<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
------------------------
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
(Exact Name of Small Business Issuer As Specified In Its Charter)
<TABLE>
<S> <C> <C>
FLORIDA 7941 91-1796903
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of Classification Code No.) I.D. Number)
incorporation or organization)
</TABLE>
20 NORTH ORANGE AVENUE, SUITE 101
ORLANDO, FL 32801
(407) 648-4444
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
JACK YOUNGBLOOD, PRESIDENT
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
20 NORTH ORANGE AVENUE, SUITE 101
ORLANDO, FL 32801
(407) 648-4444
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS TO:
GARY A. AGRON, ESQ. JOSEPH NIEBLER, SR., ESQ.
5445 DTC Parkway, Suite 520 Niebler & Muren, S.C.
Englewood, CO 80111 P.O. Drawer 825
(303) 770-7254 Brookfield, WI 53008
(303) 770-7257 (Fax) (414) 784-6630
(414) 784-7630 (Fax)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE OFFERING.
--------------------------
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 a 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,
check the following box: / /
[EXHIBIT INDEX LOCATED PAGE OF THIS FILING]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
DOLLAR AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO MAXIMUM PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT PRICE FEE
<S> <C> <C> <C> <C>
Units consisting of two shares of no par value Common
Stock and one Common Stock Purchase Warrant(1)........ 517,500 Units $10.00 $5,175,000 $1,568
Common Stock, no par value, underlying Common Stock
Purchase Warrants(2).................................. 17,500 Shares $7.50 $3,881,250 $1,176
Units underlying Representative's Unit Warrant(3)....... 45,000 Units $12.00 $540,000 $164
Common Stock, no par value, underlying Common Stock
Purchase Warrants included in Representative's Unit
Warrant(2)............................................ 45,000 Shares $7.50 $337,500 $103
Totals.................................................. $9,933,750 $3,011
</TABLE>
(1) Includes the overallotment option granted to the Representative of 67,500
Units.
(2) Pursuant to Rule 416 of the Securities Act of 1933, as amended, the number
of shares issuable upon exercise of the Warrants is subject to adjustment in
accordance with the anti-dilution provisions of such Warrants.
(3) Each Unit consists of two shares of Common Stock and one Warrant.
------------------------------
THE REGISTRANT HEREBY AMENDS THE 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, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JULY 21, 1997
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.
<PAGE>
450,000 UNITS
[LOGO]
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
------------------
The Orlando Predators Entertainment, Inc. (the "Company") is offering (the
"Offering") through First Midwest Securities, Inc. as the representative (the
"Representative") of the underwriters herein named (the "Underwriters") 450,000
units of the Company's securities ("Unit(s)"), each Unit consisting of two
shares of no par value common stock ("Common Stock") and one redeemable common
stock purchase warrant ("Warrant(s)") at a purchase price of $10.00 per Unit.
The Common Stock and Warrants are separately transferable as of the date of the
Prospectus and will not trade as Units. Each Warrant is exercisable to purchase
one share of Common Stock at $7.50 per share for a period of five years from the
date hereof and may be redeemed by the Company for $.01 per Warrant on 30 days'
written notice to the Warrantholders if the closing price of the Common Stock on
the NASDAQ SmallCap Market ("NASDAQ") is at least $7.50 per share for 20
consecutive trading days, ending not earlier than five days before the Warrants
are called for redemption. The Unit price and Warrant exercise price have been
determined by negotiations between the Company and the Representative and such
prices are not necessarily related to the Company's financial condition, net
worth or other established criteria of value. For a description of the factors
considered in determining the Unit price and the Warrant exercise price, see
"Risk Factors" and "Underwriting."
There is no trading market for Common Stock and Warrants and there can be no
assurance that a trading market will develop in these securities upon completion
of the Offering. The Company has applied to list the Common Stock and Warrants
on NASDAQ under the symbols "PRED" and "PREDW," respectively.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE 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 securities offered hereby involve a high degree of risk and substantial
dilution and should be considered only by persons able to sustain a total loss
of their investment. See "Risk Factors."
The Units are offered on a "firm commitment" basis by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to certain conditions, including the right of the
Underwriters to reject orders in whole or in part. It is expected that delivery
of certificates representing the Common Stock and Warrants will be made against
payment therefor in Milwaukee, Wisconsin, on or about three business days from
the date hereof.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)(3)
<S> <C> <C> <C>
Per Unit........................................... $10.00 1.00 $9.00
Total(3)........................................... $4,500,000 $450,000 $4,050,000
</TABLE>
(1) Excludes (i) a nonaccountable expense allowance payable to the
Representative of $135,000 ($155,250 if the Overallotment Option is
exercised) equal to 3% of the gross proceeds of the Offering, and (ii) the
issuance of warrants to the Representative (the "Representative's Unit
Warrant") to purchase up to 45,000 Units at $12.00 per Unit at any time
after 12 months from the date hereof and for a period of four years
thereafter. The Company has granted certain antidilution and registration
rights with respect to the Units underlying the Representative's Unit
Warrant and has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "1933 Act"). See "Underwriting."
(2) Before deducting costs of the Offering estimated to be $300,000, excluding
the Representative's nonaccountable expense allowance.
(3) Assumes no exercise of the Representative's option, exercisable within 30
days from the date of this Prospectus, to purchase from the Company up to
67,500 Units on the same terms as the Units offered hereby solely to cover
overallotments, if any (the "Overallotment Option"). If the Overallotment
Option is exercised in full, the Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $5,175,000, $517,500 and
$4,657,500, respectively. See "Underwriting."
------------------------------
FIRST MIDWEST SECURITIES, INC.
(414)778-1091
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
The Company will furnish annual reports to its stockholders which will
include audited financial statements. The Company may also furnish to its
stockholders quarterly financial statements and such other reports as may be
authorized by its Board of Directors. See "Available Information."
Certain persons participating in this Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock and
Warrants, including over-allotment, stabilizing and short-covering transactions
in such securities, and the imposition of a penalty bid in connection with the
Offering. For a description of these activities, see "Underwriting."
FOR CALIFORNIA RESIDENTS
Investment in the securities of the Company described in this Prospectus by
California investors is expressly limited to investors who have an adjusted
gross income of at least $65,000 for the calendar year ended December 31, 1996
and an equal amount of adjusted gross income anticipated for the calendar year
ended December 31, 1997, together with a minimum of $250,000 of liquid net worth
(excluding home, home furnishings and automobile). In the event the California
investor does not have an adjusted gross income of $65,000 and liquid net worth
of $250,000, such investor may nevertheless purchase the Company's securities if
he or she has (i) a liquid net worth of $500,000 or more, (ii) $1,000,000 or
more of total net worth, or (iii) $200,000 of gross annual income for the year
ended December 31, 1996 and an equal amount of gross annual income anticipated
for the year ending December 31, 1997.
[PICTURE OF PREDATOR FOOTBALL PLAYER]
2
<PAGE>
NUMBER OF TV HOUSEHOLDS
IN ARENA FOOTBALL LEAGUE CITIES
1994 11,000,000
1995 13,000,000
1996 20,000,000
1997 27,500,000
<PAGE>
[PICTURE OF ORLANDO ARENA DURING A
PREDATOR FOOTBALL GAME]
ARENA FOOTBALL TEAM GROWTH LEAGUE ATTENDANCE GROWTH
(APPROXIMATE)
1987 -4 1989 150,000
1989 -5 1991 500,000
1991 -8 1993 800,000
1993 -10 1994 875,000
1995 -13 1995 950,000
1997 -14 1996 1,110,000
16 TEAMS SCHEDULED TO PLAY
IN THE 1998 SEASON
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. ALL SHARE AND OTHER INFORMATION IN THIS PROSPECTUS
REFLECT A 1,380 SHARES FOR ONE SHARE FORWARD STOCK SPLIT APPROVED BY THE
COMPANY'S STOCKHOLDERS IN JUNE 1997. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL
INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
OVERALLOTMENT OPTION. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WHICH MAY INVOLVE CERTAIN RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
INTRODUCTION
The Orlando Predators Entertainment, Inc. (the "Company") was formed in
March 1997 to acquire, own and operate the Orlando Predators (the "Predators" or
the "team"), a professional Arena Football team of the Arena Football League
(the "AFL" or the "League"). The AFL is a nonprofit membership corporation
organized to govern the Arena Football teams which comprise the League and to
sell team memberships ("Memberships") in major United States markets. In
February 1997, The Monolith Limited Partnership ("Monolith") and Alan N.
Gagleard ("Gagleard") purchased the Predators from the Orlando Predators, Ltd.
("OPL"), a non-affiliated Florida limited partnership which had owned and
operated the Predators since the team's inception in January 1991. Between March
and May 1997, Monolith and Gagleard organized the Company and transferred
ownership of the Predators to the Company in exchange for the issuance by the
Company of an aggregate of 1,380,000 shares of its Common Stock and the issuance
of two non-interest bearing promissory notes totalling $1,400,000 payable to
Monolith and Gagleard due the earlier of December 31, 1998 or the closing of the
Offering. See "Certain Transactions."
The Company derives substantially all of its revenue from the Arena Football
operations of the Predators. This revenue is primarily generated from (i) the
sale of tickets to the Predators' home games, (ii) the sale of advertising and
promotions to Predator sponsors, (iii) the sale of local and regional broadcast
rights to Predators' games, (iv) the Predators' share of contracts with national
broadcast organizations and expansion team fees paid through the AFL, and (v)
the sale of merchandise carrying the Predators' logos.
The Predators commenced play in the AFL's 1991 season. Currently in its
seventh season, the team has played in the Arena Bowl for the AFL championship
on three occasions. The Predators reported the highest average AFL per game
attendance for the 1995 and 1996 seasons and hold the fourth best all time
won-lost record among 27 current and former AFL teams.
The Company's strategy is to increase revenue by (i) increasing fan
attendance at Predators' home games, (ii) expanding the Predators' advertising
and sponsorship base, and (iii) contracting with additional local and regional
broadcasters to broadcast Predators' games. The Company believes that this
strategy will also increase the market value of the Company's AFL team, should
the Company elect to sell the team in the future.
ARENA FOOTBALL AND THE ARENA FOOTBALL LEAGUE
Arena Football is played in an indoor arena on a padded 50 yard long
football field using eight players on the field for each team. Most of the game
rules are similar to college or other professional football league rules with
certain exceptions intended to make the game faster and more exciting. See
"Arena Football--Rules of the Game."
The first Arena Football game was played on April 26, 1986 and the AFL's
first season commenced in 1987. Between 1987 and 1997, the League grew from four
teams to 14 teams with two additional teams
3
<PAGE>
expected to begin play in 1998. Recorded game attendance exceeded 1,100,000 in
the 1996 season and game broadcasts include local, regional, ESPN and ESPN 2
coverage. See "Arena Football."
The Company's principal executive offices are located at 20 North Orange
Avenue, Suite 101, Orlando, Florida 32801 and its telephone number is (407)
648-4444. The Company was incorporated in Florida in March 1997.
THE OFFERING
<TABLE>
<CAPTION>
Securities offered............................ 450,000 Units, each Unit consisting of two
shares of Common Stock and one Warrant
<S> <C>
Offering price................................ $10.00 per Unit
Common Stock outstanding prior to the
Offering...................................... 1,380,000 shares
Common Stock outstanding after the
Offering(l)................................... 2,280,000 shares
Description of the Warrants................... Each Warrant is exercisable to purchase one
share of Common Stock at $7.50 per share for
a period of five years from the date hereof
and may be redeemed by the Company for $.01
per Warrant on 30 days' written notice to
the Warrantholders if the closing price of
the Common Stock on NASDAQ is at least $7.50
per share for 20 consecutive trading days
ending not earlier than five days before the
Warrants are called for redemption.
Use of proceeds............................... Repayment of debt, payment of accounts
payable, marketing expenses and working
capital. See "Use of Proceeds."
NASDAQ symbols................................ PRED (Common Stock)
PREDW (Warrants)
Transfer and Warrant Agent.................... Corporate Stock Transfer, Inc.
</TABLE>
- ------------------------
(1) Does not include shares issuable upon exercise of (i) the Warrants, the
Overallotment Option and the Representative's Unit Warrant or (ii) 103,000
stock options issued under the Company's 1997 Employee Stock Option Plan.
See "Dilution," "Capitalization" and "Management--1997 Employee Stock Option
Plan."
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following tables set forth certain summary financial data of the
Company. The summary financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements included elsewhere in this
Prospectus. The summary financial data as of December 31, 1996 and 1995, and for
the years ended December 31, 1996 and 1995, have been derived from the Company's
financial statements, which have been audited by AJ. Robbins, P.C., independent
public accountants, and are included elsewhere in this Prospectus. Interim data
for the three months ended March 31, 1997 and 1996 (except for the March 31,
1997 balance sheet) have been derived from unaudited pro forma financial
statements which are also included herein. The results of operations for the
three months ended March 31, 1997 are not necessarily indicative of the results
to be expected for the year ending December 31, 1997.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995
THREE MONTHS ENDED ------------ ------------
MARCH 31,
--------------------------
1997 1996
------------ ------------
PRO FORMA PRO FORMA
UNAUDITED UNAUDITED
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................ $ 0 $ 0 $ 2,889,383 $ 2,651,577
Net loss............................................... (150,638) (120,486) (561,307) (653,506)
Weighted average shares outstanding.................... 1,380,000 1,380,000 1,380,000 1,380,000
Net loss per share..................................... $ (.11) $ (.09) $ (.41) $ (.47)
</TABLE>
<TABLE>
<CAPTION>
AS
HISTORICAL ADJUSTED(1)
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA AT MARCH 31, 1997:
Working capital (deficit).......................................................... $ (1,953,464) $ 366,536
Total assets....................................................................... 3,798,372 6,118,372
Total liabilities.................................................................. 3,399,637 2,104,637
Stockholders' equity............................................................... $ 398,735 $ 4,013,735
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale of 450,000 Units offered hereby (after
deducting underwriting discounts and commissions and estimated Offering
expenses) and the application of the net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following risk factors,
together with the other information contained in this Prospectus, in evaluating
an investment in the securities offered hereby. The following factors and other
information set forth in this Prospectus contain certain forward-looking
statements involving risks and uncertainties. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements as a result of certain factors set forth in this section and
elsewhere in this Prospectus.
HISTORY OF LOSSES AND UNCERTAINTY OF FUTURE RESULTS. The Company has not
generated any earnings to date and has incurred net losses of approximately
$150,638, $561,307 and $653,506 for the three months ended March 31, 1997 and
the years ended December 31, 1996 and 1995, respectively. There can be no
assurance that the Company will ever achieve a profitable level of operations or
that profitability, if achieved, can be sustained on an ongoing basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Financial Statements."
DEFICIT IN WORKING CAPITAL AND NET TANGIBLE BOOK VALUE. At March 31, 1997,
the Company had a deficit in working capital of $1,953,464 and a deficit in net
tangible book value of $1,584,932. In the event the Offering is not completed,
the Company may be required to obtain other equity or debt financing or
significantly curtail its operations. See "Financial Statements."
SIGNIFICANT COMPETITION. The Predators compete for sports entertainment
dollars not only with other professional sports teams but also with college
teams and other sports-related entertainment. During parts of the AFL season,
the Predators compete for attendance and fan support in Orlando with a
professional basketball team and in Florida with professional hockey and
baseball teams. In addition, the colleges and universities in central Florida,
as well as public and private secondary schools, offer a full schedule of
athletic events throughout the year. The Predators also compete for attendance
and advertising revenue with a wide range of other entertainment and
recreational activities available in central Florida. On a broader scale, AFL
teams compete with football teams fielded by high schools and colleges, the
National Football League ("NFL"), Canadian Football League and World Football
League. See "Business-- Competition."
NEED FOR ADDITIONAL CAPITAL. The continuing operations of the Company's
business may require substantial capital infusions on a continuing basis. The
Company intends to use the net proceeds of the Offering and any cash flow from
operations to finance its operations. Whether or when the Company can achieve
cash flow levels sufficient to support its operations cannot be accurately
predicted. Unless such cash flow levels are achieved, the Company will require
borrowings, the sale of debt or equity securities or some combination thereof,
to provide funding for its operations. In the event the Company cannot generate
sufficient cash flow from its operations, and is unable to borrow or otherwise
obtain additional funds to finance its operations, the Company's financial
condition and results of operations could be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Financial Statements."
EXPIRATION OF ORLANDO ARENA LEASE. The Predators play all of their home
games at the Orlando Arena under a lease which expires at the conclusion of the
1997 AFL season. Although the Company believes it will be able to enter into a
mutually acceptable renewal lease with the Orlando Arena, there can be no such
assurance. The loss of the Orlando Arena lease would substantially and adversely
affect the operations of the Predators and the Company. See "Business--Orlando
Arena."
OFFERING TO BENEFIT INSIDERS. The Company intends to use proceeds of the
Offering to repay promissory notes in the amounts of $1,409,000 and $216,000,
respectively, due to Monolith, a principal stockholder of the Company, and Alan
N. Gagleard, a 5% stockholder and director of the Company. See "Use of Proceeds"
and "Certain Transactions."
6
<PAGE>
BUSINESS CONCENTRATION. Upon completion of the Offering, the business of
the Company will be limited to the ownership and operation of the Predators, and
therefore, the Company will continue to rely upon the Predators for all of its
revenues and profits, if any. See "Use of Proceeds" and "Business."
DEPENDENCE ON KEY PERSONNEL. The Company is dependent upon the continued
services of William G. Meris, its Chairman, Jack Youngblood, its President, and
Alex S. Narushka, its Chief Financial Officer. The loss of the services of any
of these individuals could have a material adverse effect on the Company. The
Company does not have employment agreements with Messrs. Meris or Narushka nor
does it carry key man life insurance on the lives of any executive officers. See
"Management--Executive Officers and Directors."
DEPENDENCE ON COMPETITIVE SUCCESS OF THE PREDATORS. The financial results
of the Company depend in part upon the Predators continuing to achieve game
winning success in the AFL. By achieving and maintaining such success, the
Predators expect to (i) generate greater fan enthusiasm, resulting in higher
ticket and merchandise sales throughout the regular season and (ii) capture
greater shares of local television and radio audiences. Moreover, failure to
participate in the AFL playoffs will deprive the Predators of additional revenue
which results from sales of tickets for home playoff games and from media
contracts. Revenue is significantly adversely affected by a poor game winning
performance, especially involving losses of home games. See
"Business--Performance."
POSSIBLE INCREASES IN PLAYERS' SALARIES. Although AFL player salaries are
considered small compared to other professional sports teams, there can be no
assurance that such salaries will not increase significantly in the future,
thereby increasing the Company's operating expenses and adversely affecting its
financial condition and results of operations.
DEPENDENCE ON TALENTED PLAYERS. The success of the Predators depends, in
part, upon the team's ability to attract and retain talented players. The
Predators compete with other AFL teams as well as teams fielded by the National
Football League, the Canadian Football League and the World Football League,
among others, for available players. There can be no assurance that the
Predators will be able to retain players upon expiration of their contracts or
obtain new players of adequate talent to replace players who retire or are
injured, traded or released. Even if the Predators are able to obtain and retain
players who have had previously successful football careers, there can be no
assurance of the quality of their performance for the Predators. See
"Business--Players."
SEASONALITY. The AFL season begins during the spring and ends in late
summer. As a result, the Company realizes a significant portion of its revenues
and incurs a significant portion of its expenses during that period.
ABSENCE OF INSURANCE; RISK OF INJURIES. Player contracts generally provide
that a player is entitled to receive his salary even if, as a result of injuries
sustained from Arena Football-related activities during the course of his
employment, he is unable to play. Although the Company carries occupational
health, accidental death and disability insurance of up to $500,000 per player,
the Company is required to pay the first $35,000 of loss for each player up to
an aggregate loss of $356,000. Payment of the these insurance premiums as well
as payments which must be made directly to injured players could have an adverse
effect upon the Company's financial condition and results of operations. See
"Business--Players."
RISKS ASSOCIATED WITH AFL MEMBERSHIP. Under its membership agreement with
the AFL, the Predators and other members of the AFL are generally liable on a
pro rata basis for the debts and obligations of the AFL. Any failure of other
members of the AFL to pay their pro rata share of any such debts or obligations
could adversely affect the Predators by requiring additional payments to be made
by the Company on behalf of failing or defaulting terms. The success of the AFL
and its members depends in part on the competitiveness of the teams in the AFL
and their ability to maintain fiscally sound operations. Certain AFL teams have
encountered financial difficulties, and there can be no assurance that the AFL
7
<PAGE>
and its respective members will continue to operate. If the AFL is unable to
continue operations, the Predators and the other teams forming the AFL would be
unable to continue their own operations. In addition, the Predators and their
personnel are bound by a number of rules, regulations and agreements, including,
but not limited to, the Charter and Bylaws of the AFL, national television
contracts and the AFL Membership Agreement. Any change to the rules, regulations
and agreements adopted by the AFL will be binding upon the Predators and their
personnel, regardless of whether the Predators agree with such changes, and it
is possible that any such change could adversely affect the Predators. See
"Arena Football."
POSSIBILITY OF INCREASED COMPETITION AS A RESULT OF AFL EXPANSION. It is
currently anticipated that the AFL will add additional teams in the future. In
fact, at least two expansion teams are expected to begin AFL play in the 1998
season. While such expansion affords the AFL the opportunity to enter new
markets and increase revenues, it also increases the competition for talented
players among AFL teams. Expansion teams are permitted to select in an expansion
draft certain unprotected players playing for the existing AFL teams. There can
be no assurance that the Predators will be able to retain all of the team's key
players in the event of an expansion draft or that the rules regarding the
expansion draft will not change to the detriment of the Predators. In addition,
to the extent the AFL teams share equally in the revenue generated from national
television contracts and sale of AFL merchandise, the Company may receive less
revenue from the AFL as the result of League expansion.
UNCERTAINTIES REGARDING RENEWAL OF BROADCAST CONTRACTS; LACK OF
REVENUES. The AFL currently has contracts with ESPN and ESPN 2 for the national
broadcast of certain AFL games in the United States through the 1997 season. A
percentage of the revenue generated from those contracts and any other national
or network media contracts after payment of AFL expenses, is to be divided
equally among the members of the AFL. For the years ended December 31, 1995 and
1996, the Company did not receive any revenue from the AFL because revenues were
offset by League expenses due from the AFL teams. There can be no assurance that
ESPN and ESPN 2 will continue their contracts with the AFL or that the AFL, upon
expiration of such contracts, will be able to enter into new contracts with
these or any other national or regional broadcaster on terms as favorable as
those in the current contracts.
The Company also has television contracts for the local broadcast of the
Predators pre-season, regular season and certain post-season games. The loss of
any such local television contracts would have a material adverse effect on the
Company. See "Business--Current Operations."
CONTROL BY PRINCIPAL STOCKHOLDERS; AUTHORIZATION AND ISSUANCE OF PREFERRED
STOCK; PREVENTION OF CHANGES IN CONTROL. Upon completion of the Offering, The
Monolith Limited Partnership will own approximately 56% of the then issued and
outstanding shares of Common Stock (assuming no exercise of the Warrants, the
Representative's Overallotment Option, the Representative's Unit Warrant or
other outstanding stock options) and will continue to elect all of the Company's
directors and control the affairs of the Company. The Company's Articles of
Incorporation authorize the issuance of up to 1,500,000 shares of Preferred
Stock with such rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, under the Articles of Incorporation, the
Board of Directors may, without shareholder approval, issue Preferred Stock with
dividend, liquidation, conversion, voting, redemption or other rights which
could adversely affect the voting power or other rights of the holders of the
Common Stock. The issuance of any shares of Preferred Stock having rights
superior to those of the Common Stock may result in a decrease in the value or
market price of the Common Stock and could further be used by the Board of
Directors as a device to prevent a change in control of the Company. The Company
has no other anti-takeover provisions in its Articles of Incorporation or
Bylaws. Holders of the Preferred Stock may have the right to receive dividends,
certain preferences in liquidation and conversion rights. See "Principal
Stockholders" and "Description of Securities."
LACK OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE. Prior to the
Offering, there has been no public trading market for the Units, Common Stock or
Warrants. The Offering price of the Units and
8
<PAGE>
exercise price of the Warrants were determined by negotiations between the
Company and the Representative and do not necessarily bear any relationship to
recognized criteria for the valuation of such securities. There can be no
assurance that a regular trading market for the Common Stock or Warrants will
develop or continue after the Offering or, if such a market develops, that the
market prices of the component securities will exceed the Unit price. See
"Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION. The Offering involves an immediate and
substantial dilution of $4.11 per share of Common Stock, or an 82% reduction
between the Offering price of $5.00 per share of Common Stock (ascribing no
value to the Warrants included in the Units) and the net tangible book value of
$.89 per share of Common Stock upon completion of the Offering, assuming no
exercise of the Warrants, the Overallotment Option, the Representative's Unit
Warrant or other outstanding stock options. See "Dilution."
NO DIVIDENDS. The Company has not paid any dividends on its Common Stock
and does not intend to pay dividends in the foreseeable future. See "Description
of Securities--Dividends."
POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price of the Common
Stock and Warrants following the Offering may be highly volatile, as has been
the case recently with the securities of other companies completing initial
public offerings. Factors such as the Company's operating results, its win/loss
record or public announcements by the Company or its competitors may have a
significant effect on the market price of the securities. In addition, market
prices for the securities of many small capitalization companies have
experienced wide fluctuations due to variations in quarterly operating results,
general economic conditions and other factors beyond the Company's control.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the open market or the availability of such shares for sale following
the Offering could adversely affect the market price of the securities offered
hereby. Following the Offering, all 900,000 shares of Common Stock and 450,000
Warrants offered hereby may be purchased and sold in the open market without
restriction or further registration under the 1933 Act. The currently
outstanding 1,380,000 shares of Common Stock are "restricted securities" as that
term is defined under Rule 144 of the 1933 Act, and are eligible for resale in
March 1998. However, all of the Company's stockholders have agreed, pursuant to
lock-up agreements with the Representative, not to sell or otherwise dispose of
any of their shares of Common Stock for a period of 12 months from the date of
this Prospectus without the prior written consent of the Representative. There
are no arrangements, agreements or understandings with respect to a release of
the lock-up agreements and it is not the Representative's general policy to
grant such a release. Nevertheless, the Representative will consider requests
for such releases on an individual basis and may in the future grant such
requests. See "Description of Securities--Common Stock Eligible for Future Sale"
and "Underwriting."
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant amount of the Common
Stock and Warrants offered hereby may be sold to customers of the Representative
and the Underwriters. Such customers subsequently may engage in transactions for
the sale or purchase of these securities through or with the Underwriters.
Although it has no obligation to do so, the Representative intends to make a
market or otherwise effect transactions in the securities, although this
market-making activity may terminate at any time. The Representative may exert a
dominating influence on the market, if one develops, for the securities. The
price and liquidity of the securities may be significantly affected by the
degree, if any, of the Underwriters' participation in such market. See
"Underwriting."
LIMITATIONS ON LIABILITY OF DIRECTORS. The Company's Bylaws substantially
limit the liability of the Company's directors to the Company and its
stockholders for breach of fiduciary or other duties to the Company. See
"Description of Securities--Limitation on Liabilities."
9
<PAGE>
REDEMPTION OF WARRANTS. The Warrants may be redeemed by the Company under
certain circumstances upon 30 days' written notice to the Warrantholders at $.01
per Warrant. In such event, the Warrants will be exercisable until the close of
business on the date fixed for redemption in such notice. Any Warrants not
exercised by that time will cease to be exercisable, and the holders will be
entitled only to the redemption price, which is likely to be substantially less
than the market value of the Warrants. Accordingly, such redemption could force
the Warrantholders to exercise the Warrants and pay the exercise price at a time
when it might be disadvantageous for them to do so or sell the Warrants at the
then market price when they might otherwise prefer to hold the Warrants. See
"Description of Securities--Warrants."
NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES OF COMMON STOCK
UNDERLYING THE WARRANTS. The Warrants are not convertible or exercisable
unless, at the time of exercise, the Company has a current prospectus covering
the shares of Common Stock issuable upon exercise of the Warrants and such
shares of Common Stock have been registered, qualified or deemed to be exempt
under the securities laws of the states of residence of the holders of such
Warrants. There can be no assurance that the Company will have or maintain a
current prospectus or that the securities will be qualified or registered under
any state laws. See "Description of Securities--Warrants."
The Common Stock and the Warrants, which comprise the Units, are detachable
and separately transferable as of the date hereof. Purchasers of the Warrants
may reside in jurisdictions in which the shares of Common Stock underlying the
Warrants are not registered or qualified during the period that the Warrants are
exercisable. In this event, the Company might be unable to issue Common Stock to
those persons desiring to exercise their Warrants unless and until such shares
could be qualified for sale in jurisdictions in which the purchasers reside, or
an exemption from qualification exists in such jurisdiction. Accordingly,
Warrantholders would have no choice but to attempt to sell the Warrants in a
jurisdiction where such sale is permissible, or allow them to expire
unexercised. See "Description of Securities-- Warrants."
NO ASSURANCE AS TO FUTURE RESULTS. Prospective purchasers of the Common
Stock should carefully consider the information contained in this Prospectus
before making an investment in the Common Stock. Information contained in this
Prospectus contains "forward-looking statements" which can be identified by the
use of forward-looking terminology such as "believes," "expects," "may,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. See, e.g.,
"Business--Strategy." No assurance can be given that the future results covered
by the forward-looking statements will be achieved. Many factors could also
cause actual results to vary materially from the future results covered in such
forward-looking statements.
10
<PAGE>
DILUTION
At March 31, 1997, the net tangible book value (deficit) of the Company's
Common Stock was $(1,584,932), or $(1.15) per share. Net tangible book value
(deficit) per share represents the total amount of tangible assets of the
Company, less the total amount of liabilities of the Company, divided by the
number of shares of Common Stock outstanding. Without taking into account any
changes in net tangible book value after March 31, 1997, other than to give
effect to the sale by the Company of the 450,000 Units offered hereby, less
underwriting discounts and commissions and estimated costs of the Offering, the
net tangible book value of the Company at March 31, 1997 would have been
$2,030,068, or approximately $.89 per share. This represents an immediate
increase in net tangible book value of $2.04 per share of Common Stock to
existing stockholders and an immediate dilution of $4.11 per share to new
stockholders. "Dilution" per share represents the difference between the price
to be paid by the new stockholders of $5.00 per share (ascribing no value to the
Warrants included in the Units) and the net tangible book value per share of
Common Stock immediately after the Offering.
The preceding discussion is illustrated in the following table:
<TABLE>
<S> <C> <C>
Public offering price per share of Common Stock included in
the Units.................................................. $ 5.00
Net tangible book value (deficit) per share of Common Stock
before the Offering...................................... $ (1.15)
Increase in net tangible book value per share of Common
Stock attributable to new investors purchasing in the
Offering................................................. $ 2.04
Net tangible book value per share of Common Stock after the
Offering................................................... $ .89
---------
Dilution of net tangible book value per share of Common Stock
to new investors........................................... $ 4.11
---------
---------
</TABLE>
The following table sets forth the number of shares of Common Stock
purchased, the total consideration and the average price per share paid by
existing stockholders of the Company as of March 31, 1997, and by new investors
purchasing the shares of Common Stock included in the Units offered hereby:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED ------------------------------------------
----------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
New investors................................... 900,000 39.5% $ 4,500,000 90.2% $ 5.00
Existing stockholders........................... 1,380,000 60.5% $ 487,796 9.8% $ .35
---------- ----- ------------ -----
Totals........................................ 2,280,000 100.0% $ 4,987,796 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>
The preceding discussion and tables do not include shares issuable upon
exercise of (i) the Warrants, the Overallotment Option and the Representative's
Unit Warrant or (ii) 103,000 stock options issued under the Company's 1997
Employee Stock Option Plan. See "Capitalization" and "Management--1997 Employee
Stock Option Plan."
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1997, and as adjusted to give effect to the sale by the Company of the
450,000 Units offered hereby and application of the estimated net proceeds,
without giving effect to the exercise of (i) the Warrants, the Overallotment
Option and the Representative's Unit Warrant or (ii) 103,000 stock options
issued under the Company's 1997 Employee Stock Option Plan. See "Use of
Proceeds" and "Description of Securities."
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL AS ADJUSTED
---------- ------------
<S> <C> <C>
Stockholders' equity
Preferred Stock, no par value, 1,500,000 shares authorized, none
issued or outstanding........................................... $ 0 $ 0
Common Stock, no par value, 15,000,000 shares authorized,
1,380,000 issued and outstanding, 2,280,000 shares issued and
outstanding, as adjusted........................................ 487,796 4,102,796
Accumulated deficit............................................... (89,061) (89,061)
---------- ------------
Total stockholders' equity...................................... 398,735 4,013,735
Total capitalization.......................................... $ 398,735 $ 4,013,735
---------- ------------
---------- ------------
</TABLE>
12
<PAGE>
USE OF PROCEEDS
The net proceeds of the Offering are estimated to be $3,615,000 ($4,202,250
if the Overallotment Option is exercised). The Company intends to apply the net
proceeds of the Offering in the following order of priority:
<TABLE>
<CAPTION>
PERCENT OF
NET
PURPOSE AMOUNT PROCEEDS
- --------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Repayment of debt(1)................................................. $ 1,625,000 45.0%
Payment of accounts payable.......................................... 150,000 4.1
Marketing expenses................................................... 100,000 2.8
Working capital(2)................................................... 1,740,000 48.1
------------ -----
TOTALS............................................................. $ 3,615,000 100.0%
</TABLE>
- ------------------------
(1) Represents payment of (i) two non-interest bearing promissory notes in the
amounts of $1,295,000 and $105,000, respectively, issued to Monolith and
Alan N. Gagleard due the earlier of December 31, 1998 or the closing of the
Offering and incurred by the Company in connection with its acquisition of
the Predators from Monolith and Mr. Gagleard and (ii) two promissory notes
bearing interest at 8% per annum in the amounts of $114,000 and $111,000,
respectively, issued to Monolith and Alan N. Gagleard due the earlier of
December 31, 1998 or the closing of the Offering and incurred by the Company
for working capital. See "Certain Transactions."
(2) The Company intends to reserve up to $1,000,000 of working capital to
consider acquisitions of entertainment companies or businesses related to
the Company's Arena Football operations, such as radio or television
broadcasters, media firms, sports-related manufacturers, sports service
providers and the like. There are no current negotiations, understandings or
agreements with any such companies and there can be no assurance that any
acquisition agreement will be reached with anyone. If the Company does not
proceed with any such acquisition, the $1,000,000 will be retained for
working capital.
The Company estimates that the net proceeds of the Offering, together with
its anticipated operating revenues, will be sufficient to fund its cash
requirements for at least 12 months from the date of the Prospectus. There may
be changes in the Company's proposed use of net proceeds due to modifications in
the Company's plan of operation. Management is not currently aware of any
proposed modifications to its operations. Pending use, the net proceeds will be
invested in bank certificates of deposit and other fully insured investment
grade securities. Any funds received by the Company upon exercise of the
Warrants, the Overallotment Option or the Representative's Unit Warrant will be
added to working capital.
13
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain selected financial data of the
Company. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements included elsewhere in this
Prospectus. The selected financial data as of December 31, 1996 and 1995, and
for the years ended December 31, 1996 and 1995, have been derived from the
Company's financial statements, which have been audited by AJ. Robbins, P.C.,
independent public accountants, and are included elsewhere in this Prospectus.
Interim data for the three months ended March 31, 1997 and 1996 (except for the
March 31, 1997 balance sheet) have been derived from unaudited pro forma
financial statements which are also included herein. The results of operations
for the three months ended March 31, 1997 are not necessarily indicative of the
results to be expected for the year ending December 31, 1997.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995
THREE MONTHS ENDED MARCH ------------ ------------
31,
--------------------------
1997 1996
------------ ------------
PRO FORMA PRO FORMA
UNAUDITED UNAUDITED
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................ $ 0 $ 0 $ 2,889,383 $ 2,651,577
Net loss............................................... (150,638) (120,486) (561,307) (653,506)
Weighted average shares outstanding.................... 1,380,000 1,380,000 1,380,000 1,380,000
Net loss per share..................................... $ (.11) $ (.09) $ (.41) $ (.47)
</TABLE>
<TABLE>
<CAPTION>
AS
HISTORICAL ADJUSTED(1)
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA AT MARCH 31, 1997:
Working capital (deficit).......................................................... $ (1,953,464) $ 366,536
Total assets....................................................................... 3,798,372 6,118,372
Total liabilities.................................................................. 3,399,637 2,104,637
Stockholders' equity............................................................... $ 398,735 $ 4,013,735
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale of 450,000 Units offered hereby (after
deducting underwriting discounts and commissions and estimated Offering
expenses) and the application of the net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Orlando Predators Entertainment, Inc. (the "Company") was formed in
March 1997 to acquire, own and operate the Orlando Predators (the "Predators" or
the "team"), a professional Arena Football team of the Arena Football League
(the "AFL" or the "League"). The AFL is a nonprofit corporation organized to
govern the Arena Football teams which comprise the League.
The Company derives substantially all of its revenue from the Arena Football
operations of the Predators. This revenue is primarily generated from (i) the
sale of tickets to the Predators' home games, (ii) the sale of advertising and
promotions to Predator sponsors, (iii) the sale of local and regional broadcast
rights to Predators' games, (iv) the Predators' share of contracts with national
broadcast organizations and expansion team fees paid through the AFL, and (v)
the sale of merchandise carrying the Predators' logos. A large portion of the
Company's annual revenue is determinable at the commencement of each football
season based on season ticket sales and contracts with broadcast organizations
and team sponsors.
The operations of the team are year round; however, the majority of revenues
and expenses are recognized during the AFL playing season, from April through
August of each year. The team begins to receive deposits in late September for
season tickets during the upcoming season. From September through April the team
sells season tickets and collects revenue from all such sales. Selling,
advertising and promotions also take place from September through April although
these revenues are not realized until after the season begins. Single game
tickets and partial advertising sponsorships are also sold during the season,
primarily from April to July. Additional revenues are recognized in August from
playoff games, if any.
Prospective purchasers of the Common Stock should carefully consider the
following information as well as other information contained in this Prospectus
before making an investment in the Common Stock. Information contained in this
Prospectus contains "forward-looking statements" which can be identified by the
use of forward-looking terminology such as "believes," "expects," "may,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. See, e.g.,
"Business--Strategy." No assurance can be given that the future results covered
by the forward-looking statements will be achieved. Many factors could also
cause actual results to vary materially from the future results covered in such
forward-looking statements.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed as a
percentage of revenue for the periods indicated:
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
The AFL football season extends from April to August of each year. Ticket
sales and broadcasting fees are recorded as revenue at the time the related home
games are played. Team operating expenses (primarily players' and coaches'
salaries, fringe benefits, insurance, game expenses, arena rentals and travel)
are recorded as expenses on the same basis. Accordingly, revenue and operating
expenses for the three months ended March 13, 1997 ("1997 quarter") and 1996
("1996 quarter") have not been recognized and have been recorded as deferred
revenue and prepaid expenses until the related home games are played over the
AFL season. Deferred revenue at March 31, 1997 as compared to March 31, 1996
increased from $1,695,414 to $1,858,749, an increase of $163,335, or 10%.
Prepaid team operating expenses at March 31, 1997 as compared to March 31, 1996
decreased from $353,642 to $345,520, or a decrease of $8,122. The Company's 1997
pre-season football activities were delayed a few weeks in 1997 as
15
<PAGE>
compared to the start date in 1996 due to the sale of the team to the Company.
Pre-season activities include player recruitment, player travel to Orlando and
player housing arrangements.
General and administrative expenses increased 26%, or $27,608, in the 1997
quarter as compared to the 1996 quarter. This increase was primarily
attributable to non-player bonuses of $8,100, injured player payroll of $7,200,
and $7,000 in salaries for new ticket sales and sponsorship employees.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Revenue increased from $2,651,577 to $2,889,383, an increase of $237,806, or
9%, for the year ended December 31, 1996 ("1996") as compared to the year ended
December 31, 1995 ("1995"). This increase was attributable to a 19% increase in
ticket revenues, which resulted from the AFL expanding the regular season from
12 games in 1995 to 14 games in 1996. The team also had a pre-season game added
as a home game in the Orlando Arena in 1996 as compared to one away game at the
Daytona Ocean Center in 1995. This resulted in two additional home games, or a
17% increase in the number of home games in 1996, as compared to 1995. The
Company realizes substantially more revenue for home games because home game
teams retain all ticket sales, advertising, sponsorship and media revenue
whereas visiting teams receive no revenue during the regular season and only
$40,000 (beginning in 1997 the amount increased to $45,000) per away playoff
game. During 1995, there were three away playoff games, which generated revenue
of $120,000, as compared to one away playoff game in 1996, which generated
$40,000 of revenue. The number of season ticket sales decreased from 10,649 in
1995 to 8,245 in 1995 and the number of average paid attendance decreased from
12,926 in 1995 to 10,415 in 1996. The reduction in ticket sales was offset by a
10% average increase in ticket prices in 1996. Average paid ticket prices
increased from $20.35 in 1995 to $22.46 in 1996.
Advertising and promotion revenue increased by $224,798 in 1996 as compared
to 1995 primarily as a result of additional sponsorships sold for higher average
prices than 1995 due to increased marketing efforts generated by executive
officers and the addition of new marketing personnel for the 1996 season.
Increased average sales prices for sponsorships were also due to expanded
coverage for the sponsors because of two additional home games in 1996 as
compared to 1995.
Revenue increases were offset by a $164,277 reduction in expansion fees from
1995 to 1996. Expansion fees paid by new teams are divided among the AFL's
existing teams and the game inventor. Three teams were added in 1995 as compared
to one team added in 1996.
Football operating expenses decreased by $38,125, or 7%, in 1996 as compared
to 1995 due to having one away playoff game in 1996 as opposed to three away
playoff games in 1995. The AFL teams must bear the costs of away playoff game
expenses except for a $40,000 payment from the home team which is used to
partially offset playoff game expenses such as travel and lodging. The 1995
season was three weeks longer than the 1996 season, which resulted in a decrease
of approximately $75,000 in 1996 expenses as compared to 1995. Operating
expenses increased due to the addition of two home games in 1996 as compared to
1995. Due to a higher than normal injury rate in 1995, additional players were
added in mid season. Player salaries were paid to injured players as well as
replacement players.
Selling expenses increased by $69,349 in 1996 as compared to 1995 primarily
due to a $76,000 increase in advertising promoting the two additional home games
played in 1996.
The Board of Directors of the AFL approves an annual budget, which is funded
equally by each AFL team. If the number of teams in the AFL remains the same and
AFL expenses increase, the Company's share of the AFL assessment will also rise.
If AFL expenses remain the same and the number of teams increase, the Company's
share of AFL assessments will decrease. In 1996, the AFL assessments decreased
2%, or approximately $2,000, because the Company's share of the AFL budget was
based on more teams in 1996 than in 1995.
16
<PAGE>
General and administrative expenses increased approximately $107,869 in 1996
as compared to 1995 primarily due to increased legal costs of $27,000, salaries
of $30,000, insurance of $6,000, write-off of receivables for season ticket
sales of $38,000 net of decrease of $13,000 in credit card fees. Such expenses
are expected to remain constant for the year ending December 31, 1997.
The AFL season extends from April to August of each year. Accordingly, the
Company experiences a seasonal pattern in its operating results. Revenue and
selling and promotional expenses are recognized ratable over the AFL season.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company financed net operating losses primarily with loans
from the team's former managing general partner.
As of March 31, 1997, the Company had (i) a loan outstanding in the amount
of $90,098 (which was subsequently paid) owed to its former owners and (ii) an
aggregate of $1,625,000 of promissory notes owed to its two stockholders all of
which will be repaid from proceeds of the Offering. See "Use of Proceeds."
The reduction of indebtedness using proceeds of the Offering will improve
the Company's liquidity by reducing indebtedness required to be repaid in the
future. The Company believes that cash flows from operations along with the net
proceeds of the Offering will be sufficient to satisfy the Company's anticipated
working capital requirements for at least the next 12 months.
ARENA FOOTBALL
ARENA FOOTBALL AND THE ARENA FOOTBALL LEAGUE
In 1985, Jim Foster, a professional football marketing executive, formulated
a plan for an indoor professional football game that included a 50-yard playing
field, an eight player single platoon system and the use of drop kicks and
rebound nets. The first Arena Football game was played in Rockford, Illinois on
April 26, 1986 with a second game played on February 26, 1987 in Chicago,
Illinois.
In March 1987 the U.S. Patent Office issued a U.S. Patent ("Patent") for the
Arena Football Game System and rules of play as well as trademarks for the logo
and names associated with Arena Football. The Patent was issued to Gridiron
Enterprises, Inc. an Illinois corporation ("Gridiron") as the holder of the
Patent. In December 1991, the AFL was incorporated as a non-profit membership
corporation in the state of Delaware. Also in 1991, Gridiron entered into an
exclusive licensing agreement with the AFL to organize, operate and market Arena
Football throughout the United States by selling team memberships in major
markets across the United States. Pursuant to the licensing agreement, the AFL
granted to Gridiron a per team royalty of $20,000 per year in return for using
the game system and rules of play of Arena Football. In January 1991, the AFL
sold a Membership to the Predators which allowed the Predators to operate and
market the game of Arena Football within a seventy-five mile radius of Orlando,
Florida. All names and logos of the Orlando Predators are owned and registered
in the name of Gridiron.
Four teams were fielded for the League's inaugural 1987 season. By 1991, the
League had eight teams and played exhibition games in London and Paris. In 1992
and 1993, the League fielded 12 teams and 10 teams, respectively, with some
games televised on the ESPN cable network. For the 1997 season, the League
consists of 14 teams including expansion teams in New York, New Jersey and
Nashville. For the 1998 season, teams from Miami and Los Angeles are expected to
begin play.
AFL games are generally played in an indoor basketball/hockey sports arena
which offers fans climate-controlled conditions and a more intimate view of the
game. As a result of the smaller playing field, the rebound nets and a general
emphasis on offensive play, Arena Football games are generally high scoring,
fast-paced action contests.
17
<PAGE>
Game attendance has risen consistently over the AFL's ten seasons of play
with over 1,100,000 in total recorded fan attendance for the 1996 season. Per
game recorded attendance averaged approximately 10,900 during the 1996 season.
"Recorded" game attendance represents attendance figures provided by League
teams to the League and the media and cannot be independently verified.
Approximately 66% of AFL viewers are male and 34% are female with 60% of such
viewers under the age of 35 and 40% over the age of 35. In terms of education,
39% have college or graduate degrees, 37% have some college attendance and 24%
hold high school diplomas.
The Membership fee for new teams joining the AFL has grown from $120,000 for
the 1990 season to $2,200,000 for the 1997 season. There are approximately 27
million households with AFL teams in their metropolitan areas, up from 11
million households in 1994. During the 1997 season, ESPN and ESPN 2 cable
networks will broadcast a total of 19 games including four playoff games and the
Arena Bowl.
The average AFL team is expected to pay total per team salaries for the 1997
season of between $300,000 and $500,000 versus $46.7 million per team for the
NFL. Players' salaries range from $15,000 to $40,000 per season together with a
housing provision which averages approximately $400 per month per player. AFL
players sign one-year contracts with an additional one-year option season
granted to the team. Following the contract year, if the team and a player
cannot agree on the option season salary, the player must either play for the
original option year salary or stay out during the option season, after which he
is free to negotiate with any team in the League. There are no player drafts,
although expansion teams are allowed to draw from a pool of players designated
by existing AFL teams.
Each player is provided a $500,000 occupational health, accidental death and
disability insurance policy. Each team is required to pay the first $35,000 of
claims for an injured player up to an aggregate of $356,000 for the three
Florida AFL teams.
RULES OF ARENA FOOTBALL
Arena Football is played in an indoor arena on a field which consists of a
padded surface 85 feet wide and 50 yards long with eight-yard endzones. The
endzone goalposts are nine feet wide with a cross-bar height of 15 feet compared
to NFL goalposts which are 18 1/2 feet wide with a cross-bar height of 10 feet.
Above each endzone are goal-side rebound nets which are 30 feet wide by 32 feet
high. The bottoms of these nets are eight feet above the ground.
There are eight players on the field for each team as part of 24-man active
rosters. Players play both offense and defense with the exception of the kicker,
quarterback, an offensive specialist, two defensive specialists and a kick
returner.
The game is played using an NFL-size football in four 15-minute quarters
with a 15-minute halftime. The game clock stops for out of bounds plays or
incomplete passes only in the last minute of each half, when necessary for
penalties, injuries and time-outs or following points after touchdowns, field
goals and safeties. Accordingly, the average AFL football game is played in
approximately two hours and 25 minutes compared to approximately three hours and
five minutes for an NFL game.
Four downs are allowed to advance the ball ten yards for a first down or to
score. Scoring consists of six points for a touchdown, one point for a
conversion by placekicking after a touchdown, two points for a conversion by
dropkick and two points for a successful run or pass after a touchdown. Three
points are awarded for a field goal by placement or four points for a field goal
by dropkick, with two points for a safety.
Punting is illegal. On fourth down a team may attempt a first down,
touchdown or field goal. The receiving team may field any kickoff or missed
field goal that rebounds off the rebound nets.
18
<PAGE>
Although passing rules for the AFL are similar as to outdoor NCAA football,
a unique exception involves the rebound nets. A forward pass that rebounds off
the rebound net is a live ball and is in play until it touches the playing
surface.
Overtime periods are 15 minutes during the regular season and the playoffs.
Each team has one possession to score. If, after each team has had one
possession and one team is ahead, that team wins. If the teams are tied after
each has had a possession, the next team to score wins.
AFL TEAMS
For the 1997 season, the AFL is comprised of the following 14 teams, which
are currently aligned into two conferences, with two divisions in each
conference:
<TABLE>
<CAPTION>
<S> <C>
AMERICAN CONFERENCE
Western Division Central Division
Anaheim Piranhas Iowa Barnstormers
Arizona Rattlers Milwaukee Mustangs
San Jose SaberCats Portland Forest Dragons
Texas Terror
NATIONAL CONFERENCE
Eastern Division Southern Division
Albany Firebirds Florida Bobcats
Nashville Kats Orlando Predators
New Jersey Red Dogs Tampa Bay Storm
New York CityHawks
</TABLE>
REGULAR SEASON AND PLAYOFFS
Following two pre-season games, the regular AFL season extends from May to
August, with each team playing a total of 14 games against teams from both
conferences. Half of the games are played at home, and half are played away. At
the end of the regular season, the four division champions along with the four
teams with the best winning records, qualify for the AFL playoffs to determine
the AFL's Arena Bowl champion for that season. The playoffs consist of three
single elimination rounds with the third round matching the two remaining teams
playing in the Arena Bowl to determine the League champion. Each round is played
in the home arena of the team with the best winning record.
GATE RECEIPTS, AFL ASSESSMENTS AND DISTRIBUTIONS
AFL teams are entitled to keep all gate receipts from the one pre-season
home game and seven regular season home games, and do not receive any gate
receipts from away games except that visiting teams are provided lodging by the
home team. Each team is required to pay an annual assessment to the AFL which is
generally equal to the team's share of the League's annual operating costs. Each
team's assessment is generally funded by its share of revenue derived from the
League's national television contracts, from the sale of AFL licensed
merchandise and from revenues generated by the League's sale of expansion team
franchises. Each home team participating in the playoffs pays a fixed payment of
$45,000 to the visiting team and provides it with lodging.
AFL LICENSING
The AFL operates a League licensing program on behalf of its teams. Under
the program, product manufacturers sign agreements allowing them to use the
names and logos of all 14 AFL teams, the AFL itself and AFL's special events
(including playoffs and the Arena Bowl) in exchange for royalty and
19
<PAGE>
guarantee payments. For the years ended December 31, 1996 and 1995, the
Company's share of net revenues from licensing was approximately $40,000 each
year, which, in turn, was credited against the team's AFL assessment for each
such period. The Company's share of net revenue was equal to 1/15 of the AFL's
net revenue for the 1996 season. In addition, each team is permitted to license
its club identified products locally for sale at its arena, at team owned and
operated stores and through team catalogs.
SUMMARY OF LEAGUE REVENUE AND EXPENSES
The following table summarizes the Company's share of the revenue derived
from the AFL as well as AFL assessments incurred during the last two regular
seasons:
<TABLE>
<CAPTION>
SEASON
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenue:
Expansion team franchise fees........................................ $ 17,783 $ 182,060
----------- ----------
Total revenue.................................................... 17,783 182,060
----------- ----------
Assessments:
Operating assessment................................................. 125,000 125,000
Other costs.......................................................... 26,379 28,799
----------- ----------
Total assessments................................................ 151,379 153,799
----------- ----------
Net revenue (assessments)............................................ $ (133,596) $ (28,261)
----------- ----------
----------- ----------
</TABLE>
LEAGUE GOVERNANCE
The AFL is generally responsible for regulating the conduct of its member
teams. The AFL establishes the regular season and playoff schedules of the
teams, and negotiates, on behalf of its members, the League's national and
network broadcast contracts. Each of the AFL's members is, in general, liable on
a pro rata basis for the AFL's liabilities and obligations and shares pro rata
in its profits. Under the Bylaws of the AFL, League approval is required to
complete a public offering of any team's securities (including this Offering)
and for the sale or relocation of a team.
The AFL is governed by a Board of Directors, which consists of one
representative from each team. Mr. Youngblood serves as the Predator's
representative on the AFL Board of Directors. The Board of Directors selects the
AFL Commissioner, who administers the daily affairs of the AFL including
interpretation of playing rules and arbitration of conflicts among member teams.
The Commissioner also has the power to impose sanctions, including fines and
suspensions, for violations of League rules. David Baker has been the
Commissioner of the AFL since 1996.
RESTRICTIONS ON OWNERSHIP
The AFL Charter and Bylaws contain provisions which may prohibit a person
from acquiring the Common Stock and affect the value of the Common Stock. In
general, any acquisition of shares of Common Stock which will result in a person
or a group of persons holding 5% or more of the Company's outstanding Common
Stock will require the prior approval of the AFL, which may be granted or
withheld in the sole discretion of the AFL. The prospective purchaser would be
required to submit an AFL application, in form prescribed by the AFL, providing
certain information relating to that person's background. Upon receipt of such
application, the AFL has the right to conduct an investigation of the
prospective purchaser. In addition, the AFL may condition its approval upon the
execution, delivery and performance by the prospective purchaser of such
documents as the Charter or Bylaws shall prescribe. If a prospective purchaser
obtains the AFL's consent to acquire a 5% or more interest in the Company, such
20
<PAGE>
prospective purchaser will be required to acknowledge that the purchaser will be
bound by the applicable provisions of the AFL Charter and Bylaws.
In addition, no person who directly or indirectly owns any interest in an
AFL team, may own, directly or indirectly, a 5% or more interest in any other
team, without the prior approval of the AFL. The AFL Bylaws also contain
provisions which prohibit team owners from engaging in certain activities, such
as wagering on any game in which an AFL team participates. AFL players and
referees and employees of the AFL and its member clubs (other than the Company)
are not eligible to purchase or hold Common Stock. The AFL could in the future
adopt different or additional restrictions which could adversely affect the
shareholders.
The grant of a security interest in any of the assets of the Company or the
Predators or any direct or indirect ownership interest in the Company, of 5% or
more, requires the prior approval of the AFL, which may be withheld in the AFL's
sole discretion. AFL rules limit the amount of debt that may be secured by the
assets of, or ownership interests in, an AFL team and require that the parties
to any secured loan that is approved execute an agreement limiting the rights of
the lenders and the team (or stockholder) under certain circumstances, including
upon an event of default or foreclosure. These limitations may adversely affect
the rights of the team (or stockholder) under certain circumstances.
Failure by a holder of a 5% or more interest in the Company to comply with
these restrictions may result in a forced sale of such holder's interest in the
Company or the repurchase of such interests by the Company. The Company's Bylaws
provide that the Company may redeem, at the lower of fair market value or cost,
shares held by any person or entity who becomes the owner of 5% or more of the
Company's Common Stock without the approval of the AFL. These restrictions will
be contained in a legend on each certificate issued evidencing shares of Common
Stock.
Neither the AFL, any of its affiliates or members nor any of their
respective officers, employees or representatives, other than the Company,
assume any responsibility for the accuracy of any representations made by the
Company in this Prospectus.
21
<PAGE>
BUSINESS
CURRENT OPERATIONS
The Company derives substantially all of its revenue from the Arena Football
operations of the Predators. This revenue is primarily generated from (i) the
sale of tickets to the Predators' home games, (ii) the sale of advertising and
promotions to Predator sponsors, (iii) the sale of local and regional broadcast
rights to Predators' games, (iv) the Predators' share of contracts with national
broadcast organizations obtained through the AFL, and (v) the sale of
merchandise carrying the Predators' logos.
TICKET SALES. The Predators will play seven home games and seven away games
during the 1997 AFL regular season together with one home and one away
pre-season exhibition games. Under the AFL Bylaws, the Company receives all
revenue from the sale of tickets to regular season and pre-season home games and
no revenue from the sale of tickets to regular season and pre-season away games.
The Predators play all home games at the Orlando Arena, which holds
approximately 16,000 spectators. During the last three seasons (including the
1997 season), the Company sold an average of approximately 8,000 season tickets
and had an average paid attendance of $234,038 per game. Ticket prices for
regular season home games during the 1997 season at the Orlando Arena range from
$10 to $100 per game with an average paid ticket price of approximately $24.
The following table sets forth certain information relating to the
Predators' regular season revenue generated by the sale of tickets for the
periods indicated below:
<TABLE>
<CAPTION>
NUMBER OF AVERAGE AVERAGE
SEASON TICKET PER GAME PAID AVERAGE PAID TICKET REVENUE
SEASON HOLDERS ATTENDANCE TICKET PRICE PER GAME
- --------------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
1996............................. 8,245 10,415 $ 22.46 $ 233,880
1995............................. 10,649 12,926 $ 20.35 $ 263,019
</TABLE>
ADVERTISING AND PROMOTION. The Company generates revenue from the sale of
advertising displayed on signs located throughout the Orlando Arena, and through
other promotions utilizing the team's name or logos. In addition, the Company
markets team "sponsorships" to local and regional businesses which provide a
combination of advertising rights, promotional rights and VIP ticket privileges.
Advertising rights include the use of corporate logos within the Orlando Arena,
commercials on radio and television, advertisements in the ARENABALL magazine,
display of the business's name on the Jumbotron located in the center of the
Orlando Arena, public address announcements, the inclusion of customer names on
team posters and the like. Promotional rights include banners displayed in the
team's VIP room at the Orlando Arena, availability of blocks of seats in the
upper bowl endzone for specific games, the use of the team's logos and
autographed helmets. VIP privileges include high priority seating selections,
parking passes, VIP room passes and travel packages which include attendance at
team away games.
LOCAL AND REGIONAL TELEVISION, CABLE AND RADIO BROADCASTS. The Company has
a two-year contract with the Sunshine Network expiring in the 1997 season which
conveys rights to broadcast Predator games on television, cable and radio
pursuant to which the Company received approximately $89,000 and $87,000 for the
1996 and 1997 seasons, respectively.
NATIONAL TELEVISION. For the 1997 season, the AFL granted ESPN and ESPN 2
exclusive commercial over-the-air television rights to broadcast a total of 14
AFL regular season games, four playoff games and the Arena Bowl, within the
United States. The Company did not receive revenue for these television
broadcast rights in 1996 or 1997 as all such revenue was offset by AFL operating
expenses assessed against the League's teams.
SALE OF MERCHANDISE. The Company generates additional revenue from the sale
of merchandise carrying the Predator logos (primarily athletic clothing such as
sweatshirts, T-shirts, jackets and caps) both
22
<PAGE>
at the Orlando Arena and at the Company's corporate offices in downtown Orlando.
Revenue from the sale of such merchandise was approximately $63,000 for the 1996
season.
STRATEGY
The Company's strategy is to increase revenue by (i) increasing fan
attendance at Predators' home games, (ii) expanding the Predators' advertising
and sponsorship base, and (iii) contracting with additional local and regional
broadcasters to broadcast Predators' games.
The Company believes that fan attendance will increase based upon the game
winning success (if any) of the Predators in the AFL and by increasing media
exposure of the team in the central Florida area. In order to recruit players,
the Company employs a recruiting team which includes the Company's head coach
and Director of Player Personnel. In order to generate increased media interest
in the team in central Florida, the Company employs a marketing staff of two
individuals who call upon the media, corporate sponsors and other central
Florida organizations in an attempt to increase team sponsorship. This marketing
staff also calls directly upon central Florida businesses to solicit advertising
and sponsorship funds on behalf of the team. The Predators participate in a
number of charitable events during the year as a part of a community relations
and recognition program.
In a broader sense, the Company's strategy includes maintaining and building
community support for, and recognition of, the team as an ongoing valuable
entertainment institution in central Florida and throughout the state. The
Company believes that the value of the Predators as a sports team will increase
if community support and recognition are maintained. In this regard, the
Predators are currently in their seventh AFL season and have played in the Arena
Bowl for the AFL championship in three of the prior ten championship games. The
Predators hold the fourth best all-time won-lost record among 27 current and
former AFL teams and recorded the highest average AFL per game attendance for
the 1995 and 1996 seasons.
PERFORMANCE
The following table describes the performance of the Predators during the
last three AFL seasons:
<TABLE>
<CAPTION>
SEASON RECORD FINISH IN DIVISION PLAYOFF RESULTS
----------------- ------------------- ----------------------------
<S> <C> <C> <C>
1994......................... 11-1 1st Lost in Arena Bowl
1995......................... 7-5 2nd Lost in Arena Bowl
1996......................... 9-5 2nd Lost in first playoff game
</TABLE>
On July 18, 1997 the Predators won the Southern Division championship,
qualifying the team for the 1997 playoffs.
TEAM MANAGEMENT
PRESIDENT. Jack Youngblood, a 14-year veteran of the NFL, is President of
the Predators and was appointed the Company's President in April 1997. Mr.
Youngblood directs and oversees all aspects of the Predators' organization,
including operations, administration, marketing, sponsorship, television, radio,
public relations and ticket sales. Prior to joining the team, from 1993 to 1995,
he was a radio talk show host in the Sacramento metropolitan area. During the
1991 and 1992 AFL seasons, he was director of marketing operations for the
Sacramento Surge ("Surge") of the World League of American Football and he also
handled color commentary on Surge radio and television broadcasts. His duties
with Surge included directing front office operations in the area of
sponsorships, ticket sales, corporate sales, advertising and marketing services.
From 1985 to 1991, Mr. Youngblood was employed by the Los Angeles Rams ("Rams")
of the NFL. He also worked as a color analyst on Rams broadcasts, while handling
player relations, public relations, community relations and marketing services.
Mr. Youngblood is considered one of the best defensive ends of his era having
played professional football with the Rams from 1971 to 1984.
23
<PAGE>
A first round draft pick in 1971, he played in all 14 games of his rookie season
and by 1973 was a full-time starter for the Rams. Mr. Youngblood set a Rams team
record by playing in 201 consecutive games and his 151 1/2 sacks rank as third
on the all-time NFL list behind Deacon Jones and Reggie White. He earned all-NFC
honors six times, played in seven Pro Bowls and was named to the SPORTING NEWS
NFC all-star team six times. He was twice the NFC's defensive player of the
year. Mr. Youngblood was an all-American defensive end for the University of
Florida.
COACHES. Perry Moss is in his seventh season as Head Coach and General
Manager for the Predators. During his AFL career, he has coached four teams in
the Arena Bowl, holds the second highest winning percentage in AFL history, an
Arena Bowl championship and five first-place Division finishes. Coach Moss began
his AFL career as an assistant with the Pittsburgh franchise in 1987. After head
coaching positions with the Chicago Bruisers of the AFL and the Amsterdam Lions
of the European Professional Football League, he returned to the AFL in 1990 as
head coach and general manager of the Detroit Drive which he coached to an Arena
Bowl championship. Prior to his AFL experience, Coach Moss was an NFL assistant
coach with the Buffalo Bills (1983-1984), the Green Bay Packers (1974) and the
Chicago Bears (1970-1973). He was head coach of the Montreal Alouettes of the
Canadian Football League from 1960 to 1964. Coach Moss was head coach and
athletic director at Florida State University in 1959 and Marshall University in
1968. He played college football as a quarterback for the University of Tulsa
and one season with the Green Bay Packers of the NFL as the team's 11th round
draft pick.
Coach Moss' staff includes five other assistant coaches including offensive
and defensive coaches, a director of player personnel and an administrative
coach.
24
<PAGE>
PLAYERS
In general, the rules of the AFL permit each team to maintain an active
roster of 24 players during each regular season. The following table sets forth
certain information concerning the active roster of the Predators for the 1997
season.
<TABLE>
<CAPTION>
YEARS
NO. NAME POSITION(1) HT. WT. BIRTHDATE IN AFL
- --------- ------------------------ -------------- --------- --- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 David Pool WR/DB 5-9 182 12/20/66 Rookie
2 Jeff Parker WR/DB 5-10 183 7/26/69 4th Season
4 John Clark* FB/LB 6-3 250 8/16/68 4th Season
5 Chris Barber DS 6-1 190 1/15/64 6th Season
9 Scott Semptimphelter QB 6-12 15 5/15/72 Rookie
12 Franco Grilla Kicker 5-11 180 7/21/70 2nd Season
17 Pat O'Hara QB 6-4 212 9/27/68 3rd Season
21 Bruce LaSane WR/LB 6-4 225 8/30/66 6th Season
23 Corris Ervin DS 5-11 185 8/30/66 2nd Season
28 Curtis Cotton DS 6-1 210 10/15/69 Rookie
33 Michael McClenton FB/LB 5-11 252 12/9/69 2nd Season
34 Jerry Odom FB/LB 5-10 220 11/7/68 6th Season
42 Alex Shell WR/DB 6-4 220 2/24/68 5th Season
44 Paul McGowan FB/LB 6-0 220 1/13/66 5th Season
55 Jerry Sharp OL/DL 6-3 290 10/8/69 3rd Season
62 Vance Hammond* OL/DL 6-7 300 12/4/67 2nd Season
65 Eric Drakes OL/DL 6-5 265 1/24/69 6th Season
73 Ricky Schaaf OL/DL 6-5 285 5/11/70 4th Season
78 Webbie Burnett OL/DL 6-3 285 11/7/67 6th Season
80 Maclin "Mac" Cody OS 5-7 170 8/7/72 Rookie
82 Barry Wagner WR/DB 6-3 215 11/24/67 6th Season
87 Victor Hall OL/DL 6-2 265 12/4/68 4th Season
93 Kelvin Ingram OL/DL 6-2 285 10/25/70 Rookie
95 Samuel Hairston OL/DL 6-4 260 11/9/69 Rookie
96 Skip McClendon OL/DL 6-7 300 4/19/64 3rd Season
98 Jeff Faulkner OL/DL 6-4 300 4/4/64 2nd Season
</TABLE>
- ------------------------
* Injured Reserve
(1) WR--Wide Receiver; DB--Defensive Back; FB--Fullback; LB--Lineback; DS--
Defensive Specialist; OS--Offensive Specialist; QB--Quarterback;
OL--Offensive Line; DL--Defensive Line
Player salaries range from $15,000 to $40,000 per season together with a
housing provision which averages approximately $400 per month per player. AFL
players sign one-year contracts with an additional one-year option season
granted to the team. Following the contract year, if a team and player cannot
agree on the option season salary, the player must either play for the original
option year salary or stay out during the option season, after which he is free
to negotiate with any team in the League. There are no player drafts, although
expansion teams are allowed to draw from a pool of players designated by each
AFL team.
ORLANDO ARENA
The Predators play in the Orlando Arena, which has a seating capacity of
approximately 16,000. Under the terms of the Predators' current lease, which
expires during the 1997 season, the Predators pay a rental which is the higher
of $7,500 per game or 8.5% of ticket sales for such game, up to a maximum of
$15,000 per game. The team does not share in any other arena revenue, such as
parking fees or concession
25
<PAGE>
sales. The Company will be required to negotiate a new contract with the Orlando
Arena for the 1998 season and thereafter. Although the Company believes it will
be able to enter into a mutually acceptable renewal lease (which may include
receiving a share of revenue generated from parking fees and concessions sales),
there can be no such assurance. The loss of use of the Orlando Arena would
substantially and adversely affect the operations of the Predators and the
Company.
COMPETITION
The Predators compete for sports entertainment dollars not only with other
professional sports teams but also with college athletics and other
sports-related entertainment. During parts of the AFL season, the Predators
compete in the city of Orlando with professional basketball and in the state of
Florida with professional hockey and professional baseball. In addition, the
colleges and universities in central Florida, as well as public and private
secondary schools, offer a full schedule of athletic events throughout the year.
The Predators also compete for attendance and advertising revenue with a wide
range of other entertainment and recreational activities available in central
Florida. On a broader scale, the AFL teams compete with football teams fielded
by high schools and colleges, the NFL, Canadian Football League and World
Football League.
EMPLOYEES
In addition to its 24 active players, the Company employs eight football
personnel and nine non-football personnel. During the AFL season, the Company
also uses part-time employees from time to time. None of the Company's
employees, including its players, are covered by collective bargaining
agreements. The Company considers its relations with its employees to be good.
PROPERTIES
In addition to its lease at the Orlando Arena, the Company leases its
executive offices from First Union Bank on a month-to-month basis. The rental
rate, valued at $4,167 per month, is satisfied through a trade-out with First
Union Bank for Predator season tickets and other advertising considerations.
Under the terms of the Predators' current Orlando Arena lease, which expires
during the 1997 season, the Predators pay a rental which is the higher of $7,500
per game or 8.5% of ticket sales for such game, up to a maximum of $15,000 per
game. The team does not share in any other arena revenue such as parking fees or
concession sales. The Company will be required to negotiate a new contract with
the Orlando Arena for the 1998 season and thereafter. Although the Company
believes it will be able to enter into a mutually acceptable renewal lease,
there can be no such assurance. The loss of use of the Orlando Arena would
substantially and adversely affect the operations of the Predators and the
Company. See "Risk Factors--Expiration of Orlando Arena Lease."
26
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows.
<TABLE>
<CAPTION>
OFFICER/DIRECTOR
NAME AGE POSITION SINCE
- ------------------------------------------------ --- ----------------------------------------- -----------------
<S> <C> <C> <C>
William G. Meris................................ 31 Chairman of the Board of Directors 1997
Jack Youngblood................................. 47 President and Director 1997(1)
Alex S. Narushka................................ 36 Secretary, Treasurer and Chief 1997(1)
Financial Officer
Robert G. Flynn................................. 32 Chief Operating Officer 1997
Edgar J. Allen.................................. 50 Vice President--Sales and Marketing 1997
Alan N. Gagleard................................ 44 Director 1997
Thomas F. Winters, Jr., M.D..................... 44 Director 1997
</TABLE>
- ------------------------
(1) Although newly elected executive officers of the Company, Messrs. Youngblood
and Narushka have held management positions with the Predators for three
years and four years, respectively.
Directors are elected at the Company's annual meeting of shareholders and
serve a term of one year or until their successors are elected and qualified.
Officers are appointed by the Board of Directors and serve at the discretion of
the Board of Directors, subject to the bylaws of the Company.
Following the Offering, the Company will establish an Audit and Compensation
Committee composed of a majority of independent directors. The Audit Committee
will review the engagement and independence of the Company's independent
accountants, the audit and non-audit fees of the independent accountants and the
adequacy of the Company's internal accounting controls. The Compensation
Committee will consider the compensation and incentive arrangements of the
Company's executive officers.
The Company has agreed with the Representative that, for a period of 24
months from the date of closing of the Offering, the Company will allow an
observer designated by the Representative and acceptable to the Company to
attend all meetings of the Board of Directors. The observer will have no voting
rights, will be reimbursed for out-of-pocket expense incurred in attending
meetings and will be indemnified against any claims arising out of participation
at the meetings, including claims based on liabilities arising under the
securities laws.
The principal occupation of each director and executive officer of the
Company, for at least the past five years, is as follows:
WILLIAM G. MERIS was appointed the Company's Chairman in March 1997. Since
April 1996, Mr. Meris has also served as Chairman of the Board of Directors of
Interhealth Nutritionals, Inc., a privately-held nutrition supplement
manufacturer. He is also a Director of Gum Tech International, Inc., a
publicly-held specialty chewing gum manufacturer. Since June 1995, Mr. Meris has
been President and sole stockholder of WGM Corporation, which acts as the
General Partner of the Monolith Limited Partnership, a limited partnership which
is a principal stockholder of the Company. From January 1995 to June 1995, he
was also a co-manager of Meris Financial, Inc., a private investment and
consulting company. From October 1984 until March 1995, Mr. Meris was a co-owner
of Cyberia, Inc., a virtual reality entertainment firm. Mr. Meris was employed
by Prudential Securities, Inc., as a retail stockbroker from 1989 to April 1994.
Subsequently, he worked in the same capacity at Franklin-Lord, Inc. between May
and August of 1994. Mr. Meris earned a Bachelor of Science degree in Business
Administration from Arizona State University. During the AFL season, he devotes
60% of his time to the affairs of the Company and during the remainder of the
year devotes 25% of his time to the affairs of the Company.
27
<PAGE>
JACK YOUNGBLOOD, a 14-year veteran of the NFL, is in his third season with
the Predators. He was appointed Vice President of the Predators in February 1995
and President of the Company in April 1997. Mr. Youngblood directs and oversees
all aspects of the Predators' organization, including operations,
administration, marketing, sponsorship, television, radio, public relations and
ticket sales. From 1993 until he joined the team in 1995, Mr. Youngblood was a
radio talk show host in the Sacramento metropolitan area. During the 1991 and
1992 AFL seasons, he was director of marketing operations for the Sacramento
Surge ("Surge") of the World League of American Football and he also handled
color commentary on Surge radio and television broadcasts. His duties with Surge
included directing front office operations in the area of sponsorships, ticket
sales, corporate sales, advertising and marketing services. From 1985 to 1991,
Mr. Youngblood was employed by the Los Angeles Rams ("Rams") of the NFL. He also
worked as a color analyst on Rams broadcasts, while handling player relations,
public relations, community relations and marketing services. Mr. Youngblood is
considered one of the best defensive ends of his era having played professional
football with the Rams from 1971 to 1984. A first round draft pick in 1971, he
played in all 14 games of his rookie season and by 1973 was a full-time starter
for the Rams. Mr. Youngblood set a Rams team record by playing in 201
consecutive games and his 151 1/2 sacks rank as third on the all-time NFL list
behind Deacon Jones and Reggie White. He earned all-NFC honors six times, played
in seven Pro Bowls and was named to the SPORTING NEWS NFC all-star team six
times. He was twice the NFC's defensive player of the year. Mr. Youngblood was
an all-American defensive end for the University of Florida.
ALEX S. NARUSHKA joined the Company as the Predators' Assistant General
Manager in April 1994 and was appointed the Company's Secretary, Treasurer and
Chief Financial Officer in April 1997. From 1992 to 1994, he was employed by the
former Managing General Partner of the Predators. Mr. Narushka was the Director
of Finance for the Orlando Thunder of the World Football League in 1991 and was
Controller of the Orlando Renegades of the United States Football League from
1984 to 1986. He graduated from Auburn University with a degree in Business
Administration.
ROBERT G. FLYNN joined the Predators in September 1991 and was appointed its
Director of Operations in 1995 and the Company's Chief Operating Officer in
April 1997. In these capacities, he oversees all game operations, merchandising,
internship program, game system maintenance, sponsorships and travel. He is
Director of the Winter Park YMCA and serves as chairman for the Alumni Sports
Committee of Trinity Preparatory School. Mr. Flynn earned a Masters degree in
Sports Administration from the University of Florida.
EDGAR J. ALLEN joined the Company as its Vice President--Sales and Marketing
in June 1997. From September 1996 until June 1997, Mr. Allen acted as an
independent sports consultant. From 1989 to 1996, he was Director of Sponsorship
and Broadcast Sales for the Orlando Magic of the National Basketball Association
where he was responsible for building sponsorship and broadcast sales revenue.
From 1974 to 1976, Mr. Allen was general manager of WHLQ-FM radio station and
from 1977 to 1980, was a regional executive for the Radio Advertising Bureau
(the commercial trade association of the radio business). From 1980 to 1983, he
was responsible for sales and marketing for Capital Broadcasting, a six-radio
station holding company based in Mobile, Alabama. From 1983 to 1989, Mr. Allen
was self-employed as a broadcast operating consultant.
ALAN N. GAGLEARD has been a practicing attorney since 1979 specializing in
tax law, employee benefits related law, pension and profit sharing plans, and
general civil litigation. He was also licensed as a certified public accountant
in the State of Michigan in 1973. Mr. Gagleard was employed by Coopers and
Lybrand and Price Waterhouse and Company, two major national accounting firms
prior to and during law school. In 1997, Mr. Gagleard became the President and
Chief Executive Officer of Sunwest P.E.O. Inc., the third largest professional
employer organization in Arizona. Mr. Gagleard graduated from the Detroit
College of Law in 1979.
THOMAS F. WINTERS, JR., M.D. A graduate of Brown University, Dr. Winters
received his medical degree in 1980 from the University of Connecticut. He
completed an internship in internal medicine at the
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<PAGE>
Medical College of Virginia in Richmond, Virginia, a year of general surgery at
St. Francis Hospital and Medical Center in Hartford, Connecticut and an
orthopedic residency was at the University of Connecticut Health Center in
Farmington, Connecticut. Dr. Winters completed an A.O. Fellowship in Trauma in
Hanover, West Germany, followed by Fellowships in Sports Medicine and Adult
Reconstructive Surgery at the Brigham and Women's Hospital of Harvard Medical
School. At the Harvard Medical School he served as Assistant Team Physician for
the Department of Athletics of Harvard University. He has been involved with
teaching at both Harvard and now at Orlando Regional Medical Center. Dr. Winters
currently serves as Team Physician for the Orlando Predators; a designated
consultant for Major League Baseball, Inc.; Orthopedic Consultant for the Kansas
City Royals Baseball Organization, Orlando International Aquatic Center and
Brown's Gymnasium. He also works closely with area college and high school
athletes. Dr. Winters has concentrated on adult orthopedics, specifically,
Sports Medicine and Adult Reconstruction, which includes Total Joint
Replacement, since 1986. He has received patents for the design of rotational
components for total knee replacements, and for meniscal cartilage repair
following knee injuries.
EXECUTIVE COMPENSATION
The Company was organized in March 1997 to acquire, own and operate the
Predators. See "Prospectus Summary--Introduction." Accordingly, all of the
Company's executive officers commenced their employment with the Company in
March 1997, although Messrs. Youngblood and Narushka previously held
non-executive officer positions with Orlando Predators, Ltd. ("OPL"), the prior
owner of the Predators and Mr. Youngblood earned compensation from OPL of
approximately $100,000 for the year ended December 31, 1996. No executive
officer (except Mr. Youngblood) is expected to earn in excess of $100,000 in
salary and other compensation for the year ending December 31, 1997. The table
below reflects anticipated annual compensation payable to the Company's Chairman
and President for the year ending December 31, 1997, which will be the Company's
first year of operations.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------------------------
(A) (E) (F)
NAME AND PRINCIPAL (B) (C) (D) STOCK OTHER ANNUAL
POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION($)
- --------------------------------------------------------- --------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
William G. Meris......................................... 1997 0 0 $ 15,000(1)
Chairman
Jack Youngblood.......................................... 1997 60,000 (2) 34,500 (2)
President
</TABLE>
- ------------------------
(1) Represents a housing allowance provided to Mr. Meris.
(2) In July 1997, the Company entered into a three-year employment agreement
with Mr. Youngblood providing for annual salaries of $60,000, $65,000 and
$70,000 over the ensuing three-year period. Mr. Youngblood will also receive
a commission ranging from 7% to 10% of all "Sponsorship Income" of the team,
which is defined as gross revenues generated in cash or by tradeout for any
expense that would constitute an expense on the Company's statement of
operations. In 1996, Mr. Youngblood received a commission of $45,000 based
upon total Sponsorship Income for the year ended December 31, 1996 of
$450,000. Under Mr. Youngblood's employment agreement, he was also granted
stock options to purchase up to 34,500 shares of the Company's Common Stock
at $2.00 per share vesting over a three-year period and exercisable until
July 2007.
The Company's directors do not receive compensation for attending Board
meetings but are reimbursed for out-of-pocket expenses incurred in connection
therewith.
29
<PAGE>
1997 EMPLOYEE STOCK OPTION PLAN
In April 1997, the Company's stockholders adopted the Company's 1997
Employee Stock Option Plan (the "Plan"), which provides for the grant of stock
options intended to qualify as "incentive stock options" and "nonqualified stock
options" (collectively "stock options") within the meaning of Section 422 of the
United States Internal Revenue Code of 1986 (the "Code"). Stock options are
issuable to any officer, director, key employee or consultant of the Company.
The Company has reserved 150,000 shares of Common Stock for issuance under
the Plan. The Plan is administered by the full Board of Directors, which
determines which individuals shall receive stock options, the time period during
which the stock options may be exercised, the number of shares of Common Stock
that may be purchased under each stock option and the stock option price.
The per share exercise price of incentive stock options may not be less than
the fair market value of the Common Stock on the date the option is granted. The
aggregate fair market value (determined as of the date the stock option is
granted) of the Common Stock that any person may purchase under an incentive
stock option in any calendar year pursuant to the exercise of incentive stock
options may not exceed $100,000. No person who owns, directly or indirectly, at
the time of the granting of an incentive stock option, more than 10% of the
total combined voting power of all classes of stock of the Company is eligible
to receive incentive stock options under the Plan unless the stock option price
is at least 110% of the fair market value of the Common Stock subject to the
stock option on the date of grant.
