McLAUGHLIN & STERN, LLP
260 MADISON AVENUE
NEW YORK, NEW YORK 10016
(212) 448-1100
FAX (212) 448-0066
RICHARD J. BLUMBERG Millbrook Office
DIRECT DIAL: (212) 448-6205 Franklin Avenue
P.O. Box 1369
Millbrook, N.Y. 12545
(914) 677-5700
Fax (914) 677-0097
April 9, 1997
Richard Wulff, Chief
Small Business Rev.
United States Securities and Exchange Commission
Washington, DC 20549
Re: Meisenheimer Capital, Inc. (the "Company")
Form 10-SB/A filed February 19, 1997
SEC File No.: 0-25147
Dear Mr. Wulff:
We are herewith transmitting Amendment No. 2 to Form 10-SB/A
for Meisenheimer Capital, Inc. (the "Company").
In our letter of March 21, 1997 we responded to the Staff's
comments contained in your March 3, 1997 Letter of Comment. Thereafter, we were
orally advised by Mr. David Burton that the Staff objected to the value of the
franchises exchanged for advertising due bills, and that the valuation ascribed
to the franchises was not in conformance with APB No.
29.
After discussion with Mr. Burton and further review,
management determined that the franchises exchanged for the advertising due
bills should be valued at $50,000 per franchise. This was orally submitted to
Mr. Burton, who, after review with other members of the Staff, orally confirmed
to us that the Staff accepted the aforesaid valuation. We were further advised
by Mr. Burton that there were no other comments.
Accordingly, we are submitting Amendment No. 2 and have made
appropriate changes to Item 2, "Management's Discussion and Analysis," and
appropriate changes to financial statements. All of the aforesaid changes have
been underlined, or are presented in bold face type.
It is our understanding that the present filing is now
complete in all respects, and that the next filing for the Company is the Annual
Report on Form 10-KSB, which is due May 31, 1997.
Very truly yours,
/s/ Richard J. Blumberg
Richard J. Blumberg
RJB:ww
Attachments
<PAGE>
EXHIBIT 1
MEISENHEIMER CAPITAL, INC.
CALCULATION OF MINORITY INTEREST
YEAR ENDED FEBRUARY 29, 1996 AND
NINE MONTHS ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NINE
YEAR MONTHS
ENDED ENDED
2/29/96 11/30/96
NET INCOME OF USBL SUBSIDIARY
BEFORE ELIMINATIONS $ 243,747 $324,205
---------- --------
MINORITY SHARE:
COMMON SHARES OUTSTANDING BEGINNING 3,080,000 3,371,001
COMMON SHARES OUTSTANDING ENDING 3,371,001 3,431,001
---------- ----------
AVERAGE COMMON SHARES OUTSTANDING 3,225,501 3,401,001
SHARES OWNED BY PARENT 2,075,000 2,075,000
MAJORITY SHARE 64.33% 61.01%
MINORITY SHARE 35.67% 38.99%
MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARY $ 86,942 $ 126,403
=========== ==========
ROUNDED $ 86,000 $ 126,000
=========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT 2
MEISENHEIMER CAPITAL, INC.
CALCULATION OF RELATED PARTY PAYABLES
AS OF FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
USBL
NET PREFERRED
BALANCE (PAYMENTS)/ STOCK BALANCE
2/28/95 ADVANCES ISSUED 2/29/96
DANIEL MEISENHEIMER JR. 158,723 (15,150) 88,723 54,850
DANIEL MEISENHEIMER III 125,511 (10,456) 73,908 41,147
RICHARD MEISENHEIMER 10,375 (581) 10,375 (581)
MARY ELLEN MEISENHEIMER 50,000 50,000
SPECTRUM ASSOCIATES 474,690 32,631 146,673 360,648
--------- ---------- -------- - -------
SUB-TOTAL 769,299 56,444 319,679 506,064
SPECTRUM ASSOC.
-CAP. LEASE 128,266 75,475 203,741
--------- ---------- --------
TOTAL 897,565 131,919 319,679 709,805
========= ========== ======== ========
BREAKDOWN BY SUBSIDIARY:
USBL 549,679 (18,532) 319,679 211,468
CADCOM 368,783 91,817 460,600
MCI (20,897) 8,634 (12,263)
MCREH 50,000 50,000
TOTAL 897,565 131,919 319,679 709,805
========= ========= ======== =========
</TABLE>
H:\USERS\TMARBLEY\RJB\MRB.NEW
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
AMENDMENT No.2
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
Meisenheimer Capital, Inc.
(Name of Small Business In It's Charter 06-110-1766
(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization Identification No.)
46 Quirk Road, Milford, Connecticut 06460
(Address of Principal Executive Offices)
(203) 877-9508
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of
the Act:
Title of Each Class Name of Each Exchange on Which
to be Registered Each Class is to be Registered
Securities to be registered under Section 12(g) of
the Act:
Common Stock - $0.01 par value
(Title of Class)
<PAGE>
PART I
ITEM 1. General Business
Meisenheimer Capital, Inc. ("MCI" or the "Company") was
organized under the laws of the State of Delaware in December, 1983. In 1984,
the company made an initial public offering pursuant to a Registration Statement
on Form S-18 which was declared effective by the Securities and Exchange
Commission on or about July 27, 1984. Pursuant to the offering, the Company sold
1,130,000 Units at $1.00 a Unit for net proceeds of approximately $995,000. Each
Unit consisted of one share of common stock (the "Common Stock") and one warrant
entitling the holder thereof to purchase one share of Common Stock. The Warrants
expired in April, 1985.
Since 1984, the Company has been engaged, through its subsidiary, the
United States Basketball League, Inc. ("USBL") in the business of developing
and managing a professional basketball league, the "United States Basketball
League" (the "League"). In 1992, the Company acquired another subsidiary,
Cadcom, Inc.,("Cadcom"), incorporated in the State of Connecticut in 1987.
Cadcom is engaged in the business of manufacturing component parts for high
tolerance aircraft parts. In August, 1995, MCI established another
wholly owned subsidiary, Meisenheimer Real Estate Holdings Inc. ("MCR") to
acquire the office and factory that it had been previously leasing.
MCI owns approximately 52% of the issued and outstanding stock
of USBL which consists of both common and preferred stock. The principals of MCI
and members of their immediate family (the "Meisenheimer Family") and affiliated
entities own approximately 31% and the balance of 17% is owned by members of the
public. MCI owns all of the issued and outstanding stock of Cadcom and MCR.
USBL Subsidiary
USBL owns and manages the United States Basketball League.
USBL was established to provide a professional summer basketball league. The
participating players are either recent college graduates or free agents not
under contract with teams in the National Basketball Association (the "NBA") or
are players under contract to foreign teams but who are permitted to play in the
United States in their off-season. The League provides a vehicle to these
players to improve their skills and further affords the players the opportunity
to showcase their professional ability and possibly be selected by one of the
teams in the NBA. The League's season, from early May to early July of each
year, was designed specifically to give the players the opportunity to be
scouted by NBA teams and possibly be selected to participate in the various
summer camps of the individual teams comprising the NBA, which summer camps are
normally held in the latter part of July and August of each year. To date,
approximately 100 USBL players have made NBA rosters after playing with teams in
the League. USBL also provides a training program for referees who aspire to
referee in the NBA.
Each team comprising the USBL has an active roster of ten
players during the season, and each team plays 26 games per season. The League
also has playoffs at the conclusion of the regular season.
<PAGE>
Since the inception of the League to the present time, the
number of active franchises has fluctuated from seven to its present high for
the 1996 season of eleven franchises. The current active franchises are located
in Atlanta, Georgia (the Atlanta Trojans); Atlantic City, New Jersey (the
Atlantic City Seagulls); Winston-Salem, North Carolina (the Carolina Cardinals);
Milford, Connecticut (the Connecticut Skyhawks); Jacksonville, Florida (the
Jacksonville Barracudas); Oyster Bay, New York (the Long Island Surf); Hooksett,
New Hampshire (the New Hampshire Thunder Loons); Portland, Maine (the Portland
Mountain Cats); St. Petersburg, Florida (the Tampa Bay Windjammers); Sarasota,
Florida (The Florida Sharks); and Stuart, Florida (the Treasure Coast Tropics).
The New Hampshire team, which was formerly located in Tennessee is owned and
managed by USBL. MCI, along with another partner owns the Portland Mountain
Cats. In addition there is one inactive franchise which pays annual royalty
fees.
Since 1984, USBL has sold a total of 27 franchises at various
prices ranging from $25,000 to $100,000. The current asking price for a
franchise is $300,000. However, the Company has not been able to consummate a
sale at that price. At least 15 franchises previously sold have been terminated
because of non-payment of franchise obligations. In addition and during the
fiscal year ended February 29, 1996 ("Fiscal 1996"), USBL sold five (5)
franchises in a barter transaction receiving in exchange 2,000,000 units of
negotiable television advertising due bills, and during the first quarter of
Fiscal 1997 USBL entered into an agreement to receive an additional 2,000,000
units of negotiable television advertising due bills in exchange for five
additional franchises. The 4,000,000 units of advertising time are with American
Independent Network ("AIN") which employs satellite transmissions to certain
affiliated television stations in approximately 90 cities throughout the United
States. Management has valued the advertising due bills received in Fiscal 1996
and the first quarter of Fiscal 1997 at $1,200,000. (See Financial Information.)
USBL has already used approximately 300,000 units. to broadcast certain
selective League games. The Company may use the remainder of the available
television time to broadcast its games or, in the alternative, sell off the
available television time. The barter transaction requires that the 10 franchise
teams must be established within ten years from the date of the transactions.
The Company has no assurance that any of the franchises will ever be
established. In addition, the Company retains the right to approve or disapprove
the ultimate franchisee.
Under the standard franchise agreement employed by USBL, the
term of the franchise is for ten (10) years with rights of renewal. In addition
to the initial purchase price for the franchise, the franchisees are currently
required to pay an annual royalty fee of $15,000 per year. Currently, four of
the franchises are in arrears in their annual royalty fees. The Company has the
right to terminate these franchises but has not elected to do so. In addition,
because of the Company's desire to have the League expand, the Company, in the
past, has waived annual royalty fees under certain circumstances.
The Franchise Agreement employed by USBL also entitles USBL to receive
television revenues on a sharing basis with the teams in connection with any
television broadcasting of national or regional games. To date, USBL has not
received any revenues.
<PAGE>
The Franchise Agreement also provides for USBL to receive revenues from the sale
of team and league merchandise. Revenues from these sources have been
negligible. The Franchise Agreement also requires USBL to use its good faith
efforts to obtain sponsorships for each team and the league. Such sponsorship is
generally from local or national corporations. The sponsorships, which for the
last several years have been negligible, have generally taken the form of free
basketballs, uniforms, air line tickets and discount accommodations for
traveling teams.
Since the inception of the League and to date, only one of the
franchises has operated profitably. This has been primarily due to the inability
of USBL, because of insufficient capital, to properly promote the League, and
USBL's inability to attract any meaningful sponsorships for the individual
teams. Likewise, gate attendance for the individual teams has generally been
poor. As a result, the sale of additional franchises either to maintain a
constant level of active franchises or to enlarge the League has historically
proven difficult for USBL.
From the inception of the League, USBL has operated at a loss
prior to Fiscal 96. This has been due to the poor sales of franchises and the
inability of the franchisees to pay their annual royalty fees. As a result, both
MCI and USBL have been dependent on loans and advances from officers, directors
and their affiliates. (See "Financial Information" and "Certain Relationships
and Related Transactions".) For at least the last two fiscal years, the
Company's auditors and USBL's auditors have expressed concerns in their opinion
as to the ability of both companies to continue as going concerns.
USBL currently employs four full time employees consisting of
the President, Daniel T. Meisenheimer, III, who also acts as Commissioner of the
League; a Director of Administration; a Director of Public Relations, and a
Director of Operations. During the League season, the Company employs additional
staff including approximately 50 referees who are paid on a per game basis.
Future Plans of USBL
USBL has, as its ultimate goal, the establishment of at least
sixty (60) franchises throughout the United States, consisting of fifteen (15)
teams in each regional division. This would result in regional play-off games
and then a final championship series. The Company is also attempting to develop
a formal association with the NBA. At the present time, the Continental
Basketball Association (the "CBA"), a league consisting of 14 teams, is regarded
as the minor league of the NBA, and as such, receives financial support from the
NBA. The Company believes that a formal association with the NBA would enhance
the value of the franchises and attract more significant gate attendance.
Likewise, the Company intends to use some of the television time available to it
to broadcast more games which the Company believes would create additional fan
interest and serve to attract additional franchisees. However and given the
difficulties encountered by the Company to date in the sale of additional
franchises and poor gate attendance, the Company may not be able to achieve its
long-range goals without additional capital to properly promote the League.
<PAGE>
Cadcom, Inc.
MCI's other operating subsidiary is Cadcom Inc. ("Cadcom")
which was incorporated in Connecticut in 1987. Cadcom is wholly owned by MCI and
was acquired by MCI in February, 1992 from Synercom Inc. ("Synercom"), a
corporation owned and controlled by the President of MCI and members of the
Meisenheimer Family.
Cadcom operates as a subcontractor manufacturing aluminum and
stainless steel components for high tolerance aircraft parts for both fixed wing
aircraft and helicopters which components are mainly used in pressure switches,
fuel valves and various indicators and instruments. Cadcom's total business is
derived from orders it receives from Spectrum Associates Inc. ("Spectrum"), a
Connecticut corporation owned and controlled by Synercom. Spectrum manufacturers
crash resistant breakaway valves, pressure switches, indicators and other
specialized components for the aircraft industry. Approximately twenty-five
(25%) percent of Spectrum's revenues are derived from orders from Sikorsky
Aircraft Inc. and thirty-five (35%) percent is derived from orders from various
divisions of the U.S. Armed Forces and the Department of Defense. The balance of
Spectrum's orders are from other major aircraft manufacturers. Spectrum
contracts with Cadcom as a subcontractor for approximately 70% of Spectrum's
requirements for aluminum and stainless steel components.
Cadcom's manufacturing process is controlled by rigid
standards established by both the Federal Aviation Authority ("FAA") and the
department of Defense. The manufacturing process utilizes highly sophisticated
computer-controlled turning and milling machinery. Approximately sixty (60%) of
the equipment is rented by Cadcom under capital leases from Synercom. In Fiscal
1996, Cadcom contributed approximately 50% of the total revenues generated by
MCI. In prior years, Cadcom accounted for almost all of MCI's revenues. Because
of Cadcom's dependency on Spectrum, any decline in Spectrum's business would
have an adverse impact on Cadcom's results of operations. Cadcom is actively
seeking other outside business to lessen its dependency on Spectrum.
Cadcom employs nine (9) people consisting of a plant manager
and office manager and seven factory personnel.
Government Regulation
Because USBL is actively engaged in the sale of franchises, it
is required to comply with the laws established by those states in which it has
offered and currently offers franchises. Such compliance includes registering as
a franchisor and approval of the Franchise Agreement with appropriate State
agencies. USBL is currently in full compliance.
Cadcom is subject to manufacturing standards established by
both the FAA and the Department of Defense. As such, it is subject to inspection
by the FAA and the Department of Defense to insure that the manufacturing
process and the end products comply with such regulations. Likewise, Cadcom is
subject to both local and state
<PAGE>
environmental regulations. As of this date, Cadcom is in full compliance with
all local and state regulations.
ITEM 2. Management's Discussion and Analysis of Operations
Fiscal Year 1996 Compared to Fiscal Year 1995
Results of Operations
Revenues for the fiscal year ended February 29, 1996 ("Fiscal
96") were $1,119,000 as compared to revenues of $896,000 for the fiscal year
ended February 28, 1995 ("Fiscal 95"). This increase of $223,000 was due to the
substantial increase of franchise fees generated by the Company's subsidiary,
USBL. During Fiscal 96 USBL sold five franchises in exchange for $2,000,000 of
advertising credits which have been valued by the Company at $250,000. The
Company's other operating subsidiary, Cadcom, also increased its revenues to
$735,000 in Fiscal 96 as compared to $654,000 in Fiscal 95.
Operating expenses for Fiscal 96 increased by $321,000 to
$1,248,000 as compared to operating expenses of $927,000 in Fiscal 95. This
increase was due in part to increased costs of sales for Cadcom commensurate
with its increase in revenues. Likewise, USBL's team expenses increased
approximately $36,000 for Fiscal 96 primarily as a result of the increase in
teams operated by the League as compared to prior years.
Administrative salaries for USBL also increased by $39,000 for
Fiscal 96 as a result of one additional part-time administrator to assist in
team scheduling and one part-time clerical person to assist in general clerical
work in the office.
Advertising, consulting and travel expenses of $191,000,
primarily for USBL, increased in Fiscal 96 by $108,000 as compared to
advertising and travel expenses of $83,000 in Fiscal 95. The advertising
expenses and consulting fees increased because of increased marketing efforts to
sell franchises, raise additional capital and team travel expenses incurred by
the Company-owned franchise and for travel expenses for playoffs which the
company funds.
Consolidated net loss for Fiscal 96 amounted to $161,000 a
compared to a loss of $20,000 in Fiscal 95. In addition to the items enumerated
above, net loss was adversely affected by final legal settlement costs of two
outstanding litigation matters amounting to $32,000. The Company does not have
any other pending litigation. The Company incurred income taxes of $16,000 and a
credit of $24,000 to net loss representing the minority interest's share in the
net loss of its USBL subsidiary.
Liquidity and Capital Resources
The Company's working capital deficiency decreased to $335,000
in Fiscal 96 from a deficiency of $476,000 in Fiscal 95. This decrease was
primarily due to the proceeds of $1,052,000 received by the Company's
subsidiary, USBL, in connection with an offering pursuant to Regulation D under
the Securities Act of 1933. The other items affecting this decrease were an
increase in accounts receivable and inventory in the
<PAGE>
amount of approximately $49,900 and a decrease in accounts payable and accrued
expenses of approximately $17,000.
The Company is making efforts to alleviate its working capital
deficiency by seeking additional equity capital primarily for USBL which
subsidiary accounts for a major portion of the working capital deficiency and
which subsidiary, in management's opinion, has the greatest potential for future
growth. The Company believes the 2,000,000 units of advertising credits, valued
at $250,000 will enable the Company to attract more interest in the League for
both fans and potential franchisees by utilization of the advertising credits
for free television broadcasting of League games. Additionally, Cadcom is
actively soliciting additional customers to increase its revenues and diminish
its reliance on Spectrum. However, there can be no assurance that the Company
will be successful in its efforts to reduce the working capital deficiency.
Third Quarter Ended November 30, 1996. Compared to Third Quarter Ended November
30, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
The following schedule highlights key operating data:
November 30, November 30,
1996 1995
---- ----
Revenues $1,067,000 $702,000
----------
Operating expenses $1,060,000 $69,000
----------
Operating income (loss) $7,000 $(167,000)
-----
Net loss $(24,000) $(180,000)
--------
</TABLE>
For the period ended November 30, 1996 ("Nine Months 96") revenues
generated amounted to $1,067,000, an increase of $365,000 from revenues of
$702,000 for the period ended November 30, 1995 ("Nine Months 95"). This
increase was due primarily to the recognition of $250,000 by USBL of revenues
for initial franchise fees which represented an increase of $269,000 of
franchise fees for Nine Months 96 as compared to $51,000 of franchise fees for
Nine Months 95. Most of this increase was due from the sale of five USBL
franchises for 2,000,000 of advertising due bills valued by management at
$250,000. Additionally, sales by Cadcom increased by $32,000 as a result, of
price increases of various increased components. The balance of the revenue
increase was generated by the receipt by USBL of increased advertising income.
Operating Expenses for Nine Months 96 amounted to $1,060,000, an increase
of $191,000 over operating expenses of $869,000 for Nine Months 95. This
increase consisted of various components: the use of $40,000 of pre-paid
advertising due bills to air several USBL games on Cable T.V.; the write-off of
$29,000 of advances to several USBL teams; an increase of $69,000 for
professional fees and associated costs; festival costs of $18,000, an increase
of $16,000, as compared to festival costs of $2,000, for Nine Months 95; an
increase in insurance expenses of $24,000 for additional liability insurance; an
increase in administrative salaries of $14,000 for additional personnel from
$36,000 for Nine Months 95 to $50,000 for Nine Months 96. Additionally, the
Company's real estate subsidiary MCR incurred operating expenses of $15,000 for
Nine Months 96, as compared to operating expenses of $5000, for Nine Months 95,
<PAGE>
an increase of $10,000. MCR had only five months of operation for Nine Months
95, as compared to nine months for Nine Months 96
Consolidated net loss for Nine Months 96 amounted to $24,000 as compared
to a loss of $180,000 for Nine Months 95. The decrease in net loss was
attributable to the additional revenues generated by USBL for franchise fees and
increased profit margin by Cadcom.
The Company future results will continue to be effected by a variety of
factors that could have a material adverse effect on revenues and profitability
and the ability of the Company to continue as a going concern. The financial
success of USBL is dependant upon its ability to attract additional franchises
and public interest in the League. The Company hopes to increase public exposure
to the League by airing additional games on Cable T.V. which could also have the
effect of attracting additional franchise interest. However, there can be no
assurances that the Company will be successful. With respect to the Company's
subsidiary, Cadcom, its dependence upon sales to Spectrum Associates, Inc.
("Spectrum") creates a concern as to Cadcom's future viability. Which Cadcom is
attempting to enlarge its customer base to reduce its dependence on Spectrum,
there can be no assurance it will be successful.
Liquidity and Capital Resources
Working capital deficiency increased from $214,000 as of November 30,
1995 to $544,000 as of November 30, 1996. The main component of this increase
was the utilization of $368,000 of cash outlays for debt reduction and operating
activities. As of the present time, the Company will be dependent upon loans
from management and affiliates to meet its working capital requirements.
However, USBL plans to raise additional equity capital, and Cadcom is attempting
to develop new customers. However, there can be no assurances that any of these
efforts will be successful.
<PAGE>
ITEM 3. Description of Property
In August, 1995, MCR, through its wholly-owned subsidiary,
Meisenheimer Capital Real Estate Holdings Inc. ("MCR") acquired the real estate
at 46 Quirk Road, Milford, Connecticut, from Genvest, a limited partnership
whose partners consist of the President of MCI and the Meisenheimer Family. The
property was formerly leased by MCI and its subsidiaries from Genvest. The
property consists of a building housing office and manufacturing space of
approximately 6,000 square feet. USBL currently pays a $1,000 a month rent for
approximately 1,500 square feet under a lease which expires on December 31,
1996. Cadcom pays $3,000 a month for approximately 3,500 square feet under a
lease which expires on December 31, 1999. A portion of the space is rented to
unaffiliated parties. The consideration paid to Genvest by MCI consisted of the
issuance of 200,978 shares of the Common Stock of MCI plus cash of a $120,000.
MCR borrowed funds of $120,000 from a financial institution which loan is
secured by a 20 year mortgage on the property. The loan is guaranteed by MCI.
ITEM 4. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information as of July
15, 1996 with respect to the beneficial ownership of the outstanding Common
Stock of the Company by (i) any holder of more than five (5%) percent; (ii) each
of the Company's officers and directors; and (iii) the directors and officers of
the Company as a group:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name and Address Amount and nature of Approximate
Beneficial Owner Beneficial Ownership Percent of Class
Daniel T. Meisenheimer III 1,190,500 26.3%
c/o The United States
Basketball League
46 Quirk Road
Milford, CT 06460
Richard T. Meisenheimer 269,500 6.0%
c/o The United States
Basketball League
46 Quirk Road
Milford, CT 06460
- - --------
</TABLE>
Daniel T. Meisenheimer, III is the President of MCI. The shares listed
above include shares owned by his wife and minor children. Not included are
100,000 options issued to Mr. Meisenheimer to purchase 100,000 of the Common
Stock at $0.25 per share. Mr. Meisenheimer and his family also own 425,000
shares of the common stock and 136,409 shares of the preferred stock of MCI's
subsidiary, USBL.
Richard Meisenheimer is Vice President and a Director of MCI. The shares
listed above include shares owned by his wife and minor children. Mr.
Meisenheimer also owns 500 shares of the common stock and 77,875 of the
preferred stock of MCI's subsidiary, USBL.
<PAGE>
In addition, Spectrum, of which Richard Meisenheimer is President, owns 207,857
shares of the common stock and 240,000 shares of preferred stock of USBL.
Daniel T. Meisenheimer, Jr.3 525,000 11.7%
c/o The United States
Basketball League
46 Quirk Road
Milford, CT 06460
Synercom Inc.4 980,000 22.5%
c/o The United States
Basketball League
46 Quirk Road
Milford, CT 06460
All Officers and Directors
as a Group 1,985,000 66.5%
ITEM 5. Directors, Executive Officers, Promoters and Control
Persons
The following persons are the current executive officers and
directors:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Age Position
Daniel T. Meisenheimer, III 45 Chairman of the Board
--
President and
Treasurer
Richard Meisenheimer 42 Vice President,
Director and Secretary
Daniel T. Meisenheimer, Jr. 69 Director
</TABLE>
All directors hold office until the next annual meeting of
Stockholders and the election and qualification of their successors. Officers
are appointed annually by the Board of Directors and subject to existing
employment agreements serve at the discretion of the Board.
Background of Executive Officers and Directors
Daniel T. Meisenheimer, III has been the Chairman of the Board and
President and Treasurer of MCI since its inception in 1984. Mr. Meisenheimer is
also Chairman of the Board, President and Treasurer of the Company's
subsidiaries, USBL, Cadcom and MCR. Mr. Meisenheimer is also employed as a Vice
President and serves as Cheif Financial Officer.