No incentive stock options may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the stock option may only be exercisable by the optionee. Stock
options may be exercised only if the stock option holder remains continuously
associated with the Company from the date of grant to the date of exercise. The
exercise date of a stock option granted under the Plan cannot be later than ten
years from the date of grant. Any stock options that expire unexercised or that
terminate upon an optionee's ceasing to be employed by the Company become
available once again for issuance. Shares issued upon exercise of a stock option
will rank equally with other shares then outstanding.
As of the date of this Prospectus, 103,000 stock options have been granted
under the Plan, including an aggregate of 79,500 stock options granted to
officers and directors of the Company exercisable at $2.00 per share.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
ownership of the Company's Common Stock as of the date of the Prospectus, by (i)
each person who is known by the Company to own of record or beneficially more
than 5% of the Company's Common Stock, (ii) each of the Company's directors and
(iii) all directors and officers of the Company as a group. The stockholders
listed in the table
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<PAGE>
have sole voting and investment powers with respect to the shares of Common
Stock and their addresses are in care of the Company.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NUMBER OF SHARES ----------------------
BENEFICIALLY PRIOR TO AFTER
NAME OWNED OFFERING OFFERING
- -------------------------------------------------------------------------- ----------------- --------- -----------
<S> <C> <C> <C>
William G. Meris*(1)...................................................... 5,000 .4% .2%
The Monolith Limited Partnership*(1)...................................... 1,276,500 92.5% 56.0%
Jack Youngblood(2)........................................................ 34,500 2.4% 1.5%
Alan N. Gagleard(3)....................................................... 122,300 8.7% 5.3%
Thomas F. Winters, Jr., M.D............................................... 5,000 .4% .2%
All directors and officers as a group (7 persons)(1)(2)(3)................ 1,478,300 100.0% 62.2%
</TABLE>
- ------------------------
* May be deemed to be "founders" and "promoters" of the Company as those terms
are defined under the 1933 Act.
(1) The Monolith Limited Partnership ("Monolith") is a privately-held, Delaware
limited partnership which owns 1,276,500 shares of the Company's Common
Stock as indicated above. The General Partner of Monolith is WGM
Corporation, a Delaware Corporation ("WGM"), of which William G. Meris is
the President and sole stockholder. The amount shown represents stock
options to purchase up to 5,000 shares of the Company's Common Stock at
$2.00 per share under the Company's 1997 Stock Option Plan granted to Mr.
Meris.
(2) Includes stock options to purchase up to 34,500 shares of the Company's
Common Stock at $2.00 per share until July 2007, which have not yet vested.
(3) Includes (i) 103,500 shares of Common Stock, (ii) stock options to purchase
an additional 13,800 shares of the Company's Common Stock from Monolith at
$2.00 per share, and (iii) stock options to purchase up to 5,000 shares of
the Company's Common Stock at $2.00 per share under the Company's 1997 Stock
Option Plan.
CERTAIN TRANSACTIONS
In February 1997, The Monolith Limited Partnership ("Monolith") purchased
92.5% and Alan N. Gagleard ("Gagleard") purchased 7.5% of the Predators from
Orlando Predators, Ltd. ("OPL"), a non-affiliated Florida limited partnership
for a purchase price of $2,325,000 including $1,920,000 in cash, $180,000 in the
form of a promissory note payable to OPL and the issuance of $225,000 of
Monolith limited partnership interests to OPL. In March 1997, Monolith organized
the Company and transferred its 92.5% ownership of the Predators to the Company
in exchange for the issuance by the Company of 1,276,500 shares of its Common
Stock to Monolith, the issuance of a non-interest bearing promissory note
payable to Monolith in the amount of $1,295,000 due the earlier of December 31,
1998 or the closing of the Offering and the assumption by the Company of the
$180,000 promissory note obligation to OPL. At the same time, Gagleard
transferred his 7.5% ownership of the Predators to the Company in exchange for
103,500 shares of its Common Stock and the issuance of a promissory note payable
to Gagleard in the amount of $105,000 carrying the same terms as the Monolith
promissory note. Also in March 1997, Mr. Meris, the President of WGM
Corporation, the corporate general partner of Monolith, became the Chairman of
the Company and Gagleard became a director.
In June 1997, the Company paid the $180,000 promissory note due OPL and
Monolith repurchased the $225,000 of Monolith limited partnership interests from
OPL for $225,000 in cash. At the same time, Monolith borrowed $112,500 from
Gagleard, evidenced by a non-interest bearing promissory note the earlier of
December 31, 1998 or the closing of the Offering. As additional consideration
for the loan, Monolith granted Gagleard an option to purchase 13,800 shares of
the Company's Common Stock owned by Monolith for $2.00 per share.
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<PAGE>
Meris Financial, Inc., an affiliate of William G. Meris, the Company's
Chairman, earned a consulting fee of $5,000 plus reimbursement of its expenses
for providing administrative assistance to the Company in connection with the
Offering.
In June 1997 Monolith and Gagleard loaned the Company $114,000 and $111,000,
respectively for working capital evidenced by a promissory note bearing interest
at 8% per annum due the earlier of December 31, 1998 or the closing of the
Offering.
The Company believes the terms of the above transactions were fair,
reasonable and consistent with terms that could be obtained from nonaffiliated
third parties. All future transactions with affiliates of the Company will be
approved by the disinterested members of the Company's Board of Directors.
Moreover, the Company's securities (other than stock options under the Company's
1997 Employee Stock Option Plan) may not be issued to management, promoters or
their respective associates or affiliates without obtaining (i) a fairness
opinion from a qualified brokerage firm or appraiser confirming the fairness of
the consideration to be received by the Company for the issuance of any such
securities and (ii) written approval of the securities issuance by a majority of
the Company's disinterested directors.
DESCRIPTION OF SECURITIES
UNITS
Each Unit offered hereby consists of two shares of Common Stock and one
Warrant. The Common Stock and Warrants have been approved for listing on NASDAQ
and are separately transferable as of the date of this Prospectus. The Units
have not been listed with, and will not trade on, NASDAQ.
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of no par value Common
Stock, of which 1,380,000 shares are outstanding as of the date of this
Prospectus. Upon issuance, the shares of Common Stock are not subject to further
assessment or call. The holders of Common Stock are entitled to one vote for
each share held of record on each matter submitted to a vote of stockholders.
Cumulative voting for election of directors is not permitted. Subject to the
prior rights of any series of preferred stock which may be issued by the Company
in the future, holders of Common Stock are entitled to receive ratably such
dividends that may be declared by the Board of Directors out of funds legally
available therefor, and, in the event of the liquidation, dissolution or winding
up of the Company, are entitled to share ratably in all assets remaining after
payment of liabilities. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. The outstanding
Common Stock is, and the Common Stock to be outstanding upon completion of the
Offering will be, validly issued, fully paid and nonassessable.
WARRANTS
Each Warrant represents the right to purchase one share of Common Stock at
an initial exercise price of $7.50 per share for a period of five years from the
date hereof. The exercise price and the number of shares issuable upon exercise
of the Warrants are subject to adjustment in certain events, including the
issuance of Common Stock as a dividend on shares of Common Stock, subdivisions
or combinations of the Common Stock or similar events. The Warrants do not
contain provisions protecting against dilution resulting from the sale of
additional shares of Common Stock for less than the exercise price of the
Warrants or the current market price of the Company's securities.
Warrants may be redeemed in whole or in part, at the option of the Company,
upon 30 days' notice, at a redemption price equal to $.01 per Warrant if the
closing price of the Company's Common Stock on NASDAQ is at least $7.50 per
share for 20 consecutive trading days, ending not earlier than five days before
the Warrants are called for redemption.
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<PAGE>
Holders of Warrants may exercise their Warrants for the purchase of shares
of Common Stock only if a current prospectus relating to such shares is then in
effect and only if such shares are qualified for sale, or deemed to be exempt
from qualification, under applicable state securities laws. The Company will use
its best efforts to maintain a current prospectus relating to such shares of
Common Stock at all times when the market price of the Common Stock exceeds the
exercise price of the Warrants until the expiration date of the Warrants,
although there can be no assurance that the Company will be able to do so.
The shares of Common Stock issuable upon exercise of the Warrants will be,
when issued in accordance with the Warrants, fully paid and non-assessable. The
holders of the Warrants have no rights as stockholders until they exercise their
Warrants.
For the life of the Warrants, the holders thereof are given the opportunity
to profit from a rise in the market for the Company's Common Stock, with a
resulting dilution in the interest of all other stockholders. So long as the
Warrants are outstanding, the terms on which the Company could obtain additional
capital may be adversely affected. The holders of the Warrants might be expected
to exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital by a new offering of securities on terms more
favorable than those provided by the Warrants.
PREFERRED STOCK
The Company is authorized to issue 1,500,000 shares of preferred stock, no
par value (the "Preferred Stock"). The Preferred Stock may, without action by
the stockholders of the Company, be issued by the Board of Directors from time
to time in one or more series for such consideration and with such relative
rights, privileges and preferences as the Board may determine. Accordingly, the
Board has the power to fix the dividend rate and to establish the provisions, if
any, relating to voting rights, redemption rate, sinking fund, liquidation
preferences and conversion rights for any series of Preferred Stock issued in
the future.
It is not possible to state the actual effect of any other authorization of
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of any other series of Preferred
Stock. The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the stockholders of the Company, and may adversely affect the
holders of the Common Stock. The Company has not issued any Preferred Stock and
has no current intention to do so.
COMMON STOCK ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, there will be 2,280,000 shares of Common
Stock outstanding (excluding shares issuable upon issuance of the Warrants, the
Overallotment Option or the Representative's Unit Warrant), of which 900,000
shares and 450,000 shares underlying the Warrants are being registered in the
Offering and will be freely tradeable without restriction under the 1933 Act
(unless purchased by "affiliates" of the Company as this term is defined under
the 1933 Act). The remaining 1,380,000 shares have not been registered under the
1933 Act and are therefore "restricted securities" under Rule 144 of the 1933
Act. ("Rule 144")
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one-year holding period, subject to certain
requirements concerning the availability of public information and the manner
and notice of sale, may sell within any three-month period, a number of shares
which does not exceed the greater of one percent of the then outstanding common
shares (approximately 22,800 shares immediately after the Offering assuming no
exercise of the Warrants, the Overallotment Option or the Representative's Unit
Warrant) or the average weekly trading volume during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the sale
of shares by a person without any quantity limitation, so long as such person is
not an affiliate of the Company, has not been an
33
<PAGE>
affiliate for three months prior to the sale and has beneficially owned the
shares for at least two years. All 1,380,000 shares will be available for resale
under Rule 144 in March 1998 subject to the lock-up agreements described below.
The Company is unable to predict the effect that any sales, under Rule 144 or
otherwise, may have on the then prevailing market price of the Common Stock.
All of the Company's stockholders have agreed in lock-up agreements signed
with the Representative not to sell or otherwise dispose of any of their shares
of Common Stock for a period of 12 months from the date of this Prospectus
without the prior written consent of the Representative. No prediction can be
made as to the effect, if any, that sales of Common Stock or the availability of
such shares for sale will have on the market price of the Common Stock.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market with the Representative's consent soon after
completion of the Offering, may adversely affect prevailing market prices for
the Common Stock and could impair the Company's ability to raise capital through
the sale of its equity securities.
The Company has granted certain demand and piggy-back registration rights to
the Representative with respect to the Representative's Unit Warrant as well as
the Common Stock issuable upon exercise of the Representative's Unit Warrant.
The Company may also register the Common Stock underlying its 1997 Employee
Stock Option Plan in the future. See "Management--1997 Employee Stock Option
Plan" and "Underwriting."
TRANSFER AGENT AND WARRANT AGENT
The Company has appointed Corporate Stock Transfer, Inc., 370 17th Street,
Suite 2350, Denver, Colorado 80202, as its transfer agent and warrant agent.
DIVIDENDS
The Company has not paid dividends on its Common Stock since inception and
does not plan to pay dividends in the foreseeable future. Earnings, if any, will
be retained to finance growth.
LIMITATION ON LIABILITY
The Company's bylaws provide that a director shall not be personally liable
to the Company or its stockholders for any action taken or any failure to act to
the full extent permitted by the Florida Business Corporation Act. The effect of
this provision in the bylaws is to eliminate the rights of the Company and its
stockholders, through stockholders' derivative suits on behalf of the Company,
to recover monetary damages from a director for breach of the fiduciary duty of
care as a director including breaches resulting from negligent or grossly
negligent behavior. This provision does not limit or eliminate the rights of the
Company or any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care or to seek
monetary damages for (i) a violation of criminal law, (ii) unlawful payment of
dividends or other distribution under Florida law, (iii) a transaction in which
a director derived an improper personal benefit, (iv) willful misconduct, or (v)
reckless, malicious or wanton acts.
34
<PAGE>
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase on a firm commitment basis
from the Company the number of Units set forth opposite their names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER UNITS
- ---------------------------------------------------------------------------------- -----------
<S> <C>
First Midwest Securities, Inc.
Total......................................................................... 450,000
-----------
-----------
</TABLE>
The Company has been advised by the Representative that the Underwriters
propose to offer the Units purchased by them directly to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at a maximum price of $____________ per Unit. Any changes in the
price of the Units or selling terms after the initial distribution of the Units
offered hereby will not affect the amount of net proceeds to be received by the
Company as set forth on the cover page of this Prospectus. The Underwriters are
obligated to purchase and pay for all of the Units, if any Units are taken.
After the initial public offering of the Units, the offering price and the
selling terms may be changed by the Underwriters.
The Company has granted the Representative an Overallotment Option,
exercisable within 30 days from the date of this Prospectus, to purchase up to
67,500 Units solely to cover overallotments.
The Underwriters will purchase the Units (including Units subject to the
Overallotment Option) from the Company at a price of $10.00 per Unit. In
addition, the Company has agreed to pay to the Representative a 3%
nonaccountable expense allowance on the aggregate initial public offering price
of the Units, including Units subject to the Overallotment Option. The
Overallotment Option may only be exercised by the Representative.
The offering price of the Units and the exercise price of the Warrants were
determined by negotiations between the Company and the Representative based upon
such factors as the Company's historical revenues and earnings, the percentage
of the Company's outstanding securities to be offered hereby, the experience of
the Company's management and the prospects for the Company and its competitors
within the sports entertainment industry.
The Company has agreed to issue the Representative's Unit Warrant to the
Representative for a consideration of $100. The Representative's Unit Warrant is
exercisable at any time during the four-year period commencing one year from the
date of this Prospectus to purchase up to 45,000 Units for $12.00 per Unit. The
terms of the Warrants comprising a part of the Representative's Unit Warrant are
identical to the terms of the Warrants. The Representative's Unit Warrant is not
transferable for one year from the date of this Prospectus except (i) to an
Underwriter or a partner or officer of an Underwriter or (ii) by will or
operation of law. During the term of the Representative's Unit Warrant, the
holders thereof are given the opportunity to profit from a rise in the market
price of the Company's securities. The Company may find it more difficult to
raise additional equity capital while the Representative's Unit Warrant is
outstanding. At any time at which the Representative's Unit Warrant is likely to
be exercised, the Company would probably be able to obtain additional equity
capital on more favorable terms. Any profit realized on the sale of the
Representative's Unit Warrant or the underlying securities may be deemed
additional
35
<PAGE>
underwriting compensation. The Company has registered the Units underlying the
Representative's Unit Warrant under the 1933 Act. If the Company files a
registration statement under the provisions of the 1933 Act at any time for a
period of four years commencing one year from the date of this Prospectus, the
holders of the Representative's Unit Warrant or underlying Units will have the
right, subject to certain conditions, to include in such registration statement,
at the Company's expense, all or part of the underlying Units at the request of
the holders. Additionally, the Company has agreed, for a period of four years
commencing one year from the date of this Prospectus, on demand of the holders
of a majority of the Representative's Unit Warrant or the Units issued
thereunder, to register the Units underlying the Representative's Unit Warrant
one time at the Company's expense. The registration of securities pursuant to
the Representative's Unit Warrant may result in substantial expense to the
Company at a time when it may not be able to afford such expense and may impede
future financing. The Company may find that the terms on which it could obtain
additional capital may be adversely affected while the Representative's Unit
Warrant is outstanding. The number of Units issuable under the Representative's
Unit Warrant and the exercise price are subject to adjustment under certain
events to prevent dilution.
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock and Warrants in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purposes of preventing
or retarding a decline in the market price of the Common Stock and Warrants; and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Common Stock or of Warrants than they are required to
purchase from the Company in the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Stock and Warrants sold in the Offering
for their account may be reclaimed by the syndicate if such securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock and Warrants, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on NASDAQ in the
over-the-counter market or otherwise.
All of the Company's stockholders have agreed, pursuant to lock-up
agreements with the Representative, not to sell or otherwise dispose of any of
their shares of Common Stock for a period of 12 months from the date of this
Prospectus without the prior written consent of the Representative. There are no
plans, proposals, arrangements or understandings by or with the Representative
to waive or shorten any lock-up agreements with the Company's stockholders.
The Company has agreed with the Representative that, for a period of 24
months from the date of closing of the Offering, the Company will allow an
observer designated by the Representative and acceptable to the Company to
attend all meetings of the Board of Directors. The observer will have no voting
rights, will be reimbursed for out-of-pocket expense incurred in attending
meetings and will be indemnified against any claims arising out of participation
at the meetings, including claims based on liabilities arising under the
securities laws.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Representative, the Company and the Commission. See "Available
Information."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the 1933 Act, or to contribute to
payments that any Underwriter may be required to make in respect thereof. The
Representative does not intend to sell the Units to any accounts over which it
exercises discretionary authority.
36
<PAGE>
LEGAL MATTERS
The validity of the Common Stock and Warrants comprising the Units offered
hereby will be passed upon for the Company by the Law Office of Gary A. Agron,
Englewood, Colorado. Certain legal matters in connection with the Offering will
be passed upon for the Representative by Niebler & Muren, S.C., Brookfield,
Wisconsin.
EXPERTS
The financial statements of the Company for the years ended December 31,
1996 and 1995, appearing in this Prospectus, have been audited by AJ. Robbins,
P.C., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the 1933 Act with
respect to the Units offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Units,
reference is hereby made to the Registration Statement and such exhibits and
schedules filed as a part thereof, which may be inspected without charge at the
public reference section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at the regional offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the Registration Statement may
be obtained from the Public Reference Section of the Commission upon payment of
prescribed fees.
The Company will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information may be
inspected at the public reference facilities of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material
can be obtained at prescribed rates from the Commission at such address. Such
reports, proxy statements and other information can also be inspected at the
Commission's regional offices at the addresses indicated above.
37
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
UNAUDITED PROFORMA FINANCIAL STATEMENTS
Unaudited Proforma Explanatory Headnote.................................................................. F-2
Unaudited Proforma Statements of Operations.............................................................. F-3
Notes to Unaudited Proforma Financial Statements......................................................... F-5
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
Independent Auditors' Report............................................................................. F-6
Financial Statement:
Balance Sheet.......................................................................................... F-7
Notes to Financial Statement............................................................................. F-8
ORLANDO PREDATORS, A DIVISION OF ORLANDO PREDATORS, LTD.
Independent Auditors' Report............................................................................. F-15
Financial Statements:
Balance Sheet.......................................................................................... F-16
Statements of Operations............................................................................... F-17
Statement of Changes in Division Equity (Deficit)...................................................... F-18
Statements of Cash Flows............................................................................... F-19
Notes to Financial Statements............................................................................ F-20
</TABLE>
F-1
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
UNAUDITED PROFORMA FINANCIAL INFORMATION
EXPLANATORY HEADNOTE
MARCH 31, 1997
INTRODUCTION
The following unaudited proforma financial statements give effect to the
acquisition of The Orlando Predators, a Division of Orlando Predators, Ltd.
(Predators) by The Orlando Predators Entertainment, Inc. (the Company) and is
based on the estimates and assumptions set forth herein and in the notes to such
statements. This proforma information has been prepared utilizing the historical
financial statements and notes thereto, which are incorporated by reference
herein. The proforma financial data does not purport to be indicative of the
results which actually would have been obtained had the acquisition been
effected on the date indicated or the results which may be obtained in the
future.
Revenues and related game expenses are recorded at the time games are
played. General, administrative, selling and promotional expenses are recognized
as incurred.
The proforma statement of operations for the three months ended March 31,
1997 includes the operating results of the Company for the period February 14,
1997 to March 31, 1997 and the operating results of the predecessor owners of
the Predators for the period January 1, 1997 to February 13, 1997. The proforma
statement of operations for the three months ended March 31, 1996 consists of
the operating results of the predecessor owners of the Predators.
ACQUISITION
On February 13, 1997 the Company acquired substantially all of the assets
and the business of the Orlando Predators, a Division of Orlando Predators, Ltd.
(Predators). The assets consist primarily of the Orlando Arena Football League
(AFL) Membership, game and office equipment. The purchase price for the team was
$2,325,000 comprised of $1,875,000 in cash, $180,000 note which is payable in
February, 1998, assumption of $45,000 in commissions payable, and $225,000 of
Monolith Limited Partnership interests (agent for the Company).
The purchase price for the Predators has been allocated as follows:
<TABLE>
<S> <C>
AFL Membership.......................................................... $1,989,860
Game equipment system................................................... 225,721
Office equipment........................................................ 41,948
Prepaid expenses........................................................ 67,471
---------
Total purchase price.................................................. 2,325,000
Monolith units.......................................................... (225,000)
Note payable............................................................ (180,000)
Commissions payable..................................................... (45,000)
---------
Cash paid at closing.................................................... $1,875,000
---------
---------
</TABLE>
F-2
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
UNAUDITED PROFORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
THE ORLANDO
ORLANDO PREDATORS
PREDATORS ENTERTAINMENT, THE ORLANDO PROFORMA
FOR THE INC. PREDATORS THREE
PERIOD ORLANDO FOR THE PERIOD ENTERTAINMENT, MONTHS
JANUARY 1 TO PREDATORS FEBRUARY 14 TO INC. ENDED
FEBRUARY 13, PROFORMA MARCH 31, PROFORMA MARCH 31,
1997 ADJUSTMENTS 1997 ADJUSTMENTS 1997
------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES: $ -- $ -- $ -- $ -- $ --
------------- ----------- -------------- ------- ------------
COSTS AND EXPENSES:
Selling and promotional expenses....... -- -- 3,140 -- 3,140
General and administrative............. 65,792 -- 68,054 -- 133,846
Amortization........................... 1,172 5,021(2) 6,193 -- 12,386
Depreciation........................... 1,469 (632)(2) 837 -- 1,674
------------- ----------- -------------- ------- ------------
Total Costs and Expenses............. 68,433 4,389 78,224 -- 151,046
------------- ----------- -------------- ------- ------------
OPERATING (LOSS)......................... (68,433) (4,389) (78,224) -- (151,046)
------------- ----------- -------------- ------- ------------
OTHER INCOME (EXPENSE):
Interest expense....................... -- -- (1,023) (1,023)(3) (2,046)
Interest income........................ 729 -- 1,725 -- 2,454
------------- ----------- -------------- ------- ------------
Net Other Income (Expense)........... 729 -- 702 (1,023) 408
------------- ----------- -------------- ------- ------------
NET (LOSS)............................... $ (67,704) $ (4,389) $ (77,522) $ (1,023) $ (150,638)
------------- ----------- -------------- ------- ------------
------------- ----------- -------------- ------- ------------
NET (LOSS) PER SHARE..................... $ (.11)(4)
------------
------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING............................ 1,380,000
------------
------------
</TABLE>
SEE ACCOMPANYING HEADNOTE AND NOTES TO PROFORMA FINANCIAL STATEMENTS
F-3
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
UNAUDITED PROFORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
ORLANDO
PREDATORS
FOR THE THREE ORLANDO PROFORMA
MONTHS ENDED PREDATORS THREE MONTHS
MARCH 31, PROFORMA ENDED MARCH
1996 ADJUSTMENTS 31, 1996
------------- ----------- -------------
<S> <C> <C> <C>
REVENUES:............................................................. $ -- $ -- $ --
------------- ----------- -------------
COSTS AND EXPENSES:
Selling and promotional expenses.................................... -- -- --
General and administrative.......................................... 106,238 -- 106,238
Amortization........................................................ 2,344 10,042(2) 12,386
Depreciation........................................................ 2,902 (1,228)(2) 1,674
------------- ----------- -------------
Total Costs and Expenses.......................................... 111,484 8,814 120,298
------------- ----------- -------------
OPERATING (LOSS)...................................................... (111,484) (8,814) (120,298)
------------- ----------- -------------
OTHER INCOME (EXPENSE):
Interest expense.................................................... -- (2,046)(3) (2,046)
Interest income..................................................... 1,858 -- 1,858
------------- ----------- -------------
Net Other Income (Expense)........................................ 1,858 (2,046) (188)
------------- ----------- -------------
NET (LOSS)............................................................ $ (109,626) $ (10,860) $ (120,486)
------------- ----------- -------------
------------- ----------- -------------
NET (LOSS) PER SHARE.................................................. $ (.09)(4)
-------------
-------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.................. 1,380,000
-------------
-------------
</TABLE>
SEE ACCOMPANYING HEADNOTE AND NOTES TO PROFORMA FINANCIAL STATEMENTS
F-4
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO UNAUDITED PROFORMA FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NOTE 1--PROFORMA ADJUSTMENTS
The adjustments relating to the statements of operations are computed
assuming the acquisition of the Predators occurred at the beginning of the
periods presented.
NOTE 2--DEPRECIATION AND AMORTIZATION
Reduced depreciation reflects reduction of depreciation of office equipment
due to the decreased cost of assets acquired. Additional amortization reflects
amortization of AFL membership using the straight-line method over 40 years and
the increased cost of the assets acquired. Depreciation expense for game
equipment is recognized ratably over the games.
NOTE 3--INTEREST EXPENSE
Reflects interest expense for note payable used to finance the acquisition,
at 9.25%.
NOTE 4--PROFORMA NET (LOSS) PER SHARE
Proforma net loss per share is calculated assuming that the 1,380,000 shares
of the Company's common stock are outstanding for the entire period presented.
F-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
ORLANDO, FLORIDA
We have audited the accompanying balance sheet of The Orlando Predators
Entertainment, Inc. as of March 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of The Orlando Predators
Entertainment, Inc. as of March 31, 1997, in conformity with generally accepted
accounting principles.
AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
DENVER, COLORADO
May 30, 1997
Except for Note 11 as to
which the date is June 16, 1997
F-6
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash.......................................................................... $ 357,982
Accounts receivable........................................................... 688,956
Stock subscription receivable................................................. 49,709
Inventory..................................................................... 19,985
Receivable from employees..................................................... 7,098
Prepaid expenses.............................................................. 322,443
---------
Total Current Assets........................................................ 1,446,173
PROPERTY AND EQUIPMENT, at cost, net............................................ 266,832
MEMBERSHIP COST, net............................................................ 1,983,667
RESTRICTED INVESTMENT........................................................... 100,000
OTHER ASSETS.................................................................... 1,700
---------
$3,798,372
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses......................................... $ 146,767
Due to League................................................................. 8,000
Accrued interest, related party............................................... 1,023
Deferred revenue.............................................................. 1,858,749
Note payable, related party................................................... 90,098
Note payable, stockholder..................................................... 1,295,000
---------
Total Current Liabilities................................................... 3,399,637
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, 1,500,000 shares authorized; none issued or outstanding...... --
Common stock, 15,000,000 shares authorized; 1,380,000 issued and
outstanding................................................................. 487,796
Accumulated (deficit)......................................................... (89,061)
---------
Total Stockholders' Equity.................................................. 398,735
---------
$3,798,372
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENT
F-7
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT
MARCH 31, 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[A] ORGANIZATION
The Orlando Predators Entertainment, Inc. (the Company), was formed on March
27, 1997, to acquire, own and operate the Orlando Predators, a Division of
Orlando Predators, Ltd. (Predators). The Predators are a professional Arena
Football team and a member of the Arena Football League (AFL). (See Note 3.) The
AFL membership was purchased by Monolith Limited Partnership (Monolith) as an
agent for the Company on February 13, 1997 from the Orlando Predators, Ltd.
During March 1997, Monolith organized the Company and transferred ownership of
the Predators to the Company in exchange for 1,276,500 shares of the Company's
common stock (See Note 2).
[B] ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and equivalents consists primarily of cash in banks and highly liquid
investments with original maturities of 90 days or less.
INVENTORY
Inventory consists of team merchandise available for sale. Inventory is
stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation expense is provided
on a straight-line basis using the estimated useful lives of 5-10 years.
Maintenance and repairs are charged to expense as incurred. When assets are
retired or otherwise disposed of, the property accounts are relieved of costs
and accumulated depreciation and any resulting gain or loss is credited or
charged to operations. Depreciation and amortization expense for the period
ended March 31, 1997 was $837.
RESTRICTED INVESTMENT
Restricted investment consists of an interest bearing certificate of deposit
with a financial institution, which also provides a letter of credit to the
Company. The certificate of deposit was a condition of awarding the letter of
credit (See Note 10).
MEMBERSHIP COST
The AFL membership is recorded at cost of $1,989,860 and is being amortized
on a straight-line basis over 40 years ratably over the games. Amortization for
the period ended March 31, 1997 was $6,193.
The Company continually evaluates whether events and circumstances have
occurred that indicate that the remaining estimated useful life of the
membership cost may warrant revision or that the remaining balance of the asset
may not be recoverable. If factors indicate that the membership cost may be
impaired, the Company uses an estimate of the remaining value of the membership
rights in measuring whether the asset is recoverable. Unrecoverable amounts are
charged to operations in the applicable period as required under the provisions
of Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets".
F-8
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
MARCH 31, 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOOTBALL OPERATIONS
Revenues, principally ticket sales and television and radio broadcasting
fees are recorded as revenues at the time the related game is played. The
Company is entitled to keep all gate receipts from home games but does not share
in the gate receipts from away games. Team expenses (principally player and
coaches salaries, fringe benefits, insurance, game expenses, arena rentals and
travel) are recorded as expenses on the same basis. Accordingly, income and
expenses not earned or incurred are recorded as deferred revenues and prepaid
expenses and are amortized ratably as regular season games are played. General,
administrative, selling and promotional expenses are charged to operations as
incurred.
DEFERRED OFFERING COSTS
Costs incurred in connection with the Company's anticipated public offering
will be deferred and will be charged against stockholders' equity upon the
successful completion of the offering or charged to expense if not successful.
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 and
disclosures of contingent 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 those estimates.
The Company sells sponsorships for cash and services. In exchange, the
sponsor receives advertising and various benefits to Predator games. The value
of the services has been estimated in the accompanying financial statement.
Management believes these estimates reasonably disclose the value of services
received.
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes". Under this method, deferred income
taxes are recorded to reflect the tax consequences in future years of temporary
differences between the tax basis of assets and liabilities and their financial
statement amounts at the end of each reporting period. Valuation allowances will
be established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense represents the tax payable for the
current period and the change during the period in deferred tax assets and
liabilities. Deferred tax assets and liabilities have been netted to reflect the
tax impact of temporary differences.
The Company has not recorded a deferred tax asset since it is more likely
than not that the tax asset will not be realized.
Deferred tax assets arise primarily from net operating loss carryforwards.
Deferred tax liabilities are from amortization of membership costs which are not
deductible for tax purposes until the membership is sold. A valuation allowance
equal to the net deferred tax asset has been recorded since it is more likely
than not that the tax asset will not be realized.
F-9
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
MARCH 31, 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk associated with accounts receivable is limited
due to accounts receivable transactions arising from sponsorship contracts which
have a history of performance. The supply of talented players is limited due to
the competitive nature with other professional football leagues.
The Company maintains all cash in deposit accounts, which at times may
exceed federally insured limits. The Company has not experienced a loss in such
accounts.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of accounts receivable, accounts payable and accrued
expenses approximate fair value because of the short maturity of these items.
The fair value of notes payable to related parties cannot be determined due to
the related nature of these transactions.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets" (SFAS 121). The Statement
requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amounts.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123). Under the provisions of SFAS No. 123, companies can
either measure the compensation cost of equity instruments issued under employee
compensation plans using a fair value based method, or can continue to recognize
compensation cost using the intrinsic value method under the provisions of
Accounting Principles Board Opinion (APB) No. 25. However, if the provisions of
APB No. 25 are continued, proforma disclosures of net income or loss and
earnings or loss per share must be presented in the financial statements as if
the fair value method had been applied. The Corporation intends to recognize
compensation costs under the provisions of APB No. 25 and will provide the
expanded disclosure required by SFAS No. 123.
NOTE 2--ACQUISITION OF PREDATORS
The Predators were purchased by Monolith Limited Partnership (Monolith) as
an agent for the Company on February 13, 1997 from the Orlando Predators, Ltd.
During March, 1997 Monolith organized the Company and transferred ownership of
the Predators to the Company in exchange for 1,276,500 shares of the Company's
common stock.
On February 13, 1997 the Company acquired substantially all of the assets
and the business of the Orlando Predators, a Division of Orlando Predators, Ltd.
(Predators). The assets consist primarily of the Orlando Arena Football League
(AFL) membership, game and office equipment. The purchase price for the team was
$2,325,000 comprised of $1,875,000 in cash, $180,000 note which is payable in
February, 1998, assumption of $45,000 in commissions payable, and $225,000 of
Monolith Limited Partnership interests (agent for the Company).
F-10
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
MARCH 31, 1997
NOTE 2--ACQUISITION OF PREDATORS (CONTINUED)
The purchase price for the Predators has been allocated as follows:
<TABLE>
<S> <C>
AFL Membership.......................................................... $1,989,860
Game equipment and system............................................... 225,721
Office equipment........................................................ 41,948
Prepaid expenses........................................................ 67,471
---------
Total purchase price.................................................. 2,325,000
Monolith units.......................................................... (225,000)
Note payable............................................................ (180,000)
Commissions payable..................................................... (45,000)
---------
Cash paid at closing $1,875,000
---------
---------
</TABLE>
NOTE 3--ARENA FOOTBALL LEAGUE
The AFL is a non-profit corporation, which governs the rules and conduct of
each member team. Each member owns an equal percentage of the AFL and appoints
one board member. A budget for AFL expenses is approved annually by the board
and expenses are shared equally. Revenues from expansion membership fees are
divided equally between all members and a corporation owned by the inventor
(Gridiron) of the Arena Football Game. Revenues and assessments are recognized
when billed by the league. Special assessments for membership repurchases are
recognized in the same periods as membership expansion fees that replace them.
The Company's share of the 1997 season budget is as follows:
<TABLE>
<S> <C>
Revenue:
Expansion membership fees............................................... $ 300,000
---------
Assessments:
Operating assessment.................................................. 100,000
Other costs........................................................... 220,000
---------
320,000
---------
Net Assessment.......................................................... $ (20,000)
---------
---------
</TABLE>
The Company continues to be contingently liable for its share of AFL
expenses which may exceed AFL revenues. As of May 30, 1997, the Company is
contingently liable for approximately $50,000 for other team membership
purchases.
The AFL is a defendant to a claim for alleged damages for approximately
$2,000,000. The AFL is vigorously defending this action.
The AFL is also a party to a number of lawsuits arising in the normal course
of business. In the opinion of the AFL, the resolution of those matters will not
have a material adverse effect on the AFL's financial position.
Outcomes and expenses of litigation will be divided equally between all
members. Management believes its share of the outcomes will not have a material
adverse effect on the Company's financial position.
F-11
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
MARCH 31, 1997
NOTE 3--ARENA FOOTBALL LEAGUE (CONTINUED)
LICENSE AGREEMENT
The AFL has licensed the right to operate the Arena Football League and the
use of the Arena Football League logo, trademark and the patented game known as
Arena Football from Gridiron, owner of the logo, trademark and patented game.
The Company is required to pay an annual royalty to Gridiron in the amount of
$20,000 as its share of license fees due to Gridiron.
NOTE 4--PREPAID EXPENSES
Prepaid expenses consist of the following:
<TABLE>
<S> <C>
AFL assessment.......................................................... $ 93,269
Advertising............................................................. 51,984
Sales tax............................................................... 71,000
Game expense............................................................ 61,058
Other................................................................... 45,132
---------
$ 322,443
---------
---------
</TABLE>
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<S> <C>
Office equipment........................................................ $ 41,948
Game equipment and system 225,721
---------
267,669
Less accumulated depreciation........................................... (837)
---------
$ 266,832
---------
---------
</TABLE>
NOTE 6--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following:
<TABLE>
<S> <C>
Accounts payable........................................................ $ 3,304
Accrued salary and payroll taxes........................................ 143,463
---------
$ 146,767
---------
---------
</TABLE>
NOTE 7--NOTE PAYABLE, RELATED PARTY
In connection with the acquisition of the membership, the Company entered
into a $180,000 note agreement with the seller, which is due February 1998, with
interest at 1% above prime (9.25% at March 31, 1997). The outstanding balance is
$90,098 and accrued interest is $1,023.
NOTE 8--COMMON STOCK
In March 1997 the Company issued 103,500 shares of its common stock to an
individual for $49,709 in stock subscriptions receivable which were paid in May
1997.
F-12
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
MARCH 31, 1997
NOTE 9--NOTE PAYABLE STOCKHOLDER
The note payable to the majority stockholder is due the earlier of December
31, 1998 or the completion of the public offering (See Note 11).
Through June 1997, the minority stockholder and the majority stockholder
loaned the Company $114,000 (unaudited) and $111,000 (unaudited), respectively,
which are due the earlier of December 31, 1998 or the completion of a public
offering.
NOTE 10--COMMITMENTS AND CONTINGENCIES
LOCAL MEDIA CONTRACTS
The Company has radio and television broadcasting contracts with a local
radio station and a local cable sports network. The contracts require the
Company to provide certain services, goods, and game tickets in exchange for
commercial time, promotional events and the right to broadcast the games.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with players, the head coach and the
President of the Predators. Certain of these contracts provide for guaranteed
payments which, must be paid even if the employee is injured or terminated. The
player contracts are for a term of one year. If the team does not sign the
player at the end of the contract, he is free to sign with another team.
However, the team has the option of signing the player first. If the player
refuses, he must "sit out" for one year before playing for another team. The
coach has a one-year agreement for $70,000 with bonuses based on the number of
winning games and play-off participation and contains a covenant not to compete
for a period of one-year after termination of employment.
The President has a 42 month agreement with annual compensation ranging from
$60,000 to $80,000, commission on sponsorship revenue ranging from 10% to 7%,
tickets to home games and stock options to purchase 34,500 shares of the
Company's common stock with an exercise price of $2.00 through July 2007.
LEASE OBLIGATIONS
The Company leases the Orlando Centroplex arena for all home games and the
Citrus Bowl as a practice field from the City of Orlando. Lease payments are
based upon the greater of gross ticket sales or $7,500 per regular season home
game. The lease was assigned from the previous owners of the team. The lease
expires at the end of the 1997 season.
In addition, office space is received as trade for a sponsorship from a
financial institution. The total value of the office space is $50,000 and the
lease is renewed annually.
Future minimum lease payments for the year ended December 31, 1997 are
$52,500.
SELF INSURANCE
The Company is insured for medical and disability coverage for the players.
Under the terms of the policy, the Company is required to pay the first $35,000
of medical costs for each player. An insurance policy provides reimbursement up
to $465,000 for each player or $1M in aggregate.
F-13
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENT (CONTINUED)
MARCH 31, 1997
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
LETTER OF CREDIT
The Company has entered into an agreement with a financial institution for
an irrevocable stand by letter of credit in the amount of $100,000. The letter
of credit is required by the AFL and is available to draw upon, if necessary, by
the AFL after the AFL Board of Directors has given approval. The letter of
credit is guaranteed by a $100,000 certificate of deposit.
NOTE 11--SUBSEQUENT EVENTS
LETTER OF INTENT
On June 16, 1997 the Company entered into a letter of intent with an
underwriter to sell 450,000 units of the Company's securities at $10.00 per
unit. Each unit consists of two shares of common stock and one common stock
purchase warrant to purchase an additional share of common stock at $7.50 per
share for a period of five years from the effective date of the offering. The
warrants may be redeemed at $.01 each if the closing price of common stock
equals or exceeds $7.50 per share on NASDAQ for 20 consecutive trading days.
STOCK SPLIT
In June 1997, the Board of Directors approved a 1,380 for 1 forward stock
split, all financial information and per share data has been restated to reflect
this event.
STOCK OPTION PLAN
Effective April 1, 1997, the Company's board of directors adopted the Stock
Option Plan under which 150,000 shares of the Company's common stock were
reserved for issuance at prices not less than fair market value on the date of
grant. The board may grant options to key management employees, officers,
directors and consultants.
Through July 1, 1997 (unaudited), 103,000 options were issued to key
management employees and directors. The options are exercisable for a period of
three years at $2.00 per share.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE PARTNERS
ORLANDO PREDATORS, LTD.
ORLANDO, FLORIDA
We have audited the accompanying balance sheet of the Orlando Predators, a
Division of Orlando Predators, Ltd. as of December 31, 1996 and the related
statements of operations, changes in Division Equity (Deficit) and cash flows
for each of the years in the two year period ended December 31, 1996. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 the Orlando Predators, a
Division of Orlando Predators, Ltd. as of December 31, 1996 and the results of
its operations and its cash flows for each of the years in the two year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
DENVER, COLORADO
MAY 30, 1997
F-15
<PAGE>
ORLANDO PREDATORS
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................................................ $ 1,337
Accounts receivable................................................................................. 15,000
Inventory........................................................................................... 20,000
Receivable from employees........................................................................... 5,456
Prepaid expenses.................................................................................... 39,943
----------
Total Current Assets.............................................................................. 81,736
PROPERTY AND EQUIPMENT, at cost, net.................................................................. 96,854
MEMBERSHIP COST, net.................................................................................. 320,719
----------
$ 499,309
----------
----------
LIABILITIES AND DIVISION (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses............................................................... $ 300,289
Accounts payable, related parties................................................................... 27,621
Due to League....................................................................................... 7,394
Deferred revenue.................................................................................... 397,009
----------
Total Current Liabilities......................................................................... 732,313
COMMITMENTS AND CONTINGENCIES
DIVISION (DEFICIT).................................................................................... (233,004)
----------
$ 499,309
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-16
<PAGE>
ORLANDO PREDATORS
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
REVENUES:
Ticket revenues..................................................................... $ 1,871,039 $ 1,578,115
Play-off game revenue sharing....................................................... 40,000 120,000
Local television and radio broadcast rights......................................... 89,682 75,528
Advertising and promotions.......................................................... 792,320 554,421
Advertising and promotions, related parties......................................... 43,899 57,000
League revenue...................................................................... 17,783 182,060
Other............................................................................... 34,660 84,453
------------ ------------
Total Revenues.................................................................... 2,889,383 2,651,577
------------ ------------
COSTS AND EXPENSES:
Operations.......................................................................... 2,180,734 2,181,229
Operations, related party........................................................... 13,023 50,653
Selling and promotional expenses.................................................... 443,405 374,056
League assessments.................................................................. 151,379 153,799
General and administrative.......................................................... 606,222 517,768
General and administrative, related party........................................... 19,415 --
Amortization........................................................................ 10,175 9,775
Depreciation........................................................................ 29,662 25,807
------------ ------------
Total Costs and Expenses.......................................................... 3,454,015 3,313,087
------------ ------------
OPERATING (LOSS)...................................................................... (564,632) (661,510)
------------ ------------
OTHER INCOME:
Interest............................................................................ 3,325 7,915
Other............................................................................... -- 89
------------ ------------
Total Other Income................................................................ 3,325 8,004
------------ ------------
NET (LOSS)............................................................................ $ (561,307) $ (653,506)
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-17
<PAGE>
ORLANDO PREDATORS
STATEMENT OF CHANGES IN DIVISION EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
Balance, December 31, 1994....................................................... $ 126,260
<S> <C>
Net (loss)....................................................................... (653,506)
Contributions.................................................................... 26,350
Distributions.................................................................... (1,015)
---------
Balance, December 31, 1995....................................................... (501,911)
Net (loss)....................................................................... (561,307)
Contributions.................................................................... 835,398
Distributions.................................................................... (5,184)
---------
Balance, December 31, 1996....................................................... $(233,004)
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-18
<PAGE>
ORLANDO PREDATORS
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss)............................................................................ $ (561,307) $ (653,506)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization....................................................... 39,837 35,582
Changes in assets and liabilities:
Accounts receivable............................................................... (8,999) 44,082
Inventory......................................................................... -- 13,724
Prepaid expenses.................................................................. 64,454 (40,945)
Due from League................................................................... (26,395) 78,805
Other assets...................................................................... 2,436 (2,091)
Accounts payable and accrued expenses............................................. (26,500) 70,371
Deferred revenue.................................................................. (302,458) 270,939
----------- -----------
Net Cash (Used) by Operating Activities......................................... (818,932) (183,039)
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of equipment................................................................. (14,920) (38,701)
----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Contributions to the Division......................................................... 835,398 26,350
Distributions from the Division....................................................... (5,184) (1,015)
----------- -----------
Net Cash Provided From Financing Activities..................................... 830,214 25,335
----------- -----------
(DECREASE) IN CASH...................................................................... (3,638) (196,405)
CASH, beginning of period............................................................... 4,975 201,380
----------- -----------
CASH, end of period..................................................................... $ 1,337 $ 4,975
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-19
<PAGE>
ORLANDO PREDATORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
NOTE 1--ORGANIZATION
The Orlando Predators, Ltd., a Florida limited partnership, was formed in
April, 1991. The Orlando Predators, a Division of the Orlando Predators, Ltd.
(Predators) is a professional Arena Football team located in Orlando, Florida.
During 1991, the Partners entered into a License and Membership Agreement
with the Arena Football League (AFL) for the expansion team in Orlando. (See
Note 3.)
On January 14, 1997, Orlando Predators, Ltd. entered into an agreement with
Monolith Limited Partnership to sell the membership for $1,875,000 in cash,
$180,000 note payable and $225,000 of Monolith Limited Partnership interests and
assumption of $45,000 of liabilities.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and equivalents consist primarily of cash in banks and highly liquid
investments with original maturities of 90 days or less.
INVENTORY
Inventory consists of team merchandise available for sale. Inventory is
stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation expense is provided
on a straight-line basis using the estimated useful lives of 5-10 years.
Maintenance and repairs are charged to expense as incurred. When assets are
retired or otherwise disposed of, the property accounts are relieved of costs
and accumulated depreciation and any resulting gains or loss is credited or
charged to operations. Depreciation expense for the years ended December 31,
1996 and 1995 was $29,662 and $25,807, respectively.
MEMBERSHIP COST
The AFL membership cost of $375,000 is being amortized on a straight-line
basis over 40 years. Amortization expense for each of the years ended December
31, 1996 and 1995 was $9,425.
Management continually evaluates whether events and circumstances have
occurred that indicate that the remaining estimated useful life of the
membership cost may warrant revision or that the remaining balance of the asset
may not be recoverable. If factors indicate that the membership cost may be
impaired, management uses an estimate of the remaining value of the membership
rights in measuring whether the asset is recoverable. Unrecoverable amounts are
charged to operations in the applicable period as required under the provisions
of Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets".
FOOTBALL OPERATIONS
Revenues, principally ticket sales and television and radio broadcasting
fees are recorded as revenues at the time the related game is played. The
Predators are entitled to keep all gate receipts from home
F-20
<PAGE>
ORLANDO PREDATORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1996
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
games but do not share in the gate receipts from away games. Team expenses
(principally players and coaches salaries, fringe benefits, insurance, game
expenses, arena rentals and travel) are recorded as expenses on the same basis.
Accordingly, income and expenses not earned or incurred are recorded as deferred
revenues and prepaid expenses, and amortized ratably as regular season games are
played. General, administrative, selling and promotional expenses are charged to
operations as incurred.
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 and
disclosures of contingent 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 those estimates.
The Predators sell sponsorships for cash and services. In exchange, the
sponsors receive advertising and various benefits to the Predator games. The
value of the trade goods and services has been estimated in the accompanying
financial statements. Management believes these estimates reasonably disclose
the value of goods and services received.
INCOME TAXES
The Division is not subject to income taxes. Accordingly, no income tax
provision or benefit has been recognized in the accompanying financial
statements.
CONCENTRATIONS OF CREDIT RISK
The risk associated with accounts receivable is limited due to accounts
receivable transactions arising from sponsorship contracts which have a history
of performance. The supply of talented players is limited due to the competitive
nature with other professional football leagues.
The Predators maintain all cash in deposit accounts, which at times may
exceed federally insured limits. The Predators have not experienced a loss in
such accounts.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of accounts receivable, accounts payable and accrued
expenses approximate fair value because of the short maturity of these items.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1995 the Predators adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets" (SFAS 121). The Statement requires impairment losses to be recognized
for long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows are not sufficient to recover the
assets' carrying amounts. The adoption of SFAS 121 had no material impact on the
Predators financial position.
F-21
<PAGE>
ORLANDO PREDATORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1996
NOTE 3--ARENA FOOTBALL LEAGUE
The AFL is a non-profit corporation, which governs the rules and conduct of
each member team. Each member owns an equal percentage of the AFL and appoints
one board member. A budget for AFL expenses is approved annually by the board
and expenses are shared equally. Revenues from expansion membership fees are
divided equally between all members and a corporation owned by the inventor
(Gridiron) of the Arena Football Game. Revenues and assessments are recognized
when billed by the league. Special assessments for membership repurchases are
recognized in the same periods as membership expansion fees that replace them.
The Predators share of the AFL revenues and assessments are as follows at
December 31,:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Revenue:
Expansion membership fees......................................... $ 17,783 $ 182,060
------------ ----------
Assessments:
Operating assessment.............................................. 125,000 125,000
Other costs....................................................... 26,379 28,799
------------ ----------
151,379 153,799
------------ ----------
Net Revenue (Assessment)............................................ $ (133,596) $ 28,261
------------ ----------
------------ ----------
</TABLE>
The Predators continue to be contingently liable for their share of AFL
expenses which may exceed AFL revenues. The Company continues to be contingently
liable for its share of AFL expenses which may exceed AFL revenues. As of May
30, 1997, the Predators are contingently liable for approximately $90,000 for
other team membership purchases.
The AFL is a defendant to a claim for alleged damages for approximately
$2,000,000. The AFL is vigorously defending this action.
The AFL is also a party to a number of lawsuits arising in the normal course
of business. In the opinion of the AFL, the resolution of those matters will not
have a material adverse effect on the AFL's financial position.
Outcomes and expenses of litigation will be divided equally between all
members. Management believes its share of the outcomes will not have a material
adverse effect on the Predators financial position.
LICENSE AGREEMENT
The AFL has licensed the right to operate the Arena Football League and the
use of the Arena Football League logo, trademark and the patented game known as
Arena Football from Gridiron, owner of the logo, trademark and patented game.
The Predators are required to pay an annual royalty to Gridiron in the amount of
$20,000 as its share of license fees due to Gridiron.
F-22
<PAGE>
ORLANDO PREDATORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1996
NOTE 4--PREPAID EXPENSES
Prepaid expenses consist of the following at December 31,:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
AFL assessment..................................................................... $ 21,000
Advertising........................................................................ 8,195
Sales tax.......................................................................... 4,600
Insurance.......................................................................... 2,025
Other.............................................................................. 4,123
---------
$ 39,943
---------
---------
</TABLE>
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Office equipment................................................ $ 77,041
Game equipment and system....................................... 126,887
----------
203,928
Less accumulated depreciation................................... (107,074)
----------
$ 96,854
----------
----------
</TABLE>
NOTE 6--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following at December
31, 1996:
<TABLE>
<S> <C>
Accounts payable trade............................................ $ 252,290
Accrued salary and payroll taxes.................................. 47,999
---------
$ 300,289
---------
---------
</TABLE>
NOTE 7--COMMITMENTS AND CONTINGENCIES
LOCAL MEDIA CONTRACTS
The Predators have radio and television broadcasting contracts with a local
radio station and a local cable sports network. The contracts require the
Predators to provide certain services, goods, and game tickets in exchange for
commercial time, promotional events and the right to broadcast the games.
EMPLOYMENT AGREEMENTS
The Predators have employment agreements with players, the head coach and
the vice president of the team. Certain of these contracts provide for
guaranteed payments, which must be paid even if the employee is injured or
terminated. The player contracts are for a term of one-year. If the team does
not sign the player at the end of the contract he is free to sign with another
team. However, the team has the option of signing the player first. If the
player refuses, he must "sit out" for one year before playing for
F-23
<PAGE>
ORLANDO PREDATORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1996
NOTE 7--COMMITMENTS AND CONTINGENCIES (CONTINUED)
another team. The coach has a one-year agreement for $70,000 with bonuses based
on the number of winning games and play-off participation and contains a
covenant not to compete for a period of one year after termination of
employment. The vice president has a two-year agreement for $60,000, 10%
commission on sponsorship revenue and bonuses based on play-off participation.
LEASE COMMITMENTS
The Predators are committed under a lease with the City of Orlando to lease
the Orlando Centroplex Arena for all home games and the Citrus Bowl as a
practice field. Lease payments are based upon the greater of gross ticket sales
or $7,500 per regular season game. The lease expires at the end of the 1997
season.
In addition, the office space is received as trade for a sponsorship from a
financial institution. The total value of the office space is $50,000 and the
lease is renewed annually.
Future minimum lease payments for the year ended December 31, 1997 are
$52,500.
SELF INSURANCE
The Company is insured for medical and disability coverage for the players.
Under the terms of the policy, the Company is required to pay the first $35,000
of medical costs for each player. An insurance policy provides reimbursement up
to $465,000 for each player or $1M in aggregate.
LETTER OF CREDIT
The Predators have entered into an agreement with a financial institution
for a letter of credit in the amount of $100,000. The letter of credit is
required by the League and is available to the League to draw upon, if
necessary, but only after the AFL Board of Directors has given approval. The
letter of credit was personally guaranteed by the partners of Orlando Predators,
Ltd..
NOTE 8--RELATED PARTY TRANSACTIONS
In addition to transactions with related parties discussed throughout the
notes to the financial statements, the following related party transactions have
occurred:
SPONSORSHIP REVENUE
During the years ended December 31, 1996 and 1995, the Predators received
revenue in the form of sponsorships from certain limited partners in the amounts
of $43,899 and $57,000, respectively.
COSTS OF SPONSORSHIP
During the years ended December 31, 1996 and 1995, the Predators incurred
expenses related to sponsorship revenue received from certain limited partners
in the amounts of $3,625 and $16,113, respectively.
F-24
<PAGE>
ORLANDO PREDATORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1996
NOTE 8--RELATED PARTY TRANSACTIONS (CONTINUED)
MEDICAL EXPENSES
The Predators incurred medical expenses for treatment of player and/or
employee medical conditions from certain limited partners. During the years
ended December 31, 1996 and 1995, such expenses totaled $9,398 and $34,540,
respectively.
LEGAL EXPENSES
During the year ended December 31, 1996, the Predators incurred legal
expenses from certain limited partners in the amount of $19,415.
F-25
<PAGE>
[Picture of Flame]
PLAYOFFS: 1992, 1993, 1994, 1995, 1996
REGULAR SEASON FRANCHISE WIN PERCENTAGE .720
ARENA BOWL APPEARANCES:
ARENA BOWL VI
ARENA BOWL VII
ARENA BOWL IX
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Dilution.................................................................. 11
Capitalization............................................................ 12
Use of Proceeds........................................................... 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 15
Arena Football............................................................ 17
Business.................................................................. 22
Management................................................................ 27
Principal Stockholders.................................................... 30
Certain Transactions...................................................... 31
Description of Securities................................................. 32
Underwriting.............................................................. 35
Legal Matters............................................................. 37
Experts................................................................... 37
Available Information..................................................... 37
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
450,000 UNITS
THE ORLANDO PREDATORS
ENTERTAINMENT, INC.
---------------------
PROSPECTUS
---------------------
------------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) Article XII of the Registrant's Bylaws provides as follows:
"ARTICLE XII
LIMITATIONS ON LIABILITY
Section 1. To the fullest extent permitted by the Florida Business
Corporation Act as the same exists or may hereafter be amended, a director
of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for any action taken or any failure to
take any action as a director. Notwithstanding the foregoing, a direct will
have liability for monetary damages for a breach or failure which involves:
(i) a violation of criminal law; (ii) a transaction from which the director
derived an improper personal benefit, either directly or indirectly; (iii)
distributions in violation of the Florida Business Corporations Act or the
Articles of the corporation (but only to the extent provided by law); (iv)
willful misconduct or disregard for the best interests of the corporation
concerning any proceeding by or in the right of the corporation or a
shareholder; or (v) reckless, malicious or wanton acts or omission
concerning any proceeding other than in the right of the corporation or of a
shareholder. No repeal, amendment or modification of this Article, whether
direct or indirect, shall eliminate or reduce its effect with respect to any
act or omission of a director of the corporation occurring prior to such
repeal, amendment or modification."
(ii) Article XIII of the Registrant's Bylaws provides as follows:
"ARTICLE XIII
INDEMNIFICATION
Section 1. Subject to and in accordance with Florida Business
Corporation Act (Sec. 607.0850) and except as may be expressly limited by
the Articles of Incorporation and any amendments thereto, the corporation
shall indemnify any person:
(i) made a party to any proceeding (other than an action by, or in
the right of, the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the corporation's request, as a director, officer, employee or
agent of another corporation, or other enterprise; or
(ii) who was or is a party to any proceeding by or in the right of
the corporation, to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise.
This indemnification shall be mandatory in all circumstances in which
indemnification is permitted by
law.
Section 2. The corporation may maintain indemnification insurance
regardless of its power to indemnify under the Business Corporation Act.
Section 3. The corporation may make any other or further indemnification
or advancement of expenses of any of the directors, officers, employees or
agents under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and to
II-1
<PAGE>
action in another capacity while holding such office, except an
indemnification against material criminal or unlawful misconduct as set
forth by statute, or as to any transaction wherein the director derived an
improper personal benefit.
Section 4. Except to the extent reimbursement shall be mandatory in
accordance herewith, the corporation shall have the right to refuse
indemnification, in whole or in part, in any instance in which the person to
whom indemnification would otherwise have been applicable, if he
unreasonably refused to permit the corporation, at its own expense and
through counsel of its own choosing, to defend him in the action, or
unreasonably refused to cooperate in the defense of such action."
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)(2)
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee.............................................................. $ 2,677
NASD Filing Fee................................................................... 1,383
Blue Sky Filing Fees.............................................................. 12,000
Blue Sky Legal Fees............................................................... 25,000
Printing Expenses................................................................. 60,000
Legal Fees and Expenses........................................................... 70,000
Accounting Fees................................................................... 55,000
Transfer Agent.................................................................... 3,000
NASDAQ Application Fee............................................................ 10,000
Miscellaneous Expenses............................................................ 60,940
----------
TOTAL............................................................................. $ 300,000(1)
</TABLE>
- ------------------------
(1) Does not include the Representative's commission and expenses of $520,000
($598,000 if the Overallotment Option is exercised).
(2) All expenses, except the SEC registration fee and NASD filing fee, are
estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, the Registrant sold the following shares of its
Common Stock which were not registered under the 1933 Act, as amended.
(i) In March 1997, the Registrant issued 1,276,500 shares of its Common
Stock valued at $.34 per share to The Monolith Limited Partnership
("Monolith") in exchange for transfer by Monolith of all its ownership
interest in the Orlando Predators to the Registrant. See "Certain
Transactions."
(ii) In March 1997, the Registrant issued 103,500 shares of its Common
Stock to Alan Gagleard and Nancy Gagleard valued at $.46 per share in
exchange for transfer by the Gagleards of all of their ownership interest in
the Orlando Predators to the Registrant.
(iii) From time to time, the Registrant has issued stock options
(currently aggregating 103,000 such stock options) to employees, officers
and directors under its 1997 Employee Stock Option Plan.
With respect to the sales made, the Registrant relied on Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). No advertising or general
solicitation was employed in offering the securities. The securities were
offered to a limited number of persons all of whom were business associates of
the Registrant or its executive officers and directors and the transfer thereof
was appropriately restricted by the Registrant. All shareholders were accredited
investors as that term is defined in Rule 501 of Regulation D under the 1933 Act
and were capable of analyzing the merits and risks of their investment and who
acknowledged in writing that they were acquiring the securities for investment
and not with a view toward distribution or resale and understood the speculative
nature of their investment.
II-2
<PAGE>
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- ------ --------------------------------------------------------------------------
<C> <S>
1.01 Form of Underwriting Agreement
1.02 Form of Agreement Among Underwriters
1.03 Form of Selling Agreement
1.04 Form of Representative's Warrant
1.05 Form of Warrant Agreement
1.06 Form of Lock-up Agreement (To be filed by Amendment)
3.01 Articles of Incorporation of the Registrant
3.02 Bylaws of the Registrant
5.01 Opinion of Gary A. Agron, regarding legality of the Common Stock (includes
Consent)
10.01 1997 Employee Stock Option Plan
10.02 Lease Agreement--Orlando Arena
10.03 Arena Football League Licensing Program Update--November 4, 1996
10.04 Bylaws of the Arena Football League
10.05 Membership Agreement with the Arena Football League
10.06 Form of Standard Player Contract
10.07 Employment Agreement with Mr. Moss
10.08 Purchase Agreement for Orlando Predators
10.09 Exchange Agreement for Orlando Predators' Assets
10.10 Employment Agreement with Mr. Youngblood
11.01 Computation of Earnings per Share
23.01 Consent of AJ. Robbins, P.C.
23.02 Consent of Gary A. Agron (See 5.01, above)
27.01 Financial Data Schedule
</TABLE>
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) That insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant 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 Registrant in the successful defense of
any action, suit or proceeding) is 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 of 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.
II-3
<PAGE>
(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and
Exchange Commission such supplementary and periodic information, documents
and reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred in that
section.
(c) That any post-effective amendment filed will comply with the
applicable forms, rules and regulations of the Commission in effect at the
time such post-effective amendment is filed.
(d) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To 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;
(e) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment 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.
(f) 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.
(g) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the 1933 Act, as amended, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and has caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Orlando, Florida, on July 18, 1997.
THE ORLANDO PREDATORS
ENTERTAINMENT, INC.
By: /s/ JACK YOUNGBLOOD
-----------------------------------------
Jack Youngblood,
PRESIDENT
Pursuant to the requirements of the 1933 Act, as amended, this Registration
Statement has been signed below by the following persons on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ WILLIAM G. MERIS
- ------------------------------ Chairman of the Board of July 18, 1997
William G. Meris Directors
/s/ JACK YOUNGBLOOD
- ------------------------------ President (Chief Executive July 18, 1997
Jack Youngblood Officer) and Director
Secretary, Treasurer and
/s/ ALEX S. NARUSHKA Chief Financial Officer
- ------------------------------ (Principal Accounting July 18, 1997
Alex S. Narushka Officer)
- ------------------------------ Chief Operating Officer
Robert G. Flynn
/s/ EDGAR J. ALLEN
- ------------------------------ Vice President--Sales and July 18, 1997
Edgar J. Allen Marketing
/s/ ALAN N. GAGLEARD
- ------------------------------ Director July 18, 1997
Alan N. Gagleard
- ------------------------------ Director
Thomas F. Winters, Jr.
II-5
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ----------------------------------------------------------------------------------------------
<C> <S> <C>
1.01 Form of Underwriting Agreement................................................................
1.02 Form of Agreement Among Underwriters..........................................................
1.03 Form of Selling Agreement.....................................................................
1.04 Form of Representative's Warrant..............................................................
1.05 Form of Warrant Agreement.....................................................................
3.01 Articles of Incorporation of the Registrant...................................................
3.02 Bylaws of the Registrant......................................................................
5.01 Opinion of Gary A. Agron, regarding legality of the Common Stock (includes Consent)...........
10.01 1997 Employee Stock Option Plan...............................................................
10.02 Lease Agreement--Orlando Arena................................................................
10.03 Arena Football League Licensing Program Update--November 4, 1996..............................
10.04 Bylaws of the Arena Football League...........................................................
10.05 Membership Agreement with the Arena Football League...........................................
10.06 Form of Standard Player Contract..............................................................
10.07 Employment Agreement with Mr. Moss............................................................
10.08 Purchase Agreement for Orlando Predators......................................................
10.09 Exchange Agreement for Orlando Predators' Assets..............................................
10.10 Employment Agreement with Mr. Youngblood......................................................
11.01 Computation of Earnings per Share.............................................................
23.01 Consent of AJ. Robbins, P.C...................................................................
23.02 Consent of Gary A. Agron (See 5.01, above)....................................................
27.01 Financial Data Schedule.......................................................................
</TABLE>
<PAGE>
Exhibit 1.01
ORLANDO PREDATORS ENTERTAINMENT, INC.
450,000 UNITS
UNDERWRITING AGREEMENT
July ___, 1997
First Midwest Securities, Inc.
1233 N. Mayfair Road, Suite 117
Milwaukee, WI 53213
Gentlemen:
Orlando Predators Entertainment, Inc., a Florida corporation (the
"Company"), proposes to issue and sell to you (the "Underwriter") pursuant to
this Underwriting Agreement (the "Agreement") an aggregate of 450,000 units
(the "Firm Units"), each unit ("Unit") consisting of two (2) shares of the
Company's no par value Common Stock (the "Common Stock"), and one Redeemable
Common Stock Warrant entitling the holder thereof to purchase for $7.50, one
share of Common Stock for a term of five (5) years from the effective date of
the Registration Statement described below in Section 1(a). The terms of the
Units and the components of the Units shall be as described in the Registration
Statement. In addition, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Units, the Company proposes to grant to
the Underwriter an option to purchase up to an additional 67,500 Units (the
"Option Units"). The Company further agrees to sell and issue to you as
Underwriter, five-year warrants (the "Underwriter's Warrants") to purchase for
$12.00 per Unit an aggregate of 45,000 Units (the "Underwriter's Warrant
Units"). Each Underwriter's Warrant Unit consists of two shares of Common
Stock and one Redeemable Warrant ("Underlying Warrant"). The terms and
conditions of the Underwriter's Warrants, Underwriter's Warrant Units and
Underlying Warrants, including the purchase price thereof, shall be as set
forth in the Underwriter's Warrant filed as an exhibit to the Registration
Statement.
The Firm Units, any Option Units purchased pursuant to this Agreement and
the Underwriter's Warrant Units are collectively called herein the "Units" and
the Warrants included in the Units and the Underwriter's Warrants are
collectively called herein the "Warrants." The shares of Common Stock issuable
upon exercise of the Warrants are collectively called the "Warrant Shares" and
the Warrant Shares, together with the shares of Common Stock included in the
Units, are collectively called the "Shares."
You have advised the Company that you intend to purchase the Firm Units,
and that you have been authorized to execute this Agreement. The Company
confirms the agreements made by it with respect to the purchase of the Firm
Units by the Underwriter, as follows:
<PAGE>
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with, the Underwriter
that:
(A) A registration statement (File No. 333-___) on Form SB-2 relating to
the public offering of the Units, Warrants and Shares, including a preliminary
form of prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act.
"Preliminary Prospectus" shall mean each prospectus filed pursuant to Rule 430
of the Rules and Regulations. The registration statement (including all
financial schedules and exhibits) as amended at the time it becomes effective
and the final prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus", except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) or Rule 430A of
the Rules and Regulations or otherwise utilized and not required to be so filed
shall differ from said prospectus as then amended, the term "Prospectus" shall
mean the prospectus first filed pursuant to Rule 424(b) or Rule 430A, or so
utilized from and after the date on which it shall have been filed or utilized
and (ii) if such registration statement or prospectus is amended or such
prospectus is supplemented, after the effective date (the "Effective Date") of
such registration statement and prior to the Option Closing Date (as defined
in Section 2(b)), the term "Registration Statement" shall include such
registration statement as so amended, and the term "Prospectus" shall include
the prospectus as so amended or supplemented, or both, as the case may be.
(b) At the time the Registration Statement becomes effective and at all
times subsequent thereto up to the Option Closing Date (defined above), (i) the
Registration Statement and Prospectus and any amendments or supplements
thereto, will contain all statements that are required to be stated therein in
accordance with the Act, the Rules and Regulations and the Blue Sky Laws and
will in all material respects conform to the requirements of the Act, the Rules
and Regulations and the Blue Sky Laws, (ii) there will be no stop order of the
Commission, any court of competent jurisdiction or the securities administrator
of any state in which the Units, Warrants and Shares have been, or are to be,
registered or qualified, in effect, pending or threatened with respect to the
effectiveness of the Registration Statement or the distribution of the
Prospectus and (iii) neither the Registration Statement nor the Prospectus will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make statements therein not
misleading; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, the
material set forth under the heading "Underwriting", and the identity of
counsel to the Underwriter under the heading "Legal Matters" constitute the
only information
2
<PAGE>
furnished in writing by or on behalf of the Underwriter for inclusion in the
Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. The Company has the full power and authority and all necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental and regulatory officials and bodies required to own its
properties and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business under the laws of (and is in good
standing as such in) each jurisdiction in which it owns or leases property, has
an office, or in which business is conducted and such qualification is
required, except where the failure to so qualify would not have a material
adverse effect on the business, assets or financial condition of the Company,
and no proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
(d) The authorized capital stock of the Company as of the date of the
Prospectus, as set forth under "Description of Securities" in the Prospectus,
was 10,000,000 shares of Common Stock, no par value per share, of which not
more than 1,380,000 shares will be issued and outstanding or subject to
outstanding options or warrants as of the Effective Date and 1,500,000 shares
of Preferred Stock, no par value per share, of which no shares will be issued
and outstanding. The shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered into by the
Company. The Preferred Stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Units and their components upon issuance and delivery and payment
therefor in the manner contemplated by this Agreement will be duly authorized,
validly issued, fully paid and nonassessable. The shares of Common Stock are
not subject to preemptive rights of any security holder of the Company.
Neither the filing of the Registration Statement nor the offering or sale of
the Units, Warrants or Shares, as contemplated in this Agreement and the
Underwriter's Warrant, gives rise to any rights, other than those which have
been waived or satisfied, for or relating to the registration of any shares of
Common Stock or other securities of the Company, except as described in the
Registration Statement.
(f) All offers and sales of the Company's capital stock prior to the date
hereof, other than pursuant to effective registration statements under the Act,
were at all relevant times exempt from the registration requirements of the Act
and were duly registered or the subject of an available exemption from the
registration requirements of the applicable state securities or Blue Sky laws,
or the relevant statutes of limitations have expired, or civil liability
therefor has been eliminated by an offer to rescind.
3
<PAGE>
(g) This Agreement, including the Underwriter's Warrant, the agreement
between the Company and the warrant agent (the "Warrant Agreement") and the
other agreements of the Company provided for herein, has been duly authorized,
executed and delivered by the Company and constitute the valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except insofar as rights to indemnity and/or contribution may be limited
by federal or state securities laws or the public policy underlying such laws
and except as enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally, and
be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Units,
Warrants and Shares have been duly authorized for issuance and sale, and, when
issued pursuant to this Agreement and the Underwriter's Warrant against payment
of the consideration therefor, will be validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Warrant Shares
issuable upon exercise of the Warrants have been duly authorized and reserved
for issuance upon exercise of the Warrants and when issued upon payment of the
exercise price therefor will be validly issued, fully paid and nonassessable
shares of Common Stock and not subject to preemptive rights.
(h) Except as described in the Prospectus, the Company is not in
violation, breach or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
(i) violate any provision of the articles of incorporation or by-laws of the
Company (in each case as amended at the time of this Agreement), (ii) result in
the breach, or be in contravention, of any provision of any agreement,
franchise, license, indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company is a party or by which
the Company or its property may be bound or affected, or any order, law,
statute, rule or regulation applicable to the Company of any court or
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its property, or any order of any court
or governmental agency or authority entered in any proceeding to which the
Company was or is now a party or by which it is bound or (iii) result in the
creation of any lien, charge or encumbrance upon any property of the Company.
No consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is required for the
execution and delivery of this Agreement by the Company, or the consummation by
the Company of the transactions contemplated hereby, other than under the Act,
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated by the Commission thereunder, state securities laws and regulations
(collectively, the "Blue Sky Laws") applicable to the public offering of the
Units as described in the Registration Statement and the Prospectus, and/or the
rules of the National Association of Securities Dealers, Inc. ("NASD"). This
Agreement has been duly executed and delivered by the Company and is a valid
and binding agreement of the Company, enforceable in accordance with its terms,
except insofar as rights to indemnity or contribution may be limited by
applicable law and subject to bankruptcy, insolvency or similar laws generally
affecting the rights of creditors and equitable principles effecting the right
to obtain specific enforcement or similar equitable relief.
4
<PAGE>
(i) Subject to the qualifications stated in the Prospectus, the Company
has good and marketable title to all properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges, encumbrances
or restrictions, except such as are not materially significant or important in
relation to its business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company is not in default in any material respect with respect
to any of the terms or provisions of any of such leases or subleases, and no
claim has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease
or sublease except as described or referred to in the Prospectus; and the
Company owns or leases all such properties described in the prospectus as are
necessary to its operations as now conducted and, except as otherwise stated in
the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(j) AJ. Robbins, P.C. which has certified or shall certify certain of the
financial statements filed or to be filed with the Commission as part of the
Registration Statement and Prospectus, are independent certified public
accountants within the meaning of the Act and the Rules and Regulations.
(k) The financial statements and schedules, together with related notes,
set forth in the Prospectus or the Registration Statement present fairly the
financial position and results of operations and changes in financial position
of the Company on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. The
Company has no material liabilities or obligations, contingent or otherwise,
except as disclosed in the Registration Statement and Prospectus. Said
statements and schedules and related notes have been prepared in accordance
with generally accepted accounting principles applied on a basis which is
consistent during the periods involved.
(l) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as may otherwise be stated or
contemplated therein: (i) there has not been any material adverse change in
the condition of the Company and its subsidiaries, taken as a whole, financial
and otherwise, or in the earnings, business prospects or current operations of
the Company and its subsidiaries, taken as a whole, whether or not arising in
the ordinary course of business, (ii) there have not been any material
transactions entered into by the Company or any of its subsidiaries which are
required to be disclosed in the Registration Statement, (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock or any material change in the capital stock or
material increase in the long-term indebtedness of the Company; (iv) no action,
suit or proceeding at law or in equity and no governmental or regulatory
proceeding has occurred or is pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the consummation of this Agreement or the business, operations,
5
<PAGE>
financial condition, income or business prospects of the Company and its
subsidiaries, taken as a whole and (v) neither the Company nor any of its
subsidiaries has sustained a loss of, or damage to, its properties (whether or
not insured) which would have a material adverse effect on the business,
operations, financial condition, income or business prospects of the Company
and its subsidiaries, taken as a whole.
(m) Except as set forth in the Prospectus, there is not now pending nor,
to the knowledge of the Company, threatened, any action, suit or proceeding
(including those related to environmental matters or discrimination on the
basis of age, sex, religion or race) to which the Company is a party before or
by any court or governmental agency or body, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth or properties of the Company; and no labor disputes involving the
employees of the Company exist which might be expected to materially adversely
affect the conduct of the business, property or operations or the financial
condition or earnings of the Company.
(n) The Company is not in violation of its articles of incorporation and
by-laws, or in default or breach under any court or administrative order or
decree, or in default with respect to any provision of any lease, loan
agreement, franchise, license, permit, agreement or other contractual
obligation to which the Company is a party or by which the Company or any of
its property is bound, and there does not exist any state of facts which
constitutes an event of default or breach under such documents or which, upon
notice or lapse of time or both, would constitute such an event of default or
breach except those, if any, described in the Prospectus or such defaults or
breaches which, individually or in the aggregate, are not, and with notice or
lapse of time, or both, would not become, material to the Company. The Company
is not in violation or breach of any law, order, rule, regulation, writ,
injunction or decree of any governmental authority or instrumentality or any
court, domestic or foreign, which violation would have a materially-adverse
effect on its business as described in the Prospectus.
(o) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes shown as due thereon; and there is no tax deficiency which has
been or to the knowledge of the Company might be asserted against the Company.
(p) The Company has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects complying therewith and, except as disclosed in the Prospectus, owns
or possesses adequate rights to use all material patents, patent applications,
trademarks, mark registrations, copyrights and licenses necessary for the
conduct of such business and has not received any notice of conflict with the
asserted rights of others in respect thereof. To the best knowledge of the
Company, none of the activities or business of the Company is in violation of,
or cause the Company to violate, any law, rule, regulation or order of the
United States, any state, county or locality, or of any agency or locality, the
violation of which would have a material adverse impact upon the condition
6
<PAGE>
(financial or otherwise), business, property, prospective results of operations
or net worth of the Company.
(q) The Company has not, directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or failed to disclose
fully any such contribution in violation of law, or (ii) made any payment to
any state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to
comply in all material respects with the Foreign Corrupt Practices Act of 1977,
as amended.
(r) On the Closing Dates (as defined in Section 2(c)), all transfer or
other taxes (including franchise, capital stock or other tax, other than income
taxes imposed by any jurisdiction), if any, which are required to be paid in
connection with the sale and transfer of the Units, Warrants and Shares to the
Underwriter hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with.
(s) All contracts and other documents of the Company which are, under the
Rules and Regulations, required to be filed as exhibits to the Registration
Statement have been so filed.
(t) Neither Company nor any of its affiliates, nor any director or
officer of the foregoing, have taken and will not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act or
otherwise, in (i) a violation of Rule l0b-6 under the Exchange Act or (ii) the
manipulation of the price of the Units, Warrants and Shares to facilitate the
sale or resale of the Units, Warrants and Shares hereunder.
(u) Except as set forth in the Prospectus, the Company has no
subsidiaries.
(v) The Company has not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company for services as a finder in connection with the proposed public
offering.
(w) Except as reflected in or contemplated by the Registration Statement
or any amendment thereto, since the respective dates as of which information is
given in the Registration Statement and prior to the Closing Date(s):
(i) the Company neither has nor will have incurred any material
liabilities or obligations, direct or contingent, nor entered into any material
transactions not in the ordinary course of business;
(ii) the Company shall not be delinquent in the payment of principal
or interest on any outstanding debt obligations; and
7
<PAGE>
(iii) there has not been and will not have been any material
adverse change, or any indication of a prospective material adverse change, in
the business, operations (resulting from litigation or otherwise), property,
prospects, financial condition, net worth or results of operations of the
Company.
(x) As of the effective date of the Registration Statement, the Common
Stock has been duly registered under Section 12(g) of the 1934 Act; the
Warrants have been approved for quotation on the National Association of
Securities Dealers Automated Quotation Small Cap Market ("Nasdaq Small Cap")
upon official notification of issuance; and the Units and Common Stock have
been approved for quotation upon the official National Market System of NASDAQ
(the "NASDAQ/NMS") upon official notice of issuance.
(y) The Company keeps accurate books and records and maintains internal
accounting controls which provide reasonable assurance that (i) transactions
are executed in accordance with management's authorization, (ii) transactions
are recorded as necessary to permit preparation of its financial statements and
to maintain accountability for its assets, (iii) access to its assets is
permitted only in accordance with management's authorization and (iv) the
reported accountability for its assets is compared with existing assets at
reasonable intervals.
(z) The Company has not distributed and will not distribute prior to the
Closing Dates any offering material in connection with the offer and sale of
the Units, Warrants or Shares other than as permitted by the Act.
(aa) The Company has not (i) had any material dealings within the twelve
(12) months prior to the date of this Agreement with any member of the NASD, or
any person related to or associated with such member, other than discussions
and meetings relating to the Offering, except as disclosed in writing to you
prior to the date hereof; (ii) entered into a financial or management
consulting agreement except as contemplated hereunder; or (iii) engaged any
intermediary between you and the Company, and/or any of the affiliates of the
Company, in connection with the offering of Units, Warrants or Shares and no
person has been or will be compensated in any manner for such service.
Any certificate signed by any officer of the Company and delivered to you
or to counsel for the Underwriter in connection with the Closing shall be
deemed a representation and warranty by the Company to the Underwriter as to
the matters covered thereby.
2. PURCHASE, DELIVERY AND SALE OF THE SHARES.
(a) Subject to the terms and conditions of this Agreement, and upon the
basis of the representations, warranties and agreements herein contained, the
Company agrees to issue and sell to the Underwriter, and the Underwriter agrees
to buy from the Company at $9.00 per Unit at the place and time hereinafter
specified, 450,000 Units.
8
<PAGE>
Delivery of the Firm Units as well as the Underwriter's Warrant against
payment therefor shall take place at the offices of First Midwest Securities,
Inc., 1233 N. Mayfair Road, Suite 215, Milwaukee, Wisconsin 53213 (or at such
other place as may be designated by agreement between you and the Company) at
9:00 a.m. local time on at such date as you may designate within five business
days of the effective date of the Registration Statement or the date which you
receive the Prospectus in sufficient quantity to send confirmations of sale,
such time and date of delivery for the Firm Units being herein called the
"First Closing Date." Time shall be of the essence and delivery at the time
and place specified in this subsection (a) is a further condition to the
obligations of the Underwriter hereunder. Payment shall be made to the order
of the Company on the First Closing Date.
(b) In addition, subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants an option to you to purchase all or any
part of an aggregate of an additional 67,500 Units at the same price per Unit
as you shall pay for the Firm Units being sold pursuant to the provision of
subsection (a) of this Section 2. This option may be exercised within thirty
(30) days after the First Closing Date upon notice by you to the Company
advising it as to the amount of Option Units as to which the option is being
exercised, the names and denominations in which the certificates for such
Option Units are to be registered and the time and date when such certificates
are to be delivered. Such time and date shall be determined by you but shall
not be earlier than four and not later than ten full business days after the
exercise of said option, nor in any event prior to the First Closing Date, and
such time and date is referred to herein as the "Option Closing Date."