<PAGE>
Daniel T. Meisenheimer, Jr., a Director of MCI, is the father of
Daniel Meisenheimer III and Richard Meisenheimer. The shares listed above
includes shares owned by his wife, Mary Ellen Meisenheimer. Mr. Meisenheimer
also owns 5,000 of common stock and 182,723 shares of preferred stock of USBL.
Synercom is owned jointly by Daniel Meisenheimer III, Richard Meisenheimer,
aniel Meisenheimer, Jr. and Mary Ellen Meisenheimer. Synercom also owns all of
the stock of Spectrum, Inc. a Director of Spectrum Associates, Inc. which
positions he has held since 1975. Spectrum Associates, Inc. ("Spectrum") is the
sole customer of MCI's subsidiary, Cadcom. Between 1981 and 1984 Mr.
Meisenheimer owned and operated an investment advisory firm. From 1977 to 1981,
Mr. Meisenheimer was employed as a registered representative with Merrill, Lynch
Inc.
Richard C. Meisenheimer has been Vice President, Secretary and a Director
of MCI since its inception. Mr. Meisenheimer has been associated with Spectrum
since 1976. In 1993 he became President of Spectrum succeeding his father,
Daniel T. Meisenheimer, Jr. Mr. Meisenheimer is also Vice President, Secretary
and a Director of MCI's subsidiaries, USBL, Cadcom, and MCR.
ITEM 6. Executive Compensation
MCI
Historically, the only two officers of MCI, Daniel T. Meisenheimer III,
President and Treasurer, and Richard Meisenheimer, Vice President, have not
received any salaries from MCI. However, on March 1, 1994, the Company awarded
Mr. Daniel T. Meisenheimer, III, 200,000 options to purchase 200,000 shares of
the Common Stock in recognition of past services to MCI. The options are
exercisable at $0.25 a share. On June 5, 1995, Mr. Meisenheimer exercised
options to purchase 100,000 shares. At the time of the exercise, the bid price
for MCI Common Stock was $1.00 a share. Richard Meisenheimer received 100,000
options in recognition of past services. Each option entitles Mr. Meisenheimer
to purchase one share of the Common Stock at $0.25 per share. Mr. Meisenheimer
has not exercised any options. On March 1, 1996 the Company entered into
employment agreements with Daniel T. Meisenheimer III and Richard Meisenheimer.
The agreement with Daniel T. Meisenheimer III is for a period of two years.
For the first year Mr. Meisenheimer is to receive a salary of $2,000 a month.
However, if in the opinion of the Board of Directors the payment of salary to
Mr. Meisenheimer would have an adverse impact on the Company's cash flow then
the Company is authorized to withhold payments. The agreement further provides
that in the event any monthly salary is withheld then for each month of salary
omitted Mr. Meisenheimer is to then receive 10,000 options. Each option will
entitle Mr. Meisenheimer to purchase one share of the Common Stock at $1.00 a
share. The options are to be issued at the end of each fiscal year. During the
second year of the employment agreement, Mr. Meisenheimer is to receive a
monthly salary of $5,000 and if the Company
<PAGE>
elects not to pay Mr. Meisenheimer the cash salary, then he is to receive 10,000
options for each month of salary omitted which are to be issued at the end of
the fiscal year.
Mr. Richard Meisenheimer's employment agreement is also for a
period of two years and provides for a monthly salary of $400 per month. The
Board of Directors can also withhold payment of such salary if such payment
would have an adverse impact on the Company's cash flow. In that event, Mr.
Meisenheimer is to receive 2,000 options for each month of salary not paid. Each
option will entitle Mr. Meisenheimer to purchase one share of the Company's
Common Stock at $1.00 per share. In the second year Mr. Meisenheimer is to
receive $800 a month and if any salary is omitted then 4,000 options will be
issued for each month of salary omitted. All options are issued at the end of
each fiscal year.
Pursuant to the employment agreements Mr. Daniel T. Meisenheimer, III, has
only received a total of $4,000 of salary for the months of March and April,
1996. Mr. Richard Meisenheimer has only received a total of $800 for March and
April. The Board of Directors elected to withhold any further payment of
salaries because of the impact on cash flow. As of December 31, 1996, because of
the Company's decision not to pay salaries, Mr.
Daniel T. Meisenheimer, III is entitled to receive 80,000 options and Mr.
Richard Meisenheimer is entitled to receive 20,000 options. The Company has
not
as yet issued the options.
The following tables reflect the salaries received by Daniel
T. Meisenheimer, III and Richard Meisenheimer and the options received by Daniel
T. Meisenheimer, III, and Richard Meisenheimer and the amount of options
exercised.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Summary Compensation Long Term Compensation
Annual Compensation Awards Payouts
(d) (e) (f) (g) (h) (i)Other Security Annual Restricted
Underlying All Other
Name and Fiscal Salary Bonus Compen- Stock Options/IP
Compen-
Principal Position Year ($) ($) sation Award(s) ($) SARs (#) Payouts ($)
sation ($)
- - -------------------- ---------------------------- ------------------------------------------ ------------ -------------
Daniel T. 1995 -0- -0- -0- 200,000
Meisenheimer III, 5 1996 -0- -0- -0-
President 19976 $4,000 -0- -0-
Richard 1995 -0- -0- -0- 100,000
Meisenheimer 1996 -0- -0- -0-
Vice Pres. 19972 $ 800 -0- -0-
</TABLE>
- - --------
Both Daniel T. Meisenheimer, III, and Richard Meisenheimer receive
salaries from Spectrum. Fiscal 97 is the first quarter ended May 31, 1996.
Option/SAR Grants in Last Fiscal Year
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Individual Grants
(a) (b) (c)
(d) (e)
Number of Securities Percent of Total Options/ Exercise or
Underlying Options/ SARs Granted to
Base Price Expiration
Name SARs/Granted (#) Employees in Fiscal Year
($ Share) Date
- - ---- ------------------- ------------------------
- - ------------ --------
David T. Meisenheimer,
III -0- -0-
- - -0- -0-
Richard Meisenheimer -0- -0- -0- -0-
Vice President
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at FY End In-the-Money Options/
(#) SARs at FY-End ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- - ---- ---------------- ------------------------------- -------------
Daniel T. Meisenheimer, 100,000 $75,000 100,000 (Exercisable) $287,500
(Exercisable)
III
President
Richard Meisenheimer
Vice President 100,000 (Exercisable) $287,500 (Exercisable)
</TABLE>
<PAGE>
USBL
On January 1, 1996, USBL entered into employment agreements
with Daniel T. Meisenheimer, III who serves as President and Chief Executive
Officer, and Richard Meisenheimer, who serves as Vice President and Chief
Financial Officer. The employment agreement provides for a monthly salary of
$2,000 during the first year and $5,000 a month for the second year. If, in the
opinion of the Board of Directors of USBL, the payment of salary would have an
adverse impact on the Company's cash flow, then the Company is authorized to
withhold payments. For every month of salary omitted, Mr. Meisenheimer is to
receive 10,000 options. Each option entitles Mr. Meisenheimer to purchase one
share of USBL Common Stock at $1.00 a share. All options are to be issued at the
end of each 12 month period. Mr. Meisenheimer received a total of $4,000 for
Fiscal 1996 and $4,000 during the first quarter of Fiscal 1997.
In view of the fact that neither Daniel T. Meisenheimer, III,
and Richard Meisenheimer had received any compensation for services from USBL
since the inception of the company, on September 1, 1995, the Board of Directors
adopted an option program reserving 200,000 shares to provide each officer with
20,000 options on the first business day of each calendar year. Under the plan,
each option entitles the holder to purchase one share of common stock at an
exercise price equal to the closing bid price on the date of grant. The options
were to expire five years from date of grant or nine months after retirement of
either officer. The expiration date of the options was changed by agreement to
five years. On January 2, 1996 (Fiscal 1996) Daniel T. Meisenheimer, III and
Richard Meisenheimer each received 20,000 options exercisable into common stock
at $2.25 a share. On August 20, 1996, the company and the two officers agreed to
rescind the remainder of the option program.
USBL also entered into an employment agreement with Richard
Meisenheimer on January 1, 1996. The agreement is similar to Daniel T.
Meisenheimer III's, except that Richard Meisenheimer is to receive a salary of
$800 a month during the first year and $1,600 a month for the second year. For
each month's salary omitted, Richard Meisenheimer is to receive 4,000 options.
Each option entitles Mr. Meisenheimer to purchase one share of USBL Common Stock
at $1.00 a share. All options are awarded at the end of each year. During Fiscal
96 Mr. Meisenheimer received a total of $1,600 of salaries and during the first
quarter of Fiscal 97 Mr. Meisenheimer received a total of $1,600 of salaries.
The following tables reflect the salaries and options
received by Daniel T. Meisenheimer, III and Richard Meisenheimer:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
Long Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (I)
Other Securities
Annual Restricted Underlying All Other
Name and Fiscal Salary Bonus Compen- Stock Options/ LTIP
Compen-
Principal Position Year ($) ($) sation Award(s) ($) SARs (#) Payouts ($)
sation ($)
<PAGE>
- - -------------------- ---------------------------- ------------------------------------------ ------------ -------------
Daniel T. 1995 -0- -0- -0- -0- -0- -0- -0-
Meisenheimer III 1996 -0- -0- -0- 20,000 -0- -0-
President 19972 $4,000 -0- -0-
Both Daniel T. Meisenheimer, III and Richard Meisenheimer receive salaries
from Spectrum.
Fiscal 1997 represents the first quarter ended May 31,
1997.
Richard 1995 -0- -0- -0- -0- -0- -0- -0-
Meisenheimer 1996 $1,600 -0- -0- -0- 20,000 -0- -0-
Vice Pres. 19972 $1,600 -0- -0- -0- -0- -0- -0-
Option/SAR Grants in Last Fiscal Year
Individual Grants
(a) (b) (c) (d) (e)
Number of Securities Percent of Total Options/ Exercise or
Underlying Options/ SARs Granted to Base Price Expiration
Name SARs/Granted (#) Employees in Fiscal Year ($ Share) Date
- - ---- ------------------- ------------------------ ------------ --------
David T. Meisenheimer,
III 20,000 50% -0- 1/2/2001
Richard Meisenheimer 20,000 50% -0- 1/2//2001
Vice President
Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at FY End In-the-Money Options/
(#) SARs at FY-End ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- - ---- ---------------- ------------------------------- -------------
Daniel T. Meisenheimer, -0- -0- 20,000 (Exercisable) $_______
(Exercisable)
III
President
<PAGE>
Richard Meisenheimer -0- -0- 20,000 (Exercisable) $_______
(Exercisable)
Vice President
</TABLE>
ITEM 7. Certain Relationships and Related Transactions
For at least the last ten years the principals of MCI and their
affiliated companies have made loans to USBL, MCI's subsidiary. As of February
28, 1995 ("Fiscal 1995"), USBL was indebted to the principals or their
affiliated companies in the principal sum of $601,984 together with accrued
interest at six percent (6%) per annum of $207,744. All of the outstanding debt
is payable upon demand. Of the foregoing amount, Spectrum was owed the principle
sum of $132,743 plus accrued interest of $113,930. The principals were owed
$225,579 plus accrued interest of $77,427. The remaining indebtedness of
$243,662 was due to MCI, the parent, which is eliminated on the accompanying
consolidated financial statements. During Fiscal 1996, the indebtedness to
Spectrum including interest was reduced by $146,673 through the issuance of
preferred stock of USBL. During both Fiscal 95 and 96, loans due the principals
were reduced by $233,006 through the issuance of Preferred Stock of USBL. As of
February 29, 1996 ("Fiscal 1996"), USBL is indebted to Spectrum and the
principals in the total sum, including interest of $215,469 ($107,289 to
Spectrum and $108,180 to the principals). In all of the foregoing transactions,
the preferred stock of USBL was valued at $1.00 per share.
Cadcom which was acquired by MCI in February 1992 from Synercom, Inc.,
a company owned and controlled by the Meisenheimer Family, is totally dependent
upon orders received from Spectrum, a privately held company, also owned by the
Meisenheimer Family. Substantially all of Cadcom's business is derived from
Spectrum. Intercompany pricing is done on "an arm's length" basis and with
respect to orders from the military or the defense department is subject to
competitive bid. Cadcom is paid by Spectrum in accordance with normal credit
terms. In addition and when Cadcom was acquired by MCI from Synercom, Inc., MCI
granted Synercom, Inc. the right of first refusal to buy the Cadcom common stock
in the event MCI determined to sell Cadcom.
In fiscal 1995, Cadcom entered into capital leases for new machinery.
Cadcom is leasing the equipment from Synercom, Inc. During fiscal 1996 Cadcom
also entered into capital leases with Synercom for additional manufacturing
equipment. The total amount of outstanding lease payments amounts to $203,741.
Monthly payments to Synercom for the leased equipment amount to $8,950.
In 1988, Richard Meisenheimer, Vice President, and several other
individuals purchased, through a corporation, a franchise from USBL, the
Connecticut Skyhawks. The purchase price was $50,000 and annual royalty payments
have been made to USBL for each year to date. On August 31, 1996, Spectrum, a
company owned and controlled by the Meisenheimer family purchased a franchise
from USBL for 100,000. The franchise is
not currently active but pays the annual royalty fee.
Prior to August 1995, MCI, USBL and Cadcom had been renting office and
manufacturing facilities from Genvest L.P., a limited partnership consisting of
<PAGE>
members of the Meisenheimer Family. In August, 1995 MCI, through its subsidiary
MCR, purchased the facilities from Genvest, L.P., for $340,000 through the
issuance of 200,978 shares of the Common Stock of MCI to Genvest, L.P., and
borrowed the sum of $120,000 from a financial institution secured by a 20 year
mortgage on the property. Richard C. Meisenheimer has personally guaranteed the
mortgage.
ITEM 8. Description of Securities
The Company completed a public offering of Units in August 1984. Each
Unit consisted of one share of Common Stock, $0.01 par value and one warrant to
purchase one share of Common Stock at $1.25 per share from three to six months
after the effective date of the offering (July 27, 1984) and at $1.50 per share
from six to nine months after the effective date. All of the unexercised
warrants expired on April 29, 1985.
The Company is presently authorized to issue 10,000,000 shares of
Common Stock, $0.01 par value. As of May 31, 1996, there were 4,469,528 shares
issued and outstanding. Of that amount, approximately 2,965,000 are owned by the
officers, directors and their affiliates and as such may be deemed to be
"restricted shares" as that term is described under the Securities Act of 1933
(the "Act"), as amended, and may only be sold in compliance with Rule 144 of the
Act or pursuant to a registration statement under the Act. With the exception of
100,000 shares acquired by Daniel T. Meisenheimer through the exercise of
options, the officers, directors and their affiliates have held their shares for
more than two years as required by Rule 144 and thus could avail themselves of
Rule 144 at any time.
The holders of the Common Stock (I) have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors of the Company; (ii) are entitled to share ratably in all of
the assets of the Company available for distribution to holders of Common Stock
upon liquidation, dissolution or winding up of the affairs of the Company; (iii)
do not have preemptive, subscription or conversion rights or redemption or
sinking funds applicable thereto; and (iv) are entitled to one cumulative vote
per share on all matters on which stockholders may vote at all meetings of
stockholders. Therefore, the holders of more than fifty percent (50%) of the
outstanding shares, voting for the election of directors can elect all of the
directors if they so choose.
<PAGE>
PART II
ITEM 1. Market Price of and Dividends on the Registrant's
Common Stock
The Company's Common Stock trades on the non-NASDAQ
over-the-counter market ("Bulletin Board") under the symbol "MEIS".
The following table indicates the high and low bid prices as reported
by the National Daily Quotation Service, Inc. for the Company's fiscal year
commencing March 1, 1994 through February 28, 1995 and the closing high and low
bid price from March 1, 1995 through July 31, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1995 High-Low Bid Price
High Low
First Quarter Ended 3/31/94 $0.75 $0.25
Second Quarter Ended 8/31/94 $1.25 $0.50
Third Quarter Ended 11/30/94 $1.125 $0.56
Fourth Quarter Ended 2/28/95 $1.25 $0.75
Fiscal 1996 Closing Bid Price
High Low
First Quarter Ended 5/31/95 $1.125 $0.875
Second Quarter Ended 8/31/95 $2.00 $1.00
Third Quarter Ended 11/30/95 $3.187 $0.875
Fourth Quarter Ended 2/28/96 $3.25 $2.185
Fiscal 1997
First Quarter Ended 5/31/96 $3.125 $2.00
Period 6/1/96 through 7/31/96 $2.875 $1.062
</TABLE>
The foregoing prices represent quotations between dealers without
adjustments for retail markups, markdowns or commissions and may not represent
actual transactions, as reported by the National Association of Securities
Dealers Composite Feed or other qualified inter-dealer quotation medium.
ITEM 2. Legal Proceedings
There are no legal proceedings pending or threatened.
<PAGE>
ITEM 3. Changes in and Disagreements with Accountants
For the last four fiscal years, the Company and its subsidiaries have
utilized the services of Michael Racaniello, C.P.A. to prepare its annual
audits. On April 15, 1996, the Company retained the accounting firm of Holtz,
Rubenstein & Co., LLP to prepare annual audits of the Company and its
subsidiaries. Mr. Racaniello continues to perform internal accounting services
for the Company and its subsidiaries. There have been no disagreements between
the Company and Mr. Racaniello or between the Company and Holtz, Rubenstein &
Co., LLP. --------
The closing high and low bid prices were not available from the National
Daily Quotation Service, Inc. before March, 1995.
ITEM 4. Recent Sales of Unregistered Securities
MCI
On August 16, 1995, the Company, through its subsidiary, MCR, purchased
the real estate at 46 Quirk Road, Milford, Connecticut. As part of the
consideration paid by the Company for the property, the Company issued 200,978
shares of its Common Stock to the seller, Genvest, a limited partnership whose
partners consist of the president of MCI and the Meisenheimer Family. The shares
were issued pursuant to the private placement exemption provided by Section 4(2)
of the Securities Act of 1933 (the "Act").
USBL
On February 28, 1995, the Company's subsidiary USBL issued 319,679
unregistered shares of its Preferred Stock valued at $1.00 per share as partial
payment of outstanding indebtedness due Daniel T. Meisenheimer III, Daniel T.
Meisenheimer Jr., Richard Meisenheimer, and Spectrum Associates, Inc. USBL
relied on the exemption provided by Section 4(2) of the Act.
On October 23, 1995, USBL completed an offering of 268,501 shares of
its Common Stock for total proceeds of $604,127 to 12 accredited investors. The
offering was made pursuant to Rule 504 of Regulation D promulgated under the
Act. Brookehill Equities, Inc., a registered broker-dealer, and members of the
National Association of Securities Dealers, Inc. ("NASD") acted as placement
agent and received a commission for the placement of said shares.
On February 29, 1996, USBL issued 360,000 shares of unregistered
Preferred Stock, valued at $1.00 per share, as partial payment of outstanding
indebtedness due Daniel T. Meisenheimer III, Daniel T. Meisenheimer Jr., Richard
Meisenheimer, Spectrum Associates, Inc., and MCI. USBL relied on the exemption
provided by Section 4(2) of the Act.
On September 6, 1995, USBL issued 22,500 shares of unregistered USBL
Common Stock pursuant to exercise of outstanding options granted to a third
party for consulting services. The exercise price of the options was $.01 a
share. USBL relied upon the exemption provided by Section 4(2) of the Act. On
May 12, 1995, USBL issued 100,000 warrants to three individuals in consideration
for a "bridge loan." The warrants entitled the holder to purchase
<PAGE>
shares of USBL Common Stock at an exercise price of $1.00 per share. On July 7
and July 23, 1996, two of the individuals exercised a total of 60,000 warrants
and received 60,000 shares of unregistered USBL Common Stock. USBL relied upon
the exemption provided by Section 4(2) of the Act. All of the foregoing
individuals who exercised their options are sophisticated investors and had
access to complete information regarding USBL.
ITEM 5. Indemnification of Directors and Officers
Article X of the Company's By-Laws provides the following:
(a) Any person made a party to any action, suit or proceeding, by
reason of the fact that he, his testator or intestate representative is
or was a director, officer or employee of the Corporation, or of any
Corporation in which he served as such at the request of the
Corporation, shall be indemnified by the Corporation against the
reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of such
action, suit or proceedings, or in connection with any appeal therein,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding, or in connection with any appeal therein
that such officer, director or employee is liable for negligence or
misconduct in the performance of his duties.
(b) The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which any officer or director or
employee may be entitled apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors, except that in any
case where there is no disinterested majority of the Board available,
the amount shall be fixed by arbitration pursuant to the then existing
rules of the American Arbitration Association.
<PAGE>
PART F/S
TABLE OF CONTENTS OF FINANCIAL STATEMENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Page
Independent Auditors' Reports..................................................................35
Financial Statements:
Consolidated Balance Sheet for the
Year Ended February 29, 1996 and
Three Months Ended May 31, 1996.................................................37
Consolidated Statement of Operations
for Years Ended February 29, 1996
and February 28, 1995 and Three Months
Ended May 31, 1996 and May 31, 1995.............................................38
Consolidated Statements of
Stockholders' Equity for the Years Ended
February 29, 1996 and February 28, 1995..........................................40
Consolidated Statements of Cash Flow for the Years Ended February 29,
1996 and February 28, 1995 and for the Three
Months Ended May 31, 1996 and May 31, 1995................................42
Notes to Financial Statements.............................................................41-49
</TABLE>
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
REPORT ON AUDIT OF CONSOLIDATED
FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 29, 1996
<PAGE>
Independent Auditors' Report
Board of Directors
Meisenheimer Capital, Inc.
Milford, Connecticut
We have audited the consolidated balance sheet of Meisenheimer Capital, Inc. and
Subsidiaries as of February 29, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meisenheimer
Capital, Inc. and Subsidiaries as of February 29, 1996 and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations, inability
to collect annual franchise fees and reliance on related party revenue
transactions raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Holtz Rubenstein & Co., LLP
Melville, New York
May 30, 1996
<PAGE>
MICHAEL RACANIELLO, CPA
170 POST ROAD, SUITE 204
FAIRFIELD, CONNECTICUT 06430
To the Board of Directors
Meisenheimer Capital, Inc.
Milford, Connecticut
I have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Meisenheimer Capital, Inc. and
Subsidiaries for the year ended February 28, 1995. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the statements of operations, stockholders' equity and
cash flows 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
presentation of the statements of income and retained earnings and cash flows. I
believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Meisenheimer Capital, Inc. and Subsidiaries for the year ended
February 28, 1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As explained in Note 1, the Company has
suffered substantial losses that raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that may result from the outcome of this uncertainty.
As discussed in Note 1, the Company changed its method of accounting for
investment securities as was required by Statement of Financial Accounting
Standards Board No. 115, " Accounting for Certain Investments in Debt and Equity
Securities".