Delivery of the Option Units against payment therefor shall take place at the
offices of the Underwriter. Time shall be of the essence and delivery at the
time and place specified in this subsection (b) is a further condition to your
obligations hereunder. The Option granted hereunder may be exercised only to
cover over-allotments in the sale by the Underwriter of Firm Units referred to
in subsection (a) above.
(c) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company shall sell to you individually, and/or your designated
officers, at the First Closing Date, as defined below, for $100, Underwriter's
Warrants to purchase an aggregate of up to 45,000 Underwriter's Warrant Units.
The price, terms and provisions of the Underwriter's Warrant Units and the
respective rights and obligations of the Company and the holders of the
Underwriter's Warrants and/or Underwriter's Warrant Units and the components
thereof are set forth in the Underwriter's Warrant between the Company and the
Underwriter.
(d) The Company will make the certificates for the securities comprising
the Units to be purchased by the Underwriter hereunder available to you for
examination at least two full business days prior to the First Closing Date or
the Option Closing Date (which are collectively referred to herein as the
"Closing Dates" and individually as a "Closing Date"), as the case may be. The
certificates shall be in such names and denominations as you may request, at
least two full business days prior to the relevant Closing Dates. Time shall
be of the essence and the
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availability of the certificates at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriter.
Definitive engraved certificates in negotiable form for the Firm Units and
the Option Units to be purchased by the Underwriter hereunder will be delivered
by the Company to you for your account against payment of the purchase price by
you by certified or bank cashier's checks in certified funds, payable to the
order of the Company.
In addition, in the event you exercise the option to purchase from the
Company all or any portion of the Option Units pursuant to the provisions of
subsection (b) above, payment for such Option Units shall be made to or upon
the order of the Company not later than ten (10) business days after the Option
Closing Date by certified checks at the time and date of delivery of such
Option Units as required by the provisions of subsection (b) above, against
receipt of the certificates for such Option Units by you for your account,
registered in such names and in such denominations as you may request.
It is understood that the Underwriter proposes to offer the Units to be
purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and, upon notification from the Commission that
the Registration Statement has become effective, will so advise you and will
not at any time, whether before or after the effective date, file any amendment
to the Registration Statement or supplement to the Prospectus of which you
shall not previously have been advised and furnished with a copy or to which
you or your counsel shall have objected in writing or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to
the later of (i) the completion by the Underwriter of the distribution of the
Shares contemplated hereby (but in no event more than nine months after the
date on which the Registration Statement shall have become or been declared
effective) and (ii) 25 days after the Effective Date, the Company will prepare
and file with the Commission, promptly upon your request, any amendments or
supplements to the Registration Statement or Prospectus which, in your
reasonable opinion, may be necessary or advisable in connection with the
distribution of the Shares.
(i) Promptly after you or the Company is advised thereof, you will
advise the Company or the Company will advise you, as the case may be, and
confirm the advice in writing, of the receipt of any comments of the
Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission for amendment
of the Registration Statement or for supplementing of the Prospectus or for
additional
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information with respect thereto, of the issuance by the Commission or any
state or regulatory body of any stop orders or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus, or of the suspension of the
qualification of the Shares for offering in any jurisdiction, or the
institution of any proceedings for any of such purposes, and the Company will
use its reasonable efforts to prevent the issuance of any such order and, if
issued, to obtain as soon as possible the lifting thereof.
(ii) The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to
the use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriter and selected dealers to use the Prospectus in
connection with the sale of the Units for such period as in the opinion of
counsel of the Underwriter (whether general, special, patent or otherwise) the
use thereof is required to comply with the applicable provisions of the Act and
the Rules and Regulations. In case of the happening, at any time within such
period as a Prospectus is required under the Act to be delivered in connection
with sales by an underwriter or dealer, of any event of which the Company has
knowledge and which materially affects the Company or the Securities, or which,
in the opinion of counsel for the Company or counsel for the Underwriter,
should be set forth in an amendment to the Registration Statement or a
supplement to the Prospectus in order to make the statements therein not then
misleading, in light of the circumstances existing at the time the Prospectus
is required to be delivered to a purchaser of the Units, or in case it shall be
necessary to amend or supplement the Prospectus to comply with the Act or with
the Rules and Regulations, the Company will notify you promptly and forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or
supplemented, will not contain any untrue statement of a material fact or omit
to state any material facts necessary in order to make the statements in the
Prospectus, in the light of the circumstances under which they are made, not
misleading. The preparation and furnishing of any such amendment or supplement
to the Registration Statement or amended Prospectus or supplement to be
attached to the Prospectus shall be without expense to the Underwriter.
(iii) The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Shares.
(b) The Company will use its best efforts and shall pay all costs and
expenses to qualify or register ("Blue Sky") the Firm Units and Option Units
for sale under the securities or "blue sky" laws of such jurisdictions as you
may designate and will make such applications
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and furnish such information to counsel for the Underwriter as may be required
for that purpose and to comply with such laws, provided that the Company shall
not be required to qualify as a foreign corporation or a dealer in securities
or to execute a general consent of service of process in any jurisdiction in
any action other than one arising out of the offering or sale of the Firm Units
and Option Units. Blue Sky applications shall be prepared by the Company's
counsel, Gary A. Agron, at the Company's expense. On the Effective Date of
this Agreement as defined in Section 9 below, counsel for the Company shall
deliver to Underwriter's counsel a Blue Sky Memorandum describing, among other
things, all states wherein the Offering has been qualified or registered for
sale, the number of Units registered in each such state and the period of
effectiveness of such qualification or registration. The Company will, from
time to time, prepare and file such statements and reports as are or may be
required to continue such qualification in effect for so long a period as you
may reasonably request.
(c) If the sale of the Units provided for herein is not consummated for
any reason caused by the Company, the Company shall pay all costs and expenses
incident to the performance of the Company's obligations hereunder, including
but not limited to, all of the expenses itemized in Section 8, including your
accountable expenses, as provided in Section 8(b).
(d) The Company will use its best efforts to cause a Registration
Statement under the Exchange Act to be declared effective concurrently with
the completion of the offering of the Shares or promptly thereafter, but in
no event later than three days after the date of the Prospectus.
(e) For so long as the Company is a reporting company under either
Section 12(g) or 15(d) of the Exchange Act, the Company, at its expense, will
furnish to the holders of its Common Stock, Units and Warrants an annual
report (including financial statements audited by independent public
accountants), in reasonable detail and at its expense, will furnish to you
during the period ending five years from the date hereof, (i) within 90 days
of the end of each fiscal year, a balance sheet of the Company and any
subsidiaries as at the end of such fiscal year, together with statements of
income, stockholders' equity and cash flows of the Company and any
subsidiaries as at the end of such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
auditors; (ii) as soon as they are available, a copy of all reports
(financial or other) mailed to security holders; (iii) as soon as they are
available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission; and (iv) such other information as
you may from time to time reasonably request.
(f) In addition to the information and reports set forth in Section 3(e)
above, for a period of two years from the Effective Date, the Company, at its
expense, shall furnish to you (i) unaudited quarterly financial statements on a
timely basis, and (ii) monthly shareholder lists prepared by the Company's
transfer agent.
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(g) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(h) The Company will deliver to you at or before the First Closing Date
two signed copies of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto. The
Company will deliver to or upon order of the Underwriter, from time to time
until the Effective Date, as many copies of any Preliminary Prospectus filed
with the Commission prior to the Effective Date as the Underwriter may
reasonably request. The Company will deliver to the Underwriter on the
Effective Date and thereafter for so long as a Prospectus is required to be
delivered under the Act, from time to time, as many copies of the Prospectus,
in final form, or as thereafter amended or supplemented, as the Underwriter may
from time to time reasonably request.
(i) The Company will make generally available to its security holders and
deliver to you as soon as it is practicable to do so, but in no event later
than 90 days after the end of 12 months after its current fiscal quarter, an
earnings statement (which need not be audited) covering a period of at least 12
consecutive months beginning after the Effective Date, which shall satisfy the
requirements of Section 11(a) of the Act.
(j) The Company will apply the net proceeds from the sale of the Firm
Units substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 of the Rules and Regulations.
(k) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement,
preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of Niebler & Muren, S.C., counsel to the Underwriter, may be
reasonably necessary or advisable in connection with the distribution of the
Shares and will use its reasonable efforts to cause the same to become
effective as promptly as possible.
(l) Except as stated below, each of the existing stockholders of the
Company at the date hereof (the "Existing Stockholders"), will execute
agreements ("Lock Up Agreements"), in the form previously delivered, to the
effect that for a period of 12 months from the date of the Prospectus, they
will not sell, assign, hypothecate, pledge or otherwise dispose of, directly or
indirectly, any shares of Common Stock of the Company owned prior to the date
hereof without your prior written consent, and will agree to permit all
certificates evidencing their shares to be endorsed with the appropriate
restrictive legends, and consent to the placement of appropriate stop transfer
orders with the transfer agent for the Company. Further, options of Company
employees shall be excluded from the Lock-Up Agreement. Excluded from the Lock-
Up Agreement shall be those shares of Common Stock that certain Existing
Stockholders are registering for sale as part of the Registration Statement.
The Company further agrees that for
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a period of 12 months from the date hereof, it will not register any shares
of Common Stock underlying any existing stock purchase warrants.
(m) The Company shall immediately make all filings required to seek
approval for the quotation of the Common Stock and Units on the NASDAQ National
Market and the Warrants for quotation on the Nasdaq Small Cap and will use its
reasonable efforts to effect and maintain the aforesaid approval for at least
five years from the date of this Agreement. Within 10 days after the Effective
Date, the Company shall cause the Company to be listed in Standard & Poor's
Financial Relations Program (including S&P Corporate Records, Stock Guide, OTC
Stock Reports and Market Guide) and cause such listing to be maintained for
five years from the date of this Agreement.
(n) All officers, directors, and shareholders of the Company required to
execute the Lock Up Agreement have executed the same.
(o) Prior to the First Closing Date, the Company will not issue, directly
or indirectly, without your prior written consent, a press release or other
communication or hold any press conference with respect to the Company, its
activities or the Offering.
(p) The Company and the Existing Stockholders represent that it or they
have not taken, and agree that it or they will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in the stabilization or manipulation
of the price of the Units to facilitate the sale or resale of the Units.
(q) For a period of twenty-four months from the Closing, the Company
shall, at your option, appoint a non-voting observer to the Company's Board of
Directors, designated by you and such observer shall receive notice of and be
entitled to attend all meetings of the Board of Directors. The Company agrees
it shall fully indemnify, defend and hold harmless such observer to the fullest
extent permitted by law with respect to all acts and omissions as an observer
to the Company's Board of Directors.
(r) The Company will reserve and keep available that maximum number of
its authorized but unissued Shares which are issuable upon exercise of the
Warrants and the Underwriter's Warrant (as defined in Section 11).
(s) The Company will not, prior to the First Closing Date, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction other than in the ordinary course of business, except as
disclosed prior thereto in the Prospectus.
(t) For a period of thirty-six (36) months from the Effective Date, you
shall have the right to provide a competitive 401k program to management and
all employees of the Company.
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(u) The Company shall select Common Stock and Warrant certificates and
utilize a stock transfer agent satisfactory to you.
(v) So long as any Warrants are outstanding, the Company shall use its
best efforts to cause post-effective amendments to the Registration Statement
to become effective in compliance with the 1933 Act and without any lapse of
time between the effectiveness of any such post-effective amendments and cause
a copy of each Prospectus, as then amended, to be delivered to each holder of
record of a Warrant and to furnish to the Underwriters and each dealer as many
copies of each such Prospectus as the Underwriters or dealer may reasonably
request.
4. CONDITIONS OF UNDERWRITER'S OBLIGATION.
The obligations of the Underwriter to purchase and pay for the Units which
it has agreed to purchase hereunder are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and you shall
have received notice thereof not later than December 1, 1997, 2:00 P.M.,
Milwaukee, Wisconsin time, on the date of this Agreement, or at such later time
or on such later date as to which you may agree in writing; on the Closing
Dates, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that or any similar purpose shall
have been instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Niebler & Muren, S.C., counsel
to the Underwriter; and no stop order shall be in effect denying or suspending
effectiveness of the Registration Statement nor shall any stop order
proceedings with respect thereto be instituted or pending or threatened under
the Act.
(b) Since the dates as of which information is given in the Registration
Statement:
(i) the Company shall not have sustained any material loss or
interference with its business from any labor dispute, fire, explosion, flood
or other calamity (whether or not insured), or from any court or governmental
action, order or decree; and
(ii) there shall not have been any change in the equity ownership,
short-term debt or long-term debt of the Company or a change, or a development
involving a prospective change, in or affecting the ability of the Company to
conduct its business (whether by reason of any court, legislative, other
governmental action, order, decree, or otherwise), or in the general affairs,
management, financial position, members' equity or results of operations of the
Company, whether or not arising from transactions in the ordinary course of
business, in each case other than as set forth in or contemplated by the
Registration Statement and Prospectus, the effect of which on the Company, in
any such case described in clause (i) or (ii) of this Section 4(b), is, in
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your judgment (exercising your sole discretion), so material and adverse as
to make it impracticable or inadvisable to proceed with the distribution of
the Offering or the delivery of the Units, Warrants and Shares on the terms
and in the manner contemplated in the Registration Statement and the
Prospectus.
(c) Between the date hereof and the First Closing Date and the Option
Closing Date if the option is exercised, there shall be no litigation
instituted or threatened against the Company and there shall be no proceeding
instituted or threatened against the Company before or by any federal or state
commission, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, franchises, licenses, patents,
operations or financial condition or income of the Company considered as an
entity.
(d) At the First Closing Date, you shall have received the opinion, dated
as of the First Closing Date, of Gary A. Agron, counsel for the Company, in
form and substance satisfactory to counsel for the Underwriter, to the effect
that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Florida and is duly qualified or licensed to do business as a foreign
corporation in good standing in each other jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification except where failure to so qualify would not
result in a material adverse effect on the Company;
(ii) to the best knowledge of such counsel, (a) the Company has
obtained, or is in the process of obtaining, all licenses, permits and other
governmental authorizations necessary to the conduct of its business as
described in the Prospectus, (b) such obtained licenses, permits and other
governmental authorizations are in full force and effect, and (c) the Company
is in all material respects complying therewith;
(iii) the authorized capitalization of the Company as of the date of
the Prospectus was as set forth under "Description of Securities" in the
Prospectus; all of the shares of the Company's outstanding stock requiring
authorization for issuance by the Company's Board of Directors have been duly
authorized and validly issued, are fully paid and non-assessable and conform to
the description thereof contained in the Prospectus; the outstanding shares of
Common Stock of the Company have not been issued in violation of the preemptive
rights of any stockholder and the stockholders of the Company do not have any
preemptive rights or other rights to subscribe for or to purchase, and there
are no restrictions upon the voting or transfer of, any of the Common Stock;
the Units, Common Stock, Warrants and the Underwriter's Warrants conform to the
respective descriptions thereof contained in the Prospectus; the Units and each
Unit component to be issued as contemplated in the Registration Statement has
been duly authorized and, when paid, will be non-assessable and free of
preemptive rights, and no personal liability will attach to the ownership
thereof; all prior sales of the Company's securities have been made in
compliance with, or under an exemption from, the Act and applicable state
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securities laws; a sufficient number of shares of Common Stock have been
reserved for issuance upon exercise of the Warrants and the Underwriter's
Warrants; and to the best of such counsel's knowledge, neither the filing of
the Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any registration rights or other
rights, other than those which have been waived or satisfied, for or relating
to the registration of the Units;
(iv) the Company has full power and authority to enter into and
perform each of this Agreement, the Underwriter's Warrant, the Warrant
Agreement and the Warrants; all of such agreements, and the performance of
the obligations of the Company hereunder, have been duly authorized by all
necessary action and have been duly executed and delivered by and on behalf
of the Company, and assuming due authorization, execution and delivery of
this Agreement by the Underwriter and of such other agreements by the other
parties thereto, all of such agreements are legal, valid and binding
agreements of the Company enforceable in accordance with their terms;
provided that no opinion need be expressed as to the enforceability of the
indemnity provisions contained in Section 6 or the contribution provisions
contained in Section 7 of this Agreement, and except that rights to identify
or contribution may be limited by applicable law and enforceability of the
agreement may be limited by bankruptcy, (as described in paragraph 1(f)
above) insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally; and no approval, authorization or consent of any
court, board, agency or instrumentality of the United States or of any state
or other jurisdiction is necessary in connection with the execution and
delivery of this Agreement, or in connection with the issue or sale of the
Units by the Company pursuant to this Agreement (other than under the Act,
applicable Blue Sky Laws and the rules of the NASD) or the consummation by
the Company of any transaction contemplated by this Agreement;
(v) the Warrant Shares (including those issuable upon exercise of
the Underwriter's Warrants) and Underwriter's Warrant Units have been duly
authorized and reserved for issuance and, when issued and delivered in
accordance with the terms of this Agreement and the Underwriter's Warrant,
respectively, will be duly and validly issued, fully paid and nonassessable.
(vi) the certificate evidencing the Unit components and the
Underwriter's Warrants are in valid and proper legal form; the Warrants and
the Underwriter's Warrants will be exercisable for shares of Common Stock of
the Company in accordance with the terms of the Warrant Agreement and the
Underwriter's Warrant, respectively; and at the respective prices therein
provided for; the shares of Common Stock of the Company issuable upon
exercise of the Warrants and the Underwriter's Warrants have been duly
authorized and reserved for issuance upon such exercise or conversion, and
such shares, when issued upon such exercise in accordance with the terms of
the Warrants and the Underwriter's Warrants and at the price paid, or upon
such conversion, shall be fully paid and non-assessable;
(vii) such counsel knows of no pending or threatened legal suit,
proceeding, inquiry or investigation to which the property of the Company is
subject, before or brought by any court governmental agency or body or
arbitration tribunal which could materially and
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adversely affect the business, property, financial position/condition, net
worth, operations or prospects of the Company or its affiliates or materially
and adversely affect their respective properties or assets, or which question
the validity of the Units or the components thereof, this Agreement, the
Warrant Agreement or the Underwriter's Warrant or of any action taken or to
be taken by the Company pursuant to this Agreement, the Warrant Agreement or
the Underwriter's Warrant; no such proceedings are known to such counsel to
be contemplated against the Company, or its assets; and there are no
governmental proceedings or regulations known to such counsel required to be
described or referred to in the Registration Statement which are not so
described or referred to;
(viii) to the best knowledge of such counsel, the Company is not
in violation of or default under this Agreement, the Warrant Agreement or the
Underwriter's Warrant, and the execution and delivery hereof and thereof and
the incurrence of the obligations herein and therein set forth and the
consummation of the transactions herein or therein contemplated will not
result in a violation of, or constitute a default under, the certificate or
articles of incorporation or by-laws of the Company, or in the performance or
observation of any material obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or
in any contract, indenture, mortgage, loan agreement, lease, joint venture or
other agreement or instrument to which the Company is a party or in a
violation of any material order, rule, regulation, writ, injunction or decree
or any government, governmental instrumentality or court, domestic or foreign;
(ix) the Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or is pending before, or
threatened by, the Commission or any "blue sky" or securities authority; to
the best knowledge of such counsel, all descriptions in the Registration
Statement and the Prospectus of statutes, regulations and governmental
proceedings are accurate and fairly present the information disclosed in all
material respects, and such counsel does not know of any legal, governmental
or regulatory proceedings, pending or threatened, required to be described in
the Prospectus, nor of any contracts or documents of a character required to
be described in or filed as exhibits to the Registration Statement, which are
not so described or filed;
(x) such counsel has participated in the preparation of the
Registration Statement and the Prospectus, such counsel has no reason to
believe that the Registration Statement or the Prospectus or any amendment or
supplement thereto or any document incorporated by reference therein at the
time it became effective contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading (except, for the financial
statements, notes thereto and other financial information and statistical
data contained therein, as to which such counsel need express no opinion);
(xi) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and other
documents filed as exhibits to the
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Registration Statement are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts and
other documents filed as exhibits to the Registration Statement and the
Prospectus and any such amendment or supplement, or filed as exhibits to the
Registration Statement, and such counsel does not know of any contracts or
documents of a character required to be summarized or described therein or to
be filed as exhibits thereto which are not so summarized, described or filed;
(xii) no authorization, approval, consent or license of any
governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the Units or
Unit components by the Company, in connection with the execution, delivery
and performance of this Agreement by the Company or in connection with the
taking of any action contemplated herein, or the issuance of the Warrants,
Underwriter's Warrants or the securities underlying the Warrants and the
Underwriter's Warrants, other than registration or qualification of the Units
and Underwriter's Warrants under applicable state or foreign securities or
blue sky laws and registration under the Act;
(xiii) the statements in the Registration Statement under the
captions "Business," "Use of Proceeds,"Management" and "Description of
Securities" have been reviewed by such counsel and, insofar as they refer to
descriptions of agreements, statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are correct in all
material respects;
(xiv) to the best knowledge of such counsel, the Company has good
and marketable title to all the property and assets reflected as owned by it
in the Prospectus, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind or nature whatsoever except those, if any, reflected
in the Prospectus or which are not material to the Company and do not
materially affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property; to the best
knowledge of such counsel, all property held or used by the Company under
leases, licenses, franchises or other agreements are held by it under valid,
subsisting and enforceable leases, licenses, franchises or other agreements,
subject to bankruptcy, insolvency or similar laws generally affecting the
rights of creditors and equitable principles effecting the right to obtain
specific enforcement or similar equitable relief;
(xv) to the best knowledge of such counsel, there are no holders
of securities of the Company having rights to the registration of such
securities, and there are no options, warrants or other rights to purchase or
otherwise acquire any equity interest in the Company, or any security
convertible such equity interest, except as disclosed in the Prospectus; and
(xvi) to the best knowledge of such counsel, the Company is not in
violation of its articles of incorporation or by-laws, or other
organizational or charter documents or in default (nor has an event occurred
which, with notice, lapse of time or both, would constitute such a default)
in the performance of any obligation, agreement or condition contained in any
bond, indenture, mortgage, deed of trust, note, bank loan or credit agreement
or any other agreement or instrument to which the Company is a party or by
which the Company or any of its property may be bound or affected, and to the
best knowledge of such counsel, the Company is not in
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violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation, where such violation or default could have a
material adverse effect on the respective business, property or operations of
the Company.
Such opinion shall also cover such matters including to the transactions
contemplated hereby as you or counsel for the Underwriter shall reasonably
request. In rendering such opinion, such counsel may rely upon certificates
of any officer of the Company or public officials as to matters of fact; and
may rely as to all matters of law other than the law of the United States or
the corporate law of the State of Utah upon opinions of counsel satisfactory
to you, which may also be addressed to you, in which case the opinion shall
state that they have no reason to believe that you and they are not entitled
to so rely.
(e) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus, and other related
matters shall be reasonably satisfactory to or approved by Niebler & Muren,
S.C., counsel to the Underwriter, and you shall have received from such
counsel a signed opinion, dated as of the First Closing Date, with respect to
the validity of the issuance of the Units, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial data contained therein), the execution of this Agreement and other
related matters as you may reasonably require. The Company shall have
furnished to counsel for the Underwriter such documents as they may
reasonably request for the purpose of enabling them to render such opinion.
(f) At both the time of the execution of this Agreement by the Company
and at the Closing Date, you shall have received letters in form and
substance satisfactory to you, from AJ. Robbins, P.C. (the "Auditors"), dated
respectively as of the date of this Agreement and as of the Closing Date, to
the effect that they are independent certified public accountants with
respect to the Company within the meaning of the Act and published Rules and
Regulations, and that the Registration Statement is correct insofar as it
relates to them and stating in effect that:
(i) In their opinion the audited financial statements and notes of
the Company in the Registration Statement and the Prospectus examined by them
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Rules and Regulation with respect
to registration statements on Form SB-2.
(ii) On the basis of inquiries and procedures conducted by them
(not constituting an examination in accordance with generally accepted
auditing standards), including a reading of the financial information and
other data included in the Registration Statement and the Prospectus in
response to Item 310 of Regulation S-B; that on the basis of inquiries of
officials of the Company who have responsibility for financial accounting
matters, especially as to whether there was any adverse change in revenues,
net income, or any change in the capital stock of the Company or any change
in the long-term debt or any increase in bank borrowings or any decreases in
total assets, net current assets or shareholders' equity of the Company;
reviewing minutes of all meetings of shareholders and boards of directors
(and various committees thereof) of the Company since inception and other
specified inquiries and
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procedures, nothing has come to their attention as a result of the foregoing
inquiries and procedures that caused them to believe that:
(A) the audited financial statements for the years ended
December 31, 1995 and December 31, 1996, as to the Company, included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the published Rules and
Regulations with respect to registration statements on Form SB-2; or said
financial statements are fairly presented in conformity with generally
accepted accounting principles; or the amounts included in the Registration
Statement and the Prospectus in response to Item 310 of Regulation S-B are
not consistent with the corresponding amounts in the audited or unaudited
financial statements from which such amounts were derived; or
(B) during the period from December 31, 1996 to a specified
date not more than five (5) days prior to the date of such letter, there has
been any change in the Common Stock or long-term debt of the Company or any
increase in bank borrowings of the Company or any decrease in the
shareholders' equity or working capital of the Company or change in any other
item appearing on the Company's financial statements as to which the
Underwriter may request advice, in each case as compared with amounts shown
in the financial statements included in the Prospectus, except in each case
for increases or deficiencies which the Prospectus discloses have occurred or
may occur, or as specified in such letter, in which case the letter shall be
accompanied by an explanation by the Company of the significance thereof.
(iii) On the basis of certain procedure agreed to by the
Underwriter and the Auditors and described in their letter or letters,
certain numerical data and information included in the Registration Statement
and Prospectus and referred to in their letter were in agreement with
specifically designated records of the Company which were not included in the
Registration Statement and Prospectus but from which information in the
Registration Statement or the Prospectus was derived.
(g) There shall have been furnished to you, on each Closing Date, a
certificate of the principal executive officer and the principal financial
officer of the Company, dated as of such Closing Date, to the effect that:
(i) the representations and warranties of the Company which are
set forth in this Agreement thereof are true and correct as of the date of
this Agreement and as of each Closing Date, as if again made on and as of
such Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such Closing Date;
(ii) to the best of their knowledge, the Commission has not issued
an order preventing or suspending the use of the Prospectus or any
Preliminary Prospectus filed as part of the Registration Statement or any
amendment thereto, no stop order suspending the effectiveness
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of the Registration Statement or enjoining the use of the Prospectus has been
issued, and no proceedings for that purpose have been instituted or are
pending or contemplated under the Act;
(iii) each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus and, in his
opinion and to the best of his knowledge, information and belief, the
Registration Statement and the Prospectus and any amendments or supplements,
thereto contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations to be stated therein,
and neither the Registration Statement nor the Prospectus nor any amendment
or supplement thereto includes any untrue statement of material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth
in an amended or supplemented prospectus which has not been so set forth: and
(iv) since the effective date of the Registration Statement, there
has not been any material adverse change or, to their knowledge, a
development involving a prospective material adverse change in the business,
properties, financial conditions, general affairs or earnings of the Company,
whether or not arising from transactions in the ordinary course of business,
except as disclosed in the Registration Statement and Prospectus theretofore
amended including the proposed amendment thereto delivered to you prior to or
contemporaneously with the execution of this Agreement or (but only if you
expressly consent thereto in writing) delivered to you thereafter; since such
date and except as so disclosed, or in the ordinary course of business, the
Company has not incurred any liability or obligation, direct or indirect, or
entered into any material transaction; since such date and except as so
disclosed there has not been any material change in the equity ownership of
the Company or its short-term debt or long-term debt; since such date and
except as so disclosed, no action, suit or proceeding at law shall be pending
or threatened against the Company which would be required to be disclosed in
the Registration Statement, and no proceedings shall be pending or threatened
against the Company before or by any commission, board or administrative
agency in the United States or elsewhere, wherein an unfavorable decision,
ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or
general affairs of the Company; and since such date and except as so
disclosed, the Company has not incurred any material contingent obligations,
and no material litigation is pending or, to their knowledge, threatened
against the Company; and, since such date and except as so disclosed, the
Company has not sustained a material loss or interference with its business
from any labor dispute, fire, explosion, flood or other calamity (whether or
not insured) or from any court or governmental action, order or decree.
The delivery of the certificate provided for in this Section shall be
and constitute a representation and warranty of the Company as to the facts
required in the immediately foregoing clauses (i), (ii), (iii) and (iv) of
this Section to be set forth in said certificate;
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(h) Upon exercise of the option provided for in Section 2(b) hereof,
your obligations to purchase and pay for the Option Units referred to therein
will be subject (as of the date hereof and as of the Option Closing Date) to
the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, no stop order suspending the effectiveness thereof shall
have been issued, and no proceedings for that purpose shall have been
instituted or shall be pending, or, to your knowledge or the knowledge of the
Company, shall be contemplated by the Commission, and any reasonable request
on the part of the Commission for additional information shall have been
complied with to the satisfaction of Niebler & Muren, S.C., counsel to the
Underwriter.
(ii) At the Option Closing Date there shall have been delivered to
you the signed opinion of Gary A. Agron, counsel for the Company, dated as of
the Option Closing Date, in form and substance satisfactory to Niebler &
Muren, S.C., counsel to the Underwriter, which opinion shall be substantially
the same in scope and substance as the opinion furnished to you at the First
Closing Date pursuant to Section 4(d) hereof, except that such opinion, where
appropriate, shall cover the Option Shares rather than the Firm Shares. If
the First Closing Date is the same as the Option Closing Date, such opinions
may be combined.
(iii) At the Option Closing Date, there shall have been delivered
to you a certificate of the Chairman of the Board and the principal financial
officer of the Company dated the Option Closing Date, in form and substance
satisfactory to Niebler & Muren, S.C., counsel to the Underwriter,
substantially the same in scope and substance as the certificate furnished to
you at the First Closing Date pursuant to Section 4(g) hereof.
(iv) At the Option Closing Date, there shall have been delivered
to you letters in form and substance satisfactory to you from the Auditors,
dated the Option Closing Date and addressed to you, confirming the
information in their letter referred to in Section 4(f) hereof as of the date
thereof and stating that, without any additional investigation required,
nothing has come to their attention during the period from the ending date of
their review referred to in said letter to a date not more than five (5)
business days prior to the Option Closing Date which would require any change
in said letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Units shall be
satisfactory in form and substance to you, and you and Niebler & Muren, S.C.,
counsel to the Underwriter, shall have been furnished with all such
documents, certificates and opinions as you may request in connection with
this transaction in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained therein.
(i) If any of the conditions herein provided for in this Section shall
not have been completely fulfilled as of the date indicated, this Agreement
and all obligations of the Underwriter under this Agreement may be cancelled
at, or at any time prior to, each Closing
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Date by your notifying the Company of such cancellation in writing or by
telegram at or prior to the applicable Closing Date. Any such cancellation
shall be without liability of the Underwriter to the Company, except as
otherwise provided herein.
(j) There shall have been furnished to you, on or before the First
Closing Date, the Lock Up Agreement signed by the Company, and each
shareholder, director and officer so required.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably
satisfactory to you and your counsel. The Company shall promptly furnish you
with such manually signed or conformed copies of such opinions, certificates,
letters and other documents as you may reasonably request from time to time.
With respect to any Closing, by written instrument delivered to the Company,
you may from time to time, in your sole discretion, waive any of the
requirements imposed upon the Company pursuant to this Section, including
without limitation the requirement that any opinion, certificate, survey or
other document be delivered to you at any Closing or as of any Closing Date;
any such waiver by you with respect to a Closing shall not in any way be
construed as such waiver with respect to any other Closing. If any condition
to your obligations hereunder to be satisfied prior to or a Closing Date is
not so satisfied, this Agreement at your election will terminate upon
notification to the Company without liability on the part of you or the
Company, except for the expenses or fees to be paid or reimbursed by the
Company pursuant to Section 8 hereof and except to the extent provided in
Sections 6 and 7 hereof.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligation of the Company to sell and deliver the Units is subject
to the following conditions:
(a) The Registration Statement shall have become effective not later
than December 1, 1997 at 2:00 p.m. Milwaukee, Wisconsin time, on the date of
this Agreement, or on such later date or time as the Company and you may
agree in writing.
(b) On the Closing Dates, no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only
the obligation of the Company to sell and deliver the Option Units on
exercise of the option provided for in Section 2(b) hereof shall be affected.
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6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless you, each of your
officers, directors, employees and agents, and each person, if any, who
controls you within the meaning of the Act or the Exchange Act against any
losses, claims, damages or liabilities, joint or several, to which you or
each such officer, director, employee, agent or controlling person may become
subject under the Act, the Exchange Act, Blue Sky Laws or other federal or
state laws or regulations, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in or incorporated in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or in any
application filed under any Blue Sky Law or other document executed by the
Company specifically for that purpose or based upon written information
furnished by the Company and filed in any state or other jurisdiction in
order to qualify any or all of the Units under the securities laws thereof
(any such document, application or information being hereinafter referred to
as a "Blue Sky Application") or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; the
Company agrees to reimburse you and each such other indemnified person for
any legal or other expenses incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent
that:
(i) any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or in any
Blue Sky Application in reliance upon and in conformity with written
information furnished to the Company by you specifically for use therein (but
in no event shall the assistance in the drafting of all or any portion of the
Registration Statement, any Preliminary Prospectus, the Prospectus, such
amendment or supplement or such other document of the type referred to in the
preceding paragraph by you or your counsel constitute such information); or
(ii) if such statement or omission was contained or made in a
Preliminary Prospectus and corrected in the Prospectus and (i) any such loss,
claim, damage or liability suffered or incurred by you (or any person who
controls you) resulted from an action, claim or suit by any person who
purchased Units from you in the Offering, and (ii) you failed to deliver or
provide a copy of the Prospectus to such person at or prior to the confirmation
of the sale of such Units in any case where such delivery is required by the
Securities Act unless such failure was due to failure by the Company to provide
copies of the Prospectus to you as required by this Agreement.
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The indemnification obligations of the Company as provided above are in
addition to any liabilities the Company may otherwise have under other
agreements, under common law or otherwise.
(b) You will indemnify and hold harmless the Company, each of the
directors and officers of the Company who sign the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act or
the Exchange Act, against any losses, claims, damages or liabilities to which
the Company or any such director, officer or controlling person may become
subject under the Act, the Exchange Act, Blue Sky Laws or other federal or
state laws or regulations, at common law or otherwise (including in settlement
of any litigation, if such settlement is effected with your written consent,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or in any
Blue Sky Application, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, in reliance upon and in
conformity with any written information furnished to the Company by you
specifically for use therein (but in no event shall the assistance in the
drafting of all or any portion of the Registration Statement, any Preliminary
Prospectus, the Prospectus, such amendment or supplement or such other document
of the type referred above by you or your counsel constitute such information).
You agree to reimburse the Company and each such other indemnified person for
any legal or other expenses incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action.
Your indemnification obligations as provided above are in addition to any
liabilities which you may otherwise have under other agreements, under common
law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section, notify in writing the indemnifying party of the commencement
thereof, but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ
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separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is the Underwriter or a person
who controls the Underwriter within the meaning of the Act, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such
action (including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party, and in the reasonable judgment
of the Underwriter, it is advisable for the Underwriter or controlling
persons to be represented by separate counsel (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the Underwriter or such controlling person, it being understood, however,
that the indemnifying party shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys). No settlement of any action against an indemnified party shall be
made without the consent of the indemnified party, which shall not be
unreasonably withheld in light of all factors of importance to such
indemnified party.
7. CONTRIBUTION.
In order to provide for just and equitable contribution under the Act in
any case in which (i) the Underwriter makes claims for indemnification pursuant
to Section 6 hereof but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case,
or (ii) contribution under the Act may be required on the part of the
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in
either such case (after contribution from others) in such proportions that such
Underwriter is responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per Unit appearing on the cover page of the Prospectus
bears to the public offering price per Unit appearing thereon, and the Company
shall be responsible for the remaining portion, provided, however, that (a) if
such allocation is not permitted by applicable law, then the relative fault of
the Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by
the Company or the Underwriter, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The
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Company and the Underwriter agree (a) that it would not be just and equitable
if the respective obligations of the Company and the Underwriter to
contribute pursuant to this Section 7 were to be determined by PRO RATA or
PER CAPITA allocation of the aggregate damages or by any other method of
allocation that does not take account of the equitable considerations
referred to in the first sentence of this Section 7 and (b) that the
contribution of the Underwriter shall not be in excess of its proportionate
share of the portion of such losses, claims, damages or liabilities for which
the Underwriter is responsible. No person guilty of a fraudulent
misrepresentation (within the meaning of Section ll(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company" includes
any officer, director, or person who controls the Company within the meaning
of Section 15 of the Act. If the full amount of the contribution specified
in this paragraph is not permitted by law, then the Underwriter and each
person who controls the Underwriter shall be entitled to contribution from
the Company to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale of the
Firm Units or Option Units to the Underwriter is consummated, the Company will
pay all costs and expenses incident to the performance of this Agreement by the
Company, including but not limited to the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to
the preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the NASD in connection with
the filing required by the NASD relating to the offering of the Units
contemplated hereby; all expenses, including reasonable fees (but not in excess
of the amount set forth in Section 3(b)) and disbursements of counsel to the
Underwriter, in connection with the qualification of the Units and Unit
components under the State Securities or Blue Sky Laws which we shall mutually
designate; the cost of printing and furnishing to the Underwriter copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, the Selling Agreement and the Blue Sky Memorandum; the cost of
printing the certificates representing the components comprising the Units,
expenses of Company due diligence meetings and presentations. The Company
shall pay any and all taxes (including any transfer, franchise, capital stock
or other tax imposed by any jurisdiction) on sales to the Underwriter
hereunder. The Company will also pay all costs and expenses incident to the
furnishing of any amended Prospectus or of any supplement to be attached to the
Prospectus as called for in Section 3(a) of this Agreement except as otherwise
set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at the First
Closing Date pay to you the balance of a non-accountable expense allowance of
$135,000 of which $20,000
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has been paid. In the event the over-allotment option is exercised in full,
the Company shall pay to you at the Option Closing Date an additional amount
equal to 3% of the gross proceeds received upon exercise of the
over-allotment option. In the event the transactions contemplated hereby are
not consummated for any reason, the Underwriter will retain that portion of
the $20,000 non-accountable expense allowance deposit received from the
Company as is equal to its actual accountable expenses and will reimburse the
Company for the remainder, if any.
(c) No person is entitled either directly or indirectly to compensation
from the Company, from the Underwriter or from any other person for services as
a finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriter, and the Underwriter agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the indemnified party may
become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. EFFECTIVE DATE.
The Agreement shall become effective upon its execution, except that you
may, at your option, delay its effectiveness until 9:00 a.m. Milwaukee,
Wisconsin time, on the first full business day following the Effective Date, or
at such earlier time after the Effective Date as you in your discretion shall
first commence the initial public offering of any of the Shares. The time of
the initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Shares, or the time when the Shares
are first generally offered by you to dealers by letter, telegram, or telefax
whichever shall first occur. This Agreement may be terminated by you at any
time before it becomes effective as provided above, except that Sections 3(c),
6, 7, 8, 12, 13, 14 and 17 shall remain in effect notwithstanding such
termination.
10. TERMINATION.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14 and 17,
may be terminated at any time prior to the First Closing Date, and the option
referred to in Section 2(b), if exercised, may be cancelled, at any time prior
to the Option Closing Date, by you if in your judgment it is impracticable to
offer for sale or to enforce contracts made by the Underwriter for the resale
of the Units agreed to be purchased hereunder, by reason of (i) the Company
having sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree, (ii) trading in securities on the
New York Stock Exchange or the American Stock Exchange having been suspended or
limited, (iii) material governmental restrictions having been imposed on
trading in securities generally which are not in force and effect on the date
hereof, (iv) a banking moratorium having been declared by federal, Florida or
New York State
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authorities, (v) an outbreak of major international hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably
believed likely by you to have a material adverse impact on the business,
financial condition or financial statements of the Company, (vii) any adverse
change having occurred in the sole opinion of the Underwriter in the
financial or securities markets since the date of this Agreement, (viii) any
event shall have occurred or shall exist which makes untrue or incorrect in
any material respect any statement or information contained in the
Registration Statement or which is not reflected in the Registration
Statement but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect; or (ix)
any adverse change having occurred in the sole opinion of the Underwriter
with respect to the earnings, business prospects or general condition of the
Company, financial or otherwise, other than normal fluctuations in sales,
whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 10 or in Section 9, the
Company shall be promptly notified by you, by telephone, telegram, or telefax
confirmed by letter.
(c) Any termination pursuant to section 10 or 9 of the Agreement shall be
without liability of the Underwriter to the Company or on the part of the
Company to the Underwriter, including, but not limited to, loss of anticipated
profits or consequential damages except that the Company shall remain obligated
to pay the costs and expenses provided to be paid in Section 4(b) and 8 hereof
and except as to indemnification and contribution as provided in Section 6 and
7 hereof.
11. UNDERWRITER'S WARRANT.
On the First Closing Date, the Company will issue to you, for a
consideration of $100 and upon the terms and conditions set forth in the form
of Underwriter's Warrant annexed as an exhibit to the Registration Statement,
an Underwriter's Warrant to purchase up to 45,000 Units at an exercise price of
$12.00 per Unit. In the event of conflict in the terms of this Agreement and
the Underwriter's Warrant, the language of the Underwriter's Warrant shall
control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
(a) All representations, warranties, covenants and agreements of the
Company, the Company and the Underwriter contained herein or in certificates of
officers delivered pursuant hereto, and the indemnity and contribution
agreements contained in Section 6 and 7 hereof, shall survive the delivery and
execution of this Agreement and the Closing Date and shall remain operative and
in full force and effect regardless of any investigation made by or on behalf
of you
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<PAGE>
or any person controlling you, the Company or any of its officers, directors,
or controlling persons.
(b) The indemnification and contribution provisions of Section 6 and 7
hereof are in addition to any and all remedies or rights which either of the
parties hereto may have, including the right to sue and recover damages for any
breach of any representation, warranty or covenant made or given by either of
the parties hereto to any other party.
13. NOTICE.
All communications hereunder will be in writing and, except as otherwise
expressly provided herein, if sent to you, will be mailed, certified mail,
return receipt requested, delivered or telegraphed or telefaxed and confirmed
at 1233 N. Mayfair Road, Suite 117, Milwaukee, Wisconsin 53226, telefax (414)
778-0820, or if sent to the Company, will be mailed, certified mail, return
receipt requested, delivered, or telegraphed or telefaxed and confirmed to it
at 20 North Orange Avenue, Orlando, Florida 32801, telefax (407) 648-8101.
14. PARTIES IN INTEREST.
The Agreement herein set forth is made solely for the benefit of the
Underwriter and the Company and any person controlling the Company, or the
Underwriter, and directors of the Company, nominees for directors of the
Company (if any) named in the Prospectus, the officers of the Company who have
signed the Registration Statement, and their respective executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser, as such purchaser, from the
Underwriter of the Units.
15. INTEGRATION. This Agreement (including the Schedules hereto) constitutes
the entire agreement among the parties hereto with respect to the subject
matters hereof and supersedes all prior agreements and understandings among the
parties both written and oral.
16. PARTIAL UNENFORCEABILITY. If any Section, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, such
determination shall not affect the validity or enforceability of any other
Section, paragraph or provision hereof.
17. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with, the
laws of the State of Wisconsin applicable to agreements made and to be entirely
performed within Wisconsin.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with
its terms.
Yours very truly,
ORLANDO PREDATORS ENTERTAINMENT, INC.
By
-----------------------------------
Jack Youngblood, President
Dated: __________________, 1997
The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.
FIRST MIDWEST SECURITIES, INC.
By
-----------------------------------
James Linna, President
Dated: __________________, 1997
32
<PAGE>
ORLANDO PREDATORS ENTERTAINMENT, INC.
450,000 UNITS
AGREEMENT AMONG UNDERWRITERS
To each of the Underwriters named July __, 1997
in Schedule I to the attached
Underwriting Agreement
Dear Sirs:
1. UNDERWRITING AGREEMENT. Orlando Predators Entertainment, Inc., a
Florida corporation (the "Company") proposes to enter into an underwriting
agreement in the form of the Underwriting Agreement attached hereto (the
"Underwriting Agreement") with the underwriters named in Schedule I to the
Underwriting Agreement (the "Underwriters") for whom we are acting as
representative (the "Representative"), acting severally and not jointly, with
respect to the purchase from the Company of an aggregate of 450,000 units
(the "Firm Units"), each unit ("Unit") consisting of two (2) shares of the
Company's no par value Common Stock (the "Common Stock"), and one redeemable
Common Stock Warrant entitling the holder thereof to purchase for $7.50, one
share of Common Stock for a term of two years from the effective date of the
Registration Statement described below in Section 2. In addition, the
Company proposes to sell to the Underwriters up to an additional 67,500 Units
(the "Optional Units") for the purpose of covering over-allotments.
Under the terms of the Underwriting Agreement, each of the Underwriters
will agree, in accordance with the terms thereof, to purchase on a firm
commitment basis the number of Units set forth opposite its name in said
Schedule I, subject to adjustment pursuant to Section 12 hereof.
2. REGISTRATION STATEMENT AND PROSPECTUS. The Units are described in a
registration statement on Form SB-2 (File No. 333-____) and related
prospectus which have been filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act") and the rules and regulations of the Commission
thereunder. A copy of Amendment No. 1 to the registration statement has been
delivered to you. An additional amendment to such registration statement has
been or will be filed in which you have been or will be named as one of the
Underwriters of the Units, and you hereby authorize us to approve on your
behalf any further amendments or supplements which may be necessary or
appropriate. The registration statement, as amended at the time it becomes
effective, is called the "Registration Statement" and the final prospectus as
filed by the Company with the Commission pursuant to Rule 424(b) under the
Act, is referred to as the "Prospectus."
3. AUTHORITY OF REPRESENTATIVE. You authorize us as your Representative
to execute the Underwriting Agreement with the Company in the form attached
with such insertions, deletions or other changes as we may approve (but not
as to price and number of the Units to be purchased by you except as provided
herein and therein) and to take such actions as in our discretion we may deem
advisable in respect of all matters pertaining to the Underwriting Agreement,
this Agreement, and the transactions for the accounts of the several
Underwriters
<PAGE>
contemplated thereby and hereby, determining whether and to what extent to
purchase the Optional Units on behalf of the Underwriters, and the purchase,
carrying, sale and distribution of the Units.
4. PUBLIC OFFERING. In connection with any public offering of the
Units, you authorize us, in our discretion:
(a) To determine the time and manner of the initial public offering
(after the Registration Statement becomes effective), the initial public
offering price, and the concessions and reallowances to dealers, to change
the public offering price and such concessions and reallowances after the
initial public offering, to furnish the Company with the information to be
included in the Registration Statement and the Prospectus and any amendment
or supplement thereto with respect to the terms of the offering, and to
determine all matters relating to the public advertisement of the Units and
any communications with dealers or others;
(b) To reserve all or any part of your Units for sale to retail
purchasers and to dealers selected by us ("Selected Dealers") among whom may
be included any Underwriter (including ourselves) and each of whom shall be a
member of the National Association of Securities Dealers, Inc., such
reservations for sales to retail purchasers to be as nearly as practicable in
proportion to the respective underwriting obligations of the Underwriters and
such reservations for sales to Selected Dealers to be in such proportion as
we determine, and from time to time to add to the reserved Units such
aggregate number of Units retained by you remaining unsold and to release to
you any of your Units reserved but not sold;
(c) To sell reserved Units, as nearly as practicable in proportion
to the respective reservations, to retail purchasers at the public offering
price and to Selected Dealers at the public offering price less a concession
(the "Selected Dealer's Concession") pursuant to the Selling Agreement in
substantially the form attached; and
(d) To buy Units for your account from Selected Dealers at the
public offering price less such amount not in excess of the Selected Dealer's
Concession as we may determine.
After advice from us that the Units are released for public offering, you
will offer to the public in conformity with the terms of the offering set
forth in the Prospectus, or in any amendment or supplement thereto, such of
your Units as we advise you are not reserved.
You recognize the importance of a broad distribution of the Units among
bona fide investors and you agree to use your best efforts to obtain such
broad distribution, and to that end, to the extent you deem practicable, to
give priority to small orders. In offering the Units to Selected Dealers we
will take such action as we deem appropriate to effect a broad distribution.
5. REPURCHASE OF UNITS NOT EFFECTIVELY PLACED FOR INVESTMENT. You are
requested to place for investment those of your Units which are not reserved
as aforesaid. Any Units sold by you (otherwise than through us) which may be
delivered to us against a purchase contract made by us for the account of any
Underwriter prior to the termination of the provisions referred
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<PAGE>
to in Section 11 of this Agreement, shall be repurchased by you on demand at
the cost of such purchase plus brokerage commissions and transfer taxes on
redelivery. Units delivered on such repurchase need not be the identical
Units purchased by you. In lieu of demanding repurchase by you we may in our
discretion (a) sell for your account the Units so purchased by us, at such
price and upon such terms as we may determine, and debit or credit your
account with the loss and expense or net profit resulting from such sale, or
((b) charge your account with an amount not in excess of the Selected
Dealer's Concession with respect to such Units plus brokerage commissions and
transfer taxes paid in connection with such purchase.
6. PAYMENT AND DELIVERY. You agree to deliver to us at or before 8:00
a.m., local Milwaukee time, on the Initial Closing Date referred to in the
Underwriting Agreement, a certified check or bank cashier's check payable in
Clearing House funds to the order of First Midwest Securities, Inc., as
Representative, for the full purchase price of the Units which you shall have
agreed to purchase from the Company. The proceeds shall be delivered in the
amounts required in each case for payment of the full purchase price by us to
the Company against delivery of the Units to us for your account. You
authorize us to accept that delivery and to give a receipt therefore. We may
in our discretion make such payment on your behalf with our own funds, in
which event you will reimburse us promptly upon request. You authorize us,
as your custodian, to take delivery of your Units registered as we may
direct, in order to facilitate deliveries. You also authorize us to hold for
your account such of your Units as we have reserved for sale to retail
purchasers and to Selected Dealers and to deliver your reserved Units against
such sales. We will deliver your unreserved Units to you promptly and, after
we receive payment for reserved Units sold by us for your account, we will
remit to you an amount equal to the price paid by you for such Units. As
soon as practicable after termination of Sections 4, 5 and 9 and the first
sentence of Section 8 of this Agreement (pursuant to Section 11 hereof) we
will deliver to you any of your Units reserved but not sold. All Units
delivered to you pursuant to this Section will be evidenced by certificates
in such denominations as you shall direct by written notice received by us
not later than the third full business day preceding the Initial Closing Date.
7. AUTHORITY TO BORROW. In connection with the purchase or carrying of
any Units purchased hereunder for your account, you authorize us, in our
discretion, to advance funds for your account, charging current interest
rates, or to arrange loans for your account, and in connection therewith to
execute and deliver any notes or other instruments and hold or pledge as
security any of your Units. Any lender may rely on our instructions in all
matters relating to any such loans. Any of your Units held by us for your
account may be delivered to you for carrying purposes only, and subject to
our further direction.
8. STABILIZATION AND OVER-ALLOTMENT. To facilitate the distribution of
the Units, you authorize us during the term of this Agreement, or for such
longer period as may be necessary, in our discretion, and without obligating
us to do so, to make purchases and sales of the Units for your account in the
open market or otherwise, for long or short account, on such terms and at
such prices as we deem advisable and, in arranging sales, to over-allot. You
also authorize us to cover any short position incurred pursuant to this
Section by purchase of any or all of the Optional Units from the Company
pursuant to the option contained in the Underwriting Agreement or otherwise
on such terms as we deem advisable. All such purchases and sales and
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<PAGE>
over-allotments shall be made for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations. You will on our demand take up at cost or deliver against
payment any Units so purchased or sold or over-allotted for your account.
You will be obligated in respect of purchases and sales made for your account
hereunder whether or not the proposed purchase of the Units is consummated.
Your net commitment shall not, at the end of any business day, exceed 15% of
your maximum underwriting obligation. Notwithstanding the foregoing
limitations, in the event of default by one or more Underwriters in respect
of their obligations under this Section, you will assume your proportionate
Unit of such obligation without relieving the defaulting Underwriter from
liability.
In the event that we effect any stabilizing purchases pursuant to this
Section, we will notify each Underwriter promptly of the date and time when
the first stabilizing purchase is effected and the date and time when
stabilizing is terminated. Each Underwriter agrees that if it effects any
stabilizing purchases, it will, not later than three business days following
the day on which any such stabilization purchase is effected, notify us of
the price, date and time at which such stabilizing purchase was effected and
will promptly notify us of the date and time when stabilizing was terminated
by such Underwriter. Each Underwriter authorizes us to file with the
Commission all notices and reports which may be required as a result of any
transactions made pursuant to this Section.
Upon request you will advise us of Units retained by you or purchased by
you from other Underwriters and Selected Dealers and remaining unsold and
will sell to us for the account of one or more of the Underwriters such of
your unsold Units as we may designate, at the public offering price thereof
less such amount as we may determine, but not in excess of the Selected
Dealer's Concession with respect thereto.
If, pursuant to the provisions of the first paragraph of this Section and
prior to the termination of this Agreement (or such earlier date as we may
have determined on notice to the Underwriters), we purchase or contract to
purchase any Units which were retained by or released to you for direct sale,
which Units were theretofore not effectively placed for investment by you,
you authorize us in our discretion either to charge you account with an
amount equal to the Selected Dealer's Concession with respect thereto or to
require you to repurchase such Units at a price equal to the total cost of
such purchase, including commissions, if any, and transfer tax on the
redelivery. Units delivered on such repurchase need not be the identical
Units originally purchased by and delivered to you.
Upon the termination of this Agreement, we are authorized in our
discretion, in lieu of delivering to the several Underwriters any Units then
held for their respective accounts pursuant to this Section, to sell such
Units for the accounts of each of the Underwriters at such price or prices as
we may determine and debit or credit your account for the loss or profit
resulting from such sale.
9. OPEN MARKET TRANSACTION. We and you agree not to bid for, purchase,
attempt to induce others to purchase or sell, directly or indirectly, any
Units except as brokers pursuant to unsolicited orders and as otherwise
provided in this Agreement or in the Underwriting
4
<PAGE>
Agreement. You further agree not to offer the Units for sale until notified
by us, as Representative, that they are released for that purpose.
10. EXPENSES AND SETTLEMENT. We may charge your account with Selected
Dealer's Concessions and all transfer taxes on sales made by us for your
account and with your proportionate share (based upon your underwriting
obligation) of all other expenses incurred by us under the terms of this
Agreement or the Underwriting Agreement or in connection with the purchase,
carrying, sale or distribution of the Units. Our determination of the amount
and allocation of the expenses shall be conclusive. As soon as practicable
after termination of the provisions referred to in Section 11, the accounts
hereunder will be settled, but we may reserve from distribution such amount
as we deem advisable to cover possible additional expenses. We may at any
time make partial distribution of credit balances or call for payment of
debit balances. Any of your funds in our hands may be held with our general
funds without accountability for interest. Notwithstanding any settlement,
you will pay (a) your proportionate share (based upon your underwriting
obligation) of any liability which may be incurred by the Underwriters, or
any of them, based on the claim that the Underwriters constitute an
association, partnership, unincorporated business or other separate entity,
and of any expenses incurred by us, or by any other Underwriter with our
approval, in contesting any such liability, and (b) any transfer taxes which
may be assessed and paid after such settlement on account of any sale or
transfer for your account.
11. TERMINATION. The provisions of Sections 4, 5 and 9 and the first
sentence of Section 8 of this Agreement shall terminate 30 days after the
date of this Agreement unless extended by us. We may extend said provisions
for periods not exceeding an additional 30 days in the aggregate, provided
that the Selected Dealers Agreements, if any, are similarly extended.
Whether extended or not, said provisions may be terminated in part or in
whole by notice from us to the effect that the provisions referred to in this
Section 11 have been so terminated.
12. DEFAULT BY UNDERWRITERS. Default by one or more Underwriters
hereunder or under the Underwriting Agreement shall not release the other
Underwriters from their obligations or affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from such
default. In case of default under the Underwriting Agreement by one or more
Underwriters, we may arrange for the purchase by others, including
non-defaulting Underwriters, of Units not taken up by such defaulting
Underwriters, and you will, at our request, increase pro rata with the other
non-defaulting Underwriters the number of Units which you are to purchase.
In the event any such arrangements are made, the respective number of Units
to be purchased by non-defaulting Underwriters and by such others shall be
taken as the basis for the Underwriters and by such others shall be taken as
the basis for the underwriting obligations under this Agreement.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement, each non-defaulting Underwriter shall
assume its proportionate share of the obligations under this Agreement of
each such defaulting Underwriter (other than, to the extent stated in the
first paragraph of this Section, the purchase obligation of such defaulting
Underwriter).
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<PAGE>
13. POSITION OF REPRESENTATIVE. We shall be under no liability to you
for any act or omission, except for obligations expressly assumed by us in
this Agreement, but no obligation on our part shall be implied or inferred
therefrom. Nothing shall constitute the Underwriters, or any of them, an
association, partnership, unincorporated business or other separate entity
and the rights and liability of ourselves and each of the other Underwriters
are several and not joint.
14. INDEMNIFICATION. You will indemnify and hold harmless each other
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Securities Act of 1933, as amended, to the
extent and upon the terms by which each Underwriter agrees to indemnify the
Company in the Underwriting Agreement. Such indemnity agreement shall
survive the termination of any of the provisions of this Agreement.
In the event that at any time any claim shall be asserted against us, as,
or a result of our having acted as, Representative, or otherwise involving
the Underwriters generally, relating to the Registration Statement or any
preliminary prospectus or the Prospectus, as from time to time amended or
supplemented, the public offering of the Units or any of the transactions
contemplated by this Agreement, you authorize us to make such investigation,
to retain such counsel and to take such other action as we shall deem
necessary or desirable under the circumstances, including settlement of any
claim or claims if such course of action shall be recommended by counsel
retained by us. You agree to pay to us, on request, your proportionate share
(based upon your underwriting obligation) of all expenses incurred by us
(including, but not limited to, the disbursements and fees of counsel so
retained) in investigating and defending against such claim or claims, and
your proportionate share (based upon your underwriting obligation) of any
liability incurred by us in respect of such claim or claims, whether such
liability shall be the result of a judgment against us or as a result of any
such settlement.
15. BLUE SKY MATTERS. You shall not have any responsibility with
respect to the right of any Underwriter or other person to sell Units in any
jurisdiction, notwithstanding any information we may furnish in that
connection. You hereby authorize us to file or cause to be filed, on your
behalf, a New York Further State Notice, if required, and to take such other
action as may be necessary or advisable to qualify the Units for offering and
sale in any jurisdiction.
16. TITLE TO SECURITIES. The Units purchased for the respective
accounts of the several Underwriters shall remain the property of those
Underwriters until sold; and no title to such securities shall in any event
pass to us, as Representative, by virtue of any of the provisions of this
Agreement.
17. CAPITAL REQUIREMENT. You confirm that your commitment hereunder
will not result in any violation of Section 8(b) or 15(c) of the Securities
Exchange Act of 1934 or the rules and regulations thereunder, including Rule
15c3-1, or any provision of any applicable rules of any securities exchange
to which you are subject or of any restriction imposed upon you by such
exchange.
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<PAGE>
18. NOTICES AND GOVERNING LAW. Any notice from you to us shall be
delivered, mailed, telegraphed, or telefaxed to us at First Midwest
Securities, Inc. Any notice from us to you shall be delivered, mailed,
telegraphed, or telefaxed to you at your address as set forth below.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Wisconsin.
We represent that we are a member in good standing of the National
Association of Securities Dealers, Inc.. You represent that you are a member
in good standing of said Association.
Very truly yours,
FIRST MIDWEST SECURITIES, INC.
By
------------------------------
James Linna, President
Confirmed and accepted as of the date
first above written.
By
--------------------------------
Name of Underwriter
--------------------------------
Authorized Signature
--------------------------------
Address
--------------------------------
Telephone Number
--------------------------------
Number of Units Purchased
7
<PAGE>
FIRST MIDWEST SECURITIES, INC.
450,000 Units
Orlando Predators Entertainment, Inc.
SELLING AGREEMENT
Dear Sirs:
1. We, as Underwriter, are offering for sale an aggregate of 450,000
Units (the "Firm Units") of Orlando Predators Entertainment, Inc. (the
"Company") which we have agreed to purchase from the Company. In addition, we
have been granted an option to purchase from the Company up to an additional
67,500 Units (the "Option Units") to cover over-allotments in connection with
the sale of the Firm Units. The Firm Units and the Option Units purchased are
herein collectively called the "Units." The Units and the terms under which
they are to be offered for sale by the Underwriter are more particularly
described in the Prospectus.
2. The Units are to be offered to the public by the Underwriter at the
price per Unit set forth on the cover page of the Prospectus (the "Public
Offering Price"), in accordance with the terms of the offering thereof set
forth in the Prospectus.
3. The Underwriter is offering, subject to the terms and conditions
hereof, a portion of the Units for sale to certain dealers who are engaged in
the investment banking or securities business and who are either (i) members in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD") or (ii) dealers with their principal places of business located outside
the United States, its territories and its possessions and not registered as
brokers or dealers under the Securities Exchange Act of 1934, as amended (the
"1934 Act") who have agreed not to make any sales within the United States, its
territories or its possessions or to persons who are nationals thereof or
residents therein (such dealers who shall agree to purchase Units hereunder
being herein called "Selected Dealers"), at the Public Offering Price, less a
selling concession (which may be changed) of not in excess of $.___ per Unit
payable as hereinafter provided, out of which concession an amount not
exceeding $.___ per Unit may be reallowable by Selected Dealers to members of
the NASD or foreign dealers qualified as aforesaid. The Selected Dealers have
agreed to comply with the provisions of Section 24 of Article III of the
Rules of Fair Practice of the NASD, and if any such dealer is a foreign dealer
and not a member of the NASD, such Selected Dealer also has agreed to comply
with the NASD's interpretation with respect to free-riding and withholding, to
comply, as though it were a member of the NASD, with the provisions of Section
8 and 36 of Article III of such Rules of Fair Practice, and to comply with
Section 25 of Article III thereof as that Section applies to non-member foreign
dealers. The Underwriter may be included among the Selected Dealers.
<PAGE>
4. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the public offering of the
Units.
5. If you desire to purchase any of the Units, your application should
reach us promptly by telephone, telegraph or facsimile at our office at 1233 N.
Mayfair Road, Suite 117, Milwaukee, Wisconsin 53213, Attention: William R.
Haese, Telephone No. (414) 778-1091 or (800) 776-3004, Fax No. (414) 778-0820.
We reserve the right to reject subscriptions in whole or in part, to make
allotments and to close the subscription books at any time without notice. The
Units allotted to you will be confirmed subject to the terms and conditions of
this Agreement.
6. Any Units purchased by you under the terms of this Agreement may be
immediately reoffered to the public in accordance with the terms of offering
thereof set forth herein and in the Prospectus, subject to the securities or
blue sky laws of the various states or other jurisdictions.
You agree to pay us on demand an amount equal to the Selected Dealer
concession as to any Units purchased by you hereunder which, prior to the
termination of this Agreement, we may purchase or contract to purchase and, in
addition, we may charge you with any broker's commission and transfer tax paid
in connection with such purchase or contract to purchase. Certificates for
Units delivered on such repurchases need not be the identical certificates
originally purchased.
No expenses shall be charged to Selected Dealers. A single transfer tax,
if payable, upon the sale of the Units by the Underwriter to you will be paid
when such Units are delivered to you. However, you shall pay any transfer tax
on sales of Units by you and you shall pay your proportionate share of any
transfer tax (other than the single transfer tax described above) in the event
that any such tax shall from time to time be assessed against you and other
Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Units other than as contained in the Prospectus.
7. The first three paragraphs of Section 6 hereof will terminate when we
shall have determined that the public offering of the Units has been completed
and upon telegraphic notice to you of such termination, but, if not theretofore
terminated, they will terminate at the close of business on the 30th full
business day after the date hereof; provided however, that we shall have the
right to extend such provisions for a further period or periods, not exceeding
an additional 30 full business days in the aggregate upon telegraphic or
facsimile notice to you.
8. For the purpose of stabilizing the market in the Units, we have been
authorized to make purchases and sales of the Units of the Company, in the open
market or otherwise, for long or short account, and, in arranging for sales, to
over-allot.
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9. On becoming a Selected Dealer, and in offering and selling the Units,
you agree to comply with all the applicable requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and the 1934 Act. You confirm that you
are familiar with Rule 15c2-8 under the 1934 Act relating to the distribution
of preliminary and final prospectuses for securities of an issuer (whether or
not the issuer is subject to the reporting requirements of Section 13 or 15(d)
of the 1934 Act) and confirm that you have complied and will comply therewith.
We hereby confirm that we will make available to you such number of copies
of the Prospectus (as amended or supplemented) as you may reasonably request
for the purposes contemplated by the 1933 Act or the 1934 Act, or the rules and
regulations thereunder.
10. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Units are qualified for
sale under the respective securities or blue sky laws of such states and other
jurisdictions, but we assume no obligation or responsibility as to the right of
any Selected Dealer to sell the Units in any state or other jurisdiction or as
to the eligibility of the Units for sale therein.
11. No Selected Dealer is authorized to act as our agent or otherwise to
act on our behalf, in offering or selling the Units to the public or otherwise
or to furnish any information or make any representation except as contained in
the Prospectus.
12. Nothing will constitute the Selected Dealers an association or other
separate entity or partners with the Underwriter or with each other, but you
will be responsible or your share of any liability or expense based on any
claim to the contrary. We shall not be under any liability for or in respect of
value, validity or form of the Units or the delivery of the certificates for
the Units, or the performance by anyone of any agreement on its part, or the
qualification of the Units for sale under the laws of any jurisdiction, or for
or in respect of any other matter relating to this Agreement, except for lack
of good faith and for obligations expressly assumed by us or by the Underwriter
in this Agreement and no obligation on our part shall be implied herefrom. The
foregoing provisions shall not be deemed a waiver of any liability imposed
under the 1933 Act.
Payment for the Units sold to you hereunder is to be made at the Public
Offering Price less the above-mentioned selling concession at such time and
date as we may advise, at the office of First Midwest Securities, Inc., at the
address indicated above, by a certified or official bank check in Clearing
House funds, payable to the order of First Midwest Securities, Inc., against
delivery of certificates for the Units. If such payment is not made at such
time, you agree to pay us interest on such funds at the prevailing brokers'
loan rate.
13. Notices should be addressed to us at our office address indicated
above. Notices to you shall be deemed to have been duly given if telegraphed,
mailed, or telefaxed to you at the address to which this letter is addressed.
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<PAGE>
14. This Agreement shall be governed by and construed exclusively in
accordance with the laws of the State of Wisconsin without giving effect to the
choice of law or conflicts of law principles thereof.
15. If you desire to purchase any Units, please confirm your application
by signing and returning to us your confirmation on the duplicate copy of this
letter enclosed herewith, even though you may have previously advised us
thereof by telephone, telegraph or fax. Our signature hereon may be by
facsimile.
Very truly yours,
FIRST MIDWEST SECURITIES, INC.
By:
----------------------------------
James Linna, President
4
<PAGE>
First Midwest Securities, Inc.
1233 N. Mayfair Road, Suite 117
Milwaukee, WI 53213
Gentlemen:
We hereby irrevocably subscribe for __________ Units of Orlando Predators
Entertainment, Inc. in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Prospectus referred to
in the first paragraph thereof relating to said Units and we confirm that we
have no right to return any Units to you. We further confirm that our
commitment hereunder will not result in any violation by us of Section 8(b) or
15(c) of the Securities Exchange Act of 1934 or the rules and regulations
thereunder, including Rule 15c3-1, or any provision of any applicable rules of
any securities exchange to which we are subject or of any restriction imposed
upon us by such exchange. We further state that in purchasing said Units we
have relied upon said Prospectus and upon no other statement whatsoever,
whether written or oral. We confirm that we are a dealer actually engaged in
the investment banking or securities business and that we are either (i) a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD") or (ii) a dealer with its principal place of business located
outside the United States, its territories and its possessions and not
registered as a broker or dealer under the Securities Exchange Act of 1934, as
amended, who hereby agrees not to make any sales within the United States, its
territories or its possessions or to persons who are nationals there or of
residents therein. We hereby agree to comply with the provisions of Section 24
of Article III of the rules of Fair Practice of the NASD, and if we are a
foreign dealer and not a member of the NASD, we also agree to comply with the
NASD's interpretation with respect to free-riding and withholding, to comply,
as though we were a member of the NASD, with provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that Section applies to non-member foreign dealers.
Name of Firm
Authorized Signature
Title
Date
<PAGE>
Exhibit _______
WARRANT TO PURCHASE
45,000 Units
ORLANDO PREDATORS ENTERTAINMENT, INC.
UNDERWRITER'S WARRANT
Dated: July ___, 1997
THIS CERTIFIES that First Midwest Securities, Inc. (herein sometimes
called the "Holder" and/or the "Underwriter") is entitled to purchase from
Orlando Predators Entertainment, Inc., a Florida corporation (the "Company"),
at the price and during the period as hereinafter specified, up to 45,000 Units
of the Company's securities with each Unit (the "Underwriter's Warrant Unit")
consisting of two (2) shares of the Company's no par value per share Common
Stock (the "Warrant Unit Shares") and one Redeemable Warrant (the "Underlying
Warrant") entitling the holder thereof to purchase for $7.50 (the "Underlying
Warrant Exercise Price"), one share of Common Stock (the "Underlying Warrant
Shares") for a term of five (5) years from the effective date of the
Registration Statement described below. The Warrant Unit Shares and the
Underlying Warrant Shares are sometimes referred to herein collectively as the
"Warrant Shares."
This Underwriter's Warrant (the "Underwriter's Warrant") is issued
pursuant to an Underwriting Agreement between the Company and the Underwriter
in connection with a public offering, through the Underwriter, of 450,000 Units
(the "Units") as more fully described in the Underwriting Agreement, (and up to
67,500 additional Units covered by an over-allotment option granted by the
Company to the Underwriter) pursuant to a Registration Statement on Form SB-2
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), and in consideration of $100 received by the Company for the
Underwriter's Warrant.
1. The rights represented by the Underwriter's Warrant shall be exercised at
the price, subject to adjustment in accordance with Sections 9 and 10 hereof
(the "Exercise Price") and during the periods as follows:
(a) The Underwriter's Warrant shall be numbered and shall be registered
in a warrant register. The Company shall be entitled to treat the registered
owner of any Underwriter's Warrant (the "Warrantholder") as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Underwriter's Warrant on the part of any
other person, and shall not be liable for any registration or transfer of
Underwriter's Warrants which are registered or to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with such knowledge of such facts that its
participation therein amounts to gross negligence or bad faith.
<PAGE>
(b) During the 12 month period from the Effective Date of the
Registration Statement (the "First Anniversary Date"), the Warrantholder shall
have no right to purchase any Underwriter's Warrant Units hereunder, except
that in the event of any merger, consolidation or sale of substantially all the
assets of the Company as an entirety prior to the First Anniversary Date, the
Warrantholder shall have the right to exercise the Underwriter's Warrant at
such time and into the kind and amount of Underwriter's Warrant Units and other
securities and property (including cash) receivable by a holder of the number
of Underwriter's Warrant Units into which the Underwriter's Warrant would have
been convertible or exercisable immediately prior thereto.
(c) At any time between the first anniversary and the fifth anniversary
of the Effective Date, (the fifth anniversary of the Effective Date being the
"Expiration Date") inclusive, the Warrantholder shall have the option to
purchase Underwriter's Warrant Units hereunder at a price ("Exercise Price") of
$12.00 per Underwriter's Warrant Unit.
(d) At any time between the first anniversary and the fifth anniversary
of the Effective Date, inclusive, the holders of the Underlying Warrants shall
have the option to purchase the number of fully paid and nonassessable
Underlying Warrant Shares which the holder of the Underlying Warrant may at
that time be entitled to purchase on the same terms and conditions as the
Redeemable Warrants offered and sold to the public. The Underlying Warrants
are redeemable by the Company on the same terms and conditions as the
Redeemable Warrants offered and sold to the public, provided, however, only the
Underlying Warrants which have been issued pursuant to an exercise of the
Underwriter's Warrant Units shall be subject to redemption. Holders of the
Underwriter's Warrants and the Underlying Warrants are sometimes herein
referred to collectively as "Warrantholders."
(e) After the Expiration Date, the Warrantholder shall have no right to
purchase any Underwriter's Warrant Units hereunder.
2. The rights represented by the Underwriter's Warrant or Underlying
Warrant may be exercised at any time within the periods above specified, in
whole or in part, by (i) the surrender of the Underwriter's Warrant or
Underlying Warrant (with the purchase form at the end hereof properly executed)
at the principal executive office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the
Warrantholder at the address of the Warrantholder appearing on the books of the
Company); (ii) payment to the Company of the Exercise Price then in effect for
the number of Underwriter's Warrant Units or Underlying Warrant Shares, as the
case may be, specified in the above-mentioned purchase form together with
applicable transfer taxes, if any; and (iii) delivery to the Company of a duly
executed agreement signed by the person(s) designated in the purchase form to
the effect that such person(s) agree(s) to be bound by the provisions of
paragraph 7 and subparagraphs (b), (c) and (d) of paragraph 8 hereof. The
Underwriter's Warrant or Underlying Warrant shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior to
the close of business on the date the Underwriter's Warrant or Underlying
Warrant is surrendered and payment is made in accordance with the foregoing
provisions of this paragraph 2.
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<PAGE>
3. Upon such surrender of an Underwriter's Warrant or Underlying Warrant
and payment of the Exercise Price or Underlying Warrant Exercise Price, as
applicable, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Warrantholder
exercising such Warrant or Underlying Warrant and in such name or names as such
Warrantholder may designate, a certificate or certificates for the number of
Warrant Units Shares or Underlying Warrant Shares or Underlying Warrants, as
the case may be, so purchased upon the exercise of such Underwriter's Warrant
or Underlying Warrant; and in the case of a fractional Warrant Share and/or
Underlying Warrant, such fraction shall be rounded to the nearest whole Warrant
Share and/or Underlying Warrant otherwise issuable upon such surrender. Such
certificate, certificates or Underlying Warrants shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Unit Shares, Underlying Warrants
and/or Underlying Warrant Shares, as the case may be, as of the date of receipt
by the Company or the warrant agent, if any, of such Warrant or Underlying
Warrant and payment of the applicable Exercise Price or Underlying Warrant
Exercise Price; provided, however, that if, at the date of surrender of such
Warrant or Underlying Warrant and payment of the applicable Exercise Price or
Underlying Warrant Exercise Price therefor, the transfer books for the Common
Stock or other class of stock purchasable upon the exercise of such
Underwriter's Warrants or Underlying Warrants shall be closed, the certificates
for the components of the Underwriter's Warrant Units or Underlying Warrant
Shares, as the case may be, in respect of which such Underwriter's Warrant or
Underlying Warrant is then exercised shall be issuable as of the date on which
such books shall next be opened (whether before or after the date the
Underwriter's Warrant or Underlying Warrants would otherwise terminate (the
"Termination Date")) and until such date the Company shall be under no duty to
deliver any Warrant Shares or Underlying Warrants. The rights of purchase
represented by the Underwriter's Warrants and Underlying Warrants shall be
exercisable, at the election of the Warrantholders thereof, either in full or
from time to time in part and, in the event that an Underwriter's Warrant or
Underlying Warrant is exercised in respect of less than all of the
Underwriter's Warrant Units or Underlying Warrant Shares purchasable on such
exercise at any time prior to the Termination Date, a new Warrant and/or
Underlying Warrant evidencing the remaining Underwriter's Warrants and/or
Underlying Warrants will be issued; and the Company shall deliver, or the
warrant agent, if any, is hereby irrevocably authorized to countersign and to
deliver the required new Warrant and/or Underlying Warrant pursuant to the
provisions of this Section; and the Company whenever required by the warrant
agent, if any, and will supply the warrant agent with Underwriter's Warrant or
Underlying Warrant duly executed on behalf of the Company for such purpose.
4. The Underwriter's Warrant shall not be transferred, sold, assigned,
or hypothecated for a period of one year commencing on the Effective Date
except that it may be transferred to successors of the Warrantholder, and may
be assigned in whole or in part to any person who is an officer of the
Warrantholder or to any member of the selling group and/or the officers or
partners thereof during such period. Any such assignment shall be effected by
the Warrantholder by (i) executing the form of assignment at the end hereof and
(ii) surrendering the Underwriter's Warrant for cancellation at the office or
agency of the Company referred to in paragraph 2 hereof, accompanied by a
certificate (signed by an officer of the Warrantholder
3
<PAGE>
if the Warrantholder is a corporation), stating that each transferee is a
permitted transferee under this paragraph 4; whereupon the Company shall
issue, in the name or names specified by the Warrantholder (including the
Warrantholder) a new Underwriter's Warrant or Warrants of like tenor and
representing in the aggregate rights to purchase the same number of
Underwriter's Warrant Units as are purchasable hereunder. Such transfers
shall be made in compliance with the rules and regulations of the National
Association of Securities Dealers ("NASD") as well as the Act, the Exchange
Act of 1934, as amended and the respective rules and regulations promulgated
thereunder.
5. The Company covenants and agrees that all Warrant Unit Shares and
Underlying Warrant Shares issued hereunder will, upon issuance, be duly and
validly issued, fully paid and nonassessable, and no personal liability will
attach to the holder thereof. The Company further covenants and agrees that,
during the periods within which the Underwriter's Warrant and the Underlying
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of Shares.
6. The Underwriter's Warrant and the Underlying Warrants shall not
entitle the Warrantholder to any voting rights or other rights as a shareholder
of the Company.
7. (a) If at any time for a period of four (4) years commencing one (1)
year from the Effective Date, the Company files a registration statement under
the 1933 Act which relates to a current offering of securities of the Company
(except a Registration Statement on Form S-4, S-8 or any other inappropriate
form), such registration statement and the prospectus included therein shall
also, at the written request of the Company by any of the then owners of the
Underwriter's Warrants, Warrant Units, Underlying Warrants or Warrant Shares
(the "Owners"), include and relate to the Underlying Warrants and/or Warrant
Shares issuable upon exercise of such Underwriter's Warrants and/or Underlying
Warrants so as to permit the public sale thereof in compliance with the 1933
Act. The Company shall give written notice to the Owners of its intention to
file a registration statement under the 1933 Act relating to a current offering
of the securities of the Company, at least 30 days prior to the filing of such
registration statement, and the written request provided for in the first
sentence of this subsection shall be made by the Owners at least 10 days prior
to the date specified in the notice as the date on which the Company intends to
file such registration statement. Neither the delivery of such notice by the
Company nor of such request by the Owners shall in any way obligate the Company
to file such registration statement and, notwithstanding the filing of such
registration statement, the Company may, at any time prior to the effective
date thereof, determine not to offer those securities to which such
registration statement relates, without liability to the Owners, except that
the Company shall pay such expenses incurred in connection with the preparation
and filing of such registration statement and as otherwise set forth in
subsection (d) hereof.
(b) In addition, for a period of four (4) years commencing one (1) year
from the Effective Date, upon written notice at any time from a Majority Holder
(as such term is defined in subsection (f) of this Section 7) that he, she or
it contemplates the transfer of all or any part of his, her or its Underlying
Warrants or Warrant Shares under such circumstances that a public
4
<PAGE>
offering thereof would be involved within the meaning of the 1933 Act, the
Company, as promptly as possible after the receipt of such notice, shall
file, at its expense, a post-effective amendment or a new registration
statement with respect to the offering, sale or other disposition of the
Underlying Warrants and/or Warrant Shares as to which the Company shall have
received such notice. Within 10 days after receiving any such notice, the
Company shall give notice to the other Owners advising them that the Company
is proceeding with such post-effective amendment or new registration
statement and offering to include therein the Underlying Warrants and/or
Warrant Shares of such Owners. The Company shall not be obligated to any
such other Owner unless such other Owner shall accept such offer by written
notice to the Company within 30 days of the Company's notice. The Owners
will bear the expense of fees of counsel for the Owners and any sales
commissions for the Underlying Warrants and/or Warrant Shares sold by the
Owners. In no event shall the Company be required to file a post-effective
amendment or a new registration statement pursuant to the requirements of
this subsection (b) more than once.
(c) In any exercise of the registration rights afforded pursuant to
subsection (a) and (b) of this Section 7, the Company shall:
(i) Supply to the Owner or its designee, as representative of the Owners
intending to make a public distribution of their Underlying Warrants and/or
Warrant Shares (the holder of the Underwriter's Warrant by his, her or its
receipt of the Underwriter's Warrant and/or Underlying Warrant thereby
acknowledging his, her or its appointment of the Owners' representative or
its designee as his, her or its representative for purposes of this
Agreement), four executed copies of each post-effective amendment or
registration statement and as many copies of the preliminary and final
prospectus which shall have been prepared in conformity with the
requirements of the 1933 Act and the rules and regulations promulgated
thereunder and such other documents as the representative of the Owners
shall reasonably request;
(ii) Cooperate in taking such action as may be necessary to register or
qualify the Underlying Warrants and/or Warrant Shares under the securities
acts or blue sky laws of such jurisdictions as the representative of the
Owners shall reasonably request and the Company shall do any and all other
acts and things which may be necessary or advisable to enable the Owners
to consummate such proposed sale or other disposition of the Underlying
Warrants and/or Warrant Shares in any such jurisdiction; provided,
however, that in no event shall the Company be obligated, in connection
therewith, to qualify to do business or to file a general consent to
service of process in any jurisdiction where it shall not then be so
qualified; and
(iii) Use its best efforts to cause any such post-effective amendment or
new registration statement to become effective and remain effective for a
period of not less than 12 months after the initial effectiveness thereof.