As discussed in Note 20 to the financial statements, certain errors resulting in
the understate ment of previously reported net loss and overstatement of deficit
and minority interest, were discovered by management of the Company during the
current year. Accordingly, adjustments have been made to net loss, deficit and
minority interest to correct the error.
s/Michael Racaniello, CPA
May 30, 1996
May 30, 1996 as to Note 14(b) and Note 20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 29, November 30,
ASSETS 1996 1996
------ ------------------------------------------------------------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash $ 278,188 $ 33,603
Accounts receivable (Note 10) 103,017 79,370
Inventories (Note 4) 92,370 157,801
Investments 47,597 32,672
Other current assets 6,000 32,718
-------------- --------------
Total current assets 527,172 336,164
PROPERTY AND EQUIPMENT, net (Notes 5, 8 and 9) 613,301 549,136
GOODWILL (Note 7) 29,361 28,749
PREPAID ADVERTISING CREDITS (Note 11) 225,000 435,312
-------------- --------------
$1,394,834 $1,349,361
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Notes 10 and 12)$ 243,407 $ 353,196
Notes payable - bank (Note 9) 25,900 4,600
Capital lease obligation - current portion (Note 8) 83,180 87,972
Notes payable - stockholders (Note 10) 506,064 430,494
Mortgage payable - current portion (Note 9) 3,165 3,250
-------------- --------------
Total current liabilities 861,716 879,512
-------------- --------------
CAPITAL LEASE OBLIGATION, net of
current portion (Note 8) 120,561 53,790
-------------- --------------
MORTGAGE PAYABLE, net of current portion (Note 9) 110,570 105,138
-------------- --------------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 50,000 61,000
-------------- --------------
COMMITMENT AND CONTINGENCIES (Notes 16 and 18)
STOCKHOLDERS' EQUITY (Notes 12 and 14):
Common stock, $0.01 par value, 10,000,000 shares
authorized; 4,469,528 shares and 4,471,028 shares
issued and outstanding 44,695 44,710
Additional paid-in capital 3,236,908 3,300,268
Unrealized loss on available-for-sale investments (9,641) (50,909)
Deficit (3,019,975) (3,044,148)
----------- ----------
Total stockholders' equity 251,987 249,921
-------------- --------------
$ 1,394,834 $ 1,349,361
============== ==============
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended Nine Months Ended
February 29, February 28, November 30, November 30,
1996 1995 1996 1995
------- ---------- --------- -----
(Unaudited) (Unaudited)
REVENUES: (Note 10)
Net sales $ 735,013 $ 651,324 $ 584,762 $ 553,211
Franchise fees and related revenue 383,956 244,500 481,977 148,444
------------- ----------- ------------- -------------
Total revenues 1,118,969 895,824 1,066,739 701,655
------------- ----------- ------------- -------------
OPERATING EXPENSES: (Note 8)
Cost of goods sold 566,332 517,466 417,436 431,404
Selling, general and team expenses 681,554 409,478 642,526 437,470
------------- ----------- ------------- -------------
Total operating expenses 1,247,886 926,944 1,059,962 868,874
------------- ----------- ------------- -------------
Income (loss) from operations (128,917) (31,120) 6,777 (167,219)
------------- ----------- ------------- -------------
OTHER INCOME AND EXPENSE:
Realized gain on available-for-sale
investments 7,668 41,044 - 7,668
Interest expense (47,796) (54,531) (31,845) (35,928)
Interest income 8,324 - 3,620 3,949
Other income 24,000 23,960 19,100 18,028
Settlements (32,000) - - -
------------- ----------- ------------- ------------
Total other income and expense (39,804) 10,473 (9,125) (6,283)
------------- ----------- ------------- -------------
LOSS BEFORE MINORITY
INTEREST AND TAXES (168,721) (20,647) (2,348) (173,502)
MINORITY INTEREST IN NET
EARNINGS OF SUBSIDIARY (24,000) - 11,000 -
PROVISION FOR INCOME
TAX (Note 19) 16,000 - 10,825 6,000
------------- ----------- ------------- -------------
NET LOSS $ (160,721) $ (20,647) $ (24,173) $ (179,502)
============= =========== ============= =============
NET LOSS PER SHARE $(.03) $(.00) $(.00) $(.04)
===== ======= ====== ======
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,846,883 4,268,550 5,005,384 4,846,883
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
Additional
Common Stock Paid-in
Shares Amount Capital Deficit
Balance, March 1, 1994 (as restated)
(Note 20) 4,268,550 $ 42,686 $ 1,966,675 $ (2,838,607)
Net loss - - - (20,647)
------------ --------- ------------- --------------
Balance, February 28, 1995 4,268,550 42,686 1,966,675 (2,859,254)
Issuance of shares in connection
with the purchase of building 200,978 2,009 167,990 -
Issuance of stock options - - 13,750 -
Issuance of stock by subsidiary
to minority holders - - 1,088,493 -
Net loss - - - (160,721)
------------ --------- ------------- --------------
Balance, February 29, 1996 4,469,528 44,695 3,236,908 (3,019,975)
Issuance of shares in connection
with warrant exercise (unaudited) 1,500 15 3,360 -
Issuance of stock by subsidiary
to minority holders - - 60,000 -
Net loss (unaudited) - - - (24,173)
------------ --------- ------------- --------------
Balance, November 30, 1996
(unaudited) 4,471,028 $ 44,710 $ 3,300,268 $ (3,044,148)
============ ========= ============= ==============
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended Nine Months Ended
February 29, February 28, November 30, November 30,
1996199519961995
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (160,721) $ (20,647) $ (24,173) $ (179,502)
------------ ------------ ------------- ------------
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:
Issuance of stock options for services 13,750 - - -
Minority interest (24,000) - 11,000 -
Prepaid advertising credits (250,000) - (250,000) -
Realization of prepaid advertising credits 25,000 - 39,688 -
Realized gains on investment sales (7,668) (41,044) - (7,668)
Depreciation and amortization expense 79,301 72,039 64,777 61,331
(Increase) decrease in assets:
Accounts receivable (19,790) (43,454) 23,647 31,894
Inventories (29,066) 9,201 (65,431) (37,367)
Other (214) 404 (26,718) (11,685)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses (17,111) 42,986 109,789 (40,460)
------------ ------------ ------------- ------------
(229,798) 40,132 (93,248) (3,955)
------------ ------------ ------------- ------------
Net cash (used in) provided by operating
activities (390,519) 19,485 (117,421) (183,457)
------------ ------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (50,221) (10,461) - (18,121)
Purchase of investments (54,258) (32,227) (26,343) (46,132)
Proceeds from sales of investments 40,099 64,563 3,375 40,099
Trademark costs (203) (826) - -
------------ ------------ ------------- -----------
Net cash (used in) provided by investing
activities (64,583) 21,049 (22,968) (24,154)
------------ ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 33,400 - - 13,125
Payments on notes payable (7,500) (32,435) (21,300) -
Payments on mortgage payable (6,265) - (5,347) (2,629)
Reduction of long-term obligation (35,000) - - (35,000)
Proceeds from bridge loan payable 100,000 - - 100,000
Payment of bridge loan payable (100,000) - - (100,000)
Payments on capital lease obligation (65,975) (37,398) (61,979) (52,824)
Proceeds from minority shareholders
for subsidiary stock 1,051,957 - 60,000 1,051,957
Advances to shareholders, net (257,228) (26,179) (75,570) (384,841)
------------ ------------ ------------- ------------
Net cash provided by (used in)
financing activities 713,389 (96,012) (104,196) 589,788
------------ ------------ ------------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 258,287 (55,478) (244,585) 382,177
CASH AND CASH EQUIVALENTS,
beginning of period 19,901 75,379 278,188 19,901
------------ ------------ ------------- ------------
CASH AND CASH EQUIVALENTS,
end of period $ 278,188 $ 19,901 $ 33,603 $ 402,078
============ ============ ============= ============
SUPPLEMENTAL DISCLOSURES:
Cash payments made during the period:
Interest $ 30,120 $ 35,370 $ 17,457 $ 22,425
============ ============ ============= ============
Taxes $ - $ - $ 825 $ -
============ ============ ============= ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 29, 1996
1. Description of Business and Basis of Presentation:
Meisenheimer Capital, Inc. (MCI) is a holding company, with three operating
subsidiaries: Cadcom, Inc. ("Cadcom") (100% owned by MCI), Meisenheimer Capital
Real Estate Holdings, Inc. ("MCREHI") (100% owned by MCI), and the United States
Basketball League, Inc. ("USBL") (61.55% owned by MCI).
Cadcom, Inc. is a machine shop which manufactures aluminum and stainless
steel aircraft parts. Substantially all of Cadcom's sales were to one customer,
Spectrum Associates, an affiliate of MCI.
MCREHI was incorporated during the fiscal year ended February 29, 1996 and
owns a commercial building in Milford, Connecticut.
The USBL operates a professional summer basketball league through
franchises located in the eastern part of the United States.
The Company has a consolidated deficit of approximately $3,020,000. This
factor, as well as the Company's reliance on related parties and significant
non-cash transactions (see Notes 10 and 11) create an uncertainty as to the
Company's ability to continue as a going concern. The Company is making efforts
to revitalize the USBL by raising equity capital and marketing new franchises
and Cadcom is seeking to expand its machine shop business by seeking new
customers for its services. However, there can be no assurance that the Company
will be successful in accomplishing these objectives. Because of the
uncertainties surrounding the ability of the Company to continue its operations,
there is substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
The accompanying consolidated financial statements, as of November 30, 1996
and for the nine months ended November 30, 1996 and 1995, are unaudited and have
been prepared by the Company. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In the opinion of
the Company's management, the disclosures made are adequate to make the
information presented not misleading, and the consolidated financial statements
contain all adjustments necessary to present fairly the financial position as of
November 31, 1996, results of operations for the nine months ended November 30,
1996 and 1995.
2. Summary of Significant Accounting Policies:
a. Principles of consolidation
The consolidated financial statement includes the accounts of MCI and its
three operating subsidiaries. All significant intercompany balances and
transactions have been eliminated and applicable minority interests have been
reflected in consolidation.
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
b. Cash and cash equivalents
For purposes of the cash flow statement, the Company considers all
highly liquid debt instruments purchased with a maturity of nine months or less
to be cash and cash equivalents.
c. Revenue recognition
The Company and its subsidiaries generally use the accrual method of
accounting. However, due to the uncertainty of collecting royalty and franchise
fees from its franchisees, the USBL recognizes revenue when it is received. As
described more fully in Note 11, management recorded the advertising due bills
received in exchange for initial franchise fees based upon the fair market value
of such due bills. The fair market value was determined based upon the value of
the franchises sold as there is no ready active market to convert the due bills
to cash.
Cadcom recognizes revenue on the accrual method based upon the
shipping date of orders in process which are of a short-term nature.
d. Available-For-Sale Investments
The Company adopted SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," effective as of the beginning of the fiscal year
ended February 28, 1995. As of February 29, 1996, available-for-sale investments
were composed of common stocks with a historical cost basis (average cost) of
$57,241 and an approximate market value of $48,000. Unrealized loss, which is
reported as a part of stockholders' equity, was approximately $10,000 as of
February 29, 1996. As of November 30, 1996, the historical cost basis was
approximately $84,000 and its approximate market value was $33,000.
e. Inventories
Manufacturing inventories (Cadcom) are stated at cost on the first-in,
first-out method. The USBL's inventory consists of USBL trading cards,
basketball uniforms, sporting equipment and printed promotional material. Most
of the USBL's inventory was obtained through barter transactions whereby the
USBL granted suppliers with advertising space or air time in return for the
supplier's products. These transactions were accounted for based upon the fair
values of the assets and services involved in the transactions.
f. Property and equipment
Property and equipment are recorded at cost. Major additions are
capitalized while minor improvements, which do not extend the useful life of an
asset, are expensed in the period incurred.
Depreciation has been provided utilizing both the straight-line and
accelerated cost recovery systems. Assets are depreciated over their estimated
useful life or at the statutory rate provided (predominantly 7 years for
equipment and 39 years for real estate).
g. Income taxes
MCI, MCREHI and Cadcom file a consolidated federal income tax return.
As of February 29, 1996, MCI and Cadcom had approximately $415,000 in net
operating loss carry forwards available and the USBL had a net operating loss
carryforward of approximately $1,787,000. Both loss carryforwards are available
through February 28, 2009, to offset future taxable income. Utilization of these
operating losses eliminated substantially all federal income tax expense for the
year ended February 29, 1996.
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
g. Income taxes (Cont'd)
Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation allowance has been
provided for the deferred tax asset resulting from the net operating loss
carryforward.
h. 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
disclosure 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.
i. Advertising costs
Advertising costs are expensed as incurred, and were approximately
$57,000 and $19,700 for the years ended February 29, 1996 and February 28, 1995.
These expenses were approximately $67,000 and $24,000 for the nine months ended
November 30, 1996 and 1995, respectively.
j. Earnings per share
Earnings per common share were computed by dividing net earnings by
the weighted average number of shares of common stock and common stock
equivalents outstanding during the period.
3. Segment Information:
The consolidated financial statements include the accounts of Meisenheimer
Capital, Inc. and its three operating subsidiaries; Cadcom, Inc., Meisenheimer
Capital Real Estate Holdings, Inc. and the United States Basketball League, Inc.
The following summarizes the contribution to consolidated revenues and expenses
by each company (after elimination of intercompany transactions and minority
interest).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year ended February 29, 1996:
MCI MCREHI Cadcom USBL Total
Revenues $ 27,350 $ 4,200 $ 735,014 $ 352,405 $ 1,118,969
Operating expenses 90,350 11,007 581,721 564,808 1,247,886
Operating profit (loss) (63,000) (6,807) 153,293 (212,403) (128,917)
Net income (loss) (69,234) (25,655) 106,424 (172,256) (160,721)
Identifiable assets 107,021 325,632 449,420 512,761 1,394,834
Year ended February 28, 1995:
MCI MCREH I Cadcom USBL Total
Revenues $ - $ - $ 654,148 $ 241,676 $
895,824
Operating expenses 73,150 - 573,760 280,034 926,944
<PAGE>
Operating profit (loss) (73,150) - 80,388 (38,358)
(31,120)
Net income (loss) (14,089) - 66,105 (72,663) (20,647)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
4. Inventories:
Inventories consist of the following:
February 29, November 30,
1996 1996
-------- -------
(Unaudited)
Cadcom:
Raw materials $ 26,870 $ 33,000
Finished goods 57,000 101,301
USBL inventory 8,500 23,500
---------- -----------
$ 92,370 $ 157,801
========== ===========
5. Property and Equipment:
Property and equipment, at cost, consists of the following:
February 29, November 30,
1996 1996
-------- -------
(Unaudited)
Land $ 121,253 $ 121,253
Building 197,836 197,836
Equipment 729,016 729,016
Transportation equipment 52,090 52,090
------------- -------------
1,100,195 1,100,195
Less accumulated depreciation 486,894 551,059
------------- -------------
$ 613,301 $ 549,136
============= =============
6. Trademark Costs:
Trademark costs totaling $10,488 were fully amortized at February 29,
1996.
7. Goodwill:
Goodwill arising from the acquisition of Cadcom is being amortized over
40 years and consisted of the following:
February 29, November 30,
1996 1996
-------- -------
(Unaudited)
Excess of cost over net assets $ 32,625 $ 32,625
Less accumulated amortization 3,264 3,876
---------- ----------
</TABLE>
$ 29,361 $ 28,749
========== ==========
8. Lease Commitments:
Capital leases
Cadcom leases certain manufacturing equipment under capital leases. The
Company has capitalized manufacturing machinery in the amount of $365,100.
Accumulated depreciation on this machinery at February 29, 1996 was $174,021.
The future minimum lease payments required under capital leases are:
<PAGE>
8. Lease Commitments: (Cont'd)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Capital leases (Cont'd)
Years Ending
February 28,
1997 $ 106,300
1998 100,400
1999 40,800
----------
247,500
Less interest and taxes 43,759
Present value of net minimum lease payments $ 203,741
==========
</TABLE>
Operating leases
As of February 28, 1995, Cadcom was renting its Milford, Connecticut
facility under a non-cancellable operating lease that was to expire February
1997. The minimum annual lease payments under this lease were $41,400. MCI and
USBL leased office space in the same build ing on a month-to-month basis for
$1,000 per month. Subsequently, MCREHI purchased the building that Cadcom
leased. Accordingly, the rent charges have been eliminated in consolida tion.
Rent expense for the fiscal year 1996 and the nine months ended November
30, 1996 was eliminated in consolidation. Rent expense for fiscal 1995 was
approximately $44,700. Rent expense for the nine months ended November 30, 1995
was approximately $22,500.
9. Notes and Mortgage Payable:
The Company had the following loan obligations outstanding:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
February 29, November 30,
1996 1996
-------- -------
Mortgage, dated August 16, 1995 secured by a commercial (Unaudited)
building, interest at 7.98%, with monthly payments over
20 years of approximately $1,000 per month. The
Company's president has guaranteed the mortgage. $ 113,735 $ 108,388
Term bank loans, secured by Company assets, with interest
at annual rates of 8.25% and 10.25%, with approximate
monthly payments of $3,300 per month. 25,900 4,600
----------- -----------
139,635 112,988
Less current portion 29,065 7,850
----------- -----------
$ 110,570 $ 105,138
=========== ===========
Maturities of notes and mortgages are as follows:
Years Ending
February 29/28,
1997 $ 29,065
1998 2,500
1999 2,600
2000 2,800
Thereafter 102,670
$ 139,635
</TABLE>
<PAGE>
10. Related Party Transactions:
Spectrum Associates, Spectrum Associates' parent company, Synercom, Inc.
and MCI are entities controlled and operated by MCI's president and members of
his immediate family. This group also owns a significant portion of the minority
interest in the USBL. In addition, the capital leases (see Note 8) are payable
to Spectrum Associates. Until February 28, 1992, Cadcom was a 100% owned
subsidiary of Synercom, Inc. Synercom, Inc. sold its 100% interest in Cadcom to
Meisenheimer Capital, Inc. (MCI). As part of this agreement MCI granted to
Synercom a right of first refusal to purchase all of the Cadcom shares sold to
MCI should MCI propose to transfer said shares to a third party. This right of
first refusal is effective through February 28, 2002, and is collateralized by
all of Cadcom's assets.
The Company through its subsidiary, MCREHI, purchased from Genvest, a
partnership controlled by the Company's president and his immediate family, a
commercial building in Milford, Connecticut for $320,000.
Revenues recorded from related parties (mainly Spectrum Associates)
approximated $823,000, or 56% of total revenues for the current year.
Loans payable to shareholders plus an additional $192,000 included in
accounts payable and accrued expenses are due to related parties as of February
29, 1996. Substantially all of the notes due to shareholders carry an interest
rate of 6% per year.
Substantially all of Cadcom's sales are to Spectrum Associates and as of
February 29, 1996 and November 30, 1996 all of the Company's accounts receivable
are due from Spectrum Associates.
11. Non-Cash Transactions:
The Company entered into the following non-cash transactions during the
year ended February 29, 1996 and the nine months ended November 30, 1996:
o The sale of 5 franchises in fiscal 1996 for 2,000,000 negotiable
advertising due bills from an independent cable television network. The USBL has
valued these due bills at $250,000. The deferred charge on the balance sheet of
$225,000, represents the unused amount of deferred advertising expense relating
to advertising due bills. These advertising due bills can be traded for various
goods and services and they can be assigned, sold or transferred. However, they
are not recognized as currency in the United States although they can be traded
as such. The credits will be amortized at the time the advertising is utilized.
The 2,000,000 advertising due bills were recorded at a substantial discount from
their face value. However, if the Company is unable to realize the recorded
value of this asset a significant reduction in overall equity may result.
o In the nine months ended November 30, 1996, the USBL sold an
additional 5 franchises under the same terms and conditions as above.
o A long-term obligation of the USBL of approximately $117,000 was
repaid by Spectrum Associates, a stockholder that is also controlled
by the Meisenheimer group, in exchange for a note. This note was
partially repaid with $35,000 in cash and USBL preferred stock valued
at $20,000 in fiscal 1996. The remaining $56,536 of debt was forgiven
by Spectrum Associates and has been reflected as additional paid-in
capital.
o The Company, purchased $141,450 in equipment by incurring an
additional capital lease payable of $141,450.
<PAGE>
11. Non-Cash Transactions: (Cont'd)
o MCREHI acquired the commercial building in Milford, Connecticut by
incurring a mortgage payable of $120,000 plus the issuance of 200,978
shares of MCI stock, which were valued at $169,990.
12. Stock Options:
During the fiscal year ended February 28, 1995, the Company granted its
officers options to purchase 400,000 shares of common stock at $.25 per share.
100,000 of these options were exercised in June 1995, however, the shares have
not been issued and, accordingly, a liability of $25,000 has been included in
accrued expenses. The remaining 300,000 options expire February 28, 1998.
In December 1994, the Company granted its underwriter 200,000 options to
purchase common stock at $.35 per share as compensation for services in
connection with an equity offering. These options expire in February 1997.
As compensation for marketing services, the Company granted its advisor
12,500 options to purchase common stock at $4.50 per share, expiring August 1997
and 10,000 options to purchase common stock at $7.50 per share, expiring
February 1998.
As compensation for marketing services, relating to future equity
offerings, the Company granted its advisor 25,000 options to purchase common
stock at the market value on the date of contract (February 1996) per share.
These options are exercisable between July 1996 and July 1998. An additional
25,000 options, with similar terms, will be granted contingent upon successful
future equity offerings.
13. Concentration of Credit Risk:
As of February 29, 1996, the Company maintained balances at a bank in
excess of the federally insured amount.
14. Stockholders' Equity:
a. The USBL completed a private placement for 268,501 shares of stock,
and had 22,500 shares issued under warrants. Since the shares were sold to
minority shareholders, the effect on the consolidated financial statements was
to increase consolidated additional paid-in capital by $1,051,957.
b. The accumulated deficit for the year ended February 28, 1995 was
restated from ($2,078,552) to ($2,838,607) and additional paid-in capital was
restated from $1,104,777 to $1,966,675 to correct for the recording of minority
interests in a consolidated subsidiary in prior years.
15. Savings Plan:
The Company has an employee savings plan that qualifies as a deferred
salary arrangement under Section 403(k) of the Internal Revenue Code. Under the
Savings Plan, participating employees may defer a portion of their pretax
earnings, up to the Internal Revenue Service annual contribution limit.
Management has elected not to contribute discretionary employer matching.
<PAGE>
16. Commitment:
Two officers of the Corporation have entered into employment agreements
for a period of two years. For the first year, the combined monthly salary is to
equal $2,400. The Board of Directors may withhold payment of the salaries if
such payment would have an adverse impact on the Company's cash flow. In that
event, the Company would issue to the officers 12,000 options to purchase the
Company's common stock for each month the salary is not paid. In the second year
of the agreements, the officers are to receive a combined monthly salary of
$5,800. As in the first year, if the salaries are not paid, the Company will
issue to the officers 14,000 options to purchase the Company's common stock for
each month the salary is not paid. All options under these agreements would be
excercisable at $1.00 per share.
The Company's USBL subsidiary has entered into employment agreements with
two of its officers who are also officers of the Company. The agreements are for
a term of three years and call for annual combined salaries of $150,000 per year
plus an additional amount of stock in the USBL equal to the cash value paid.
However, these agreements also allow for the reduction and deferral of the cash
portion of the compensation if the payment of the compensation would negatively
impact the cash flow of the USBL. The USBL's president received no compensation
from the USBL during the year ended February 29, 1996.
17. Fair Value of Financial Instruments:
In 1996, the Company adopted Financial Accounting Standards Board
Statement No. 107, which requires disclosures about the fair value of the
Company's financial instruments. The methods and assumptions used to estimate
the fair value of the following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash,
current receivables and payables and certain other short-term financial
instruments approximate their fair value.
Long-Term Liabilities: The carrying amounts of the capital lease
obligations and the mortgage payable approximate their fair value.
The carrying amount and the fair value of the Company's financial
instruments at February 29, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Carrying Fair
Amount Value
Cash $ 278,188 $ 278,188
Investments 47,597 47,597
Prepaid advertising credits 225,000 225,000
Notes payable, bank 25,900 25,900
Notes payable, stockholders 506,064 506,064
Mortgages payable 113,735 113,735
Capital lease obligation 203,741 203,741
</TABLE>
18. Contingencies:
During the year ended February 29, 1996, the Company has paid and accrued
for several legal actions which have been brought against it. The net expense of
$32,000 is estimated based on inquiry of legal counsel.
<PAGE>
19. Income Taxes:
MCI, MCREHI and Cadcom file consolidated federal income tax returns. The
provision for income taxes consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Years Ended Nine months Ended
February 29, February 28, November 30, November 30,
1996199519961995
(Unaudited) (Unaudited)
Current:
Federal $ - $ - $ - $
-
State and local 16,000 - 10,825 6,000
--------- ----------- --------- ---------
16,000 - 10,825 6,000
--------- ----------- --------- ---------
Deferred:
Federal - - -
-
State and local - - - -
--------- ----------- --------- --------
- - - -
--------- ----------- --------- --------
$ 16,000 $ - $ 10,825 $ 6,000
========= =========== ========= =========
</TABLE>
The components of the net deferred taxes as of February 29, 1996 are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 141,100
Allowance for realization of assets (141,100)
-----------
</TABLE>
$ -
A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory federal income tax rate to income before
taxes is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Years Ended
February 29, February 28,
1996 1995
---------------- ----------
Computed income tax credit at 34% $ (49,205) $ -
Increase (decrease) in taxes resulting from:
Addition to allowance for realization of
deferred tax asset NOL carryforward (49,205) -
State and local taxes 16,000 -
---------- ----------
$ 16,000 $ -
========== ==========
</TABLE>
20. Correction of an Error:
The accompanying financial statements for the year ended February 28,
1995 have been restated to correct an error in the calculation of minority
interest and net income for the year ended February 28, 1995. The effect of the
error was to increase the net loss by $16,413.
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
The following schedule highlights key operating data:
November 30, November 30,
1996 1995
--------------- ----------
Revenues $ 1,417,000 $ 702,000
Operating expenses 1,116,000 869,000
Operating income (loss) 301,000 (167,000)
Net income (loss) 155,000 (180,000)
</TABLE>
Revenue increased by $715,000 from November 1995 to November 1996. This increase
was due mainly by a $639,000 increase in initial franchise fees generated by the
USBL subsidiary from $51,000 to $690,000. Most of this increase in USBL initial
franchise fee revenue was from the sale of 5 USBL teams for $600,000 of
advertising due bills. Sales of machined aluminum parts by the Company's Cadcom
subsidiary also increase by $32,000. Most of this increase was related to a
price increase. The balance of the revenue increase was generated mainly by
increased advertising income of the USBL for the nine month period ended
November 30, 1996 over the same nine month period in 1995.
Operating Expenses increased by $247,000 from November 1995 to November 1996 for
a variety of reasons. Advertising expenses increased by $99,000 from $24,000 to
$123,000. This increase was caused mainly by the USBL's use of $95,000 worth of
the prepaid advertising due bills to air several USBL games on a cable
television network. Advances to USBL teams of $29,000 were written off in the
nine month period ended November 30, 1996 vs. no such charge for the same nine
month period in the prior fiscal year. Various professional fees and other
registration fees increased by $69,000 due to the Company's efforts to be a
listed public company. The USBL's post season festival costs increased by
$16,000 from $2,000 to $18,000. The company also increased its liability
insurance protection in the USBL with a resulting increase in insurance expense
of $24,000. Administrative salaries increased by $14,000 to $50,000 from
$36,000. Cadcom's costs of sales decreased both in total dollars, $14,000 and as
a percentage of net sales. This drop in costs were due to price increases and
productivity gains. MCREHI operating expenses increased by $10,000 from $5,000
to $15,000 as that subsidiary did not commence operations until September 1995.
Consolidated net income increased from a $180,000 loss in November 1995 to a
$155,000 profit in November 1996 as a result of the significant revenue
increases by the USBL subsidiary and increased margins of its Cadcom subsidiary.
Several factors may influence results. The Company's results will continue to be
effected by a variety of factors that could have a material adverse effect on
revenues and profitability during any particular period, including the results
of the USBL's ability to attract new franchisees and fans. In addition, Cadcom's
sales are directly related to the sales and fortunes of Spectrum Associates
(Cadcom's major customer).
Liquidity and Capital Resources. Working capital deficiency increased from
($214,000) in November 1995 to ($544,000) in November 1996 which cash decreased
by $368,000 from $402,000 in November 1995 to $34,000 in November 1996. Both
cash and working capital decreases were due to debt reductions and for operating
activities.