The Company shall
5
<PAGE>
cooperate in taking such other action as may be necessary to permit the
public sale or other disposition of the Underlying Warrants and/or Warrant
Shares by the Owners.
(d) The Company shall comply with the requirements of subsections (a) and
(b) of this Section (including the related requirements of subsection (c) of
this Section), at its own expense, including the costs to register/qualify the
securities under the securities laws of those states as the Owners shall
reasonably request; but excluding underwriting commissions, transfer taxes and
underwriter's expense allowance attributable to the securities being offered by
the Owners.
(e) The term "Majority Holder" as used in this Section shall include any
owner or combination of owners of Underwriter's Warrants, Underlying Warrants
and/or Warrant Shares, in any combination, if the aggregate amount of:
A. the Warrant Unit Shares and/or Underlying Warrant Shares then
held by him, her, it or among them, plus
B. the Warrant Unit Shares and/or Underlying Warrant Shares then
issuable upon exercise of the Underwriter's Warrants and/or Underlying Warrants
then held by him, her, it or among them would constitute more than fifty
percent of the Underwriter's Warrant Unit Shares and/or Underlying Warrant
Shares originally issuable upon exercise of all of the Underwriter's Warrants
and Underlying Warrants.
(f) The provisions contained herein shall continue in effect regardless
of the exercise or surrender of any of the Warrants. Notwithstanding anything
in this Section 7 to the contrary, the Company shall not be obligated to
register any Underlying Warrants or Underlying Warrant Shares if the Underlying
Warrants shall have expired unexercised or if the Underlying Warrants shall
have been redeemed by the Company; and the Underlying Warrant Shares shall not
be used to calculate a Majority Holder if the Underlying Warrants shall have
expired unexercised or shall have been redeemed by the Company.
8. (a) Whenever pursuant to paragraph 7 a registration statement
relating to the Underlying Warrants and/or Warrant Shares is filed under the
Act, amended or supplemented, the Company will indemnify and hold harmless each
holder of the securities covered by such registration statement, amendment or
supplement (such holder being hereinafter called the "Distributing Holder"),
and each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of
the Act) any such underwriter, against any losses, claims, damages or
liabilities, joint or several, to which the Distributing Holder, any such
controlling person or any such underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities, or actions
in respect thereof, arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any such
registration statement or any preliminary prospectus or final
6
<PAGE>
prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse
the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration
statement, said preliminary prospectus, said final prospectus or said
amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder or any other Distributing
Holder for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said registration
statement and such amendments and supplements thereto, and each person, if any,
who controls the Company (within the meaning of the Act) against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director, officer or controlling person may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities, or
actions in respect thereof, arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in said registration
statement, said preliminary prospectus, said final prospectus, or said
amendment or supplement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement
in reliance upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under this paragraph 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this paragraph 7.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such
7
<PAGE>
indemnified party under this paragraph 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No settlement
shall be made without the consent of the indemnifying party.
9. In case of any reclassification, capital reorganization or other
change of outstanding Shares of Common Stock, or in case of any consolidation
or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital, reorganization or
other change of outstanding Shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of this Warrant shall have the right thereafter, by
exercising such Warrant, to purchase the kind and number of Shares of stock or
other securities or property (including cash) receivable upon such
reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of Shares of Common Stock
that might have been purchased upon exercise of such Warrant, immediately prior
to such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding Shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
10. If, prior to the expiration of this Warrant by exercise or by its
terms the Company shall issue any of its shares of Common Stock as a share
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then, in either such case, the Exercise Price per
Underwriter's Warrant Unit shall be proportionately reduced, and the number of
Underwriter's Warrant Units at the time purchasable pursuant to this Warrant
shall be proportionately increased; and conversely, if the Company shall
contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the Exercise Price
per Underwriter's Warrant Unit in effect at the time of such action shall be
proportionately increased and the number of Underwriter's Warrant Units at that
time purchasable pursuant to this Warrant shall be proportionately decreased.
If the Company shall, at any time during the life of this Warrant declare a
dividend payable in cash on its shares of Common Stock and shall at
substantially the same time offer to its shareholders a right to purchase new
shares of Common Stock from the proceeds of such dividend or for an amount
substantially equal to the dividend, all shares of Common Stock so issued
shall, for the purpose of this Warrant, be deemed to have been issued as a
share dividend. Any dividend paid or distributed upon the shares of Common
Stock in shares of any other class of securities convertible into shares of
Common Stock shall be treated as a dividend paid in shares of Common Stock to
the extent that shares of Common Stock are issuable upon the conversion
thereof.
11. This Agreement shall be governed by and construed in accordance with
the internal substantive laws of the State of Wisconsin, without regard for the
conflict of laws.
8
<PAGE>
IN WITNESS WHEREOF, Orlando Predators Entertainment, Inc. has caused this
Underwriter's Warrant to be signed by its duly authorized officers under its
corporate seal and this Underwriter's Warrant to be dated ____________________,
1997.
ORLANDO PREDATORS ENTERTAINMENT, INC.
By
-------------------------------------
Jack Youngblood, President
Attest:
--------------------------------
______________, Secretary
9
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Underwriter's Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such
Underwriter's Warrant for, and to purchase thereunder, _________ Units
("Unit") of Orlando Predators Entertainment, Inc. with each Unit comprised of
two (2) shares of Orlando Predators, Entertainment, Inc. no par value common
stock and one (1) warrant to purchase an additional share of such common stock
at $7.50 per share and herewith makes payment of $__________ therefor and
requests that the certificates for Units be issued in the name(s) of, and
delivered to ______________________________, whose address(es) is (are):
________________________________.
Dated: _________________, 19__
By:
-----------------------------------
TRANSFER FORM
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________ the right to purchase Shares represented by the
foregoing Underwriter's Warrant to the extent of _________ Units and appoints
_____________________ attorney to transfer such rights on the books of Orlando
Predators Entertainment, Inc., with full power of substitution in the premises.
Dated: _________________, 19__
By:
-----------------------------------
10
<PAGE>
STATE OF FLORIDA
ARTICLES OF INCORPORATION
OF
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
FIRST: THE CORPORATE NAME THAT SATISFIES THE REQUIREMENTS OF SECTION
607.0401 IS: THE ORLANDO PREDATORS ENTERTAINMENT, INC.
SECOND: THE STREET ADDRESS OF THE INITIAL PRINCIPAL OFFICE AND, IF
DIFFERENT, THE MAILING ADDRESS OF THE CORPORATION IS: 20 N. ORANGE AVENUE, SUITE
101, ORLANDO, FLORIDA 32801.
THIRD: THE NUMBER OF SHARES THE CORPORATION IS AUTHORIZED TO ISSUE IS:
FIFTEEN MILLION (15,000,000) NO PAR VALUE VOTING COMMON STOCK AND ONE MILLION,
FIVE HUNDRED THOUSAND (1,500,000) NO PAR VALUE PREFERRED STOCK.
FOURTH: THE STREET ADDRESS OF THE INITIAL REGISTERED OFFICE OF THE
CORPORATION IS C/O C T CORPORATION SYSTEM, 1200 SOUTH PINE ISLAND ROAD, CITY
OF PLANTATION, FLORIDA 33324, AND THE NAME OF ITS REGISTERED AGENT AT SUCH
ADDRESS IS C T CORPORATION SYSTEM.
FIFTH: THE NUMBER OF DIRECTORS CONSTITUTING THE INITIAL BOARD OF DIRECTORS
OF THE CORPORATION IS THREE (3), AND THE NAMES AND ADDRESSES OF THE PERSONS WHO
ARE TO SERVE AS DIRECTORS UNTIL THE FIRST ANNUAL MEETING OF SHAREHOLDERS OR
UNTIL THEIR SUCCESSORS ARE ELECTED AND SHALL QUALIFY ARE:
Jack Youngblood 20 N. Orange Avenue, Suite 101
Orlando, Florida 32801
William Meris 20 N. Orange Avenue, Suite 101
Orlando, Florida 32801
Alan Gagleard 20 N. Orange Avenue, Suite 101
Orlando, Florida 32801
SIXTH: THE NAME AND ADDRESS OF EACH INCORPORATOR ARE:
Candice Maerz 3225 N. Central Avenue, Phoenix, AZ 85012
Loren D. Bates 3225 N. Central Avenue, Phoenix, AZ 85012
(FLA - 1959 - 7/14/93) -1-
<PAGE>
THE UNDERSIGNED HAVE EXECUTED THESE ARTICLES OF INCORPORATION
THIS 27th DAY OF March, 1997.
SIGNATURE/TITLE
/s/ Candice Maerz
------------------------------
Candice Maerz, Incorporator
/s/ Loren D. Bates
------------------------------
Loren D. Bates, Incorporator
ACCEPTANCE BY THE REGISTERED AGENT AS REQUIRED IN SECTION
607.0501 (3) F.S.: C T CORPORATION SYSTEM IS FAMILIAR WITH AND
ACCEPTS THE OBLIGATIONS PROVIDED FOR IN SECTION 607.0505.
C T CORPORATION SYSTEM
DATED March 27, 1997. By /s/ William C. Bradford, Jr.
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William C. Bradford, Jr.
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(TYPE NAME OF OFFICER)
Vice President
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(TITLE OF OFFICER)
(FLA - 1959 - 7/14/93) -2-
<PAGE>
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
March 28, 1997
C T CORPORATION SYSTEM
660 EAST JEFFERSON STREET
TALLAHASSEE, FL 32301
The Articles of Incorporation for THE ORLANDO PREDATORS ENTERTAINMENT, INC. were
filed on March 28,1997 and assigned document number P97000028568. Please refer
to this number whenever corresponding with this office regarding the above
corporation.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATE STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION
OF YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO INSURE THAT YOU RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL
REPORT. TO OBTAIN A FEI NUMBER, CONTACT THE IRS AT 1-800-829-3676 AND REQUEST
FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOU.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Doris Brown, Document Specialist
New Filings Section Letter Number: 997AOOO15936
Division of Corporations - P.O. BOX 6327 -Tallahassee, Florida 32314
<PAGE>
EXHIBIT 3.02
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
* * * * *
BY L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Plantation, Florida.
Section 2. The corporation may also have offices at such other places both
within and without the State of Florida as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held at such place, within or without the State of Arizona, as may from
time to time be fixed or determined by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year
1997, shall be held during the first week of the last month of the fiscal
year end of the corporation, at a time of day
(FL - 1948 - 11/30/92)
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and place as determined by the board of directors (or, in the absence of action
by the board of directors, as set forth in the notice given, or waiver signed,
with respect to such meeting pursuant to Section 3 below), for the purpose of
electing directors and for the transaction of any other business as may properly
come before such meeting. If any such annual meeting is for any reason not
held on the date which the meeting is called, a special meeting may thereafter
be called and held in lieu thereof, and the same business (including the
election of directors) may be conducted as at an annual meeting.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be delivered not less than ten nor more
than sixty days before the date of the meeting, either personally or by mail, by
or at the direction of the president, secretary, or the officer or person
calling the meeting, to each shareholder of record entitled to vote at such
meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than the
election of directors may be held at such time and place within or without the
State of Florida as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Special meetings of shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
(FL - 1948 - 11/30/92)
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meeting.
Section 3. Written or printed notice of a special meeting stating the
place, day, and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the board, president, or the holders of not less than one-tenth of
all the shares entitled to vote at the meeting to each shareholder of record
entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by the articles of incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders present in person or represented by proxy shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
(FL - 1948 - 11/30/92)
3
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Section 2. If a quorum is present, the affirmative vote of a plurality of
the shares of stock represented at the meeting shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be three (3). Directors need not
be residents of the State of Florida nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first annual meeting of shareholders.
The number of directors may be increased or decreased by amendment to the
articles of incorporation or to these bylaws.
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<PAGE>
Section 2. Any vacancy occurring in the board of directors may be filled
by the affirmative vote of a majority of the remaining directors though less
than a quorum of the board of directors, or by the shareholders, unless the
articles of incorporation provide otherwise. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of his
predecessor in office. A director elected to fill a newly created directorship
shall serve until the next succeeding annual meeting of shareholders and until
his successor shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the articles of
incorporation or by these bylaws directed or required to be exercised or done by
the shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Florida, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of any personal interest of
any of its members, shall have authority to establish reasonable compensation of
all directors for services to the corporation as directors, officers or
otherwise.
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ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be
held either within or without the State of Florida.
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place
and time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Meetings of the board of directors may be called by the
chairman of the board or by the president. Special meetings of the board of
directors shall be preceded by 2 days' notice sent to directors of the date,
time, and place of the meeting. Notice may be sent in writing or orally, and
communicated in person, by telephone, telegraph, teletype, electronic
communication, or by mail. The notice shall include the purpose of the meeting.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 6. A majority of the directors shall constitute a quorum for the
transaction of
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business unless a different number is required by law or by the articles of
incorporation. The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, unless the
act of a greater number is required by statute or by the articles of
incorporation. Whether or not a quorum shall be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
ARTICLE VII
EXECUTIVE COMMITTEES
Section 1. The board of directors, by resolution adopted by a majority of
the full board of directors, may designate two or more directors to constitute
an executive committee, to the extent provided in such resolution, shall have
and exercise all of the authority of the board of directors in the management of
the corporation, except as otherwise required by law. Vacancies in the
membership of the committee shall be filled by the board of directors at a
regular or special meeting of the board of directors. The executive committee
shall keep regular minutes of its proceedings and report the same to the board
when required.
ARTICLE VIII
NOTICES
Section 1. Whenever any notice whatever is required to be given under the
provisions of
(FL - 1948 - 11/30/92)
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<PAGE>
the statutes or under the provisions of the articles of incorporation or these
by-laws, a waiver thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a secretary and a treasurer. The board of
directors may also choose additional vice-presidents, and one or more assistant
secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president, a secretary and a treasurer,
none of whom need be a member of the board.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
(FL - 1948 - 11/30/92)
8
<PAGE>
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the
(FL - 1948 - 11/30/92)
9
<PAGE>
board of directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors or president, under whose supervision he shall be. He
shall have custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section II. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board
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of directors, taking proper vouchers for such disbursements, and shall render to
the president and the board of directors, at its regular meetings, or when the
board of directors so requires, an account of all his transactions as treasurer
and of the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, or, if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate. Certificates shall be signed by the president of the corporation,
and may be sealed with the seal of the corporation or a facsimile thereof. When
the corporation is authorized to issue shares of more than one class there shall
be set forth upon the face or back of the certificate, or the certificate
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shall have a statement that the corporation will furnish to any shareholder upon
request and without charge, a full or summary statement of the designations,
preferences, limitations, and relative rights of the shares of each class
authorized to be issued and, if the corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series.
Section 2. The signature of the officer of the corporation upon a
certificate may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate in place of
any certificate theretofore issued by the corporation alleged to have been lost,
destroyed, or wrongfully taken. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost, destroyed, or wrongfully
taken.
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TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate cancelled and the transaction recorded upon the books of the
corporation.
FIXING OF RECORD DATE
Section 5. For the purpose of determining shareholders entitled to notice
of a shareholders' meeting, to demand a special meeting, to vote, or in order to
make a determination of shareholders for any other proper purpose, the board of
directors may provide that the record date be fixed not more than seventy days
before the meeting or action requiring a determination of shareholders. For the
purpose of determining those shareholders entitled to demand a special meeting,
such record date shall be at least ten (10) days but not more than seventy (70)
days before the special meeting. For the purpose of determining those
shareholders entitled to take action without a meeting, such record date shall
be at least ten (10) days but not more than seventy (70) days before the action
requiring a determination of shareholders. For the purpose of determining those
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, such record date shall be at least ten (10) days but not
more than seventy (70) days before the meeting. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply
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to any adjournment thereof
LIST OF SHAREHOLDERS
Section 6. After fixing a record date for a meeting, the officer or agent
in charge of the records for shares shall prepare an alphabetical list of the
names of all shareholders who are entitled to notice of a shareholders' meeting,
arranged by voting group, with the address of, and the number and class and
series, if any, of shares held by each. The shareholders' list shall be
available for inspection by any shareholder for a period of 10 days prior to the
meeting and shall be kept on file at the corporation's principal office. A
shareholder or his agent or attorney shall be entitled on written demand to
inspect the list, subject to the requirements of F.S. section 607.1602(3) during
regular business hours and at his expense, during the period it shall be
available for inspection. The shareholders' list shall be made available at the
meeting, and any shareholder or his agent or attorney shall be entitled to
inspect the list at any time during the meeting or any adjournment. The
shareholders' list shall be prima facie evidence of the identity of shareholders
entitled to examine the shareholders' list or to vote at a meeting of
shareholders.
ARTICLE XI
GENERAL PROVISIONS
DISTRIBUTIONS
Section 1. Subject to the restrictions of the articles of incorporation
relating thereto, if any,
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and to limitation by statute, distributions may be declared by the board of
directors at any regular or special meeting, pursuant to law. Distributions may
be made in cash, in property, or as a dividend.
Share dividends may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series, subject to the provisions of the articles of incorporation.
Section 2. Before any distribution may be made, there may be set aside out
of any funds of the corporation available for distributions such sum or sums as
the directors from time to time, in their absolute discretion, think proper to
meet debts of the corporation as they become due in the usual course of
business, or for such other purpose as the directors shall think conducive to
the interest of the corporation.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
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[SEAL]
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Florida". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be altered, amended, or repealed or new bylaws
may be adopted by the affirmative vote of a majority of the board of directors
at any regular or special meeting of the board.
SECRETARY'S CERTIFICATE
I, Alex Narushka, Secretary of The Orlando Predators Entertainment, Inc.,
do hereby certify that the foregoing is a true and correct copy of the
Corporation's Bylaws as adopted by the directors of the Corporation on
__________________,1997.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Corporate
Seal of the Corporation this _________________ day of _________________, 1997.
----------------------------------
Alex Narushka, Secretary
[CORPORATE SEAL]
16
<PAGE>
FIRST AMENDMENT TO BYLAWS
OF
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
Pursuant to a resolution adopted by the Board of Director of THE ORLANDO
PREDATORS ENTERTAINMENT, INC. (the "Corporation"), the Bylaws of the Corporation
are hereby amended as follows:
1. Article XIV of the Bylaws, entitled "Amendments" is hereby renumbered
as Article XVII.
2. The Bylaws are hereby supplemented by the addition of the Articles set
forth on the attached Exhibit "A".
3. Except as amended by this First Amendment, the Bylaws shall remain in
full force and effect.
CERTIFICATE
I, Alex Narushka, Secretary of THE ORLANDO PREDATORS ENTERTAINMENT, INC.,
do hereby certify that the foregoing is a true and correct copy of the First
Amendment to the Corporation's Bylaws adopted by the Board of Directors of the
Corporation on __________________,1997.
-------------------------
ALEX NARUSHKA, SECRETARY
<PAGE>
EXHIBIT "A"
<PAGE>
ARTICLE XIV
ARENA FOOTBALL LEAGUE TRANSFER RESTRICTIONS
Section 1. All purchases, sales, assignments or transfers which involve
the transfer of ten percent (10%) or more of the ownership in the corporation
and/or which will result in a single shareholder owning ten percent (10%) or
more of the ownership in the corporation, must be reported to the corporation
at least 3 business days prior to the effective date of the proposed
purchase, sale, assignment or transfer. The report must include a
description of the ownership interest being purchased, sold, assigned or
transferred, the names and addresses of all of the parties involved in the
purchase, sale, assignment or transfer, and the price or other consideration
paid, to be paid or to be owed to or by any of the parties that are involved
in the purchase, sale, assignment or transfer. If required by the Arena
Football League, Inc. (the "AFL"), the parties to the purchase, sale,
assignment or transfer covenant and agree to furnish such information as the
Commissioner of the AFL deems appropriate, including, but not limited to, all
information required pursuant to the AFL Bylaws, as the same may be amended
from time to time.
Section 2. All purchases, sales, assignments or transfers which involve
the transfer of ten percent (1O%) or more of the ownership in the corporation
and/or which will result in a single shareholder owning ten percent (10%) or
more of the ownership in the corporation shall only become effective if such
purchase, sale, assignment or transfer is approved by the affirmative vote of
at least three-fourths of the Board of Directors of the AFL.
Section 3. Any purchase, sale, assignment or transfer in violation of the
provisions of this Article XIV or in violation of the AFL Bylaws shall be
automatically null and void and the violating shareholder covenants and agrees
to pay to the corporation the sum of two times the penalty imposed by the AFL
upon the corporation as a result of such violation, as full liquidated damages
therefor. The shareholders acknowledge that it is impossible to more precisely
estimate the specific damage which would be suffered by the corporation in the
event of such a breach by a shareholder and the shareholder expressly
acknowledges and intends that this provision is a provision for liquidated
damages and not a penalty provision.
ARTICLE XV
ARENA FOOTBALL LEAGUE COVENANTS
Section 1. Each officer, director, shareholder covenant and agree:
a. To conduct all of its AFL-related and/or all of its non-AFL
related activities in a manner that will not result in the AFL being held in
disrepute;
b. To abide by any and all decisions of the Commissioner of the
AFL and/or the Board of Directors of the AFL in all matters that are within
their respective jurisdictions; and
c. To be bound by all of the terms and conditions of (i) the
AFL's "License
<PAGE>
Agreement" with Gridiron Enterprises, Inc., (ii) the AFL's "Articles of
Incorporation", "Bylaws", and "Operations Manual", (iii) any other rules and
regulations of the AFL, (iv) all contracts binding the AFL and/or its members,
as may now exist and/or as may be later entered into in the future (including,
but not limited to, all of the licensing, merchandising and/or television
agreements), and/or (v) all of the AFL's obligations and indebtedness, existing
now or in the future, as any of the foregoing may be amended, modified or
otherwise changed in the future.
Section 2. No officer, director, shareholder shall:
a. Directly or indirectly own stock or have any
financial interest, directly or indirectly, in any other member of the AFL;
b. Loan money to and/or become a surety or guarantor for
any AFL referee;
c. Tamper with and/or otherwise interfere with a player
who is on the roster or the reserve list of any other team in the AFL for any
purpose whatsoever;
d. Tamper with and/or otherwise interfere with any
collegiate players who are not eligible to play in the AFL;
e. Enter an official's dressing room unless (s)he has
been authorized to do so in advance and in writing by the President of the
AFL;
f. Publicize and/or take part in the publication of any
mythical All-AFL or All Opponents Team, except those which have been
expressly authorized by the Commissioner of the AFL and which have been
selected according to procedures that have been established by the
Commissioner of the AFL;
g. Issue any free tickets to a visiting player or coach,
other than those that are permitted under the AFL's policy for complimentary
tickets;
h. Pay the fine for any other person that is penalized
by the Commissioner of the AFL and/or by the Board of Directors of the AFL
and pursuant to the provisions of the AFL Bylaws;
i. Publicly make and/or publicly concur with any
statement that is not in the best interest of the AFL. Any complaints
directed at the AFL by any officer, director or shareholder must be made to
the Commissioner of the AFL in writing, and they may not be given any
publicity either directly or indirectly;
j. Publicly comment on any disciplinary actions that are
taken by the Commissioner of the AFL. The Commissioner of the AFL may make a
public statement regarding such disciplinary actions when (s)he believes it is
in the best interest of the AFL to do so;
k. Tamper and/or otherwise interfere with another AFL
member's officers, employees or staff for any purpose whatsoever; and/or
<PAGE>
l. Engage in any action that is inconsistent with either
the letter or spirit of the AFL's performer's contract.
Section 3. Each officer, director and shareholder of the corporation
covenants and agrees to pay to the corporation the sum of two times the penalty
imposed by the AFL upon the corporation as a result of any violation by such
officer, director or shareholder of any of the covenants contained in this
Article XV, as full liquidated damages therefor. The officers, directors and
shareholders acknowledge that it is impossible to more precisely estimate the
specific damage which would be suffered by the corporation in the event of such
a violation of the covenants and agreements contained in this Article XV and
they expressly acknowledge and intend that this provision is a provision for
liquidated damages and not a penalty provision.
ARTICLE XVI
FORCED SALE/REDEMPTION OF SHARES
Section 1. Each shareholder acknowledges that a violation of the
provisions of Articles XIV and/or XV can result in the suspension or
termination of the corporation's membership in the AFL. In the event of a
violation of the provisions of Articles XIV or XV, the corporation may, but
is not obligated to, cause the sale of such shareholder's ownership interest
in the corporation or may redeem the shares, at a purchase/redemption price
equal to the lower of fair market value or cost.
Section 2. Each shareholder covenants and agrees to execute any and all
documents and instruments reasonably necessary or incidental to effectuating the
provisions of Section 1 of this Article XVI.
<PAGE>
LAW OFFICE OF GARY A. AGRON
5445 DTC PARKWAY
SUITE 520
ENGLEWOOD, COLORADO 80111
TELEPHONE (303) 770-7254
FACSIMILE (303) 770-7257
EXHIBIT 5.01
July 16, 1997
Orlando Predators Entertainment, Inc.
20 North Orange Avenue, Suite 101
Orlando, FL. 32801
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We are counsel for Orlando Predators Entertainment, Inc., a Florida
corporation (the "Company") in connection with its proposed public offering
under the Securities Act of 1933, as amended, of up to 450,000 Units of its
securities, each Unit consisting of two shares of no par value common stock
("Common Stock") and one common stock purchase warrant ("Warrant") through a
Registration Statement on Form SB-2 ("Registration Statement") as to which
this opinion is a part, to be filed with the Securities and Exchange
Commission (the "Commission").
In connection with rendering our opinion as set forth below, we have
reviewed and examined originals or copies identified to our satisfaction of the
following:
(1) Articles of Incorporation, and amendments thereto, of the Company as
filed with the Secretary of State of the State of Florida.
(2) Corporate minutes containing the written deliberations and resolutions
of the Board of Directors and shareholders of the Company.
(3) The Registration Statement and the Preliminary Prospectus contained
within the Registration Statement.
(4) The other exhibits to the Registration Statement.
<PAGE>
Orlando Predators Entertainment, Inc.
July 10, 1997
Page 2
We have examined such other documents and records, instruments and
certificates of public officials, officers and representatives of the Company,
and have made such other investigations as we have deemed necessary or
appropriate under the circumstances.
Based upon the foregoing and in reliance thereon, it is our opinion that
the Units, Common Stock, Warrants and Common Stock issuable upon exercise of the
Warrants offered under the Registration Statement will, upon the purchase,
receipt of full payment, issuance and delivery in accordance with the terms of
the offering described in the Registration Statement, be fully and validly
authorized, legally issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus constituting a part thereof.
Very truly yours,
Gary A. Agron
GAA/mdi
<PAGE>
EXHIBIT 10.01
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STOCK OPTION PLAN
SECTION 1. PURPOSE AND SCOPE
The purposes of this Plan are to encourage stock ownership by key
management employees, officers, directors and consultants of THE ORLANDO
PREDATORS ENTERTAINMENT, INC. (herein called the "Company"), to provide an
incentive for such individuals to expand and improve the profits and prosperity
of the Company, and to assist the Company in attracting and retaining key
personnel through the grant of options to purchase shares of the Company's
common stock.
SECTION 2. DEFINITIONS
Unless otherwise required by the context:
2.1 "Board" shall mean the Board of Directors of the Company.
2.2 "Company" shall mean The Orlando Predators Entertainment, Inc., a
Florida Corporation.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.4 "Option" shall mean a right to purchase Stock, granted pursuant
to the Plan.
2.5 "Option Price" shall mean the purchase price for Stock under an
Option, as determined in Section 6 below.
2.6 "Participant" shall mean an employee, officer or director of the
Company or consultant to the Company to whom an Option is granted under the
Plan.
2.7 "Plan" shall mean this Stock Option Plan.
2.8 "Stock" shall mean the voting common stock of the Company, no par
value.
SECTION 3. STOCK TO BE OPTIONED
Subject to the provisions of Sections 11.1 and 11.2 of the Plan, the
maximum number of shares of Stock that may be optioned or sold under the Plan is
150,000 shares. Such shares may be treasury, or authorized, but unissued,
shares of Stock of the Company.
SECTION 4. ADMINISTRATION
The Plan shall be administered by the Board. The Board shall be
responsible for the operation of the Plan and shall be responsible for
selecting the Participants and determining the extent of
<PAGE>
participation (including the number of shares and the vesting schedule of the
Option rights). The interpretation and construction of any provision of the
Plan by the Board shall be final. No member of the Board shall be liable for
any action or determination made by him in good faith.
SECTION 5. ELIGIBILITY
The Board may grant Options to any key management employee, officer or
director of the Company or any consultant of the Company. Options may be
awarded by the Board at any time and from time to time to new Participants,
or to then Participants, or to a greater or lesser number of Participants,
and may include or exclude previous Participants, as the Board shall
determine. Options granted at different times need not contain similar
provisions.
SECTION 6. OPTION PRICE
The purchase price for Stock under each Option shall be an amount
determined by the Board but shall in no event be less than one hundred
percent (100%) of the fair market value of the Stock at the time the Option
is granted and in no event less than the par value of the Stock.
NOTWITHSTANDING THE FOREGOING, THE PURCHASE PRICE FOR STOCK UNDER EACH OPTION
GRANTED TO A PARTICIPANT WHO OWNS, DIRECTLY OR INDIRECTLY, AT THE TIME OF THE
GRANTING OF AN OPTION [ISO] MORE THAN TEN PERCENT (10%) OF THE TOTAL COMBINED
VOTING POWER OF ALL CLASSES OF STOCK OF THE COMPANY SHALL BE AN AMOUNT
DETERMINED BY THE BOARD BUT SHALL IN NO EVENT BE LESS THAN ONE HUNDRED TEN
PERCENT (110%) OF THE FAIR MARKET VALUE OF THE STOCK AT THE TIME THE OPTION
IS GRANTED AND IN NO EVENT LESS THAN THE PAR VALUE OF THE STOCK.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by the
Board and shall be evidenced by a Grant of Stock Option substantially in the
form attached hereto as EXHIBIT "A". In addition, the Board may, in its
discretion, include in any Option granted under the Plan a vesting schedule
and/or a condition that the Participant shall agree to remain in the employ
of, and to render services to, the Company for a period of time and enter
into a suitable employment agreement in a form satisfactory to the Company.
No such agreement shall impose upon the Company, however, any obligation to
employ the Participant for any period of time. THE AGGREGATE FAIR MARKET
VALUE (DETERMINE AS OF THE DATE THE OPTION IS GRANTED) OF THE STOCK THAT ANY
PARTICIPANT MAY PURCHASE UNDER AN OPTION [ISO] IN ANY CALENDAR YEAR PURSUANT
TO AN EXERCISE OF AN OPTION [ISO) MAY NOT EXCEED $100,000.
SECTION 8. RIGHTS IN EVENT OF DEATH
If a Participant dies without having fully exercised his Options, the
personal representatives, trustees, or legatees or heirs, of his estate shall
have the right to exercise the Options at any time within the one year
anniversary date of the Participant's death, but only to the extent that the
Options
2
<PAGE>
would otherwise have been exercisable by the Participant; provided, however,
that in no event shall the Options be exercisable more than ten years from
the date they were granted.
SECTION 9. NO OBLIGATIONS TO EXERCISE OPTION OR STOCK APPRECIATION RIGHTS
The granting of an Option shall impose no obligation upon the Participant
to exercise such Option.
SECTION 10. STOCK
10.1 PARTICIPANT'S INTEREST IN OPTION STOCK. Participant shall have
no interest in stock covered by his Option until such Option has been exercised.
10.2 ISSUANCE OF STOCK. Stock to be delivered to a Participant under
the Plan shall be issued in the name of the Participant.
SECTION 11. MISCELLANEOUS
11.1 EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
The aggregate number of shares of Stock available for Options under the
Plan, the shares subject to any Option, the price per share, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock subsequent to the effective date of the Plan resulting from
(1) a subdivision or consolidation of shares or any other capital adjustment,
(2) the payment of a stock dividend, or (3) other increase or decrease in
such shares effected without receipt of consideration by the Company. If the
Company shall be the surviving corporation in any merger or consolidation,
any Option shall pertain, apply, and relate to the securities to which a
holder of the number of shares of Stock subject to the Option would have been
entitled after the merger or consolidation. Upon dissolution or liquidation of
the Company, or upon a merger or consolidation in which the Company is not
the surviving corporation, all Options outstanding under the Plan shall
terminate; provided, however, that each Participant (and each other person
entitled under Section 8 to exercise an Option) shall have the right,
immediately prior to such dissolution or liquidation, or such merger or
consolidation, to exercise such Participant's Options in whole or in part,
but only to the extent that such Options are otherwise exercisable under the
terms of the Plan.
11.2 AMENDMENT AND TERMINATION
The Board, by resolution, may terminate, amend, or revise the Plan with
respect to any shares of Stock as to which Options have not been granted.
The Board shall not, without the consent of the holder of an Option, alter or
impair any Option previously granted under the Plan, except as authorized
herein. Unless sooner terminated, the Plan shall remain in effect until
January 1, 2007. Termination of the Plan shall not affect any Option
previously granted.
3
<PAGE>
11.3 AGREEMENT AND REPRESENTATION OF EMPLOYEES
Each Participant will be required to:
(a) Acknowledge that neither the Option nor the shares of
Stock to be delivered upon exercise of the Option (collectively, the
"Securities") have been registered under the Securities Act of 1933, as
amended, or applicable state securities laws.
(b) Represent that the Options are being, and the Securities
will be, acquired and/or purchased for investment and not with a view to
their distribution or resale. Each of the Participants shall execute and
deliver to the Company (in the form attached hereto as EXHIBIT "B") and on
the date of each closing (in the form attached hereto as EXHIBIT "C") an
investment letter. Each stock certificate evidencing any of the Common Stock
shall, if and when delivered to a Participant, bear on its face a restrictive
legend substantially in the following form:
"These securities have not been registered under the Securities
Act of 1933, as amended. They may not be sold or otherwise
disposed of in the absence of an effective registration statement
under that Act or an opinion of counsel satisfactory to the
Company that such registration is not required."
11.4 RESERVATION OF SHARES OF STOCK
The Company, during the term of this Plan, will at all times
reserve and keep available, and will seek or obtain from any regulatory body
having jurisdiction any requisite authority necessary to issue and to sell,
the number of shares of Stock that shall be sufficient to satisfy the
requirements of this Plan. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority deemed necessary by counsel
for the Company for the lawful issuance and sale of its Stock hereunder shall
relieve the Company of any liability in respect of the failure to issue or
sell Stock as to which the requisite authority has not been obtained.
11.5 EFFECTIVE DATE OF PLAN
The Plan shall be effective as of April __, 1997.
11.6 INCORPORATION OF GRANT OF STOCK OPTION BY REFERENCE
Grant of any Option created under this Plan, shall be made by a separate
Grant of Option attached hereto as EXHIBIT "A". The terms of that grant are
hereby incorporated by reference, and the terms of the grant shall in all
respects be interpreted in accordance and as part of the Plan. The Board
shall interpret and construe the plan and accompanying grant, and its
interpretations and
4
<PAGE>
determinations shall be conclusive and binding upon the parties hereto and
any other parties claiming any interest hereunder, with respect to any issue
arising hereunder or under the terms of the grant.
11.7 GOVERNING LAW
The validity, construction and interpretation of this instrument shall be
exclusively governed by and determined in accordance with the laws of the
State of Florida.
THE ORLANDO PREDATORS
ENTERTAINMENT, INC., a Florida corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
5
<PAGE>
EXHIBIT "A"
The Orlando Predators Entertainment, Inc. Stock Option Plan
Grant of Incentive Stock Option
Date of Grant:
------------------
THIS GRANT, dated as of the date of grant first stated above (the "Date
of Grant"), is delivered by The Orlando Predators Entertainment, Inc., a
Florida corporation ("Company") to _____________________(the "Grantee"), who
is an employee, officer or director of Company or a consultant of the Company.
WHEREAS, the Board of Directors of Company (the "Board") effective April
__, 1997, adopted The Orlando Predators Entertainment, Inc. Stock Option Plan
(the "Plan");
WHEREAS, the Plan provides for the granting of stock options by the Board
to directors, officers and key employees of Company or consultants of the
Company to purchase, or to exercise certain rights with respect to, shares of
no par value, voting common stock of the Company (the "Stock"), in accordance
with the terms and provisions thereof; and
WHEREAS, the Board considers the Grantee to be a person who is eligible
for a grant of stock options under the Plan, and has determined that it would be
in the best interest of Company to grant the stock options documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
SECTION 1. GRANT OF OPTION; VESTING
Subject to the terms and conditions hereinafter set forth, Company, with
the approval and at the direction of the Board, hereby grants to the Grantee, as
of the Date of Grant, an option to purchase up to __________ shares of Stock at
a price of $_________ per share, the fair market value of such shares at the
time of the grant. Such option is hereinafter referred to as the "Option" and
the shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares." The Option to purchase the Option
Shares shall vest as follows:_________________________________________________.
The vesting shall occur only if the Grantee on the date of the vesting has
continuously served as an employee, officer or director of the Company since the
Date of Grant.
6
<PAGE>
SECTION 2. EXERCISE OF OPTION
Subject to such further limitations as are provided herein, that portion
of the Option which has vested in accordance with Section 1 shall become
exercisable any time after such vesting date, subject to the limitations set
forth in Section 3 below.
SECTION 3. TERMINATION OF OPTION
3.1 The Option and all rights hereunder with respect thereto, to
the extent such rights shall not have been exercised, shall terminate and
become null and void after the expiration of three(3) years from the Date
of Grant(the "Option Term").
3.2 In the event of the death or disability of the Grantee, the
Option may be exercised by the Grantee or the Grantee's legal representative(s)
at any time within the one year anniversary date of the Grantee's death, but
only to the extent that the Option would otherwise have been exercisable by the
Grantee.
3.3 In the event of that Grantee is no longer a key management
employee, officer or director of the Company, the Option, to the extent
vested, may be exercised by the Grantee or its legal representative(s): (a)
at any time within 90 days after the Grantee is no longer a key management
employee, officer or director if the Option Shares are subject to an S-8
Registration Statement filed with the Securities Exchange Commission; or (b)
at any within one year after the Grantee is no longer a key management
employee, officer or director if the Option Shares are not subject to an S-8
Registration Statement filed with the Securities Exchange Commission.
3.4 Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting Company, (ii) breach any covenant not to compete, or employment
contract, with the Company or any subsidiary of Company, or (iii) engage in
conduct that would warrant the Grantee's discharge for cause (excluding
general dissatisfaction with the performance of the Grantee's duties, but
including any act of disloyalty or any conduct clearly tending to bring
discredit upon or any subsidiary of Company), any unexercised portion of the
Option shall immediately terminate and be void.
SECTION 4. EXERCISE OF OPTIONS
4.1 The Grantee may exercise the Option with respect to all or any
part of the number of Option Shares then exercisable and vested hereunder by
giving the Secretary of Company written notice of intent to exercise. The
notice of exercise shall specify the number of Option Shares as to which the
Option is to be exercised and the date of exercise thereof, which date shall
be at least five days after the giving of such notice unless an earlier time
shall have been mutually agreed upon.
4.2 Full payment (in U.S. dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in
7
<PAGE>
cash, or, with the prior written consent of the Board, in whole or in part
through the surrender of previously acquired shares of Stock at their fair
market value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as Company
may elect) upon full payment for such Option Shares. The obligations of
Company to deliver Stock shall, however, be subject to the condition that if
at any time the Board shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase
of Stock thereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
4.3 If the Grantee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof, the Grantee's
right to purchase such Option Shares may be terminated by Company. The date
specified in the Grantee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in full for the Option
Shares to be purchased upon such exercise shall have been received by such date.
SECTION 5. ADJUSTMENT OF AND CHANGES IN STOCK OF COMPANY
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of Company, the
Board shall make such adjustment as it deems appropriate in the number and
kind of shares of Stock subject to the Option or in the option price;
provided, however, that no such adjustment shall give the Grantee any
additional benefits under the Option.
SECTION 6. FAIR MARKET VALUE
As used herein, the fair market value of a share of Stock shall
be the value determined by the resolution of the Board of Directors of the
Company.
SECTION 7. NO RIGHTS OF STOCKHOLDERS
Neither the Grantee nor any personal representative shall be, or shall have
any of the rights and privileges of, a stockholder of Company with respect to
any shares of Stock purchasable or issuable upon the exercise of the Option,
in whole or in part, prior to the date of exercise of the Option.
8
<PAGE>
SECTION 8. NON-TRANSFERABILITY OF OPTION
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any personal representative, guardian,
conservator or legal representative of the Grantee, and the Option shall not
be transferable except, in case of the death of the Grantee, by will or the
laws of descent and distribution, nor shall the Option be subject to
attachment, execution or other similar process. In no event of (a) any
attempt by the Grantee to alienate, assign, pledge, hypothecate or otherwise
dispose of the Option, except as provided for herein, or (b) the levy of any
attachment, execution or similar process upon the rights or interest hereby
conferred, Company may terminate the Option by notice to the Grantee and it
shall thereupon become null and void.
SECTION 9. EMPLOYMENT NOT AFFECTED
Neither the granting of the Option nor its exercise shall be construed as
granting to the Grantee, if he is an employee of the Company, any right with
respect to continuance of employment of the Company. Except as may otherwise
be limited by a written agreement between the Company and the Grantee, the
right of the Company to terminate at will the Grantee's employment with it at
any time (whether by dismissal, discharge, retirement or otherwise) is
specifically reserved by Company, as the Company or on behalf of the Company
(whichever the case may be), and acknowledged by the Grantee.
SECTION 10. AMENDMENT OF OPTION
The Option may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable
in the light of any addition to or change in the Internal Revenue Code of
1986 or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the Date
of Grant and by its terms applies to the Option; or (ii) other than in the
circumstances described in clause (i), with the consent of the Grantee.
SECTION 11. NOTICE
Any notice to Company provided for in this instrument shall be addressed
to it in care of its Secretary of The Orlando Predators Entertainment, Inc.,
at 20 North Orange Avenue, Suite 101, Orlando, Florida 32801 and any notice
to the Grantee shall be addressed to the Grantee at the current address shown
on the payroll records of the Company. Any notice shall be deemed to be duly
given if and when properly addressed and posted by registered or certified
mail, postage prepaid.
SECTION 12. INCORPORATION OF PLAN BY REFERENCE
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall in all
respects be interpreted in accordance with the Plan. The Board shall
interpret and construe the Plan and this instrument, and its interpretations
and
9
<PAGE>
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue
arising hereunder or thereunder.
SECTION 13. GOVERNING LAW
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance
with the law of the State of Florida.
IN WITNESS WHEREOF, Company has caused its duly authorized officers to
execute and attest this Grant of Incentive Stock Option, and to apply the
corporate seal hereto, and the Grantee has placed his or her signature
hereon, effective as of the Date of Grant.
THE ORLANDO PREDATORS
ENTERTAINMENT, INC., a Florida corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ACCEPTED AND AGREED TO:
------------------------------------------
Grantee
10
<PAGE>
EXHIBIT "B"
INVESTMENT LETTER
TO: THE ORLANDO PREDATORS ENTERTAINMENT, INC.
In connection with the undersigned's acquisition of an Option to purchase
Stock in the Company, as those terms are defined in the The Orlando Predators
Entertainment, Inc. Stock Option Plan dated April___, 1997, the undersigned
acknowledges, represents, warrants, covenants and agrees as follows:
1. The undersigned represents that:
(a) He is acquiring the Option, and will acquire the shares of
Stock for his own account, for investment and not with a view to, or for
resale in connection with, the distribution thereof and that he has no
present intention of distributing the Securities (as that term is defined in
The Orlando Predators Entertainment, Inc. Stock Option Plan);
(b) He personally possesses such knowledge and experience in financial
and business matters pertaining to the type of business conducted by the
Company and otherwise, that he is capable of evaluating the merits and risks
of an investment in the Securities;
(c) He is fully familiar with the Company and its business, operations,
condition (financial and other), assets, liabilities and prospects and has
had access to any and all material information he deems necessary or
appropriate to enable him to make an investment decision in connection with
the acquisition of the Securities; and
(d) His financial situation is such that he can afford to bear the
economic risk of holding the Securities for an indefinite period of time and
can afford to suffer a complete loss of his investment in the Securities.
2. The undersigned understands and acknowledges that:
(a) Neither the Option nor the shares of Stock have been registered
pursuant to the Securities Act of 1933, as amended (the "Act"), or any state
securities laws, that he may not transfer, resell or otherwise dispose of
the Securities except pursuant to a registration statement in compliance with
the Act and any applicable state securities laws, unless exemptions from the
registration requirements of the Act and any applicable state securities laws
are available that he must, therefore, bear the economic risks of an
investment in the Securities for an indefinite period of time;
11
<PAGE>
(b) The Company is under no obligation to register the the
Securities pursuant to the Act or any state securities laws or to comply
with or make available any exemption from the registration requirements
thereof;
(c) Any certificates representing the Securities will contain a legend
to the effect that the Securities cannot be transferred, resold or
otherwise disposed of except in compliance with the Act and any applicable
state securities laws; and
(d) A "stop-transfer" order will be issued with respect to the
Securities to effectuate the foregoing restrictions on transfer of the
Securities and the Company and its transfer agents shall have no obligation
to effect any purported transfer of the Securities except upon demonstration
of compliance with the foregoing restrictions.
(e) He has had the opportunity to ask questions of the Company and its
representatives and receive answers from the Company and its representatives
concerning the Company and his investment in the Securities and to obtain
additional information possessed by the Company, or obtainable without
unreasonable effort or expense, that is necessary to verify the accuracy of
the information furnished to him.
3. The undersigned covenants and agrees that he will not sell, pledge,
transfer or otherwise dispose of the Option or the Securities or any interest
therein, or make any offer to attempt to do any of the foregoing, except
pursuant to a registration statement in compliance with the Act and all
applicable state securities laws or in a transaction which, in the opinion of
counsel for the Company, is exempt from the registration requirements thereof.
4. Words used herein, regardless of number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.
The undersigned understands and acknowledges that the Company will rely
upon the acknowledgments, representations, warranties, covenants and
agreements convenants herein (and any supplemental information provided to
the Company) for the purpose of determining whether this transaction meets
the requirements for an exemption from the registration requirements of the
Act and applicable state securities laws. The undersigned hereby agrees to
indemnify and hold harmless the Company and its directors and officers from
and against any cost, expense, claim, liability or damage arising out of or
resulting from any breach of such covenant and agreement including, without
limitation, any liability of the Company to any third person purchasing the
Option or any capital stock of the Company. Further the undersigned
covenants and agrees that if there should be any material change with respect
to any of the representations and warranties contained herein, after the
execution of this Investment Letter and prior to the exercise of the Option
or the transfer of Securities to him the undersigned will immediately furnish
the revised or corrected information to the Company.
12
<PAGE>
EXECUTED this ________day of _______ , 199__.
---------------------------
13
<PAGE>
EXHIBIT "C"
INVESTMENT LETTER
TO: THE ORLANDO PREDATORS ENTERTAINMENT, INC.
In connection with the undersigned's acquisition of shares of Stock in
the Company pursuant to an exercise of the Option (as those terms are defined
in The Orlando Predators Entertainment, Inc. Stock Option Plan dated
April _, 1997) the undersigned acknowledges, represents, warrants, covenants
and agrees as follows:
1. The undersigned represents that:
(a) He is purchasing the Stock for his own account, for investment and
not with a view to, or for resale in connection with, the distribution
thereof and that he has no present intention of distributing any of the Stock;
(b) He personally possesses such knowledge and experience in financial
and business matters pertaining to the type of business conducted by the
Company and otherwise, that he is capable of evaluating the merits and risks
of an investment in the Stock;
(c) He is fully familiar with the Company and its business, operations,
condition (financial and other), assets, liabilities and prospects and has
had access to any and all material information he deems necessary or
appropriate to enable him to make an investment decision in connection with
the purchase of the Stock; and
(d) His financial situation is such that he can afford to bear the
economic risk of holding the Stock for an indefinite period of time and can
afford to suffer a complete loss of his investment in the Stock.
2. The undersigned understands and acknowledges that:
(a) The Stock has not been registered pursuant to the Securities Act
of 1933, as amended (the "Act"), or any state securities laws, that he may
not transfer, resell or otherwise dispose of the Stock except pursuant to a
registration statement in compliance with the Act and any applicable state
securities laws, unless exemptions from the registration requirements of the
Act and any applicable state securities laws are available that he must,
therefore, bear the economic risks of an investment in the Stock for an
indefinite period of time;
(b) The Company is under no obligation to register the Stock pursuant to
the Act or any state securities laws or to comply with or make available any
exemption from the registration requirements thereof;
<PAGE>
(c) The certificates representing the Stock will contain a legend to the
effect that the Stock cannot be transferred, resold or otherwise disposed of
except in compliance with the Act and any applicable state securities laws;
and
(d) A "stop-transfer" order will be issued with respect to the Stock to
effectuate the foregoing restrictions on transfer of the Stock and the
Company, or its transfer agent, shall have no obligation to effect any
purported transfer of the Stock except upon demonstration of compliance with
the foregoing restrictions.
(e) He has had the opportunity to ask questions of the Company and its
representatives and receive answers from the Company and its representatives
concerning the Company and his investment in the Stock and to obtain
additional information possessed by the Company, or obtainable without
unreasonable effort or expense, that is necessary to verify the accuracy of
the information furnished to him.
3. The undersigned covenants and agrees that he will not sell, pledge,
transfer or otherwise dispose of the Stock or any interest therein, or make
any offer to attempt to do any of the foregoing, except pursuant to a
registration statement in compliance with the Act and all applicable state
securities laws or in a transaction which, in the opinion of counsel for the
Company, is exempt from the registration requirements thereof.
4. Words used herein, regardless of number and gender specifically used,
shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine or neuter, as the context
requires.
The undersigned understands and acknowledges that the Company will rely
upon the acknowledgments, representations, warranties, covenants and
agreements contained herein (and any supplemental information provided to the
Company) for the purpose of determining whether this transaction meets the
requirements for an exemption from the registration requirements of the Act
and applicable state securities laws. The undersigned hereby agrees to
indemnify and hold harmless the Company and its directors and officers from
and against any cost, expense, claim, liability or damage arising out of or
resulting from any breach of such covenant and agreement including, without
limitation, any liability of the Company to any third person purchasing any
capital stock of the Company. Further the undersigned covenants and agrees
that if there should be any material change with respect to any of the
representations and warranties contained herein, after the execution of this
Investment
2
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Letter and prior to the transfer of Stock to him the undersigned will
immediately furnish the revised or corrected information to the Company.
EXECUTED this______ day of________19__.
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Orlando Centroplex
P.O. Box 151, Orlando, Florida 328O2
Phone: (407) 849-2562 Permit No. 584-96-AOO454-#1170
THIS AGREEMENT, made this 21 day of February, 1996, between the CITY OF
ORLANDO, FLORIDA, Permittor, acting through its Centroplex Department,
hereinafter sometimes referred to as "City" represented by the Director,
hereinafter referred to as "Director" and Orlando Predators, Ltd., as
Permittee, whose address is 20 N. Orange Ave., Ste 101, Orl., Orlando, FL 32801
and whose telephone number is 648-4444. Attention: Donald Dizney.
1. PREMISES RENTED: For and in consideration of the sum hereinafter
specified, the City grants to the Permittee the use of the following
facilities subject to the terms and conditions contained herein and on the
reverse hereof.
Mayor Bob Carr Orlando Expo Florida Tinker
Performing Arts Centre Arena xx Centre Citrus Bowl Field
Area Within Facility
Orlando Arena
located in the City of Orlando, Florida.
SPACE RENT USE DATE HOURS
Arena See Below Arena Football 5/3; 5/10; 6/7; 8AM-11PM
6/21; 7/12; 7/19 & 8/2/96
$7,500.00 base rent vs. 8.5% of gross ticket sales (less applicable taxes)
whichever is greater, with a rent cap of $15,000.00. See Addendum.
It is expressly understood that the Permittee shall have the right of ingress
and egress through the halls and corridors of such building and as provided
herein below, but acquires hereby no other right in any other part of the
building than the part specified above.
2. TERM: Permittee represents that such premises are being rented solely
for the purpose of (type of program) Arena Football. The term of this permit
shall be from As Above, 19 , to As Above, 19 , between the hours of
8AM-11PM or conclusion of game, which includes move-in and move-out.
3. RENT: Permittee agrees to pay to Orlando Centroplex as rent for the
said premises the following sums:
a) As minimum guaranteed rent, the sum of $ See Above, plus $ See
Above rent tax, or percent of all admission fees less
applicable taxes required by law to be charged, whichever is
greater. Permittee agrees to pay Orlando Centroplex,
contemporaneously with the delivering by Permittee to Orlando
Centroplex of the executed Agreement, a deposit in the amount
of $1,000.00* contract due on March 22, 1996.
The balance of the minimum guaranteed rent is due on or before at
each game settlement, 19 .
The deposit shall be non-refundable except in the event of a
cancellation of the Agreement pursuant to the provisions set
forth herein. The deposit paid hereunder shall be credited to,
and deducted from, the amount of money due Orlando Centroplex
pursuant to this Agreement.
b) Rental of building and equipment subject to rental tax as
provided by law.
c) No collections, whether for charity or otherwise, shall be made,
attempted or announced on the premises, without the prior written
consent of the City. Whenever the facilities are rented and a
collection is made, or donations received, then all such monies
from such collections and donations will be considered as ticket
sales for the purpose of determining rental monies due to the
City.
d) All sums due owing to the City under this permit or any addendum
thereto, shall bear interest at the rate of eighteen percent
(18%) per annum computed on a daily basis from date due until the
date of payment.
4. PAYMENTS: Checks for the rental deposits shall be made payable to the
"City of Orlando/Centroplex" and delivered to Orlando Centroplex along with all
signed copies of Permit Agreement.
5. SUPPORT SERVICES AND PERSONNEL:
a) The Permittee shall arrange and pay for all decorations, signs
(subject to the Director's approval or rejection as provided in
the Rules and Regulations), booth equipment, musical instruments
and musicians, and radio and television services. All contractors
and personnel providing these services are subject to the approval
or rejection of the Director or designee.
b) Unless the Director permits otherwise, the Orlando Centroplex
shall provide all personnel and services in support of the
Permittee's activities, including but not limited to, production
personnel, ticket sellers, ticket takers, door guards, ushers,
security or emergency medical personnel, janitors, telephone
service, electrical wiring and other services, equipment and
installations incidental to the event, even though such services,
equipment and installations are in addition to regular services.
c) For the support services and personnel described in subparagraph
b, above, permittee shall pay the Orlando Centroplex according to
the charges for support services and personnel established and on
file in the Director's office.
d) The Permittee shall be responsible for making arrangements with
the Director for all program requirements in staffing. Such
arrangements shall be coordinated, and approved by the Director at
least fourteen (14) days before the beginning of the term of the
agreement. In the event the Permittee fails to do so, then the
decision of the Director shall control and the Permittee shall be
financially responsible for all charges for such services and
equipment so furnished.
6. TICKETS: All tickets and money received therefrom shall at all times
be under the charge and control of the Director or designee and shall remain so
until completion of the event or promotion and the full and satisfactory
settlement for all rent and charges incurred in connection with the event or
promotion. Under no circumstances may the Permittee draw an advance of funds
from gross receipts generated in connection with this permit prior to the final
settlement herein described.
7. UTILITIES: The Orlando Centroplex will provide customary lighting,
heating, air conditioning, electricity, and water at no additional costs to
Permittee. However, the Permittee shall pay the costs of heating and air
conditioning during the move-in and move-out periods. Also, either the
Permittee or his exhibitors, or performers shall pay the costs of special
lighting, electricity, gas, water, telephone, or other utilities required for
exhibits or performances depending on which party orders the services. It is
specifically understood that in the event the Orlando Centroplex is unable to
furnish any of the foregoing services resulting from the circumstances beyond
the control of the Orlando Centroplex, then such failure shall not be considered
a breach of this Agreement.
8. CLEAN-UP: The Orlando Centroplex will be responsible for cleaning the
facilities before and after use. However, there will be a labor charge for
above normal clean-up services. Said fees for said extra clean-up shall be set
by the Director.
9. PREMISES AS IS: The Permittee has inspected the premises and accepts
the premises as is.
10. RIGHTS RESERVED: The right is reserved by the Director to protect
other bookings and take whatever actions are necessary to enforce such right.
The Director reserves the right to refuse any booking or cancel any booking, if
in his sole discretion the attraction is not of sufficient quality to warrant
showing. In the case of such cancellation, the permittee's only legal claims
shall be for a refund of the rental deposit.
11. PERMITTEE'S COST AND TAXES: Permittee shall obtain at his own cost,
licenses and permits as required by law and pay all federal, state and local
taxes, fees and charges prescribed by law.
12. INTERMISSIONS: It is agreed that the City retains the right to demand
an intermission of not less than fifteen (15) minutes duration during the event
and that the Orlando Centroplex be notified of the time of said intermission
prior to the time of said events.
13. CONTROL OF PREMISES: The Orlando Centroplex and premises, including
keys thereto, shall be at all times under the control of the Director and other
duly authorized representatives of the Orlando Centroplex and they shall have
the right to enter the premises at all times during the period covered by this
contract and shall have free access at all times to all space occupied by the
Permittee. The entrances and exits of said promises shall be locked and
unlocked at such times as may be reasonably required by Permittee for its use of
the Orlando Centroplex; but the Centroplex Director or designee shall have final
determination as to when entrances and exits shall be unlocked and locked.
IN WITNESS WHEREOF the parties have affixed their signatures as follows:
PERMITTEE: CITY OF ORLANDO
By /s/ [Illegible]
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Title Managing General Partner Director, Orlando Controplex
WITNESSES: WITNESSES:
/s/ Kevin Barkman
- -------------------------------------- --------------------------------------
/s/ [Illegible]
- -------------------------------------- --------------------------------------
As to Permittee As to City
Corporate Seal (if applicable) *$1,000.00 deposit on account.
ATTEST.
By
------------------------------------
PLEASE SIGN AND RETURN BOTH COPIES OF THIS AGREEMENT
<PAGE>
ADDENDUM TO ARENA FOOTBALL AGREEMENT
AND PERMIT NO._____ BETWEEN THE CITY
OF ORLANDO AND THE ORLANDO PREDATORS
THIS ADDENDUM to the Arena Football Agreement and Permit No.
58495AOO4041170 (the "Addendum"), made and entered into this 17 day of April,
1995 by and between the CITY OF ORLANDO (the "City"), a municipal corporation
organized and existing under the laws of the State of Florida and the ORLANDO
PREDATORS LIMITED PARTNERSHIP, a Florida limited partnership (the "Club") is
hereby incorporated by reference with the ORLANDO CENTROPLEX PERMIT (the
"Permit"). The Permit, this Addendum and all attachments thereto shall
comprise the total agreement between the parties and shall hereinafter be
referred to as the "Agreement."
W I T N E S S E T H:
WHEREAS, the City owns and operates the Orlando Arena (the "Arena"); and
WHEREAS, the Club has requested the use of the Arena to play the home
game portion of its football schedule during the 1995, 1996 and 1997 seasons
of the ARENA FOOTBALL LEAGUE; and
WHEREAS, the Club's use of the Arena should attract business and tourism
to downtown Orlando and create additional economic benefits for the City and
its citizens; and
WHEREAS, the City deems it advantageous for itself and for the citizens
of Orlando to permit the Club the non-exclusive use of the Arena together
with the rights and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereby agree as follows:
I. TERM AND DESCRIPTION
Section 1.1 TERM. The term of this Agreement shall be for the dates as
described in paragraph 2 of the Permit for the home game portion of the
Club's 1995 schedule and for the home game portion of the Club's 1996 and
1997 schedules. There will be no automatic renewal of this Agreement and all
terms and conditions set forth herein will be subject to renegotiation upon
expiration.
Section 1.2 ARENA DESCRIPTION. The Arena, which is the object of this
Agreement, is
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located at 600 W. Amelia Street, Orlando, Florida 32801.
II. USE OF CENTROPLEX FACILITIES
Section 2.1 MAINTAINING A FRANCHISE AND A HOME SCHEDULE. The Club
agrees, in exchange for the right to the non-exclusive use of the Arena for
the 1995, 1996 and 1997 Arena football seasons, that it will take all
reasonable actions within its capacity during the term of this Agreement to
retain an ARENA FOOTBALL LEAGUE franchise in Orlando to play all home games
at the Arena for such seasons.
Section 2.2 USAGE FEES FOR ORLANDO ARENA. During the term of the
Agreement, the Club shall have the right to the non-exclusive use of the
Arena, during the Arena football season, for the Club to play the home game
portions of its regular season and play-off schedule. In consideration of
such right to the non-exclusive use of the Arena during the regular season
and play-offs as aforesaid, the Club's compensation to the City shall be the
rent and usage fee plus taxes as follows:
$7500 base rent or 8.5% of gross ticket sales (less applicable taxes),
whichever is greater, with a rent cap of $15,000 for regular season games
and a rent cap of $10,000 for play-offs. Rent cap for the Arena Bowl
championship game will be negotiated should the Club earn the right to host
the event.
In addition to the Rent payment set forth in paragraph 3 of the Permit and
above, the Club shall pay the City for the following:
(A) All technical services to include video crews and set up and tear
down of the floor at prevailing posted rates;
(B) All video cabling fees at the rate of $250.00 for each home T.V.
and $500.00 for each away T.V.;
(C) A video package (for a 2 camera shoot) at $500.00 per game. If
a third camera is required, then Club shall pay to rent such
third camera and for "slo mo;"
(D) The cost of complimentary tickets at ten cents ($O.10) each
(over the allotment of 2% of the manifested capacity);
(E) All Club catering costs and expenses;
(F) The actual cost of rental of any equipment which the City must
rent for the benefit of the Club. In this regard, the City
acknowledges that all City owned chain motors and fork lifts can
be used by the Club during the term without rent or payment.
However, any additional chain motors or other equipment which the
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City must rent to accommodate the Club shall be paid for by the
Club at the City's actual cost for the same;
(G) All media phones at a cost of $75.00 per phone plus the actual
cost of all calls made by the media; provided, however, City
agrees to provide to Club three (3) phones for the Club's use at
no charge to the Club. However, Club will pay for all applicable
telephone charges for the free phones.
Section 2.3 In consideration of the payment of the rent as set forth
above, and the usage fees set forth in Section 2.2, the City agrees to
provide the following services to Club as part of the services covered by
the rent and usage fee: all staffing costs, including Law Enforcement,
Paramedics/EMTs, Ticket Takers, Ticket Sellers, Ushers and Security
(excluding tech as referenced above); all costs of clean-up and equipment
(including risers, spot lights, and forklifts); and one (1) chain motor and
three (3) phones as referenced in Section 2.2.
In addition, the Club shall have access to all locker rooms excluding
the Orlando Magic locker room and any permanent IHL home locker room which
may be constructed. Both the Club and the visiting team will enter the
facility through the west end security entrance.
The City will make other rooms available to the Club on an as needed
basis, based upon the availability of the rooms, subject to the approval of
the Director.
In addition to the foregoing, the Club shall have the right, after
notifying Director and obtaining Director's consent, which consent shall not
be unreasonably withheld, to cause the home games of the Club in the Arena to
be broadcast by radio or television or to be filmed, recorded or video-taped.
Such broadcasting, filming, recording or video-taping shall be in accordance
with the rules and regulations in effect for such activities within the
Arena; however, the Club shall not be charged any fee by the City in
connection with the approval of or undertaking by or on behalf of the Club of
any of the same.
The usage fee set forth in Section 2.2 and paragraph 3 of the Permit
does not include use of Thunder Field or the Citrus Bowl locker rooms (the
"facilities") by the Club. In addition to the usage fee set forth above, the
Club agrees to pay the City $100.00 per week for use of the facilities on an
as available basis. The Club also agrees to reimburse the City for twice a
week Citrus Bowl locker room clean-up costs. The Club further agrees to pay
for more frequent clean-up of the Citrus Bowl locker room facilities if it is
deemed necessary by the Centroplex Director. The City may preempt the Club's
use of the facilities if the City can rent the facilities at posted rates.
The Club acknowledges that the facilities will be unavailable for a portion
of the 1996 season due to the City's designation as an Olympic soccer venue.
During, this time frame, the City will make reasonable effort to allow the
Club to utilize the locker rooms located at the Arena.
When utilizing the Citrus Bowl locker rooms, the Club shall remove their
equipment and goods used at the Eastside locker room, during periods when the
locker room is being used by
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other tenants/users. Whenever possible, the City shall allow the Club to
store said equipment and goods in a section of the locker room facility to be
designated by the Director. It shall be the responsibility of the Club to
move their equipment and goods back and forth between the two locations and
to remove their equipment within ten (10) business days after the last game
of the season.
In addition, should the Club use the Citrus Bowl locker room in
connection with its practices, the Club shall be responsible for and shall
indemnify and save the City harmless from any damage or theft which occurs to
the Club's property while located at the Citrus Bowl locker room.
Section 2.4. TICKET SALES. The Ticket Agency currently designated for
the City is TicketMaster; however, such Ticket Agency is subject to change by
decision of the City only. The exact number of tickets sold for each of the
respective Club home games will be finally determined by the Centroplex Box
Office's computerized ticket audit. The Club must provide the Centroplex
Director with credible documentation evidencing the number of commemorative
tickets sold and complimentary tickets issued (including trade tickets) for
the respective home game. The Club ticket office shall serve only as a
secondary box office for season/group ticket sales and shall not sell any
individual game tickets.
Should the Gross Receipts for any home game be insufficient to cover any
and all costs including, but not limited, to those contained in paragraphs 3.
RENT, 4. PAYMENTS, and Section 2.2 of the Agreement, then these outstanding
monetary obligations will be settled out of the deposit money required under
Section 2.6 herein. To the extent the deposit money is insufficient to cover
those outstanding monetary obligations, the Club shall pay to the City no
later than three (3) business days following after the respective Club home
game, all amounts determined by the City to be outstanding.
Section 2.5. PAYMENT. The City agrees to pay to the Club any monies
due after the settlement of the event no later than three (3) business days
following game.
All payments by the Club to the City shall be made payable to the City
of Orlando and shall be either hand delivered to the Centroplex Business
Office or mailed first class, postage prepaid, to: Orlando Centroplex, c/o
Centroplex Director, P.O. Box 151, Orlando, Florida 32802.
Section 2.6. DEPOSIT. The Club agrees to pay the City, as
consideration for reserving the Arena for the regular-season home schedule
dates, a deposit of one thousand dollars ($1,000).
Section 2.7 FAILURE: IMPOSSIBILITY
(a) FAILURE. If the Club fails to use the Arena on a date reserved
for a home or playoff game and the Club does not notify the City
of the anticipated failure at
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least seven (7) calendar days prior to its scheduled date, then the
non-refundable deposit will be applied toward the date the Club
failed to use the Arena. The Club shall remain obligated to pay the
City the full amount of any monetary obligations due hereunder to
City which are outstanding after each home game and any monetary
obligations outstanding at the conclusion of Club's home schedule
(or playoffs) for the season. The Club shall have ten (10) calendar
days from the date of the Club's scheduled final home game for that
season to make payment to City of any outstanding monetary
obligations.
Notwithstanding the Club's compliance with the foregoing, the City
may make such other use of the Arena as it desires on the date the
Club fails to use the Arena. For any rescheduling of a date on
which the Club fails to use the Arena, the Club will be required to
pay a fee of two thousand dollars ($2,000) to City, in addition to
the usage fee contained in the Permit, at least five (5) calendar
days prior to the rescheduled date.
If the Club is required by the television or cable network
televising the game to reschedule any home game and does so
reschedule, then it will not be deemed a "failure to use" the Arena
and the Club will not be subject to the additional fee referenced
above.
(b) IMPOSSIBILITY. Notwithstanding the provisions of subsection (a),
the Club shall be excused and relieved from any monetary
obligations owed the City in regard to any Club home game, if the
performance of such home game is made impossible, prevented or
substantially impeded or interfered with by any law decree of a
governmental authority having jurisdiction, public enemy, riot,
transportation failure, closing down of the Arena by a governmental
authority, disaster, act of God or other like cause beyond the
reasonable control of the Club. When such impossibility, prevention
or substantial impediment occurs, the Club shall use their best
efforts to reschedule the respective home game in cooperation with
the City. Notwithstanding anything in this subsection, the Club
shall be obligated to pay any Arena preparation costs incurred by
the City, if the Club had timely knowledge of such impossibility
and did not provide the City with notice of cancellation at least
twenty-four (24) hours prior to the commencement of the scheduled
home game.
Section 2.8. CITY'S PERFORMANCE IMPOSSIBLE. If any law, decree of any
government authority having jurisdiction, public enemy, riot, labor dispute,
construction delay, transportation failure, closing down of the Arena by a
governmental authority other than the City, disaster, act of God or any other
like cause beyond the reasonable control of the City prevents, substantially
interferes with or makes it impossible for the City to provide the Arena to
the Club for any scheduled home game, then the City shall not be responsible
for or liable to the Club for damages resulting from the Club not being able
to use the Arena and the Club shall have no obligation to pay the rent and
usage fee or any additional fee to the City for such date.
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Section 2.9 ARTIFICIAL TURF: CARPETING. The City will use its best
efforts to provide the Club access to the Arena prior to the opening game to
measure and paint the carpeting for the artificial turf for the floor of the
Arena. The City agrees to provide a location for the storage of the carpet
during the ARENA FOOTBALL LEAGUE season. The City further agrees to allow the
Club access to the Arena for practice as available prior to the opening game
and prior to all other home games if available for which (and when) the
carpet is in place for a flat fee of $50.00 per hour.
Section 2.10 PARKING RIGHTS; PASSES. For each Club home game, the City
reserves to itself exclusively the right to control and charge for parking in
facilities controlled by the City and to keep such revenue in its entirety.
For each Club home game, the City shall provide to the Club, one hundred
(100) parking passes free of charge. Any additional parking passes requested
will be issued at the posted prevailing rates. The Club shall not resell any
parking provided by the City.
Section 2.11 RIGHTS TO NOVELTIES AND PROGRAMS. For all Club events at
the Arena, the Club shall retain all rights for the merchandising and sale of
programs and novelties.
Section 2.12 ASSUMPTION OF RISK. The placement and storage of Club
novelties and programs, and any promotional giveaway items, within the Arena
shall be on an as available basis and shall be the responsibility of and
solely at the risk of the Club. The City assumes no liability for the theft,
damage or spoilage of any stored novelties and programs or other personal
property of the Club, unless due to the gross negligence or wilful misconduct
of the City, and even then only to the extent permitted by law.
Section 2.13 CONCESSIONS. The City, or its designee, shall manage all
concessions, including, but not limited to those for food and beverage, and
the City shall retain all revenue therefrom. The Club shall not be permitted
to bring food or beverages into the Arena and shall purchase any such item
from the concessionaire located at the Arena.
Section 2.14 TICKET ADMINISTRATION. The Club shall be responsible for
setting the prices for all categories of tickets available for scheduled Club
home games. However, in accordance with the Arena Skybox Agreement between
the City and the Orlando Magic, the Club must:
(A) allow each skybox sublessee to purchase a number of
tickets up to the maximum seating capacity permitted in the
sublessee's respective skybox; and
(B) charge a price for each skybox ticket equal to the highest
published per seat ticket price being charged per seat anywhere
else in the Arena for that event.
Section 2.15 AUDIT. At the end of the Club's fiscal year following the
completion of the Club's season, the Club shall submit to the City its
financial records regarding attendance, ticket
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sales, ticket prices and other records necessary to determine the total Gross
Receipts from the Club's use of the Arena. The Club shall keep true, complete
and accurate records in accordance with generally accepted accounting
principles.
Section 2.16 ADVERTISING
(A) TEMPORARY SIGNAGE; MESSAGE BOARD. The Club shall not, nor shall
they allow anyone else to, erect or display any temporary signage
or advertisement anywhere inside, outside or connected to the Arena
immediately prior to or during any Club home game without the
written approval of the Centroplex Director. The City reserves the
right to approve any advertisers and the advertising copy with
specific concerns regarding illegality, poor taste or potential
damage to the City's revenues or the City's reputation. The Club
shall have the right to hang temporary signage in the four
vomitories. Said signage shall be non-permanent and shall be
removed after each home game. Additionally, the Club shall be
permitted to place signage on their dasherboards. Unless the
Centroplex Director has given written approval, the Club shall not,
nor shall they allow anyone else to, display any message or
advertisement on the Arena scoreboard message-center during any
Club home game which might, in any manner, conflict with third
party messages or advertisements already approved by the Centroplex
Director. The content of all temporary signage and advertisements
and all scoreboard messages and advertisements must be submitted to
the Centroplex Director, for written approval, at least seventy-two
(72) hours prior to each home game at which they are to be erected
or displayed. The written approval of the Centroplex Director shall
not be unreasonably withheld; however, such written approval will
often depend on whether the rights to erect or display signage,
messages or advertisements have previously been assigned
exclusively to third parties.
(B) DIRIGIBLE
1. OPERATION. During, their events, the Club may operate and
display during the pre-game period, half-time and post-game
period one dirigible in the size and shape outlined in
Exhibit "1" attached. Any deviation from the dimensions
outlined in Exhibit "1" must be submitted to the Centroplex
Director for prior written approval.
2. STORAGE. The Club shall be solely responsible for the storage
of the dirigible. At the present time, no City-controlled space
is available in the Arena for storage of the dirigible.
3. DIRIGIBLE INSURANCE. Prior to display or operation of the
dirigible
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at the Arena, the Club shall submit written evidence that the
dirigible is covered by the Club's liability insurance.
Section 2.17 BROADCAST FEE; MEDIA REQUESTS. The Club shall retain all
broadcast revenue derived from telecasts of Club home games emanating from
the Arena. As referenced in Section 2.2, the Club shall pay a fee of five
hundred ($500.00) per home game. The Club shall remove all equipment from the
Centroplex facilities within ten (10) business days after the Club's last
home game. Provided, however, if the City has leased the Arena to another
user during the period between seven (7) days following such last home game
and ten (10) business days following such last home game, then the Club shall
remove all equipment from the Arena within seven (7) days following the last
home game and shall remove all its equipment from the balance of the
Centroplex facilities within ten (10) business days as aforesaid. The only
exception to the foregoing is if a league play-off game is scheduled at the
Arena for the first Saturday in September, the equipment must be removed
within twenty-four hours after the game is played. The Club shall pay the
City five hundred dollars ($500.00) for each day that the equipment remains
at the Centroplex facilities after the above-referenced deadlines.
III. MISCELLANEOUS
Section 3.1 TAXES. The Club shall pay to the proper authority, before
delinquency, all taxes, levies and assessments arising out of or directly
related to its use of the Arena or any other City owned property including,
but not limited to, taxes arising out of the activity or business conducted
therein as a result of or due to the existence of this Agreement between the
parties.
Section 3.2 RECITALS. The parties hereto agree that all recitals are
true and correct.
Section 3.3 CAPTIONS. The titles of paragraphs herein are for
convenience only and do not define or limit their contents.
Section 3.4 WAIVER. Failure on the part of the City to object to any
action or non-action on the part of the Club, no matter how long the same may
continue, shall not be construed as a waiver of the City's rights hereunder.
Section 3.5 AMENDMENTS. Material amendments to this Agreement may be
made only in writing duly approved and executed by the City and the Club.
Section 3.6 ASSIGNMENT. The Club shall not assign or otherwise
transfer to another person or entity any of its rights, duties, or
obligations under the terms and conditions of this Agreement without the
prior approval of the City Council, with such approval shall not be
unreasonably withheld. The assignee or transferee assumes and agrees
directly with the City to perform all the terms and conditions of this
Agreement on the part of the Club, to be performed.
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Section 3.7 NO RELATIONSHIP. In no event shall the City be construed
to be a partner, associate or joint venturer of the Club, or any party
associated with the Club. The Club is not an agent of the City for any
purpose whatsoever. The Club shall not create any obligation or
responsibility on behalf of the City or bind the City in any manner.
Section 3.8 APPLICABLE LAW; VENUE. This Agreement shall be construed
in accordance with and governed by the laws of the State of Florida. Venue
for any action brought hereunder shall be in Orange County, Florida.
Section 3.9 CONFLICT. In the event that any of the terms or provisions
of this Addendum shall conflict with any of the terms or provisions of the
Permit, then the terms and provisions set forth in this Addendum shall
control and govern with respect to the subject matter of the conflicting
terms.
Section 3.10 STORAGE. All Club equipment shall be removed from the
Centroplex facilities within ten (10) business days after the Club's last
home game. Provided, however, if the City has leased the Arena to another
user during the period between seven (7) days following such last home game
and ten (10) business days following such last home game, then the Club shall
remove all equipment from the Arena within seven (7) days following the last
home game and shall remove all its equipment from the balance of the
Centroplex facilities within ten (10) business days as aforesaid. The Club
shall pay the City five hundred dollars ($500.00) for each day that the
equipment remains at the Centroplex facilities after the above-referenced
deadlines.
IN WITNESS WHEREOF, the City and the Club have duly approved this
Agreement and authorized, respectively, the Mayor and City Clerk of the City
and the general partner of the Club to execute and deliver this Agreement,
all as of the day and year written above.
CITY OF ORLANDO FLORIDA
By: /s/ WILLIAM L. BECKER
--------------------------------
CENTROPLEX DIRECTOR
WITNESS:
/s/ MICHELLE SUTHERLAND
- --------------------------------
/s/ CINDY METCHEN
- --------------------------------
APPROVED AS TO FORM AND LEGALITY
For the use and reliance of the City of
Orlando, Florida only.
4-18, 1995
--------------------------------
/s/ XXXXXX X. XXXXXXXXXX
--------------------------------
Asst. City Attorney
Orlando, Florida
-9-
<PAGE>
* * * * *
ORLANDO PREDATORS LIMITED
PARTNERSHIP, a Florida limited
partnership
By Its General Partner:
By: /s/ DONALD R. DIZNEY
------------------------
Donald R. Dizney
STATE OF FLORIDA
COUNTY OF ORANGE
PERSONALLY APPEARED before me, the undersigned authority, Donald R.
Dizney, well known to me and known by me to be the Managing General Partner
of Orlando Predators Limited Partnership, a Florida limited partnership, and
acknowledged before me that he executed the foregoing instrument on behalf
of the partnership, as its true act and deed, and that he was duly authorized
to do so. He is PERSONALLY KNOWN to me or has produced _________________ as
identification and did (did not) take an oath.
/s/ EDITH E. STOJANOVIC
-------------------------------
Name: Edith E. Stojanovic
-------------------------
Notary Public, State of Florida
Notary Commission No. _________
My Commission Expires:
[SEAL]
-10-
<PAGE>
ARENA FOOTBALL LEAGUE
LICENSING PROGRAM UPDATE
NOVEMBER 4, 1996
BRIAN P. HAKAN & ASSOCIATES, INC.
10800 Faerly, Suite 310, Overland Park, KS 66210
913-327-7900 Fax: 913-327-7979
<PAGE>
ARENA FOOTBALL LEAGUE
LICENSING PROGRAM UPDATE
NOVEMBER 4, 1996
LICENSEES
We currently have 24 National Licensees and 11 Regional Licensees.
RETAIL EXPOSURE
This year we a number of regional and national stores that carried AFL licensed
products. National Retailers that carried Arena Football League team
merchandise this season were:
Dillards
Fan Fair
JC Penney
K-Mart
Pro Image
Sportfan
We are working toward setting up Headquarters Store relationships in at least
six AFL markets for the 1997 season. Our success with these Headquarters Stores
will be determined by the support we receive from the retailers, licensees and
Arena Football League office and member teams.
Part of our plans include supporting the retail program with hangtags, stickers
and point-of-purchase(P.O.P.) signs designating the products as "Arena Football
League officially licensed products."
We plan to product and distribute an Arena Football League direct-to-consumer
catalog. Distribution plans include season ticket holders, database of AFL fans
and AFL on-line.
BRIAN P. HAKAN & ASSOCIATES. INC.
10800 FARLEY, SUITE 310, OVERLAND PARK, KS 66210
913-327-7900) Fax: 913-327-7979
<PAGE>
TRADE SHOW
EXPOSURE
We have exhibited and promoted the, Arena Football League at the following trade
shows this year:
The SGMA (Sporting Goods Manufacturer Association) SUPER SHOW in February in
Atlanta-we presented the Arena Football League and its member teams to the
entire sporting goods industry. Right now we are finalizing a meeting of AFL
licensees and teams during the 1997 Super Show in preparation for the 1997
season.
THE LICENSING SHOW in New York-this is the International Licensing Industry
Merchandisers Association (LIMA) show the only show of its kind where
manufacturers walk the show "shopping for licenses". This year there were over
12,000 manufacturers who attended this show.
NSGA (National Sporting Goods Association) in Chicago-because of our
relationships on the Licensed Products Show Committee and Exhibitors Advisory
Board we were able to get an overhead banner with the Arena Football League logo
displayed with all the other major league sports.
Please note: the booth we use for these trade shows was purchased and paid for
by ABC Sports and the International Hockey League. The AFL gets the benefit of
the exposure while only paying for the rental space, freight to ship the booth,
electrical etc.
PER CAPITA
REPORTING
We implemented a per capita sales reporting system for the league this year.
The league wide average (based upon reports submitted by the merchandise
coordinators from each team) are as follows:
Gross Merchandise Sales Per Capita
----------------------- ----------
$493,170.73 $ .65
We still have not received any reports from the following teams:
St. Louis, Memphis, and Charlotte.
BRIAN P. HAKAN ASSOCIATES, INC.
10800 FARLEY, SUITE 310, OVERLAND PARK, KS 66210
913-327-7900 Fax: 913-327-7979
<PAGE>
POLICING THE
MARKETPLACE
We are aware of three manufacturers that produced Arena Football League
merchandise without a license last season. We have taken action to collect the
royalties for products produced and in at least one case the manufacturer has
signed a license for next year as well.
You can help by making sure that your team is buying products exclusively from
licensed vendors and by calling us if you find AFL unlicensed products in your
local marketplace.
PROBLEMS...
WILSON JERSEY PROGRAM: Wilson pulled the retail aspect of this program on April
15 so there were no replica jerseys available to retail stores.
Teams not paying their bills to manufacturers.
There were 3 teams that bought form unlicensed vendors in 1996.
BRIAN P. HAKAN & ASSOCIATES, INC.
10800 FARLEY, SUITE 310, OVERLAND PARK, KS 66210
913-327-7900 Fax: 913-327-7979
<PAGE>
Brian P. Hakan & Associates Inc.
ARENA FOOTBALL LEAGUE
RETAIL LICENSEE LIST
October 30, 1996
The following are licensed vendors for the Arena Football League. If you have
any questions about the authenticity of any merchandise or comments about any
vendors, please contact Brian P. Hakan & Associates, Inc. at 913-327-7900.
COMPANY PRODUCT
- -------------------------------------------------------------------------------
ANTIGUA SPORTSWEAR Apparel
9319 N. 94th Way
Scottsdale, AZ 85258
Mr. Kevin O'Neill
800-562-9777
602-860-0822 Fax
ARIZONA SHIRT CO. APPAREL AND HEADWEAR
410 S. Perry Lane, Suite 1
Tempe, AZ 85281
Mr. Larry Stark
602-921-2288
602-921-7702 Fax
BEI SPORTSWEAR INC. APPAREL AND HEADWEAR
602 West 1st Street
Tempe, AZ 85281
Mr. William Kaverman
602-921-3966
602-921-8030 Fax
BETRAS PLASTICS SPORTS CONTAINERS, THERMAL MUGS,
Interstate 85 & US 221 INSULATED GEL MUGS AND FOAM COOLERS
Spartenburg, SC 29304
Ms. Diane Kinion
854-599-0855
854-599-7090 Fax
BIMM RIDDER SPORTSWEAR APPAREL & HEADWEAR
1600 3rd Street SE
Ceder Rapids, IA 52401
Mr. Gary Ficken
319-364-3479
800-388-3479
319-364-7877 Fax
BOA SPORTSWEAR APPAREL
2800 Venture Blvd.
Norman, OK 73069
Mr. Mike Doran
405-329-5553
405-329-6271 Fax
CARRINGTON CREATIONS NOVELTIES- ACRYLIC TEAM NAME PLATES
8474 Shady Glen Drive
Orlando, FL 32819
Mr. George Morhack
407-629-6767
407-629-5177
Trademark Licensing & Marketing Specialists
[Illegible]
<PAGE>
COMPETITIVE EDGE NOVELTIES including Buttons, magnets,
3500 109th Street golfballs, sun visors, bumper stickers,
Des Moines, IA 50322 shot glasses, fobs, fans, telescope,
Mr. Michael Neary seat cushions, coin banks, coffee mugs,
800-458-3343 thermal mugs, rubber face masks, and
515-280-3343 miniature metal replicas.
515-288-3343 Fax
DSI Marketing, Inc. Temporary Tattoos
4321 Lauriston Street, Suite 301
Philadelphia, PA 19128-4939
Mr. Ira Dichter
800-759-9977
800-784-8695 Fax
FOTOBALL USA, INC. NOVELITIES including synthetic mini
3738 Ruffin Road footballs, logo wristbands and golf
San Diego, CA 92123 balls
Mr. Jon Schnieder
619-467-9900
800-323-3686
619-467-9947 Fax
LOGO 7 APPAREL AND HEADWEAR,
8677 Logo 7 Court
Indianapolis, IN 46219
Ms. Cindy Hill
317-895-7060
317-895-7256 Fax
MARKET IDENTITY NOVELTIES- youthful logo'd
2290 Agate Court souvenirs including teddy bears
Simi Valley, CA 93065 dressed in sport specific clothing
Ms. Nancy Bleier and accessories. Custom Mascot
800-927-8070 ext. 230 dolls designed and manufactured.
805-579-6066 Fax
MARKETING PROFESSIONALS INC. NOVELTIES including buttons,
3909 E. Raines Road umbrellas, watches, plaques,
Memphis,TN 38118 playing cards, decals, magnets, license
Ms. Angie Jones plates and frames, bumper stickers,
901-794-3636 stuffed animals, executive portfolios,
901-794-3658 Fax sunglasses, utility knives, glassware,
writing instruments and golf products.
NOVEL SPORTS STUFF, INC. Flags
4315 Weston Lane
Plymouth, MN 55446
Mr. Mark Austin
612-553-1480
612-509-1830 Fax
NUTMEG MILLS APPAREL AND HEADWEAR
4408 W. Linebaugh Avenue
Tampa, FL 33624
Ms. Angela Ivie
813-969-6263
813-969-6252 Fax
<PAGE>
REGIONAL LICENSEES
Albany Firebirds
- ----------------
BROADWAY MARKETING APPAREL AND HEADWEAR
80 Fuller Road
PO Box 13896
Albany, NY 12212-3896
Mr. Geoffrey Patack
518-489-3226
518-489-7397 Fax
Anaheim Piranhas
- ----------------
PROMOTOYS, INC. APPAREL AND NOVELTIES
4004 Riverside Drive
Burbank, CA 91505
Mr. Pat Pattison
818-842-7700
818-842-2749 Fax
Florida Bobcats
- ----------------
EDELMAN ENTERPRISES HEADWEAR
1336 N.W. 129th Way
Sunrise, FL 33323
954-845-0005
954-845-0005 Fax
Iowa Barnstormers
- ------------------
COMPETITIVE EDGE APPAREL AND HEADWEAR
3500 109th Street
Des Moines, IA 50322
Mr. Mchael Neary
800-258-3343
515-280-3343
515-288-3343 Fax
Memphis Pharaohs
- ----------------
CHAMPION AWARDS, INC. APPAREL & NOVELTIES
3649 Winplace Road
Memphis, TN 38118
Mr. Mike Bowen
901-365-4830
901-365-2796 Fax
Minnesota Fighting Pike
- -----------------------
PIKE INTERNATIONAL APPEAREL, HEADWEAR &
2500 39th Avenue NE, Suite 220 NOVELTIES
Minneapolis, MN 55421
Mr. Ty Herman
612-706-0140
612-786-0139 Fax
<PAGE>
Orlando Predators
- ------------------
CARPE DIEM SALES & MARKETING APPAREL
101 Wymore Road, Suite 151
Altamonte Springs, FL 32714
Mr. Phil Fry
407-682-1400
407-682-4707 Fax
San Jose Sabercats
- ------------------
KEEN MERCHANDISE & PROMOTIONS APPAREL, HEADWEAR AND
40 N. 1st Street NOVELTIES
San Jose, CA 95113
Ms. Mary Keen Meulman
408-280-5336
408-977-7900 Fax
Tampa Bay Storm
- ---------------
PERSONAL EYES SUNGLASSES
9417 Princess Palm Ave, #725
Tampa, FL 33619
Mr. Tony Colelli
813-623-5027
813-620-1107 Fax
Texas Terror
- ------------
CARROUSEL PRODUCTIONS APPAREL AND HEADWEAR
11000 Wilcrest, Suite 100
Houston, TX 77099
Mr. Ben Shenker
713-568-9300
713-568-9498 Fax
POSITIVE RESOURCES, INC. NOVELTIES
13O2 -B N. Meyer Avenue
Seabrook,TX 77586
Mr. Jesse Jones
713-474-3490
713-474-3489 Fax
<PAGE>
ARENA FOOTBALL LEAGUE, INC
"BY-LAWS"
AS REVISED 1/7/97
<PAGE>
[LOGO] ARENA FOOTBALL LEAGUE, INC.
75 E. WACKER DRIVE, SUITE 400
CHICAGO, ILLINOIS 60601
PHONE: (312) 332-5510 FAX: (312) 332-5540
WEB SITE ADDRESS: www.arenafootball.com
FINAL REVISION OF AFL BY-LAWS
To: All Members of the Arena Football League Board of Directors
From: Ronald J. Kurpiers II, President & General Counsel
Date: January 20, 1997
Memo: Board of Directors Memo # 29.97
File: a:AFLI\MEMO\BOARD MEMO29.97
pages: one (1) page
RE: Final Revisions of the AFL By-Laws
To All Board of Directors:
Enclosed you will find the final revision of the AFL By-Laws that
has been approved by the AFL Legal & By-Laws Committee. This latest
revision has taken into consideration everyone's suggested changes and
modifications. It also includes the By-Laws we have changed along the
way such as the addition of coaches to the Board, the change of the
application fee to $25,000.00, etc.
Please review these changes carefully. The changes by the Committee
are underlined to aid you in seeing what was changed. This revision
replaces the copy distributed at the meetings in Nashville, TN back in
November. These final revisions will be presented for a vote at our
Spring meeting in Anaheim in February 13-15, 1997. Any questions please
give me a call.
<PAGE>
ARENA FOOTBALL LEAGUE, INC
"BY-LAWS"
AS REVISED 1/7/97
<PAGE>
ARENA FOOTBALL LEAGUE, INC.
"BY-LAWS"
AS REVISED 1/7/97
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Article I: Name and Corporate Status 1
Article II: Purpose and Objectives 1
Article III: Board of Directors 1
Article IV: Office of the Commissioner 4
Article V: Relocation and Transfer of Existing Memberships 7
Article VI: Obligations of Membership 11
Article VII: Withdrawal of Membership 12
Article VIII: Suspension/Termination of Ownership of Membership 12
Article IX: Competition 14
Article X: General Violations, Prohibitions, Fines & Violations 15
Article XI: Broadcasting and Television 18
Article XII: Merchandising, Licensing and Trademarks 18
Article XIII: Miscellaneous 19
Article XIV: Amendments 19
<PAGE>
1
ARTICLE I: NAME AND CORPORATE STATUS
Arena Football League, Inc. (hereinafter referred to as "AFLI") is a
Delaware corporation doing business under the name of the Arena Football
League (hereinafter referred to as "the AFL"). Each Member in the AFL owns
an equal percentage of AFLI which has been organized under SECTION 501(c)(6)
of the Internal Revenue Code. The AFL is supported on an annual basis by
means of [illegible] assessments to each of its Members and it is not operated
to produce a profit.
ARTICLE II: PURPOSE AND OBJECTIVES
SECTION 1 - DEFINITIONS
A. As used in these By-laws the term "On-Going Basis" shall mean: "the
uninterrupted continuation of team business/operations and the fielding of a
team for all scheduled Arena Football League games".
B. As used in these By-laws the term "Majority Vote" shall mean: "all
votes are calculated on the basis of present voting members. Abstentions have
no affect on calculation of votes. A majority is more than half of the votes
cast by legal voters".
C. As used in these By-laws the term "Two--Thirds Vote" shall mean:
"all votes are calculated on the basis of present voting members. Abstentions
have no affect on calculation of votes. There must be at least two-thirds of
the present voting members in the affirmative for adoption".
D. As used in these By-laws the term "Majority of Directors" shall
mean: "the majority of Directors present at the time of the vote. Abstentions
have no affect on calculation of votes".
E. As used in these By-laws the term "Days" shall mean: "business days".
F. As used in these By-laws the term "Unanimous Vote" shall mean: "a
vote in which no present voting member votes contrary to the others, even if
only a few of the others vote".
The AFL is organized to operate a league of professional indoor
football teams (hereinafter referred to as the "Teams") under an exclusive
license that has been granted to AFLI by Gridiron Enterprises, Inc. with
regard to the United States, Canada and Mexico. Each such Team must be owned
and operated by an individual, a partnership, a corporate entity, or some
other type of business enterprise (hereinafter referred to as a "Member of
the AFL"). Furthermore, as set forth in ARTICLE X, SECTION 1(A) herein, no
Member and/or any person or entity that has any ownership interest in a
Member is allowed to directly or indirectly own stock in and/or have any
direct or indirect financial interest in any other AFL Member or Team.
Each Member of the AFL must organize and operate a Team in the AFL on an
ongoing basis. In this regard, a Member which can not and/or which does not
operate its Team on an ongoing basis will automatically forfeit its AFL
membership and its AFL Team.
These "By-Laws", the AFL's "Operations Manual", the AFL's "Rule Book",
and such other rules and regulations that the AFL may enact from time-to-time
constitute a contract among the Members of the AFL. In this regard, the AFL
and each of its Members will be governed by these "By-Laws", the AFL's
"Operations Manual", the AFL's "Rule Book", and any other rules and/or
regulations that the AFL may adopt and as those may be amended, modified,
added to or deleted from at any time in the future. In addition, the AFL and
each of its Members will be governed by the license granted to AFLI by
Gridiron Enterprises, Inc.
Any revenue that the AFL receives for its own benefit and/or for the
benefit of its Members will be deemed to be the property of the AFL and not
the Members. The AFL's Board of Directors may divide any such revenue and
transfer it to ANY AND/OR all of the Members; provided, however, that if the
Executive Committee of the AFL's Board of Directors determines, via a
majority vote, that an "emergency situation" exists with regard to the
ownership and/or operation of a Member or Team, with regard to the attachment
or "freezing" of any stock or assets of a Member or Team, and/or with regard
to the Member's ability to continue operating its Team, then the Commissioner
may exclude that Member from its share of any such AFL funds. Under no
circumstances may a Member's "Letter-of-Credit" be drawn without a majority
vote of the AFL's Executive Committee. Any such funds that would have been
transferred had an "emergency situation" not existed will remain in the AFL's
general operating account under the control of the CFO and the CFO under the
supervision of the Commissioner will transfer such funds to the Member only
when the Board of Directors has determined that the aforementioned
"emergency situation" no longer exists.
ARTICLE III: BOARD OF DIRECTORS
SECTION 1 - COMPOSITION OF THE BOARD
(A) The Members will oversee the affairs of the AFL through a Board of
Directors (hereinafter referred to as "the Board"). Each Member will appoint
one representative (hereinafter referred to as "the Director") to the Board
and each such Director will have the right to exercise one (1) vote on all
matters that are voted upon by the Board. In addition, each Member will also
appoint one (1) alternate representative (hereinafter referred to as "the
Alternate Director") to the Board and, in the absence of the Member's
Director, this Alternate Director will have the right to exercise one (1) vote
on all matters that are voted upon by the Board.
In addition to the above, Gridiron Enterprises, Inc., the owner of the
applicable patent regarding the game of Arena Football, will also appoint one
(1) Director to the Board and one (1) Alternate Director to the Board.
Gridiron's Director will have the right to exercise one (1) vote on all
matters that are voted upon by
1
<PAGE>
2
the Board and, in the absence of Gridiron's Director, Gridiron's Alternate
Director will have the right to exercise one (1) vote on all matters that are
voted upon by the Board.
THE COMMISSIONER AND THE PRESIDENT OF THE AFLI WILL ALSO BE DIRECTORS OF
THE BOARD, DESIGNATED AS AN "EX OFFICIO DIRECTORS" and the Commissioner will
be required to exercise one (1) vote whenever the Board is otherwise
deadlocked in a tie vote. IN THE ABSENCE OF THE COMMISSIONER THE AFLI
PRESIDENT SHALL CAST THIS VOTE. NEITHER THE COMMISSIONER NOR THE AFLI
PRESIDENT, HOWEVER, WILL BE ALLOWED TO APPOINT AN ALTERNATE DIRECTOR.
(B) Unless otherwise noted herein, all actions of the Board will
require a simple majority of all of the Directors voting on a matter at a
meeting for which a quorum was established at the start of the meeting and
the Board will be empowered to conduct meetings and to transact business so
long as there was such a quorum present at the start of the meeting. See
ARTICLE III, SECTION 2 herein. A Director's absence and/or a Director's vote
to abstain will be counted as a "non-vote" on the issue being considered and,
as such, an absence and/or abstention vote will not be counted in determining
whether a majority has voted in favor of or against any issue.
(C) A Member's presence at any meeting of the Board may be accomplished
by means of the personal appearance of its Director or Alternate Director or
by the proper assignment of its proxy to another Director or Alternate
Director per ARTICLE III, SECTION 1(G) herein. Except as otherwise noted
herein, the Board may conduct meetings and transact business by means of
meetings in person or by means of telephone conference calls.
(D) Within sixty (60) days after a new membership has been established,
the new Member must submit to the LEAGUE OFFICE in writing, the name of the
person who will serve as its Director and the name of the person who will
serve as its Alternate Director for the following year. This must be
done via the Member's submission to the LEAGUE OFFICE, of an "Arena Football
League Information Form", a copy of which is appended hereto to as APPENDIX I
and incorporated herein by reference. In addition, each Member must notify
the LEAGUE OFFICE, in writing, within forty-eight (48) hours of the
resignation or removal of its Director or Alternate Director, and must, at
that same time, notify the LEAGUE OFFICE, of the replacement for same. The
resignation or removal of a Director or Alternate Director and the
appointment of the replacement will be deemed to be effective upon the LEAGUE
OFFICE, receipt of the written notice regarding same.
Each Member may replace its respective Director and/or its respective
Alternate Director at will, at any time, and for any or no reason. However, a
Member may only replace its Director and/or Alternate Director by filing a
revised "Arena Football League Information Form" (See APPENDIX I) with the
LEAGUE OFFICE. The replacement will be effective upon the LEAGUE OFFICE'S
receipt of the "Arena Football League Information Form".
At a minimum, either the Director or the Alternate Director must be a
shareholder, a partner, or an executive-level employee of the appointing
Member. In the absence of any evidence to the contrary, it will be presumed
that the majority owner of the Member has the authority and power to appoint
its Director and Alternate Director. However, no AFL player, AFL coach, or
agent for an AFL player or an AFL coach may be a Director, Alternate
Director or proxy thereof unless (s)he is also the majority shareholder of the
team. Except that any person who is a full time employee in the position of a
team executive may be an Alternate Director, without regard to any other job or
function performed by that person. In addition, any person serving as a
Director, Alternate Director, or proxy thereof will be prohibited from being
an AFL player or an AFL coach for two (2) years from the date (s)he last held
the position of Director, Alternate Director, or proxy thereof.
Notwithstanding anything to the contrary that is set forth in this
subsection, any AFL coach who was designated as an Alternate Director prior
to September 1, 1994 may remain in that position so long as his Member
chooses to retain him in same.
Each Director and Alternate Director will hold office until his/her term
expires or until his/her resignation or removal by the appointing Member. If,
however, any Member of the AFL withdraws from or is expelled from the AFL,
then the term of that Member's Director and Alternate Director will
automatically terminate at the time of the withdrawal/expulsion.
(E) Each Member's Director will be allowed to attend and participate in
all meetings of the Board and will have their right to exercise one (1) vote on
all matters that are voted upon by the Board at same. In addition, each
Member's Alternate Director will be allowed to attend and participate in all
meetings of the Board but such an Alternate Director will only be allowed to
exercise the Member's vote in the absence of the Director.
(F) Only a Member's Director and Alternate Director have the right to
attend meetings of the Board. No other person may attend such meetings as a
representative of the Member unless (s)he has expressly been authorized to do
so, in advance and in writing, by the Commissioner. The Commissioner must
notify the full Board at the start of the meeting whenever anyone other than
a Director and/or Alternate Director has been authorized to attend a meeting
of the Board.
(G) In the absence of both a Member's Director and Alternate Director
at a face-to-face meeting of the Board, a Member will be entitled to vote by
proxy only if:
1. the proxy is in writing and it is given to another voting
Director or voting Alternate Director;
2. the validity of the proxy is limited to the one (1) meeting for
which it is granted; and
3. a copy of the proxy has been provided to the LEAGUE OFFICE; and
the Commissioner or his designee has informed the Board of
2
<PAGE>
3
the proxy prior to the proxy casting any vote.
In the absence of both a Member's Director and Alternate Director at a
meeting of the Board via a "Conference Call", a Member will be entitled to
vote by proxy only if:
1. the proxy is announced at the outset of the "Conference Call" or
at the time that a Director and/or Alternate Director is leaving
same; and
2. the validity of the proxy is limited to the one (1) "Conference
Call" or to the balance of the "Conference Call" for which it is
granted.
Notwithstanding the above, no voting via a proxy will be permitted in
considering an application for membership or relocation; an application for
the sale, transfer, assignment or termination of a Member; or the dissolution
of the AFL. Only those Members who are directly represented by a Director or
Alternate Director will be allowed to vote concerning an application for
membership or relocation, an application for the sale, transfer, assignment
or termination of a Member, or the dissolution of the AFL.
(H) As used in the remainder of these By-Laws, the term Director will
mean the Director or Alternate Director who has been selected by the Member
to vote at the meeting or on the issue in question. All such references will
apply equally to the Director and the Alternate Director.
SECTION 2 - MEETINGS
(A) The "Annual Meeting" of the AFL will be held within sixty (60) days
after the AFL's "Championship Game" in a city to be selected by the
Commissioner OR HIS DESIGNEE and/or by the AFL's Board of Directors. In the
event that the Commissioner and the Board of Directors do not agree upon the
location for the "Annual Meeting", the Board of Directors' selection will be
designated as the site for same.
(B) The Commissioner and/or at least three (3) members of the AFL's
Executive Board may call a "Special Meeting" at any time and place and any
such "Special Meeting" may take place via telephone conference call. In
addition, the entity that has scheduled a "Special Meeting" must provide at
least forty-eight (48) hours written notice to each Director prior to the
start of such meeting. The date, time and/or place of any "Special Meeting"
may be changed via a petition that is signed by two-thirds (2/3) of all the
Members.
(C) The LEAGUE OFFICE, must provide at least ten (10) days written
notice to each Director prior to the "Annual Meeting".
(D) The notice requirements for any meeting of the Board may only be
waived by the unanimous vote of the entire Board.
(E) The Commissioner must provide a written description of any item that
is to be voted upon by the Board during an "Annual Meeting" to each Director
at least ten (10) days prior to the start of the "Annual Meeting". Similarly,
the entity that has scheduled a "Special Meeting" must provide a written
description of any item that is to be voted upon by the Board during a
"Special Meeting" to each Director at least forty-eight (48) hours prior to
the start of the "Special Meeting".
(F) One-half (1/2) of the Directors of those Members that are "in good
standing" plus one (1) will constitute a quorum for all AFL meetings. A
quorum, once established, can not be broken by the departure of any Directors.
(G) At all Board meetings, each Member that is "in good standing" will
be entitled to one (1) vote on all matters that are voted upon by the Board
and this vote may only be cast by that Member's Director or Alternate
Director or by a proxy which has been properly appointed per ARTICLE III,
SECTION 1(G) herein.
(H) Robert's Rules of Order will govern all aspects of any Board
meetings with regard to issues that are not addressed by these "By-Laws".
(I) At all meetings of the Board where the Directors meet in person, no
Director will be allowed to participate in the meeting via telephone.
(J) The Commissioner may recess any meeting of the Board without the
requirement of a further notice to reconvene.
SECTION 3 - CORPORATE OFFICERS
(A) The Commissioner will serve as the Chief Executive Officer (CEO) of
AFLI and serve as chair of all the meetings of the Board of Directors.
(B) The President of AFLI will serve as the Chief Administrative Officer
(CAO) and will in the absence of the Commissioner, chair all of the meetings
of the Board of Directors. The President shall manage the administration and
operations of AFLI. The Commissioner shall oversee and supervise the
activities of the President and may delegate to the President such duties,
responsibilities and activities of the Commissioner as the Commissioner deems
to be in the best interests of AFLI. The AFLI President will also be
responsible for the care and custody of the official records and papers of
the AFL. The AFLI President will also prepare and furnish such records as may
be requested by the Commissioner, or the Board.
(C) The Vice President of Budget & Finance will serve as the Chief
Financial Officer (CFO) for the AFLI and in that capacity will oversee all of
the financial operations of the AFL as authorized by the AFLI President. The
CFO will be empowered to receive and to transmit all funds on behalf of the
AFL and (s)he will prepare and present quarterly reports to the Board with
regard to the fiscal status of the AFL and its Member Teams.
(D) In addition to the officers noted above, the Commissioner or the
AFLI President, as the Commissioner's designee, may also appoint one or more
Vice President's, one or more Assistant Treasurers and one or more Assistant
Secretary(ies).
(E) At the conclusion of his/her tenure, or at the request of the Board,
each corporate officer must, within twenty-four (24) hours of his/her
departure within twenty-four (24) hours of receiving such a request from the
Board
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deliver to his/her successor or to the Board, all of the AFL funds, records
and property that are in his/her possession.
(F) The Commissioner and AFLI President and the other corporate officers
of the AFL will be indemnified by the AFL against any and all costs and
expenses (including, but not necessarily limited to attorney's fees,
judgments, fines, and/or any amounts paid in settlement) that are actually
and reasonably incurred by them in connection with the defense of any action,
suit or proceeding to which they are made a party by reason of their being
corporate officers of the AFL, except with regard to matters as to which a
court of competent jurisdiction, in a proceeding to which they are a party,
has adjudged that such indemnification is contrary to law or is against
public policy, or unless (s)he or they are adjudged in such action, suit or
proceeding to be liable for intentional gross misconduct in the performance
of his/her duties as a corporate officer of the AFL. This right of
indemnification will be in addition to and will not be deemed to be a
substitution for any other rights to which the COMMISSIONER AND President
and/or the other corporate officers may be entitled under applicable law.
SECTION 3 - EXECUTIVE BOARD
(A) The Board will elect an Executive Board which will supervise the
implementation of the directives of the Board and its execution by the
Commissioner and the AFLI President. The Executive Board shall consist of six
(6) Directors chosen by the entire Board of Directors. The Executive Board
shall meet on a bi-weekly basis or as deemed necessary to carry out the
functions of the League office with the AFLI President and Commissioner to
review the affairs of the AFL. It shall report to the Board once a month or
sooner, if necessary. The Executive Board shall consist of the Chairman and
five (5) Vice-Chairman who will serve on a succeeding basis. If a member of
the Executive Board is no longer a Director of the Board, his/her term will
be considered to be "vacant" immediately and a new Director will be elected
to the Executive Board to fill the balance of the vacant term.
The election method for all vacancies on the Executive Board will be as
follows:
(i) At a meeting of the AFL's Board of Directors, Directors and
Alternate Directors may nominate candidates to fill any vacant
term(s) on the Executive Board.
(ii) Each Member will vote for one (1) nominee for each vacant term; and
(B) The Executive Board will regularly supervise and consult with the
both the Commissioner and the AFLI and AFLP Presidents. They will oversee the
daily operations of the League Office and will, as appropriate, make
recommendations to the full Board on matters of major significance to the AFL.
(C) If a member of the Executive Board dies, is incapacitated, resigns,
is removed as a Director or is otherwise unable to serve his/her full term, a
replacement will be elected by the Board for the balance of the member's term
at the next meeting of the Board.
SECTION 4 - LITIGATION AGAINST A MEMBER
Except as may be otherwise precluded by these "By-Laws", the AFL may
only institute appropriate legal action(s) against a Member if a two-thirds
(2/3) majority of the Board votes, in advance, to approve such action(s). A
vote to consider such action(s) may only take place at a "Special Meeting"
which has been properly announced for that express purpose per ARTICLE III
SECTION 2 herein.
ARTICLE IV: Office of the Commissioner
SECTION 1 - HIRING/VESTING OF AUTHORITY OF COMMISSIONER
(A) The Board of Directors will hire an individual to serve as the
Commissioner of the AFL. The Commissioner's initial employment contract must
be approved by an affirmative vote of two-thirds (2/3) of the Board. Once
approved, however, the Commissioner's employment contract may extended by a
TWO-THIRDS (2/3) vote of the Board of Directors.
(B) Via the approval of the Commissioner's employment contract, the AFL
and all of its Members automatically vest the Commissioner with the full
power and authority to carry out the duties that are delegated to him/her via
these "By-Laws". If the position of Commissioner remains vacant for more than
thirty (30) days, the AFLI President will assume all of the powers and duties
of the Commisssioner until a new Commissioner is appointed.
(C) The Commissioner shall be the Chief Executive officer of the League
and have general supervision of its business and affairs, including the
hiring of League Office employees. The Commissioner may delegate any and all
duties, responsibilities and activities of the Commissioner to the President
of AFLI in the best interests of the AFL.
(D) The AFLI President shall be the principal administrative officer of
the AFL and have the general supervision of the business affair,
administration and operation of the AFL office and all AFL employees.
SECTION 2 - POLICIES AND PROCEDURES
The AFLI President as the Commissioner's designee, shall interpret and,
from time-to-time, establish policies and procedures with respect to the
provisions of the AFL's "By-Laws" and any enforcement thereof. Such
interpretations of the AFLI President may be appealed to the Commissioner.
The interpretations and/or rulings of the Commissioner can only be overruled
via a three-fourths (3/4) majority vote of the AFL's Board of Directors.
SECTION 3 - INCURRING EXPENSES
The Commissioner, the AFLI President and other corporate officers on
behalf of the AFL, may incur any reasonable expenses which, in his/her
discretion, are necessary to conduct and transact the business of the AFL;
provided, however, that prior Board approval will be required for any
expenditure over and above the "Annual League Office Budget" that has been
approved by the Board. These expenses will include, but will not necessarily
be limited to, the following: the leasing of office space; the hiring of
League Office employees; and the engaging of other assistance or services.
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SECTION 4 - MANAGEMENT COMMITTEES
The Commissioner will appoint appropriate Management Committees to
assist him/her with regard to specific functions of the AFL. Each of these
Management Committees will consist of five (5) or seven (7) members. These
Management Committees will include, but will not necessarily be limited to,
the following: the Administration & Finance Committee; the Expansion &
Relocation Committee; the Legal & By-Laws Committee; the Marketing &
Television Committee; the Rules & Competition Committee; and the Team
Operations Committee.
SECTION 5 - LEGAL ACTIONS ON BEHALF OF THE AFL
The Commissioner and the AFLI President, as the Commissioner's designee,
are authorized at the expense of the AFL, to hire a legal counsel and to take
or adopt appropriate legal action(s) or such other steps or procedures as
(s)he deems necessary and proper in the best interests of either the AFL or
Arena Football, whenever any party or organization that is not a member of,
employed by, or connected with the AFL or any member thereof, is guilty of
any conduct that is detrimental either to the AFL, its member Teams or
employees, or to Arena Football, provided, however, that an affirmative vote
of two-thirds (2/3) of the Directors has approved, in advance, all such legal
action(s)/defense(s).
SECTION 6 - WORKING AGREEMENTS WITH OTHER PROFESSIONAL FOOTBALL LEAGUES
The Commissioner and the AFLI President, as the Commissioner's designee
may negotiate working agreements with other leagues or professional football
associations (such as the National Football League, the Canadian Football
League, the World League of American Football, etc.) on behalf of the AFL,
provided, however, that a majority of the Directors must approve all such
working agreements that are entered into by the AFL before they are signed by
the Commissioner or the AFLI President.
SECTION 7 - KEEPING OF ACCURATE AND CURRENT RECORDS
The AFLI President, as supervised by the Commissioner, must ensure that
complete and accurate records and accounts of all of the AFL's proceedings
and business transactions are kept on a current basis. The AFLI President
must draft "Minutes" of each meeting of the Board and must submit those
"Minutes" to the AFL's Board of Directors within ten (10) days of each such
meeting. The Board of Directors MUST APPROVE OR DISAPPROVE those "Minutes" at
its next regularly-scheduled meeting. In addition to the above, the AFLI
President must make a full and complete report of all of the AFL's business
transactions during the preceding twelve (12) month period at each of the
AFL's "Annual Meetings" and/or at the direction of the Board.
SECTION 8 - FINANCIAL ACCOUNTING OF AFL FUNDS
The CFO under the supervision of the AFLI President as directed by the
Commissioner must submit an accurate and detailed financial accounting of the
AFL's exact financial condition, which such report must be compiled in
accordance with generally accepted accounting principles, within thirty (30)
days after the end of each operational quarter, and within sixty (60) days
following the end of each operational year. The AFL's "operational year" will
run from January 1st of each year through December 31st of the year. In
addition, the CFO must, upon the request of the Board, submit additional
financial reports with regard to the AFL's financial condition.
SECTION 9 - "OPERATIONS MANUAL"
The AFLI President under the supervision of the Commissioner must
maintain and, as necessary, update the "AFL Operations Manual", which will be
reviewed and approved each year by the Board at its "Annual Meeting" in the
absence of any such approval, the "AFL Operations Manual" that was previously
approved by the Board will remain in full force and effect. The Board may
also develop policies and procedures for inclusion in the "AFL Operations
Manual" and the "AFL Operations Manual" may be amended, at anytime, by a
two-thirds (2/3) majority vote of the Board.
SECTION 10 - "RULE BOOK"
The AFLI President, under the direction and supervision of the
Commissioner, must maintain and, as necessary, update the "AFL Rule Book",
which will be reviewed and approved by the Board on or before February 15th
of each year. In the absence of any such approval, the "AFL Rule Book" that
was previously approved by the Board will remain in full force and effect.
The Board may also develop policies and procedures for inclusion in the "AFL
Rule Book" and the "AFL Rule Book" may be amended by a majority vote of the
Board. The "AFL Rule Book" may only by amended during the period from April
15th through September 15th via a unanimous vote of the Board of Directors.
SECTION 11 - "ANNUAL OPERATING BUDGET"
The CFO under the supervision of the AFLI President as directed by the
Commissioner, will prepare a proposed "Annual Operating Budget" and will
submit same to the Administration & Finance Committee at least fifteen (15)
days before each "Annual Meeting". Thereafter, the Administration & Finance
Committee will present the proposed "Annual Operations Budget", along with
its findings and recommendations, to the entire Board at least ten (10) days
prior to the "Annual Meeting".
At the "Annual Meeting" of the AFL, the Board will review and, as it
deems appropriate, amend the proposed "Annual Operating Budget". Thereafter,
the Board will approve an "Annual Operating Budget" which will include, but
which will not necessarily be limited to, the following items: the
Commissioner's and the AFLI President's salary and expenses; the AFL
employees' and consultants' salaries and expenses; other League Office
expenses; and the fees for game officials and any other fees as may, from
time to time, be incurred by the AFL in the normal course of its operations.
In the absence of the Board approving a new "Annual Operating Budget" at the
"Annual Meeting" of the AFL, the AFL will automatically adopt the same
"Annual Operating Budget" that was in effect for the prior operational year.
SECTION 12 - OUTSIDE ACCOUNTANT
The AFLI President at the direction of and under the supervision of the
Commissioner will recommend to the Board an outside accountant for the AFL. A
majority of the Directors must approve all such appointments and the method
and amount of compensation for same.
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SECTION 13 - CONFIDENTIALITY
All business conducted at all meetings of the Board will be deemed to be
"confidential" unless the Commissioner or AFLI President determines that it
is in the best interest of the AFL to publicly disseminate specific
information concerning any item(s) that was/were discussed and/or decided
upon at such meetings. The Commissioner or AFLI President will disseminate an
"official press release" upon the conclusion of any "Annual Meeting" or
"Special Meeting" of the Board unless the Board has voted, by a two-thirds
(2/3) majority, not to issue such a release.
SECTION 14 - REGULAR SEASON SCHEDULING
The Commissioner or the AFLI President as the Commissioner's designee,
will oversee the preparation of the schedule of regular season games prepared
by the Vice-President of Football Operations under the following terms and
conditions:
1. the Board will determine how to arrange the Teams in divisions,
conferences, etc,;
2. the Board will determine the number of games to be played by each
Team and every Team must be scheduled for the same number of
regular season games One-half (1/2) of each Team's games will be
scheduled as "home" games and the other half will be scheduled as
"away" games.
3. the Board will determine the number of games that each
Team will play in its respective division, including the number of
times each Team will play each divisional opponent; and
4. any Team's refusal or financial inability to play a
scheduled game will render the offending Member subject to a fine
of Two Hundred Fifty Thousand Dollars ($250,000), forfeiture of the
game, and termination and/or suspension from the AFL per ARTICLE
VIII, SECTION 1(H).
SECTION 15 - NUMBER OF GAMES
The number of games to be played by each Team in an upcoming
season will be the same as the number of games played by each Team
during the previous season; provided, however, that the Board may
change the number of regular season games by a TWO-THIRDS (2/3)
vote at its "Annual Meeting".
SECTION 16 - PROTEST OF A REGULAR SEASON GAME
(A) In order to protest the result of any regular season game and/or to
question a player's eligibility for same a Team must notify the VICE
PRESIDENT OF FOOTBALL OPERATIONS, in writing, within twenty-four (24) hours
after the conclusion of said game, by facsimile, by telegram or by other
electronic transmission, stating therein all of the grounds for the
protest/question. However, no such protest/question may be filed in
connection with any game that is played after 12:00 Midnight (CDT) on the day
of the last game of the regular season.
(B) A regular season game may be protested and/or a player's
eligibility during a regular season game may be questioned only by a Member's
Director or Alternate Director. In addition, the right to protest a game
and/or to question a player's eligibility for same will be limited to those
Teams that were involved in the game.
(C) Each notice of protest and/or question of player eligibility must
be immediately confirmed via written letter and each such
letter-of-confirmation must be accompanied by a check in the amount of Ten
Thousand Dollars ($10,000) payable to the AFL. If the Member filing the
protest/question prevails in the protest, the $10,000 payment will be
refunded and if the Member does not prevail in the protest, the $10,000
payment will be forfeited and retained by the AFL. The COMMISSIONER OR HIS
DESIGNEE will decide as to whether a Member has/has not prevailed in a
protest.
(D) Upon receipt of a notice of protest and/or question of player
eligibility, the COMMISSIONER will immediately notify the Member operating
the opposing Team in the game. Thereafter, the COMMISSIONER will require both
Members to file with the COMMISSIONER such evidence as (s)he deems to be
relevant to the issuers involved in the protest/question.
(E) Each Member that is protesting a game and/or that is questioning
the eligibility of a player will have two (2) days AFTER THE SUBMISSION OF
THE PROTEST to submit the requested evidence and the COMMISSIONER OR HIS
DESIGNEE will decide the protest/question raised within twenty-four (24)
hours of his/her receipt of such evidence.
(F) The Commissioner's decision regarding all protested games and/or
all questions of player eligibility will be final and binding upon both of
the affected Teams and upon all of the other Teams in the AFL. Such a
decision can only be appealed to the AFL's Executive Board and the AFL's
Executive Board will be obligated to hear such an appeal only if at least one
(1) member of that committee who is not directly involved in the protested
game recommends that such a review be undertaken. All such appeals to the
Executive Board must be submitted, in writing, to the Chair of the Executive
Board within twenty-four (24) hours of the Commissioner's decision regarding
a protest/question. Thereafter, the Executive Board must render a decision
within twenty-four (24) hours of its receipt of the written notice of appeal
and the Executive Board can only overrule the decision of the Commissioner by
a unanimous vote. No member of the Executive Board directly involved in the
appeal of the Commissioner's decision regarding a protest may, under any
circumstances, vote with regard to the Executive Board's review of same.
SECTION 17 - LEGAL ACTION AGAINST THE COMMISSIONER/AFL BY A MEMBER
Any Member that initiates any lawsuit(s) and/or any other legal
proceeding against the Commissioner, or any other corporate officer or
employee either individually or in his/her official capacity, and/or against
the AFL, any AFL Director, any AFL Alternate Director, or AFL Officer,
and/or any Member, or any Member's employees, directors or officers for any
claim or demand whatsoever arising out of or in connection with any decision
or action of the
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Commissioner, individually or in his/her official capacity, and/or of the
AFL, any AFL Director, any AFL Alternate Director or any AFL Officer, and/or
any Member, or any Member's employees, directors, or officers automatically
agrees to pay the attorneys' fees, COSTS AND EXPENSES for all of the
defendants in such lawsuit(s) and/or legal proceeding(s) if the person or
Member who brings the suit or proceeding does not completely prevail in same.
In addition, no such lawsuit and/or other legal proceeding can be initiated
unless the person or Member has already posted a Fifty Thousand Dollar
($50,000) cash bond with the League to be held in a separately established
escrow account. If the plaintiff in such a lawsuit and/or legal action
prevails in same, the $50,000 will be returned but, if the plaintiff does not
prevail, the $50,000 will be forfeited and retained by the AFL.
For the purposes of this Section of the "By-Laws", it will be presumed
that a Member has authorized any lawsuits and/or other legal proceedings that
are initiated by any of its shareholders, officers, directors or employees. A
Member will be subject to the same requirements and/or to the same penalties
with regard to any lawsuits or other legal proceedings that are initiated by
any such parties against the Commissioner, the AFLI President, or other AFL
officers or employees, either individually or in his/her official capacity,
and/or against the AFL, any AFL Director, any AFL Alternate Director, or any
AFL Officer, and/or any Member, or any Member's employees, directors or
officers for any claim or demand whatsoever arising out of or in connection
with any decision or action of the Commissioner, the President, or other AFL
Officers or employees, individually or in his/her official capacity, and/or
of the AFL, any Member or any Member's employees, directors, or officers.
SECTION 18 - AFL DRUG POLICY
On or before October 1, 1996, the AFLI President as directed by the
Commissioner will formulate an AFL "Drug Policy" which will be consistent
with all of the applicable laws concerning the player's rights to privacy and
employment security and (s)he will submit same to the Board for inclusion in
the AFL's "Operations Manual". Any AFL "Drug Policy" which is adopted by the
Board will be applicable to all Teams and, under no circumstances, will any
Member be allowed to adopt a less stringent drug policy for its own Team.
SECTION 19 - VIOLATIONS NOT OTHERWISE COVERED
Wherever there is a rule for which no penalty has been specifically
established for violation thereof, the Commissioner or the AFLI President as
directed by the Commissioner, will have the authority to fix a penalty which,
in his/her judgment, is appropriate and fair. Similarly, whenever a situation
arises that is not covered in these "By-Laws", the Commissioner or the AFLI
President as directed by the Commissioner will have the authority to make
such decisions which, in his/her judgment, are appropriate and fair; provided,
however, that no monetary penalty fixed under this provision can exceed Ten
Thousand Dollars ($10,000) without the prior approval of a two-thirds (2/3)
vote of the Board.
SECTION 20 - "IN THE BEST INTEREST OF THE AFL"
In addition to all of the other powers granted to or vested in the
Commissioner under these "By-Laws", the "Membership Agreement", the AFL's
"Rule Book" and/or any other rules and/or regulations that are adopted by the
Board, the Commissioner will have the power to make decisions on any other
issue(s) that is/are not specifically addressed in such document(s) so long
as the announced decision is one which the Commissioner declares to be "in
the best interest of the AFL". All such decisions of the Commissioner which
are announced as being "in the best interest of the AFL" and which are not
otherwise prescribed or provided for hereunder must be circulated to the
Board of Directors by the close of business (i.e., 5:00 pm CDT) on the day of
the decision. All such decisions will be subject to the review of the
Directors via a "Special Meeting" which must be called by the Commissioner
for this purpose if at least one-quarter (1/4) of the Board of Directors
requests, in writing, such a meeting. All such "Special Meeting" must be held
within forty-eight (48) hours of the issuance of such a decision. At all such
"Special Meetings", the Directors may discuss and review all of the actions
which have been taken by the Commissioner "in the best interest of the AFL"
and the Directors may overturn the Commissioner only by a three-fourths (3/4)
majority vote of the Directors who are actually in attendance at such
meeting. No "interested" Director will be disqualified from voting thereon.
SECTION 21 - ACTIONS TAKEN BY THE COMMISSIONER
Except as provided otherwise herein, all of the actions which are taken
by the Commissioner or the Commissioner's designee, pursuant to this ARTICLE
IV and/or pursuant to any other Article of these "By-Laws" and which are not
specifically referable to the Board will be final, binding and conclusive as
an award in arbitration except that any action taken by the AFLI President or
other designee of the Commissioner shall be appealable to the Commissioner.
As such, once so determined by the Commissioner, all such actions may be
enforced by the AFL via an appropriate action in a court of competent
jurisdiction in accordance with the laws of the state in which the league is
headquartered.
SECTION 22 - AFL PROPERTIES AND AFL FILMS
THE COMMISSIONER SHALL BE THE PRINCIPAL SPOKESPERSON AND REPRESENTATIVE
FOR THE AFL AND OVERSEE AFL PROPERTIES AND ITS OFFICERS AND EMPLOYEES AND
HAVE GENERAL SUPERVISION OF AFLP INCLUDING THE OVERSIGHT OF ARENA FOOTBALL
LEAGUE PROPERTIES AND ARENA FOOTBALL LEAGUE FILMS. THE COMMISSIONER SHALL
REPORT DIRECTLY TO THE AFL EXECUTIVE COMMITTEE AND THE AFL BOARD OF DIRECTORS
WITH RESPECT TO ALL ACTIVITIES OF AFL PROPERTIES AND AFL FILMS.
ARTICLE V: RELOCATION AND TRANSFER OF EXISTING MEMBERSHIPS AND MEMBERSHIP
OBLIGATIONS
SECTION 1 - ESTABLISHMENT OF MEMBERSHIP TERRITORY
All memberships will be issued to Members for the location that was
originally approved by the Board and as thereafter was set forth in the
Member's "Membership Certificate" Unless otherwise specified in a Member's
"Membership Agreement", all such locations will be exclusive to that Member
for the municipality named therein and for an area covering a radius of
seventy-five (75) miles from the geographic center of the City or Township
for which the Member's membership was granted and in which its
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home arena is located. The area described above will be referred to as the
Member's "Territory".
SECTION 2 - APPLICATION TO RELOCATE
A Member may change its territory of operation to a different location
only in accordance with and subject to the following provisions:
(A) An application to relocate a member team to a new territory must be
made in writing to the Commissioner and this application must identify the
proposed new location, the name and location of the new arena, and provide
one or more weekend dates on ten (10) or more weekends in which the member
proposes to play its home games; and
(B) No application to relocate may be considered unless it is submitted
on or before August 18, in 1996 and on or prior to the first day of August of
the year prior to the year in which the proposed relocation is to take
effect. If the proposed relocation will be subject to the provisions of
ARTICLE V SECTION 4 (A) herein, then written notice of the "consent" set
forth therein must accompany the application to relocate; and
(C) All requests by any Member for a change in the Member's territory
may be approved only if the relocation request is first referred to the
Expansion & Relocation Committee, which may request any and all reasonable
information from the Member that is requesting such relocation. Upon its
review of all of the factors relating to the need for the transfer and the
demographics and environment of the proposed new location, the Expansion &
Relocation Committee will, by majority, recommend to the Board that the
proposed transfer be approved or disapproved. Thereafter, the Board may
approve such relocation of a Member only upon an affirmative vote of
two-thirds (2/3) of the Board.
(D) The team requesting the relocation must make a presentation at the
League's meetings held in conjunction with the ArenaBowl championship game.
The "new" ownership group, if applicable, must be present during the
presentation to answer any questions from the Board of Directors. Assuming
the Board has all the appropriate paperwork and information provided, the
Board has until the adjournment of the ArenaBowl meetings to approve and/or
disapprove the relocation request.
(E) "The Board, in its discretion, as part of its approval by a
two-thirds (2/3) vote of the Board, may impose, as a condition of its
approval of the relocation of an existing Membership, a relocation fee not in
excess of the fee charged for a new Membership. The amount of the relocation
fee, if any, shall be based upon the value of the new Membership Territory to
the League as a potential expansion territory."
SECTION 3 - APPLICATION FOR NEW MEMBERSHIP
(A) The Board will determine the expansion fee to be charged with regard
to the sale of each new Membership in the AFL and the terms and conditions
for such a sale. The sale of each new Membership is deemed the sale of a
portion of the equity of the AFL's corporate assets. This includes, but is
not limited to, player contracts in an expansion draft, office equipment, and
the rights to future accounts receivable.
(B) All requests by any person or entity for the granting of a "new"
Membership by the AFL must be made in writing no later than August 18, 1996
for teams that will start play in 1997, and no later than August 1 for all
applications for new membership for teams starting play in the year prior to
the team's first season of play. All applications must contain all of the
information that is required on the most current edition of the AFL's
"Membership Application Form." The original application materials will be
reviewed by the AFL Commissioner and complete copies of same will be sent
within five (5) days of his/her receipt of same to the Chair of the AFL's
Expansion & Relocation Committee per ARTICLE V, SECTION 4 (B) herein. All
such applications must be accompanied by a One Hundred and Twenty-Five
Thousand Dollar ($125,000) application fee in the form of a certified or
cashiers check and by the "consent", if required, as set forth ARTICLE V,
SECTION 4 (A) herein. All such fees will be maintained by the AFL President
in an interest-bearing escrow fund and no funds will be dispersed and/or
distributed from that account without the approval of at least two-thirds
(2/3) of the AFL's full Board of Directors).
(C) $25,000 of the above-referenced application fee will be deemed to be
a "fee absolute" which the AFL has earned upon its receipt and review of the
application. Thereafter, if the membership application is rejected by the
Board, then the $100,000 "balance" will be returned to the applicant and if
the application is approved by the Board, the $100,000 "balance" will be
applied to the then outstanding membership fee.
(D) Within ten (10) days after it receives any payment from the sale of
a new Membership, the AFL League Office will divide those proceeds in equal
shares among all of the Members that are "in good standing" and Gridiron.
(E) If a Member's membership has been terminated and/or if the Member's
Team withdraws from the AFL then that Member and Team will not be entitled to
any proceeds from the sale of any new Membership which occurred after the
Membership has been terminated or the Team withdraws.
(F) With the exception of ARTICLE V, SECTION 3(E) herein, and with the
exception of the "emergency situation" provision set forth in ARTICLE II
herein, once a new Membership is approved, each existing team and Gridiron
will become permanently vested in the expansion payments of each such new
Membership. Once a new Membership is approved, the Board may not reduce,
change, defer, adjust, allocate or redirect any of the expansion revenues
related to that new Member without an unanimous vote of all of the Directors.
SECTION 4 - INVESTIGATION AND APPROVAL PROCESS FOR NEW MEMBERSHIP AND
RELOCATION APPLICATIONS
(A) If an applicant for relocation or a new membership proposes to
operate in a municipality which is within a current Member's "territory",
then the Director representing the existing Member must consent, in writing,
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to the filing of the application. If such written "consent" is not
forthcoming, then the application for relocation or a new membership can not
be considered by the Board.
(B) Within five (5) business days of the receipt of a completed
application for a new membership or an application to relocate, the
Commissioner must send complete copies of the application materials to the
Expansion & Relocation Committee. Thereafter, within forty-five (45) days of
its receipt of the completed application for expansion or relocation, the
Chair of the Expansion & Relocation Committee will report to the Board with
respect to the results of that Committee's investigation and its
recommendation as to whether the application should be granted or denied.
(C) In considering an application for a new membership, the Expansion &
Relocation Committee will conduct such investigations and consider such
factors that it deems to be appropriate and relevant, including, but not
limited to, whether it is in the best interest of the AFL to expand the
number of members in the AFL as well as those factors set forth in ARTICLE V,
SECTION 4 (D) herein. The Chair of the Expansion & Relocation Committee must
submit the Committee's recommendation for each application for a new
membership to the full Board on or before September 30th of each year and the
Board can not review any such recommendations that it receives after that
date unless it first approves, via a two-thirds (2/3) vote, to extend the
September 30th "deadline". No application for membership shall be considered
after September 15. This deadline shall only apply to applications for
membership to begin play in the next fiscal year. All other applications for
play in future years may be submitted at any time up to September 15th of the
fiscal year before the season in which the new member will play.
(D) In considering an application for new membership or relocation, the
recommendations of the Expansion/Relocation Committee will be based solely
and exclusively upon the following factors:
1. Whether the proposed location can support a Team in the AFL or,
if the proposed new location is within the "territory" of an
existing Member, whether the proposed new location can support
another Team. In evaluating this issue, the Expansion &
Relocation Committee will consider the following factors: the
existing and projected population within the proposed
"territory"; the income levels and age distribution of the
residents of the proposed "territory"; the existing and projected
markets for radio, broadcast television, cable television and
other forms of audio-visual transmission of AFL games within the
proposed "territory"; the size, quality and location of the arena
in which the relocating Member proposes to play its home games
within the proposed "territory"; and the presence, history and
popularity in the proposed "territory" of other professional
sports leagues;
2. Whether the applicant has demonstrated that it will be able
successfully to operate an AFL Team in the proposed "territory".
In evaluating this factor, the Expansion & Relocation Committee
will consider the applicant's present and projected financial
condition and resources and its past performance, if any, in
operating a Team in the AFL;
3. Whether the proposed "territory" is likely to have an adverse
effect upon the AFL's ability to market and promote AFL football
on a nationwide basis in a diverse group of geographic markets;
4. Whether the proposed "territory" presents particular
disadvantages for the operation of the AFL, such as by creating
significant traveling or scheduling difficulties or because of
adverse state or local laws or regulations; and
5. Whether other AFL Members, in addition to the applicant, are
interested in transferring their memberships to the proposed
"territory and/or whether there are other persons or entities
interested in obtaining an expansion membership in the proposed
"territory".
(E) The Expansion & Relocation Committee will investigate each of the
applications and will recommend which of the applications, if any, should be
granted. In making its recommendations, the Expansion & Relocation Committee
will consider all factors listed in ARTICLE V, SECTION 4(D), herein, and will
also consider which applicant, if any, is most likely to operate a successful
operation in the proposed "territory" and/or which applicant, if any, will
otherwise serve the best interest of the AFL.
(F) The applicant for a new membership or relocation must furnish all of
the information that the Commissioner and/or the Expansion & Relocation
Committee deem to be necessary and appropriate in conjunction with their
respective investigations. The Commissioner and/or the Expansion & Relocation
Committee may engage consultants or other experts to assist in the
investigation of the application as they respectively deem appropriate). All
such information that is supplied to the Commissioner and/or the Expansion &
Relocation Committee pursuant to this subsection will be made available to
the applicant and the applicant will be afforded an opportunity to appear
before the Commissioner and/or the Expansion & Relocation Committee to
present whatever additional information or arguments the applicant desires.
In addition to the above, any Director may also appear before the
Commissioner and/or the Expansion & Relocation Committee to present whatever
information or arguments such Director desires.
(G) All of the reports and recommendations of the Expansion & Relocation
Committee will be delivered to each Director at least fifteen (15) days
before the "Annual Meeting". Thereafter, each applicant will be afforded an
opportunity to appear before the Board at its "Annual Meeting" to present
whatever information or arguments the applicant desires. The vote of each
Director on a proposed relocation will be based solely and exclusively upon
the factors listed in ARTICLE V, SECTION 4 (D) herein.
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(H) A new Membership may only be granted with the approval of
three-fourths (3/4) of the Directors and a relocation may only be granted
with the approval of two-thirds (2/3) of the Directors. In this regard, no
voting by proxy will be permitted with regard to the question of whether to
approve a proposed new Membership and/or a proposed relocation.
SECTION 5 - TRANSFER OF MEMBERSHIP
(A) No Membership, or any interest therein, may be sold, assigned, or
otherwise transferred in whole or in part, directly or indirectly (other than
by operation of law in the event of death, divorce, etc.), except in
accordance with and subject to the provisions of this subsection. Any attempt
to sell, assign, or otherwise transfer any Membership, or any interest
therein, that is not in accordance with and subject to the provisions of this
subsection will automatically be null and void and the Member(s) that are
involved, in any way, with the attempted sale, assignment, or other transfer
of the Membership must be subject to a fine in the amount of One Hundred
Thousand Dollars ($100,000) by the Commissioner.
(B) Any application for the sale, transfer, or assignment of a
Membership, or of any interest therein, which would or which could be deemed
to transfer the control of such Member, must be made in writing to the
Commissioner. Upon receipt of such application, the Commissioner is empowered
to require from the applicant and the applicant will be required to furnish
such information as the Commissioner deems appropriate, including, but not
necessarily limited to, the following:
1. the names and addresses of each of the buyers, transferees or
assignees thereof;
2. the price to be paid for such sale, transfer or assignment, and
the terms of payment, including a description of the security for
the unpaid balance, if any;
3. a banking reference for each buyer, transferee or assignee;
4. a financial statement for each buyer, transferee or assignee;
5. if the buyer, transferee or assignee is a corporation, a copy of
the "Articles of Incorporation" and "By-Laws" thereof, a
"Certificate of Good Standing" from the Secretary of State in
which the corporation was incorporated, together with a copy of
the share certificate of each class of stock that is outstanding,
the names and addresses of the directors and officers thereof,
the names and addresses of the stockholders therein, the price
paid or to be paid and the time of payment for said stock, a copy
of any proposed voting trust agreement, and a copy of any voting
trust certificates;
6. if the buyer, transferee or assignee is a partnership,
association or other entity, a certified copy of the "Partnership
Agreement", "Articles of Partnership" or "Organization Agreement"
and all other governing documents and the names and addresses of
all of the partners, members or other persons or entities with an
ownership interest in the buyer, transferee or assignee;
7. a notarized statement from the buyer, transferee or assignee
that, upon the AFL's approval of the proposed sale, assignment or
transfer, the buyer, transferee or assignee will subscribe to and
will agree to be bound by -- the AFL's "By-Laws", the AFL's
"Operations Manual", the AFL's "Rule Book" and any other rules
and regulations of the AFL as they exist now and as they may be
modified in the future; and
8. copies of any proposed sale, assignment or transfer agreements.
(C) Each application for the transfer, sale or assignment of a
Membership must be accompanied by a certified or cashier's check payable to
the AFL in the sum of Twenty-Five Thousand Dollars ($25,000) which is the
amount of the AFL's non-refundable "Transfer Fee". Regardless of whether the
application for the transfer, sale or assignment of a Membership is approved
or not approved, the AFL will be entitled to keep this "Transfer Fee".
(D) Upon receipt of an application for the transfer, sale or assignment
of a Membership and all of the required information, the Commissioner will
conduct such investigation as (s)he deems appropriate. In this regard, the
Commissioner will appoint an "Ad Hoc Committee" to assist him/her in any
matters relating to proposed sale, transfer or assignment of any membership
interests that are greater than five percent (5%). Upon the completion of the
investigation, the Commissioner and/or the Ad Hoc Committee will submit the
proposed sale, transfer or assignment to the Board for its review and
approval/disapproval, together with its recommendations thereon, as well as
copies of all of the information in respect thereto that the Commissioner
and/or the Ad Hoc Committee deems pertinent.
(E) All of the proposed sales, transfers or assignments described in
ARTICLE V, SECTION 5 (B) herein will only become effective if they are
approved by the affirmative vote of at least three-fourths (3/4) of the Board
at a "Special Meeting" that is duly called for that purpose.
(F) For every proposed sale, assignment or transfer of any partial
interest in any Member, which partial interest does not affect the control of
such Member, no advance approval of the Board is necessary. However, all such
sales, assignments or transfers which involve the transfer of a ten percent
(10%) or greater interest in the owning entity and/or which will result in a
single entity owning ten percent (10%) or more of the Member must be reported
in detail, and in writing, to the Commissioner and the Chair of the Executive
Committee at least forty-eight (48) hours prior to the effective date of the
proposed transfer, sale or assignment. This report must include the
description of the interest sold, assignment or transferred; the names and
addresses of all of the entities that were involved in the sale, assignment
or transfer; and the price or any other consideration paid, to be paid, or to
be owed to or
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by any of the entities that are involved with the sale, assignment or
transfer.
ARTICLE VI: OBLIGATIONS OF MEMBERSHIP
SECTION 1 - MEMBERSHIP AGREEMENT/MEMBERSHIP CERTIFICATE
Each Member will execute a copy of the AFL's "Membership Agreement", as
that agreement exists now and/or as it may be amended from time-to-time.
Thereafter, the Commissioner will issue a "Membership Certificate" to each
Member in good standing. This certificate will be non-transferable unless the
Membership is forfeited, sold or transferred pursuant to the terms and
conditions of these "By-Laws". At a minimum, this "Membership Certificate" will
indicate the entity that owns the membership and the designated geographic
area in which the Member may operate its Team.
SECTION 2 - ASSESSMENTS
Each Member will pay an equal amount of annual assessments per the
"Annual Operating Budget" that is established by the Board at its "Annual
Meeting". Thereafter, upon the Commissioner's certification to the Board that
the available funds of the AFL are insufficient for the proper operation of
the AFL, the Board may, within ten (10) days, levy an additional equal
assessment upon all of the Members, which such assessment will be due within
ten (10) days.
SECTION 3 - NO "OFFSETS"
No Member may "offset" any funds that are owed to the AFL by a claim of
vested rights with regard to any funds that are supposed to be distributed to
AFL Members in the future. The Commissioner will treat any such attempted
"offsets" as non-payments per ARTICLE VI, SECTION 4 herein.
SECTION 4 - PENALTY FOR LATE PAYMENT OF ASSESSMENTS
Any assessments that are not paid on a timely basis will be subject to a
ten percent (10%) penalty for every ten (10) day period that the assessments
have not been paid. In addition, if a Member is more than fifteen (15) days
late in paying an assessment, the Member will automatically be declared to be
"not in good standing" as that term is defined in ARTICLE VI, SECTION 9
herein. Penalties for late payment of assessments are not eligible to be
waived by the Commissioner.
SECTION 5 - OBLIGATIONS OF MEMBERSHIP
Each Member and all of the parties that are formally affiliated with the
Member, including, but not necessarily limited to, the Member's owners,
officers, stockholders, directors, partners or any person otherwise owning
any interest in the Member, expressly agree to be bound by all of the
following obligations:
A. To conduct all of its AFL-related and/or all of its non-AFL related
activities in a manner that will not result in the AFL being held in
disrepute;
B. To abide by any and all decisions of the Commissioner and/or the
Board in all matters that are within their respective jurisdictions;
C. To include in any agreement/contract between any Member and any
employee, a provision specifying that all of the respective parties
agree to be bound by these "By-Laws", by the AFL's "Operations
Manual", by the AFL's "Rule Book" and/or by any other rules and
regulations of the AFL, as they exist and/or as they may be amended,
modified or otherwise changed from time-to-time; and
D. To be bound by all of the terms and conditions of the AFL's "License
Agreement" with Gridiron Enterprises, Inc., by the AFL's "Articles
of Incorporation", by these "By-Laws", by the AFL's "Operations
Manual", and/or by any other rules and regulations of the AFL as they
may be amended, modified or otherwise changed in the future; all of
the contracts binding the AFL, and/or its Members, as may now exist
and/or as they may be later entered into in the future (including,
but not limited to, all of the licensing, merchandising and/or
television agreements); and all of the AFL's obligations and
indebtedness as that may now exist and as it may later be incurred,
regardless of when the acts or events giving rise to the obligation
or indebtedness occurred.
E. To deliver to the AFL by the due date, an Irrevocable Letter-of-Credit
in the exact amount and exact wording as determined by the Board of
Directors." The "Irrevocable Letter-of-Credit" required of any one
Member must be identical in form, amounts, content, and wording to that
which is required of every other Member. All Letters-of-Credit must
be posted with the AFL League office by October 1 or five (5) days
after Board approval of a new membership if Board approval was after
the October 1 deadline. If a Member is more than ten (10) days late
in posting the requisite Letter-of-Credit, the Member shall be
penalized 10% of the value of the Letter-of-Credit for every ten (10)
day period the Letter-of-Credit is not posted. If a Member is fifteen
(15) days late in posting of the requisite Letter-of-Credit, the
Member will automatically be declared to be "not in good standing" as
that term is defined in ARTICLE VI, SECTION 9 herein.
SECTION 6 - DESIGNATED HOME ARENA
Except as provided by this subsection, a Team must play all of its home
games in its designated home arena. In this regard, however, the Commissioner
may, in his/her discretion, permit a Team to play up to a maximum of one (1)
of its designated "home" games in an alternative arena, provided that the
alternative arena is not within another Team's "territory".
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SECTION 7 - TEAM NAME, LOGO AND UNIFORM COLORS
The proposed name, nickname, logo and uniform colors of each Team must
be approved, in writing, by the Commissioner. No Team may change its name,
nickname, logo or uniform colors without first obtaining the written approval
of the Commissioner.
SECTION 8 - TWO TEAMS IN THE SAME STATE
Where two (2) or more Teams are located in the same state, neither may
use the state's name without first obtaining written permission to do so from
the other Team(s) located in said state. However, if a current Team is
already using a state name, and another Team later enters the same state, the
latter Team is pre-empted from using the state name and the existing Team may
continue to use the state name for so long as it wants to do so. If the
existing Team ceases to use the state name but there continues to be more
than one Team in that state, then no Team may utilize the state name.
SECTION 9 - "NOT IN GOOD STANDING"
A Member will automatically be deemed to be "not in good standing" if it
does not pay all of its AFL-related assessments or post the requisite
Letter-of-Credit within fifteen (15) days of the original "due date" for each
such assessment. In addition, a Member may be declared to be "not in good
standing" by a majority vote of the Board of Directors for any other
action(s) that is/are determined to be "not in the best interest of the AFL."
Once a Member has been deemed or declared to be "not in good standing",
it will lose its right to be present at and/or to vote at any meetings of the
AFL Board of Directors. Moreover, if the reason(s) that led to the
deeming/determination of "not in good standing" has/have not been corrected
within thirty (30) days, then the President must call a "Special Meeting" of
the AFL Board of Directors in order to determine whether the Member should be
suspended and/or terminated See ARTICLE IX: "Suspension and/or Termination
of Ownership or Membership".
If the Board of Directors decides not to suspend and/or terminate a
Member who has remained "not in good standing" for more than thirty (30)
days, the affected Member must execute a UCC-1 FORM in favor of the AFL with
regard to any funds that the AFL already owes and/or any funds that the AFL
may owe at some point in the future to the affected Member. If the Member
does NOT execute the requisite UCC-1 FORM within two (2) days after it is
first preferred to the Member by the Commissioner, then that Member will
automatically be deemed to be suspended from the AFL. Such a suspension can
only be removed if (a) the affected Member removes the underlying cause for
the deeming/declaration of the "not in good standing" status; or (b) the
Member executes the UCC-1 FORM in favor of the AFL.
ARTICLE VII: WITHDRAWAL OF MEMBERSHIP
SECTION 1 - VOLUNTARY WITHDRAWAL OF MEMBERSHIP
Any Member may voluntarily withdraw from its membership in the AFL via
the following methods:
By selling, assigning or otherwise transferring its Membership
pursuant to ARTICLE V of these "By-Laws"; or
By giving written notice of its withdrawal to the Commissioner and
to the other Members of the AFL, provided, however, that such
resignation will only be effective if, within thirty (30) days of
such notice, the resigning Member will have made a full payment of
all of its dues or other debts owing to the AFL and/or to its
Members.
SECTION 2 - EFFECTIVE DATE OF WITHDRAWAL
On the effective date of any withdrawal, the withdrawing Member will hold
no further interest in the AFL and its membership will cease and terminate in
its entirety.
SECTION 3 - WITHDRAWAL OF MEMBERSHIP TO JOIN ANOTHER PROFESSIONAL LEAGUE
If, for the purpose of joining any other indoor professional football
league, any Member either withdraws from the AFL without the consent of
three-fourths (3/4) of the Directors or transfers, disposes of or surrenders
its Membership in the AFL then the following results will automatically
occur:
1. All right, title and interest in the Membership will immediately
become the property of the AFL;
2. All right, title and interest in all of the player contracts that
were held by the withdrawing Member and all right, title and
interest in all of the players on that Member's "Reserve List" may,
at the option of the AFL, become the AFL's property; and
3. Upon the vote of two-thirds (2/3) of all the remaining Directors,
the Member must pay to the AFL, the amount of Five Hundred
Thousand-Dollars ($500,000) or the current price of an AFL
expansion team, whichever is greater, as "liquidated damages".
ARTICLE VIII: SUSPENSION AND/OR TERMINATION OF OWNERSHIP OR MEMBERSHIP
SECTION 1 - GENERAL
The membership of a Member or the interest of any ownership entity (i.e.,
any owner, officer, stockholder, partner or anyone holding any interest
therein) may be SUSPENDED via a vote of two-thirds (2/3) of the Board or
terminated via a vote of three-fourths (3/4) of the Board, if the Member or
ownership entity will do or suffer the following:
(A) Intentionally, willfully or repeatedly violates any of the
provisions of these "By-Laws", the AFL's "Operations Manual", the AFL's "Rule
Book" and/or any other rules and regulations of the AFL as they may be
amended or modified in the future;
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(B) Fails to pay any dues, fines, assessments or other
indebtedness owing to the AFL within ten (10) days after receiving
written notice from the Commissioner or the AFLI President that the
Member owes such dues, fines or assessments to the AFL;
(C) Willfully fails and/or refuses to fulfill its contractual
obligatons including, but not limited to, those to the AFL, to the AFL's
Members, or to its players in such a way as to affect the AFL or its
Members adversely;
(D) Wagers or countenances wagering by its officers or employees
on any game in which an AFL team participates;
(E) Intentionally or willfully permits open betting or pool
selling upon any premises that are owned, leased and/or otherwise
controlled by the Member, if such betting or pool selling is unlawful
within the Member's jurisdiction;
(F) Offers, agrees, conspires or attempts to lose or control the
score of any game involving a Member of the AFL, or fails to suspend
immediately any officer, player or other employee of the Member who, in
a court of law or in any hearing sanctioned by these "By-Laws," has been
found to have offered, agreed, conspired or attempted to lose or control
the score of any such game or of being interested in any pool or wager
on any game in which a Member of the AFL participates;
(G) States, in writing, its intent to disband or, in fact,
disbands its Membership during the AFL season, or dissolves its business
organization or ceases its operation;
(H) Willfully fails to appear at the time and place it is
scheduled to play any AFL Pre-Season, Regular Season or Playoff Game;
(I) Willfully misrepresents any material fact contained in its
application for Membership in the AFL; and/or
(J) Willfully engages in conduct that is deemed by a two-thirds
(2/3) majority of the AFL's Board of Directors to be detrimental to the
AFL, its Members, its employees or to Arena Football.
(K) Fails to file an "Irrevocable Letter-of-Credit" in the exact
wording and amount as determined by the AFL Board of Directors within
five (5) business days after written notice from the President of
non-receipt of the "Irrevocable Letter-of-Credit."
(L) Fails to file an "Additional Irrevocable Letter-of-Credit"
within five (5) business days after written notice from the Commissioner
or the AFLI President that demand has been made, in whole or in part, on
the Member's "Irrevocable Letter-of-Credit." Such "Additional
Irrevocable Letter-of-Credit" must be in an amount identical to the
amount demanded by the Board from the original "Irrevocable
Letter-of-Credit."
SECTION 2 - AUTOMATIC TERMINATION
A Member will be automatically terminated from the AFL when it:
(A) Is adjudicated to be a bankrupt or makes an assignment for the
benefit of creditors and/or a receiver or a trustee is appointed for all
or a substantial part of the property and/or assets of the Member in any
proceedings; or
(B) Fails for more than sixty (60) days to pay its AFL assessments
and/or fees in accordance with deadlines that are established by the
Board of Directors for such payments.
SECTION 3 - PROCEDURE FOR SUSPENSION AND/OR TERMINATION
The membership of an entity and/or the interest of any "related
party" (e.g., owner, officer, stockholder, partner, or anyone holding
any interest therein) may be suspended and/or terminated upon the
occurrence of any of the events that are described in ARTICLE VIII,
SECTION 1 herein via the following procedures:
(A) Any Member of the AFL, or the Commissioner may prefer
"charges" against any Member and/or "related party" that has violated
one (1) or more of the provisions of ARTICLE VIII, SECTION 1 herein.
Those "charges" must be made in writing and they must be filed with the
Commissioner, who will, no later than three (3) days after the receipt
of same, will send a copy thereof via registered, certified or overnight
mail to the Member and/or "related party" against whom such "charges"
have been made.
(B) The Member and/or "related party" so charged must, within
three (3) business days after receipt of a copy of the "charges," file
with the President its written answer thereto. The failure to file an
answer within the prescribed time period will automatically be deemed to
be an admission that all of the charges are true. Within two (2)
business days after the expiration of the time period within which the
answer is due, the Commissioner will send a copy of the "charges" and a
copy of the answer, if any, to each Director and will schedule a "Special
Meeting" of the Directors to hear the charges. This "Special Meeting"
will be held within five (5) business days after the Commissioner's
transmittal of a copy of the "charges" and a copy of the answer, if any,
to the Directors.
(C) The above-referenced "Special Meeting"/hearing will be presided
over by the Chair of the Executive Board unless (s)he is directly associated
with the complaining Member or with the Member "related party" that has been
charged. Any Member that has preferred "charges" which are related to the
matter(s) at issue will be deemed to be directly associated with the
complaining Member. If the Chair of the Executive Board is directly
associated with the complaining Member or the Member or "related party" that
is being charged, then the Executive Board will select one of its other
members to preside over the "Special Meeting"/hearing.
(D) At the "Special Meeting"/hearing, the Member or "related
party" that has been charged will have the right to appear with counsel.
In this regard, however, strict rules of evidence will not apply and any
relevant evidence that is submitted to the Board at the "Special
Meeting"/hearing may be received and considered.
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(E) After duly reviewing all of the presented evidence, the Board
except for the complaining Member and the Member or "related party" that
has been charged will vote to sustain the charges in whole or in part
and/or to suspend or terminate the Member or "related party." A majority
vote will be necessary to sustain the charge; or a vote of two-thirds
(2/3) will be necessary in order to suspend the Member or "related
party"; and a vote of three-fourths (3/4) will be necessary in order to
terminate the Member or "related party".
(F) If the "charges" are sustained, either in whole or in part,
the Board will establish an appropriate penalty for the Member or
"related party" that was the subject of the "Special Meeting"/hearing.
If, however, the Board has voted to suspend or terminate the Member or
"related party" that was the subject of the "Special Meeting"/hearing,
then that Member's membership in the AFL or the "related party's"
interest in the affected Member will automatically be suspended or
terminated unless the provisions of the ARTICLE VIII, SECTION 4 herein
are invoked.
SECTION 4 - MODIFICATION OF PENALTY
If the Board has voted to suspend or terminate a Member or "related
party," it may by a vote of two-thirds (2/3) with regard to a suspension or
by a vote of three-fourths (3/4) with regard to a termination waive the
suspension or termination and instead direct the Member or "related party" to
pay a stated fine in a stipulated manner and by a stipulated date, which fine
may be required to be paid, in whole or in part, to any other Member(s) as
compensation to such Member(s) for any damages sustained by it/them as the
result of the offending Member's act(s) or act(s) of omission or commission
and/or as the result of the related party's act(s) or act(s) of omission or
commission.
SECTION 5 - CONSEQUENCES OF SUSPENSION
When a Member is suspended from the AFL, such Member will, for the
duration of the suspension, forfeit all of its rights and privileges as a
Member of the AFL, including, but not necessarily limited to, the right to
vote and/or to participate in meetings of the Board. Such a forfeiture will
remain in full force and effect throughout the duration of the suspension. No
such suspension, however, will in any way negate or reduce the Member's
obligations to the AFL and/or to its Members.
If a suspended Member has any outstanding financial obligation to
the AFL and that suspended Member subsequently becomes eligible to
receive a portion of any proceeds that are being distributed by the AFL,
then the AFL must apply the amount due to the suspended Member as an
"offset" to the amount owed to the AFL by the suspended Member. A
suspended Member can only receive a share of any funds being distributed
by the AFL, if all of its financial obligations to the AFL have been
satisfied via the "offset" or via the payment of its outstanding debt.
ARTICLE IX: COMPETITION
SECTION 1 - GENERAL
(A) The Board will adopt rules of competition for the AFL which
will be compiled into the AFL's "Rule Book". In addition, the Board
will also determine the name and number of playing divisions of the AFL;
the number of players to be permitted on the roster of each AFL Team;
and the number of regular season games to be played by each AFL team.
(B) If the Board does not set the name and number of playing divisions,
the number of players to be permitted on each AFL Team roster and/or the
nubmer of regular season games to be played by each AFL Team for a particular
season within three (3) months after the end of a season, then these will be
the same for the next season.
SECTION 2 - THE SCHEDULE
The AFLI President in conjunction with the Vice President of
Football Operations will oversee at the direction of the Commissioner
the preparation of the schedule of regular season games under the
following terms and conditions:
1. Per ARTICLE IV, SECTION 14, the Board will determine the
number of games to be played by each Team and every Team must
be scheduled for the same number of regular season games.
One-half (1/2) of each Team's games will be scheduled as
"home" games and the other half will be sheduled as "away"
games.
2. Per ARTICLE IV, SECTION 14, the Board will determine the
number of games that each Team will play in its respective
division, including the number of times each Team will play
each divisional opponent;
3. Unless otherwise amended by a two-thirds (2/3) majority
vote of the Board of Directors, the schedule will specify that
all of the AFL's regular season games will take place during
the period from May 1st through August 31st;
4. Per ARTICLE IV, SECTION 14, any team's refusal or
financial inability to play a scheduled game will render the
offending Member subject to a fine of Two Hundred Fifty
Thousand Dollars ($250,000), forfeiture of the game, and
suspension and/or termination as specified in ARTICLE VIII,
SECTION 1, herein; and
5. If, after the schedule has been adopted, and before the
regular season has ended, a Member has been suspended or
terminated or it has withdrawn or otherwise ceased to operate
then the Commissioner will amend the schedule as (s)he deems
appropriate. The amended schedule will become effective
immediately unless within twenty-four (24) hours after it has
been
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established by the President and distributed to the Board, a
two-thirds (2/3) majority of the Board votes--to disapprove the
amended schedule. If the amended schedule is disapproved, the
Commissioner will proceed to establish another amended schedule and
this latter schedule will automatically become effective without
being subject to any further review of the Board.
SECTION 3 - DISTRIBUTION OF GAME RECEIPTS
The distribution, if any, of game receipts between the visiting Team and
the home Team will be determined by a two-thirds (2/3) vote of all the
Directors at each "Annual Meeting." If such a determination is not made, then
the distribution plan for home games' gate receipts, if any, that was in
effect during the previous season will continue in full force and effect for
the next season.
SECTION 4 - SCOREKEEPER, OFFICIAL TIMERS, STATISTICAL SUMMARIES
The home Team will provide an official scorekeeper, official timers, and
an official statistical summary sheet for the visiting Team. Notwithstanding
the above, the Vice President of Football Operations may, at his discretion,
select personnel for the official clocks, scorebooks and scoreboards when
(s)he determines that this would likely improve the fairness and quality of
game operations).
SECTION 5 - PLAYER'S BENCH AREA
The player's bench will be exclusively reserved for three coaches, the
players, a Team trainer, a Team physician, and ball boys and water boys.
SECTION 6 - POLICE PROTECTION
Each home Team will provide sufficient police protection before, during
and after each game to a visiting Team, home Team and other AFL personnel. A
home Team that fails to provide such police protection will be subject to a
fine, at the discretion of the Commissioner, in an amount not to exceed Ten
Thousand Dollars ($10,000).
SECTION 7 - PRE-GAME TIME/MEMBER RESPONSIBILITIES
Each Team will be ready to play at least thirty (30) minutes before a
game's scheduled starting time. The visiting Team may ask for at least
fifteen (15) minutes of practice before the scheduled starting time of the
game. The Referee will determine whether to start an AFL game and only the
Referee may suspend it.
SECTION 8 - PLAYOFF FORMAT
On or before March 31st of each year, the Board, by majority vote, will
determine the playoff format for the upcoming season. This will include,
among other things, the number of Teams to be eligible for the playoffs, the
"seeding" methodology and the number of games per round). The AFL's playoff
format will continue unaltered from season to season unless it is changed
before by March 31st of each year by a majority of the Board. After March
31st of each year, a two-thirds (2/3) vote of the Board will be needed in
order to make any changes to the established playoff format for that season.
SECTION 9 - TIME/DATE OF PLAYOFF GAMES
The AFLI President in conjunction with the Vice President of Football
Operations at the direction of the Commissioner will set the date and time
for all playoff games and, (s)he will ensure that the schedule of playoff
games is consistent with the AFL's obligations under any national television
or radio contract. The refusal of any Team to play a scheduled playoff game
will result in the forfeiture of that game to the non-offending party and
will, AT the discretion of the Commissioner or his designee, subject the
offending Team to a fine not to exceed the amount that is stipulated in
ARTICLE IX herein.
SECTION 10 - CHAMPIONSHIP GAME
At the conclusion of the playoff games, the AFL will conduct a
championship game between the two (2) Teams that have not lost any playoff
games. In this regard, that championship game will be held at the venue of
the Team that was higher seeded at the start of the playoffs unless the Board
has established, prior to March 31st of each year, another site or another
methodology for selecting the site for the championship game.
SECTION 11 - DISTRIBUTION OF REVENUES FOR PLAYOFF GAMES & THE CHAMPIONSHIP GAME
On or before March 31st of each year, the Board will establish the
amount that will be paid to each visiting Team by each respective home Team
with regard to the AFL's playoff games and the AFL's championship game. If
the Board does not establish those amounts by the above-stated deadline, then
the Board will be deemed to have adopted the same amounts that had been
established for the prior season.