The Company is making efforts to revitalize the USBL by seeking additional
equity capital and marketing new USBL franchises. In addition, the Company is
seeking to expand its machine shop business (Cadcom) by finding new customers
for its services. The Company also hopes to increase exposure to the USBL to new
fans and franchise owners by airing additional games on cable television.
However, there can be no assurance that the Company will be successful in these
efforts.
<PAGE>
PART III
INDEX TO EXHIBITS
3.1 Certificate of Incorporation of Meisenheimer Capital, Inc. ("MCI")
3.2 Certificate of Renewal of Certificate of Incorporation of MCI
3.3 By-Laws of MCI
4.1 Form of Stock Certificate
4.2 Form of Option
10.1 Employment Agreement of Daniel T. Meisenheimer, III with MCI
10.2 Employment Agreement of Richard Meisenheimer with MCI
10.3 Employment Agreement of Daniel T. Meisenheimer, III with MCI's
subsidiary, The United States Basketball League, Inc. ("USBL")
10.4 Employment Agreement of Richard Meisenheimer with USBL
10.5 Mortgage Note between Fleet Bank, National Association and
Meisenheimer Capital Real Estate Holdings, Inc. and Guaranty of MCI
10.6 Lease between Meisenheimer Capital Real Estate Holdings, Inc. and
Cadom, Inc.
10.7 Lease between Meisenheimer Capital Real Estate Holdings, Inc. and USBL
10.8 Equipment Lease Agreement between Synercom, Inc. and MCI's subsidiary,
Cadcom, Inc., dated September 11, 1992
10.9 Equipment Lease Agreement between Synercom, Inc. and MCI's subsidiary,
Cadcom, Inc., dated July 1, 1995
10.10 Standard Franchise Agreement of USBL
10.11 A greement between USBL and Topaz Selections Ltd. for Barter
Transaction for acquisition of advertising due bills in exchange for
franchises
11.0 Statement of Computations of Earnings Per Share
16.0 Letter of Accountant Pursuant to Item 304 (a)(3) of Reg.S-B
21.0 List of Subsidiaries
27.0 Financial Data Schedules
<PAGE>
SIGNATURE PAGE
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEISENHEIMER CAPITAL, INC.
By: /S/ Daniel T. Meisenheimer, III
Daniel T. Meisenheimer, PRESIDENT
Dated: October 7, 1996
<PAGE>
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State
---------------------------------------
I, EDWARD J . FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "MEISENHEIMER CAPITAL, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO
FAR AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TENTH DAY OF AUGUST, A.D.
1995.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES
HAVE BEEN PAID TO DATE.
AND I DO HEREBY FURTHER CERTIFY THAT THE SAID "MEISENHEIMER
CAPITAL, INC." WAS INCORPORATED ON THE TWENTY-SECOND DAY OF
DECEMBER, A.D. 1983.
S/ EDWARD J. FREEL,
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 7603989
DATE 08-10-95
<PAGE>
EXHIBIT 3.2
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
---------------------------------------
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY
OF THE CERTIFICATE OF RENEWAL OF "MEISENHEIMER CAPITAL, INC,"
FILED
IN THIS OFFICE ON THE NINTH DAY OF AUGUST, A.D. 1995, AT 9 O'CLOCK
A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
S/ EDWARD J. FREEL
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 7602480
DATE: 08-09-95
EXHIBIT 3.2 CONTINUED
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM
08/09/1995
950179910-
2024069
CERTIFICATE
for Renewal and Revival of Charter
Meisenheimer Capital, Inc., a corporation organized under the laws of Delaware,
the charter of which was voided for non-payment of taxes, now desires to procure
a restoration, renewal and revival of its charter, and hereby certifies as
follows:
1. The name of this corporation is Meisenheimer Capital, Inc.
2. Its registered office in the State of Delaware is located at 15 East
North Street, City of Dover Zip Code 19901 County of Kent the name and address
of its registered agent is United corporate services, inc., 15 East North
Street, Dover, DE 19901
3. The date of filing of the original Certificate of
Incorporation in Delaware was December 22, 1983
4. The date when restoration, renewal, and revival of the charter of this
company is to commence the 29th day of February, 1988, same being prior to the
date of the expiration of the charter. this renewal and revival of the charter
is to be perpetual.
<PAGE>
EXHIBIT 3.2 CONTINUED
5. This corporation was duly organized and carried on the business
authorized by its charter until the First day of March A.D. 1988 at which time
its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
providing for the renewal, extension and restoration of charters. DANIEL T.
MEISENHEIMER III the last and acting President, and RICHARD C. MEISENHEIMER the
last and acting Secretary of MEISENHEIMER CAPITAL, INC. have hereunto set their
hands to this certificate this 8th day of August, 1995.
S/ DANIEL T MEISENHEIMER III
Last and Acting President
S/ RICHARD C. MEISENHEIMER
Last and Acting Secretary
<PAGE>
EXHIBIT 3.3
BY-LAWS
OF
MEISENHEIMER CAPITAL, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of ten per cent (10%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Business Corporation Act.
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal ,office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
By-Laws
Section 4 - Notice of Meetings.:
(a) Except as otherwise provided by Statute, written notice of each meeting of
shareholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for their shares
pursuant to Statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be directed to
each such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to some other address, in which case, it
<PAGE>
shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact thereunto duly authorized in writing No
proxy shall be valid after the expiration of eleven months from the date of its
execution, unless the person executing it shall have specified therein the
length of time it is to continue in force. Such instrument shall be exhibited to
the Secretary at the meeting and shall be filed with the records of the
Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of share holders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of office:
(a) The number of the directors of the Corporation shall be three (3 ), unless
and until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders permitted by statute.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders. Section 3
Annual and Regular Section 3 - Annual and Regular Meetings; Notice: (a) A
regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the shareholders, at the place of such annual
meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in paragraph
(c) of such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not specify
the purpose of the meeting.
<PAGE>
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the President shall preside, and in his absence, a Chairman chosen by the
directors shall preside.
Section 6 - Quorum and Adjournments.:
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. (b) A majority of the directors present
at the time and place of any regular or special meeting, although less than a
quorum, may adjourn the same from time to time without notice, until a quorum
shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action 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. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
<PAGE>
Section 10 - Removal:
Any director may be removed with or without cause at any time by the affirmative
vote of shareholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
shareholders called for that purpose, and may be removed for cause by action of
the Board.
Section 11 - Salary:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 12 - Contracts:
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
Section 13 - Committees:
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they may deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
Section I - Number, Qualifications, Election
and term of office:
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, and such other officers, including a Chairman of the Board of
Directors, and one or more Vice Presidents,' as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation. Any
two or more offices may be held by the same person.
<PAGE>
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall
have been elected
and qualified, or until is death, resignation or removal.
Section 2 - Resignation:.
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of officers:
officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other Corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President, or such other person as the Board of
Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section I - Certificate of Stock:
(a) The certificates representing shares of the Corporation shall be in
such a form as shall be adopted by the Board of Directors, and shall be
<PAGE>
numbered and registered in the order issued. They shall bear the holder's name
and the number of shares, and shall be signed by (I) the Chairman of the Board
or the President, or a Vice-President, and (ii) the Secretary or Treasurer, or
any Assistant Secretary or Assistant Treasurer, and shall bear the corporate
seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the holder
to exercise voting rights, receive dividends and participate in liquidating
distributions, proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it may authorize the
issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full but such scrip shall not
entitle the holder to any of a shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board of
Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the of the Board
of Directors, it is proper so to do.
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation only by the holder of record thereof, in person or by his duly
authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to recognize any legal, equitable or other claim to, or interest
in, such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
<PAGE>
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of share holders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned-meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by the affirmative vote of shareholders holding of record
in the aggregate at least a majority of the outstanding shares entitled to vote
in the election of directors at any annual or special meeting of shareholders,
provided that the notice or waiver of notice of such meeting shall have
summarized or set forth in full therein, the proposed amendment.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with respect thereto as in this Article IX
above-provided may alter, amend or repeal by-laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
<PAGE>
ARTICLE X - INDEMNITY
(a) Any person made a party to any action, suit or proceeding, by reason of the
fact that he, his testator or intestate representative is or was a director,
officer or employee of the Corporation, or of any Corporation in which he served
as such at the request of the Corporation, shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding, or in connection with any appeal therein that such officer, director
or employee is liable for negligence or misconduct in the performance of his
duties. (b) The foregoing right of indemnification shall not be deemed exclusive
of any other rights to which any officer or director or employee may be entitled
apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be entitled
shall be fixed by the Board of Directors. except that in any case where there is
no disinterested majority of the Board available, the amount shall be fixed by
arbitration pursuant to the then existing rules of the American Arbitration
Association.
<PAGE>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
PAR VALUE $.01 PAR VALUE $.01
SHARES
SEE REVERSE FOR CERTAIN DEFINITIONS AND LIMITATIONS
CUSPID 413110 10 7
MEISENHEIMER CAPITAL, INC. INCORPORATED UNDER THE LAWS OF THE
STATE
OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, OF
MEISENHEIMER CAPITAL, INC.
(hereinafter call the Corporation) transferable on the books of the Corporation
or by the holder hereof, in person or duly authorized Attorney, upon surrender
of this Certificate properly endorsed. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar. WITNESS the
facsimile of the Corporation ans the facismilie signatures of its duly
authorized officers.
Dated:
Countersigned and Registered:
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
Transfer Agent and Registrar
AUTHORIZED SIGNATURE
SECRETARY
PRESIDENT
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entities
JT TEN - as joint tenants with right of survivorship and nor as
tenants in common
UNIF GIFT MIN ACT - Under Uniform Gifts to Minor Act
CUST - Custodian
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign and transfer unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR
TYPEWRITTEN)
Shares of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint Attorney to transfer the said stock on the
books of the within-named Corporation with full power of substitution in the
premises.
DATED:
SIGNATURE;
SIGNATURE(S) GUARANTEED BY:
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE PROGRAM) PURSUANT TO S.E.C.
RULE 17 Ad-15.
NOTICE; The signature of this assignment must correspond with name(s) as written
upon the face of the certificate in every particular without alteration or
enlargement or any change whatsoever.
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO A
REGISTRATION
STATEMENT UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO
COUNSEL FOR THE ISSUER THAT AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT IS
AVAILABLE. THE TRANSFER OR EXCHANGE OF THE WARRANTS
REPRESENTED BY THIS
CERTIFICATE ARE FURTHER RESTRICTED AS DESCRIBED HEREIN.
MEISENHEIMER CAPITAL, INC.
Common Stock Purchase Options
No. 20,000 Shares
EXERCISABLE BEGINNING ON MARCH 1, 1994 UNTIL MARCH 4, 1999
This Option Certificate certifies that Daniel T. Meisenheimer, or its
registered assigns, is the registered holder of Options to purchase initially up
to 20,000 fully-paid and non-assessable shares (the "Option Shares") of common
stock, $0.01 par value ("Common Stock") of Meisenheimer Capital, Inc., a
Delaware corporation (the "Company"), at any time until March 4, 1999 (the
<PAGE>
"Expiration Date"). The number of Option Shares issuable hereunder and the
Exercise Price are each subject to adjustment as provided herein. No Option may
be exercised after 5:00 P.M., New York time, on the Expiration Date, after which
time all Options evidenced hereby, unless exercised prior thereto, shall be
void.
1. Certain Definitions. As used
herein, the following terms, unless
the context otherwise requires, have
the following meanings:
1.1 The term "Company" shall
include Meisenheimer Capital, Inc.
and any corporation that shall
succeed or assume the obligations of
Meisenheimer Capital, Inc. hereunder.
1.2 The terms "Option" or "Options" mean these Options and any other
Option or Options issued in exchange or substitution for, or upon partial
exercise of, these Options.
1.3 The term "Holder" means
the registered holder(s) of this
Option Certificate.
2. Exercise of Options.
2.1 Options may be exercised by the Holder hereof, at any time until
5:00 P.M. New York time on the Expiration Date or 5:00 P.M. New York time on the
last business day before the Redemption Date (as defined in Section 8), as the
case may be, as to the whole or any lesser number of the Option Shares covered
hereby, by the surrender of this Option Certificate (with the election at the
end hereof duly executed) to the Company at its main office at 46 Quirk Road,
Post Office Box 211, Milford, Connecticut 06460 ("Main Office"), or at such
other place as may be designated in writing by the Company, together with a
certified or bank check payable to the order of the Company in an amount equal
to the Exercise Price multiplied by the number of Option
Shares for which such Options are being exercised.
2.2 Upon each exercise of the Holder's rights to purchase Option
Shares, the Holder shall be deemed to be the holder of record of the Option
Shares issuable upon such exercise, notwithstanding that the transfer books of
the Company shall then be closed or certificates representing such Option Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of a Option, the Company shall issue and
deliver to the Holder a certificate or certificates for the Option Shares
issuable upon such exercise, registered in the name of the Holder or its
designee. If a Option should be exercised in part only, the Company shall, upon
surrender of the Option Certificate evidencing such Option for cancellation,
execute and deliver a new Option Certificate evidencing the right of the Holder
to purchase the balance of the Option Shares (or portions thereof) subject to
purchase hereunder.
2.3 The issuance of any shares or other securities upon the exercise of
Options and the delivery of certificates or other instruments representing such
shares or other securities shall be made without charge to the Holder for any
tax or other charge (other than payment of the Exercise Price) in respect of
such issuance. The Company shall not, however, be required to pay any tax that
<PAGE>
may be payable in respect of any transfer involved in the issue and delivery of
any certificate in a name other than that of the Holder, and the Company shall
not be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the company
the amount of such tax or shall have established of the satisfaction of the
Company that such tax has been paid.
3. Adjustment of Exercise Price.
Subject to the provisions of this Section 3, the Exercise Price in effect from
time to time shall be subject to adjustment as follows:
3.1 If the Company shall at any time after the date hereof (I) declare
a dividend on the outstanding Common Stock payable in shares of its Common
Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its Common Stock by reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation,
then, in each such case, the Exercise Price in effect and the number of Option
Shares issuable upon exercise hereof at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, shall be proportionately adjusted so that the Holder hereof
after such time shall be entitled to receive upon exercise hereof the aggregate
number and kind of shares that such Holder would have owned upon exercise of
this Option immediately before such time and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification.
3.2 If the Company shall distribute to all holders of Common Stock
(including any such distribution made to the shareholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) (I) evidences of its indebtedness, cash or assets (other than
ordinary cash dividends paid out of the net profits of the Company for its most
recent fiscal year), (ii) rights, options or Options to subscribe for or
purchase Common Stock, or (iii) any equity securities of the Company (other than
Common Stock), including any securities convertible into or exchangeable for
shares of Common Stock, then, in each case, the Exercise Price shall be adjusted
by multiplying the Exercise Price in effect immediately before the record date
for the determination of shareholders entitled to receive such
distribution by a fraction, the numerator of which shall be the CurrentMarket
Price (as determined pursuant to
Section 3.6 hereof) per share of Common Stock on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such securities, rights, options, or Options, or the amount of such cash,
applicable to one share, and the denominator of which shall be such Current
Market Price per share of Common Stock. Such adjustment shall become effective
at the close of business on such record date.
3.3 In any case in which this Section 3 shall require that an
adjustment in the number of Option Shares be made effective as of a record date
for a specified event (an "Event"), the Company may elect to defer, until the
occurrence of such Event, issuing to the Holder, if the Holder exercised this
Option after such record date, the shares of Common Stock, if any issuable upon
such exercise over and above the number of Option Shares, if any, issuable upon
such exercise on the basis of the number of Option Shares in effect prior to
such adjustment; provided, however, that the Company shall deliver to the Holder
a due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares upon the occurrence of the Event requiring such
<PAGE>
adjustment.
3.4 Whenever there shall be an adjustment as provided in this Section
3, the Company shall within 15 days thereafter cause written notice thereof to
be sent by registered or certified mail, postage prepaid, to the Holder, at its
address as it shall appear in the Option Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Option
Shares issuable hereunder and the Exercise Price thereof after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
3.5 All calculations under this Section 3 shall be made to the nearest
cent or to the nearest on-thousandth of a share, as the case may be. no
adjustment in the Exercise Price shall be required if such adjustment is less
than $.05; provided, however, that any adjustments that by reason o f this
Section 3.5 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. The Company shall not be required to issue
fractions of shares of Common Stock or other capital stock of the Company upon
the exercise of Options. If any fraction of a share would be issuable on the
exercise of Options, the Company shall purchase such fraction for an amount in
cash equal to the same fraction of the Current Market Price (as hereinafter
defined) of such share of Common Stock on the date of exercise of the Option.
3.6 The Current Market Price per share of Common Stock as of any date
shall be the average of the daily closing prices for the 20 consecutive trading
days immediately preceding the date in question. The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sale takes place on such day, the closing id price regular way, in either case
on the principal national securities exchange (including, for purposes hereof,
the NASDAQ National Market)on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the highest reported bid price of the Common Stock
as furnished by the National Association of Securities Dealers, Inc. through
NASDAQ, or a similar organization if NASDAQ is no longer reporting such
information. If on any such date the Common Stock is not listed or admitted to
trading on any national securities exchange and is not quoted by NASDAQ or any
similar organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
4. Mergers; Reorganizations.
4.1 In each case of a consolidation with or merger of the Company with
or into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation and that does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in the case of any sale, lease or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of the Options (in lieu of the number of Option Shares
theretofore deliverable) the kind and amount of shares of stock or other
securities or property to which a holder of the number of Option Shares that
would otherwise have been deliverable upon the exercise hereof upon such
Reorganization if the Options had been exercised in full immediately before such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
<PAGE>
and interests of the holder so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of the Options. Any such
adjustment shall be made by and set forth in a supplemental agreement between
the Company, or any successor thereto, and the Holder and shall for all purposes
hereof conclusively be deemed to be an appropriate adjustment. The Company shall
not effect any such Reorganization unless upon or before the consummation
thereof the successor corporation or, if the Company shall be the surviving
corporation in any such Reorganization and is not the issuer of the shares of
stock or other securities or property to be delivered to holders of shares of
the Common Stock outstanding at the effective time thereof, then such issuer,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities, cash or other property as the Holder shall be
entitled to purchase in accordance with the foregoing provisions.
4.2 In each case of a reclassification r change of the shares of Common
Stock issuable upon exercise of the Options (other than a change in par value or
from no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), and in each case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of the Options solely the kind and amount of
shares of stock and other securities, property, cash, or any combination thereof
receivable upon such reclassification, change, consolidation, or merger by a
holder of the number of shares of Common Stock for which the Options might have
been exercised immediately before such reclassification, change, consolidation,
or merger. Thereafter, appropriate provision shall be made for adjustments that
shall be as nearly equivalent as practicable to the adjustments required by
Section 3.
5. Notice of Certain Events. In
case at any time the Company shall
propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends that are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, Options or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, Options or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease or conveyance of property
described in Section 4; or
(d) to effect any liquidation,
dissolution or winding-up of the
Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered or certified mail, postage prepaid, to the Holder
at the Holder's address as it shall appear in the Option Register, mailed at
least 15 days before (I) the date as of which the holders of record of shares of
<PAGE>
Common Stock to be entitled to receive any such dividend, distribution, rights,
Options or other securities are to be determined or (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up is expected to become effective and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up.
6. Option Register; Transfer of
Options.
6.1 This Option Certificate and any new Option Certificate issued upon
the transfer or exercise in part of any Options shall be numbered and shall be
registered in a Option Register as it is issued. The Company shall be entitled
to treat the holder of this Option Certificate registered on the Option Register
as the owner in fact of the Options evidenced hereby for all purposes, shall not
be bound to recognize any equitable or other claim to or interest in such
Options on the part of any other person, and shall not be liable for any
registration or transfer of a Option Certificate that is 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 the knowledge of such
facts that its participation therein amounts to bad faith. Options shall be
transferable only in the Option Register upon delivery of the Option Certificate
evidencing such Options duly endorsed by the Holder or by his or its duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment, or authority to transfer. In all cases of transfer by an
attorney, executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced.
6.2 Upon any registration of transfer, the Company shall deliver to the
person entitled thereto a new Option Certificate of like tenor and evidencing in
the aggregate a like number of Options in exchange for this Option Certificate,
subject to the limitations provided herein. This Option Certificate may be
exchanged, at the option of the Holder hereof, for another Option Certificate or
other Option Certificates of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Option
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Options to be transferred on its books to any person if, in
the reasonable opinion of counsel to the Company, such transfer does not comply
with the provisions of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations thereunder, or with any other restrictions set forth
herein.
6.3 The Options and Option Shares shall be subject to a stop transfer
order and the certificate or certificates evidencing the Option Shares shall
bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND SUCH SHARES MAY NOT BE
OFFERED OR SOLD
EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER SUCH ACT
OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER THAT
AN EXEMPTION FROM
<PAGE>
REGISTRATION UNDER SUCH ACT IS AVAILABLE."
7. Authorized Shares. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the Options, such number of shares of Common Stock
as shall, from time to time, be sufficient therefor. The Company covenants that
all shares of Common Stock issuable upon exercise of the Options shall, upon
receipt by the Company of the full payment therefor, be validly issued, fully
paid, nonassessable, and free of preemptive rights.
8. Miscellaneous.
8.1 Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Option Certificate (and upon surrender
of any Option Certificate if mutilated), upon issuance of an indemnity bond if
required by the Company, and upon reimbursement of the Company's incidental
expenses, the Company shall execute and deliver to the Holder hereof a new
Option Certificate of like date, tenor and denomination.
8.2 The Holder hereof shall not have, solely on account of such status,
any rights of a stockholder of the Company, either at law or in equity, or to
any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided herein.
8.3 This Option Certificate and the Options shall be construed in
accordance with the laws of the State of Delaware applicable to contracts made
and performed within such State, without regard to principles of conflicts of
law.
IN WITNESS WHEREOF, the Company has caused this Option
Certificate to be duly executed as an instrument under seal as of
, 1996.
MEISENHEIMER CAPITAL, INC.
By:
Title:
Attest:
Secretary
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
OF
DANIEL T. MEISENHEIMER, III
WITH
MEISENHEIMER CAPITAL, INC.
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st
day of March, 1996 by and between MEISENHEIMER CAPITAL, INC., a Delaware
corporation ("MCI") and DANIEL T. MEISENHEIMER, III (the "Employee").
1. Employment. MCI agrees to employ the Employee in
the position of
President and Chairman of the Board of MCI or in such other capacity as MCI and
the
Employee shall mutually agree, and the Employee agrees to accept such employment
on the terms and conditions hereinafter set forth.
2. Duties. (a) The Employee agrees to devote substantially all
of his business time and attention and skill to the business affairs of MCI and
its subsidiaries. Subject to the following paragraphs, the Employee shall
perform the duties of this office and exercise such powers as may from time to
time be assigned to or vested in him faithfully, diligently and loyally devoting
thereto his time, attention and skill to the extent necessary for the due
performance of his duties under this Agreement.
(b) In connection with the foregoing, Employee shall not
conduct any business for others nor shall Employee invest, directly or
indirectly, during the term of this Agreement, which businesses are in direct
competition with the business of MCI and its subsidiaries.
3. Limitations on Authority. Except as otherwise
provided herein, approval
must be obtained by the Board of Directors of MCI or its successor prior to the
Employee
taking any of the following actions on behalf of MCI:
(a) Acquisition or disposition of real property or any
rights deriving
therefrom, or changing title in any such real property;
(b) Make any capital expenditure, or any commitment
therefor in excess of
$5,000.00 for any one item and construction expenditure in excess of $5,000.00;
(c) Borrowing or guaranteeing any borrowings from or on behalf
of any party, or altering the terms of any loan agreements for such borrowings
except for any such loans or borrowings as shall be agreed upon by the Board of
Directors;
(d) Hiring or terminating executive personnel, as well as
hiring or terminating any personnel with annual base salaries in excess of
$25,000, or increasing salaries of such employees by more than twenty-five (25%)
percent per annum;
(e) Acquiring the assets or shares of another company or
partnership;
(f) Acquiring or disposing of the assets or shares of
MCI; or any subsidiary.
(g) Entering into or terminating agreements of any kind
or nature with a
monthly financial obligation in excess of $5,000.00 for more than six (6)
months;
(h) Making basic changes in the administration or
organization of MCI and
its subsidiaries;
(I) Entering into any transaction on behalf of MCI or its
subsidiaries which is not in MCI's usual course of business.
4. Term. The term of employment of the Employee pursuant to
this Agreement shall be for a term of two years from the date of this Agreement.
This Agreement shall automatically be renewed for an additional two years
subject to adjustment of compensation as may be agreed upon by the parties
unless either party serves written notice at least ninety (90) days before
expiration of the term that the serving party elects not to renew this
<PAGE>
Agreement.
5. Compensation and Benefits. (a) The Employee shall
receive regular
compensation (the "Base Salary") at the initial rate for the first year of
Twenty-four
Thousand Dollars ($24,000.00) and for the second year at the rate of Sixty
Thousand
Dollars
($60,000.00). The salary shall be payable bi-weekly in arrears less the usual
payroll deductions, and deductions for benefits as the Employee may request or
as offered by the Company. However and notwithstanding the aforesaid, Employee
agrees that if in the discretion of the Board, the payment of the aforesaid
salaries would have an adverse impact on the Company's cash flow, then the
Company is authorized to withhold payment of salaries. The company agrees that
for each month of salary withheld, Employee shall receive 10,000 options. Each
option shall entitle Employee to purchase one (1) share of MCI Common Stock at
an exercise price of $1.00 a share. Options shall be issued at the end of each
twelve (12) month period. All options shall expire five (5) years from the date
of grant.
(b) The Employee shall be entitled to participate in all
savings, thrift, retirement or pension, health and accident, Blue Cross/Blue
Shield, Major Medical or other hospitalization, holiday vacation, and other
fringe benefit programs which may be generally available to senior executives of
MCI in accordance with and subject to the terms and conditions of such programs.
In addition thereto, Employee, as Chairman of the Board of Directors, shall be
entitled to all benefits as may be conferred upon the other directors of MCI.
(c) Employee shall be authorized to receive a salary from the
Company's subsidiary, The United States Basketball League, Inc.
6. Death; Permanent Disability. (a) Upon the death of the
Employee this Agreement shall terminate immediately and MCI shall no longer be
required to make payments hereunder, except that within thirty (30) days of the
death of the Employee or within thirty (30) days after receipt of notice of
permanent disability (as hereinafter defined), MCI shall make a lump sum payment
to the Employee's widow or other designated beneficiary in an amount equal to
twelve (12) months of the Employee's Base Salary.
(b) MCI shall have the right to purchase keyman life insurance
on the Employee's life in an amount not to exceed $1,000,000, at its expense,
and the Employee agrees to submit to any necessary physical examination, and to
sign any documents or releases which shall be necessary in order to purchase
such insurance.
(c) If during the term of his employment the Employee becomes
disabled or incapacitated to such an extent that he is physically unable to
discharge his duties (i.e., disabled) as contemplated by this Agreement for a
period of time exceeding twelve (12) cumulative months during any three (3) year
period, then, at the option of MCI, the Employee shall be deemed "permanently
disabled" and his employment hereunder may be terminated effective upon notice
by MCI to the Employee. It is understood that during such periods of disability
(i.e., prior to permanent disability), Employee will continue to receive his
full compensation. However, should Employee receive any interim disability
benefits prior to permanent disability (and if the cost of obtaining such
benefits shall have been paid for by MCI), then such amounts shall be deducted
from the Base Salary paid to Employee.
(d) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of MCI, by reason of physical or mental disability to perform the
duties required of him under this Agreement for the above-stated cumulative
twelve (12) month period. The Board of Directors shall provide the Employee with
immediate written notice of its determination of permanent disability. If any
<PAGE>
determination of the Board of Directors with respect to permanent disability is
disputed by the Employee, the parties hereto agree to abide by the decision of a
panel of three physicians. The Employee and MCI shall each appoint one member,
and the third member of the panel shall be appointed by the other two members.
7. Non-Disclosure of Information. It is understood that the
business of MCI is of a confidential nature. During the period of the Employee's
employment with MCI, the Employee may have received and/or may secure
confidential information concerning MCI or any of MCI's affiliates or
subsidiaries which, if known to competitors thereof, would or could damage MCI
or its said affiliates or subsidiaries. The Employee agrees that during and
after the term of this Agreement he will not (except as authorized by MCI or in
the proper performance of his duties or except as ordered by a court or other
body of competent jurisdiction or as otherwise required by law), directly or
indirectly, divulge, disclose or appropriate to his own use, or to the use of
any third party, any secret, proprietary or confidential information or
knowledge obtained by him during the term hereof concerning such confidential
matters of MCI or its subsidiaries or affiliates, including, but not limited to
information pertaining to trade secrets, systems, manuals, confidential reports,
methods, processes, designs, equipment lists, operating procedures, equipment
and methods used and preferred by MCI. Upon termination of this Agreement, the
Employee shall promptly deliver to MCI all materials of a secret or confidential
nature relating to the business of MCI or any of its subsidiaries or affiliates
which are, directly or indirectly, in the possession or under the control of the
Employee. The provisions of this paragraph shall continue to apply after the
Employee ceases to be employed by MCI for a period of five (5) years except in
respect of any information or knowledge disclosed to the public, other than
through an unauthorized disclosure by the Employee.
8. Termination for Cause. Notwithstanding anything
herein to the
contrary, the Employee's employment under this Agreement shall be terminable by
the
Board of Directors at any time for good cause ("Good Cause"). Good Cause for
termination
shall be the occurrence of any one of the following:
(a) The Employee repeatedly and materially acts in an
insubordinate manner or fails to execute in a reasonable and responsible manner
the business plans, and/or policies of the Company or any instructions as
reflected in a written resolution received from the Board of Directors, or
engage in any conduct which is dishonest or fraudulent or damages the reputation
or standing of the Company, or in breach of any of the terms of this Agreement
and upon the Employee's failure to correct any such deficiency in a manner
satisfactory to the Board within ninety (90) days after receipt of written
notice from the Board outlining the substance of the deficiency and the Employee
having failed to cure or cease such actions within the notice period. In all
events, the conduct of Employee
constituting Good Cause for termination must relate to a material and
substantial act or beach or failure to act. Employee shall be entitled to
receive a written notice setting forth in detail, together with any documentary
evidence, the allegations constituting good cause, and Employee shall have an
opportunity to respond in writing within ten (10) days after receipt of said
written notice and to appear as soon thereafter before the Board of Directors to
contest any allegations of Good Cause.
(b) If the Employee shall be deemed permanently disabled
as hereinbefore
described in Article 7.
(c) Upon the death of the Employee, then automatically
as of the date of his
death.
9. Non-Competition. (a) During the term of this Agreement or
any renewal thereof, and for a period of three (3) years thereafter, provided
<PAGE>
MCI continues in business, the Employee agrees that he will not engage, either
directly or indirectly, individually or as an owner, partner, joint venturer,
employee, officer, director, stockholder, consultant, independent contractor or
lender of or to any corporation, holding company or other business entity which
competes directly or indirectly with the business of MCI or its subsidiaries.
(b) If any provision of this Section is held to be
unenforceable because of the scope, duration or area of its applicability or
otherwise, the legal entity making that determination will have the power to
modify the scope, duration or area, or all of them, and the provision will then
apply in its modified form.
10. Indemnification. MCI or any successor shall indemnify and
hold harmless the Employee from and against all damages, loss, liability or
expense (including reasonable legal fees) in the course of his employment
hereunder in his capacity as Chairman and President, and employee of MCI to the
maximum extent permitted under the laws of the State of Delaware.
11. Reimbursement of Expenses. The Employee is authorized to
incur reasonable expenses in connection with and for the promotion of the
business of MCI, including expenses for meals and lodging, entertainment, and
similar items as required from time to time by the Employee's duties. MCI shall
reimburse the Employee for all such expenses upon the presentation of an
accounting thereof, together with appropriate supporting documentation.
12. Access to Books and Records. During the term of
this Agreement,
Employee shall have access to all of MCI's and its subsidiaries' books and
records.
13. Burden and Benefit. This Agreement shall be binding upon,
and shall inure to the benefit of, MCI and the Employee, and their respective
heirs, personal and legal representatives, successors and assigns. No sale of
any of the assets or stock of MCI shall in any way affect the validity and
enforceability of this Agreement.
14. Governing Law. It is understood and agreed that the
construction and
interpretation of this Agreement shall at all times and in all respects be
governed by the
laws
of the State of Connecticut.
15. Arbitration. Notwithstanding the fact that the parties
shall be entitled to equitable relief in order to enforce certain provisions
hereunder (e.g., temporary restraining orders or injunctive relief), any
dispute, controversy or claim arising out of or relating to this Agreement. The
situs of any such arbitration shall be New Haven, Connecticut, and any award
shall be deemed to be a Connecticut award. Any such award shall be final and
binding upon both parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction in any state of the United
States or country or application may be made to such court for a judicial
acceptance of the award and an enforcement, as the law of such jurisdiction may
require or allow. The substantive law to be applied to any case determined
pursuant to this Section 14 is that of the State of Connecticut. The expense of
arbitration shall be borne by the respective parties except to the extent that
the arbitrators shall determine that the entire expense shall be borne by a
single party.
16. Severability. The invalidity of all or any part or any
portion of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such portion. If any provision of this Agreement
is so broad as to be unenforceable, it is expressly intended by the parties
hereto that such provision shall be interpreted to be only so broad as is
enforceable.
<PAGE>
17. Section Headings. The section headings of this
Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of any
of the provisions hereof.
18. Counterparts. This Agreement may be executed in any
number of
counterparts, each of which shall be deemed to be an original, but all of which
together
shall
constitute one and the same instrument.
19. Entire Agreement; Amendment. This Agreement contains the
entire agreement and understanding by and between MCI and the Employee with
respect to the employment of the Employee by MCI, and no representations,
promises, agreements or understandings, written or oral, not contained herein or
therein shall be of any force or effect. Except as otherwise provided herein,
this Agreement supersedes all prior agreements between MCI and the Employee. No
change or modification of this Agreement shall be valid or binding unless it is
in writing and signed by the party 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 at
any other time.
20. Notices. All notices or other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered or mailed, first class mail, postage
prepaid, or delivered personally or by courier to the following addresses:
If sent to MCI:
46 Quirk Road
Milford, CT 06460
With a copy to:
Richard J. Blumberg, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016
If sent to Employee:
Mr. Daniel T. Meisenheimer
46 Quirk Road
Milford, CT 06460
IN WITNESS WHEREOF, MCI and the Employee have duly executed
this Agreement as of the day and year first written above.
MEISENHEIMER CAPITAL, INC.
By: S/Daniel T. Meisenheimer,
Employee:
S/Daniel T. Meisenheimer
Daniel T. Meisenheimer, III
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
OF
RICHARD C. MEISENHEIMER
WITH
MEISENHEIMER CAPITAL, INC.
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st
day of March, 1996 by and between MEISENHEIMER CAPITAL, INC., a Delaware
corporation ("MCI") and RICHARD C. MEISENHEIMER (the "Employee").
1. Employment. MCI agrees to employ the Employee in the position of Vice
President and Chief Financial Officer of MCI or in such other capacity as MCI
and the Employee shall mutually agree, and the Employee agrees to accept such
employment on the terms and conditions hereinafter set forth.
2. Duties. (a) The Employee agrees to devote at least twenty (20) hours per
week to the business affairs of MCI and its subsidiaries. The Employee shall
perform the duties of this office and exercise such powers as may from time to
time be assigned to or vested in him faithfully, diligently and loyally devoting
thereto his time, attention and skill to the extent necessary for the due
performance of his duties under this Agreement. (b) In connection with the
foregoing, Employee shall not
conduct any business for others nor shall Employee invest, directly or
indirectly, during the term of this Agreement, which businesses are in direct
competition with the business of MCI and its subsidiaries.
3. Limitations on Authority. Employee shall not be authorized to undertake
any of the following actions on behalf of MCI or its subsidiaries unless
authorized by the President and Board of Directors:
(a) Acquisition or disposition of real property or any rights deriving
therefrom, or changing title in any such real property;
(b) Make any capital expenditure, or any commitment therefor in excess of
$5,000.00 for any one item and construction expenditure in excess of $5,000.00;
(c) Borrowing or guaranteeing any borrowings from or on behalf of any
party, or altering the terms of any loan agreements for such borrowings except
for any such loans or borrowings as shall be agreed upon by the Board of
Directors;
(d) Hiring or terminating any personnel;
(e) Acquiring for MCI the assets or shares of another company or
partnership;
(f) Acquiring or disposing of the assets or shares of MCI or any
subsidiary;
(g) Entering into or terminating agreements of any kind or nature with a
monthly financial obligation in excess of $5,000.00 for more than six (6)
months;
(h) Making basic changes in the administration or organization of MCI and
its subsidiaries;
(i) Entering into any transaction on behalf of MCI or its subsidiaries
which is not in MCI's usual course of business.
4. Term. The term of employment of the Employee pursuant to
this Agreement shall be for a term of two years from the date of this Agreement.
<PAGE>
This Agreement shall automatically be renewed for an additional two years
subject to adjustment of compensation as may be agreed upon by the parties
unless either party serves written notice at least ninety (90) days before
expiration of the term that the serving party elects not to renew this
Agreement.
5. Compensation and Benefits. (a) The Employee shall receive
regular compensation at the initial rate for the first year of Four Thousand
Eight Hundred Dollars ($4,800.00) and for the second year at the rate of Nine
Thousand Six Hundred Dollars ($9,600.00). The salary shall be payable bi-weekly
in arrears less the usual payroll deductions, and deductions for benefits as the
Employee may request or as offered by the Company. However and notwithstanding
the aforesaid, Employee agrees that if in the discretion of the Board, the
payment of the aforesaid salaries would have an adverse impact on the Company's
cash flow, then the Company is authorized to withhold payment of salaries. For
each month of salary not paid to Employee, then Employee shall receive 2,000
options for each of month of salary omitted during the first year, and during
the second year 4,000 options for each month of salary omitted. The options
shall entitled Employee to purchase one (1) share of MCI Common Stock at $1.00
per share. All options shall be issued to Employee at the end of each twelve
(12) month period. All options shall expire five (5) years from date of grant.
(b) The Employee shall be entitled to participate in all
savings, thrift, retirement or pension, health and accident, Blue Cross/Blue
Shield, Major Medical or other hospitalization, holiday vacation, and other
fringe benefit programs which may be generally available to senior executives of
MCI in accordance with and subject to the terms and conditions of such programs.
In addition thereto, Employee, as Chairman of the Board of Directors, shall be
entitled to all benefits as may be conferred upon the other directors of MCI.
(c) Employee shall be authorized to receive a salary from the
Company's subsidiary, The United States Basketball League, Inc. The Company
acknowledges and agrees that Employee is authorized to devote a substantial
amount of his time to the business of Spectrum Associates, Inc.
6. Death; Permanent Disability. (a) Upon the death of the
Employee this Agreement shall terminate immediately and MCI shall no longer be
required to make payments hereunder, except that within thirty (30) days of the
death of the Employee or within thirty (30) days after receipt of notice of
permanent disability (as hereinafter defined), MCI shall make a lump sum payment
to the Employee's widow or other designated beneficiary in an amount equal to
twelve (12) months of the Employee's Base Salary.
(b) MCI shall have the right to purchase keyman life insurance
on the Employee's life in an amount not to exceed $1,000,000, at its expense,
and the Employee agrees to submit to any necessary physical examination, and to
sign any documents or releases which shall be necessary in order to purchase
such insurance.
(c) If during the term of his employment the Employee becomes
disabled or incapacitated to such an extent that he is physically unable to
discharge his duties (i.e., disabled) as contemplated by this Agreement for a
period of time exceeding twelve (12) cumulative months during any three (3) year
period, then, at the option of MCI, the Employee shall be deemed "permanently
disabled" and his employment hereunder may be terminated effective upon notice
by MCI to the Employee. It is understood that during such periods of disability
(i.e., prior to permanent disability), Employee will continue to receive his
full compensation. However, should Employee receive any interim disability
benefits prior to permanent disability (and if the cost of obtaining such
benefits shall have been paid for by MCI), then such amounts shall be deducted
from the Base Salary paid to Employee.
(d) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
<PAGE>
Directors of MCI, by reason of physical or mental disability to perform the
duties required of him under this Agreement for the above-stated cumulative
twelve (12) month period. The Board of Directors shall provide the Employee with
immediate written notice of its determination of permanent disability. If any
determination of the Board of Directors with respect to permanent disability is
disputed by the Employee, the parties hereto agree to abide by the decision of a
panel of three physicians. The Employee and MCI shall each appoint one member,
and the third member of the panel shall be appointed by the other two members.
7. Non-Disclosure of Information. It is understood that the
business of MCI and its subsidiaries is of a confidential nature. During the
period of the Employee's employment with MCI, the Employee may have received
and/or may secure confidential information concerning MCI or any of MCI's
affiliates or subsidiaries which, if known to competitors thereof, would or
could damage MCI or its said affiliates or subsidiaries. The Employee agrees
that during and after the term of this Agreement he will not (except as
authorized by MCI or in the proper performance of his duties or except as
ordered by a court or other body of competent jurisdiction or as otherwise
required by law), directly or indirectly, divulge, disclose or appropriate to
his own use, or to the use of any third party, any secret, proprietary or
confidential information or knowledge obtained by him during the term hereof
concerning such confidential matters of MCI or its subsidiaries or affiliates,
including, but not limited to information pertaining to trade secrets, systems,
manuals, confidential reports, methods, processes, designs, equipment lists,
operating procedures, equipment and methods used and preferred by MCI. Upon
termination of this Agreement, the Employee shall promptly deliver to MCI all
materials of a secret or confidential nature relating to the business of MCI or
any of its subsidiaries or affiliates which are, directly or indirectly, in the
possession or under the control of the Employee. The provisions of this
paragraph shall continue to apply after the Employee ceases to be employed by
MCI for a period of five (5) years except in respect of any information or
knowledge disclosed to the public, other than through an unauthorized disclosure
by the Employee.
8. Termination for Cause. Notwithstanding anything
herein to the contrary,
the
Employee's employment under this Agreement shall be terminable by the Board of
Directors at any
time for good cause ("Good Cause"). Good Cause for termination shall be the
occurrence
of any
one of the following:
(a) The Employee repeatedly and materially acts in an
insubordinate manner or fails to execute in a reasonable and responsible manner
the business plans, and/or policies of the Company or any instructions as
reflected in a written resolution received from the Board of Directors or
officers senior to Employee, or engage in any conduct which is dishonest or
fraudulent or damages the reputation or standing of the Company, or in breach of
any of the terms of this Agreement and upon the Employee's failure to correct
any such deficiency in a manner satisfactory to the Board within ninety (90)
days after receipt of written notice from the Board outlining the substance of
the deficiency and the Employee having failed to cure or cease such actions
within the notice period. In all events, the conduct of Employee constituting
Good Cause for termination must relate to a material and substantial act or
beach or failure to act. Employee shall be entitled to receive a written notice
setting forth in detail, together with any documentary evidence, the allegations
constituting good cause, and Employee shall have an opportunity to respond in
writing within ten (10) days after receipt of said written notice and to appear
as soon thereafter before the Board of Directors to contest any allegations of
Good Cause.
(b) If the Employee shall be deemed permanently disabled
as hereinbefore
<PAGE>
described in Article 7.
(c) Upon the death of the Employee, then automatically
as of the date of his
death.
9. Non-Competition. (a) During the term of this
Agreement or
any renewal thereof, and for a period of three (3) years thereafter, provided
MCI continues in business, the Employee agrees that he will not engage, either
directly or indirectly, individually or as an owner, partner, joint venturer,
employee, officer, director, stockholder, consultant, independent contractor or
lender of or to any corporation, holding company or other business entity which
competes directly or indirectly with the business of MCI or its subsidiaries.
(b) If any provision of this Section is held to be
unenforceable because of the scope, duration or area of its applicability or
otherwise, the legal entity making that determination will have the power to
modify the scope, duration or area, or all of them, and the provision will then
apply in its modified form.
10. Indemnification. MCI or any successor shall indemnify and
hold harmless the Employee from and against all damages, loss, liability or
expense (including reasonable legal fees) in the course of his employment
hereunder in his capacity as Chairman and President, and employee of MCI to the
maximum extent permitted under the laws of the State of Delaware.
11. Reimbursement of Expenses. The Employee is authorized to
incur reasonable expenses in connection with and for the promotion of the
business of MCI, including expenses for meals and lodging, entertainment, and
similar items as required from time to time by the Employee's duties. MCI shall
reimburse the Employee for all such expenses upon the presentation of an
accounting thereof, together with appropriate supporting documentation.
12. Access to Books and Records. During the term of
this Agreement,
Employee
shall have access to all of MCI's and its subsidiaries' books and records.
13. Burden and Benefit. This Agreement shall be binding upon,
and shall inure to the benefit of, MCI and the Employee, and their respective
heirs, personal and legal representatives, successors and assigns. No sale of
any of the assets or stock of MCI shall in any way affect the validity and
enforceability of this Agreement.
14. Governing Law. It is understood and agreed that the construction and
interpretation of this Agreement shall at all times and in all respects be
governed by the laws of the
State of Connecticut.
15. Arbitration. Notwithstanding the fact that the parties
shall be entitled to equitable relief in order to enforce certain provisions
hereunder (e.g., temporary restraining orders or injunctive relief), any
dispute, controversy or claim arising out of or relating to this Agreement. The
situs of any such arbitration shall be New Haven, Connecticut, and any award
shall be deemed to be a Connecticut award. Any such award shall be final and
binding upon both parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction in any state of the United
States or country or application may be made to such court for a judicial
acceptance of the award and an enforcement, as the law of such jurisdiction may
require or allow. The substantive law to be applied to any case determined
pursuant to this Section 14 is that of the State of Connecticut. The expense of
arbitration shall be borne by the respective parties except to the extent that
the arbitrators shall determine that the entire expense shall be borne by a
single party.
<PAGE>
16. Severability. The invalidity of all or any part or any
portion of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such portion. If any provision of this Agreement
is so broad as to be unenforceable, it is expressly intended by the parties
hereto that such provision shall be interpreted to be only so broad as is
enforceable.
17. Section Headings. The section headings of this
Agreement are for
convenience
of reference only and shall not affect the construction or interpretation of
any of the
provisions
hereof.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall
constitute one and the same instrument.
19. Entire Agreement; Amendment. This Agreement contains the
entire agreement and understanding by and between MCI and the Employee with
respect to the employment of the Employee by MCI, and no representations,
promises, agreements or understandings, written or oral, not contained herein or
therein shall be of any force or effect. Except as otherwise provided herein,
this Agreement supersedes all prior agreements between MCI and the Employee. No
change or modification of this Agreement shall be valid or binding unless it is
in writing and signed by the party 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 at
any other time.
20. Notices. All notices or other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered or mailed, first class mail, postage
prepaid, or delivered personally or by courier to the following addresses:
If sent to MCI:
46 Quirk Road
Milford, CT 06460
With a copy to:
Richard J. Blumberg, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016
If sent to Employee:
Mr. Richard C. Meisenheimer
179 North Broad Street
Milford, CT 06460
IN WITNESS WHEREOF, MCI and the Employee have duly executed
this Agreement as of the day and year first written above.
<PAGE>
MEISENHEIMER CAPITAL, INC.
By S/DANIEL T. MEISENHEIMER, III
S/RICHARD C. MEISENHEIMER
Richard C. Meisenheimer
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
OF
DANIEL T. MEISENHEIMER, III
WITH
THE UNITED STATES BASKETBALL LEAGUE, INC.
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st
day of January, 1996 by and between THE UNITED STATES BASKETBALL LEAGUE, INC., a
Delaware corporation ("USBL") and DANIEL T. MEISENHEIMER, III (the "Employee").
1. Employment. USBL agrees to employ the Employee in the position of
President and Chairman of the Board of USBL or in such other capacity as USBL
and the Employee shall mutually agree, and the Employee agrees to accept such
employment on the terms and conditions hereinafter set forth.
2. Duties. (a) The Employee agrees to devote substantially all of his
business time and attention and skill to the business affairs of USBL. Subject
to the following paragraphs, the Employee shall perform the duties of this
office and exercise such powers as may from time to time be assigned to or
vested in him faithfully, diligently and loyally devoting thereto his time,
attention and skill to the extent necessary for the due performance of his
duties under this Agreement.
(b) In connection with the foregoing, Employee shall not
conduct any business for others nor shall Employee invest, directly or
indirectly, during the term of this Agreement, which businesses are in direct
competition with the business of USBL.
3. Limitations on Authority. Except as otherwise provided herein, approval
must be obtained by the Board of Directors of USBL prior to the Employee taking
any of the
following actions on behalf of USBL:
(a) Acquisition or disposition of real property or any rights deriving
therefrom, or changing title in any such real property;
(b) Make any capital expenditure, or any commitment therefor in excess of
$5,000.00 for any one item and construction expenditure in excess of $5,000. 00;
(c) Borrowing or guaranteeing any borrowings from or on behalf of any
party, or altering the terms of any loan agreements for such borrowings except
for any such loans or borrowings as shall be agreed upon by the Board of
Directors;
(d) Hiring or terminating executive personnel, as well as hiring or
terminating any personnel with annual base salaries in excess of $25,000, or
increasing salaries of such employees by more than twenty-five (25%) percent per
annum;
(e) Acquiring the assets or shares of another company or partnership;
(f) Acquiring or disposing of the assets or shares of USBL;
(g) Entering into or terminating agreements of any kind or nature with a
monthly financial obligation in excess of $5,000.00 for more than six (6)
months;
(h) Making basic changes in the administration or organization of USBL;
(i) Entering into any transaction on behalf of USBL which is not in
USBL's usual course of business.
4. Term. The term of employment of the Employee pursuant to
this Agreement shall be for a term of two years from the date of this Agreement.
This Agreement shall automatically be renewed for an additional two years
subject to adjustment of compensation as may be agreed upon by the parties
<PAGE>
unless either party serves written notice at least ninety (90) days before
expiration of the term that the serving party elects not to renew this
Agreement.
5. Compensation and Benefits. (a) The Employee shall receive
regular compensation (the "Base Salary") at the initial rate for the first year
of Twenty-four Thousand Dollars ($24,000.00) and for the second year at the rate
of Sixth Thousand Dollars ($60,000.00). The salary shall be payable bi-weekly in
arrears less the usual payroll deductions, and deductions for benefits as the
Employee may request or as offered by the Company. However and notwithstanding
the aforesaid, Employee agrees that if in the discretion of the Board, the
payment of the aforesaid salaries would have an adverse impact on the Company's
cash flow, then the Company is authorized to withhold payment of salaries. The
Company agrees that for each month of salary withheld, Employee shall receive
10,000 options. Each option shall entitle Employee to purchase one (1) share of
MCI Common Stock at an exercise price of $1.00 a share. Options shall be issued
at the end of each twelve (12) month period. All options shall expire five (5)
years from the date of grant.
(b) The Employee shall be entitled to participate in all
savings, thrift, retirement or pension, health and accident, Blue Cross/Blue
Shield, Major Medical or other hospitalization, holiday vacation, and other
fringe benefit programs which may be generally available to senior executives of
USBL in accordance with and subject to the terms and conditions of such
programs. In addition thereto, Employee, as Chairman of the Board of Directors,
shall be entitled to all benefits as may be conferred upon the other directors
of USBL.