SECTION 12 - POSTPONEMENT OF GAME IN CASE OF AN ACT OF GOD
In the case of an Act of God which would prevent a game from being
played and/or which would cause a game to be delayed by more than three (3)
hours, the Commissioner IN CONJUNCTION WITH THE VICE PRESIDENT OF FOOTBALL
OPERATIONS may postpone any game. Should a game be postponed, the
Commissioner will also establish a new date and time for the game to be
played. In addition, the Commissioner may, at his/her discretion, reimburse
the visiting Team for any extra expenses that it incurs as a result of the
postponement. All such reimbursements will be paid for out of the AFL's funds
and, if necessary, the Commissioner will issue a "special assessment" to all
of the AFL's Members in order to replenish any funds that are expensed via
this Section.
ARTICLE X: GENERAL VIOLATIONS, PROHIBITIONS FINES AND PENALTIES
SECTION 1 - VIOLATIONS
It will be a violation of these "By-Laws" and it will be considered to
be conduct that is detrimental to the AFL for any Director, Member (or
"related party"), any official and/or referee:
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(A) To directly or indirectly own stock, or have any financial
interest, directly or indirectly, in any other Member, provided, however,
that if any Director, Member (or "related party") "related party" has
established a direct or indirect ownership of stock or has any financial
interest, directly or indirectly.
(B) To loan money to and/or become a surety or guarantor for any AFL
referee;
(C) To tamper with and/or to otherwise interfere with a player who is on
the roster or the reserve list of another Team for any purpose whatsoever,
(D) To tamper with and/or to otherwise interfere with any collegiate
players who are not eligible to play in the AFL;
(E) To enter an official's dressing room unless (s)he has been
authorized to do so, in advance and in writing, by the AFLI President;
(F) To publicize and/or take part in the publication of any mythical
All-AFL or All-Opponents Team, except those which have been expressly
authorized by the Commissioner and which have been selected according to
procedures that have been established by the Commissioner.
(G) To issue any free tickets to a visiting player or coach, other than
those that are permitted under the AFL's policy for complimentary tickets;
(H) To pay the fine for any other person that is penalized by the
Commissioner; and/or by the Board pursuant to these "By-Laws";
(I) To publicly make and/or publicly concur with any statement that is
not in the best interest of the AFL. Any complaints directed at the AFL by
any person covered by these "By-Laws" must be made to the Commissioner in
writing, and they may not be given any publicity, either directly or
indirectly;
(J) To publicly comment on any disciplinary actions that are taken by the
Commissioner. The Commissioner may make a public statement regarding such
disciplinary actions when (s)he believes it is in the best interest of the
AFL to do so;
(K) To tamper and/or otherwise interfere with another Member's officers,
employees or staff for any purpose whatsoever; and/or
(L) To engage in any action that is inconsistent with either the letter
or spirit of the AFL's performer's contract.
SECTION 2 - FINES AND PENALTIES
Unless otherwise provided by these "By-Laws", the AFLI President or his
designee will conduct an investigation of any charges that a Member (or
"related party") and/or a player, coach or referee has violated these
"By-Laws", the AFL's "Operations Manual", the AFL's "Rule Book", and/or any
other rules and other regulations of the AFL and/or that a Member (or
"related party") and/or a player, coach or referee has engaged in conduct
that is detrimental to the best interest of the AFL. If the AFLI President or
his designee determines that such a violation has occurred, (s)he may do any
of the following:
1. Levy a fine, not to exceed Ten Thousand Dollars ($10,000),
against any Member (or "related party") or player, coach or
referee for the violation of any provision of these "By-Laws",
the AFL's "Operations Manual", AFL's "Rule Book" and/or any
other rules and regulations of the AFL, or for any action that
is detrimental to the best interest of the AFL;
2. Levy a fine, not to exceed One Hundred Thousand Dollars
($100,000), against any Member (or "related party"), or any
player, coach or referee for refusing or failing to adequately
cooperate or produce materials in any investigation that is
being undertaken by the AFLI President and/or the Board;
3. Cancel or suspend the contract of any player, coach or referee
who has violated the provisions of these "By-Laws", the AFL's
"Operations Manual", the AFL's "Rule Book", and/or any other
rules and regulations of the AFL or for any action that is
detrimental to the best interest of the AFL;
4. Levy a fine not to exceed Ten Thousand Dollars ($10,000) against
any Member (or "related party") and/or against any player,
coach or referee that, in the AFLI President's discretion,
gives, makes, issues, authorizes, or endorses any statement
having and/or designed to have a prejudicial or detrimental
effect on the AFL or a Member;
5. Levy a fine not to exceed Ten Thousand Dollars ($10,000) and/or
revoke any draft pick or picks in any AFL draft of players
against any Member (or "related party") that tampers with a
player who is on the roster or the reserve list of another
Member;
6. Levy a fine not to exceed One Hundred Thousand Dollars
($100,000) against any Member (or "related party") whose Team
fails to appear for a schedule game; whose Team fails to start
or complete any pre-season game, any regular season game, any
playoff game and/or any championship game, including any
overtime period thereof; or
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whose Team fails to start and finish a playing season due to the
Member's withdrawal of membership in the AFL. Any Director may
petition the Board to direct the President to impose and/or to
increase such a fine;
7. Levy a fine not to exceed Five Thousand Dollars ($5,000) against any
Member that is not properly represented at any Board meeting;
8. Levy a fine not to exceed Five Thousand Dollars ($5,000) against any
Member (or "related party") which announces or causes to be
announced that it has protested or will protest the game and which
fails to actually file such a protest;
9. Levy a fine not to exceed Five Thousand Dollars ($5,000) against any
home Team that fails to send to the AFL's Vice President of
Football Operations official game statistics for any regular season
game, any playoff and/or championship game, within twenty-four (24)
hours after the completion of such game;
10. Levy a fine not to exceed Five Thousand Dollars ($5,000) per day per
player against any Member that has extra players on its roster in
excess of the roster limits that are provided in these "By-Laws",
in the AFL's "Operations Manual", in the AFL's "Rule Book", and/or
in any other rules and regulations of the AFL;
11. Levy a fine in the amount of Five Thousand Dollars ($5,000) for each
"time change", One Thousand Dollars ($1,000) for each "arena
change", and Ten Thousand Dollars ($10,000) for each "date change"
if a Member causes such a change to be made after the official AFL
schedule has been released; and/or
12. Levy a fine not to exceed Ten Thousand Dollars ($10,000) for any
action which is inconsistent with either the letter and/or the
spirit of the AFL's "Standard Player's Contract".
13. All such actions of the AFLI President of his/her designee shall be
appealable, in writing, within twenty-four (24) hours to the
Commissioner. Decisions of the Commissioner shall be rendered in
writing within twenty-four (24) HOURS AND SHALL BE FINAL AND BINDING.
SECTION 3 - PAYMENT OF FINES
(A) The AFLI President will notify the Member (or "related party") that
(s)he has fined, within forty-eight (48) hours of his/her decision to impose
same. All such fines must be paid, in full, within ten (10) days of their
imposition and a ten percent (10%) penalty will be imposed with regard to any
fines that are not paid by that deadline. An additional penalty of one
percent (1%) of the fine per day will be imposed if the fine is not paid
within twenty (20) days of its imposition. Moreover, if a Member fails to pay
a fine within thirty (30) days of its imposition, the AFLI President will
declare the affected Member to be "not in good standing" per ARTICLE VI
SECTION 9 herein.
(B) Unless otherwise provided by these "By-Laws", all moneys that are
collected as fines will be deposited in the AFL treasury.
(C) The AFLI President may unilaterally revoke or modify any fine and/or
suspend or modify any disciplinary action that is imposed by him/her in
conjunction with these "By-Laws".
(D) Upon petition by the affected Member and after approval by the Board
any fine, or a portion thereof, may be distributed to any Member that was
economically disadvantaged by the conduct which resulted in the fine.
SECTION 4 - FAILURE TO REPORT ATTEMPT TO FIX OUTCOME OF A GAME
(A) If a Member (or "related party"), any player, coach or referee has
knowledge of any offer, directly or indirectly, by insinuation or
implication, to control, to fix and/or to influence any AFL game in any
manner whatsoever, and that party fails to report same immediately to the
AFLI President, then the AFLI President is authorized, after appropriate
notice and hearing, to suspend the person for a specified period of time; to
suspend the person indefinitely; to suspend and bar the person from the AFL
for life; to cancel and terminate the employment contract of any affected
parties; to order the sale, within sixty (60) days, of the stock and/or any
ownership interest whatsoever in any Member that is owned by the affected
party; and/or to levy a fine not to exceed One Hundred Fifty Thousand Dollars
($150,000) against the affected party.
(B) Any Member (or "related party"), any player, any coach any/or any
referee who makes any offer covered by SECTION 4(A) herein will be banned
from participating in any capacity in the AFL for life.
(C) A player must immediately report his/her knowledge of any infraction
specified in SECTION 4(A) herein to the Head Coach or General Manager of his
Team and that latter party must immediately notify the AFL's Vice President
of Football Operations of same. Similarly, any Member (or "related party"),
any coach and/or any referee must immediately report any knowledge of any
infraction specified in SECTION 4(A) herein directly to the President.
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SECTION 5 - VIOLATIONS NOT OTHERWISE COVERED
The Commissioner will, wherever there is a rule for which no penalty has
been specifically fixed for violation thereof, have the authority to fix such
penalty as in his/her judgment will be in the best interest of the AFL.
Similarly, whenever a situation arises which is not covered in the "By-Laws",
in the AFL's "Operations Manual" and/or in the AFL's "Rule Book", the
Commissioner will have the authority to make such decisions, as in his/her
judgment, will be in the best interest of the AFL. Notwithstanding the above,
no monetary penalty fixed under this provision can exceed Fifty Thousand
Dollars ($50,000).
ARTICLE XI: BROADCASTING AND TELEVISION
SECTION 1 - MANDATORY TELEVISION CONTRACT TERMS
All contracts that are entered into by any Member (or "related party")
of the AFL for the broadcasting of any of its games on radio and/or
television must contain provisions which:
1. Reserve to the AFL and/or to the Member the copyright in all such
broadcasts; and
2. Specify that such a contract is subject to and superseded by
these "By-Laws" and/or any other rules and regulations of the AFL as
they presently exist and as they may be amended from time-to-time;
the terms of any existing or future regional, national and network
broadcasting contracts that are entered into by the AFL for the
broadcasting of Arena Football games; and the approval of the
Commissioner, with whom all contracts will be filed within ten (10)
days of their execution, and who may disapprove such contracts only
on the ground that they fail to comply with the requirements of this
ARTICLE XI.
SECTION 2 - REGIONAL, NATIONAL, AND NETWORK RADIO AND TELEVISION BROADCASTS
All national and/or network radio and television broadcasts of
pre-season, regular season, All-Star and/or playoff games will be negotiated
and contracted for by the AFL or its designated agent. Any income that is
derived from these contracts will be paid to the AFL treasury and this income
will be distributed equally to the Members and Gridiron Enterprises, Inc. in
amounts and at such times as the Board may decide.
SECTION 3 - RIGHT OF PRE-EMPTION
A Member may contract for the television or radio broadcast of its home
or away games, provided that such contracts reserve the right of pre-emption
as that right may exist in the AFL's regional, national or network
contracts. Any income that is derived by any Member from its local radio
and/or television broadcasting contracts will belong entirely to said Member.
SECTION 4 - VISITING TEAM'S RIGHT TO TELECAST
Subject to ARTICLE XI, SECTION 1 each Member will grant the visiting Team
the right to do radio and/or television broadcasts with regard to any game
played between them, subject to the pre-emption right, if any, that is set
forth in the AFL's regional, national or network contracts and subject to any
reasonable origination fee that may be charged by the home Team's arena.
SECTION 5 - HOME TEAM'S "PROTECTED TELEVISION RADIUS"
No Member visiting another Member may have a game broadcast within
thirty-five (35) miles of the home Team. Any broadcast by the visiting Team
that will penetrate the thirty-five (35) mile radius will only be permitted
after the visiting Team has received written permission from the home Team.
SECTION 6 - NATIONAL BROADCAST OF AFL GAMES
No Member may interfere with and/or prohibit the broadcast of national
games from their facility. Any Member who attempts any such interference
and/or prohibition will be fined and/or suspended by the Commissioner.
ARTICLE XII: MERCHANDISING, LICENSING, AND TRADEMARKS
SECTION 1 - LICENSED MERCHANDISE
All merchandise which carries, or has affixed to it or imprinted on it,
the name of the AFL and/or the name of any of its Teams, or the Gridiron
logos, trademarks or tradenames and which is sold by concessionaires; team
shops; retail establishments; and/or all other persons, firms or entities,
must be purchased solely from manufacturers that are licensed under the AFL's
"Licensed Merchandise Program".
SECTION 2 - OWNERSHIP OF LOGOS AND TRADEMARKS
All of the names, logos and trademarks of the AFL's Member teams are
owned by Gridiron Enterprises, Inc.. New AFL Members may apply for
registration of their trademarks in their own name, provided that they convey
those registrations or applications to Gridiron Enterprises, Inc. and/or to
the entity, if any, that has been established to control the AFL's "Licensed
Merchandise Program." All of the AFL's Members and Gridiron Enterprises, Inc.
will convey all of their rights in the above-referenced team names,
trademarks and logos when the AFL establishes a licensed property entity as
required under the "License Agreement" with Gridiron Enterprises, Inc. AFLI,
Members and Gridiron will have the right to use all Team, League and Gridiron
marks for publicity purposes only (i.e., not merchandise).
SECTION 3 - LICENSING & PROPERTIES COMMITTEE
The AFL's Licensing and Properties Committee will establish guidelines and
coordinate merchandise activities and work toward the goal of establishing a
properties and licensing company as contemplated by the "License Agreement"
between AFLI and Gridiron. Team members will comply with the guidelines and
assist AFLI in accomplishing the goals of the Licensed Merchandise Program.
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SECTION 4 - SUBMISSION OF LOGOS, MARKS AND DESIGNS
Members shall submit any proposed logo, name, design and/or trademark
and description of the goods on which the marks are to be used to the
"Quality Review Committee", who, in turn, will approve/disapprove the
request within five (5) days of receipt. Requests can be made by fax unless
otherwise required by the Committee.
SECTION 5 - ASSIGNMENT OF RIGHT TO GRANT LICENSES
AFLI, with Gridiron's advice and consent, will issue all licenses under
the AFL's "Licensed Merchandise Program".
SECTION 6 - LABELING OF ALL MERCHANDISE
All licensed manufacturers must utilize the following "Official Licensed
Product" label or such other "Official Licensed Product" label as AFLI may
from time-to-time develop and direct;
SECTION 7 - RECORDING OF SALES
All Members must keep written records and report all sales with the
following conditions:
(A) Game-by-game sales activity, with figures relative to attendance,
gross revenues and per capital numbers;
(B) Retail distribution and gross sales activity; and
(C) Reports must be submitted to the Quality Review Committee on a
monthly basis. These figures will be audited at the request of and at the
expense of the AFL League Office.
ARTICLE XIII: MISCELLANEOUS
SECTION 1. All of the "By-Laws" that were previously adopted by the AFL are
hereby repealed.
SECTION 2. In addition to these "By-Laws", the Board may establish such rules
and regulations as it deems necessary and proper to implement any and all of
the objectives, purposes of these "By-Laws", the AFL's "Operations Manual"
and/or the AFL's "Rule Book".
SECTION 3. Any action that the Board can take or adopt which because of its
urgent nature can not await the next Board meeting may be taken or adopted
via a written document which describes the action and which is signed or
facsimile consented to by two-thirds (2/3) of the Directors. Unless otherwise
specified, the action will be padded or defeated as if in normal meeting of
the Board.
SECTION 4. Any notice required by any "By-Law" will be deemed to be
sufficient if it is given in writing and addressed to the last known
address of the addressee and deposited in the United States mail with postage
prepaid, or if it is sent via facsimile to the last known facsimile number of
the addressee or personally served unless the specific "By-Law" specifically
requires a different form of notice.
SECTION 5. If any Article, Section or other portion of these "By-Laws" is
determined to be invalid, illegal or unenforceable, such Article, Section or
other portion of these "By-Laws" will be severable from the rest of the
"By-Laws" and the validity, legality and enforceability of the remaining
provisions of these "By-Laws" will not in any way be affected or impaired.
SECTION 6. In these "By-Laws", the masculine, feminine or neuter gender, and
the singular or plural number, will each be deemed to include the others
whenever the context so requires.
ARTICLE XIV: AMENDMENTS
SECTION 1. These "By-Laws" and the "AFL Operations Manual" may be amended at
any Board Meeting by:
(A) A three-fourths (3/4) vote if notice of the proposed amendment is
submitted in writing by any Team or the Commissioner to every Director at
least fourteen (14) days before the meeting; or
(B) By a unanimous vote, if the notice provision of ARTICLE XIV, SECTION
1(A) herein is not satisfied.
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ARTICLE I: NAME AND CORPORATE STATUS
Arena Football League, Inc. (hereinafter referred to "AFLI") is a
Delaware corporation doing business under the name of Arena Football League
(hereinafter referred to as "the AFL"). In this regard, each Member in the
AFL owns an equal percentage of AFLI which has been organized under SECTION
501(c)(6) of the Internal Revenue Code (NOTE: The AFL is supported on an
annual basis be means of equal annual assessments to each of its Members and
it is not operated to produce a profit).
ARTICLE II: PURPOSE AND OBJECTIVES
The AFL is organized to operate a league of professional indoor football
teams (hereinafter referred to as the "Teams") under an exclusive license
that has been granted to AFLI by Gridiron Enterprises, Inc. with regard to
the United States, Canada and Mexico. In this regard, each such Team must be
owned and operated by an individual, a partnership, a corporate entity, or
some other type of business enterprise (hereinafter referred to as a "Member
of the AFL"). Furthermore, as set forth in ARTICLE X, SECTION 1 (A) herein,
no Member -- and/or any person or entity that has any ownership interest in a
Member -- is allowed to directly or indirectly own stock in -- and/or have
any direct or indirect financial interest in -- any other AFL Member or Team.
Each Member of the AFL must organize and operate a Team in the AFL on an
ongoing basis. In this regard, a Member which can not -- and/or which does
not -- operate its Team on an ongoing basis will automatically forfeit its
AFL membership and its AFL Team.
These "By-Laws", the AFL's "Operations Manual", the AFL's "Rule Book",
and such other rules and regulations that the AFL may enact from time-to-time
constitute a contract among the Members of the AFL. In this regard, the AFL
and each of its Members will be governed by these "By-Laws", the AFL's
"Operations Manual", the AFL's "Rule Book", and any other rules and/or
regulations that the AFL may adopt -- and as those may be amended, modified,
added to or deleted from at any time in the future. In addition, the AFL and
each of its Members will be governed by the license granted to AFLI by
Gridiron Enterprises, Inc.
Any revenue that the AFL receives for its own benefit -- and/or for the
benefit of its Members -- will be deemed to be the property of the AFL and
not the Members. In this regard, the AFL's Board of Directors may divide any
such revenue and transfer it -- to all of the Members; provided, however,
that if the Executive Committee of the AFL's Board of Directors determines,
via a majority vote, that an "emergency situation" exists with regard to the
ownership and/or operation of a Member or Team, with regard to the attachment
or "freezing" of any stock or assets of a Member or Team, and/or with regard
to the Member's ability to continue operating its Team, then the Commissioner
may exclude that Member from its share of any such AFL funds (NOTE: Under no
circumstances may a Member's "Letter-of-Credit" be drawn without a majority
vote of the AFL's Executive Committee). Any such funds that would have been
transferred had an "emergency situation" not existed will remain in the AFL's
general operating account under the control of the Commissioner -- and the
Commissioner will transfer such funds to the Member only when the Board of
Directors has determined that the aforementioned "emergency situation" no
longer exists.
ARTICLE III: BOARD OF DIRECTORS
SECTION 1 - COMPOSITION OF THE BOARD
(A) The Members will supervise the affairs of the AFL through a Board of
Directors (hereinafter referred to as "the Board"). In this regard, each
Member will appoint one representative (hereinafter referred to as "the
Director") to the Board -- and each such Director will have the right to
exercise one (1) vote on all matters that are voted upon by the Board. In
addition, each Member will also appoint one (1) alternate representative
(hereinafter referred to as "the Alternate Director") to the Board -- and, in
the absence of the Member's Director, this Alternate Director will have the
right to exercise one (1) vote on all matters that are voted upon by the
Board.
In addition to the above, Gridiron Enterprises, Inc., the owner of the
applicable patent regarding the game of Arena Football, will also appoint one
(1) Director to the Board and one (1) Alternate Director to the Board. In
this regard, Gridiron's Director will have the right to exercise one (1) vote
on all matters that are voted upon by the Board -- and, in the absence of
Gridiron's Director, Gridiron's Alternate Director will have the right to
exercise one (1) vote on all matters that are voted upon by the Board.
The Commissioner of the AFL will also be a Director of the Board,
designated as an "Ex Officio Director" -- and the Commissioner will be
required to exercise one (1) vote whenever the Board is otherwise deadlocked
in a tie vote. The Commissioner, however, will not be allowed to appoint an
Alternate Director.
(B) Unless otherwise noted herein, all actions of the Board will require
a simple majority of all of the Directors voting on a matter at a meeting for
which a quorum was established at the start of
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the meeting -- and the Board will be empowered to conduct meetings and to
transact business so long as there was such a quorum present at the start of
the meeting (NOTE: See ARTICLE III, SECTION 2 herein). In this regard, a
Director's absence and/or a Directors vote to abstain will be counted as a
"non-vote" on the issue being considered and, as such, an absence and/or an
abstention vote will not be counted in determining whether a majority has
voted in favor of -- or against -- any issue.
(C) A Member's presence at any meeting of the Board may be accomplished
by means of the personal appearance of its Director or Alternate Director --
or by the proper assignment of its proxy to another Director or Alternate
Director per ARTICLE III, SECTION 1(G) herein. Expect as otherwise noted
herein, the Board may conduct meetings and transact business by means of
meetings in person or by means of telephone conference calls.
(D) Within sixty (60) days after a new membership has been established,
the new Member must submit to the Commissioner, in writing, the name of the
person who will serve as its Director and the name of the person who will
serve as its Alternate Director for the following year (NOTE: This must be
done via the Member's submission to the Commissioner of an "Arena Football
League Information Form", a copy of which is appended hereto to as APPENDIX I
and incorporated herein by reference). In addition, each Member must notify
the Commissioner, in writing, within forty-eight (48) hours of the
resignation or removal of its Director or Alternate Director, and must, at
that same time, notify the Commissioner of the replacement for same (NOTE: The
resignation or removal of a Director or Alternate Director and the
appointment of the replacement will be deemed to be effective upon the
Commissioner's receipt of the written notice regarding same).
Each Member may replace its respective Director and/or its respective
Alternate Director at will, at any time, and for any or no reason. In this
regard, however, a Member may only replace its Director and/or Alternate
Director by filing a revised "Arena Football League Information Form" (See
APPENDIX I) with the Commissioner (NOTE: The replacement will be effective
upon the Commissioner's receipt of the "Arena Football League Information
Form").
At a minimum, either the Director or the Alternate Director must be a
shareholder, a partner, or an executive-level employee of the appointing
Member (NOTE: In the absence of any evidence to the contrary, it will be
presumed that the majority owner of the member has the authority and power to
appoint its Director and Alternate Director). In this regard, however, no AFL
player, AFL coach, or agent for an AFL player or an AFL coach may be a
Director, Alternate Director or proxy thereof unless (s)he is also the
majority shareholder of the team. In addition, any person serving as a
Director, Alternate Director, or proxy thereof will be prohibited from being
an AFL player or an AFL coach for two (2) years from the date (s)he last held
the position of Director, Alternate Director, or proxy thereof.
Notwithstanding anything to the contrary that is set forth in this
subsection, any AFL coach who was designated as an Alternate Directors prior
to September 1, 1994 may remain in that positions so long as his Member
chooses to retain him in same.
Each Director and Alternate Director will hold office until his/her term
expires or until his/her resignation or removal by the appointing Member. If,
however, any Member of the AFL withdraws from -- or is expelled from -- the
AFL, then the term of that Member's Director and Alternate Director will
automatically terminate at the time of the withdrawal/expulsion.
(E) Each Member's Director will be allowed to attend and participate in
all meetings of the Board -- and will have their right to exercise one (1)
vote on all matters that are voted upon by the Board at same. In addition,
each Member's Alternate Director will be allowed to attend and participate in
all Meetings of the Board -- but such an Alternate Director will only be
allowed to exercise the Member's vote in the absence of the Director.
(F) Only a Member's Director and Alternate Director have the right to
attend meetings of the Board. In this regard, no other person may attend such
meetings as a representative of the Member unless (s)he has expressly been
authorized to do so, in advance and in writing, by the Commissioner (NOTE:
The Commissioner must notify the full Board at the start of the meeting
whenever anyone other than a Director and/or Alternate Director has been
authorized to attend a meeting of the Board).
(G) In the absence of both a Member's Director and Alternate Director at
a face-to-face meeting of the Board, a Member will be entitled to vote by proxy
only if:
- the proxy is in writing and it is given to another voting Director
voting Alternate Director;
- the validity of the proxy is limited to the one (1) meeting for
which it is granted;
- a copy of the proxy has been provided to the Commissioner; and the
Commissioner has informed the Board of the proxy prior to the proxy
casting any vote.
In the absence of both a Member's Director and Alternate Director at a
meeting of the Board via a "Conference Call", a Member will be entitled to
vote by proxy only if:
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<PAGE>
- the proxy is announced at the outset of the "Conference Call" or
at the time that a Director and/or Alternate Director is leaving
same; and
- the validity of the proxy is limited to the one (1) "Conference
Call" or to the balance of the "Conference Call for which it is
granted.
Notwithstanding the above, no voting via a proxy will be permitted in
considering an application for membership or relocation; an application for
the sale, transfer, assignment or termination of a Member; or the dissolution
of the AFL. In this regard, only those Members who are directly represented
by a Director or Alternate Director will be allowed to vote concerning an
application for membership or relocation, an application for the sale,
transfer, assignment or termination of a Member, or the dissolution of the
AFL.
(H) As used in the remainder of these By-Laws, the term Director will mean
the Director or Alternate Director who has been selected by the Member to
vote at the meeting or on the issue in question. In this regard, all such
reference will apply equally to the Director and the Alternate Director.
SECTION 2 - MEETINGS
(A) The "Annual Meeting" of the AFL will be held within sixty (60)
days after the AFL's "Championship Game" in a city to be selected by the
Commissioner and/or by the AFL's Board of Directors (NOTE: In the event that
the Commissioner and the Board of Director's do NOT agree upon the location
for the "Annual Meeting", the Board of Directors' selection will be
designated as the site for same).
(B) The Commissioner -- and/or any at least three (3) members of the
AFL's Executive Committee -- may call a "Special Meeting" at any time and
place -- and any such "Special Meeting" may take place via telephone
conference call (NOTE: In addition, the entity that has scheduled a "Special
Meeting" must provide at least forty eight (48) hours written notice to each
Director prior to the start of such meeting). The date, time and/or place of
any "Special Meeting" may be changed via a petition that is signed by
two-thirds (2/3) of all the Members.
(C) The Commissioner must provide at least ten (10) days written notice
to each Director prior to the "Annual Meeting".
(D) The notice requirements for any meeting of the Board may only be
waived by the unanimous vote of the entire Board.
(E) The Commissioner must provide a written description of any item that
is to be voted upon by the Board during an "Annual Meeting" to each
Director at least ten (10) days prior to the start of the "Annual Meeting".
Similarly, the entity that has scheduled a "Special Meeting" must provide a
written description of any item that is to be voted upon by the Board during
a "Special Meeting" to each Director at least forty-eight (48) hours prior
to the start of the "Special Meeting".
(F) One-half (1/2) of the Directors of those Members that are "in good
standing" plus one (1) will constitute a quorum for all AFL meetings. A
quorum, once established, can not be broken by the departure of any
Director(s).
(G) At all Board meetings, each Member that is "in good standing" will
be entitled to one (1) vote on all matters that are voted upon by the Board --
and this vote may only be cast by that Member's Director or Alternate
Director or by a proxy which has been properly appointed per ARTICLE III,
SECTION 1 (G) herein.
(H) ROBERT'S RULES OF ORDER will govern all aspects of any Board
meetings with regard to issues that are not addressed by these "By-Laws".
(I) At all meetings of the Board where the Directors meet in person, no
Director will be allowed to participate in the meeting via telephone.
(J) The Commissioner may recess any meeting of the Board without the
requirement of a further notice to reconvene.
SECTION 3 - CORPORATE OFFICERS
(A) The Board will appoint a President and other corporate officers at
its "Annual Meeting". Each such officer will be elected by an affirmative
vote of the majority of the Directors -- and no person may be elected to more
than one (1) of these positions.
The Board's appointment of a President and other corporate officers will
be subject to the provisions for removal as outlined below. In this regard,
however, the appointed individuals may be elected to successive terms in the
same office without any limitation with regard to the total number of terms
served in any one position or in any total number of positions.
The President and the other corporate officers will serve without
compensation; provided, however, that they all may be reimbursed for any
appropriate out-of-pocket expenses that are related to their functioning as
officers of the AFL. In this regard, the Chair of the AFL's Administration &
Finance Committee will review and approve, as appropriate; the out-of-pocket
expenses of the President and the other corporate officers.
(B) The President will be elected for a three (3) year term by
affirmative vote of a majority of all of the Directors. In this regard, the
President will, in the absence of the Commissioner, chair all of the meetings
of the Board. In addition, the President will serve as the Chief Executive
Officer (CEO) of AFLI.
(C) The Executive Vice President will be elected for a two (2) year term
by an affirmative vote of a majority of the Directors. In this regard, the
Executive
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<PAGE>
Vice President will undertake whatever action is necessary in order to
promote the interests of the AFL and, in the absence of the Commissioner and
the President, the Executive Vice President will serve as CEO of AFLI and
will, respectively, chair all of the meetings of the Board.
(D) The Treasurer will be elected for a one (1) year term by an
affirmative vote of a majority of the Directors. In this regard, the
Treasurer will serve as the Chief Fiscal Officer (CFO) for the AFL and, in
that capacity, the Treasurer will oversee all of the financial operations of
the AFL. In addition, the Treasurer will also be empowered to receive - and
to transmit - all funds on behalf of the AFL, and (s)he will prepare and
present quarterly reports to the Board with regard to the fiscal status of
the AFL and its Members' Teams.
(E) The Secretary will be elected for a one (1) year term by an
affirmative vote of a majority of the Directors. In this regard, the
Secretary will be responsible for the care and custody of the official
records and papers of the AFL. The Secretary will also prepare and furnish
such reports as may be requested by the Commissioner, the President and/or
the Board.
(F) In addition to the officers noted above, the Board may also
appoint one or more Vice President(s), one or more Assistant Treasurer(s) and
one or more Assistant Secretary(ies) but these appointees, if any, will not
be deemed to be corporate officers of the AFL. In this regard, all of these
appointments, if any, will automatically conclude on September 30th of each
year unless they are specifically extended by the Board.
(G) At the conclusion of his/her tenure, or at the request of the
Board, each corporate officer must, within twenty-four (24) hours of his/her
departure to within twenty-four (24) hours of receiving such a request from
the Board, deliver, to his/her successor or to the Board, all of the AFL
funds, records and property that are in his/her possession.
(H) The President and the other corporate officers of the AFL will
be indemnified by the AFL against any and all costs and expenses (including,
but not necessarily limited to, attorneys' fees, judgments, fines, and/or any
amounts paid in settlement) that are actually and reasonably incurred by them
in connection with the defense of any action, suit or proceeding to which
they are made a party by reason of their being, or having been elected to
serve as, corporate officers of the AFL, except with regard to matters as to
which a court of competent jurisdiction, in a proceeding to which they are a
party, has adjudged that such indemnification is contrary to law or is
against public policy, or unless (s)he or they are adjudged in such action,
suit or proceeding to be liable for intentional gross misconduct in the
performance of his/her duties as a corporate officer of the AFL. This right
of indemnification will be in addition to - and will not be deemed to be a
substitution for - any other rights to which the President and/or the other
corporate officers may be entitled under applicable law.
(I) The President will have the authority to temporarily fill any
vacancies which may occur in elective offices until the Board has had an
opportunity to conduct an election to fill such vacancies.
SECTION 4 - EXECUTIVE COMMITTEE
(A) The Board will elect an Executive Committee which will consist
of five (5) Directors or Alternate Directors. At the time of the adoption of
these "By-Laws", the terms of the current members of the Executive Committee
were as follows: two (2) terms expire on December 31, 1997; two (2) terms
expire on December 31, 1996; and one (1) term expires on December 31, 1995.
As each of those terms expires, the Board will elect a Director of Alternate
Director to a three (3) year term to fill the vacancy. If a member of the
Executive Committee is no longer a Director or Alternate Director of the
Board, his/her term will be considered to be "vacant' immediately - and a new
Director or Alternate Director will be elected to the Executive Committee to
fill the balance of the vacant term.
The election method for all vacancies on the Executive Committee
will be as follows:
(i) At a meeting of the AFL's Board of Directors, Directors and
Alternate Directors may nominate candidates to fill any vacant
term(s) on the Executive Committee (NOTE: Only Directors or
Alternate Directors serving on the Board at that time may be
nominated to fill a vacancy on the Executive Committee);
(ii) Each Member will vote for one (1) nominee for each vacant
term; and
(iii) The candidate receiving the most votes will fill the longest
vacant term; the candidate receiving the second-most votes will
fill the second longest vacant term, etc. In the event of a tie,
a lottery will determine which candidate will fill the longest
vacant term.
(B) The Executive Committee will select its own Chair - and the Chair
will serve for a one (1) year term.
(C) The Executive Committee will consult regularly with the
Commissioner and, as appropriate, will make recommendations to the full Board
on matters of major significance to the AFL.
(D) If a member of the Executive Committee dies, is incapacitated,
resigns, is removed as a Director or is otherwise unable to serve his/her
full term, a replacement will be elected by the Board for the balance of the
member's term at the next meeting of the Board.
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<PAGE>
SECTION 5 - LITIGATION AGAINST A MEMBER
Except as may be otherwise precluded by these "By-Laws", the AFL may
only institute appropriate legal action(s) against a Member if a two-thirds
(2/3) majority of the Board votes, in advance, to approve such action(s). In
this regard, a vote to consider such action(s) may only take place at a
"Special Meeting" which has been properly announced for that express purpose
per ARTICLE III, SECTION 2 herein.
ACTION IV: COMMISSIONER
SECTION 1 - HIRING/VESTING OF AUTHORITY
(A) The Board of Directors will hire an individual to serve as the
Commissioner of the AFL. In this regard, the Commissioner's initial
employment contract must be approved by an affirmative vote of two-thirds
(2/3) of the Board. Once approved, however, the Commissioner's employment
contract may extended by a majority vote of the Board of Directors.
(B) Via the approval of the Commissioner's employment contract, the
AFL - and all of its Members - automatically vest the Commissioner with the
full power and authority to carry out the duties that are delegated to
him/her via these "By-Laws". If the position of Commissioner remains vacant
for more than thirty (30) days, the President will assume all of the powers
and duties of the Commissioner until a new Commissioner is appointed.
(C) The Commissioner shall be the principal executive officer of the
League and have general supervision of its business and affairs, including
the hiring of League Office employees.
SECTION 2 - POLICIES AND PROCEDURES
The Commissioner shall interpret - and, from time-to-time, establish -
policies and procedures with respect to the provisions of the AFL's
"By-Laws" and any enforcement thereof. In this regard, the interpretations
and/or rulings of the Commissioner can only be overruled via a three-fourths
(3/4) majority vote of the AFL's Board of Directors.
SECTION 3 - INCURRING EXPENSES
The Commissioner, on behalf of the AFL, may incur any reasonable
expenses which, in his/her discretion, are necessary to conduct and transact
the business of the AFL; provided, however, that prior Board approval will be
required for any expenditure over and above the "Annual League Office Budget"
that has been approved by the Board. These expenses will include, but will
not necessarily be limited to, the following: the leasing of office space;
the hiring of League Office employees; and the engaging of other assistance
or services.
SECTION 4 - MANAGEMENT COMMITTEES
The Commissioner will appoint appropriate Management Committees to
assist him/her with regard to specific functions of the AFL (NOTE: Each of
these Management Committees will consist of five (5) or seven (7) members).
These Management Committees will include, but will not necessarily be limited
to, the following: the Administration & Finance Committee; the Expansion &
Relocation Committee; the Legal & By-Laws Committee; the Marketing &
Television Committee; the Property & Licensing Committee; the Public
Relations Committee; the Rules & Competition Committee; and the Team
Operations Committee.
SECTION 5 - LEGAL ACTIONS ON BEHALF OF THE AFL
The Commissioner is authorized at the expense of the AFL, to hire a
legal counsel and take or adopt appropriate legal action(s) or such other
steps or procedures as (s)he deems necessary and proper in the best interests
of either the AFL or Arena Football, whenever any party or organization that
is not a member of, employed by, or connected with the AFL or any member
thereof, is guilty of any conduct that is detrimental either to the AFL, its
member Teams or employees, or to Arena Football, provided, however, that an
affirmative vote of two-thirds (2/3) of the Directors has approved, in
advance, all such legal action(s)/defense(s).
SECTION 6 - WORKING AGREEMENTS WITH OTHER PROFESSIONAL FOOTBALL LEAGUES
The Commissioner may negotiate working agreements with other leagues
or professional football associations (such as the the National Football
League, the Canadian Football League, the World League of American Football,
etc.) on behalf of the the AFL provided, however, that a majority of the
Directors must approve all such working agreements that are entered into by
the AFL before they are signed by the Commissioner.
SECTION 7 - KEEPING OF ACCURATE AND CURRENT RECORDS
The Commissioner must ensure that complete and accurate records and
accounts of all of the AFL's proceedings and business transactions are kept
on a current basis. In this regard, the Commissioner must draft "Minutes" of
each meeting of the Board - and must submit those "Minutes" to the AFL's
Board of Directors within ten (10) days of each such meeting (NOTE: If the
Board of Directors does not "disapprove" those "Minutes" at its next
regularly-scheduled meeting then the "Minutes" will be considered to be
"approved" and added to the permanent records of the AFL's Board of
Directors). In addition to the above, the Commissioner must make a full and
complete report of all of the AFL's business transactions during the
preceding twelve (12) month period at each of the AFL's "Annual Meetings"
and/or at the direction of the Board.
SECTION 8 - FINANCIAL ACCOUNTING OF AFL FUNDS
The Commissioner must submit an accurate and detailed financial
accounting of the AFL's exact financial condition, which such report must be
compiled in accordance with generally accepted accounting principles, within
thirty (30) days after the end of each operational quarter, and within sixty
(60) days following
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<PAGE>
the end of each operational year (NOTE: The AFL's "operational year" will
run from October 1st of each year through September 30th of the next year). In
addition, the Commissioner must, upon the request of the Board, submit
additional financial reports with regard to the AFL's financial condition.
SECTION 9 - "OPERATIONS MANUAL"
The Commissioner must maintain - and, as necessary, update - the "AFL
Operations Manual", which will be reviewed and approved each year by the
Board at its "Annual Meeting" (NOTE: In the absence of any such approval,
the "AFL Operations Manual" that was previously approved by the Board will
remain in full force and effect). In this regard, however, the Board may also
develop policies and procedures for inclusion in the "AFL Operations Manual"
- - and the "AFL Operations Manual" may be amended, at anytime, by a two-thirds
(2/3) majority vote of the Board.
SECTION 10 - "RULE BOOK"
The Commissioner must maintain - and, as necessary, update - the "AFL
Rule Book", which will be reviewed and approved by the Board on or before
February 15th of each year (NOTE: In the absence of any such approval, the
"AFL Rule Book" that was previously approved by the Board will remain in full
force and effect). In this regard, however, the Board may also develop
policies and procedures for inclusion in the "AFL Rule Book" - and the "AFL
Rule Book" may be amended by a majority vote of the Board (NOTE: The "AFL
Rule Book" may only by amended during the period from April 15th through
September 15th via a unanimous vote of the Board of Directors).
SECTION 11 - "ANNUAL OPERATING BUDGET"
The Commissioner will prepare a proposed "Annual Operating Budget" - and
will submit same to the Administration & Finance Committee at least fifteen
(15) days before each "Annual Meeting". Thereafter, the Administration &
Finance Committee will present the Commissioner's proposed "Annual Operating
Budget", along with its findings and recommendations, to the entire Board at
least ten (10) days prior to the "Annual Meeting".
At the "Annual Meeting" of the AFL, the Board will review - and, as it
deems appropriate, amend - the Commissioner's proposed "Annual Operating
Budget". Thereafter, the Board will approve an "Annual Operating Budget"
which will include, but which will not necessarily be limited to, the
following items: the Commissioner's salary and expenses; the AFL employees'
and consultants' salaries and expenses; other League Office expenses; and the
fees for game officials and any other fees as may, from time to time, be
incurred by the AFL in the normal course of its operations. In the absence of
the Board approving a new "Annual Operating Budget" at the "Annual Meeting"
of the AFL, the AFL will automatically adopt the same "Annual Operating
Budget" that was in effect for the prior operational year.
SECTION 12 - OUTSIDE LEGAL COUNSEL/OUTSIDE ACCOUNTANT
The Commissioner will recommend to the Board an outside legal counsel
and an outside accountant for the AFL. A majority of the Directors must
approval all such appointments - and the method and amount of compensation
for same.
SECTION 13 - CONFIDENTIALITY
All business conducted at all meetings of the Board will be deemed to be
"confidential" unless the Commissioner determines that it is in the best
interest of the AFL to publicly disseminate specific information concerning
any item(s) that was/were discussed and/or decided upon at such meetings. In
this regard, however, the Commissioner will disseminate an "official press
release" upon the conclusion of any "Annual Meeting" or "Special Meeting" of
the Board unless the Board has voted, by a two-thirds (2/3) majority, not to
issue such a release.
SECTION 14 - REGULAR SEASON SCHEDULING
The Commissioner will oversee the preparation of the schedule of regular
season games under the following terms and conditions:
- the Board will determine how to arrange the Teams in divisions,
conferences, etc.;
- the Board will determine the number of games to be played by each
Team - and every Team must be scheduled for the same number of
regular season games (NOTE: One-half (1/2) of each Team's games
will be scheduled as "home" games - and the other half will be
scheduled as "away" games).
- the Board will determine the number of games that each Team will play
in its respective division, including the number of times each Team
will play each divisional opponent; and
- any Team's refusal or financial inability to play a scheduled game
will render the offending Member subject to a fine of Two Hundred
Fifty Thousand Dollars ($250,000), forfeiture of the game, and
termination and/or suspension from the AFL per ARTICLE VIII,
SECTION 1(H).
SECTION 15 - NUMBER OF GAMES
The number of games to be played by each Team in an upcoming season will
be the same as the number of games played by each Team during the previous
season; provided, however, that the Board may change the number of regular
season games by a sixth-tenths (6/10) vote at its "Annual Meeting".
SECTION 16 - PROTEST OF A REGULAR SEASON GAME
(A) In order to protest the result of any regular season game - and/or
to question a player's eligibility for same - a Team must notify the
Commissioner, in writing, within twenty-four (24) hours after the conclusion
of said game, by facsimile, by telegram or
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<PAGE>
by other electronic transmission, stating therein all of the grounds for the
protest/question. In this regard, however, no such protest/question may be
filed in connection with any game that is played after 12:00 Midnight (CDT)
on the day of the last game of the regular season.
(B) A regular season game may be protested - and/or a player's
eligibility during a regular season game may be questioned - only by a Member's
Director or Alternate Director. In addition, the right to protest a game -
and/or to question a player's eligibility for same - will be limited to those
Teams that were involved in the game.
(C) Each notice of protest and/or question of player eligibility must be
immediately confirmed via written letter - and each such letter-of-confirmation
must be accompanied by a check in the amount of Ten Thousand Dollars
($10,000) payable to the AFL. If the Member filing the protest/question
prevails in the protest, the $10,000 payment will be refunded - and if the
Member does not prevail in the protest, the $10,000 payment will be forfeited
and retained by the AFL. In this regard, the Commissioner will decide as to
whether a Member has/has not prevailed in a protest.
(D) Upon receipt of a notice of protest and/or question of player
eligibility, the Commissioner will immediately notify the Member operating the
opposing Team in the game. Thereafter, the Commissioner will require both
Members to file with the Commissioner such evidence as (s)he deems to be
relevant to the issues involved in the protest/question.
(E) Each Member that is protesting a game - and/or that is questioning
the eligibility of a player - will have two (2) days to submit the requested
evidence - and the Commissioner will decide the protest/question raised
within twenty-four (24) hours of his/her receipt of such evidence.
(F) The Commissioner's decisions regarding all protested games - and/or
all questions of player eligibility - will be final and binding upon both of
the affected Teams and upon all of the other Teams in the AFL. In this
regard, such a decision can only be appealed to the AFL's Executive Committee
- - and the AFL's Executive Committee will be obligated to hear such an appeal
only if at least one (1) member of that committee who is not directly
involved in the protested game recommends that such a review be undertaken
(NOTE: All such appeals to the Executive Committee must be submitted, in
writing, to the Chair of the Executive Committee within twenty-four (24)
hours of the Commissioner's decision regarding a protest/question).
Thereafter, the Executive Committee must render a decision within twenty-four
(24) hours of its receipt of the written notice of appeal - and, in this
regard, the Executive Committee can only overrule the decision of the
Commissioner by a unanimous vote (NOTE: No member of the Executive Committee
directly involved in the appeal of the Commissioner's decision regarding a
protest may, under any circumstances, vote with regard to the Executive
Committee's review of same).
SECTION 17 - LEGAL ACTION AGAINST THE COMMISSIONER/AFL BY A MEMBER
Any Member that initiates any lawsuit(s) and/or any other legal
proceeding against the Commissioner, either individually or in his/her
official capacity, and/or against the AFL, any AFL Director, any AFL
Alternate Director, or AFL Officer, and/or any Member, or any Member's
employees, directors or officers for any claim or demand whatsoever arising
out of or in connection with any decision or action of the Commissioner,
individually or in his/her official capacity, and/or of the AFL, any AFL
Director, any AFL Alternate Director or any AFL Officer, and/or any Member,
or any Member's employees, directors, or officers automatically agrees to pay
the attorneys' fees for all of the defendants in such lawsuit(s) and/or legal
proceeding(s) if the person or Member who brings the suit or proceeding does
not completely prevail in same. In addition, no such lawsuit and/or other
legal proceeding can be initiated unless the person or Member has already
posted a Fifty Thousand Dollar ($50,000) cash bond with the Commissioner
(NOTE: If the plaintiff in such a lawsuit and/or legal action prevails in
same, the $50,000 will be returned but, if the plaintiff does not prevail,
the $50,000 will be forfeited and retained by the AFL).
For the purposes of this Section of the "By-Laws", it will be presumed
that a Member has authorized any lawsuits and/or other legal proceedings that
are initiated by any of its shareholders, officers, directors or employees.
In this regard, a Member will be subject to the same requirements - and/or to
the same penalties - with regard to any lawsuits or other legal proceedings
that are initiated by any such parties against the Commissioner, either
individually or in his/her official capacity, and/or against the AFL, any AFL
Director, any AFL Alternate Director, or any AFL Officer, and/or any Member,
or any Member's employees, directors or officers for any claim or demand
whatsoever arising out of or in connection with any decision or action of the
Commissioner, individually or in his/her official capacity, and/or of the
AFL, any Member or any Member's employees, directors, or officers.
SECTION 18 - AFL DRUG POLICY
On or before March 31, 1995, the Commissioner will formulate an AFL
"Drug Policy" which will be consistent with all of the applicable laws
concerning the player's rights to privacy and employment security - and (s)he
will submit same to the Board for inclusion in the AFL's "Operations Manual".
In this regard, any AFL "Drug Policy" which is adopted by the Board will be
applicable to all Teams and, under no circumstances, will any Member be
allowed to adopt a less stringent drug policy for its own Team.
SECTION 19 - VIOLATIONS NOT OTHERWISE COVERED
Wherever there is a rule for which no penalty
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has been specifically established for violation thereof, the Commissioner
will have the authority to fix a penalty which, in his/her judgment, is
appropriate and fair. Similarly, whenever a situation arises that is not
covered in these "By-Laws", the Commissioner will have the authority to make
such decisions which, in his/her judgment, are appropriate and fair;
provided, however, that no monetary penalty fixed under this provision can
exceed Ten Thousand Dollars ($10,000) without the prior approval of a
two-thirds (2/3) vote of the Board.
SECTION 20 - "IN THE BEST INTEREST OF THE AFL"
In addition to all of the other powers granted to or vested in the
Commissioner under these "By-Laws", the "Membership Agreement", the AFL's
"Rule Book" and/or any other rules and/or regulations that are adopted by the
Board, the Commissioner will have the power to make decisions on any other
issue(s) that is/are not specifically addressed in such document(s) so long
as the announced decision is one which the Commissioner declares to be "in
the best interest of the AFL". All such decisions of the Commissioner which
are announced as being "in the best interest of the AFL" - and which are not
otherwise prescribed or provided for hereunder - must be circulated to the
Board of Directors by the close of business (i.e., 5:00 pm CDT) on the day of
the decision. All such decisions will be subject to the review of the
Directors via a "Special Meeting" which must be called by the Commissioner
for this purpose if at least one-quarter (1/4) of the Board of Directors
requests, in writing, such a meeting (NOTE: All such "Special Meeting" must
be held within forty-eight (48) hours of the issuance of such a decision). At
all such "Special Meetings", the Directors may discuss and review all of the
actions which have been taken by the Commissioner "in the best interest of
the AFL" - and the Directors may overturn the Commissioner only by a
three-fourths (3/4) majority vote of the Directors who are actually in
attendance at such meeting (NOTE: No "interested" Director will be
disqualified from voting thereon).
SECTION 21 - ACTIONS TAKEN BY THE COMMISSIONER
Except as provided otherwise herein, all of the actions which are taken by
the Commissioner pursuant to this ARTICLE VI - and/or pursuant to any other
Article of these "By-Laws" - and which are not specifically referable to the
Board will be final, binding and conclusive as an award in arbitration. As
such, all such actions may be enforced by the AFL via an appropriate action
in a court of competent jurisdiction in accordance with the laws of the state
in which the league is headquartered.
ARTICLE V: RELOCATION AND TRANSFER OF EXISTING MEMBERSHIPS AND MEMBERSHIP
OBLIGATIONS
SECTION 1 - ESTABLISHMENT OF MEMBERSHIP TERRITORY
All memberships will be issued to Members for the location that was
originally approved by the Board and as thereafter was set forth in the
Member's "Membership Certificate" (NOTE: Unless otherwise specified in a
Member's "Membership Agreement", all such locations will be exclusive to that
Member for the municipality named therein and for an area covering a radius
of seventy-five (75) miles from the geographic center of the City or Township
for which the Member's membership was granted and in which its home arena is
located). The area described above will be referred to as the Member's
"Territory".
SECTION 2 - APPLICATION TO RELOCATE
A Member may change its territory of operation to a different location
only in accordance with and subject to the following provisions:
(A) An application to relocate a member team to a new territory must be
made in writing to the Commissioner - and this application must identify the
proposed new location and the new arena in which the Member proposes to play
its home games;
(B) No application to relocate may be considered unless it is submitted
on or prior to the first day of September of the year prior to the year in
which the proposed relocation is to take effect (NOTE: If the proposed
relocation will be subject to the provisions of ARTICLE V, SECTION 4 (A)
herein, then written notice of the "consent" set forth therein must accompany
the application to relocate); and
(C) All requests by any Member for a change in the Member's territory
may be approved only if the relocation request is first referred to the
Expansion & Relocation Committee, which may request any and all reasonable
information from the Member that is requesting such relocation. Upon its
review of all of the factors relating to the need for the transfer - and the
demographics and environment of the proposed new location, the Expansion &
Relocation Committee will, by majority, recommend to the Board that the
proposed transfer be approved or disapproved. Thereafter, the Board may
approve such relocation of a Member only upon an affirmative vote of
two-thirds (2/3) of the Board.
SECTION 3 - APPLICATION FOR NEW MEMBERSHIP
(A) The Board will determine the expansion fee to be charged with regard
to the sale of each new Membership in the AFL - and the terms and conditions
for such a sale. In this regard, the sale of each new Membership is deemed
the sale of a portion of the equity of the AFL's corporate assets (NOTE: This
includes, but is not limited to, player contracts in an expansion draft,
office equipment, and the rights to future accounts receivable).
(B) All requests by any person or entity for the granting of a "new"
Membership by the AFL must be made in writing and must contain all of the
information that is required on the most current edition of the AFL's
"Membership Application Form" (NOTE: The original application materials will
be reviewed by the AFL Commissioner - and complete copies of same will be
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sent within five (5) days of his/her receipt of same to the Chair of the
AFL's Expansion & Relocation Committee per ARTICLE V, SECTION 4 (B) herein).
All such applications must be accompanied by a Twenty-Five Thousand Dollar
($25,000) application fee in the form of a certified or cashiers check - and
by the "consent", if required, as set forth ARTICLE V, SECTION 4 (A) herein
(NOTE: All such fees will be maintained by the AFL Commissioner in an
interest-bearing escrow fund - and no funds will be dispersed and/or
distributed from that account without the approval of at least two-thirds
(2/3) of the AFL's full Board of Directors).
(C) $5,000 of the above-referenced application fee will be deemed to be
a "fee absolute" which the AFL has earned upon its receipt and review of the
application. Thereafter, if the membership application is rejected by the
Board, then the $20,000 "balance" will be returned to the applicant - and if
the application is approved BY THE BOARD, then the $20,000 "balance" will be
applied to the then outstanding membership fee.
(D) Within ten (10) days after it receives any payment from the sale of
a new Membership, the AFL League Office will divide those proceeds - in equal
shares - among all of the Members that are "in good standing" and Gridiron.
(E) If a Member's membership has been terminated and/or if the Member's
Team withdraws from the AFL then that Member and Team will not be entitled to
any proceeds from the sale of any new Membership which occurred after the
Membership has been terminated or the Team withdraws.
(F) With the exception of ARTICLE V, SECTION 3(E) herein, and with the
exception of the "emergency situation" provision set forth in ARTICLE II
herein, once a new Membership is approved, each existing team and Gridiron
will become permanently vested in the expansion payments of each such new
Membership (NOTE: Once a new Membership is approved, the Board may not
reduce, change, defer, adjust, allocate or redirect any of the expansion
revenues related to that new Member without an unanimous vote of all of the
Directors).
SECTION 4 - INVESTIGATION AND APPROVAL PROCESS FOR NEW MEMBERSHIP AND
RELOCATION APPLICATIONS
(A) If an applicant for relocation or a new membership proposes to
operate in a municipality which is within a current Member's "territory",
then the Director representing the existing Member must consent, in writing,
to the filing of the application. If such written "consent" is not
forthcoming, then the application for relocation or a new membership can not
be considered by the Board.
(B) Within five (5) business days of the receipt of a completed
application for a new membership or an application to relocate, the
Commissioner must send complete copies of the application materials to the
Expansion/Relocation Committee. Thereafter, within forty-five (45) days of
its receipt of the completed application for expansion or relocation, the
Chair of the Expansion & Relocation Committee will report to the Board with
respect to the results of that Committee's investigation - and its
recommendation as to whether the application should be granted or denied.
(C) In considering an application for a new membership, the Expansion &
Relocation Committee will conduct such investigations and consider such
factors that it deems to be appropriate and relevant, including, but not
limited to, whether it is in the best interest of the AFL to expand the
number of members in the AFL as well as those factors set forth in ARTICLE V,
SECTION 4 (D) herein. In this regard, the Chair of the Expansion & Relocation
Committee must submit the Committee's recommendation for each application for
a new membership to the full Board on or before September 30th of each year -
and the Board can not review any such recommendations that it receives after
that date unless it first approves, via a two-thirds (2/3) vote, to extend
the September 30th "deadline".
(D) In considering an application for new membership or relocation, the
recommendations of the Expansion/Relocation Committee will be based solely
and exclusively upon the following factors:
- Whether the proposed location can support a Team in the AFL or, if the
proposed new location is within the "territory" of an existing
Member, whether the proposed new location can support another Team
(NOTE: In evaluating this issue, the Expansion & Relocation Committee
will consider the following factors: the existing and projected
population within the proposed "territory"; the income levels and age
distribution of the residents of the proposed "territory"; the
existing and projected markets for radio, broadcast television, cable
television and other forms of audio-visual transmission of AFL games
within the proposed "territory"; the size, quality and location of
the arena in which the relocating Member proposes to play its home
games within the proposed "territory"; and the presence, history and
popularity in the proposed "territory" of other professional sports
leagues);
- Whether the applicant has demonstrated that it will be able
successfully to operate an AFL Team in the proposed "territory" (NOTE:
In evaluating this factor, the Expansion & Relocation Committee will
consider the applicant's present and projected financial condition
and resources - and its past
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performance, if any, in operating a Team in the AFL);
- Whether the proposed "territory" is likely to have an adverse
effect upon the AFL's ability to market and promote AFL
football on a nationwide basis in a diverse group of
geographic markets;
- Whether the proposed "territory" presents particular
disadvantages for the operation of the AFL, such as by
creating significant traveling or scheduling difficulties or
because of adverse state or local laws or regulations; and
- Whether other AFL Members, in addition to the applicant, are
interested in transferring their memberships to the proposed
"territory and/or whether there are other persons or entities
interested in obtaining an expansion membership in the
proposed "territory".
(E) The Expansion & Relocation Committee will investigate each of
the applications and will recommend which of the applications, if any, should
be granted. In making its recommendations, the Expansion & Relocation
Committee will consider all factors listed in ARTICLE V. SECTION 4 (D),
herein, and will also consider which applicant, if any, is most likely to
operate a successful operation in the proposed "territory" and/or which
applicant, if any, will otherwise serve the best interest of the AFL.
(F) The applicant for a new membership or relocation must furnish
all of the information that the Commissioner and/or the Expansion &
Relocation Committee deem to be necessary and appropriate in conjunction with
their respective investigations (NOTE: The Commissioner and/or the Expansion
& Relocation Committee may engage consultants or other experts to assist in
the investigation of the application as they respectively deem appropriate).
In this regard, all such information that is supplied to the Commissioner
and/or the Expansion & Relocation Committee pursuant to this subsection will
be made available to the applicant - and the applicant will be afforded an
opportunity to appear before the Commissioner and/or the Expansion &
Relocation Committee to present whatever additional information or arguments
the applicant desires. In addition to the above, any Director may also appear
before the Commissioner and/or the Expansion & Relocation Committee to
present whatever information or arguments such Director desires.
(G) All of the reports and recommendations of the Expansion &
Relocation Committee will be delivered to each Director at least fifteen (15)
days before the "Annual Meeting". Thereafter, each applicant will be afforded
an opportunity to appear before the Board at its "Annual Meeting" to present
whatever information or arguments the applicant desires (NOTE: The vote of
each Director on a proposed relocation will be based solely and exclusively
upon the factors listed in ARTICLE V, SECTION 4 (D) herein).
(H) A new Membership may only be granted with the approval of
three-fourths (3/4) of the Directors - and a relocation may only be granted
with the approval of two-thirds (2/3) of the Directors. In this regard, no
voting by proxy will be permitted with regard to the question of whether to
approve a proposed new Membership and/or a proposed relocation.
SECTION 5 - TRANSFER OF MEMBERSHIP
(A) No Membership, or any interest therein, may be sold, assigned,
or otherwise transferred in whole or in part directly or indirectly (other
than by operation of law in the event of death, divorce, etc.), except in
accordance with - and subject to - the provisions of this subsection. In this
regard, any attempt to sell, assign, or otherwise transfer any Membership,
or any interest therein, that is not in accordance with - and subject to -
the provisions of this subsection will automatically be null and void and the
Member(s) that are involved, in any way, with the attempted sale, assignment,
or other transfer of the Membership must be subject to a fine in the amount
of One Hundred Thousand Dollars ($100,000) by the Commissioner.
(B) Any application for the sale, transfer, or assignment of a
Membership, or of any interest therein, which would - or which could be
deemed to - transfer the control of such Member, must be made in writing to
the Commissioner. Upon receipt of such application, the Commissioner is
empowered to require from the applicant - and the applicant will be required
to furnish - such information as the Commissioner deems appropriate,
including, but not necessarily limited to, the following:
- the names and addresses of each of the buyers, transferees or
assignees thereof;
- the price to be paid for such sale, transfer or assignment,
and the terms of payment, including a description of the
security for the unpaid balance, if any;
- a banking reference for each buyer, transferee or assignee;
- a financial statement for each buyer, transferee or assignee;
- if the buyer transferee or assignee is a corporation, a copy
of the "Articles of Incorporation" and "By-Laws" thereof, a
"Certificate of Good Standing" from the Secretary of State in
which the corporation was incorporated, together with a copy
of the share certificate of each class of stock that is
outstanding, the names and addresses of the directors and
officers thereof, the names and addresses of the stockholders
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therein, the price paid or to be paid and the time of payment
for said stock, a copy of any proposed voting trust agreement,
and a copy of any voting trust certificates;
- if the buyer, transferee or assignee is a partnership,
association or other entity, a certified copy of the
"Partnership Agreement", "Articles of Partnership" or
"Organization Agreement" and all other governing documents -
and the names and addresses of all of the partners, members or
other persons or entities with an ownership interest in the
buyer, transferee or assignee;
- a notarized statement from the buyer, transferee or assignee
that, upon the AFL's approval of the proposed sale, assignment
or transfer, the buyer, transferee or assignee will subscribe
to - and will agree to be bound by - the AFL's "By-Laws", the
AFL's "Operations Manual", the AFL's "Rule Book" and any other
rules and regulations of the AFL as they exist now and as they
may be modified in the future; and
- copies of any proposed sale, assignment or transfer agreements.
(C) Each application for the transfer, sale or assignment of a
Membership must be accompanied by a certified or cashier's check payable
to the AFL in the sum of Five Thousand Dollars ($5,000), which is the amount
of the AFL's non-refundable "Transfer Fee" (NOTE: Regardless of whether the
application for the transfer, sale or assignment of a Membership is approved
or not approved, the AFL will be entitled to keep this "Transfer Fee").
(D) Upon receipt of an application for the transfer, sale or
assignment of a Membership and all of the required information, the
Commissioner will conduct such investigation as (s)he deems appropriate. In
this regard, the Commissioner will appoint an "Ad Hoc Committee" to assist
him/her in any matters relating to proposed sale, transfer or assignment of
any membership interests that are greater than five percent (5%). Upon the
completion of the investigation, the Commissioner and/or the Ad Hoc Committee
will submit the proposed sale, transfer or assignment to the Board for its
review and approval/disapproval, together with its recommendations thereon, as
well as copies of all of the information in respect thereto that the
Commissioner and/or the Ad Hoc Committee deems pertinent.
(E) All of the proposed sales, transfers or assignments described
in ARTICLE V SECTION 5 (B) herein will only become effective if they are
approved by the affirmative vote of at least three-fourths (3/4) of the Board
at a "Special Meeting" that is duly called for that purpose.
(F) For every proposed sale, assignment or transfer of any partial
interest in any Member, which partial interest does NOT affect the control of
such Member, no advance approval of the Board is necessary. However, all such
sales, assignments or transfers which involve the transfer of a ten percent
(10%) or greater interest in the owning entity - and/or which will result in
a single entity owning ten percent (10%) or more of the Member - must be
reported in detail, and in writing, to the Commissioner and the Chair of the
Executive Committee at least forty-eight (48) hours prior to the effective
date of the proposed transfer, sale or assignment (NOTE: This report must
include the description of the interest sold, assignment or transferred; the
names and addresses of all of the entities that were involved in the sale,
assignment or transfer; and the price or any other consideration paid, to be
paid, or to be owed to or by any of the entities that are involved with the
sale, assignment or transfer.
ARTICLE VI: OBLIGATIONS OF MEMBERSHIP
SECTION I - MEMBERSHIP AGREEMENT/MEMBERSHIP CERTIFICATE
Each Member will execute a copy of the AFL's "Membership Agreement", as
that agreement exists now and/or as it may be amended from time-to-time.
Thereafter, the Commissioner will issue a "Membership Certificate" to each
Member in good standing. (NOTE: This certificate will be non-transferable
unless the Membership is forfeited, sold or transferred pursuant to the terms
and conditions of these "By-Laws"). At a minimum, this "Membership
Certificate" will indicate the entity that owns the membership - and the
designated geographic area in which the Member may operate its Team.
SECTION 2 - ASSESSMENTS
Each Member will pay an equal amount of annual assessments per the
"Annual Operating Budget" that is established by the Board at its "Annual
Meeting". Thereafter, upon the Commissioner's certification to the Board that
the available funds of the AFL are insufficient for the proper operation of
the AFL, the Board may, within ten (10) days, levy an additional equal
assessment upon all of the Members, which such assessment will be due within
ten (10)days.
SECTION 3 - "NO OFFSETS"
No Member may "offset" any funds that are owed to the AFL by a claim of
vested rights with regard to any funds that are supposed to be distributed to
AFL Members in the future. In this regard, the Commissioner will treat any
such attempted "offsets" as non-payments per ARTICLE VI, SECTION 4 herein.
SECTION 4 - PENALTY OF LATE PAYMENT OF
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ASSESSMENTS
Any assessments that are not paid on a timely basis will be subject to a
ten percent (10%) penalty for every ten (10) day period that the assessments
have not been paid. In addition, if a Member is more than fifteen (15) days
late in paying an assessment, the Member will automatically be declared to be
"not in good standing" as that term is defined in ARTICLE VI, SECTION 9
herein (NOTE: Penalties for late payment of assessments are NOT eligible to
be waived by the Commissioner).
SECTION 5 - OBLIGATIONS OF MEMBERSHIP
Each Member and all of the parties that are formally affiliated with the
Member, including, but not necessarily limited to, the Member's owners,
officers, stockholders, directors, partners or any person otherwise owning
any interest in the Member, expressly agree to be bound by all of the
following obligations:
- To conduct all of its AFL-related - and/or all of its non-AFL related
activities - in a manner that will not result in the AFL being held
in disrepute;
- To abide by any and all decisions of the Commissioner and/or the
Board in all matters that are within their respective jurisdictions;
- To include in any agreement/contract between any Member and any
employee, a provision specifying that all of the respective parties
agree to be bound by these "By-Laws", by the AFL's "Operation
Manual", by the AFL's "Rule Book" and/or by any other rules and
regulations of the AFL, as they exist and/or as they may be amended,
modified or otherwise changed from time-to-time; and
- To be bound by all of the terms and conditions of the AFL's "License
Agreement" with Gridiron Enterprises, Inc., by the AFL's "Articles
of Incorporation", by these "By-Laws", by the AFL's "Operations
Manual", and/or by any other rules and regulations of the AFL as they
may be amended, modified or otherwise changed in the future; all of
the contracts binding the AFL, and/or its Members, as may now exist
and/or as they may be later entered into in the future (including,
but not limited to, all of the licensing, merchandising and/or
television agreements); and all of the AFL's obligations and
indebtedness as that may now exist and as it may later be incurred,
regardless of when the acts or events giving rise to the obligation or
indebtedness occurred.
- To deliver to the AFL by the due date, an Irrevocable
Letter-of-Credit in the exact amount and exact wording as determined
by the Board of Directors. (Note: the "Irrevocable Letter-of-Credit"
required of any one Member must be identical in form, amounts,
content, and wording to that which is required of every other
Member.)
The AFL may require a new Member to file an "Additional Irrevocable
Letter-of-Credit" to secure any balance due on its membership fee.
This additional "Irrevocable Letter-of-Credit" will not be
considered to be in conflict with the previous sentence.
Notwithstanding the above-listed requirements, a Member may deposit
cash with the AFL in the same amount of the above referenced
"Irrevocable Letter-of-Credit" - and/or the above referenced
"Additional Irrevocable Letter-of-Credit" - in lieu of the above listed
requirements.
SECTION 6 - DESIGNATED HOME ARENA
Except as provided by this subsection, a Team must play all of its home
games in its designated home arena. In this regard, however, the Commissioner
may, in his/her discretion, permit a Team to play up to a maximum of one (1)
of its designated "home" games in an alternative arena, provided that the
alternative arena is not within another Team's "territory".
SECTION 7 - TEAM NAME, LOGO AND UNIFORM COLORS
The proposed name, nickname, logo and uniform colors of each Team must
be approved, in writing, by the Commissioner. In this regard, no Team may
change its name, nickname, logo or uniform colors without first obtaining
the written approval of the Commissioner.
SECTION 8 - TWO TEAMS IN THE SAME STATE
Where two (2) or more Teams are located in the same state, neither may
use the state's name without first obtaining written permission to so do from
the other Team(s) located in said state. However, if a current Team is
already using a state name, and another Team later enters the same state, the
latter Team is pre-empted from using the state name and the existing Team may
continue to use the state name for so long as it wants to do so (NOTE: If the
existing Team ceases to use the state name but there continues to be more
than one Team in that state, then no Team may utilize the state name).
SECTION 9 - "NOT IN GOOD STANDING"
A Member will automatically be deemed to be "not in good standing" if it
does not pay all of its AFL-related assessments within thirty (30) days of the
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original "due date" for each such assessment. In addition, a Member may be
declared to be "not in good standing" by a majority vote of the Board of
Directors for any other action(s) that is/are determined to be "not in the
best interest of the AFL".
Once a Member has been deemed - or declared - to be "not in good
standing", it will lose its right to be present at - and/or to vote at - any
meetings of the AFL Board of Directors. Moreover, if the reason(s) that led
to the deeming/determination of "not in good standing" has/have not been
corrected within thirty (30) days, then the Commissioner must call a "Special
Meeting" of the AFL Board of Directors in order to determine whether the
Member should be suspended and/or terminated (NOTE: See ARTICLE VIII:
"Suspension and/or Termination of Ownership or Membership").
If the Board of Directors decides not to suspend and/or terminate a
Member who has remained "not in good standing" for more than thirty (30)
days, the affected Member must execute a UCC-1 FORM in favor of the AFL with
regard to any funds that the AFL already owes - and/or any funds that the AFL
may owe at some point in the future - to the affected Member (NOTE: If the
Member does NOT execute the requisite UCC-1 FORM within two (2) days after it
is first preferred to the Member by the Commissioner, then that Member will
automatically be deemed to be suspended from the AFL (NOTE: Such a suspension
can only be removed if (a) the affected Member removes the underlying cause
for the deeming/declaration of the "not in good standing" status; or (b) the
Member executes the UCC-1 FORM in favor of the AFL.
ARTICLE VII: WITHDRAWAL OF MEMBERSHIP
SECTION 1 - VOLUNTARY WITHDRAWAL OF MEMBERSHIP
Any Member may voluntarily withdraw from its membership in the AFL via
the following methods:
- By selling, assigning or otherwise transferring its Membership
pursuant to ARTICLE V of these "By-Laws"; or
- By giving written notice of its withdrawal to the Commissioner and to
the other Members of the AFL, provided, however, that such resignation
will only be effective if, within thirty (30) days of such notice,
the resigning Member will have made a full payment of all of its dues
or other debts owing to the AFL and/or to its Members.
SECTION 2 - EFFECTIVE DATE OF WITHDRAWAL
On the effective date of any withdrawal, the withdrawing Member will
hold no further interest in the AFL and its membership will cease and
terminate in its entirety.
SECTION 3 - WITHDRAWAL OF MEMBERSHIP TO JOIN ANOTHER PROFESSIONAL LEAGUE
If, for the purpose of joining any other indoor professional football
league, any Member either withdraws from the AFL without the consent of
three-fourths (3/4) of the Directors - or transfers, disposes of or
surrenders its Membership in the AFL - then the following results will
automatically occur:
- All right, title and interest in the Membership will immediately
become the property of the AFL;
- All right, title and interest in all of the player contracts that
were held by the withdrawing Member - and all right, title and
interest in all of the players on that Member's "Reserve List" - may,
at the option of the AFL, become the AFL's property; and
- Upon the vote of two-thirds (2/3) of all the remaining Directors, the
Member must pay to the AFL, the amount of Five Hundred
Thousand-Dollars ($500,000) or the current price of an AFL expansion
team, whichever is greater, as "liquidated damages".
ARTICLE VIII: SUSPENSION AND/OR TERMINATION OF OWNERSHIP OR MEMBERSHIP
SECTION 1 - GENERAL
The membership of a Member or the interest of any ownership entity
(i.e., any owner, officer, stockholder, partner or anyone holding any
interest therein) may be SUSPENDED via a vote of two-thirds (2/3) of the
Board - or terminated via a vote of three-fourths (3/4) of the Board, if the
Member or ownership entity will do or suffer the following:
(A) Intentionally, willfully or repeatedly violates any of the
provisions of these "By-Laws", the AFL's "Operations Manual", the AFL's "Rule
Book" and/or any other rules and regulations of the AFL as they may be
amended or modified in the future;
(B) Fails to pay any dues, fines, assessments or other indebtedness
owning to the AFL within ten (10) days after receiving written notice from
the Commissioner that the Member owes such dues, fines or assessments to the
AFL;
(C) Willfully fails - and/or refuses to fulfill - its contractual
obligations including, but not limited to, those to the AFL, to the AFL's
Members, or to its players in such a way as to affect the AFL or its Members
adversely;
(D) Wagers or countenances wagering by its officers or employees on any
game in which an AFL team participates;
(E) Intentionally or willfully permits open
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betting or pool selling upon any premises that are owned, leased and/or
otherwise controlled by the Member, if such betting or pool selling is
unlawful within the Member's jurisdiction;
(F) Offers, agrees, conspires or attempts to lose or control the score
of any game involving a Member of the AFL, or fails to suspend immediately any
officer, player or other employee of the Member who, in a court of law or in
any hearing sanctioned by these "By-Laws", has been found to have offered,
agreed, conspired or attempted to lose or control the score of any such game
or of being interested in any pool or wager on any game in which a Member of
the AFL participates;
(G) States, in writing, its intent to disband or, in fact, disbands its
Membership during the AFL season, or dissolves its business organization or
ceases its operation;
(H) Willfully fails to appear at the time and place it is scheduled to
play any AFL Pre-Season, Regular Season or Playoff Game;
(I) Willfully misrepresents any material fact contained in its
application for Membership in the AFL; and/or
(J) Willfully engages in conduct that is deemed -- by a two-thirds
(2/3) majority of the AFL's Board of Directors -- to be detrimental to the
AFL, its Members, its employees or to Arena Football.
(K) Fails to file an "Irrevocable Letter-of-Credit" in the exact
wording and amount as determined by the AFL Board of Directors within five
(5) business days after written notice from the Commissioner of non-receipt
of the "Irrevocable Letter-of-Credit."
(L) Fails to file an "Additional Irrevocable Letter-of-Credit within
five (5) business days after written notice from the Commissioner that demand
has been made, in whole or in part, on the Member's "Irrevocable
Letter-of-Credit". Such "Additional Irrevocable Letter-of-Credit" must be in
an amount identical to the amount demanded by the Board from the original
"Irrevocable Letter-of-Credit."
SECTION 2 - AUTOMATIC TERMINATION
A Member will be automatically terminated from the AFL when it:
(A) Is adjudicated to be a bankrupt or makes an assignment for the
benefit of creditors -- and/or a receiver or a trustee is appointed for all
or a substantial part of the property and/or assets of the Member in any
proceedings; or
(B) Fails -- for more than sixty (60) days -- to pay its AFL assessments
and/or fees in accordance with deadlines that are established by the Board of
Directors for such payments.
SECTION 3 - PROCEDURE FOR SUSPENSION AND/OR TERMINATION
The membership of an entity -- and/or the interest of any "related party"
(e.g., owner, officer, stockholder, partner, or anyone holding any interest
therein) -- may be suspended and/or terminated upon the occurrence of any of
the events that are described in ARTICLE VIII, SECTION 1 herein via the
following procedures:
(A) Any Member of the AFL or the Commissioner may prefer "charges"
against any Member and/or "related party" that has violated one (1) or more
of the provisions of ARTICLE VIII, SECTION 1 herein. In this regard, those
"charges" must be made in writing -- and they must be filed with the
Commissioner, who will, no later than three (3) days after the receipt of
same, will send a copy thereof via registered, certified or overnight mail to
the Member and/or "related party" against whom such "charges" have been made.
(B) The Member and/or "related party" so charged must, within three (3)
business days after receipt of a copy of the "charges", file with the
Commissioner its written answer thereto. In this regard, the failure to file
an answer within the prescribed time period will automatically be deemed to
be an admission that all of the charges are true. Within two (2) business
days after the expiration of the time period within which the answer is due,
the Commissioner will send a copy of the "charges" and a copy of the answer,
if any, to each Director -- and will schedule a "Special Meeting" of the
Directors to hear the charges (NOTE: This "Special Meeting" will be held
within five (5) days after the Commissioner's transmittal of a copy of the
"charges" and a copy of the answer, if any, to the Directors.
(C) The above-referenced "Special Meeting"/hearing will be presided
over by the Chair of the Executive Committee unless (s)he is directly
associated with the complaining Member or with the Member "related party"
that has been charged (NOTE: Any Member that has preferred "charges" which
are related to the matter(s) at issue will be deemed to be directly
associated with the complaining Member). If the Chair of the Executive
Committee is directly associated with the complaining Member or the Member or
"related party" that is being charged, then the Executive Committee will
select one of its other members to preside over the "Special Meeting"/hearing.
(D) At the "Special Meeting"/hearing, the Member or "related party"
that has been charged will have the right to appear with counsel. In this
regard, however, strict rules of evidence will not apply -- and any relevant
evidence that is submitted to the Board at the "Special Meeting"/hearing may
be received and considered.
(E) After duly reviewing all of the presented evidence, the Board --
except for the complaining Member and the Member or "related party" that has
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been charged -- will vote to sustain the charges in whole or in part and/or to
suspend or terminate the Member or "related party". In this regard, a
majority vote will be necessary to sustain the charge; or a vote of
two-thirds (2/3) will be necessary in order to suspend the Member or "related
party"; and a vote of three-fourths (3/4) will be necessary in order to
terminate the Member or "related party".
(F) If the "charges" are sustained, either in whole or in part, the
Board will establish an appropriate penalty for the Member or "related party"
that was the subject of the "Special Meeting"/hearing. If, however, the Board
has voted to suspend or terminate the Member or "related party" that was the
subject of the "Special Meeting"/hearing, then that Member's membership in
the AFL -- or the "related party's" interest in the affected Member -- will
automatically be suspended or terminated unless the provisions of ARTICLE
VIII, SECTION 4 herein are invoked.
SECTION 4 - MODIFICATION OF PENALTY
If the Board has voted to suspend or terminate a Member or "related
party", it may -- by a vote of two-thirds (2/3) with regard to a suspension or
by a vote of three-fourths (3/4) with regard to a termination -- waive the
suspension or termination and instead direct the Member or "related party" to
pay a stated fine in a stipulated manner and by a stipulated date, which fine
may be required to be paid, in whole or in part, to any other Member(s) as
compensation to such Member(s) for any damages sustained by it/them as the
result of the offending Member's act(s) or act(s) of omission or commission
and/or as the result of the related party's act(s) or act(s) of omission or
commission.
SECTION 5 - CONSEQUENCES OF SUSPENSION
When a Member is suspended from the AFL, such Member will, for the
duration of the suspension, forfeit all of its rights and privileges as a
Member of the AFL, including, but not necessarily limited to, the right to
vote and/or to participate in meetings of the Board (NOTE: Such a forfeiture
will remain in full force and effect throughout the duration of the
suspension). No such suspension, however, will in any way negate or reduce
the Member's obligations to the AFL and/or to its Members.
If a suspended Member has any outstanding financial obligation to the
AFL and that suspended Member subsequently becomes eligible to receive a
portion of any proceeds that are being distributed by the AFL, then the AFL
must apply the amount due to the suspended Member as an "offset" to the
amount owed to the AFL by the suspended Member. In this regard, a suspended
Member can only receive a share of any funds being distributed by the AFL, if
all of its financial obligations to the AFL have been satisfied via the
"offset" or via the payment of its outstanding debt.
ARTICLE IX: COMPETITION
SECTION 1 - GENERAL
(A) The Board will adopt rules of competition for the AFL which will be
compiled into the AFL's "Rule Book". In addition, the Board will also
determine the name and number of playing divisions of the AFL; the number of
players to be permitted on the roster of each AFL Team; and the number of
regular season games to be played by each AFL team.
(B) If the Board does not set the name and number of playing divisions,
the number of players to be permitted on each AFL Team roster and/or the
number of regular season games to be played by each AFL Team for a particular
season within three (3) months after the end of a season, then these will be
the same for the next season.
SECTION 2 - THE SCHEDULE
The Commissioner will oversee the preparation of the schedule of regular
season games under the following terms and conditions:
- Per ARTICLE IV, SECTION 14, the Board will determine the number of
games to be played by each Team -- and every Team must be scheduled
for the same number of regular season games (NOTE: One-half (1/2) of
each Team's games will be scheduled as "home" games -- and the other
half will be scheduled as "away" games).
- Per ARTICLE IV, SECTION 14, the Board will determine the number of
games that each Team will play in its respective division, including
the number of times each Team will play each divisional opponent;
- Unless otherwise amended by a two-thirds (2/3) majority vote of the
Board of Directors, the schedule will specify that all of the AFL's
regular season games will take place during the period from May 1st
through August 31st;
- Per ARTICLE IV, SECTION 14, any team's refusal or financial inability
to play a scheduled game will render the offending Member subject to
a fine of Two Hundred Fifty Thousand Dollars ($250,000), forfeiture
of the game, and suspension and/or termination as specified in
ARTICLE VIII, SECTION 1 herein; and
- If, after the schedule has been adopted, and before the regular
season has ended, a Member has been suspended or terminated -- or it
has withdrawn or otherwise ceased to operate -- then the Commissioner
will amend the schedule as (s)he deems appropriate. In this regard,
the amended schedule will become effective immediately unless within
twenty-four (24) hours after it has
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been established by the Commissioner and distributed to the Board, a
two-thirds (2/3) majority of the Board votes to disapprove the
amended schedule (NOTE: If the amended schedule is disapproved, the
Commissioner will proceed to establish another amended schedule - and
this latter schedule will automatically become effective without
being subject to any further review of the Board).
SECTION 3 - DISTRIBUTION OF GAME RECEIPTS
The distribution, if any, of game receipts between the visiting Team and
the home Team will be determined by a two-thirds (2/3) vote of all the
Directors at each "Annual Meeting". If such a determination is not made, then
the distribution plan for home games' gate receipts, if any, that was in
effect during the previous season will continue in full force and effect for
the next season.
SECTION 4 - SCOREKEEPER, OFFICIAL TIMERS, STATISTICAL SUMMARIES
The home Team will provide an official scorekeeper, official timers, and
an official statistical summary sheet for the visiting Team (NOTE:
Notwithstanding the above, the Director of Football Operations may, at his
discretion, select personnel for the official clocks, scorebooks and
scoreboards when (s)he determines that this would likely improve the fairness
and quality of game operations).
SECTION 5 - PLAYER'S BENCH AREA
The players' bench will be exclusively reserved for three coaches, the
players, a Team trainer, a Team physician, and ball boys and water boys.
SECTION 6 - POLICE PROTECTION
Each home Team will provide sufficient police protection before, during
and after each game to a visiting Team, home Team and other AFL personnel. In
this regard, a home Team that fails to provide such police protection will be
subject to a fine, at the discretion of the Commissioner, in an amount not to
exceed Ten Thousand Dollars ($10,000).
SECTION 7 - PRE-GAME TIME/MEMBER RESPONSIBILITIES
Each Team will be ready to play at least thirty (30) minutes before a
game's scheduled starting time (NOTE: The visiting Team may ask for at least
fifteen (15) minutes of practice before the scheduled starting time of the
game. The Referee will determine whether to start an AFL game and only the
Referee may suspend it.
SECTION 8 - PLAYOFF FORMAT
On or before March 31st of each year, the Board, by majority vote, will
determine the playoff format for the upcoming season (NOTE: This will
include, among other things, the number of Teams to be eligible for the
playoffs, the "seeding" methodology and the number of games per round). In
this regard, the AFL's playoff format will continue unaltered from season to
season unless it is changed before by March 31st of each year by a majority
of the Board. After March 31st of each year, a two-thirds (2/3) vote of the
Board will be needed in order to make any changes to the established playoff
format for that season.
SECTION 9 - TIME/DATE OF PLAYOFF GAMES
The Commissioner will set the date and time for all playoff games - and,
in this regard, (s)he will ensure that the schedule of playoff games is
consistent with the AFL's obligations under any national television or radio
contract. The refusal of any Team to play a scheduled playoff game will
result in the forfeiture of that game to the non-offending party - and will,
at the discretion of the Commissioner, subject the offending Team to a fine
not to exceed the amount that is stipulated in ARTICLE VIII herein.
SECTION 10 - CHAMPIONSHIP GAME
At the conclusion of the playoff games, the AFL will conduct a
championship game between the two (2) Teams that have not lost any playoff
games. In this regard, that championship game will be held at the venue of
the Team that was higher seeded at the start of the playoffs unless the Board
has established, prior to March 31st of each year, another site - or another
methodology for selecting the site - for the championship game.
SECTION 11 - DISTRIBUTION OF REVENUES FOR PLAYOFF GAMES & THE CHAMPIONSHIP GAME
On or before March 31st of each year, the Board will establish the
amount that will be paid to each visiting Team by each respective home Team
with regard to the AFL's playoff games and the AFL's championship game. If
the Board does not establish those amounts by the above-stated deadline, then
the Board will be deemed to have adopted the same amounts that had been
established for the prior season.
SECTION 12 - POSTPONEMENT OF GAME IN CASE OF AN ACT OF GOD
In the case of an Act of God which would prevent a game from being
played and/or which would cause a game to be delayed by more than three (3)
hours, the Commissioner may postpone any game (NOTE: Should a game be
postponed, the Commissioner will also establish a new date and time for the
game to be played). In addition, the Commissioner may, at his/her discretion,
reimburse the visiting Team for any extra expenses that it incurs as a result
of the postponement (NOTE: All such reimbursements will be paid for out of
the AFL's funds and, if necessary, the Commissioner will issue a "special
assessment" to all of the AFL's Members in order to replenish any funds that
are expended via this Section).
ARTICLE X: GENERAL VIOLATIONS,
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PROHIBITIONS FINES AND PENALTIES
SECTION 1 - VIOLATIONS
It will be a violation of these "By-Laws" - and it will be considered to
be conduct that is detrimental to the AFL - for any Director, Member (or
"related party"), any official and/or referee:
(A) To directly or indirectly own stock, or have any financial
interest, directly or indirectly, in any other Member; provided, however,
that if any Director, Member (or "related party") "related party" has
established a direct or indirect ownership of stock or has any financial
interest, directly or indirectly, in any other Member prior to September 30,
1994, then they shall have until September 30, 1997 to fully divest that
ownership interest.
(B) To loan money to - and/or become a surety or guarantor for - any
AFL referee;
(C) To tamper with - and/or to otherwise interfere with - a player who
is on the roster or the reserve list of another Team for any purpose
whatsoever;
(D) To tamper with - and/or to otherwise interfere with - any
collegiate players who are not eligible to play in the AFL;
(E) To enter an official's dressing room unless (s)he has been
authorized to do so, in advance and in writing, by the Commissioner;
(F) To publicize - and/or take part in the publication of - any
mythical All-AFL or All-Opponents Team, except those which have been
expressly authorized by the Commissioner and which have been selected
according to procedures that have been established by the Commissioner;
(G) To issue any free tickets to a visiting player or coach, other than
those that are permitted under the AFL's policy for complimentary tickets;
(H) To pay the fine for any other person that is penalized by the
Commissioner - and/or by the Board - pursuant to these "By-Laws";
(I) To publicly make - and/or publicly concur with - any statement that
is not in the best interest of the AFL (NOTE: Any complaints directed at the
AFL by any person covered by these "By-Laws" must be made to the
Commissioner, in writing, and they may not be given any publicity, either
directly or indirectly);
(J) To publicly comment on any disciplinary actions that are taken by
the Commissioner (NOTE: The Commissioner may make a public statement
regarding such disciplinary actions when (s)he believes it is in the best
interest of the AFL to do so);
(K) To tamper - and/or otherwise interfere with - another Member's
officers, employees or staff for any purpose whatsoever; and/or
(L) To engage in any action that is inconsistent with either the letter
or spirit of the AFL's performer's contract.
SECTION 2 - FINES AND PENALTIES
Unless otherwise provided by these "By-Laws", the Commissioner will
conduct an investigation of any charges that a Member (or "related party")
and/or a player, coach or referee has violated these "By-Laws", the AFL's
"Operations Manual", the AFL's "Rule Book", and/or any other rules and other
regulations of the AFL - and/or that a Member (or "related party") and/or a
player, coach or referee has engaged in conduct that is detrimental to the
best interest of the AFL. If the Commissioner determines that such a
violation has occurred, (s)he may do any of the following:
- Levy a fine, not to exceed Ten Thousand Dollars ($10,000), against
any Member (or "related party") or player, coach or referee for the
violation of any provision of these "By-Laws", the AFL's "Operations
Manual", AFL's "Rule Book", and/or any other rules and regulations of
the AFL, or for any action that is detrimental to the best interest
of the AFL;
- Levy a fine, not to exceed One Hundred Thousand Dollars ($100,000),
against any Member (or "related party"), or any player, coach or
referee for refusing or failing to adequately cooperate or produce
materials in any investigation that is being undertaken by the
Commissioner and/or the Board;
- Cancel or suspend the contract of any player, coach or referee who
has violated the provisions of these "By-Laws", the AFL's "Operations
Manual", the AFL's "Rule Book", and/or any other rules and
regulations of the AFL or for any action that is detrimental to the
best interest of the AFL;
- Levy a fine not to exceed Ten Thousand Dollars ($10,000) against any
Member (or "related party") and/or against any player, coach or
referee that, in the Commissioner's discretion, gives, makes, issues,
authorizes, or endorses any statement having - and/or designed to
have - a prejudicial or detrimental effect on the AFL or a Member;
- Levy a fine not to exceed Ten Thousand Dollars ($10,000) - and/or
revoke any draft pick or picks in any
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<PAGE>
AFL draft of players - against any Member (or "related party")
that tampers with a player who is on the roster or the reserve
list of another Member.
- Levy a fine not to exceed One Hundred Thousand Dollars ($100,000)
against any Member (or "related party") whose Team fails to appear
for a schedule game; whose Team fails to start or complete any
pre-season game, any regular season game, any playoff game and/or
any championship game, including any overtime period thereof; or
whose Team fails to start and finish a playing season due to the
Member's withdrawal of membership in the AFL (NOTE: Any Director
may petition the Board to direct the Commissioner to impose -
and/or to increase - such a fine);
- Levy a fine not to exceed Five Thousand Dollars ($5,000) against
any Member that is not properly represented at any Board meeting;
- Levy a fine not to exceed Five Thousand Dollars ($5,000) against
any Member (or "related party") which announces - or causes to be
announced - that it has protested or will protest the game and
which fails to actually file such a protest;
- Levy a fine not to exceed Five Thousand Dollars ($5,000) against
any home Team that fails to send to the AFL's Director of
Football Operations official game statistics for any regular
season game, any playoff and/or championship game, within twenty-
four (24) hours after the completion of such game;
- Levy a fine not to exceed Five Thousand Dollars ($5,000) per day
per player against any Member that has extra players on its
roster in excess of the roster limits that are provided in these
"By-Laws", in the AFL's "Operations Manual", in the AFL's
"Rule Book", and/or in any other rules and regulations of the AFL;
- Levy a fine in the amount of Five Thousand Dollars ($5,000) for
each "time change", One Thousand Dollars ($1,000) for each "arena
change", and Ten Thousand Dollars ($10,000) for each "date change"
if a Member causes such a change to be made after the official
AFL schedule has been released; and/or
- Levy a fine not to exceed Ten Thousand Dollars ($10,000) for any
action which is inconsistent with either the letter - and/or the
spirit - of the AFL's "Standard Player's Contract".
SECTION 3 - PAYMENT OF FINES
(A) The Commissioner will notify the Member (or "related party")
that (s)he has fined, within forty-eight (48) hours of his/her decision to
impose same. In this regard, all such fines must be paid, in full, within
ten (10) days of their imposition - and a ten percent (10%) penalty will be
imposed with regard to any fines that are not paid by that deadline (NOTE: An
additional penalty of one percent (1%) of the fine per day will be imposed if
the fine is NOT paid within twenty (20) days of its imposition). Moreover,
if a Member fails to pay a fine within thirty (30) days of its imposition,
the Commissioner will declare the affected Member to be "not in good
standing" per ARTICLE VI SECTION 9 herein.
(B) Unless otherwise provided by these "By-Laws", all moneys that
are collected as fines will be deposited in the AFL treasury.
(C) The Commissioner may unilaterally revoke or modify any fine -
and/or suspend or modify any disciplinary action - that is imposed by him/her
in conjunction with these "By-Laws".
(D) Upon petition by the affected Member - and after approval by
the Board - any fine, or a portion thereof, may be distributed to any Member
that was economically disadvantaged by the conduct which resulted in the fine.
SECTION 4 - FAILURE TO REPORT ATTEMPT TO FIX OUTCOME OF A GAME
(A) If a Member (or "related party"), any player, coach or referee
has knowledge of any offer, directly or indirectly, by insinuation or
implication, to control, to fix and/or to influence any AFL game in any
manner whatsoever, and that party fails to report same immediately to the
Commissioner, then the Commissioner is authorized, after appropriate notice
and hearing, to suspend the person for a specified period of time; to suspend
the person indefinitely; to suspend and bar the person from the AFL for life;
to cancel and terminate the employment contract of any affected parties; to
order the sale, within sixty (60) days, of the stock - and/or any ownership
interest whatsoever in any Member that is owned by the affected party; and/or
to levy a fine not to exceed One Hundred Fifty Thousand Dollars ($150,000)
against the affected party.
(B) Any Member (or "related party"), any player, any coach any/or
any referee who makes any offer covered by SECTION 4(A) herein will be banned
from participating in any capacity in the AFL for life.
(C) A player must immediately report his/her knowledge of any
infraction specified in SECTION 4(A)
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herein to the Head Coach or General Manager of his Team - and that latter
party must immediately notify the AFL's Director of Football Operations of
same. Similarly, and Member (or "related party"), any coach and/or any
referee must immediately report any knowledge of any infraction specified in
SECTION 4(A) herein directly to the Commissioner.
SECTION 5 - VIOLATIONS NOT OTHERWISE COVERED
The Commissioner will, wherever there is a rule for which no penalty has
been specifically fixed for violation thereof, have the authority to fix such
penalty as in his/her judgment will be in the best interest of the AFL.
Similarly, whenever a situation arises which is not covered in the "By-Laws",
in the AFL's "Operations Manual" and/or in the AFL's "Rule Book", the
Commissioner will have the authority to make such decisions, as in his/her
judgment, will be in the best interest of the AFL. Notwithstanding the above,
no monetary penalty fixed under this provision can exceed Fifty Thousand
Dollars ($50,000).
ARTICLE XI: BROADCASTING AND TELEVISION
SECTION 1 - MANDATORY TELEVISION CONTRACT TERMS
All contracts that are entered into by any Member (or "related party")
of the AFL for the broadcasting of any of its games on radio and/or
television must contain provisions which:
- Reserve to the AFL and/or to the Member the copyright in all
such broadcasts; and
- Specify that such a contract is subject to - and superseded by -
these "By-Laws" and/or any other rules and regulations of the
AFL as they presently exist and as they may be amended from
time-to-time; the terms of any existing or future regional,
national and network broadcasting contracts that are entered
into by the AFL for the broadcasting of Arena Football games; and
the approval of the Commissioner, with whom all contracts will be
filed within ten (10) days of their execution, and who may
disapprove such contracts only on the ground that they fail to
comply with the requirements of this ARTICLE XI.
SECTION 2 - REGIONAL, NATIONAL, AND NETWORK RADIO AND TELEVISION BROADCASTS
All regional, national and/or network radio and television broadcasts of
pre-season, regular season, All-Star and/or playoff games will be negotiated
and contracted for by the AFL or its designated agent (NOTE: Any income that is
derived from these contracts will be paid to the AFL treasury - and this
income will be distributed equally to the Members and Gridiron Enterprises,
Inc. in amounts and at such times as the Board may decide).
SECTION 3 - RIGHT OF PRE-EMPTION
A Member may contract for the television or radio broadcast of its home
or away games, provided that such contracts reserve the right of pre-emption
as that right may exist in the AFL's regional, national or network contracts
(NOTE: Any income that is derived by any Member from its local radio and/or
television broadcasting contracts will belong entirely to said Member).
SECTION 4 - VISITING TEAM'S RIGHT TO TELECAST
Subject to ARTICLE XI, SECTION 1 each Member will grant the visiting
Team the right to do radio and/or television broadcasts with regard to any
game played between them, subject to the pre-emption right, if any, that is
set forth in the AFL's regional, national or network contracts and subject to
any reasonable origination fee that may be charged by the home Team's arena.
SECTION 5 - HOME TEAM'S "PROTECTED TELEVISION RADIUS"
No Member visiting another Member may have a game broadcast within
thirty-five (35) miles of the home Team. In this regard, any broadcast by the
visiting Team that will penetrate the thirty-five (35) mile radius will only
be permitted after the visiting Team has received written permission from
the home Team.
SECTION 6 - NATIONAL BROADCAST OF AFL GAMES
No Member may interfere with - and/or prohibit - the broadcast of
national games from their facility. In this regard, any Member who attempts
any such interference and/or prohibition will be fined and/or suspended by
the Commissioner.
ARTICLE XII: MERCHANDISING, LICENSING, AND TRADEMARKS
SECTION 1 - LICENSED MERCHANDISE
All merchandise which carries, or has affixed to it or imprinted on
it, the name of the AFL and/or the name of any of its Teams, or the Gridiron
logos, trademarks or tradenames and which is sold by concessionaires; team
shops; retail establishments; and/or all other persons, firms or entities,
must be purchased solely from manufacturers that are licensed under the AFL's
"Licensed Merchandise Program".
SECTION 2 - OWNERSHIP OF LOGOS AND TRADEMARKS
All of the names, logos and trademarks of the AFL's Member teams are
owned by Gridiron Enterprises, Inc. In this regard, new AFL Members may
apply for registration of their trademarks in their own name, provided that
they convey those registrations or applications to Gridiron Enterprises, Inc.
and/or to the entity, if any, that has been
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established to control the AFL's "Licensed Merchandise Program" (NOTE: All of
the AFL's Members and Gridiron Enterprises, Inc. will convey all of their
rights in the above-referenced team names, trademarks and logos when the AFL
establishes a licensed property entity as required under the "License
Agreement" with Gridiron Enterprises, Inc.). AFLI, Members and Gridiron will
have the right to use all Team, League and Gridiron marks for publicity
purposes only (i.e., NOT merchandise).
SECTION 3 - LICENSING & PROPERTIES COMMITTEE
The AFL's Licensing and Properties Committee will establish guidelines
and coordinate merchandise activities and work toward the goal of
establishing a properties and licensing company as contemplated by the
"License Agreement" between AFLI and Gridiron. Team members will comply with
the guidelines and assist AFLI in accomplishing the goals of the Licensed
Merchandise Program.
SECTION 4 - SUBMISSION OF LOGOS, MARKS AND DESIGNS
Members shall submit any proposed logo, name, design and/or trademark
and a description of the goods on which the marks are to be used to the
"Quality Review Committee", who, in turn, will approve/disapprove the request
within five (5) days of receipt. Requests can be made by fax unless
otherwise required by the Committee.
SECTION 5 - ASSIGNMENT OF RIGHT TO GRANT LICENSES
AFLI, with Gridiron's advice and consent, will issue all licenses under
the AFL's "Licensed Merchandise Program".
SECTION 6 - LABELING OF ALL MERCHANDISE
All licensed manufacturers must utilize the following "Official Licensed
Product" label or such other "Official Licensed Product" label as AFLI may
from time-to-time develop and direct.
SECTION 7 - RECORDING OF SALES
All Members must keep written records and report all sales with the
following conditions:
(A) Game-by-game sales activity, with figures relative to attendance,
gross revenues and per capital numbers;
(B) Retail distribution and gross sales activity; and
(C) Reports must be submitted to the Quality Review Committee on a
monthly basis. In this regard, these figures will be audited at the request
of - and at the expense of - the AFL League Office.
ARTICLE XIII: MISCELLANEOUS
SECTION 1. All of the "By-Laws" that were previously adopted by the AFL are
hereby repealed.
SECTION 2. In addition to these "By-Laws", the Board may establish such
rules and regulations as it deems necessary and proper to implement any and
all of the objectives, purposes of these "By-Laws", the AFL's "Operations
Manual" and/or the AFL's "Rule Book".
SECTION 3. Any action that the Board can take or adopt which because of its
urgent nature can not await the next Board meeting may be taken or adopted
via a written document which describes the action and which is signed or
facsimile consented to by two-thirds (2/3) of the Directors. Unless
otherwise specified, the action will be passed or defeated as if in a normal
meeting of the Board.
SECTION 4. Any notice required by any "By-Law" will be deemed to be
sufficient if it is given in writing and addressed to the last known address
of the addressee and deposited in the United States mail with postage
prepaid, or if it is sent via facsimile to the last known facsimile number of
the addressee or personally served unless the specific "By-Law" specifically
requires a different form of notice.
SECTION 5. If any Article, Section or other portion of these "By-Laws" is
determined to be invalid, illegal or unenforceable, such Article, Section or
other portion of these "By-Laws" will be severable from the rest of the
"By-Laws" - and the validity, legality and enforceability of the remaining
provisions of these "By-Laws" will not in any way be affected or impaired.
SECTION 6. In these "By-Laws", the masculine, feminine or neuter gender, and
the singular or plural number, will each be deemed to include the others
whenever the context so requires.
ARTICLE XIV: AMENDMENTS
SECTION 1. These "By-Laws" and the "AFL Operations Manual" may be amended at
any Board Meeting by:
(A) A three-fourths (3/4) vote if notice of the proposed amendment is
submitted in writing by any Team or the Commissioner to every Director at
least fourteen (14) days before the meeting; or
(B) By a unanimous vote, if the notice provision of ARTICLE XIV,
SECTION 1(A) herein is not satisfied.
Page 21 - Rev. 1/3/95
<PAGE>
EXHIBIT 10.05
MEMBERSHIP AGREEMENT
This Membership Agreement is entered into as of the 1st day of January
1993, by and between the Orlando Predators, Ltd. (hereinafter the "Member")
having a business address of P.O. Box 1100, Windermere, FL and the ARENA
FOOTBALL LEAGUE, INC., a not-for-profit membership corporation organized under
the laws of the State of Delaware, and having its principal place of business
in Des Plaines, Illinois (hereinafter the "AFL").
WHEREAS, the AFL is the assignee of an exclusive License Agreement with
Gridiron Enterprises, Inc., (hereinafter "Gridiron") wherein and whereby AFL
has received the exclusive license to operate a league (the "League") of
football teams playing a patented form of football known as "Arena Football",
and to use the trademarks, names and logos associated with that game; and
WHEREAS, the AFL has been organized as a membership corporation for the
purpose of facilitating the coordination, among its members, of the holding of
Arena Football games using players employed by the AFL; and
WHEREAS, the Member desires to obtain a membership in the AFL and to
operate a football team within the League using AFL players; and
WHEREAS, the Member agrees to be subject to the Bylaws of the League
(hereinafter the "By-Laws"), the restrictions contained in the AFL's License
Agreement with Gridiron, the "Rules of Play" as established by the AFL from time
to time, the regulations set forth in the AFL's "Operations Manual" as
established by the AFL from time to time, and such other requirements as the AFL
may establish from time to time, and any other set of rules, regulations,
covenants and restrictions which are applicable to all of the members of the
AFL;
NOW, THEREFORE, in consideration of, and as a requirement for being granted
the privilege of a membership in the AFL, as evidenced by the issuance of the
accompanying membership Certificate and the rights of participation in League
activities in an exclusive territory, the Member hereby agrees to the following:
1. TERRITORY
The Member acknowledges that its membership in the AFL carries with it
the exclusive right to operate a football team within the League in the city or
township known as Orlando in the State of Florida. This location will be
referred to in this document and other AFL documents as the "Territory" or
"Exclusive Territory" and it will include all of the area within
<PAGE>
a seventy-five (75) mile radius of the geographic center of the city or township
noted above in which the member's team plays its AFL home games, and as
otherwise described in the AFL By-Laws, subject to their amendment from time-to-
time.
2. LICENSE AGREEMENT
The Member acknowledges it has received a copy of the License Agreement
between Gridiron and the AFL and agrees that, at all times, it will abide by all
of the restrictions and limitations which are placed upon or becomes a duty of
the AFL, its MEMBERS or the League under which License Agreement as the same is
in effect and as it may be modified or amended from time to time.
3. BY-LAWS AND OPERATIONS MANUAL
The Member acknowledges that it has received a copy of the current version
of the By-Laws of the AFL and the AFL "Operations Manual" and agrees that at all
times it will avail itself of the privileges and will abide by all of the
restrictions and limitations and penalties which are placed upon each member by
said By-Laws and/or said "Operations Manual". The Member further understands
and acknowledges that the By-Laws and AFL "Operations Manual" will necessarily
be modified and amended from time to time in accordance with the established
amendment procedures for the By-Laws and majority vote by the AFL Board of
Directors in the case of the "Operations Manual".
4. MERCHANDISING
(a) The Member agrees to be subject to the AFL's "Licensed Merchandise
Program" as mandated by the License Agreement.
(b) The Member agrees that all team names, design logos and trademarks
related to the Member's team (other than slogans which do not contain the team's
name) will be owned by Gridiron and exclusively licensed to the AFL and all
marks and names must be registered in the name of or assigned to Gridiron,
(Note: Any team which assigns an improperly registered mark or logo will be
charged by the AFL for the proper registration or assignment).
(c) The Member acknowledges that the AFL has established a "Licensed
Merchandise Program" (the "Program") which requires royalties to be paid to the
AFL from sales of all merchandise bearing the team names, logos and trademarks.
Member acknowledges and agrees to abide by any reporting requirements and to pay
all royalties when due.
The rights to the Miami Hooters will be determined via a separate agreement
between AFLI and _____________________________
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<PAGE>
5. PREPAID EXPENSES AND CONTINGENCY FUND/IRREVOCABLE LETTER OF CREDIT
(a) The Member acknowledges that the AFL's Board of Directors may
establish a preseason "cash deposit" which each team would be obligated to place
in the League's escrow account for purposes of assuring mid-season assessments
or creating a "contingency" fund for League emergencies. The Member further
acknowledges that this deposit requirement may be increased in amount for future
years and that its payment requirement date(s) may be advanced significantly.
The Member further understands that such deposit by the required date(s) is an
absolute requirement to maintaining its membership in good standing and that the
failure to make the deposit(s) by the required date(s) will result in
termination of membership or other penalties as may be established by resolution
of the Board of Directors to be applicable for each LEAGUE SEASON, and the
Member hereby acknowledges his full acceptance and understanding of this
requirement.
(b) The Member acknowledges that the AFL's Board of Directors may, by
resolution, establish a requirement that each member supply an Irrevocable
Letter of Credit (ILOC) in favor of the AFL, which said ILOC may be a supplement
to, or replacement for, the aforesaid cash deposit requirement. The amount and
content of the ILOC may be changed by a majority vote of the Board of Directors
in advance of each LEAGUE SEASON.
6. OBLIGATIONS OF MEMBERS
In addition to any obligation established by virtue of its position as a
member of the AFL or by virtue of this or any other contractual or statutory
provision, the Member expressly agrees and covenants as follows:
(a) To abide by and be bound by any decision of the AFL Commissioner
and/or the AFL Board of Directors in all matters within the respective
jurisdiction of such Commissioner and/or Board;
(b) To include in any contract between the Member and any employee or
coach a provision specifying that the contracting parties agree to be bound by
all of the provisions contained in the AFL By-Laws, the AFL "Operations
Manual", the AFL's License Agreement with Gridiron, Inc., and any written
directives from the Board of Directors or the Commissioner of the AFL.
(c) To operate an active team within the League (Note: Unless the By-Laws
are properly amended so as to create such an option, the Member may not choose
to be inactive for all or any portion of a League season. Inactivity -- defined
generally to be the failure of a member to field a team to play any scheduled
game -- may be determined by the Commissioner of the AFL. If a Member becomes
inactive for any period of time, it shall be
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<PAGE>
subject to fines, suspension or termination as further described in the AFL's
By-Laws).
(d) To take all actions necessary to uphold and abide (and to aid the AFL
in its attempts to uphold and abide) all AFL or Member obligations under the
License Agreement.
(e) To pay to the AFL all team assessments and other common expenses of
the AFL as may be determined from time to time by the AFL's Board of Directors,
as well as all fines levied as described in the AFL By-Laws.
7. MEMBERS AS LIMITED AGENT OF AFL
The Member acknowledges that it will be recognized as an agent of the
AFL for the limited purpose of controlling and managing the AFL's players which
are assigned to the Member. In this regard, the Member agrees to cause said
players to be coached by the Member's staff. The Member further agrees and
understands that all expenses of maintaining the Member's team and the players
assigned to it are strictly an expense of the Member and the AFL will not be
responsible for any player or team expense that is not specifically agreed upon
by resolution of the AFL's Board of Directors.
8. BROADCAST RIGHTS
The Member acknowledges that the AFL retains the exclusive right to
broadcast (via live transmission and/or tape) or to license the broadcast of any
and all of the games played by or between any of the League members. In this
regard, it is quite likely that any national television contract will contain
restrictions regarding the rights of the Member to broadcast games in its local
market, and the Member acknowledges and agrees to abide by such restrictions as
the same may be continued in any present or future AFL broadcast contract or
otherwise as may be determined by resolution of the AFL board of directors.
9. WITHDRAWAL FROM OR TERMINATION OF MEMBERSHIP
(a) The Member may withdraw from the AFL or may have its membership
terminated or suspended for reasons or causes and under the conditions set forth
herein and/or in the By-Laws of the AFL as the same are in existence and as may
be modified or amended from time to time, and the Member hereby acknowledges
all such reasons, causes and conditions.
(b) As may be more specifically stated in the AFL's ByLaws, any member
withdrawing and/or being terminated shall remain liable for all of the then-
outstanding obligations (e.g., fines or assessments) to the AFL, and the Member
agrees and commits to pay such outstanding obligations to the AFL regardless of
whether the AFL has applied the Member's prepaid expenses and/or ILOC proceeds
to pay expenses associated with the operations of the
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<PAGE>
Member's team. In this regard, the Member also agrees to pay all of the AFL's
costs and expenses for collecting the same from/against the Member, including
reasonable attorneys' fees and expenses.
10. TRANSFER
If the Member has applied to the AFL for a transfer of all or part
of the ownership of the Member, and the AFL approves the transfer of the
membership, any new entity to which the Partnership is to be transferred must
sign the version of this Partnership Agreement in effect at the time of the
transfer before the transfer will become effective.
IN WITNESS WHEREOF, the undersigned Member acknowledges and agrees to the
terms of Membership stated herein.
February , 1993
ORLANDO PREDATORS, LTD.
---------------------------------------
MEMBER
TRUSTEES:
[illegible] BY: /s/ James English
- ------------------------------ ----------------------------------
[illegible] (President or General Partner)
- ------------------------------
ARENA FOOTBALL LEAGUE, INC.
/s/ Joseph J. O'Hara
- ------------------------------
JOSEPH J. O'HARA, President
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<PAGE>
ARENA FOOTBALL LEAGUE INC.
STANDARD PLAYER CONTRACT
This contract is between (insert full and complete corporate name of team here]
Orlando Predators Ltd. ("Team") a Member of the Arena Football League, Inc. and
(insert name of player here] Paul Franklin ("Player") an individual
Professional Football Player. In consideration of the promises listed in this
Contract, and for other good and valuable consideration the receipt of which and
the adequacy of which is acknowledged by the Player and the Team, the Player and
the Team agree:
1. TERM: The Team hires the Player as a skilled football player for a one (1)
year term starting April 1, 1996 and ending March 31 of the following year,
unless terminated or renewed as specified elsewhere in this contract. The
execution of this contract, will supercede any and all prior contracts,
including renewals, entered into between the Player and the Team.
2. COMPENSATION AND EXPENSES: The Player is NOT entitled to compensation and
benefits if a strike, work stoppage or lockout causes the cancellation of any
game, or if the Player retires, or if the player's contract is terminated by the
Team, or if the player is placed on the reserve list. (In this contract the term
"Reserve List" means: exempt list, suspended list, failure to report list and/or
retired list) Payment to the Player by the Team is according to its rules,
regulations and business practices. Player agrees NOT to play for any other
football team and/or league and this fact has been considered in determining the
player's salary.
A. SALARY:
1. PRE-SEASON: In conjunction with his participation in his Team's
pre-season training camp, the Team will pay to transport the Player to the site
of the pre-season training camp. The Team determines the type of
transportation.
2. REGULAR SEASON: For performance of Player's services and all
other promises of Player, the Team will pay Player a yearly salary of
$ $8400.00, (less all amounts required to be withheld by taxing
authorities) subject to the following conditions and payable as follows:
a. In 14 equal payments in the gross amount of $600.00 each, payable on the
following dates:
Wednesday's following each game.
b. Each payment is payable only if the player was an "active" player on the
AFL Team's 20-man active roster (as opposed to its reserve list which shall
include: exempt list, injured reserve list, suspended list, failure to report
list and/or retired list) on the date of the Player's Team's game immediately
preceding each payment date. The Player may be moved back and forth from the
Team'sTaxi squad and to and from the Team's roster (and receive the designated
salary contained within this contract for those respective positions) on a need
basis to be determined at the discretion of the coaching staff of each Team.
Players base salary shall be adjusted on a pro rata basis and reduced by the
total number of games missed/played during the term of this contract. This base
salary is compensation for regular season games and is not compensation for
playoff games. All playoff compensation shall be according to the schedule
provided below under the "Bonuses" paragraph entitled "Playoff Game
Compensation".
c. The Team will also pay the Player's necessary travel expenses to his usual
residence, if this contract is terminated by Team and the Player's reasonable
room expenses during the season and the Player's hotel expenses when the Player
is playing road games during the regular and post season outside the Team's home
city.
3. TAXI SQUAD MEMBERS: If the Player's contract is assigned to the
Taxi Squad for performance of Player's services and all other promises of
Player, the team will pay the Taxi Squad Members a minimum yearly salary of
$4900., (less all amounts required to be withheld by taxing authorities)
payable as follows:
a. In 14 equal payments the gross amount of $350.00 each. Payment
will be under the same schedule as subsection 2 a.,b., and c above.
B. BONUSES: In addition to the salary listed in the previous
subsections, the Team will pay the Player the following bonuses only
if the Player was on the Team's 20-man "active" roster on the day of
the game for subsections 1, 2, and 4 below and only if the following
criteria are met:
<PAGE>
1. REGULAR SEASON WIN BONUS: $200 for each regular season victory
of the Team, or $100 for each regular season tie if the Player
was on the Teams' 20-man active roster for that game.
2. PLAYOFF GAME COMPENSATION: On the Wednesday after each playoff
round, if the Player was on the Team's AFL 20-man active roster
for that playoff game an amount per game as follows:
a. FIRST ROUND: $1,000 if the Team wins the game or
$750.00 if the Team loses the game.
b. SECOND ROUND: $1,250 if the Team wins the game or $875
if the team loses the game.
c. THIRD ROUND (ArenaBowl): $1,500 if the Team wins the
game or $1,000 if the Team loses the game.
3. POST SEASON AWARDS: (a) $1,000 if the Player is selected as his
Team's Most Valuable Player (MVP) at end of the 1996 season, (b)
$1,000 if the Player is selected his Team's "Ironman" at the end
of the season, (c) $1,000 if the Player is selected the AFL's
Most Valuable Player/Ironman at the end of the season, (d) $l,000
if the Player is selected as the AFL's Offensive Player of the
Year, (e) $1,000 if the Player is selected as the AFL's Defensive
Player of the Year, and (f) $600 if the Player is selected to the
post-season "All League first Team".
C. HOUSING:. The Team will be responsible to find and provide housing,
if appropriate, for the Player if he is on the Team roster. Any tax
liability associated with this provision shall be the responsibility
of the Team and/or the Player only.
3. DELAY IN THE START AND/OR SUSPENSION OF THE TERM OF THIS CONTRACT: The
Player may delay the start and/or suspend the terms of this contract, only with
the prior written approval of the Team's General Manager, if
(A) the Player signs a contract before April 6, 1996 to play for a
team in the National Football League ("NFL"), World Football League
("WFL") or Canadian Football League, ("CFL"), and
(B1) the Player notifies the Team's General Manager, in writing,
before April 6, 1996 that the Player is delaying the start of the term
of this Contract, or
(B2) the Player was listed in the official transactions list of the
NFL, WFL or CFL as having signed an NFL, WFL or CFL contract before
April 6, 1996, or
(B3) the player is asked to participate in a National Football League
("NFL") preseason training camp after the start of this contract. If
this should occur, the player's contract may, but is not required to
be suspended with the prior written approval of the Team's General
Manager. Player understands that the Team is not obligated in any
manner to release the player from this contract.
If the Player delays the start and/or is allowed to suspend the term
of this contract, all rights and obligations of the Player, and the Team,
under the terms of this contract are suspended immediately upon written
notification before April 6, 1996 and/or written notification and approval
of the Team's General Manager if suspension is requested after the start of
the season. Once the player is no longer under contract to the NFL or CFL
team, then the terms of this contract are no longer suspended and the term
of this contract begins on the date that the Player reports to the Player's
AFL Team. However, the player must report to the Team within twenty-four
(24) hours from the date he was last under contract to the NFL, WFL or CFL
team. (The term "under contract" means until the player clears waivers from
the applicable league). The Player may not delay the start of this
contract after April 6, 1996 without prior written permission from the
Team's General Manager for only the above listed reasons.
4. RETIREMENT: In order for a Player to retire from the AFL, he must sign a
"Player Retirement Form" provided by the AFL and sent to the AFL Director of
Football Operations. The minimum period of the Player's retirement is one (1)
year from the date of notification to the AFL. If the player retires before
this contract ends, then this contract's term will be tolled between the date
the player retires and the later date of his return to Arena Football. During
the period this contract is tolled, the player is not entitled to receive any
compensation and benefits from the Team. When the Players returns as a Player
to Arena Football, the term of this contract will be extended for a period of
time equal to the length of the retirement.
2
<PAGE>
5. TRADE: At any time during the term of this contract, the Team may trade this
contract to any other Team in the AFL. If the Team trades the Player, it will
pay the player's reasonable transportation expenses to the location of his new
Team. The Player must report to his new Team he is traded to within forty eight
(48) hours of being informed of the trade. If the Team ceases or suspends
operations, the rights to the Player's services under this contract will be
subject to the AFL's by-laws, operations manual and rules and regulations.
6. SCOPE:
(A) The Player's "employment" with the Team means the player will
report promptly for and participate fully in all Team pre-season
training camps, all team meetings and practice sessions and all
pre-season, regular season, and/or playoff games scheduled by the AFL
for the Player's Team. If invited, Player may practice for and play
in any AFL All-Star Game and will fully participate in all of the
events associated with it, and will participate in all reasonable
promotional events of the AFL and the Team, throughout the entire
pre-season, regular season and playoffs.
(B) The Player is not authorized to incur any expenses on behalf of
the Team or the AFL unless authorized, in writing, by the Team's
General Manager and/or the AFL's Director of Football Operations
respectively, to do so.
7. MEDICAL POLICIES:
A. As appropriate, during the term of this Contract, the Team
may direct the Player to undergo medical examinations and treatments from a
health care provider selected and provided by the Team. The Team pays for such
examinations and treatments. The health care provider shall furnish all
relevant information pertaining to the Player to any independent health care
provider designated by the Team.
B. The Player must notify the Team through the trainer and head
coach of the Player's Team immediately if the player is injured during the term
of this Contract. The notice must include the time, place, cause and nature of
the injury. The Team reserves the right and the Player agrees to submit to an
independent physical examination at any time during the term of this contract by
a physician chosen by the Team.
8. PHYSICAL CONDITION/MEDICAL TESTING: The Player represents to the Team
that he is in and will maintain himself in excellent physical condition.
Player agrees that he will undergo a complete entrance physical examination
by the Team (including, if requested to do so, and if permitted by state law,
a substance abuse test) at any reasonable time, by a physician approved by
the Team during which physical examination Player agrees to make full and
complete disclosure of any physical or mental condition known to him which
might impair his performance under this contract and to respond fully and in
good faith when questioned by the Team physician about such condition. If
Player fails to establish or maintain his excellent physical condition to the
satisfaction of the Team physician, then the Team may terminate this
contract. When permitted by state law, in addition to taking a substance
abuse test if he is asked to do so as part of the entrance medical exam, the
Player also agrees to submit to reasonable, confidential random testing for
substance abuse during the term of this contract and the Player acknowledges
that his failure to comply with such testing will be grounds for the
immediate termination of this contract by the Team. The Player also agrees
to submit to an exit physical examination within forty-eight (48) hours after
his Team's last game of the 1996 season or at the termination of this
contract, whichever occurs earlier.
9. INJURY: If Player is injured in the performance of his services under this
contract, he must immediately report such injury to the Team trainer and
physician no later than twenty-four (24) hours after the Player's first
awareness of such injury. The Player will receive such medical and hospital
care during the term of this contract as the Team's physicians deem necessary
and appropriate in their professional judgment. If the Player is unable to
perform the services required of him as a member of his Team due to such injury,
then the Player will receive such care and compensation as provided by the Team
pursuant to applicable state laws. Players must follow the instructions of the
Team physician and trainer and keep all appointments for treatment and/or
rehabilitation. This includes traveling to meet with the physician and trainer,
if required. If the Player fails to keep appointments or follow the physician's
and/or trainer's instructions, it will be grounds for the termination of this
contract by the Team.
10. INDUCING OTHERS TO BREACH CONTRACT: The Player shall NOT, during this
contract's term, entice, induce, or persuade any other player or coach under
contract to the AFL or any AFL member team to negotiate with any other person or
organization for services as a player or as a coach.
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<PAGE>
11. TERMINATION OF CONTRACT: The rights of termination set forth in this
contract will be in addition to any other rights allowed either party by law.
The Team may terminate this contract upon written notice to the Player if the
Player at any time, fails, refuses or neglects to conform his personal conduct
to the standards of good citizenship, good moral character and good
sportsmanship; fails, refuses or neglects to keep himself in good physical
condition; fails, refuses or neglects to obey the Team's or AFL's rules; fails,
in the sole opinion of the Team, to exhibit sufficient skills or ability to
continue as a member of the Team; fails, refuses or neglects to render his
services in any manner materially breaching this contract.
12. AFL RULES AND REGULATIONS: The Team and the AFL has established reasonable
written rules for the conduct of the Player and after they are provided to the
Player, these rules are deemed a part of this contract. The Team and the AFL
may impose reasonable fines or suspensions on the Player for violating these
rules by giving the Player written notice of the amount of any fine or the
length of any suspension and the reasons for the fine or suspension and by
deducting the fine from any money due or to become due to the Player. During
any suspension, the Player is not entitled to any compensation under this
contract.
13. INTEGRITY OF THE GAME: Player recognizes the detriment to the Arena
Football League and professional football that would result from impairment of
public confidence in the honest and orderly conduct of AFL games or the
integrity and good character of AFL players. Player therefore agrees NOT to
accept a bribe or throw or fix any AFL game or attempt to do the same. Player
also agrees not to bet, legally or illegally, anything of value on the result or
margin of victory of any Arena Football game and Player agrees to not, legally
or illegally, bet anything of value on the result or margin of victory of any
professional or college football game. Player also agrees to promptly report to
the AFL Director of Football Operations, a bribe offer or an attempt to throw or
fix an AFL game. Player also agrees not to knowingly associate with gamblers or
gambling activity; not to use illegal drugs; not to provide other players with
stimulants or other drugs for the purpose of attempting to enhance on field
performance; or to be found guilty of any other form of conduct reasonably
judged by the AFL Director of Football Operations to be detrimental to the AFL
or professional football. If the AFL Director of Football Operations, in his
sole discretion, finds any player responsible for any of the above violations,
the Director of Football Operations may suspend, dismiss and/or permanently
disqualify the player from any further association with the AFL. The AFL
Director of Football Operation's findings and decisions with regard to this
matter are final, binding and unappealable.
14. RIGHTS OF PUBLICITY AND PRIVACY: The player grants to the Team and the
AFL, separately and together, the full authority to use his name, signature,
likeness and/or picture for all publicity and promotional purposes in
newspapers, magazines, motion pictures, trading cards, game programs, roster
manuals, all broadcasts and telecasts, and all other publicity and
advertising media. The player agrees to cooperate with the news media and to
participate, upon request and without further compensation that is specified
herein, in any reasonable promotional activities of the Player's team and/or
the AFL including but not necessarily limited to, the following: personal
appearances, media, television and print interviews; autograph sessions;
videos and other media. The Player also agrees NOT to engage in any
promotional, advertising, sponsorship or related activity for any entity or
purpose during the term of this Agreement without the prior, written
permission of the Team, and the AFL General Counsel, which permission will
not be unreasonably withheld if the Team and the AFL General Counsel finds
that such activity does not conflict with any and all AFL protected
trademarks, copyrights and/or logos associated with the AFL or any AFL member
team or any other protected purpose of the Team, the AFL or with any sponsors
of the Team and/or the AFL. The terms "publicity", "endorsements", and/or
"promotions", as used herein, will include, but will not necessarily be
limited to, the following: athletic gear and/or apparel supplied or provided
by the Team to the Player. In addition, the Team and the AFL may make
pictures and sound recordings of the Player alone or with others, for
photographs, computer images, motion pictures, television and other media
known or unknown. The Team and the AFL may use the pictures and recordings,
no matter by whom taken, in any manner for publicity, advertising,
promotional, or trade purposes. The rights in any pictures and recordings
belong to the Team and the AFL but not the Player. The Player may NOT use
any logo, trademark and/or copyright of the AFL for any purpose without the
prior written consent of the AFL General Counsel.
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<PAGE>
15. UNIFORM: The Player must wear the official uniform of the Team including,
but not limited to helmets, jerseys, pants, socks, wristbands, athletic shoes
and pads at all games, practices and other occasions when he wears a football
uniform or plays football in the AFL. The Player may not wear the identifying
logo, name, colors, marks, or design of any company, product or service at any
AFL football game, practice or other occasion when he represents the Team or the
AFL, including, but not limited to, logos, names, colors, marks or designs on
athletic shoes, headbands, arm and wrist bands, socks, and bandannas. Upon the
termination of this Contract, or at the end of the playing season, the Player
must return to the Team all of the uniforms and equipment in his possession or
issued to him. The Team may deduct from any payment due the Player, the value
of any uniform or equipment not returned by the Player.
16. PLAYER'S WARRANTIES: The Player warrants and represents that he is not
obligated to play football for any other football team or league during the term
of this Contract. The Player will indemnify and hold harmless the Team and the
AFL for any claims, actions, demands, losses, costs, expenses, liability and
damages with respect to any contract the Player has previously executed to play
football during the term of this Contract; will give his best services and
loyalty to the Team and the AFL and play football only for the Team; will be
neatly and fully attired in public and will always conduct himself on and off
the field according to the highest standards of honesty, morality, fair play and
sportsmanship; will not do anything detrimental to the best interests of the
Team or the AFL, and will not sponsor, participate in, operate or own any
football training, teaching, scouting or tryout camp for college or professional
players without the written permission of the AFL Director of Football
Operations; will pay all his obligations incurred in each city in which he
participates with the AFL. If the Player fails to pay any obligation which is
incurred while the Player is under contract to the Team, the Team may pay the
obligation and deduct the amount from any amount due, or to become due to the
Player.
17. DISPUTES: If the Player claims that the Team has defaulted on the payment
of any compensation or rights provided under this contract, the Player must
immediately notify AFL's Director of Football Operations, in writing, of all the
facts regarding his claim(s). In that event, the parties agree to first attempt
in good faith to mediate this dispute, before resorting to arbitration, or the
filing or any other dispute resolution procedure. In the event the parties can
not resolve the dispute then the parties hereby agree to enter into binding and
final arbitration with an independent arbitrator on the disputed claim(s). This
includes but is not limited to a dispute between Player and Team involving the
interpretation or application of any provision of this contract. All decisions
regarding such dispute will be final and binding on both the Player and the
Team.
18. ASSUMPTION OF RISK: The Player understands and agrees that there are risks
of injury, severe injury and partial and/or permanent disability associated with
playing in the AFL. These risks include the risks ordinarily associated with the
playing of football outdoors as well as other risks that are associated with the
playing of Arena football, including, but not limited to the following: the use
and/or misuses of indoor football equipment; coming into contact with side
boards or dashberboards, balls caroming off the sideboards or the endzone net
systems; players, coaches, referees and other game personnel reacting to balls
caroming off sideboards or the net system, a field that is approximately 25% of
the area of an outdoor field, but with 73% the number of players on an outdoor
field creating a higher density of people on the field; endzones that are two
yards shorter than an endzone of an outdoor field; endzones with curved corners,
different visibility due to indoor lighting, different audio conditions indoors
as opposed to outdoor, closer proximity to the fans in attendance; rules that in
some cases are different from outdoor football rules, uncovered floors beyond
the endzones, down markers with less room to be dropped onto the ground; and,
due to the smaller size field, less time to react to situations as they develop
on the field. Therefore the Player agrees to assume all risks that result from
playing the game of Arena Football.
19. PROHIBITION ON ENGAGING IN DANGEROUS ACTIVITIES: The Player agrees that he
will not engage in any dangerous activities or other activities that may expose
the Player to physical risks during the term of this contract, including but not
limited to: boxing, wrestling, motorcycling racing, auto racing, sky-diving,
bungee jumping, scuba diving or hang gliding.
20. RELEASE AND WAIVER OF CLAIMS: The Player waives and releases every claim,
demand, judgement and cause of action he may have against the Team, the AFL, the
AFL Commissioner, AFL Deputy Commissioner/ General Counsel, the AFL Director of
Football Operations, every AFL MemberTeam and their directors, officers,
stockholders or partners, for damages in connection with any decision of the
Commissioner, Deputy Commissioner, the AFL or any AFL Member Team or any injury
suffered by Player during the term of this contract.
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<PAGE>
21. ENTIRE AGREEMENT: This contract, and the documents explicitly incorporated
by reference into this contract constitute the entire agreement between the Team
and the Player and cannot be modified or supplemented orally. No change,
termination or attempted waiver of any portion of this contract is binding
unless in writing and signed by the Player and the Team.
22. EXECUTION OF CONTRACT: This contract is valid and binding upon the Player
and the Team immediately upon execution. A copy of this contract, including any
attachment to it, will be filed by the Team with the AFL League office within
10 days after execution. The AFL Director of Football Operations will have the
right to disapprove this contract on reasonable grounds, including but not
limited to an attempt by the parties to abridge or impair the rights of any
other Team, uncertainty or incompleteness in expression of the parties'
respective rights and obligations, or conflict between the terms of this
contract and the League rules and regulations then in existence. Approval will
be automatic unless, within 10 days after receipt of this contract in his
office, the AFL Director of Football Operations notifies the parties either of
disapproval or of extension of this 10-day period for purposes of investigation
or clarification pending his decision. On the receipt of notice of disapproval
and termination, both parties will be relieved of their respective rights and
obligations under this contract. Pursuant to the AFL Operations Manual, the AFL
Director of Football Operations will keep and maintain a copy of every Player's
contract listed by Team.
23. OPTION TO RENEW CONTRACT: The Team may renew this contract for one
additional one year term (the 1997 season) by paying the Player a salary equal
or greater than the salary listed in this contract. To renew the Contract, the
Team must notify the player, in writing, that it has exercised this renewal
option on or before March 31, 1997. If the Team does not notify the Player
before March 31, 1997, then this renewal option automatically expires.
24. GOVERNING LAWS: The Player understands and agrees that the Team and not the
AFL is his employer and as such, he agrees that this contract is governed by the
laws of the State of FLORIDA.
25. AMATEUR STATUS: By signing this Contract, the Player may forfeit any
amateur or collegiate standing or eligibility he may have.
26. MISCELLANEOUS: In this contract, the term "TEAM" includes the Team's
assignees.
Insert any additional contract terms, if any, here (and on additional sheets, if
needed).
*ADDENDUM A & WAIVER
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<PAGE>
ADDENDUM "A"
ORLANDO PREDATORS, LTD.
SELF INSURANCE
MEDICAL/DISABILITY PLAN
1996 SCHEDULE OF BENEFITS
A. TRAINING CAMP: Preseason training camp is a "conditional tryout
period" during which 30 or more players compete for 23 spots on the final
roster. There is no guarantee of a roster spot, however players will be
compensated during this period, as they are preforming the duties of
professional athletes (practice, meetings, preseason games, etc.).
1. Injury Benefits: 100% of medical expenses for treatment directed or
approved by the team physician. Lost time benefits will be $150.00 per week,
with a maximum payment of $600.00 per month to an aggregate of $2,000.00 or
until certified as having reached Maximum Medical Improvement, whichever occurs
first.
B. REGULAR SEASON AND PLAYOFFS: Players that make the 24 man roster as of
April 22, 1996, or are added to the roster after that date will be considered as
"rostered" players, and will be entitled to earn up to 100% of their base salary
in the event of injury during practice, or in a game.
1. Injury Benefits: 100% of medical expenses for treatment directed or
approved by the team physician. During the regular season, while the team is
still active in playoffs, or should a player finish the season still "injured",
lost time benefits shall be $350.00 per week, to a maximum disability benefit of
the contract amount (8,400.00), less amounts earned while on the active or
reserve roster.
-Should a player sustain an injury late in the season or
require post season surgery, such that he will be unable to perform in any off
season occupation, a disability benefit in the amount of $250.00 per week, to a
maximum of $1,000.00 per month , to an aggregate amount of $4,000.00 will be
paid until the player is certified by the AFL physician as having reached
Maximum Medical Improvement, or benefits have reached the aggregate amount,
whichever occurs first.
-Players must follow the instructions of the AFL physician,
and keep all appointments for treatment and rehabilitation. This includes
traveling to meet with the physician, if required. Failure to keep
appointments or follow such physician instructions will be grounds for
suspension or termination of the lost time portion of benefits.
Player's Initials
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-Player agree that team shall have a dollar for dollar
offset for any money payments that may be owed if player is either gainfully
part or full time employed up to the maximum benefits allowed in this contract.
* A more comprehensive document detailing all benefits, terms and conditions of
the AFL Self-Insurance Employee Medical/Disability Plan will be presented to
each player within 30 days of execution of this contract.
C. CATASTROPHIC DISABILITY BENEFITS: If the Player's injury in the
performance of his services under this contract results in his permanent and/or
partial disability or death, then the unpaid balance of his annual salary and
the amount due the player under the Catastrophic Benefits Plan administered by
American Specialty Underwriters (ASU) in the amounts of $250,000.00 for
Accidental Death, and/or $250,000.00 Lump Sum Presumptive Disability; if after
twelve (12) consecutive months of disability, it is medically determined that
the insured is permanently and totally disabled from ever again engaging in any
occupation due to quadriplegia, paraplegia, loss of sight of both eyes, loss of
both hands and feet, or the loss of one hand and one foot, the company will pay
the stated benefits for death and/or presumptive disability to player or, to his
stated beneficiary or, in the absence of a stated beneficiary, to his
estate. Player: Paul Franklin elects as
-----------------------------
his stated beneficiary:
------------------------------
Player's Initials
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ACKNOWLEDGEMENT AND ACCEPTANCE OF RISKS
AND RELEASE AND WAIVER OF LIABILITY
The undersigned desires to participate in various activities associated
with the sport known as arena football, including activities specifically
associated with the Orlando Predators, Limited, Pro-Vision, Inc., and Fifty
Sports, Inc. These activities include, but are not necessarily limited to;
tryouts or other activities designed to select members of the team; training;
practice activities; promotional activities and arena football games. The
undersigned realizes that there are a number of risks associated with the
contact sport involved and acknowledge that this document is intended to
record and confirm his acknowledgement and assumption of those risks
associated with the activity, in addition to reflecting his agreement to
release and waive any liability on the part of Orlando Predators Ltd.,
Pro-Vision, Inc., and Fifty Sports, Inc., arising from any and all such
activities, with the exception of liability arising from gross negligence,
willful and wanton misconduct or intentional negligence on the part of any
employee or agent of those entities. This acknowledgement, waiver, and
release is being given in specific consideration of the opportunity provided
to the undersigned to tryout for, or participate in the activities referred
in this document.
The undersigned is familiar with the activity known as arena football and
acknowledges fully the possibility of serious injury arising from the activity.
The undersigned is aware of the fact that participation in activities associated
with arena football
Player's initials
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carries with it the risk of injuries arranging from temporary soft tissue
injuries to serious and permanent disabling injuries or death. Notwithstanding
this awareness of the risks associated with the activity, the undersigned
desires to participate in those activities and hereby expressly assumes all
risks associated with, arising from or in any manner related to participation in
any activity associated with arena football, including but not limited to the
following:
1. Injuries arising from or related in any manner to any contact with any
other player or participant in any activity associated or connected with arena
football, whether such contact is inadvertent, negligent, intentional or
malicious on the part of the player or participant in the activity causing the
contact.
2. Injuries arising from any and all contact with any playing surface or
any object, fixture, barrier or devise, near, on or in the vicinity of any
playing surface while participating in any activity associated with arena
football.
3. Injuries arising from any and all contacts of any nature with any
third party, including members of any audience attending or observing any arena
football activity.
4. Injuries arising from the failure, malfunction, design or condition of
equipment utilized in any arena football activity.
5. Injuries arising while in transit to or from any arena football
activity or arising form any condition on the premises at which the activity is
conducted.
Player's initials
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6. In addition to expressly assuming all responsibility for any injuries
arising from the risks specifically identified above, the undersigned agrees to
assume all liability for any risks arising form or related in any manner to the
performance of any activity associated with arena football which is inherent
within the operation of the activity or is a reasonably foreseeable hazard
associated with the performance of any such activity. In addition to expressly
assuming all such risks, the undersigned hereby agrees to release and hold
harmless Orlando Predators Limited, Pro-Vision, Inc., and Fifty Sports, Inc.,
from any and all claims associated with, arising from or related in any manner
to the participation by the undersigned in any activity associated with arena
football, including any claims or any injuries arising in whole or in part of
any negligence on the part of Orlando Predators Limited, Pro-Vision, Inc., and
Fifty Sports, Inc.
The specific intent of the undersigned is to limit the liability of those
parties to any claims arising from gross negligence, willful and wanton, or
intentional conduct on the part of Orlando Predators Limited, Pro-Vision, Inc.,
and Fifty Sports, Inc., which shall not include any liability on the part of
those parties associated with any gross negligence, willful and wanton
misconduct, or intentional conduct on the part of any third party.
THE UNDERSIGNED SPECIFICALLY AGREES THAT HE IS UNDER NO DURESS OR
COMPULSION TO EXECUTE THIS DOCUMENT, AND THAT HE IS
Player's initials
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FREE TO DECLINE TO PARTICIPATE IN ANY ACTIVITY ASSOCIATED WITH ARENA FOOTBALL
TO WHICH THIS AGREEMENT APPLIES. THE UNDERSIGNED FURTHER AGREES THAT HE HAS
EITHER SIGNED THIS DOCUMENT AFTER OBTAINING INDEPENDENT ADVICE OF COUNSEL OF HIS
OWN CHOOSING OR AFTER INDEPENDENTLY AND VOLUNTARILY DECIDING NOT TO SEEK SUCH
COUNSEL BEFORE SIGNING THIS AGREEMENT. THE UNDERSIGNED ALSO AGREES THAT HE
UNDERSTANDS FULLY THE TERMS AND INTENT OF THIS AGREEMENT.
The undersigned further agrees that he is not relying on any oral
representations, statements or interpretations regarding the interpretation,
application or effect of this agreement, which he intends to be binding and
enforceable according to its terms. The undersigned further understands and
agrees that the terms of this agreement shall apply to any participation in any
and all activities associated with arena football from the date this document is
signed until it is revoked or withdrawn by the Orlando Predators Limited,
Pro-Vision, Inc., and Fifty Sports, Inc.
The undersigned further agrees that this document will be governed and
interpreted under the law of the State of Florida, and that exclusive venue for
any claim against the Orlando Predators Limited, Pro-Vision, Inc., and Fifty
Sports, Inc., arising form any activity covered by this agreement shall be in
Orange County, Florida.
<PAGE>
I HAVE FULLY READ AND UNDERSTAND THE CONTENTS OF THE PRECEDING PORTIONS OF
THIS DOCUMENT AND INTEND TO BE BOUND BY IT AS REFLECTED IN MY SIGNATURE BELOW.
----------------------------------
Participant
- ----------------------
Witness
- ----------------------
Witness
Player's initials
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<PAGE>
EXHIBIT 10.07
EMPLOYMENT AGREEMENT
OF
PERRY L. MOSS
THIS AGREEMENT, made this 16th, day of October, 1996, by and between ORLANDO
PREDATORS, LIMITED PARTNERSHIP, a Florida limited partnership, hereinafter
called the "Partnership," and PERRY L. MOSS, hereafter called "Moss."
W I T N E S S E T H :
WHEREAS, the Partnership, pursuant to the terms of a geographically
exclusive license agreement with Arena Football League, Inc., an Illinois
corporation, shall operate and manage the Orlando Predators (the "Team"), an
Arena Football team in the Orlando area for the 1997 season (the "Season") of
the Arena Indoor Football League (TM) (the "League");
WHEREAS, the Partnership desires to contract with Moss and Moss desires to
contract with the Partnership to serve as Head Coach and General Manager of the
Team; and
WHEREAS, the parties realize that it is in the best interest of both the
Partners and Moss that they enter into this Agreement to set forth the terms and
conditions of Moss's employment with the partnership.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Moss shall be employed as Head Coach and General
Manager for the Team, at the salary, and upon the terms and conditions set
forth in this Agreement.
2. TERM. The effective date of this Agreement shall be January 1,
1997 and it shall continue in force and effect for until December 31, 1997.
3. DUTIES. Moss shall be responsible for the management of the player
and football team development, coaching and football operations of the Team
during and for the Season and thereafter unit the expiration of this Agreement.
In pursuance thereof, and with the advice and consultation, and subject to the
superseding powers of the Partnership, Moss shall:
A. Supervise and manage the football operations staff of the Team on
behalf of the Partnership;
B. Participate, if requested by the Partnership, in the business of
the football operations of the Team and the League;
<PAGE>
C. Scout, train and select players for the Team in accordance with
the provisions of the current Team Management Agreement in effect
with the League and Arena Football League, Inc. and such
standards, rules and regulations as the League, Arena Football
League, Inc. and the Partnership shall develop and apply to the
football operations of the Team;
D. Participate and cooperate in the operation of such League tryout
and training camps as may be conducted on a League-wide basis;
E. Participate and cooperate in such player assignments, transfers,
exchanges, trades, acquisitions and releases as may be required
by the Partnership;
F. Perform all the necessary and customary duties of the G. M. Head
Coach of a professional sports team, including the development of
game strategies, player performance standards, play preparation,
and the performance, or supervision of the performance, of all
matters relating to game preparation and play;
G. Supervise player conduct and demeanor, and impose such reasonable
disciplinary manners and sanctions as may be necessary to
maintain appropriate player conduct and demeanor, subject to the
rules, limitations and standards which may be developed and
imposed by the Partnership;
H. Participate and assist, if requested by the Partnership, in the
development and maintenance of effective public relations with
the national and local print, radio and television media, and
project and promote a positive and enthusiastic attitude
concerning Arena Football, the Partnership, the League and the
Team;
I. Cooperate with the Team and the Partnership in such promotional
activities of the Partnership, the League and the Team as may be
reasonably required, including but not limited to personal
appearances, radio, television and print interviews, autograph
sessions and the like;
J. Appear, at the request of the Partnership and upon mutually
agreeable terms, as host or guest on any Team or Partnership
sponsored local or national radio or television broadcast upon
mutually agreeable terms;
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<PAGE>
K. Grant to the Partnership (and Moss hereby so grants to the
Partnership) the right to use Moss' name, portrait, and picture
likeness and game or practice performance in all exhibitions,
descriptions and representations of the football games of the
Team or the field, or by radio broadcast, telecast, motion
pictures, videotape photograph or any other media, in connections
with any and all promotional advertising or trade purposes of the
Partnership and/or Team;
L. Perform such other duties, or expand, reduice or otherwise alter
the role, title and scope of the duties herein described, as may
be reasonably required by the Partnership to provide for the
successful development of Arena Football, the Partnership, the
League and the Team.
4. DEVOTION FULL-TIME TO SERVICE OF THE PARTNERSHIP: Moss agrees to
devote his full time to the business of the Partnership and he shall not engage
in or carry on or be employed by, directly or indirectly, any other business or
profession without the consent of the Partnership.
5. COMPENSATION. The Partnership shall pay Moss, and Moss shall accept
from the Partnership, in full payment for Moss' services under this Agreement,
as follows:
A. SALARY. The gross salary before deductions payable by the
Partnership to Moss during the term of this Agreement shall be
SEVENTY THOUSAND AND NO/100 DOLLARS ($70,000.00) per annum.
Payments shall be made bi-weekly.
B. BONUS. Moss shall additionally receive a bonus of FIVE THOUSAND
AND NO/100 DOLLARS ($5,000.00) per "Home" League Playoff Game, or
TWO THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($2,500.00) per Away
Playoff Game, payable in the event of and upon receipt by the
Partnership of written notification from the League of selection
of the Team to participate in the League Playoffs at the end of
the Season. Moss shall receive an additional bonus of FIVE
THOUSAND AND NO/100 DOLLARS ($5,000.00) payable in the event the
Team wins the Arena Football League Championship. Bonus to be
paid within seven (7) days of when earned.
C. INSURANCE. Moss shall receive in accordance with an insurance
program to be instituted by the Partnership, major medical
insurance for Moss and Moss's spouse. The Partnership shall pay
50% and Moss shall pay 50% of the premiums of said insurance
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<PAGE>
plan. The Partnership shall pay, if available through a group,
50% of the premiums for, a life insurance policy insuring the
life of Moss.
6. REIMBURSABLE EXPENSES. The Partnership may reimburse Moss for
reasonable and necessary expenses incurred by Moss in furtherance of the
business and affairs of the Team and the Partnership but only in the event an
expense reimbursement policy is adopted by the Partnership, and only in the
amounts allowed by the Partnership's budget levels and only with pre-approval
for such expenses according to the Partnership's rules and regulations for such
expenses. Such reimbursement shall be made as soon as reasonable practicable
after such expenditures are made, against presentation of signed and itemized
expense reports and in accordance with the travel and business policies which
the Partnership may promulgate.
6B. TRAVELING EXPENSE. Moss and Moss's wife will be paid by the Team all
airline and room costs incurred while attending an "away" Orlando Predator game.
7. USE OF VEHICLE. In the event (but only in the event) that pursuant
to the terms of a sponsorship or advertising agreement approved by the
Partnership, a sufficient number of automobiles are made available for use by
the Team, Moss shall be entitled to the use of one such automobile; provided
however, that such automobile shall first be made available for any reasonable
business use by the Team, and for Moss' personal use only as and to the extent
that such reasonable business use is not required.
8. OTHER BENEFITS. Moss shall be entitled to those usual and customary
benefits which shall be offered by the League to the Head Coach for all other
League teams. Without limiting the foregoing, such benefits may include major
medical health insurance, worker's compensation, and group life insurance,
disability insurance and related benefits as and when such benefit packages are
developed for League employees. In addition, Moss shall be entitled to thirty
(30) days of vacation time per year, without interruptions or reduction of any
salary payments or other benefits otherwise due pursuant to the terms of this
Agreement; provided however, that Moss shall give reasonable prior notice to the
Partnerships of any period during which Moss shall be absent due to vacation,
and shall arrange for the effective performance of his duties and obligations
during any such absence and provided further, that Moss shall not schedule any
vacation period so as to adversely affect the football operations of the Team.
Vacation time to which Moss is entitled, but which remains unused at the
conclusion of this Agreement, shall not accumulate or accrue but shall be deemed
to be waived by Moss.
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9. LIMITATION ON AUTHORITY. Moss shall have no authority:
A. to pledge the credit of the Partnership;
B. To bind the Partnership under any contract, agreement, note,
mortgage or otherwise;
C. To release or discharge any debt due the Partnership;
D. To sell, mortgage, transfer, or otherwise dispose of any assets
of the Partnership.
10. DEATH OF MOSS -- SALARY CONTINUATION. In the event Moss should die
prior to the termination of his employment, the Partnership shall pay, by
reason of death of Moss and as additional compensation for the services
rendered to the Partnership by Moss during his lifetime, his regular salary
for the month in which his death occurred, plus any and all Life Insurance.
11. TRADE SECRETS; PROPRIETARY INFORMATION. In the course and scope of
this Agreement, Moss will be exposed to certain trade secrets, sensitive
financial data, sources of supply, product specifications and other confidential
information concerning the business of the Partnership which require protection.
Moss understands that, among other things, methods of operation, sensitive
financial and business information concerning players, other persons and
entities affiliated or doing business with the Partnership scouting reports,
playing strategies, and the nature or extent of research projects being
conducted or contemplated by or on behalf of the Partnership, are all
confidential, and are not at any time during or after the term of this Agreement
to be revealed to or used for any reason, by anyone outside the Partnership,
without the Partnership's specific, written authorization. Moss further agrees
that he will not indulge or otherwise commercialize such confidential
information, so long as the confidential or secret nature of such information
shall remain, whether such information belongs to the Partnership or to some
other entity to which the Partnership owes or may be held to owe some obligation
of confidentiality or to anyone outside the Partnership, including, but not
limited to, competitors of the Partnership or businesses engaged in a business
similar to that of the Partnership. On the termination of this Agreement, Moss
shall not take from the premises of the Team or from the Partnership or
otherwise retain, and shall surrender to the Partnership, any such confidential
information and any records, files or other documents, or copies thereof,
relating to the business of affairs of the Partnership.
In the event of a breach or threatened breach by Moss of the provisions of
this Section, the Partnership shall be entitled to an injunction restraining
Moss from disclosing or permitting the disclosure in whole or in part of any and
all of the information set forth herein or from rendering any services directly
or
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<PAGE>
indirectly to any person, firm, corporation, association, or other entity to
whom such information, in whole or in part, has been disclosed or is threatened
to be disclosed. Nothing herein shall be construed as prohibiting the
Partnership from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Moss.
Moss further acknowledges that the Partnership's source of material and its
practices and methods as such are valuable, special and unique assets of its
business, and Moss covenants and agrees to keep all such matters secret from all
persons except authorized officers and employees of the Partnership. This
entire sectional shall be construed as a covenant independent of any other
provision of this Agreement, and the existence of claim or cause of action of
Moss against the Partnership, whether based upon this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Partnership of these
covenants. In the event of a breach or threatened breach of this Paragraph, the
non-prevailing party will pay the prevailing party's attorney's fees in any
action brought to enforce this provision on all trial and appellate levels.
12. COVENANT NOT TO COMPETE. Moss agrees that during the term of this
Agreement under this Agreement and, for a period of one (1) year after same, he
will not, within the southeast region of the United States, for his own account
or for the account of others as an officer, director, stockholder, owner,
partner, employee, promoter, consultant, manager or otherwise, participate in
the promotion, financing, ownership, operation or management of, or assist in or
carry on through a proprietorship, corporation, partnership, other form of
business entity or otherwise, any business activity directly or indirectly
involved in the management or operation of any indoor football league, except as
such league(s) shall be either operated by the Partnership, or licensed to
operate by the Partnership.
If any court of competent jurisdiction shall at any time deem the time
period or the extent and scope of the covenant not to compete as set forth in
this Paragraph to be unreasonable or excessive, then: (i) all provisions of this
Paragraph not so deemed to be excessive shall nevertheless remain in full force;
(ii) the restrictive time period herein shall be deemed to be the longest period
permissible by law; and (iii) the scope of this covenant shall be deemed to be
as extensive as permitted by law under the circumstances. The court in such
case shall reduce the time period and/or scope of such covenant to permissible
duration and extent.
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<PAGE>
13. TERMINATION. Moss' employment under this Agreement may be terminated
by the Partnership as defined and provided below:
A. EVENTS CAUSING TERMINATION. Subject to the provisions of
Subsection B below, Moss shall be subject to termination immediately
upon written notice after the occurrence of any of the following
events:
(i) Moss is determined by the Partnership to be guilty of acts or
fraud, dishonesty, or similar misconduct;
(ii) Moss is determined by the Partnership to have been negligent in
the performance of those duties required of him under this Agreement;
(iii) Moss is determined by the Partnership to have failed or refused
to fulfill the duties and responsibilities specifically required of
Moss pursuant to the terms of this Agreement;
(iv) Moss is determined by the Partnership to have become mentally or
physically incapacitated to such extent that Moss is or shall be
unable to perform his duties of Head Coach and G. M. Coach for a
period of more than three (3) weeks. Upon termination of Moss'
employment solely under this Subsection (iv), the Partnership shall
pay to Moss three (3) months of Moss' gross salary of $5,833.00 per
month for a total of $17,500.00, less any accelerated payments made
to Moss during the months of January through July for the year of
termination as set forth in Section 5 of this Agreement. Accelerated
payments shall be defined as the amounts paid to Moss in excess of
$5,833.00 per month during the months of January through July of the
year of termination.
(v) Moss is determined by the Partnership to have used intoxicants,
stimulants, or any other substance in a manner, to an extent, or with
the effect that Moss is impaired in the performance of his duties
hereunder;
(vi) Moss accepts a bribe or agrees to throw or fix any Arena Football
game, or bets money or anything of value on the outcome or score of
any Arena Football game, or knowingly associates with gamblers or
gambling activity;
(vii) Moss is convicted of a felony or misdemeanor involving moral
turpitude, or is determined by the Partnership to have engaged in
conduct that brings discredit to the Partnership, or impairs the
integrity of the League or the game of Arena Football.
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B. PROCEDURE FOR TERMINATION. Any determination by the Partnership to
terminate Moss's employment under this Agreement pursuant to this
Paragraph shall require notice to Moss at the address provided in this
Agreement.
C. CESSATION OF PAYMENTS. Upon termination of Moss pursuant to this
Paragraph by the Partnership, the Partnership shall be under no
further obligation to Moss except to pay to Moss such amounts as have
been accrued up to the time of such termination. The failure of the
Partnership to exercise any right whether granted pursuant to the
provisions of this Paragraph hereof, under the law or otherwise, after
receiving notice or knowledge of any breach of the Agreement by Moss,
shall not be deemed a waiver by the Partnership of any subsequent
breach by Moss of a similar or different nature.
D. ACKNOWLEDGEMENT. Moss agrees to fully accept and adhere to all
rules and regulations of the Partnership, as listed in the Arena
Football Rule Book and as additionally instituted presently or in the
future by the League or Arena Football League, Inc. Moss acknowledges
and agrees that any failure to comply with those rules and regulations
could lead to Moss being:
(i) Fined;
(ii) Suspended for a game or games; or
(iii) Dismissed by the League.
Moss further acknowledges that all decisions regarding rules and
regulations of Arena Football fall solely with the Partnership, the
League and Arena Football League, Inc.
14. CHANGE OF PARTNERSHIP OR TEAM FORM. In the event that, at any time
prior to the expiration of the term of the Agreement: (i) the Partnership
dissolves and/or reconstitutes itself in a different form, structure, or manner
of doing business (including, but not limited to, a corporation or franchise
association form); or (ii) the Partnership sells, assigns, transfers, or
otherwise conveys its right, title and interest in the ownership, operation
and/or management of the Team, then Moss shall nevertheless be entitled to the
salary set forth in Section 5 for the remainder of the term of this Agreement.
15. BREACH OF REMEDIES. Moss acknowledges that a breach of any of the
covenants in this Agreement would cause irreparable harm to the Partnership for
which there is no adequate remedy at law. In the event of a breach or a
threatened breach of the provisions of this Agreement, the Partnership may seek
an injunction restraining the event or continuation of such breach. Moss hereby
agrees and acknowledges that the covenants set forth herein, shall apply with
full force and effect regardless of when, how or why
8
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this Agreement is terminated and whether such termination is effected by the
partnership or by the parties hereto mutually. With respect to each and every
breach or violation or threatened breach or violation by Moss or any of the
covenants set forth herein, the Partnership, in addition to all other remedies
available at law or in equity, shall be entitled to enjoin the commencement or
continuance thereof and may, without notice to Moss, apply to any court of
competent jurisdiction for entry of an immediate restraining order or
injunction. In addition, Moss agrees to immediately, upon demand, account for
and pay over to the Partnership an amount equal to all compensation, commission,
bonus, salary, gratuity, or other remuneration of any kind directly or
indirectly received by Moss resulting from an activity in breach or violation of
any of the covenants as set forth in this Agreement, such amount being agreed to
constitute a partial liquidation of damages in that the amount of actual damages
to be sustained by the Partnership on account of any such breach or violation is
not capable of measurement. The Partnership may pursue any of the remedies
described herein concurrently or consecutively in any order as to any such
breach or violation, and the pursuit of one of such remedies at any time will
not be deemed an election of remedies or waiver of the right to pursue any of
the other such remedies.
16. NOTICES. Any notices and communications required to be given under
this Agreement shall be in writing and shall be sent registered or certified
mail, postage prepaid or delivered by hand to the parties at the addresses set
forth below, or at such other addresses as any party may designate to the other
by notice hereunder.
If to the Partnership: Orlando Predators, Limited Partnership
603 Main Street
Post Office Box 1100
Windermere, Florida 34786-1100
If to Moss: Perry L. Moss
217 Williams Road
Winter Springs, Florida 32708
17. INVALID PROVISION. The invalidity or unenforceability of a particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
18. ASSIGNMENT. This Agreement is personal and may not be assigned by
Moss, but may be assigned by the Partnership, if so assigned, shall inure to the
benefit of and be binding upon the successor and assigns of the Partnership.
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19. MODIFICATION. No change or modification of this Agreement shall be
valid unless the same be in writing and signed by the parties hereto.
20. APPLICABLE LAW AND BINDING EFFECT. This Agreement shall be construed
and regulated under and by the laws of the State of Florida, and shall inure to
the benefit of and be binding upon the parties hereto and their heirs, personal
representatives, successors and assigns.
WHEREAS, the parties hereto have hereunto caused this Agreement to be
executed on the day and year first above written. Signed, sealed and delivered
in the presence of:
ORLANDO PREDATORS, LIMITED
PARTNERSHIP, a Florida
limited partnership
By: FIFTY SPORTS, INC., a
Florida corporation as General
Partner
/s/ [illegible] By: /s/ Donald R. Dizney
- ------------------------ ---------------------------------
Donald R. Dizney
Managing General Partner
- ------------------------
/s/ [illegible] By: /s/ Perry L. Moss
- ------------------------ ---------------------------------
Perry L. Moss
- ------------------------
"MOSS"
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EXHIBIT A
PAY PERIOD PAY
ENDING AMOUNT
------------- -------------
01/13/95 $ 2,692.30
01/27/95 2,692.30
02/10/95 2,692.30
02/24/95 2,692.30
03/10/95 2,692.30
03/24/95 2,692.30
04/07/95 2,692.30
04/21/95 2,692.30
05/05/95 2,692.30
05/19/95 2,692.30
06/02/95 2,692.30
06/16/95 2,692.30
06/30/95 2,692.30
07/14/95 2,692.30
07/28/95 2,692.30
08/11/95 2,692.30
08/25/95 2,692.30
09/08/95 2,692.30
09/22/95 2,692.30
10/06/95 2,692.30
10/20/95 2,692.30
11/03/95 2,692.30
11/17/95 2,692.30
12/01/95 2,692.30
12/15/95 2,692.30
12/29/95 2,692.30
------------- -------------
TOTAL SALARY: $ 70,000.00
11
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EXHIBIT 10.08
AGREEMENT OF PURCHASE AND SALE
This Agreement of Purchase and Sale (this "Agreement") is made to be effective
on January 14, 1997 (the "Effective Date"), by and between THE ORLANDO
PREDATORS, LTD., a Florida limited partnership ("Seller"), and THE MONOLITH
LIMITED PARTNERSHIP, a Delaware limited partnership ("Buyer"). This Agreement
contemplates a transaction in which the Buyer will purchase certain assets and
assume certain of the liabilities of Seller in return for the consideration set
forth herein. In consideration of the mutual promises, agreements and covenants
set forth in this Agreement, Buyer and Seller hereby agree as follows:
ARTICLE I - SALE AND PURCHASE OF ASSETS
1.1 SALE AND PURCHASE OF ASSETS. Subject to, and upon the terms and
conditions hereof, and on the basis of the agreements, representations and
covenants contained in this Agreement, Seller shall sell, transfer, assign,
convey, set over and deliver to Buyer, and Buyer shall purchase and acquire
from Seller at the Closing all of the assets of Seller used in the operation
of a professional arena football franchise known as the Orlando Predators and
located in Orlando, Florida (the "Business"), including, without limitation,
the rights, properties, and other assets listed and described below, except
for the Excluded Assets (hereinafter collectively referred to as the
"Assets"):
1.1.1 FRANCHISE LEAGUE MEMBERSHIP. All of the Seller's right,
title and membership interest in and to the Arena Football League, Inc. (the
"League")
1.1.2 EQUIPMENT. All of Seller's sport and training equipment and
uniforms.
1.1.3 INVENTORY. All of Seller's inventory of souvenir and
licensed merchandise relating to the Business (the "Inventory").
1.1.4 PERSONAL PROPERTY. All of Seller's furniture,
furnishings, supplies and other tangible personal property listed on the
attached EXHIBIT 1.1.4.
1.1.5 CONTRACTS. All of the leases, guaranties, warranties,
agreements, governmental permits or licenses, operating contracts, agreements
for the purchase or the sale of spectator tickets, supplies, products or
other personal property or for the furnishing or receipt of services,
agreements concerning confidentiality or noncompetition, service and facility
contracts, and licenses and other rights relating to the ownership,
management and operation of the Business to which Seller is a party or by
which Seller is bound and all agreements under which the consequences of a
default or termination could have a materially adverse effect on the
Business, financial condition, operations, results of operations, or future
prospects of the Business (the "Contracts"), including, but not limited, to
those Contracts listed on the attached EXHIBIT 2.3.
1.1.6 INTELLECTUAL PROPERTY. All of Seller's rights (if any) in
and to all trademarks, trade names (including, but not limited to the
"Orlando Predators"), service marks, and logos related to or used in the
Business, together with all translations, adaptations, derivations and
combinations thereof, and all other proprietary rights of Seller, including,
without limitation, all
<PAGE>
telephone exchanges and numbers, computer programs and software and all
copies and tangible embodiments thereof. Seller agrees to change its name to
exclude the phrase "Orlando Predators" or any variations thereof.
1.1.7 DOCUMENTS. All ticket holder lists, mailing lists,
sponsor lists, records, correspondences, sales and marketing records and
literature.