6. Death; Permanent Disability. (a) Upon the death of the
Employee this Agreement shall terminate immediately and USBL shall no longer be
required to make payments hereunder, except that within thirty (30) days of the
death of the Employee or within thirty (30) days after receipt of notice of
permanent disability (as hereinafter defined), USBL shall make a lump sum
payment to the Employee's widow or other designated beneficiary in an amount
equal to twelve (12) months of the Employee's Base Salary.
(b) USBL shall have the right to purchase keyman life
insurance on the Employee's life in an amount not to exceed $1,000,000, at its
expense, and the Employee agrees to submit to any necessary physical
examination, and to sign any documents or releases which shall be necessary in
order to purchase such insurance.
(c) If during the term of his employment the Employee becomes
disabled or incapacitated to such an extent that he is physically unable to
discharge his duties (i.e., disabled) as contemplated by this Agreement for a
period of time exceeding twelve (12) cumulative months during any three (3) year
period, then, at the option of USBL, the Employee shall be deemed "permanently
disabled" and his employment hereunder may be terminated effective upon notice
by USBL to the Employee. It is understood that during such periods of disability
(i.e., prior to permanent disability), Employee will continue to receive his
full compensation. However, should Employee receive any interim disability
benefits prior to permanent disability (and if the cost of obtaining such
benefits shall have been paid for by USBL), then such amounts shall be deducted
from the Base Salary paid to Employee.
(d) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of USBL, by reason of physical or mental disability to perform the
duties required of him under this Agreement for the above-stated cumulative
twelve (12) month period. The Board of Directors shall provide the Employee with
immediate written notice of its determination of permanent disability. If any
determination of the Board of Directors with respect to permanent disability is
<PAGE>
disputed by the Employee, the parties hereto agree to abide by the decision of a
panel of three physicians. The Employee and USBL shall each appoint one member,
and the third member of the panel shall be appointed by the other two members.
7. Non-Disclosure of Information. It is understood that the
business of USBL is of a confidential nature. During the period of the
Employee's employment with USBL, the Employee may have received and/or may
secure confidential information concerning USBL or any of USBL's affiliates or
subsidiaries which, if known to competitors thereof, would or could damage USBL
or its said affiliates or subsidiaries. The Employee agrees that during and
after the term of this Agreement he will not (except as authorized by USBL or in
the proper performance of his duties or except as ordered by a court or other
body of competent jurisdiction or as otherwise required by law), directly or
indirectly, divulge, disclose or appropriate to his own use, or to the use of
any third party, any secret, proprietary or confidential information or
knowledge obtained by him during the term hereof concerning such confidential
matters of USBL or its subsidiaries or affiliates, including, but not limited to
information pertaining to trade secrets, systems, manuals, confidential reports,
methods, processes, designs, equipment lists, operating procedures, equipment
and methods used and preferred by USBL. Upon termination of this Agreement, the
Employee shall promptly deliver to USBL all materials of a secret or
confidential nature relating to the business of USBL or any of its subsidiaries
or affiliates which are, directly or indirectly, in the possession or under the
control of the Employee. The provisions of this paragraph shall continue to
apply after the Employee ceases to be employed by USBL for a period of five (5)
years except in respect of any information or knowledge disclosed to the public,
other than through an unauthorized disclosure by the Employee.
8. Termination for Cause. Notwithstanding anything herein to the contrary,
the Employee's employment under this Agreement shall be terminable by the Board
of Directors at any time for good cause ("Good Cause"). Good Cause for
termination
shall be the occurrence of any one of the following:
(a) The Employee repeatedly and materially acts in an
insubordinate manner or fails to execute in a reasonable and responsible manner
the business plans, and/or policies of the Company or any instructions as
reflected in a written resolution received from the Board of Directors or
engages in any conduct which is dishonest or fraudulent, or damages the
reputation or standing of the Company, or in breach of any of the terms of this
Agreement and upon the Employee's failure to correct any such deficiency in a
manner satisfactory to the Board within ninety (90) days after receipt of
written notice from the Board outlining the substance of the deficiency and the
Employee having failed to cure or cease such actions within the notice period.
In all events, the conduct of Employee constituting Good Cause for termination
must relate to a material and substantial act or beach or failure to act.
Employee shall be entitled to receive a written notice setting forth in detail,
together with any documentary evidence, the allegations constituting good cause,
and Employee shall have an opportunity to respond in writing within ten (10)
days after receipt of said written notice and to appear as soon thereafter
before the Board of Directors to contest any allegations of Good Cause.
(b) If the Employee shall be deemed permanently disabled as hereinbefore
described in Article 7.
(c) Upon the death of the Employee, then automatically as of the date of
his death.
9. Non-Competition. (a) During the term of this Agreement or
any renewal thereof, and for a period of three (3) years thereafter, provided
<PAGE>
USBL continues in business, the Employee agrees that he will not engage, either
directly or indirectly, individually or as an owner, partner, joint venturer,
employee, officer, director, stockholder, consultant, independent contractor or
lender of or to any corporation, holding company or other business entity which
competes directly or indirectly with the business of USBL.
(b) If any provision of this Section is held to be
unenforceable because of the scope, duration or area of its applicability or
otherwise, the legal entity making that determination will have the power to
modify the scope, duration or area, or all of them, and the provision will then
apply in its modified form.
10. Indemnification. USBL or any successor shall indemnify and
hold harmless the Employee from and against all damages, loss, liability or
expense (including reasonable legal fees) in the course of his employment
hereunder in his capacity as Chairman and President, and employee of USBL to the
maximum extent permitted under the laws of the State of Delaware.
11. Reimbursement of Expenses. The Employee is authorized to
incur reasonable expenses in connection with and for the promotion of the
business of USBL, including expenses for meals and lodging, entertainment, and
similar items as required from time to time by the Employee's duties. USBL shall
reimburse the Employee for all such expenses upon the presentation of an
accounting thereof, together with appropriate supporting documentation.
12. Access to Books and Records. During the term of this Agreement,
Employee shall have access to all of USBL's and its subsidiaries' books and
records.
13. Burden and Benefit. This Agreement shall be binding upon,
and shall inure to the benefit of, USBL and the Employee, and their respective
heirs, personal and legal representatives, successors and assigns. No sale of
any of the assets or stock of USBL shall in any way affect the validity and
enforceability of this Agreement.
14. Governing Law. It is understood and agreed that the construction and
interpretation of this Agreement shall at all times and in all respects be
governed by the laws
of the State of Connecticut.
15. Arbitration. Notwithstanding the fact that the parties
shall be entitled to equitable relief in order to enforce certain provisions
hereunder (e.g., temporary restraining orders or injunctive relief), any
dispute, controversy or claim arising out of or relating to this Agreement. The
situs of any such arbitration shall be New Haven, Connecticut, and any award
shall be deemed to be a Connecticut award. Any such award shall be final and
binding upon both parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction in any state of the United
States or country or application may be made to such court for a judicial
acceptance of the award and an enforcement, as the law of such jurisdiction may
require or allow. The substantive law to be applied to any case determined
pursuant to this Section 14 is that of the State of Connecticut. The expense of
arbitration shall be borne by the respective parties except to the extent that
the arbitrators shall determine that the entire expense shall be borne by a
single party.
16. Severability. The invalidity of all or any part or any
portion of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such portion. If any provision of this Agreement
is so broad as to be unenforceable, it is expressly intended by the parties
hereto that such provision shall be interpreted to be only so broad as is
enforceable.
<PAGE>
17. Section Headings. The section headings of this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of any of the provisions hereof.
18.
constitute one and the same instrument.
19. Entire Agreement; Amendment. This Agreement contains the
entire agreement and understanding by and between USBL and the Employee with
respect to the employment of the Employee by USBL, and no representations,
promises, agreements or understandings, written or oral, not contained herein or
therein shall be of any force or effect. Except as otherwise provided herein,
this Agreement supersedes all prior agreements between USBL and the Employee. No
change or modification of this Agreement shall be valid or binding unless it is
in writing and signed by the party 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 at
any other time.
20. Notices. All notices or other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered or mailed, first class mail, postage
prepaid, or delivered personally or by courier to the following addresses:
If sent to USBL:
46 Quirk Road
Milford, CT 06460
With a copy to:
Richard J. Blumberg, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016
If sent to Employee:
Mr. Daniel T. Meisenheimer, III
46 Quirk Road
Milford, CT 06460
IN WITNESS WHEREOF, USBL and the Employee have duly executed
this Agreement as of the day and year first written above.
THE UNITED STATES BASKETBALL
LEAGUE, INC.
By:S/DANIEL T. MEISENHEIMER, III
Employee:
S/DANIEL T. MEISENHEIMER, III
Daniel T. Meisenheimer, III
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
OF
RICHARD C. MEISENHEIMER
WITH
THE UNITED STATES BASKETBALL LEAGUE, INC.
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st
day of January, 1996 by and between THE UNITED STATES BASKETBALL LEAGUE, INC., a
Delaware corporation ("USBL") and RICHARD C. MEISENHEIMER (the "Employee").
1. Employment. USBL agrees to employ the Employee in the position of Vice
President and Chief Financial Officer of USBL or in such other capacity as USBL
and the Employee shall mutually agree, and the Employee agrees to accept such
employment on the terms and conditions hereinafter set forth.
2. Duties. (a) The Employee agrees to devote at least ten (10)
hours per week to the business affairs of USBL and its subsidiaries. The
Employee shall perform the duties of this office and exercise such powers as may
from time to time be assigned to or vested in him faithfully, diligently and
loyally devoting thereto his time, attention and skill to the extent necessary
for the due performance of his duties under this Agreement.
(b) In connection with the foregoing, Employee shall not
conduct any business for others nor shall Employee invest, directly or
indirectly, during the term of this Agreement, which businesses are in direct
competition with the business of USBL and its subsidiaries.
3. Limitations on Authority. Employee shall not be authorized to undertake
any of the following actions on behalf of USBL unless authorized by the
President and Board
of Directors:
(a) Acquisition or disposition of real property or any rights deriving
therefrom, or changing title in any such real property;
(b) Make any capital expenditure, or any commitment therefor in excess of
$5,000.00 for any one item and construction expenditure in excess of $5,000.00;
(c) Borrowing or guaranteeing any borrowings from or on behalf of any
party, or altering the terms of any loan agreements for such borrowings except
for any such loans or borrowings as shall be agreed upon by the Board of
Directors;
(d) Hiring or terminating any personnel;
(e) Acquiring for USBL the assets or shares of another company or
partnership;
(f) Acquiring or disposing of the assets or shares of USBL;
(g) Entering into or terminating agreements of any kind or nature with a
monthly financial obligation in excess of $5,000.00 for more than six
(6) months; (h) Making basic changes in the administration or
organization of USBL; (i) Entering into any transaction on
behalf of USBL which is not in USBL's
usual course of business.
4. Term. The term of employment of the Employee pursuant to
this Agreement shall be for a term of two years from the date of this Agreement.
This Agreement shall automatically be renewed for an additional two years
subject to adjustment of compensation as may be agreed upon by the parties
unless either party serves written notice at least ninety (90) days before
<PAGE>
expiration of the term that the serving party elects not to renew this
Agreement.
5. Compensation and Benefits. (a) The Employee shall receive
regular compensation at the initial rate for the first year of Nine Thousand Six
Hundred Dollars ($9,600.00) and for the second year at the rate of Nineteen
Thousand Two Hundred Dollars ($19,200.00). The salary shall be payable bi-weekly
in arrears less the usual payroll deductions, and deductions for benefits as the
Employee may request or as offered by the Company. However and notwithstanding
the aforesaid, Employee agrees that if in the discretion of the Board, the
payment of the aforesaid salaries would have an adverse impact on the Company's
cash flow, then the Company is authorized to withhold payment of salaries. For
each month of salary not paid to Employee, Employee shall receive 4,000 options
for each of month of salary omitted during the term of this Agreement. The
options shall entitled Employee to purchase one (1) share of USBL Common Stock
at $1.00 per share. All options shall be issued to Employee at the end of each
twelve (12) month period. All options shall expire five (5) years from date of
grant.
(b) The Employee shall be entitled to participate in all
savings, thrift, retirement or pension, health and accident, Blue Cross/Blue
Shield, Major Medical or other hospitalization, holiday vacation, and other
fringe benefit programs which may be generally available to senior executives of
USBL in accordance with and subject to the terms and conditions of such
programs. In addition thereto, Employee, as Chairman of the Board of Directors,
shall be entitled to all benefits as may be conferred upon the other directors
of USBL.
(c) USBL acknowledges and agrees that Employee is authorized
to devote a substantial amount of his time to the business affairs of Spectrum
Associates, Inc.
6. Death; Permanent Disability. (a) Upon the death of the
Employee this Agreement shall terminate immediately and USBL shall no longer be
required to make payments hereunder, except that within thirty (30) days of the
death of the Employee or within thirty (30) days after receipt of notice of
permanent disability (as hereinafter defined), USBL shall make a lump sum
payment to the Employee's widow or other designated beneficiary in an amount
equal to twelve (12) months of the Employee's Base Salary.
(b) USBL shall have the right to purchase keyman life
insurance on the Employee's life in an amount not to exceed $1,000,000, at its
expense, and the Employee agrees to submit to any necessary physical
examination, and to sign any documents or releases which shall be necessary in
order to purchase such insurance.
(c) If during the term of his employment the Employee becomes
disabled or incapacitated to such an extent that he is physically unable to
discharge his duties (i.e., disabled) as contemplated by this Agreement for a
period of time exceeding twelve (12) cumulative months during any three (3) year
period, then, at the option of USBL, the Employee shall be deemed "permanently
disabled" and his employment hereunder may be terminated effective upon notice
by USBL to the Employee. It is understood that during such periods of disability
(i.e., prior to permanent disability), Employee will continue to receive his
full compensation. However, should Employee receive any interim disability
benefits prior to permanent disability (and if the cost of obtaining such
benefits shall have been paid for by USBL), then such amounts shall be deducted
from the Base Salary paid to Employee.
(d) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of USBL, by reason of physical or mental disability to perform the
<PAGE>
duties required of him under this Agreement for the above-stated cumulative
twelve (12) month period. The Board of Directors shall provide the Employee with
immediate written notice of its determination of permanent disability. If any
determination of the Board of Directors with respect to permanent disability is
disputed by the Employee, the parties hereto agree to abide by the decision of a
panel of three physicians. The Employee and USBL shall each appoint one member,
and the third member of the panel shall be appointed by the other two members.
7. Non-Disclosure of Information. It is understood that the
business of USBL is of a confidential nature. During the period of the
Employee's employment with USBL, the Employee may have received and/or may
secure confidential information concerning USBL or any of USBL's affiliates or
subsidiaries which, if known to competitors thereof, would or could damage USBL
or its said affiliates or subsidiaries. The Employee agrees that during and
after the term of this Agreement he will not (except as authorized by USBL or in
the proper performance of his duties or except as ordered by a court or other
body of competent jurisdiction or as otherwise required by law), directly or
indirectly, divulge, disclose or appropriate to his own use, or to the use of
any third party, any secret, proprietary or confidential information or
knowledge obtained by him during the term hereof concerning such confidential
matters of USBL or its subsidiaries or affiliates, including, but not limited to
information pertaining to trade secrets, systems, manuals, confidential reports,
methods, processes, designs, equipment lists, operating procedures, equipment
and methods used and preferred by USBL. Upon termination of this Agreement, the
Employee shall promptly deliver to USBL all materials of a secret or
confidential nature relating to the business of USBL or any of its subsidiaries
or affiliates which are, directly or indirectly, in the possession or under the
control of the Employee. The provisions of this paragraph shall continue to
apply after the Employee ceases to be employed by USBL for a period of five (5)
years except in respect of any information or knowledge disclosed to the public,
other than through an unauthorized disclosure by the Employee.
8. Termination for Cause. Notwithstanding anything herein to the contrary,
the Employee's employment under this Agreement shall be terminable by the Board
of Directors at any time for good cause ("Good Cause"). Good Cause for
termination shall be the occurrence of any one of the following:
(a) The Employee repeatedly and materially acts in an
insubordinate manner or fails to execute in a reasonable and responsible manner
the business plans, and/or policies of the Company or any instructions as
reflected in a written resolution received from the Board of Directors or
officers senior to Employee, or engage in any conduct which is dishonest or
fraudulent or damages the reputation or standing of the Company, or in breach of
any of the terms of this Agreement and upon the Employee's failure to correct
any such deficiency in a manner satisfactory to the Board within ninety (90)
days after receipt of written notice from the Board outlining the substance of
the deficiency and the Employee having failed to cure or cease such actions
within the notice period. In all events, the conduct of Employee constituting
Good Cause for termination must relate to a material and substantial act or
beach or failure to act. Employee shall be entitled to receive a written notice
setting forth in detail, together with any documentary evidence, the allegations
constituting good cause, and Employee shall have an opportunity to respond in
writing within ten (10) days after receipt of said written notice and to appear
as soon thereafter before the Board of Directors to contest any allegations of
Good Cause.
(b) If the Employee shall be deemed permanently disabled as hereinbefore
described in Article 7.
(c) Upon the death of the Employee, then automatically as of the date of
his death.
<PAGE>
9. Non-Competition. (a) During the term of this Agreement or any
renewal thereof, and for a period of three (3) years thereafter, provided USBL
continues in business, the Employee agrees that he will not engage, either
directly or indirectly, individually or as an owner, partner, joint venturer,
employee, officer, director, stockholder, consultant, independent contractor or
lender of or to any corporation, holding company or other business entity which
competes directly or indirectly with the business of USBL.
(b) If any provision of this Section is held to be
unenforceable because of the scope, duration or area of its applicability or
otherwise, the legal entity making that determination will have the power to
modify the scope, duration or area, or all of them, and the provision will then
apply in its modified form.
10. Indemnification. USBL or any successor shall indemnify and
hold harmless the Employee from and against all damages, loss, liability or
expense (including reasonable legal fees) in the course of his employment
hereunder in his capacity as Chairman and President, and employee of USBL to the
maximum extent permitted under the laws of the State of Delaware.
11. Reimbursement of Expenses. The Employee is authorized to
incur reasonable expenses in connection with and for the promotion of the
business of USBL, including expenses for meals and lodging, entertainment, and
similar items as required from time to time by the Employee's duties. USBL shall
reimburse the Employee for all such expenses upon the presentation of an
accounting thereof, together with appropriate supporting documentation.
12. Access to Books and Records. During the term of this Agreement,
Employee shall have access to all of USBL's and its subsidiaries' books and
records.
13. Burden and Benefit. This Agreement shall be binding upon,
and shall inure to the benefit of, USBL and the Employee, and their respective
heirs, personal and legal representatives, successors and assigns. No sale of
any of the assets or stock of USBL shall in any way affect the validity and
enforceability of this Agreement.
14. Governing Law. It is understood and agreed that the construction and
interpretation of this Agreement shall at all times and in all respects be
governed by the laws of the State of Connecticut.
15. Arbitration. Notwithstanding the fact that the parties
shall be entitled to equitable relief in order to enforce certain provisions
hereunder (e.g., temporary restraining orders or injunctive relief), any
dispute, controversy or claim arising out of or relating to this Agreement. The
situs of any such arbitration shall be New Haven, Connecticut, and any award
shall be deemed to be a Connecticut award. Any such award shall be final and
binding upon both parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction in any state of the United
States or country or application may be made to such court for a judicial
acceptance of the award and an enforcement, as the law of such jurisdiction may
require or allow. The substantive law to be applied to any case determined
pursuant to this Section 14 is that of the State of Connecticut. The expense of
arbitration shall be borne by the respective parties except to the extent that
the arbitrators shall determine that the entire expense shall be borne by a
single party.
16. Severability. The invalidity of all or any part or any
portion of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such portion. If any provision of this Agreement
<PAGE>
is so broad as to be unenforceable, it is expressly intended by the parties
hereto that such provision shall be interpreted to be only so broad as is
enforceable.
17. Section Headings. The section headings of this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of any of the provisions hereof.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
19. Entire Agreement; Amendment. This Agreement contains the
entire agreement and understanding by and between USBL and the Employee with
respect to the employment of the Employee by USBL, and no representations,
promises, agreements or understandings, written or oral, not contained herein or
therein shall be of any force or effect. Except as otherwise provided herein,
this Agreement supersedes all prior agreements between USBL and the Employee. No
change or modification of this Agreement shall be valid or binding unless it is
in writing and signed by the party 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 at
any other time.
20. Notices. All notices or other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered or mailed, first class mail, postage
prepaid, or delivered personally or by courier to the following addresses:
If sent to USBL:
46 Quirk Road
Milford, CT 06460
With a copy to:
Richard J. Blumberg, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016
If sent to Employee:
Mr. Richard C. Meisenheimer
179 North Broad Street
Milford, CT 06460
IN WITNESS WHEREOF, USBL and the Employee have duly executed
this Agreement as of the day and year first written above.
THE UNITED STATES BASKETBALL
LEAGUE, INC.
By S/DANIEL T. MEISENHEIMER, III
<PAGE>
S/RICHARD C. MEISENHEIMER
Richard C. Meisenheimer
<PAGE>
EXHIBIT 10.5
MORTGAGE NOTE
$120,000 New Haven, Connecticut
August 10, 1995
FOR VALUE RECEIVED, the undersigned MEISENHEIMER CAPITAL REAL ESTATE HOLDINGS,
INC., a Connecticut corporation ("Maker"), promises to pay to the order of FLEET
BANK, NATIONAL ASSOCIATION, a national banking association having a place of
business in Hartford, Connecticut ("Payee"), or any subsequent assignee or
holder hereof (Payee or any subsequent assignee or holder hereof sometimes being
hereinafter referred to as "Holder"), at the office of Payee at One Constitution
Plaza, Hartford, Connecticut, or at such other place as Holder may designate
from time to time in writing, the principal sum of ONE HUNDRED TWENTY THOUSAND
DOLLARS ($120,000), together with: (I) interest on the principal balance of this
Note outstanding from time to time, from the date hereof until said balance
shall have been paid in full, at the rate or rates and in the manner hereinafter
provided; (ii) all amounts which may be or become due under the Mortgage (as
hereinafter defined) or any other document now or hereafter evidencing, securing
or otherwise executed in connection with the indebtedness evidenced by this Note
(collectively, with this Note and the Mortgage, the "Loan Documents"); (iii) all
costs and expenses, including reasonable attorneys' and appraisers, fees,
incurred in collecting or attempting to collect the indebtedness evidenced by
this Note, or in enforcing any of the Loan Documents or protecting or sustaining
the lien thereof or in any litigation or controversy arising from or connected
with this Note or any of the other Loan Documents; and (iv) all taxes or duties
assessed upon the indebtedness evidenced by this Note or by any of the other
Loan Documents or upon the Mortgaged Property (as defined in the Mortgage) or
any other property securing such indebtedness. All amounts owing under this Note
shall be payable in legal tender of the United States of America.
1. The principal balance of the indebtedness evidenced by this
Note outstanding from time to time shall bear interest,-from the
date hereof until said indebtedness shall have been paid in full,
at the rate of Seven and 98/100s percent (7.98%) per annum. , Interest shall
be
calculated on the daily unpaid principal balance of the indebtedness evidenced
by this Note based on a 360-day year, provided that interest shall be due for
the actual number of days elapsed during each period for which interest is being
charged.
2. (a) commencing on September 16, 1995, and continuing on the same day of
each calendar month thereafter until prepayment or maturity, by acceleration or
otherwise, Maker shall pay to Holder monthly installments of principal and
interest, each in the amount of One Thousand Ten and 52/100s Dollars
($1,010.52).
(b) Any payments received hereunder shall be applied to interest and
other charges accrued under this Note to the day such payment shall have been
received by Holder, in such order as Holder shall determine in its sole
discretion, and then to principal.
3. All indebtedness evidenced by this Note, if not sooner paid in accordance
with this Note, shall be due and payable in full on August 16, 2005 (the
<PAGE>
"Maturity Date").
4. Any payment under this Note which is stated to be due on a day other than a
"Business Day" (a day on which banks are open for business in Hartford,
Connecticut) shall be made on the next succeeding Business Day, and any such
extension of time shall be included in the computation of the amount of interest
to be paid; provided, however, that, if any such extension would cause any
payment to be payable in the next following calendar month, such payment shall
be made on the next preceding Business Day.
5. Maker may prepay the indebtedness evidenced by this Note, in whole or in
part without premium or penalty. Amounts so prepaid shall be applied to interest
and other charges accrued under this Note to the day prepayment shall have been
received by Holder, in such order as Holder shall determine in its sole
discretion, and then to principal, in the inverse order of the installments of
principal payable under this Note.
6. It shall be an "Event of Default" hereunder if any Event of Default (as
defined in the Mortgage) shall occur or if Maker shall fail to make any payment
under this Note when due. If an Event of Default or any other cause for
acceleration of the indebtedness
evidenced by this Note shall occur, then, at the option of Holder, all amounts
remaining unpaid under this Note shall immediately become due and payable. Any
failure to exercise any such option or any other right under this Note or under
any of the other Loan Documents, or any delay in such exercise, shall not
constitute a waiver of the right to exercise such option or such other right at
a later time so long as such Event of Default shall remain uncured, and shall
not constitute a waiver of the right to exercise such option or other right if
any other Event of Default shall occur. The acceptance by Holder of payment of
any sum payable- under this Note after the due date of such payment shall
not be a waiver of Holder's right to require prompt payment when due of all
other sums payable under this Note or of Holder's right to declare a default for
failure to make prompt payment in full.
7. Upon the occurrence of any Event of Default, or upon maturity hereof (by
acceleration or otherwise), the outstanding principal balance of the
indebtedness evidenced by this Note shall, at the option of Holder, bear
interest from the date of occurrence of such Event of Default or such maturity
until collection (including any period of time occurring after judgment), at the
"Default Rate", being the lower of (a) the highest rate allowed by applicable
law, or (b) a rate per annum equal to two percentage points (2-.) above the rate
or rates that otherwise would have been in effect under this Note, as the same
may vary from time to time. If Holder shall not receive the full amount of any
payment due under the terms of this Note within ten (10) days after the due date
of such payment, then Maker shall pay to Holder, upon demand, a late charge
equal to five percent (5.0'-.) of such payment, to cover the additional expense
involved in handling such overdue payment. Such charge shall be in addition to,
and not in lieu of, any other remedy Holder may have and shall be in addition
to, and not in lieu of, Maker's obligation to pay any reasonable fees and
charges of any agents or attorneys employed in the event of any default
hereunder. 8. Maker and each endorser, guarantor and surety of this Note
(hereinafter referred to, individually and collectively, as "Guarantor"), and
each other person liable or who shall become liable for all or any part of the
indebtedness evidenced by this Note:
(a) waive demand, presentment,
protest, notice of protest, notice of
dishonor, diligence in collection, notice of
nonpayment and all notices of a like
<PAGE>
nature; and
(b) consent to (I) all renewals, extensions or modifications of this Note or
any of the other Loan Documents (including any affecting the time of payment),
(ii) under this Note or any of the other Loan Documents, release, surrender,
exchange or substitution of all the security for the indebtedness evidenced by
this taking of any additional security, (iv) the release other persons from
liability, whether primary or contingent, for the indebtedness evidenced by this
Note or for any related obligations, and (v) the granting of any other
indulgences to any all advances (iii) the or any part of Note, or the of any or
all such person.
Any such renewal, extension, modification, advance, release, surrender,
exchange, substitution, taking or indulgence may take place without notice to
any such person, and, whether or not any such notice is given, shall not impair
the liability of any such person.
9. Maker and each Guarantor, and each other person liable or who
shall become
liable for all or any part of the indebtedness evidenced by this Note, hereby
give Holder a lien and right of set off for all of their respective liabilities
in respect of such indebtedness upon and against all of their respective
deposits, credits and property (other than the Mortgaged Property), now or
hereafter in the possession or control of Holder or in transit to Holder. Holder
may at any time apply the same, or any part thereof, to any liability of Maker
or any such other person, whether matured or unmatured.
10. MAKER AND EACH GUARANTOR, AND EACH OTHER PERSON LIABLE OR WHO SHALL BECOME
LIABLE FOR ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE, HEREBY
(a) ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER APPLICABLE LAW,
HEREBY WAIVE THEIR RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE, (b) WAIVE
ALL RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY ENFORCEMENT OF HOLDERS RIGHTS
UNDER THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENTS AND ANY OTHER CASE OR
PROCEEDING ARISING OUT OF OR OTHERWISE RELATING TO THE INDEBTEDNESS EVIDENCED BY
THIS NOTE OR THE TRANSACTION OF WHICH THIS NOTE IS A PART, AND (c) ACKNOWLEDGE
THAT THE AFORESAID ACKNOWLEDGMENTS AND WAIVERS ARE MADE KNOWINGLY AND
VOLUNTARILY, AFTER CONSULTATION WITH COUNSEL.
11. If any one or more of the provisions of this Note shall for any reason be
held to be invalid, illegal or unenforceable, in whole or in part, or in any
respect, or if any one or more of the provisions of this Note shall operate, or
would prospectively operate, to invalidate this Note, then such provision or
provisions only shall be deemed to be null and void and of no force or effect
and shall not affect any other provision of this Note, and the remaining
provisions of this Note shall remain operative and in full force and effect,
shall be valid, legal and enforceable, and shall in no way be affected,
prejudiced or disturbed thereby.
12. This Note may not be modified or terminated orally, but only by a written
instrument signed by the party against whom enforcement of any such modification
or termination is sought. Time is and shall be of the essence in the performance
<PAGE>
of all obligations under this Note. This Note shall be governed by and construed
in accordance with the laws of the State of Connecticut.
13. If this Note is now, or hereafter shall be, signed by more than one
person, it shall be the joint and several obligation of all such persons
(including, without limitation, all makers and Guarantors, if any) and shall be
binding on all such persons and their respective heirs, executors,
administrators, legal representatives, successors and assigns. This Note and all
covenants, agreements and provisions set forth in this Note shall inure to the
benefit of Holder and its successors and assigns.
14. The indebtedness evidenced by this Note is secured by a Mortgage Deed and
Security Agreement of even date herewith (the "Mortgage") from Maker to Holder,
encumbering certain real and personal property located in Milford, Connecticut,
being described in the Mortgage, and by any and all other instruments presently
in effect or hereafter given as security for the indebtedness evidenced by this
Note.
MEISENHEIMER CAPITAL REAL
ESTATE HOLDINGS, INC.
By-
Richard C. Meisenheimer
Vice President
GUARANTY
THIS GUARANTY from MEISENHEIMER CAPITAL, INC., a Delaware
corporation (the "Guarantor") to FLEET BANK, NATIONAL ASSOCIATION, a
national banking association (the "Lender").
RECITALS
A. The Lender has agreed to make a loan (the "Loan") in the
maximum
principal amount of One Hundred Twenty Thousand Dollars ($120,000) to
Meisenheimer
Capital Real Estate Holdings, Inc. (the "Borrower").
B. The Loan will be evidenced by Borrower's promissory note, in the
principal amount of One Hundred Twenty Thousand Dollars ($120,000) dated on or
about the date hereof (the "Note,,) and secured by a Mortgage Deed and Security
Agreement dated on or about the date hereof from Borrower to the Lender (the
"Mortgage").
C. As an affiliate of Borrower, the Guarantor has received
and will receive direct financial benefit by reason of such Loan.
D. Guarantor acknowledges that Lender would not make the Loan to
Borrower without this Guaranty, and in order to induce the Lender to make the
Loan to the Borrower, the Guarantor desires and agrees hereby to guarantee
Borrower's payment and performance under the Note and all other documents
delivered in connection with the Note (hereinafter collectively referred to as
the "Loan Documents").
<PAGE>
NOW THEREFORE, in consideration of the foregoing and as a material
inducement for the Lender's having made or making, now or in the future, the
Loan:
1. Guaranty. The Guarantor does hereby unconditionally guarantee to the
lender, its successors and assigns full and prompt payment of any and all
liabilities owed to the Lender by the Borrower under the Loan and the Loan
Documents. As used herein, "liabilities" means any and all liabilities of the
Borrower to the Lender under the Loan and the Loan Documents of every kind and
description, direct or indirect, primary and secondary, absolute or contingent,
due or to become due, now existing or hereafter arising, secured or unsecured,
without deduction by reason of
set-off, defense or counterclaim, together with interest on and fees and other
charges with respect to such liabilities to the extent provided for in the Loan
Documents and all reasonable costs, expenses and attorneys, fees paid or
incurred by the Lender in the enforcement thereof against either the Borrower or
any guarantor of said liabilities. Guarantor's obligations hereunder shall take
effect immediately upon default by the Borrower under the Loan Documents.
2. Bankruptcy. The Guarantor further unconditionally guarantees that all
payments made by the Borrower to the Lender with respect to any liabilities
hereby guaranteed will, when made, be final, and agrees that if any such payment
is recovered from, or repaid by, the Lender, in whole or in part in any
bankruptcy, insolvency or similar proceeding instituted by or against the
Borrower, this guaranty shall continue to be fully applicable to such
liabilities to the same extent as though the payment so recovered or repaid had
never been originally made on such liabilities.
3. Guaranty Absolute, Unconditional and Continuing. This guaranty shall be an
absolute and unconditional continuing guaranty until all of the Borrower's and
the Guarantor's obligations with respect to the Loan Documents shall have been
performed. This Guaranty and Guarantor's obligations hereunder shall remain
absolute and unconditional irrespective of the validity or enforceability or
lack of validity or enforceability of the Loan, the Loan Documents or this
Guaranty. Upon performance by the Borrower and the Guarantor of all of their
obligations with respect to the Loan Documents, this Guaranty shall terminate.
4. Waiver of Demand, Etc. The Guarantor hereby waives demand, presentment,
protest, notice of dishonor and notice of the Leader's acceptance of this Loan
Documents and of any loans made, extension granted or other action taken in
reliance hereon And all other rights and remedies accorded by applicable law to
guarantors.
5. Right of Set off. Any deposits, securities or other property of the
Guarantor which at any time are within the Lender's possession or control may be
held and treated as collateral security for the payment of the liabilities, and
the Lender shall have a lien thereon and right to set off the same against
matured liabilities or against any other sums due hereunder.
6. Modifications. THE LIABILITY OF THE GUARANTOR HEREUNDER SHALL
NOT BE TERMINATED OR OTHERWISE AFFECTED BY, AND THE GUARANTOR
HEREBY ASSENTS TO, ANY MODIFICATION OR AMENDMENT OF THE LOAN
DOCUMENTS OR ANY OTHER INSTRUMENT EXECUTED BY THE BORROWER
OR ANY PERSON WHO SUCCEEDS THE BORROWER; AND SHALL NOT BE
TERMINATED OR OTHERWISE AFFECTED BY, AND THE GUARANTOR
HEREBY ASSENTS TO, ANY EXTENSION OR POSTPONEMENT OF THE TIME OF
PERFORMANCE OR PAYMENT OF ANY LIABILITY
OR ANY OTHER INDULGENCE, ANY SUBSTITUTION, EXCHANGE OR RELEASE
OF COLLATERAL, ALL OR ANY PART THEREOF, THE ADDITION, RELEASE
<PAGE>
OR DISCHARGE OF ANY PARTY PRIMARILY OR SECONDARILY LIABLE, WHETHER AS A
GUARANTOR OR OTHERWISE, WHETHER IN WHOLE OR IN PART, WHETHER OR NOT NOTICE
THEREOF IS GIVEN TO THE GUARANTOR. THE LENDER SHALL HAVE NO DUTY TO COLLECT OR
PROTECT ANY COLLATERAL OR ANY INCOME THEREON, NOR TO PRESERVE ANY RIGHTS AGAINST
OTHER PARTIES, AND THE LENDER MAY PROCEED UNDER THIS GUARANTY IMMEDIATELY UPON
BORROWERS DEFAULT WITHOUT EXHAUSTING ANY OTHER REMEDIES THE LENDER MAY HAVE OR
WITHOUT RESORTING TO OR REGARD TO ANY COLLATERAL OR ANY OTHER GUARANTY OR SOURCE
OF PAYMENT.
7. Failure to Perfect. The liability of the Guarantor hereunder shall be
unaffected by the Lender's failure to record any mortgage or file any UCC-1
financing statements or otherwise to perfect, protect, secure or insure any
security interest or lien given as security for the Note or this Guaranty.
8. Commercial Transaction. THE GUARANTOR ACKNOWLEDGES THAT THE TRANSACTIONS OF
WHICH THIS GUARANTY IS A PART ARE COMMERCIAL TRANSACTIONS AND HEREBY WAIVES
PRESENTMENT, PROTEST AND NOTICE OF DISHONOR AND ANY OTHER FORMALITIES WHICH MAY
AFFECT OR IMPEDE THE RIGHT OF THE LENDER TO EXERCISE ITS RIGHTS OR TO COLLECT
THE SUMS DUE HEREUNDER, INCLUDING, WITHOUT LIMITATION, ANY AND ALL RIGHTS THE
GUARANTOR MAY HAVE UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES
("CGS--), AS THE SAME MAY BE AMENDED, OR UNDER SIMILAR LAWS THAT MAY BE
HEREAFTER ENACTED, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE LENDER MAY USE; PROVIDED, HOWEVER,
THAT GUARANTOR DOES NOT HEREBY WAIVE ANY OF ITS RIGHTS (I) PURSUANT TO SECTION
52- 278e(c) OF CGS TO MOVE TO DISSOLVE OR MODIFY A PREJUDGMENT REMEDY GRANTED
PURSUANT TO SECTION 52-278e OF CGS, OR (ii) PURSUANT TO SECTION 52-278k OF CGS
TO MODIFY OR VACATE ANY PREJUDGMENT REMEDY.
9. Costs and Expenses. The Guarantor agrees to pay all costs, expenses and
fees (including, without limitation, reasonable attorneys, fees) which may be
incurred by the Lender in enforcing or attempting to enforce this Guaranty.
10. Successors and Assigns. This Guaranty shall inure to the benefit of the
Lender and its successors and assigns, and it shall be binding upon the
Guarantor and its successors.
11. Invalidity. If any one or more provisions hereof are invalid or
unenforceable in any jurisdiction for any reason, the remaining provisions
hereof shall remain in full force and effect.
12. Jury Trial. GUARANTOR AND LENDER DO HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR CONTROVERSY ARISING OUT OF THIS GUARANTY OR THE LOAN DOCUMENTS.
13. Connecticut Law. This Guaranty is intended to take effect as a sealed
instrument and its validity and construction shall be determined by the laws of
the State of Connecticut.
14. No Assertion of Borrower's Defenses. THIS GUARANTY SHALL REMAIN
FULLY
ENFORCEABLE AGAINST THE GUARANTOR IN ACCORDANCE WITH ITS
TERMS IRRESPECTIVE OF ANY DEFENSES OR COUNTERCLAIMS THAT THE
BORROWER MAY ASSERT OR MAY HAVE THE RIGHT TO ASSERT ON THE
UNDERLYING DEBT, INCLUDING BUT NOT LIMITED TO FAILURE OF
<PAGE>
CONSIDERATION, BREACH OF WARRANTY, FRAUD, PAYMENT, STATUTE
OF FRAUDS, BANKRUPTCY, INFANCY, STATUTE OF LIMITATIONS, LENDER
LIABILITY, ACCORD AND SATISFACTION, AND USURY, AND GUARANTOR
AGREES THAT SUCH DEFENSES SHALL NOT BE
ASSERTED AGAINST THE LENDER.
15. Representations by Guarantor. Guarantor hereby agrees, acknowledges and
represents that (a) neither Lender nor any person or party acting on behalf of
Lender has made any representation, warranty or covenant, express, implied or
statutory, of any kind whatsoever upon which Guarantor has relied in entering
into this Guaranty or upon which Guarantor shall rely in consummating the
transaction contemplated by this Guaranty; (b) Guarantor is entering into this
Guaranty and shall perform all of Guarantor's obligations hereunder and
consummate the transaction contemplated by this Guaranty solely in reliance on
and as a result of Guarantor's own knowledge of and investigations and inquiries
into the Loan and the financial capacity of the Borrower; (c) nothing is known
to Guarantor at the present time would affect Guarantor's decision to enter into
this Guaranty or would affect the decision of any reasonable person to enter
into this Guaranty; and (d) Guarantor is an affiliate of the Borrower.
16.. Financial Statements and Financial Covenants. (a) Guarantor shall
provide to Lender such financial statements as are required by the commitment
letter for the Loan from Lender to Borrower dated August 15, 1995 (the
"Commitment Letter").
(b) Guarantor, Borrower and each other guarantor of the Loan shall maintain at
all times a combined debt service coverage ratio of not less than 1.2 to 1.0. As
used herein "combined debt service coverage ratio" means the ratio of combined
net income, depreciation and interest, and personal income to combined business
debt service, personal debt service, and personal living expenses. Such
financial covenant shall be determined in accordance with generally accepted
accounting principles consistently applied.
Signed and Sealed this day of August, 1995.
WITNESSES: GUARANTOR:
MEISENHEIMER CAPITAL, INC.
By.
Richard C. Meisenheimer
Vice President
<PAGE>
EXHIBIT 10.6
LEASE AGREEMENT
AGREEMENT, made this IST day of October, 1995, by and between Meisenheimer
Capital Real Estate Holdings, Inc., a Connecticut Corporation, with its
principal office located at 46 Quirk Road in the City of Milford, County of New
Haven, State of Connecticut, hereinafter referred to as the Landlord, and the
United States Basketball League, Inc., a Delaware corporation, with its
principal office located at 46 Quirk Road in the City of Milford, County of New
Haven, State of Connecticut, hereinafter referred to as the Tenant.
W I T N E S E T H
In consideration of the mutual promises herein contained the parties
hereto agree as follows:
First.: The Landlord agrees to lease to the Tenant, and the Tenant agrees
to lease from the Landlord for the term and upon the conditions hereinafter
specified, 1500 sq. feet of office space at 46 Quirk Road, situated in the City
of Milford, County of New Haven and State of Connecticut, hereinafter called the
"Premises", and being more particularly bounded and described as follows:
All that certain piece, parcel or tract of land, with the buildings and
improvements thereon standing, situated in the City of Milford, County of New
Haven and State of Connecticut, bounded and described as follows, to wit:
NORTHEASTERLY 200.67 feet by Lot #2, as shown on hereinafter
mentioned map;
SOUTHEASTERLY 149.90 feet by Quirk Road;
SOUTHWESTERLY 203.098 feet by Lot #4, as shown on said map;
NORTHWESTERLY166 feet by land now or formerly of
Penn Central
Railroad, as shown on
said map.
Said premises being known and designated as Lot #3, as shown
and delineated on a certain map entitled, "Proposed Subdivision Map
of Quirk Center, an Industrial Subdivision, Milford, Conn., July 6, 1976",
on
file in the office of the Town Clerk of the City of Milford by the Map No.
AB-780.
Second.: The term of this lease shall be for six (6) months beginning
October 1, 1995 and ending March 30, 1996. The rent for the lease term shall be
$750 per month. The lease may be extended for an additional nine (9) months at
$1,000 a month until December, 1996.
The rent shall be payable monthly the first day of each calendar month for the
lease term, and shall be paid to Landlord'S office at 46 Quirk Road in the City
0 f Milford, County of New Haven, State of Connecticut, or as may be otherwise
directed by the Landlord in writing.
Third.: The Landlord covenants that the Tenant, upon paying the rent and
performing the covenants and conditions in this Lease shall and may peaceably
and quietly have, hold and enjoy the premises for the term thereof.
<PAGE>
Fourth.: The Tenant covenants and agrees to use the premises for office space
and agrees not to use or permit the premises to be used for any other purpose
without the prior written consent of the Landlord.
Fifth.: In the event of non-payment of rent for more than ten days after
becoming due, or if the Tenant shall be dispossessed for non-payment of rent, or
if the leased premises shall be vacated, the Landlord shall have the right to
and may enter the premises as the agent of the Tenant, either by force or
otherwise, without being liable for any prosecution or damages therefor, and may
relet the premises as the agent of the Tenant, and receive the rent therefor,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the premises under this lease shall be forfeited. Such
reentry by the Landlord shall not operate to release the Tenant from any rent to
be paid or covenants to be performed hereunder during the full term of this
lease.
Sixth.: The Tenant has examined the premises, and accepts them in their
present condition and without any representations on the part of the Landlord or
its agents as to the present or future condition of the premises. The Tenant
shall keep the premises in good condition, and shall redecorate paint and
renovate the premises as may be necessary to keep them in repair and good
appearance. The Tenant shall quit and surrender the premises at the end of the
lease term in as good condition as the reasonable use thereof will permit. All
alterations, additions and improvements, whether temporary or permanent in
character, which may be made upon the premises either by the Landlord or the
Tenant, except furniture or movable trade fixtures installed at the expense of
the Tenant, shall be the property of the Landlord and shall remain upon and be
surrendered with the premises as a part thereof at the termination of this
Lease, without compensation to the Tenant. The Tenant further agrees to keep the
premises and all parts thereof in a clean and sanitary condition. The Tenant
further agrees to keep the sidewalks in front of the premises clean and free of
obstructions, snow and ice.
Seventh.: The Landlord shall not be responsible for the loss of or damage
to property, or injury to persons, occurring in or about the premises, by reason
of any existing or future condition, defect, matter or thing in the premises or
the property or which the premises are a part, or for the acts, omissions or
negligence of other persons or tenants in and about the property. The Tenant
agrees to indemnify and save the Landlord harmless from all claims and liability
for losses of or damage to property, or injuries to persons occurring in or
about the premises.
Eighth.: In the event of the destruction of the premises by fire,
explosion, the elements or otherwise during the term of this lease, or partial
destruction thereof as to render the premises wholly untenantable or unfit for
occupancy, or should the premises be so badly damaged that it cannot be repaired
within ninety days from the occurrence of such damage, then and in such case the
term hereby created shall, at the option of the Landlord, cease and become null
and void from the date of such damage or destruction, and the Tenant shall
immediately surrender the premises and all the Tenant'S interest therein to the
Landlord, and shall pay rent only to the time of such surrender, in which event
the Landlord may re-enter the premises and repossess the premises thus
discharged from the lease and may remove all parties therefrom. Should the
premises be rendered untenable and unfit for occupancy, but yet be repairable
within ninety days from the happening of such damage, the Landlord may enter and
repair the premises with reasonable speed, and the rent shall not accrue after
the damage or while repairs are being made,
<PAGE>
but shall recommence immediately after the repairs shall be completed. But if
the premises shall be so slightly damaged as not to be rendered untenantable and
unfit for occupancy, then the landlord agrees to repair the same with reasonable
promptness and in that case the rent accrued and accruing shall not cease.
Ninth.: The Tenant agrees to observe and comply with all laws, ordinances,
rules and regulations of the Federal, State, County and Municipal authorities
applicable to the business to be conducted by the Tenant in the premises.
Tenth.: In case of violation by the Tenant of any of the covenants,
agreements and conditions of this lease, and upon failure to discontinue such
violation within ten days after notice hereof given to the Tenant, this lease
shall thenceforth, at the option of the Landlord, become null and void, and the
Land lord may re-enter without further notice or demand. The rent in such case
shall become due, be apportioned and paid on and up to the day of such re-entry,
and the Tenant shall be liable for all loss or damage resulting from such
violation.
IN WITNESS WHEREOF, the parties hereby have hereunto set their hand and
seals the day and year first above written.
IN THE PRESENCE OF: Meisenheimer Capital Real
Estate Holding. Inc.
MEISENHEIMER, Landlord
Vice President
IN THE PRESENCE OF: United States Basketball League,
Inc.
B
Meisenheimer, 111
President
<PAGE>
EXHIBIT 10.7
LEASE AGREEMENT
AGREEMENT, made this 1lth day of September, 1995, by and between
Meisenheimer Capital Real Estate Holdings, Inc., a Connecticut Corporation, with
its principal office located at 46 Quirk Road in the City of Milford, County of
New Haven, State of Connecticut, hereinafter referred to as the Landlord, and
Cadcom, Inc., a Connecticut corporation, with its principal office located at 46
Quirk Road in the City of Milford, County of New Haven, State of Connecticut,
hereinafter referred to as the Tenant.
W I T N E S S E T H
In consideration of the mutual promises herein contained the parties
hereto agree as follows:
First.: The Landlord agrees to lease to the Tenant, and the Tenant agrees
to lease from the Landlord for the term and upon the conditions hereinafter
specified, 3000 sq. feet of space at 46 Quirk Road, situated in the City of
Milford, County of New Haven and State of Connecticut, hereinafter called the
"Premises", and being more particularly bounded and described as follows:
All that certain piece, parcel or tract of land, with the buildings and
improvements thereon standing, situated in the City of Milford, County of New
Haven and State of Connecticut, bounded and described as follows, to wit:
NORTHEASTERLY 200.67 feet by Lot #2, as shown on hereinafter
mentioned map;
SOUTHEASTERLY 149.90 feet by Quirk Road;
SOUTHWESTERLY 203.098 feet by Lot #4, as shown on said map;
NORTHWESTERLY 166 feet by land now or formerly of Penn Central
Railroad, as shown on said map.
Said premises being known and designated as Lot #3, as shown
and delineated on a certain map entitled, "Proposed Subdivision Map
of Quirk Center, an Industrial Subdivision, Milford, Conn., July 6, 1976", on
file in the office of the Town Clerk of the City of Milford by the Map No.
AB-780.
Second.: The term of this lease shall be for five (5) years and four (4)
months beginning September 1, 1995 and ending December 31, 1999. The rent for
the lease term shall be $2,725 per month for the first 4 months, $3,000 per
month for 1996, $3,100 per month for 1997, $3,200 per month for 1998 and $3,300
per month for 1999. The rent shall be payable monthly in advance of the first
day of each calendar month for the lease term, and shall be paid to Landlord'S
office at 46 Quirk Road in the City of Milford, County of New Haven, State of
Connecticut, or as may be otherwise directed by the Landlord in writing.
Third.: The Landlord covenants that the Tenant, upon paying the rent and
performing the covenants and condition S in this Lease shall and may peaceably
and quietly have, hold and enjoy the premises for the term thereof.
<PAGE>
Fourth.: The Tenant covenants and agrees to use the premises for office
space and agrees not to use or permit the premises to be used for any other
purpose without the prior written consent of the Landlord.
Fifth.: In the event of non-payment of rent for more than ten days after
becoming due, or if the Tenant shall be dispossessed for non-payment of rent, or
if the leased premises shall be vacated, the Landlord shall have the right to
and may enter the premises as the agent of the Tenant, either by force or
otherwise, without being liable for any prosecution or damages therefor, and may
relet the premises as the agent of the Tenant, and receive the rent therefor,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the premises under this lease shall be forfeited. Such
reentry by the Landlord shall not operate to release the Tenant from any rent to
be paid or covenants to be performed hereunder during the full term of this
lease.