1.2 EXCLUDED ASSETS. Anything contained in this Agreement to the contrary
notwithstanding, cash on hand or in bank accounts and accounts receivable for
the fiscal year containing the 1996 arena football season and personal property
of the nature described in Section 1.1.4 but not listed on Exhibit 1.1.4 shall
not be included in the Assets (the "Excluded Assets").
ARTICLE II - CLOSING AND PURCHASE PRICE
2.1 THE CLOSING. Subject to the satisfaction of the conditions set
forth in Article III, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on or before January 31, 1997,
provided, however, that upon payment of the Additional Earnest Money Deposit
(as that term is defined below), the Closing shall be extended to February
17, 1997 (the "Closing Date"), at the time mutually agreed to by Buyer and
Seller, such time to be during normal business hours based on Eastern
Standard Time, in Orlando, Florida. Provided, however, that in the event that
the League does not approve the transaction contemplated by this Agreement on
or before February 17, 1997 (the "Approval Date"), which Approval Date may be
extended, thereby correspondingly extending the Closing Date, fourteen days
at the election of Seller, upon giving written notice to Escrow Agent and
Buyer, then the condition set forth in Section 3.1 (b) shall be deemed to
have failed to be satisfied and the provisions of Section 3.3 shall apply.
2.2 CONSIDERATION/PURCHASE PRICE. In consideration of the transfer of the
Assets and the other undertakings of Seller hereunder, Buyer shall pay to Seller
the sum of $2,325,000.00 (the "Purchase Price") payable as follows:
2.2.1 EARNEST MONEY. $200,000 in immediately available funds
(the "Initial Earnest Money Deposit") within 24 hours following execution of
this Agreement by Seller, by wire transfer to Lowndes Drosdick Doster Kantor
& Reed, P.A. ("Escrow Agent"). An additional earnest money deposit of
$200,000 (the "Additional Earnest Money Deposit") shall be due and payable by
Buyer on or before January 31, 1997. If Buyer fails to timely make the
Additional Earnest Money Deposit, the Initial Earnest Money Deposit shall be
forfeited to Seller, Buyer shall remain liable to Seller to pay the
Additional Earnest Money Deposit and Buyer's rights hereunder shall
terminate. Escrow Agent agrees to hold the Initial Earnest Money Deposit and
the Additional Earnest Money Deposit (collectively, the "Earnest Money
Deposit") in trust (pursuant to the provisions of an escrow agreement in form
and content reasonably satisfactory to Buyer, Seller and Escrow Agent) to be
disbursed pursuant to the terms and conditions of this Agreement. The Earnest
Money Deposit shall be refundable only in accordance with the provisions of
this Agreement, specifically including, but not limited to, Sections 3.3 and
8.2.
2.2.2 PROMISSORY NOTE. $450,000 shall be evidenced by a secured
promissory note, recourse to Buyer, in the original principal amount of
$450,000 (the "Note"). The Note will be secured by a security interest in the
Assets. The Note will bear simple interest at the rate of one
2
<PAGE>
percent (1%) per annum above the Wall Street Journal Western Region Prime Rate,
as the same may change from time to time but no more often than daily. The Note
will mature on the first anniversary date of the Closing Date at which time the
outstanding principal balance and all interest accrued thereon shall be due and
payable. Buyer shall be entitled to offset, from time to time, against amounts
payable under the Note as follows:
(a) Any damages, liabilities, costs and expenses in excess of
$10,000 incurred by Buyer as a result of the breach by Seller of any
representation, warranty or Agreement of Seller contained herein; and
(b) In the event that it is determined that Seller has retained
any revenues, whether generated from ticket sales, from sponsors or otherwise,
with respect to the fiscal year end which includes the 1997 arena football
season which retained revenues were not offset from the amounts due under
Section 2.2.3, then for each dollar of such revenues retained by Seller, Buyer
shall be entitled to reduce the amount due under the Note by one dollar and, to
the extent that such offset is not sufficient for Buyer to fully recoup the
retained revenues, Seller shall be liable to Buyer for the deficiency.
2.2.3 BALANCE OF PURCHASE PRICE. The balance of the Purchase
Prices shall be paid in immediately available funds on the Closing Date, as
reduced and offset, dollar for dollar, by any revenues, whether generated from
ticket sales, from sponsors or otherwise, retained by Seller with respect to the
fiscal year end which includes the 1997 arena football season (the "Revenues"),
which as of the date of the execution of this Agreement is estimated by Seller
to be approximately $400,000. Seller will deliver to Buyer at the Closing a
statement certifying the Revenues as of the Closing Date.
2.3 ASSUMPTION OF CONTRACTS. Upon Closing and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
all of the liabilities and obligations which arise under the Contracts listed on
the attached EXHIBIT 2.3 and after the Closing (the "Assumed Liabilities").
2.4 BULK SALE. To the extent such laws are applicable to the transactions
contemplated herein, Buyer and Seller waive compliance with the uniform
commercial code provisions of the laws of any jurisdiction regarding bulk
transfers, and Seller covenants and agrees to pay and discharge when due, unless
contested by appropriate proceedings, all creditors and all liabilities of
Seller pertaining to the Business that are not among the Assumed Liabilities.
2.5 PURCHASE PRICE ALLOCATION. Buyer and Seller acknowledge that they
will be required to comply with the requirements of Code Section 1060 including
all applicable recording requirements thereunder. Accordingly, the parties will
execute, at the Closing, an agreement allocating the Purchase Price in a manner
reasonably satisfactory to Buyer and Seller.
2.6 DELIVERY OF INSTRUMENTS AT CLOSING. At the Closing, Seller shall
execute and deliver to Buyer a bill of sale, an assignment and assumption
agreement, endorsements and other instruments and documents reasonably
satisfactory in form and substance to the parties and their
3
<PAGE>
counsel as shall be effective to vest in Buyer on the Closing Date good title
to the Assets, subject to no lien, charge, security interest or other claim,
right, interest or encumbrance, other than those which constitute the Assumed
Liabilities. Buyer shall execute and deliver to Seller such assignment and
assumption agreements (pursuant to which Buyer shall have assumed the
obligations of Seller in respect of the Assumed Liabilities), security
agreements and other instruments and documents reasonably satisfactory in
form and substance to the parties and their counsel.
2.7 LEAGUE MEMBERSHIP AGREEMENT. Buyer shall execute a membership
contract with the League at the closing in form and substance mutually agreed to
by Buyer and the League.
ARTICLE III - CONDITIONS TO CLOSING
3.1 CONDITIONS TO BUYER'S OBLIGATION. The obligation of Buyer under
this Agreement to purchase the Assets from Seller is subject to the
satisfaction, of the following conditions:
(a) The representations and warranties made by Seller in this
Agreement shall be true, accurate and complete in all material respects on and
as of the Closing Date with the same force and effect as if such representations
and warranties had been made on and as of such date:
(b) Obtaining, on or before the Closing Date, the required
consents and approvals of the League (and in connection therewith, Buyer
covenants and agrees to use commercially reasonable efforts to obtain such
consents and approvals); and
(c) On the Closing Date, no claim, investigation, proceeding or
litigation, either administrative or judicial, shall be threatened or pending
against Seller for the purpose of enjoining or preventing the consummation of
the transactions contemplated by this Agreement or otherwise claiming that
this Agreement or the consummation hereof is improper, or which might
materially or adversely affect the Business or the right of Buyer to continue
the same.
3.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller under
this Agreement to sell the Assets to Buyer is subject to obtaining, on or before
the Closing Date, the required consents and approvals of the League (and in
connection therewith, Seller covenants and agrees to use commercially reasonable
efforts to obtain such consents and approvals).
3.3 FAILURE TO MEET A CONDITION. In the event that any of the condition
set forth in Sections 3.1 or 3.2 are not timely satisfied or waived by the
appropriate party(ies), then the Earnest Money Deposit shall be immediately
refunded by Escrow Agent to Buyer, without requirement for any further
instruction by Buyer or Seller and despite any conflicting instruction from
Seller, and this Agreement shall be void and of no further force or effect and
neither party having any further duty or obligation to the other under this
Agreement.
4
<PAGE>
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SELLER. In order to induce Buyer
to enter into this Agreement, Seller hereby makes the following representations
and warranties to Buyer each of which, except as hereinafter provided, shall be
deemed to be material:
4.1.1 ORGANIZATION OF SELLER. Seller is a limited partnership
duly organized, validly existing and in good standing under the laws of Florida.
4.1.2 AUTHORITY. Seller has all necessary corporate power and
authority to own the Assets and has the right, power and authority to assign and
transfer the Assets, in accordance with the terms and conditions hereof. Seller
has all necessary power and authority to execute, deliver and perform this
Agreement. All proceedings of Seller required to authorize the legal and valid
execution, delivery and performance of this Agreement and the consummation of
all of the transactions contemplated by this Agreement, have been duly and
validly completed. This Agreement has been duly and validly authorized,
executed and delivered by, and is the valid and binding obligation of Seller
enforceable in accordance with its terms.
4.1.3 NO CONSENTS. Except for any required consent by the League
and except for any consent required by the City of Orlando, Florida in
connection with the assignment of the arena facilities lease, no consents,
approvals, orders or authorizations are required for the execution and delivery
of this Agreement by Seller, for the transfer and assignment of the Assets, or
for the consummation by Seller of the transactions contemplated hereby.
4.1.4 EXECUTION AND PERFORMANCE: NO VIOLATION OF LAWS,
AGREEMENTS; NO LIENS. The execution and delivery of this Agreement by Seller
and the consummation by Seller of the transactions contemplated hereby (i) are
not prohibited by, and do not violate any provision and will not result in the
breach (with or without the giving of notice, lapse of time or both) of, or
accelerate or permit the acceleration of the performance required by the terms
of (a) any applicable law, rule, regulation, judgment, decree, order or other
requirement of the United States or of any State of the United States or of any
court, authority, department, commission, board, bureau, agency or
instrumentality of either of the foregoing; (b) the Certificate or Agreement of
Limited Partnership of Seller, and any amendments thereto; or (c) any material
contract, agreement or commitment relating directly to the Business and to which
Seller is a party or is bound or which is material to the operations of Seller
with respect to the Business, and (ii) have not resulted and will not result in
the creation or imposition of any lien, encroachment, easement, encumbrance,
mortgage, hypothecation, equity, charge, restriction, possibility of reversion
or other similar conflicting ownership or security interest material to the
Business in favor of any person or entity on any Asset.
4.1.5 ALL ASSETS USED IN THE BUSINESS. The description of the
Assets in Section 1 above is a true, correct and complete description of the
Assets which: (a) are beneficially owned by Seller and used in the conduct of
the Business and (b) are all the assets (except the Excluded Assets) used in the
Business that are material to the operation of the Business, and there are no
other assets material to the continued operation of the Business in the ordinary
course.
5
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4.1.6 BUSINESS IN THE ORDINARY COURSE. During the years 1994 and
1995 and through the Effective Date, Seller has conducted the Business in the
ordinary course or otherwise in a manner that would not result in a material or
adverse change in the Business, financial condition, results of operation, or
future aspects of the Business.
4.1.7 NO LITIGATION. There are no injunctions, orders, decrees or
rulings outstanding or actions, suits, claims, investigations or other
proceedings pending or, to the best of Seller's knowledge, contemplated or
threatened against Seller that could affect Seller's ability to perform its
obligations under this Agreement.
4.1.8 COMPLIANCE. Except for such violations that will not
materially and adversely affect the Assets or the Business or its prospects or
financial condition, Seller has complied in all material respects with each and
is not in material violation of any federal, state, county and municipal law,
ordinance, code or regulation or governmental rule or regulation, directives or
orders to which the Business and/or the Assets are subject.
4.1.9 FINANCIAL STATEMENTS. The financial statements of Seller
for the years ended December 31, 1994 and 1995 as prepared by Blake Kuehler
Babione & Pool and the internal financial statements of Seller for the period
January 1, 1996 through November 30, 1996, including any notes thereto: (i)
were prepared in accordance with the books and records of Seller (which books
and records are correct and complete in all material respects) and in
accordance with generally accepted accounting principles consistently
applied; (ii) are correct and complete in all material respects; (iii)
present fairly, in all material respects, the results of operations and the
financial condition of the Business as and at the dates and for the periods
subject thereto; and (iv) reflect no other business but the Business. Since
the most recent fiscal year end, there have not been, to Seller's knowledge,
any material adverse changes in the financial condition, results or operation
or future prospects of the Business. There are no material expenses related
to the Assets and/or the Business that have not been included in the
Financial statements and all expenses relating to the Assets and/or the
Business paid by persons other than Seller have been properly allocated to
the Assets and/or Business and are reflected in the Financial statements.
All income reflected in the Financial statements relate to the Assets and/or
the Business and have been generated in the ordinary course.
The Financial statements for the fiscal year which includes the 1996 arena
football season will reflect that: (a) revenues exceeded $2,600,000; (b) player
salaries were not more than $300,000; (c) coaches salaries were not more than
$170,000; and (d) all player and coaches salaries have been paid in full and
there are no accrued and unpaid salaries for any prior seasons.
4.1.10 TITLE TO THE ASSETS. Seller is the owner of the Assets to
be conveyed pursuant hereto, has good, marketable and indefeasible title to the
Assets and shall convey to Buyer at the Closing the Assets, free and clear of
any and all liens or encumbrances whatsoever except the Assumed Liabilities.
4.1.11 COMPENSATION. Seller, (i) has paid, if and when due, and
until the Closing Date will pay if and when due, all salaries, bonuses,
commissions and compensation for all periods
6
<PAGE>
prior to the Closing Date due to all employees, consultants, players, coaches
and contractors of Seller; (ii) has withheld and paid over, and until the
Closing Date will withhold and pay over if and when due, to the proper tax
receiving offices, all taxes (including state and federal income, FICA and FUTA
taxes), required to be withheld from or paid with respect to such payments for
all periods prior to the Closing Date; and (iii) has paid (to the best of its
knowledge), and will pay, if due and payable in connection with the period
before the Closing, any and all taxes of any nature whatsoever validly imposed
on it which could or might affect Buyer's enjoyment and use of the Assets or
operations of the Business, or result in any liability to Buyer.
4.1.12 DISCLOSURE. The representations, warranties and covenants
of Seller contained in this Agreement, all information contained herein, in the
Exhibits attached to this Agreement, and any other documents furnished and all
written information delivered to Buyer pursuant to this Agreement or otherwise,
are and shall be on the Closing Date, correct and complete in all material
respects. Such information does not make any untrue statement of a material fact
or omit to state all material facts required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements are made, correct, complete and not misleading. All information
relating to Seller and the operation of the Business which is known or would on
reasonable inquiry be known to Seller and which could reasonably be anticipated
to have a material adverse effect on the Assets or the Business has been
disclosed to Buyer and any such information arising prior to the Closing Date
will forthwith be disclosed to Buyer. All underlying documents incorporated or
referred to in such Exhibits or in documents furnished to Buyer pursuant to this
Agreement are true and correct copies thereof, as the same have been or shall be
amended or modified.
4.1.13 MEMBERSHIP AGREEMENT. The membership interest in the League
is in good standing and there exists no event of default or an event which with
the passage of time, the giving of notice or both, will become an event of
default under the membership agreement with the League or any provisions of the
League's Bylaws or any other governing instruments.
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER. In order to induce Seller to
enter into this Agreement, Buyer hereby makes the following representations and
warranties to Seller, each of which shall be deemed to be material.
4.2.1 ORGANIZATION. Buyer is a Delaware limited partnership, duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which is was organized.
4.2.2 AUTHORITY. Each of the persons executing this Agreement on
behalf of Buyer is duly authorized to do so. Buyer has full right and authority
to enter into this Agreement and to consummate the transactions contemplated
herein. This Agreement constitutes the valid and legally binding obligation of
buyer and is enforceable against Buyer in accordance with its terms.
4.2.3 LITIGATION. There are no injunctions, orders, decrees or
rulings outstanding or actions, suits, claims, investigations or other
proceedings pending or, to the best of Buyer's knowledge, contemplated or
threatened against Buyer that could affect Buyer's ability to perform its
obligations under this Agreement.
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4.2.4 FINANCIAL ABILITY. Buyer has sufficient funds available to
consummate Closing. Buyer covenants that Buyer and/or its general and limited
partners have, in the aggregate, a net worth of at least $25,000,000.
4.3 SCOPE OF REPRESENTATIONS AND WARRANTIES. Other than as provided in
this Agreement and the Exhibits attached hereto, neither Seller nor Buyer makes
any other representation or warranty to the other regarding the Assets or the
Business.
ARTICLE V - SURVIVAL AND INDEMNIFICATION
5.1 SURVIVAL. All representations, warrants, covenants and agreements of
Seller and Buyer contained in this Agreement shall survive the Closing Date
and the conveyance of the Assets for a period of one year following the
Closing Date.
5.2 SELLER'S INDEMNIFICATION.
(a) Seller shall indemnify and hold Buyer harmless from, and be
liable to Buyer for, any and all damages, liabilities, costs and expenses
(collectively "Losses") sustained by Buyer (including, without limitation,
all reasonable legal fees and costs), resulting from or attributable to the
breach of any covenant or any of the representations and warranties of
Seller. With respect to Losses arising out of breaches of representation and
warranties, Buyer shall not be entitled under this Section 5.2(a) to
indemnification (i) with respect to Losses of less than $10,000 arising out
of a breach of any particular representation or warranty (or out of a series
of related breaches), or (ii) unless and until all Losses from all breaches
of representations and warranties shall exceed $10,000 in the aggregate.
(b) From and after the Closing, Seller shall further indemnify and
hold Buyer harmless from, and be liable to Buyer for, any and all Losses that
may be sustained by Buyer (including, without limitation, reasonable legal
fees and costs) in respect of any liability or obligation of the Business
arising prior to the Closing Date or of Seller (whether or not arising prior
to the Closing Date) that does not constitute an Assumed Liability; provided,
however, that Buyer shall be responsible for any and all assessments or
liabilities assessed by the League to teams from and after January 3, 1997
whether or not the assessment or responsiblity arises from an event prior to
January 3, 1997.
5.3 BUYER'S INDEMNIFICATION.
(a) Buyer shall indemnify and hold Seller harmless from, and be liable
to Seller for, any and all Losses sustained by Seller (including, without
limitation, all reasonable legal fees and costs), resulting from or attributable
to the breach of any covenant or any of the representations and warranties of
Buyer. With respect to Losses arising out of breaches of representations and
warranties, Seller shall not be entitled under this Section 5.3(a) to
indemnification (i) with respect to Losses of less than $10,000 arising out of a
breach of any particular representation or warranty
8
<PAGE>
(or out of a series of related breaches), or (ii) unless and until all Losses
from all breaches of representations and warranties shall exceed $10,000 in the
aggregate.
(b) From and after the Closing, Buyer shall further indemnify and hold
Seller harmless from, and be liable to Buyer for, any and all Losses that may be
sustained by Seller (including, without limitation, reasonable legal fees and
costs) in respect of any liability or obligation of the Business arising after
the Closing Date; provided, however, that Buyer shall be responsible for any and
all assessments or liabilities assessed by the League to teams from and after
January 3, 1997 whether or not the assessment or responsibility arises from an
event prior to January 3, 1997.
5.4 DEFENSE OF CLAIM. In case any claim, demand or deficiency (a
"Claim") is asserted or any action is commenced or notice is given of any
administrative or other proceeding against either party ("Indemnitee") in
respect of which indemnity properly may be sought against the other party
("Indemnitor") pursuant to this Agreement, Indemnitee shall give prompt notice
thereof in writing to Indemnitor. Within 30 days after receipt of such notice
(or prior to such earlier date as any answer in any administrative or other
proceeding is due), Indemnitor may give Indemnitee written notice of its
election to conduct the defense of such Claim at its own expense (and any
separate counsel engaged by Indemnitee shall be at its expense). If Indemnitor
has given Indemnitee such notice of election to conduct the defense, Indemnitee
shall nevertheless have the right to participate in the defense thereof, but
such participation shall be solely at its expense. If Indemnitor shall not
notify Indemnitee in writing (within the time hereinabove provided) of its
election to conduct the defense of such Claim, Indemnitee may (but need not)
conduct (at the expense of Indemnitor) the defense of any Claim. The party
assuming the defense of a Claim hereunder (the "Defending Party") shall notify
the other party of its intention to settle, compromise or satisfy any such claim
and make such settlement, compromise or satisfaction unless such other party
(the "Assuming Party") shall notify the Defending Party in writing (within 30
days after receipt of such notice of intention to settle, compromise or satisfy)
of its election to assume (at its sole expense) the defense of any such Claim
and promptly thereafter take appropriate action to implement such defense. The
Assuming Party shall indemnify the Defending Party and hold it harmless against
any losses in excess of the amount of losses the Defending Party would have
incurred if the proposed settlement had been agreed to. Indemnitee shall
cooperate with Indemnitor in such defense, at Indemnitor's cost, and Indemnitee
shall provide reasonable access to, and copies of, records requested by
Indemnitor and shall provide the reasonable assistance of Indemnitee's employees
in connection with such defense.
ARTICLE VI - CONDUCT PRIOR TO CLOSING
6.1 COOPERATION; ACCESS TO RECORDS.
6.1.1 PRESERVATION OF BUSINESS. From and after the Effective Date
until the Closing Date, Seller shall use commercially reasonable efforts to
maintain and preserve its business organization intact and to maintain its
relationship with its players, coaches, ticket holders and sponsors. After
giving 24 hours verbal or written notice to Seller, Buyer shall be entitled to
contact Seller's sponsors, coaches, players, employees and consultants in
cooperation with Seller's personnel, which personnel shall be made reasonably
available to Buyer for such purpose.
9
<PAGE>
6.1.2 GENERAL REQUIREMENTS. Neither Seller nor Buyer shall
voluntarily undertake any course of action inconsistent with satisfaction of the
requirements applicable to it as set forth in this Agreement, and each shall
promptly do all such acts and take all such measures as may be appropriate to
enable it to perform as early as practicable the obligations herein provided to
be performed by it. Buyer and Seller shall each promptly do all such
commercially reasonable acts required to insure the satisfaction of the
conditions set forth in Article III.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Seller hereby agrees that,
unless it receives the prior written consent of Buyer from and after the date
hereof until the Closing Date, Seller shall not operate the Business otherwise
than in a manner consistent with past practices.
ARTICLE VII - COSTS, TAXES AND ADJUSTMENTS
7.1 SELLER'S COSTS. At Closing, Seller shall pay (a) the costs of
releasing all deeds of trust and mortgages and other types of monetary liens,
encumbering the Assets as of the Closing Date, and of recording such releases;
(b) the brokerage fee payable to Broker and his company; (c) pay any transfer or
similar tax arising as a result of the consummation of the transactions
contemplated herein; and (d) any and all other expenses of, or to be paid by,
Seller under the other terms of this Agreement. Seller shall also be
responsible for the payment of Seller's own attorneys' fees.
7.2 BUYER'S COSTS. At Closing, Buyer shall pay all expenses of, or to
be paid by, Buyer under the other terms of this Agreement. Buyer shall also be
responsible or the payment of Buyer's own attorneys' fees.
ARTICLE VIII - DEFAULT
8.1 BUYER'S DEFAULT. If Seller is ready, willing and able to tender to
Buyer the documents and other matters required of Seller at Closing but Buyer
fails to close in breach of the terms of this Agreement, then Seller shall have
the right, exercisable by giving notice to that effect to Buyer to terminate
this Agreement, in which event Escrow Agent is hereby instructed to pay the
Earnest Money Deposit to Seller. Seller may sue Buyer to recover $200,000.00 if
Buyer failed to make the Additional Earnest Money Deposit.
8.2 SELLER'S DEFAULT. If Buyer is ready, willing and able to tender to
Seller the documents and other matters required of Buyer at Closing but Seller
fails to close in breach of the terms of this Agreement, then Buyer shall have
the right, exercisable by giving notice to that effect to Seller to: (i)
terminate this Agreement prior to the Closing, in which event Escrow Agent is
hereby instructed to pay the Earnest Money Deposit to Buyer; and/or (ii) pursue
specific performance, provided, however, that in the event that specific
performance is not available to Buyer for any reason whatsoever, then Buyer
shall be entitled to pursue any other right or remedy available at law or in
equity or under this Agreement.
8.3 ATTORNEYS' FEES. The losing party shall pay all attorneys' fees and
costs incurred by the prevailing party in any proceeding arising out of or to
enforce the provisions of this Agreement, whether the same are incurred in
preparation for or in pursuit of litigation, or both, all as equitably
determined by the applicable court.
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<PAGE>
ARTICLE IX - CONFIDENTIALITY
9.1 CONFIDENTIALITY. All of the "Confidential Information" exchanged
between Buyer and Seller is confidential and is to be kept confidential by the
parties, who may, however, disclose same, on a "need-to-know" basis, to their
directors, officers, partners, employees, agents, advisors, attorneys,
accountants, consultants, bankers and financial advisors. Before disclosing any
such information to such representatives or authorizing them to receive any such
information, each party shall instruct them to keep that information
confidential in the same manner. Except with respect to any financial
information provided by one party to the other, the foregoing provisions of this
Article shall terminate at Closing if Buyer does in fact purchase the Assets.
The term "Confidential Information" means all information provided by a party
except information available in public records, information that is or becomes
generally available to the public because of release by the respective party or
information that must be released under applicable law or a valid, final
judicial or administrative order.
ARTICLE X - BROKERS
10.1 BROKERS. Except for the commissions payable by Seller on the
Closing Date to Seller's broker, Sports Franchise Marketing, Inc. (James
Drucker, President), each party represents and warrants to the other that the
party has not dealt with any brokers or salesmen, finders or other persons or
entities of any kind or nature who will, may or might make a claim for a
commission or finder's fee in connection with the transactions hereunder and
each party shall indemnify and hold harmless the other from and against any and
all liability, responsibility, claims, losses, damages, costs, controversies,
expenses and attorneys' fees of any kind or nature incurred or sustained by the
other party as a result of the claim of any person or entity for a commission or
finder's fee resulting from the activities or actions of the party.
ARTICLE XI - NOTICES
11.1 ADDRESSES. All notices, waivers, demands, requests and other
communications required or permitted by this Agreement (collectively,
"Notices"), to be effective, shall be in writing and shall be given as follows
by (a) personal delivery, (b) established overnight commercial courier with
delivery charges prepaid or duly charged or, (c) registered or certified mail,
return receipt requested, first class postage prepaid; if to Seller, at 603 Main
Street, Windermere, Florida 34786, and if to Buyer, c/o 2675 Windmill Parkway,
Suite 1521, Henderson, Nevada 89014 or to any other address or addressee as any
party entitled to receive notice under this Agreement shall designate, from time
to time, by Notice given to the others in the manner provided in this Article.
11.2 NOTICES. Notices thus given by personal delivery shall be deemed to
have been received upon tender to the respective natural person named above.
Notices thus given by overnight courier shall be deemed to have been received
the next business day after delivery to such overnight commercial courier.
Notices thus given by certified or registered mail shall be deemed to have been
received on the second day after deposit into the United States Postal System.
All copies to the respective person or persons, or entity or entities, listed
above to receive copies shall be given in the
11
<PAGE>
same manner as the original Notice, and such giving shall be a prerequisite to
the effectiveness of any Notice.
ARTICLE XII - MISCELLANEOUS
12.1 RIGHT TO WAIVE CONDITIONS. Either party may waive any of the terms
or conditions of this Agreement made for such party's benefit provided that such
waiver is in a writing signed by the waiving party. No waiver by any party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
12.2 BINDING EFFECT. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
12.3 PARTIAL INVALIDITY. If any term, covenant or condition of this
Agreement, or the application thereof, to any person or circumstance shall be
invalid or unenforceable at any time or to any extent, then the remainder of
this Agreement, or the application of such term, covenant or condition to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby. Each term, covenant and condition
of this Agreement shall be valid and enforced to the fullest extent permitted by
law.
12.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the Assets and there are no promises,
agreements, conditions, undertakings, understandings, warranties, covenants or
representations, oral or written, express or implied, between them with respect
to the Assets, this Agreement, or the transaction described in this Agreement,
other than as set forth in this Agreement.
12.5 MODIFICATIONS. This Agreement may not be modified orally or in any
manner, other than by an agreement in writing signed by all the parties or their
respective successors in interest. Escrow Agent shall not be required to sign
any modification unless its rights or responsibilities under this Agreement are
directly affected.
12.6 FURTHER ASSURANCES. In addition to the respective obligations
required to be performed under this Agreement, Seller and Buyer shall each
perform, at Closing or from time to time thereafter, such other acts, and shall
execute, acknowledge and/or deliver such other instruments, documents and other
materials, as may be reasonably required in order to consummate the transaction
described in this Agreement. It is understood and agreed, inter alia, that the
foregoing provisions shall not be deemed to require either party to perform any
of the obligations of the other.
12.7 INFORMATION. If, prior to the Closing, Seller hereafter receives
any actual written notices specifically concerning the Assets from any
governmental agency or judicial authority, then Seller shall provide Buyer
with a true and complete copy thereof.
12
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12.8 NO THIRD PARTY BENEFICIARIES. There shall be no third party
beneficiaries to this Agreement.
12.9 HEADINGS. The headings used in this Agreement are for reference and
convenience only, and shall not enter into the interpretation of this Agreement.
12.10 EXHIBITS. All exhibits to this Agreement shall be considered
incorporated in this Agreement by reference and made a material part of this
Agreement unless otherwise stated.
12.11 TIME OF ESSENCE. Time is of the essence of hereunder.
12.12 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other party; PROVIDED, HOWEVER, that Buyer may assign all of its rights
and interests hereunder to an entity in which Buyer is a majority shareholder,
general partner or manager but only if Buyer remains the Maker or a guarantor of
payment of the Note.
12.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
12.14 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
12.15 SEASON TICKETS. For so long as Buyer or any of its affiliates owns
the professional arena football franchise known as the Orlando Predators and
located in Orlando, Florida, Buyer covenants and agrees to make available to
Seller, at no cost to Seller, fifty (50) season tickets for arena football
league regular season and playoff games in Orlando, Florida. The location of
the seats shall be: 12 seats located together at the "lower bowl" area, 10
"dream" seats located in the "lower bowl" area, and 28 seats located in the
"lower bowl" area in the approximate location assigned to the limited partners
of Seller during the 1996 season.
12.16 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida, with venue to be in the Superior Court for the County of
Orange, Florida.
[SIGNATURES BLOCKS CONTINUED ON NEXT PAGES]
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<PAGE>
BUYER'S
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
--------------------
IN WITNESS WHEREOF, Buyer has signed and delivered this Agreement as its
own free act and deed.
BUYER:
THE MONOLITH LIMITED PARTNERSHIP, a Delaware limited
partnership
By: WGM Corporation, a Delaware corporation
General Partner
By: /s/ William G. Meris
----------------------------------------------
William G. Meris, President
Buyer's federal tax employer identification number:
14
<PAGE>
SELLER'S
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
--------------------
IN WITNESS WHEREOF, Seller has signed and delivered this Agreement as its
own free act and deed.
SELLER:
ORLANDO PREDATORS, LIMITED PARTNERSHIP A/K/A
THE ORLANDO PREDATORS, LTD., a Florida limited
partnership
By: Fifty Sports, Inc., a general partner
BY: /s/ Donald R. Dizney
---------------------------------------------------
NAME: Donald R. Dizney
-------------------------------------------------
TITLE: Chairman
------------------------------------------------
Attest: /s/ James English
-----------------------------------------------
James E. English, President
Seller's federal tax employer identification number:
15
<PAGE>
ESCROW AGENT'S
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
----------------------
IN WITNESS WHEREOF, Escrow Agent has signed this Agreement for the limited
purpose of acknowledging its responsibilities in connection with the Earnest
Money Deposit.
Escrow Agent: Lowndes, Drosdick, Doster, Kantor &
Reed, P. A.
215 North Eola Drive
Post Office Box 2809
Orlando, Florida 32802
Attention: Loran A. Johnson
By: /s/ Loran A. Johnson
------------------------------------------
Loran A. Johnson
16
<PAGE>
FIST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
This First Amendment (this "Amendment") to that certain Agreement of
Purchase and Sale, dated January 17, 1997 (the "Purchase Agreement"), by and
between Orlando Predators, Limited Partnership, a Florida limited partnership
("Seller"), and The Monolith Limited Partnership, a Delaware limited partnership
("Buyer"), is made this 13th day of February, 1997. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller hereby agree as set forth in this Amendment. All terms not
defined herein shall have the meaning ascribed to them in the Purchase
Agreement.
Notwithstanding any provision to the contrary contained in the Purchase
Agreement:
1. CLOSING DATE. Subject to the satisfaction of the conditions set forth
in Article III of the Purchase Agreement, the Closing shall take place on
February 13, 1997.
2. PURCHASE PRICE. The Purchase Price shall be payable as follows:
a. EARNEST MONEY. Seller acknowledges that Buyer has deposited with
Lowndes Drosdick Doster Kantor & Reed, P.A., as Escrow Agent, the sum of
$400,000 as and for the earnest money deposit required by the Purchase
Agreement.
b. PROMISSORY NOTE. $180,000 of the Purchase Price shall be
evidenced by the Note, secured by the Assets.
c. MONOLITH LIMITED PARTNERSHIP UNITS. $225,000 of the Purchase
Price shall be deemed satisfied upon the issuance by Buyer of 3 limited
partnership units in Buyer (the "Units"), which issuance shall occur at the
Closing. Seller shall deliver to Buyer at the Closing a completed
subscription agreement for the Units.
d. JACK YOUNGBLOOD COMMISSIONS. $45,000 by assumption by Buyer of
the obligation of Seller to pay to Jack Youngblood $45,000 in commissions for
services performed for the 1996 arena football season.
e. BALANCE OF PURCHASE PRICE. The balance of the Purchase Prices
shall be paid in immediately available funds at the Closing pursuant to the
provisions of Section 2.2.3 of the Purchase Agreement.
3. AFFECT OF AMENDMENT. Except as amended by this Amendment, the
Purchase Agreement shall remain in full force and effect.
4. COUNTERPART. This Amendment may be executed in any number of
counterparts and each such executed counterpart shall constitute one and the
same instrument. Buyer and Seller agree that signatures received via facsimile
transmission shall in all respects be deemed to be original signatures.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed to be effective the
date first set forth above.
SELLER:
ORLANDO PREDATORS, LIMITED PARTNERSHIP, a Florida
limited partnership
By: Fifty Sports, Inc., a Florida corporation, The
General Partner
By: /s/ Donald R. Dizney
----------------------------------------------
Name: Donald R. Dizney
--------------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------------
BUYER:
THE MONOLITH LIMITED PARTNERSHIP, a Delaware limited
partnership
By: WGM Corporation, a Delaware corporation, The
General Partner
By: /s/ William G. Meris
----------------------------------------------
William G. Meris, President
<PAGE>
PROMISSORY NOTE
$180,000.00 Orlando, Florida
February 13, 1997
FOR VALUE RECEIVED, the undersigned, THE MONOLITH LIMITED PARTNERSHIP, a
Delaware limited partnership ("Maker"), promises to pay to ORLANDO PREDATORS,
LIMITED PARTNERSHIP, a Florida limited partnership ("Payee"), or order, at
603 Main Street, Windermere, Florida 34786 or at such other place as the
holder ("Holder") of this Promissory Note (this "Note") may from time to time
designate in writing, in lawful money of the United States of America, the
aggregate principal sum of One Hundred Eighty Thousand Dollars ($180,000.00),
together with interest thereon, as more fully provided below. All payments
in respect of this Note shall be made in immediately available funds.
Simple interest shall accrue from and after the date hereof on the unpaid
principal balance outstanding (computed on a 365-day year, charged for the
actual days elapsed) at an annual interest rate equal the rate of one percent
(1%) per annum above the Wall Street Journal Western Region Prime Rate, as the
same may change from time to time but no more often than daily. Interest
payable from time to time, at any time, or in the aggregate during the term of
this Note shall in no event exceed the maximum contract rate permitted under the
Applicable Usury Law (as hereinafter defined).
The outstanding principal balance under this Note, together with all accrued
and unpaid interest, is payable on February 13, 1998.
Maker shall be entitled to offset, from time to time, against amounts
payable under this Note as follows: (a) any damages, liabilities, costs and
expenses in excess of $10,000 incurred by Maker as a result of the breach of any
representation, warranty or covenant made by Payee acting as seller under that
certain Agreement of Purchase and Sale, dated January 14, 1997, with Maker as
buyer (the "Agreement") or any breach of the Agreement by Payee; and (b) in the
event that it is determined that Payee has retained any revenues, whether
generated from ticket sales, from sponsors or otherwise, with respect to the
fiscal year end which includes the 1997 arena football season which retained
revenues were not offset from the amounts due under Section 2.2.3 of the
Agreement, then for each dollar of such revenues retained by Payee, Maker shall
be entitled to reduce the amount due under this Note by one dollar.
Prepayment of principal and interest amounts outstanding under this Note
shall be permitted in whole or in part at any time, without penalty. All
prepayments shall be accompanied by a payment of all accrued and unpaid interest
under this Note.
This Note is secured by a Security Agreement of even date herewith,
encumbering the "Assets" purchased by Maker pursuant to the Agreement (the
"Security Agreement").
<PAGE>
Time is of the essence in the performance of all obligations hereunder and
under the Security Agreement. Upon any monetary event of default under this
Note or upon any non-monetary event of default under this Note which remains
uncured thirty (30) days after receipt of written notice of the non-monetary
default, Holder may, at its option and discretion, exercise any remedies
available to it hereunder, including the option to declare immediately due and
payable the entire unpaid principal sum of this Note together with all accrued
interest.
Payments received with respect to this Note shall be applied first to costs
and expenses of Holder incurred in collecting amounts owed to it under this Note
or the Security Agreement and to enforce its rights or obligations under this
Note or the Security Agreement, then to accrued and unpaid interest, and then to
principal owing hereunder.
If Maker is in default hereunder and Holder undertakes to collect this
Note, Maker will pay to Holder in addition to any indebtedness due and unpaid,
all costs and expenses of collection including, without limitation, Holder's
reasonable attorneys' fees, whether or not legal proceedings shall be
instituted.
Every person or entity at any time liable for the payment of the
indebtedness evidenced hereby severally waives: demand, presentment for payment,
protest, notice of presentment for payment, protest, and demand; notice of
dishonor and nonpayment of this Note and each and every other notice of any kind
respecting this Note except as provided herein or in the Security Agreement.
Every such person or entity further consents that Holder may renew or extend the
time of payment of any part or the whole of the indebtedness and may amend or
modify this Note or the Security Agreement, release or substitute collateral,
release any guarantor, surety or Maker of this Note, at any time and from time
to time, without limit as to the number or aggregate period of such renewals,
extensions, amendments, modifications, releases or substitutions, at the
request of any other person or entity liable therefor. Any such renewals,
extensions, amendments, modifications, releases or substitutions may be made
without notice to any person or entity liable for the payment of the
indebtedness evidenced hereby, and shall not affect the obligation of Maker,
endorsers, guarantors or sureties under this Note.
This Note and all its provisions, conditions, promises and covenants
hereof shall be binding in accordance with the terms hereof upon Maker, its
successors, transferees and assigns; and the same shall inure to the benefit
of Holder, its successors and assigns. No modification, variation,
termination, discharge or abandonment hereof and no waiver of any of the
provisions or conditions hereof shall be valid unless in writing and signed
by Maker and Holder or their successors, transferees or assigns, as the case
may be; and a waiver of any right or remedy on one occasion shall not be
construed as continuing or as a bar to or waiver of such right or remedy on
any other occasion. No remedy herein or in the Security Agreement conferred
on or reserved to Holder is intended to be exclusive of any other remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or under the Security
Agreement or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power shall be construed to be a waiver of
any default or acquiescence therein or a waiver of any right or power; and
every such right and power may be exercised from time to time and as often as
may be deemed expedient.
-2-
<PAGE>
If any one or more of the provisions contained in this Note shall be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
This Note has been delivered in Orlando, Florida. This Note shall be
governed by the internal substantive laws of the State of Florida (without
reference to choice of law principles) and, to the extent they preempt the laws
of such state, the laws of the United States.
It is the intent of Maker and Holder to comply with all usury laws
("Applicable Usury Law") applicable pursuant to the terms of the preceding
paragraph or such other usury law which is applicable if the law chosen by
the parties is not. Accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Note, in no event shall this Note require
the payment or permit the collection of interest in excess of the maximum
contract rate permitted by the Applicable Usury Law.
Notices required or permitted to be given hereunder shall be sufficient if
in writing and delivered or deposited in the mail, postage prepaid, certified
mail, return receipt requested (or the equivalent in a foreign country)
addressed, in the case of Maker to 2675 Windmill Parkway, Suite 1521, Henderson,
Nevada 89014 and in the case of the Holder to the address set forth above or to
such other address as may be designated in writing hereafter by either party
hereto. Notice shall be deemed effective and received upon: (i) the date of
receipt if delivered by courier or by personal delivery, or (ii) seven (7) days
after the deposit of same in a letter box or other means provided for the
posting of mail, postage prepaid as provided above.
"MAKER"
THE MONOLITH LIMITED PARTNERSHIP, a Delaware limited
partnership
By: WGM Corporation, a Delaware corporation, The
General Partner
By: /s/ William G. Meris
----------------------------------------------
William G. Meris, President
-3-
<PAGE>
EXCHANGE AGREEMENT
EFFECTIVE DATE: March 28, 1997
PARTIES: The Monolith Limited Partnership,
a Delaware limited partnership ("Monolith")
2675 Windmill Parkway, Suite 1521
Henderson, Nevada 89014
The Orlando Predators Entertainment, Inc.,
a Florida corporation ("Orlando Predators")
20 North Orange Avenue, Suite 101
Orlando, Florida 32801
RECITALS:
A. Monolith and the Orlando Predators desire that shares of
voting common stock of the Orlando Predators be exchanged with Monolith for
certain assets of Monolith (the "Exchange"), effective on the Effective Date
first set forth above.
B. Monolith and the Orlando Predators further desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the Exchange.
AGREEMENTS:
In consideration of the Exchange and the mutual agreements and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Monolith and the Orlando Predators
hereby agree as set forth in this Exchange Agreement (this "Agreement").
Article I
EXCHANGE
1.1 ISSUANCE OF STOCK. Simultaneous with the execution of this Agreement
and subject to and in consideration of the performance by Monolith of the
provisions of Section 1.2 below, the Orlando Predators shall issue and deliver
to Monolith 925 shares of voting, common stock of the Orlando Predators (the
"Shares").
1.2 ASSETS TO BE TRANSFERRED--LIABILITIES TO BE ASSUMED.
a. Simultaneous with the execution of this Agreement and subject to
and in consideration of the performance by the Orlando Predators of the
provisions of Section 1.1 above, Monolith shall convey and transfer to the
Orlando Predators all of the assets of Monolith which (a)
<PAGE>
Monolith acquired from The Orlando Predators, Ltd., a Florida limited
partnership, and (b) are used in the operation of a professional arena football
franchise known as the Orlando Predators and located in Orlando, Florida (the
"Business"), including, without limitation, the rights, properties, and other
assets listed and described on the attached Exhibit "A" (collectively, the
"Assets").
b. In connection with the transfer of the Assets, the Orlando
Predators agrees to assume and become responsible for: (i) all of the
liabilities and obligations under those agreements described on Exhibit 2.3
of that certain Agreement of Purchase and Sale, dated January 14, 1997, by
and between Monolith and The Orlando Predators, Ltd., as amended (the
"Original Purchase Agreement"), incurred from and after February 13, 1997 and
(ii) all of the liabilities and obligations of Monolith under the Original
Purchase Agreement and all instruments entered into in connection with the
transactions referenced in the Original Purchase Agreement, including, but
not limited to, that certain Promissory Note, dated February 13, 1997, in the
original principal amount of $180,000 (collectively, the "Assumed
Liabilities").
c. Monolith shall execute and deliver to the Orlando Predators a
bill of sale, an assignment and assumption agreement, endorsements and other
instruments and documents reasonably satisfactory in form and substance to
the parties and their counsel as shall be effective to vest in the Orlando
Predators good title to the Assets, subject to no lien, charge, security
interest or other claim, right, interest or encumbrance, other than those
which constitute the Assumed Liabilities. The Orlando Predators shall
execute and deliver to Monolith such assignment and assumption agreements
(pursuant to which the Orlando Predators shall have assumed the obligations
of Monolith in respect of the Assumed Liabilities), security agreements and
other instruments and documents reasonably satisfactory in form and substance
to the parties and their counsel.
1.3 BULK SALE. To the extent such laws are applicable to the transactions
contemplated herein, Monolith and the Orlando Predators waive compliance with
the uniform commercial code provisions of the laws of any jurisdiction regarding
bulk transfers, and Monolith covenants and agrees to pay and discharge when due,
unless contested by appropriate proceedings, all creditors and all liabilities
of Monolith pertaining to the Business that are not among the Assumed
Liabilities.
Article II
REPRESENTATIONS OF MONOLITH LIMITED PARTNERSHIP
Monolith represents and warrants to the Orlando Predators, as of the Effective
Date, as follows:
2.1 ORGANIZATION OF MONOLITH. Monolith is a limited partnership duly
organized, validly existing and in good standing under the laws of Delaware.
2.2 AUTHORITY. Monolith has all necessary partnership power and authority
to own the Assets and has the right, power and authority to assign and transfer
the Assets in accordance with the terms and conditions hereof. Monolith has all
necessary power and authority to execute, deliver
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and perform this Agreement. All proceedings of Monolith required to authorize
the legal and valid execution, delivery and performance of this Agreement and
the consummation of all of the transactions contemplated by this Agreement, have
been duly and validly completed. This Agreement has been duly and validly
authorized, executed and delivered by, and is the valid and binding obligation
of Monolith enforceable in accordance with its terms.
2.3 NO CONSENTS. Except for any required consent by the League and except
for any consent required by the City of Orlando, Florida in connection with the
assignment of the arena facilities lease, to Monolith's knowledge no consents,
approvals, orders or authorizations are required for the execution and delivery
of this Agreement by Monolith, for the transfer and assignment of the Assets, or
for the consummation by Monolith of the transactions contemplated hereby.
2.4 EXECUTION AND PERFORMANCE: NO VIOLATION OF LAWS, AGREEMENTS; NO LIENS.
The execution and delivery of this Agreement by Monolith and the consummation by
Monolith of the transactions contemplated hereby (i) are not prohibited by, and
do not violate any provision and will not result in the breach (with or without
the giving of notice, lapse of time or both) of, or accelerate or permit the
acceleration of the performance required by the terms of (a) any applicable law,
rule, regulation, judgment, decree, order or other requirement of the United
States or of any State of the United States or of any court, authority,
department, commission, board, bureau, agency or instrumentality of either of
the foregoing; (b) the Certificate or Agreement of Limited Partnership of
Monolith, and any amendments thereto; or (c) any material contract, agreement or
commitment relating directly to the Business and to which Monolith is a party or
is bound or which is material to the operations of Monolith with respect to the
Business, and (ii) have not resulted and will not result in the creation or
imposition of any lien, encroachment, easement, encumbrance, mortgage,
hypothecation, equity, charge, restriction, possibility of reversion or other
similar conflicting ownership or security interest material to the Business in
favor of any person or entity on any Asset.
2.5 NO LITIGATION. There are no injunctions, orders, decrees or rulings
outstanding or actions, suits, claims, investigations or other proceedings
pending or, to the best of Monolith's knowledge, contemplated or threatened
against Monolith that could affect Monolith's ability to perform its obligations
under this Agreement.
2.6 COMPLIANCE. Except for such violations that will not materially and
adversely affect the Assets or the Business or its prospects or financial
condition, Monolith, to the best of its knowledge, has complied in all material
respects with each and is not in material violation of any federal, state,
county and municipal law, ordinance, code or regulation or governmental rule or
regulation, directives or orders to which the Business and/or the Assets are
subject.
2.7 TITLE TO THE ASSETS. Monolith is the owner of the Assets to be
conveyed pursuant hereto, has good, marketable and indefeasible title to the
Assets and shall convey to the Orlando Predators the Assets, free and clear of
any and all liens or encumbrances whatsoever except the Assumed Liabilities.
3
<PAGE>
2.8 MEMBERSHIP AGREEMENT. The membership interest in the League is in
good standing and there exists no event of default or an event which with the
passage of time, the giving of notice or both, will become an event of default
under the membership agreement with the League or any provisions of the League's
Bylaws or any other governing instruments.
2.9 ORIGINAL PURCHASE AGREEMENT. Except as otherwise disclosed by
Monolith to the Orlando Predators, Monolith is not aware that any of the
representations, warranties or covenants of The Orlando Predators, Ltd. under
the Original Purchase Agreement are not true or accurate as of the Effective
Date.
2.10 INVESTMENT REPRESENTATIONS. In connection with the acquisition of the
Shares, Monolith hereby represents and warrants that (i) it has such knowledge
and experience in financial and business matters to enable it to evaluate the
merits and risks of the acquisition of the Shares and to make an informed
investment decision with respect thereto; (ii) Monolith has discussed the
Orlando Predators' business, management and financial affairs with the Orlando
Predators' management, has had access to and has reviewed current and historical
information concerning the Business, and has had full opportunity to ask
questions of and receive answers from the authorized representatives of the
Orlando Predators concerning the Business and the Shares and all such questions
have been answered to the full satisfaction of Monolith; and (iii) Monolith is
acquiring the Shares for investment for its own account and not with the view
to, or for resale in connection with, any distribution thereof. Monolith
understands that the Shares have not been registered under the Securities Act of
1933 (the "Act") or any applicable state securities laws by reason of exemptions
from the registration provisions of the Act and applicable state securities laws
which may depend upon, among other things, the bona fide nature of its
investment intent as expressed herein.
Any representations or warranties made herein to Monolith's knowledge shall be
deemed to be based only upon Monolith's actual knowledge which shall be deemed
to consist only of the actual knowledge of Monolith's general partner.
Article III
REPRESENTATIONS OF ORLANDO PREDATORS
The Orlando Predators represent and warrant to Monolith, as of the Effective
Date, as follows:
3.1 ORGANIZATION. The Orlando Predators is a corporation, duly organized,
validly existing and in good standing under the laws of Florida.
3.2 AUTHORITY. The Orlando Predators has all necessary corporate power
and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby, to carry on its business as now conducted and
to own and operate its properties and assets now owned and being operated by it.
All proceedings of the Orlando Predators required to authorize the legal and
valid execution, delivery and performance of this Agreement and the consummation
of all of the transactions contemplated by this Agreement, have been duly and
validly completed. This
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Agreement has been duly and validly authorized, executed and delivered by, and
is the valid and binding obligation of the Orlando Predators enforceable in
accordance with its terms.
3.3 NO CONSENTS. To the knowledge of the Orlando Predators, no consents,
approvals, orders or authorizations are required for the execution and delivery
of this Agreement by the Orlando Predators for the issuance of the Shares or for
the consummation by the Orlando Predators of the transactions contemplated
hereby.
3.4 EXECUTION AND PERFORMANCE: NO VIOLATION OF LAWS, AGREEMENTS. The
execution and delivery of this Agreement by the Orlando Predators and the
consummation by the Orlando Predators of the transactions contemplated hereby
are not prohibited by, and do not violate any provision and will not result in
the breach (with or without the giving of notice, lapse of time or both) of, or
accelerate or permit the acceleration of the performance required by the terms
of (a) any applicable law, rule, regulation, judgment, decree, order or other
requirement of the United States or of any State of the United States or of any
court, authority, department, commission, board, bureau, agency or
instrumentality of either of the foregoing; (b) the Articles of Incorporation or
Bylaws of the Orlando Predators, and any amendments thereto; or (c) any material
contract, or agreement to which the Orlando Predators is a party or is bound or
which is material to the operations of the Orlando Predators.
3.5 NO LITIGATION. There are no injunctions, orders, decrees or rulings
outstanding or actions, suits, claims, investigations or other proceedings
pending or, to the best of the Orlando Predators' knowledge, contemplated or
threatened against the Orlando Predators that could affect the Orlando
Predators' ability to perform its obligations under this Agreement.
3.6 COMPLIANCE. Except for such violations that will not materially and
adversely affect the Orlando Predators or its assets or business or its
prospects or financial condition, the Orlando Predators, to the best of its
knowledge, has complied in all material respects with each and is not in
material violation of any federal, state, county and municipal law, ordinance,
code or regulation or governmental rule or regulation, directives or orders to
which its business and/or its assets are subject.
3.7 CAPITALIZATION. There are 1,000 shares of voting common stock of the
Orlando Predators (the "Common Stock") issued and outstanding and no shares of
preferred stock issued and outstanding. There are no shares of Common Stock
held as treasury shares. Other than this Agreement, the Orlando Predators is
not a party to or bound by any contract, agreement or arrangement to issue or
sell any capital stock or any other security of the Orlando Predators or any
other security exercisable or convertible into any capital stock or any other
security of the Orlando Predators. Other than this Agreement, there are no
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to subscribe for or purchase, or contracts, agreements or
arrangements with respect to, any capital stock or other security of the Orlando
Predators or any other security exercisable or convertible into any capital
stock or any other security of the Orlando Predators.
5
<PAGE>
3.8 SUBSIDIARIES. The Orlando Predators does not own or control, directly
or indirectly, any shares of capital stock of or any equity investment in any
corporation, partnership, business trust, association or other business entity.
3.9 VALIDITY OF SECURITIES. The Shares to be purchased and sold pursuant
to this Agreement, when sold and delivered in accordance with the terms hereof
and for the consideration expressed herein, shall be duly and validly issued,
fully paid and nonassessable, free and clear of any lien, encumbrance, option,
charge, equity or restriction whatsoever.
Any representations or warranties made herein to the Orlando Predators's
knowledge shall be deemed to be based only upon the Orlando Predators's actual
knowledge which shall be deemed to consist only of the actual knowledge of the
Orlando Predator's President.
Article V
SURVIVAL
5.1 SURVIVAL. All representations, warrants, covenants and agreements of
the Orlando Predators and Monolith contained in this Agreement shall survive the
issuance of the Shares and the conveyance of the Assets for a period of one year
following the Effective Date.
Article VI
NOTICES
6.1 ADDRESSES. All notices, waivers, demands, requests and other
communications required or permitted by this Agreement (collectively,
"Notices"), to be effective, shall be in writing and shall be given as follows
by (a) personal delivery, (b) established overnight commercial courier with
delivery charges prepaid or duly charged or, (c) registered or certified mail,
return receipt requested, first class postage prepaid: if to the Orlando
Predators, at 20 North Orange, Suite 101, Orlando, Florida 32801 and if to
Monolith, c/o 2675 Windmill Parkway, Suite 1521, Henderson, Nevada 89014 or to
any other address or addressee as any party entitled to receive notice under
this Agreement shall designate, from time to time, by Notice given to the others
in the manner provided in this Article.
6.2 NOTICES. Notices thus given by personal delivery shall be deemed to
have been received upon tender to the respective natural person named above.
Notices thus given by overnight courier shall be deemed to have been received
the next business day after delivery to such overnight commercial courier.
Notices thus given by certified or registered mail shall be deemed to have been
received on the second day after deposit into the United States Postal System.
All copies to the respective person or persons, or entity or entities, listed
above to receive copies shall be given in the same manner as the original
Notice, and such giving shall be a prerequisite to the effectiveness of any
Notice.
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Article VII
MISCELLANEOUS
7.1 RIGHT TO WAIVE CONDITIONS. Either party may waive any of the terms or
conditions of this Agreement made for such party's benefit provided that such
waiver is in a writing signed by the waiving party. No waiver by any party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.2 BINDING EFFECT. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
7.3 PARTIAL INVALIDITY. If any term, covenant or condition of this
Agreement, or the application thereof, to any person or circumstance shall be
invalid or unenforceable at any time or to any extent, then the remainder of
this Agreement, or the application of such term, covenant or condition to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby. Each term, covenant and condition
of this Agreement shall be valid and enforced to the fullest extent permitted by
law.
7.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the Assets and the Shares and there are no
promises, agreements, conditions, undertakings, understandings, warranties,
covenants or representations, oral or written, express or implied, between them
with respect to the Assets, the Shares, this Agreement, or the transaction
described in this Agreement, other than as set forth in this Agreement.
7.5 MODIFICATIONS. This Agreement may not be modified orally or in any
manner, other than by an agreement in writing signed by all the parties or their
respective successors in interest. Escrow Agent shall not be required to sign
any modification unless its rights or responsibilities under this Agreement are
directly affected.
7.6 FURTHER ASSURANCES. In addition to the respective obligations
required to be performed under this Agreement, the Orlando Predators and
Monolith shall each perform, on the Effective Date or from time to time
thereafter, such other acts, and shall execute, acknowledge and/or deliver such
other instruments, documents and other materials, as may be reasonably required
in order to consummate the transaction described in this Agreement. It is
understood and agreed, inter alia, that the foregoing provisions shall not be
deemed to require either party to perform any of the obligations of the other.
7.7 NO THIRD PARTY BENEFICIARIES. There shall be no third party
beneficiaries to this Agreement.
7.8 HEADINGS. The headings used in this Agreement are for reference and
convenience
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only, and shall not enter into the interpretation of this Agreement.
7.9 EXHIBITS. All exhibits to this Agreement shall be considered
incorporated in this Agreement by reference and made a material part of this
Agreement unless otherwise stated.
7.10 TIME OF ESSENCE. Time is of the essence of hereunder.
7.11 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other party.
7.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.13 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
[SIGNATURES BLOCKS CONTINUED ON NEXT PAGES]
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MONOLITH'S
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
-------------------
IN WITNESS WHEREOF, Monolith has signed and delivered this Agreement as its
own free act and deed.
THE MONOLITH LIMITED PARTNERSHIP, a Delaware limited
partnership
By: WGM Corporation, a Delaware corporation
General Partner
By:
-----------------------------------
William G. Meris, President
9
<PAGE>
ORLANDO PREDATORS'
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
-----------------------------
IN WITNESS WHEREOF, the Orlando Predators has signed and delivered this
Agreement as its own free act and deed.
THE ORLANDO PREDATORS ENTERTAINMENT, INC., a Florida
corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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<PAGE>
Exhibit "A"
List of Assets
1 FRANCHISE LEAGUE MEMBERSHIP. All of Monolith's right, title and
membership interest in and to the Arena Football League, Inc. (the "League")
2. EQUIPMENT. All of Monolith's sport and training equipment and
uniforms in connection with the Business.
3. INVENTORY. All of Monolith's inventory of souvenir and licensed
merchandise relating to the Business.
4. PERSONAL PROPERTY. All of Monolith's furniture, furnishings, supplies
and other tangible personal property used in connection with the Business.
5. CONTRACTS. All of the leases, guaranties, warranties, agreements
(including, but not limited to, that certain Agreement of Purchase and Sale,
dated January 14, 1997, by and between Monolith and The Orlando Predators, Ltd.,
as amended), governmental permits or licenses, operating contracts, agreements
for the purchase or the sale of spectator tickets, supplies, products or other
personal property or for the furnishing or receipt of services, agreements
concerning confidentiality or noncompetition, service and facility contracts,
and licenses and other rights relating to the ownership, management and
operation of the Business to which Monolith is a party or by which Monolith is
bound and all agreements under which the consequences of a default or
termination could have a materially adverse effect on the Business, financial
condition, operations, results of operations, or future prospects of the
Business (the "Contracts").
6. INTELLECTUAL PROPERTY. All of Monolith's rights (if any) in and to
all trademarks, trade names (including, but not limited to the "Orlando
Predators"), service marks, and logos related to or used in the Business,
together with all translations, adaptations, derivations and combinations
thereof, and all other proprietary rights of Monolith, including, without
limitation, all telephone exchanges and numbers, computer programs and software
and all copies and tangible embodiments thereof.
7. DOCUMENTS. All ticket holder lists, mailing lists, sponsor lists,
records, correspondences, sales and marketing records and literature related to
the Business.
8. REVENUES. All revenues, whether generated from ticket sales, from
sponsors or otherwise, with respect to the fiscal year end which includes the
1997 arena football season which have not been expended in the ordinary course
of business for expenses related to the fiscal year end which includes the 1997
arena football season.
11
<PAGE>
BILL OF SALE
THIS BILL OF SALE (this "Bill of Sale"), dated March 28, 1997 is executed
by THE MONOLITH LIMITED PARTNERSHIP, a Delaware limited partnership
("Assignor"), in favor of THE ORLANDO PREDATORS ENTERTAINMENT, INC., a Florida
corporation ("Assignee").
WHEREAS, Assignor and Assignee entered into an Exchange Agreement, dated
March 28, 1997 (the "Agreement") for the exchange of shares of voting common
stock of Assignee for certain of "Assets", as that term is defined in the
Agreement.
WHEREAS, under the Agreement, Assignor is obligated to assign, transfer,
set over and deliver to Assignee all of Assignor's right, title and interest in
and to that certain property described on the attached EXHIBIT "A" (the
"Property").
NOW, THEREFORE, in accordance with the Agreement and for good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged,
Assignor does hereby absolutely and unconditionally give, grant, bargain, sell,
transfer, set over, assign, convey, release, confirm and deliver to Assignee all
of the Assignor's right, title and interest in and to the Property, free and
clear of any and all liens and encumbrances of any nature whatsoever and
Assignee hereby accepts the foregoing assignment of the Property.
Assignor hereby covenants that Assignor will, at any time and from time to
time upon written request therefor, execute and deliver to Assignee and
Assignee's successors, nominees or assigns, such documents as Assignee or they
may reasonably request in order to fully assign and transfer to and vest in
Assignee or Assignee's successors, nominees, and assigns, and protect Assignee's
or their right, title and interest in and to all of the Property and rights of
Assignor intended to be transferred and assigned hereby, or to enable the
Assignee and Assignee's successors, nominees and assigns to rely upon and
otherwise enjoy such rights and property.
This Bill of Sale shall be binding upon and inure to the benefit of the
successors and assigns of Assignee and Assignor.
This Bill of Sale shall be governed by, interpreted under, and construed in
accordance with the laws of the State of Florida.
In the event of any litigation between Assignor and Assignee arising out of
this Bill of Sale or concerning the meaning or interpretation of any provision
contained herein, the losing party shall pay the prevailing party's costs and
expenses of such litigation, including, without limitation, reasonable
attorneys' fees.
<PAGE>
IN WITNESS WHEREOF, this Bill of Sale has been signed, sealed and delivered
by the parties as of the date first above written.
THE MONOLITH LIMITED PARTNERSHIP, a Delaware limited
partnership
By: WGM Corporation, a Delaware corporation, The
General Partner
By:
----------------------------------------------
William G. Meris, President
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<PAGE>
EXHIBIT "A"
Description of Property
1. All of Assignor's sport and training equipment and uniforms.
2. All of Assignor's inventory of souvenir and licensed merchandise relating
to the operation of the professional arena football franchise known as the
Orlando Predators and located in Orlando, Florida.
3. All of Assignor's furniture, furnishings, supplies and other tangible
personal property listed on the attached Schedule A-1.
<PAGE>
Schedule A-1
List of Assigned Tangible Personal Property
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EFFECTIVE DATE: July 1, 1997
EMPLOYER: THE ORLANDO PREDATORS ENTERTAINMENT, INC.
a Florida corporation
EMPLOYEE: JACK YOUNGBLOOD
PURPOSE:
Employer owns, manages and operates a professional arena football franchise
known as the Orlando Predators and located in Orlando, Florida (the "Business").
Employer desires to employ Employee as President and Employee desires to accept
such employment, on the terms, covenants and conditions set forth in this
Employment Agreement (this "Agreement").
AGREEMENTS:
For the reasons set forth above, and in consideration of the mutual
promises and agreements set forth in this Agreement, Employer and Employee agree
as follows:
1. EMPLOYMENT; DUTIES.
1.1 Subject to and in accordance with this Agreement, Employer
employs Employee as the President of Employer and Employee accepts employment
with Employer subject to the general supervision and pursuant to the orders,
advice and direction of Employer. In such capacity, Employee shall be
responsible for the overall and day-to-day operations of the Business.
1.2 Employee shall use his best efforts and devote his full time to
the performance of all the duties that may be required of and from him pursuant
to the express and implicit terms of this Agreement. Such duties shall be
rendered in Orlando, Florida and at such other places as Employer and Employee
shall mutually agree upon.
1.3 Employee represents and warrants that there are no
agreements or arrangements, written or oral, in effect which would prevent
Employee from rendering services to Employer during the term of this Agreement.
1.4 Nothing herein contained shall be construed to create a
partnership or joint venture between Employer and Employee. Neither party
hereto shall be liable for the debts or obligations of the other unless
expressly assumed in writing and signed by the parties hereto.
2. TERM. This Agreement shall become effective on the date first written
above and, unless terminated sooner pursuant to Section 5, continue through June
30, 2000 (the "Initial Term"). Employer shall have the right and option, but
not the obligation, to extend the Initial Term through
<PAGE>
December 31, 2001 (the "Extension Term"), subject to the termination provisions
of Section 5 below and the other terms and provisions of this Agreement, by
giving Employee written notice of the extension to Employee on or before
September 1, 2001.
3. COMPENSATION AND OTHER BENEFITS.
3.1 COMPENSATION. For services rendered to Employer hereunder, in
whatever capacity rendered, Employee shall have and receive, subject to
withholding and other applicable taxes, the following:
(a) A salary during the Initial Term as set forth on the
attached Exhibit "A" (the "Base Salary"), which Base Salary will be payable
monthly, in arrears in two equal monthly installments;
(b) A commission calculated and payable pursuant to the
provisions set forth on the attached Exhibit "A"; and
(c) Ten tickets to each home game played by the Franchise.
3.2 STOCK OPTIONS. Employer shall grant to Employee stock options to
purchase 34,500 shares of no par value, voting common stock of Employer, to be
issued pursuant to Employer's stock option plan and to be evidenced by the stock
option agreement in form and content required by Employer's stock option plan
and providing for an exercise price equal to the fair market value of the shares
on the date of grant (being July 1, 1997) and for the vesting of the right to
purchase the shares as follows: one third shall become vested on July 1, 1998,
one third shall become vested on July 1, 1999 and the remaining one third shall
become vested on July 1, 2000.
3.3 BUSINESS EXPENSES. Upon submission of proper documentation,
Employer shall pay or reimburse Employee for all reasonable and necessary
office, telephone, travel and other expenses incurred by him in the pursuit of
his duties on behalf of Employer.
3.4 EMPLOYEE BENEFITS. Employee shall be entitled to participate in
any other bonus, stock option, incentive compensation, deferred compensation,
group medical and dental insurance plans or other plans or programs and to
receive any other benefits for which he is eligible and which Employer may
provide its employees generally or its officers specifically. Specifically,
without limiting the generality of the foregoing, Employer shall pay 100% of
the health insurance premiums attributable to a group medical insurance policy
for Employee, his spouse and his dependent children.
3.5 AUTOMOBILE ALLOWANCE. As part of a sponsorship package with a
sponsor of the franchise, Employee shall be entitled to negotiate and, upon
approval of Employer's Board of Directors, execute an automobile lease for
Employee's use in the pursuit of his duties on behalf of Employer. In
connection therewith, Employer shall bear all lease payments and all expenses
for taxes, license, insurance, ordinary maintenance, oil, antifreeze,
lubricants, and other ordinary
-2-
<PAGE>
expenditures incurred in the operation of said automobile. Employee shall be
solely responsible for individual fines and penalties for parking, traffic and
speeding violations, and shall return the automobile to Employer upon the
termination of this Agreement or the automobile lease, in good condition,
reasonable wear and tear excepted.
3.6 VACATION. At such reasonable times as Employer shall in its sole
discretion permit, Employee shall be entitled, without loss of pay, to absence
himself voluntarily from the performance of his employment under this Agreement.
Employee shall be entitled to such period of absence of not more than four weeks
for each twelve month period under this Agreement.
4. FACILITIES. Employer shall provide and maintain (or cause to be
provided and maintained) such facilities, equipment, offices, secretarial help,
and other services and supplies as it deems necessary for Employee's performance
of his duties under this Agreement, as established from time to time by
Employer.
5. TERMINATION.
5.1 This Agreement and Employee's employment hereunder may be
terminated at any time:
(a) By Employee upon the material breach by Employer of any of the
material provisions of this Agreement.
(b) By Employer for Cause. For purposes of this Agreement, the term
"Cause" shall mean: (i) conduct on the part of Employee which is intended to
result directly or indirectly in substantial gain or personal enrichment at the
expense of Employer; (ii) the material breach by Employee of any of the
provisions of this Agreement; or (iii) the failure by Employee to substantially
perform his duties hereunder.
Further, this Agreement and Employee's employment hereunder shall automatically
terminate upon the death or disability of Employee or the bankruptcy of Employer
or the discontinuance of Employer's Business.
5.2 Notwithstanding the termination of this Agreement or of
Employee's employment hereunder, the parties hereto shall be required to carry
out any provision hereof which contemplate performance by them subsequent to
such termination, nor shall such termination affect any liability or obligation
which has accrued prior to such termination, including but not limited to,
accrued but unpaid compensation and any liability for loss or damage on account
of default.
5.3 Following any termination of employment hereunder, or notice
thereof, Employee shall fully cooperate with Employer in all matters relating to
the winding up of his pending work on behalf of Employer and the orderly
transfer of any such pending work to other employees of Employer as may be
designated by Employer. In consideration thereof, Employer shall pay Employee
for any services rendered post-termination at a rate equivalent to the hourly
rate
-3-
<PAGE>
payable to Employee during the Initial Term or the Extension Term, as
applicable, during which the termination occurred.
5.4 Upon termination of this Agreement, or whenever requested by
Employer, Employee shall immediately turn over to Employer all of Employer's
property, including all items used by Employee in rendering services hereunder,
that may be in Employee's possession or under his control.
6. COVENANT NOT TO COMPETE; DISCLOSURE OF INFORMATION.
6.1 SOLICITATION.
6.1.1 In the event that Employee terminates this Agreement in
breach of the terms and provisions hereof, then for a period of six months after
the date of such termination in breach of this Agreement, Employee shall not,
whether alone or as a partner, officer, director, employee or shareholder (or
other holder of an equity interest) of, or consultant, advisor or lender to, any
other corporation, partnership or other entity, or as a trustee, fiduciary or
other representative, solicit Employer's customers with respect to, engage in or
have any interest, including as a creditor, in any person, partnership,
corporation, association, or other business entity, whether as employee,
officer, director, agent, consultant, stockholder or holder of any right to any
form of equity ownership, or otherwise, that engages in the business of owing,
operating or managing professional football teams or leagues.
6.1.2 Employee shall not, during or for a period of six (6)
months after the term of this Agreement, solicit any employee, sales
representative or independent contractor of Employer for employment by any
person, firm, partnership, corporation, association or other entity for any
reason or purpose allied or related to the Business whatsoever.
6.2 NON DISCLOSURE.
6.2.1 Employee hereby recognizes and acknowledges that: (i)
Employee will be making use of, acquiring, and/or adding to proprietary
information of a special and unique nature and value relating to and including,
but not limited to, such matters Employer's trade secrets, systems, procedures,
manuals, confidential reports, lists of suppliers, research and development
projects, policies, processes, formulas, techniques, know-how and facts relating
to sales, advertising, mailing, promotions, financial matters, customers,
customer lists, purchases or requirements or other methods used and preferred by
Employer in its operations, (ii) Employer will disclose certain proprietary
information to Obligor including, but not limited to, the details of any
statistical or financial data, the operations and structure of the business of
Employer, and manuals, forms, techniques, methods or procedures of Employer used
by or made available to Employee in the course of Employee's employment (the
information referenced to in paragraphs 6.2.1 (i) and (ii) above are hereinafter
collectively referred to as the "Proprietary Information").
-4-
<PAGE>
6.2.2 Employee hereby recognizes and acknowledges that the
Proprietary Information is a valuable, special and unique asset of Employer's
business.
6.2.3 Employee will not at any time, directly or indirectly make
use of, divulge or disclose any of the Proprietary Information or any part
thereof for any purpose whatsoever to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever that has been obtained by,
or disclosed to, him as a result of his relationship with Employer. Immediately
upon request by Employer, Employee shall return to Employer any and all
materials relating to Proprietary Information.
6.3 ACKNOWLEDGMENT.
6.3.1 Employee acknowledges that the covenants contained in this
Section 6 are a material inducement for Employer to enter into this Agreement
and to perform its obligations hereunder and that the services Employee is to
render to Employer hereunder are of a special and unusual character with a
unique value to Employer. Employee acknowledges that it would take at least six
(6) months for Employer to retain and train personnel to replace Employee.
Accordingly, Employee acknowledges that the restrictions contained in this
Section 6 are reasonably necessary for the protection of Employer's business and
that a breach of any such restrictions could not adequately be compensated by
damages in an action at law.
6.3.2 In the event of a breach or threatened breach by Employee
of any provision contained in this Section 6, Employer shall be entitled to
obtain, by posting an appropriate bond, an injunction (preliminary or permanent,
or a temporary restraining order) restraining Employee from the activity or
threatened activity constituting or that would constitute a breach.
6.3.3 In the event of a breach by Employee of any provision
contained under this Section 6, Employer shall be entitled to an accounting and
repayment of all profits, compensation, commissions, remunerations or other
benefits that Employee, directly or indirectly, has realized and/or may realize
as a result of, arising out of or in connection of any such breach.
6.3.4 The remedies provided in this Section 6 shall be in
addition to, and not in lieu of, any and all other remedies of Employer at law
or in equity.
7. MISCELLANEOUS.
7.1 NOTICE. Notices required or permitted to be given hereunder
shall be sufficient if in writing, and delivered or deposited in the mail,
postage prepaid, certified mail, return receipt requested (or the equivalent in
a foreign country), addressed, if to Employer, at its principal place of
business and, if to Employee, at the address set forth in Employer's employee
records or to such other address as may be designated in writing hereafter by
either party hereto. All notices hereunder shall be effective: (a) five (5)
days after deposit in the mail; or (b) upon delivery, if delivered in person or
by commercial express service.
-5-
<PAGE>
7.2 BURDEN. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of any successor of Employer and
any such successor shall be deemed substituted for Employer under the terms of
this Agreement. As used in this Agreement, the term "4 successor" shall mean
any person, firm, corporation or other business entity which at any time,
whether by merger, purchase or otherwise acquires all or substantially all of
the assets or business of Employer.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding by and between Employer and Employee with respect to the
employment of Employee and no representations, promises, agreements or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the parties intended to be bound. No
waiver of any provision of this Agreement shall be valid unless it is in writing
and signed by the parties against whom the waiver is sought to be enforced. No
valid waiver of any provision of this Agreement at any time shall be deemed a
waiver of any other provision of this Agreement at such time or any other time.
7.4 ARBITRATION. In the event any dispute or controversy arising out
of this Agreement cannot be settled by Employer and Employee, such controversy
or dispute, at the election of either Employer or Employee, by written notice to
the other, may be submitted to arbitration in Orlando, Florida and for this
purpose Employer and Employee each hereby expressly consent to such arbitration
and such place. In the event Employer and Employee cannot, within 15 days
following the election to submit the dispute or controversy to arbitration,
mutually agree upon an arbitrator to settle their dispute or controversy, then
Employer and Employee shall each select one arbitrator and the two arbitrators
shall select a third arbitrator. The decision of the majority of said
arbitrators shall be binding upon Employer and Employee for all purposes, and
judgment to enforce any such binding decision may be entered in the Superior
Court, Orlando County, Florida (and for this purpose Employer and Employee
hereby irrevocably consent to the jurisdiction of said court). If either
Employer or Employee fails to select an arbitrator within fifteen (15) days
after written demand from the other party to do so, then the Chief Judge in the
United States District Court of the District of Florida shall select such other
arbitrator. At the election of either Employer or Employee, all arbitrators
shall be selected pursuant to the then existing rules and regulations of the
American Arbitration Association governing commercial transactions. At the
request of either Employer or Employee, arbitration proceedings shall be
conducted in the utmost secrecy. In such case, all documents, testimony and
records shall be available for inspection only for purposes of the arbitration
and only by either party and their respective attorneys and experts who shall
agree, in advance and in writing, to receive all such information in secrecy.
In all other respects, the arbitrators shall conduct all proceedings pursuant to
the Uniform Arbitration Act as adopted by the State of Florida and the then
existing rules and regulations of the American Arbitration Association governing
commercial transactions. The costs of the arbitration and the arbitrators shall
be borne by the non-prevailing party, as determined by the arbitrators, and each
party shall bear their own attorneys' fees.
-6-
<PAGE>
7.5 PROHIBITION AGAINST ASSIGNMENT. This Agreement is personal to
Employee and Employee shall not assign or delegate any of his rights or
obligations hereunder without first obtaining the written consent of Employer.
7.6 GOVERNING LAW. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise by the
laws of the State of Florida. The section headings used in this Agreement are
included solely for convenience and shall not affect or be used in connection
with the interpretation of this Agreement.
7.7 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions.
7.8 AFL LEAGUE. In accordance with the provisions of Section 5C of
Article VI of the Arena Football League, Inc. Bylaws, Employee agrees to be
bound by the Arena Football League, Inc. Bylaws, Operations Manual, Rule Book
and/or by any other rules and regulations of the Arena Football League, Inc. as
they exist and/or as they may be amended, modified or otherwise changed from
time-to-time.
IN WITNESS WHEREOF, the parties have executed this document to be effective
the date first above written.
EMPLOYEE: EMPLOYER:
THE ORLANDO PREDATORS ENTERTAINMENT, INC.,
a Florida corporation
By:
- ------------------------------ ---------------------------------------
JACK YOUNGBLOOD William Meris, Vice President
-7-
<PAGE>
Exhibit "A"
Compensation
1. Base Salary During Initial Term:
a. From July 1, 1997 through December 31, 1997: $60,000.00 per annum.
b. From January 1, 1998 through December 31, 1998: $65,000.00 per annum.
c. From January 1, 1999 through December 31, 1999: $70,000.00 per annum.
d. From January 1, 2000 through December 31, 2000: $75,000.00 per annum.
2. Base Salary During Extension Term, if any:
a. From January 1, 2001 through December 31, 2001: $80,000.00 per annum.
3. Commissions:
a. Calculation:
(i) Ten percent (10%) of the Sponsorship Income received by
Employer (or its predecessor) during the period commencing on September 1, 1996
and ending on August 31, 1997 (the "First Commission").
(ii) Seven percent (7%) of the Sponsorship Income received by
Employer during the period commencing on September 1, 1997 and ending on
August 31, 1998 (the "Second Commission").
(ii) Seven percent (7%) of the Sponsorship Income received by
Employer during the period commencing on September 1, 1998 and ending on
August 31, 1999 (the "Third Commission").
(ii) Seven percent (7%) of the Sponsorship Income received by
Employer during the period commencing on September 1, 1999 and ending on
August 31, 2000 (the "Fourth Commission").
(ii) If there is an Extension Term, seven percent (7%) of the
Sponsorship Income received by Employer during the period commencing on
September 1, 2000 and ending on August 31, 2001 (the "Fifth Commission").
For purposes of this Agreement, "Sponsorship Income" means the gross revenues
generated in cash or by trade-out for an expense which would otherwise
constitute a budget item on Employer's income statement from sponsors of the
team.
-8-
<PAGE>
b. Payment:
(i) The First Commission shall be payable in 26 equal installments
commencing on the first pay period during the calendar year 1998.
(ii) The Second Commission shall be payable in 26 equal installments
commencing on the first pay period during the calendar year 1999.
(iii) The Third Commission shall be payable in 26 equal installments
commencing on the first pay period during the calendar year 2000.
(iv) The Fourth Commission shall be payable in 26 equal installments
commencing on the first pay period during the calendar year 2001.
(iii) The Fifth Commission shall be payable in 26 equal installments
commencing on the first pay period during the calendar year 2002.
-9-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.01
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------------------
1996 1995 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS
Net (loss)................................. (561,307) (653,506) (150,638) (120,486)
Shares
Weighted average number of
common shares outstanding................ 1,380,000 1,380,000 1,380,000 1,380,000
Primary earnings per common share:
Net income................................. (0.41) (0.47) (0.11) (0.09)
------ ------ ------ ------
------ ------ ------ ------
FULLY DILUTED EARNINGS
Net income................................. (561,307) (653,506) (150,638) (120,486)
Shares
Weighted average number of
common shares outstanding................ 1,380,000 1,380,000 1,380,000 1,380,000
Fully diluted earnings per common share:
Net income................................. (0.41) (0.47) (0.11) (0.09)
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our reports dated:
REPORT DATE: FINANCIAL STATEMENTS OF:
----------- -----------------------
May 30, 1997 The Orlando Predators Entertainment, Inc.
May 30, 1997 Orlando Predators, a Division of Orlando
Predators, Inc.
and to the reference made to our firm under the caption "Experts" included in
or made part of this SB-2 Registration Statement.
/s/ AJ. ROBBINS, P.C.
-----------------------------------
AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
DENVER, COLORADO
JULY 18, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 1,337 357,982
<SECURITIES> 0 0
<RECEIVABLES> 15,000 688,956
<ALLOWANCES> 0 0
<INVENTORY> 20,000 19,985
<CURRENT-ASSETS> 81,736 1,446,173
<PP&E> 203,928 267,669
<DEPRECIATION> 107,074 837
<TOTAL-ASSETS> 499,309 3,798,372
<CURRENT-LIABILITIES> 732,313 3,399,637
<BONDS> 0 0
0 0
0 0
<COMMON> 0 487,796
<OTHER-SE> (233,004) (89,061)
<TOTAL-LIABILITY-AND-EQUITY> 499,309 3,798,372
<SALES> 1,897,318 0
<TOTAL-REVENUES> 2,889,383 0
<CGS> 0 0
<TOTAL-COSTS> 2,788,541 0
<OTHER-EXPENSES> 662,149 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (561,307) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (561,307) 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (561,307) 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