Sixth.: The Tenant has examined the premises, and accepts them in their
present condition and without any representations on the part of the Landlord or
its agents as to the present or future condition of the premises. The Tenant
shall keep the premises in good condition, and shall redecorate, paint and
renovate the premises as may be necessary to keep them in repair and good
appearance. The Tenant shall quit and surrender the premises at the end of the
lease term in as good condition as the reasonable use thereof will permit. All
alterations, additions and improvements, whether temporary or permanent in
character, which may be made upon the premises either by the Landlord or the
Tenant, except furniture or movable trade fixtures installed at the expense of
the Tenant, shall be the property of the Landlord and shall remain upon and be
surrendered with the premises as a part thereof at the termination of this
Lease, without compensation to the Tenant. The Tenant further agrees to keep the
premises and all parts thereof in a clean and sanitary condition. The Tenant
further agrees to keep the sidewalks in front of the premises clean and free of
obstructions, snow and ice.
Seventh.: The Landlord shall not be responsible for the loss of or damage
to property, or injury to persons, occurring in or about the premises, by reason
of any existing or future condition, defect, matter or thing in the premises or
the property or which the premises are a part, or for the acts, omissions or
negligence of other persons or tenants in and about the property. The Tenant
agrees to indemnify and save the Landlord harmless from all claims and liability
for losses of or damage to property, or injuries to persons occurring in or
about the premises.
Eighth.: In the event of the destruction of the premises by fire,
explosion, the elements or otherwise during the term of this lease, or partial
destruction thereof as to render the premises wholly untenantable or unfit for
occupancy, or should the premises be so badly damaged that it cannot be repaired
within ninety days from the occurrence of such damage, then and in such case the
term hereby created shall, at the option of the Landlord, cease and become null
and void from the date of such damage or destruction, and the Tenant shall
immediately surrender the premises and all the Tenant'S interest therein to the
Landlord, and shall pay rent only to the time of such surrender, in which event
the Landlord may re-enter the premises and repossess the premises thus
discharged from the lease and may remove all parties therefrom. Should the
premises be rendered untenable and unfit for occupancy, but yet be repairable
within ninety days from the happening of such damage, the Landlord may enter and
repair the premises with reasonable speed, and the rent shall not accrue after
the damage or while repairs are being made, but shall recommence immediately
after the repairs shall be completed. But if the premises shall be so' slightly
damaged as not to be rendered untenantable and unfit for occupancy, then the
landlord agrees to repair the same with reasonable promptness and in that case
the rent accrued and accruing shall not cease.
<PAGE>
Ninth.: The Tenant agrees to observe and comply with all laws, ordinances,
rules and regulations of the Federal, State, County and Municipal authorities
applicable to the business to be conducted by the Tenant in the premises.
Tenth.: In case of violation by the Tenant of any of the covenants,
agreements and conditions of this lease, and upon failure to discontinue such
violation within ten days after notice hereof given to the Tenant, this lease
shall thenceforth, at the option of the Landlord, become null and void, and the
Landlord may re-enter without further notice or demand. The rent in such case
shall become due, be apportioned and paid on and up to the day of such re-entry,
and the Tenant shall be liable for all loss or damage resulting from such
violation.
IN WITNESS WHEREOF, the parties hereby have hereunto set their hand and seals
the day and year first above written.
IN THE PRESENCE OF: Meisenheimer Capital Real
Estate Holding
B
MEISENHEIMER, Landlord
Vice President
IN THE PRESENCE OF: Cadcom, Inc.
B
Meisenheimer, III Tenant
Vice President
<PAGE>
EXHIBIT 10.8
EQUIPMENT LEASE AGREEMENT
Lessor: SYNERCOM (herein called "Lessor")
Address:
Lessee: CADCOM, INC.(herein called "Lessee:)
Address: 179 NORTH BROAD STREET, MILFORD, CT.06460
1. Lease. Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor, the following personal property (herein called
"Equipment"):
QUANTITY MAKE/MANUFACTURER-DESCRIPTION MODEL NO. SERIAL
NO.
Hitachi Seiki Hicell Integrated
1 Turning Cell. ETIH SELCOS L3
Control And all Accessories GLC1-10-025 CA23309
Place of Installation 46 Quirk Road
2. LEASE TERM. The term of lease hereunder shall commence on the date of
acceptance of the Equipment by Lessee and shall continue for a period of 60
months. Lessee shall have the right at the end of the initial lease term upon
not less that 60 days prior written notice to Less to purchase the Equipment for
$10,000.00.
3. RENT: NET LEASE. Lessee shall pay Lessor rent for the Equipment
during the term hereof in 60 monthly installments as follows:
Year One $5,100.00 per month
Year Two $5,500.00 per month
Year Three $5,000.00 per month
Year Four $4,950.00 per month
Year Five $4,900.00 per month
The first and last 0 installments in the aggregate amount of $__0__ being
payable on the signing of this Agreement and the remaining 60 installments being
payable commencing 9/15/92, and continuing on the same day of each month
thereafter for the term hereof. Any such amounts received by Lessor pursuant to
the foregoing sentence in the excess of the rent due for the first month of the
lease term hereof shall be held by Lessor as security for Lessee'S performance
hereunder. If Lessee is not in default hereunder ( or any other lease between
the parties hereto), said security shall be applied by Lessor at the end of the
lease term hereof toward the payment of the rent installments so indicated.
All rent and other amounts due hereunder shall be paid to Lessor at its office
at P.O. Box 470 Milford or at such other place as Lessor shall specify. In the
event any rent or other amounts due hereunder shall not be paid promptly when
due, Lessee shall pay Lessor, as additional rent hereunder, interest on such
overdue amount from the due date thereof to the date of payment thereof at a
rate equal to the lesser of (I) 12% per annum, or (ii) the maximum rate
permitted by law. This Agreement provides for a new lease and the rent and other
amounts due hereunder form Lessee shall not be subject to any defense, claim,
reduction, set-off or adjustment for any reason whatsoever.
<PAGE>
4. WARRANTIES. LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTY
WHATSOEVER OF TITLE,
MERCHANTABILITY, FITNESS FOR ANY PURPOSE OR OTHERWISE
REGARDING THE EQUIPMENT OR
ANY UNIT THEREOF except that Lessor makes to Lessee the current manufacturer'S
warranty with respect to the Equipment as set forth ion the warranty form to be
delivered to the Lessee in connection therewith, if any, Lessee represents and
warrants that it has full power and authority to execute, deliver and perform
this Agreement and that this Agreement constitutes it legal, valid and binding
obligation.
5. USE OF EQUIPMENT. The Equipment shall be the exclusive property of the
Lessor. Lessee shall have no rights therein except the right to use the
Equipment so long as Lessee is not in default hereunder. Lessee agrees that the
Equipment will be used solely in the conduct of its business and with due care
to prevent injury thereto or to any person or property, and in conformity with
all applicable laws, ordinance, rules regulations, l and other requirements of
any insurer or governmental body. Lessee shall not permit the Equipment to
become or remain a fixture to any real estate or an accession to any person not
leases hereunder. Lessor or its duly authorized representative may from time to
time inspect the Equipment and Lessee'S records with respect thereto wherever
the same may be located. Lessee shall not, without Lessor'S prior written
consent, remove any Equipment form the location set forth in Section 1 hereof or
permit any lien, charge, encumbrance, security interest. or other similar
interest to arise or remain on any Equipment. Lessee shall place and maintain on
each unit of Equipment a notice disclosing Lessor'S ownership thereof and shall
maintain on each unit of Equipment the serial and other identifying numbers, if
any, set forth in Section 1 hereof.
6. TAXES: INDEMNIFICATION. Lessee agrees to pay and to indemnify
and hold Lessor harmless form and against all sales, use, personal
property, leasing use, stamp, or other taxes (together with any
penalties, fines, or interest thereon) imposed against Lessor, Lessee
or the Equipment by any governmental authority with respect to the
Equipment or upon the purchase, ownership delivery, lease, possession,
use, operation, return, sale or other disposition thereof, or upon the
rentals therefrom or upon or with respect to this Agreement
(excluding, however, Federal and State Taxes, on, or measured by, the
net income of Lessor.)
Lessee further agrees to and does hereby indemnify and hold Lessor harmless from
and against any and all expense, liability or loss whatsoever, including
(without limitation) reasonable legal fees and expenses, relating to or in any
way arising out of this Agreement or the purchase, ownership, lease , operation,
return or sale of the Equipment (including, without limitation, expense,
liability or loss relating to or in any way arising out of injury to persons or
property, patent and invention rights or strict liability in tort). The
indemnities and agreements of Lessee contained in this Section 6 shall survive
and continue in full force and effect notwithstanding termination of this
Agreement or of the lease of any or all units of Equipment hereunder.
7. INSURANCE. Lessee will retain physical damage and liability insurance
covering the Equipment in the name of Lessor and Lessee in such amounts and in
such form as Lessee would in the prudent management of its properties maintain
with respect to similar equipment owned by it. In all events, Lessee will
<PAGE>
maintain insurance against all risks of physical damage to the Equipment as
provided under a standard all-risk policy in the amount not less than the
Casualty Value of the Equipment. Each such insurance policy shall provide that
all losses thereunder will be adjusted with Lessee or Lessor, that the proceeds
thereof will be payable to Lessor and Lessee as their respective interests shall
appear and that the insurer will give Lessor at least 10 days prior written
notice of any alteration in the terms of such policy or of the cancellation
thereof. Lessee shall at Lessor'S request furnish a certificate of insurance
evidencing such coverage.
8. MAINTENANCE OF EQUIPMENT: EVENT OF LOSS. Lessee shall keep the Equipment in
good repair, condition and working order and shall supply all parts, service and
other items required in the operation and maintenance thereof. All parts,
improvements and replacements of any Equipment shall immediately become
Equipment and the property of the Lessor. Lessee assumes all risk of, and
Lessee'S obligations under this agreement shall continue unmodified despite, any
loss, theft, destruction\ion, damage, condemnation, requisition, taking by
eminent domain or other interruption or termination use of any Equipment
regardless of the cause thereof. Upon the happening of any loss, theft,
destruction or damage which renders any unit of Equipment beyond repair, or
other condemnation, requisition, taking by eminent domain or other interruption
or termination of use of any unit of Equipment regardless of the cause thereof,
Lessee shall on the next subsequent rent payment date hereunder with respect to
such unit of Equipment pay to Lessor the Casualty Value (as hereafter defined
and determined as of such next subsequent rent payment date) of such unit of
Equipment. Upon payment of such Casualty Value and payment of any other amount
owing by Lessee hereunder, rent on such unit of Equipment shall cease and Lessor
shall transfer to Lessee, without any representation or warranty of any kind,
express, or implied, whatever title to such unit of Equipment it may have.
9. RETURN OF EQUIPMENT: PURCHASE. Upon the final termination of the
lease of any unit of Equipment or any renewal thereof (other than a
termination under Section 8), Lessee shall assemble and return such
unit of Equipment to Lessor in the same condition as when received,
ordinary wear and tear accepted, at such location as Lessor shall
specify.
10. EVENTS OF DEFAULT.
(a) The following shall be events of default
hereunder, (I) default , and continuance thereof for 15 days, in the payment of
any rent or other amount hereunder; (ii) default in the performance of any of
Lessee'S other agreements herein set forth and continuance of such default for
30 days after notice thereof from Lessor to Lessee; (iii) any representation or
warranty made by Lessee in this Agreement, or any report, notice or other
writing furnished by Lessee to Lessor in connection herewith, is untrue in any
material respect; (iv) Lessee becomes insolvent or unable to pay its debts as
they mature, or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy, or insolvency law, or any dissolution or
liquidation proceeding is instituted by or against Lessee and if instituted
against Lessee is consented to or acquiesced in by Lessee or remains for 30 days
undismissed.
(b) Upon the happening of an event of default,
Lessor shall (except to the extent otherwise required by law ) be entitled to :
(1) proceed to enforce performance by Lessee of the applicable covenants and
terms of this Agreement or to recover damages for the breach thereof; (2)
repossess any or all units of Equipment without prejudice to any remedy or claim
hereinafter refereed to; (3) elect to sell any or all units Equipment after
giving 15 days notice to Lessee, at one or more public or private sales and
recover from Lessee as liquidated damages for Lessee'S default hereunder an
amount equal to the amount, if any, by which (A0 the sum of (1) the aggregate
<PAGE>
Casualty Value of such units of Equipment on the date such notice is given, (ii)
all rent owing hereunder to and including the rent payment date immediately
preceding the date such a notice is given, (iii) all costs and expenses incurred
in searching for, removing, storing, repairing, and selling such units of
Equipment; (iv) all other amounts owing by Lessee hereunder, and (v) all costs
and expenses, including (without limitation) reasonable legal fees and expenses,
incurred by Lessor as a result of Lessee'S default hereunder, exceeds (B0 the
amount received by Lessor upon the sale(s) of such units of Equipment; (4) upon
notice to Lessee receive prompt payment from Lessee of an amount equal to the
aggregate Casualty Value on the date such notice is given of all units of
Equipment which have not been sold be Lessor pursuant to clause (3) above plus,
to the extent not otherwise recovered from Lessee pursuant to said clause (3)
all amounts and expenses of the types referred to in terms (iii)-(iv) of (A) of
said clause (3) which have been incurred by Lessor as a result of Lessee'S
default hereunder; (5) by notice to Lessee declare this Agreement terminated
without prejudice to Lessor's rights in respect to obligations then accrued and
remaining unsatisfied; or (6) avail itself of any other remedy or remedies
provided for by any statue or otherwise available at law, in equity, or in
bankruptcy or insolvency proceedings. The remedies herein set forth or referred
to shall be cumulative.
11. SUBLEASE AND ASSIGNMENT. Lessee shall not without Lessor'S prior
written consent, assign any right or interest in or to this Agreement
or any Equipment or sublet or otherwise relinquish possession of any
unit of Equipment.
Lessor and any direct or remote assignee of any right, title or interest of
Lessor hereunder shall have the right at any time or from time to time to assign
part or all of its right, title and interest in an to this Agreement or, subject
to Lessee'S rights hereunder, to sell or grant a security interest in any
unit(S) of Equipment. Lessor may obtain financing through a financial
institution and secure such financial institution ("Secured Party") by granting
a security interest or other lien on any or all of the Equipment, this Agreement
and sums due under this Agreement. In such event (a) the security agreement or
lien instrument will specifically provide that it is subject to Lessee'S rights
as herein provided; (b) such assignment of this Agreement will not relieve
Lessor from its obligations hereunder or be construed to be an assumption by
Secured {arty of such obligations hereunder of such obligations (but Secured
Party may perform at its option, some or all of Lessor'S obligations); (c) upon
request by Secured Party, Lessee will make all payments of rent and other
amounts due hereunder directly to Secured Party; (d) Lessee hereby agrees for
the benefit of Secured Party that Lessee'S obligations hereunder, including
(without limitations) its obligation to pay rent and other amounts due
hereunder, shall not be subject to any reduction, abatement, defense, set off,
counter-claim or recoupment for any reason whatsoever; and (e) Lessee will not,
after obtaining knowledge of any such assignment, consent to any modification of
this Agreement without the consent of Secured Party. Only that counterpart
hereof labeled "Lease Original" shall be effective by delivery to transfer any
rights of Lessor hereunder to a Secured Party.
12. LESSOR'S RIGHTS TO PERFORM. If Lessee fails to make any payments or to
perform any of its other covenants. The amount of any such payment ans Lessor'S
expenses, including (without limitation) reasonable legal fees and expenses in
connection therewith and with such performance, shall thereupon become payable
by Lessee to Lessor upon demand as additional rent hereunder.
13. FURTHER ASSURANCES, FINANCIAL STATEMENTS. Lessee agrees, at its
expense,
promptly upon Lessor'S written request, to execute and deliver such instruments
and to take such other action as may reasonably be necessary in the opinion or
<PAGE>
the Lessor to protect Lessor'S interest, including without limitation landlord
and mortgage waivers and easements and Uniform Commercial Code financing
statements. Lessee agrees to furnish Lessor, upon request, with copies of
Lessee'S annual audit reports and such other financial information as Lessor may
reasonably request.
14. NOTICES. Any notice hereunder shall be in writing and, if mailed, shall be
deemed to be given when sent by first class mail, postage prepaid, and addressed
to the parties at their respective addresses shown above or at such other
address as either party may designate as its address for purposes of notice
hereunder.
15. CASUALTY VALUE. The "Casualty Value" of any unit or units of
Equipment shall mean as of any rent payment date the sum of (I)j the
aggregate unpaid rent payments for the remaining full lease term of
such unit or units hereunder.
16. MISCELLANEOUS. If this Agreement or any provision hereof shall be deemed
invalid, illegal or unenforceable in any respect or in any jurisdiction, the
validity, legality, and enforceability of this Agreement in other respects and
other jurisdictions shall not be in any way impaired or affected thereby. No
breach or default by Lessee or waiver of any of Lessor'S rights hereunder.
Lessee hereby waives any right to assert that Lessor cannot enforce this
Agreement or that this Agreement is invalid because of any failure of Lessor to
qualify to do business in any jurisdiction. In the event that the commencement
date for rent payments in Section 3 hereof is left blank at the time this
Agreement is signed, Lessee hereby authorizes Lessor to insert in the signed
copies of this Agreement in its possession the appropriate commencement date
based on the Lessee'S date of acceptance of the units of Equipment leased
hereunder. If more than one party shall sign this Agreement as Lessee, all such
parties shall be binding upon Lessor and Lessee and their respective successors
and assigns, and shall inure to the benefit of Lessor and Lessee and the
Successors and assigns of Lessor.
Executed on 09/12/92 Accepted on 09/11/92
CADOM, INC. (Lessee) SYNERCOM, INC. Lessor)
By S/ By S/
Title: Vice President Title: Vice President
<PAGE>
EXHIBIT 10.9
EQUIPMENT LEASE AGREEMENT
Lessor: SYNERCOM, INC,(herein called "Lessor")
Address: 179 North Broad Street, Milford, Ct 06460
Lessee: Cadom, Inc.(herein called "Lessee:)
Address: 179 North Broad Street, Milford, Ct 06460
1. Lease. Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor, the following personal property (herein called
"Equipment"):
QUANTITY MAKE/MANUFACTURER-DESCRIPTION MODEL NO. SERIAL
NO.
1 Ikegai T167-10 50690V
1 Ikegai TV4 50265V
Place of Installation 46 Quirk Road Milford, CT 06460
2. LEASE TERM. The term of lease hereunder shall commence on the date of
acceptance of the Equipment by Lessee and shall continue for a period of 60
months. Lessee shall have the right at the end of the initial lease term upon
not less that 60 days prior written notice to Lessor to purchase the Equipment
for $15,000.00.
3. RENT: NET LEASE. Lessee shall pay Lessor rent for the Equipment
during the term hereof in m 36 monthly installments as follows:
Year One $4,500.00 per month
Year Two $4,400.00 per month
Year Three $4,300.00 per month
The first and last 0 installments in the aggregate amount of $0 being payable on
the signing of this Agreement and the remaining 36 installments being payable
commencing July 1,1995 continuing on the same day of each month thereafter for
the term hereof. Any such amounts received by Lessor pursuant to the foregoing
sentence in the excess of the rent due for the first month of the lease term
hereof shall be held by Lessor as security for Lessee'S performance hereunder.
If Lessee is not in default hereunder ( or any other lease between the parties
hereto), said security shall be applied by Lessor at the end of the lease term
hereof toward the payment of the rent installments so indicated.
All rent and other amounts due hereunder shall be paid to Lessor at its office
at P.O. Box 470 Milford or at such other place as Lessor shall specify. In the
event any rent or other amounts due hereunder shall not be paid promptly when
due, Lessee shall pay Lessor, as additional rent hereunder, interest on such
overdue amount from the due date thereof to the date of payment thereof at a
rate equal to the lesser of (I) 12% per annum, or (ii) the maximum rate
permitted by law. This Agreement provides for a new lease and the rent and other
amounts due hereunder form Lessee shall not be subject to any defense, claim,
reduction, set-off or adjustment for any reason whatsoever.
<PAGE>
4. WARRANTIES. LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTY
WHATSOEVER OF TITLE,
MERCHANTABILITY, FITNESS FOR ANY PURPOSE OR OTHERWISE
REGARDING THE EQUIPMENT OR
ANY UNIT THEREOF except that Lessor makes to Lessee the current manufacturer'S
warranty with respect to the Equipment as set forth ion the warranty form to be
delivered to the Lessee in connection therewith, if any, Lessee represents and
warrants that it has full power and authority to execute, deliver and perform
this Agreement and that this Agreement constitutes it legal, valid and binding
obligation.
5. USE OF EQUIPMENT. The Equipment shall be the exclusive property of the
Lessor. Lessee shall have no rights therein except the right to use the
Equipment so long as Lessee is not in default hereunder. Lessee agrees that the
Equipment will be used solely in the conduct of its business and with due care
to prevent injury thereto or to any person or property, and in conformity with
all applicable laws, ordinance, rules regulations, l and other requirements of
any insurer or governmental body. Lessee shall not permit the Equipment to
become or remain a fixture to any real estate or an accession to any person not
leases hereunder. Lessor or its duly authorized representative may from time to
time inspect the Equipment and Lessee'S records with respect thereto wherever
the same may be located. Lessee shall not, without Lessor'S prior written
consent, remove any Equipment form the location set forth in Section 1 hereof or
permit any lien, charge, encumbrance, security interest. or other similar
interest to arise or remain on any Equipment. Lessee shall place and maintain on
each unit of Equipment a notice disclosing Lessor'S ownership thereof and shall
maintain on each unit of Equipment the serial and other identifying numbers, if
any, set forth in Section 1 hereof.
6. TAXES: INDEMNIFICATION. Lessee agrees to pay and to indemnify
and hold Lessor harmless form and against all sales, use, personal
property, leasing use, stamp, or other taxes (together with any
penalties, fines, or interest thereon) imposed against Lessor, Lessee
or the Equipment by any governmental authority with respect to the
Equipment or upon the purchase, ownership delivery, lease, possession,
use, operation, return, sale or other disposition thereof, or upon the
rentals therefrom or upon or with respect to this Agreement (excluding, however,
Federal and State Taxes, on, or measured by, the net income of Lessor.)
Lessee further agrees to and does hereby indemnify and hold Lessor harmless from
and against any and all expense, liability or loss whatsoever, including
(without limitation) reasonable legal fees and expenses, relating to or in any
way arising out of this Agreement or the purchase, ownership, lease , operation,
return or sale of the Equipment (including, without limitation, expense,
liability or loss relating to or in any way arising out of injury to persons or
property, patent and invention rights or strict liability in tort). The
indemnities and agreements of Lessee contained in this Section 6 shall survive
and continue in full force and effect notwithstanding termination of this
Agreement or of the lease of any or all units of Equipment hereunder.
7. INSURANCE. Lessee will retain physical damage and liability insurance
covering the Equipment in the name of Lessor and Lessee in such amounts and in
such form as Lessee would in the prudent management of its properties maintain
with respect to similar equipment owned by it. In all events, Lessee will
maintain insurance against all risks of physical damage to the Equipment as
provided under a standard all-risk policy in the amount not less than the
Casualty Value of the Equipment. Each such insurance policy shall provide that
all losses thereunder will be adjusted with Lessee or Lessor, that the proceeds
thereof will be payable to Lessor and Lessee as their respective interests shall
appear and that the insurer will give Lessor at least 10 days prior written
<PAGE>
notice of any alteration in the terms of such policy or of the cancellation
thereof. Lessee shall at Lessor'S request furnish a certificate of insurance
evidencing such coverage.
8. MAINTENANCE OF EQUIPMENT: EVENT OF LOSS. Lessee shall keep the Equipment in
good repair, condition and working order and shall supply all parts, service and
other items required in the operation and maintenance thereof. All parts,
improvements and replacements of any Equipment shall immediately become
Equipment and the property of the Lessor. Lessee assumes all risk of, and
Lessee'S obligations under this agreement shall continue unmodified despite, any
loss, theft, destruction\ion, damage, condemnation, requisition, taking by
eminent domain or other interruption or termination use of any Equipment
regardless of the cause thereof. Upon the happening of any loss, theft,
destruction or damage which renders any unit of Equipment beyond repair, or
other condemnation, requisition, taking by eminent domain or other interruption
or termination of use of any unit of Equipment regardless of the cause thereof,
Lessee shall on the next subsequent rent payment date hereunder with respect to
such unit of Equipment pay to Lessor the Casualty Value (as hereafter defined
and determined as of such next subsequent rent payment date) of such unit of
Equipment. Upon payment of such Casualty Value and payment of any other amount
owing by Lessee hereunder, rent on such unit of Equipment shall cease and Lessor
shall transfer to Lessee, without any representation or warranty of any kind,
express, or implied, whatever title to such unit of Equipment it may have.
9. RETURN OF EQUIPMENT: PURCHASE. Upon the final termination of the lease
of any unit of Equipment or any renewal thereof (other than a termination under
Section 8), Lessee shall assemble and return such unit of Equipment to Lessor in
the same condition as when received, ordinary wear and tear accepted, at such
location as Lessor shall specify.
10. EVENTS OF DEFAULT.
(a) The following shall be events of default
hereunder, (i) default , and continuance thereof for 15 days, in the payment of
any rent or other amount hereunder; (ii) default in the performance of any of
Lessee'S other agreements herein set forth and continuance of such default for
30 days after notice thereof from Lessor to Lessee; (iii) any representation or
warranty made by Lessee in this Agreement, or any report, notice or other
writing furnished by Lessee to Lessor in connection herewith, is untrue in any
material respect; (iv) Lessee becomes insolvent or unable to pay its debts as
they mature, or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy, or insolvency law, or any dissolution or
liquidation proceeding is instituted by or against Lessee and if instituted
against Lessee is consented to or acquiesced in by Lessee or remains for 30 days
undismissed.
(b) Upon the happening of an event of default,
Lessor shall (except to the extent otherwise required by law ) be entitled to :
(1) proceed to enforce performance by Lessee of the applicable covenants and
terms of this Agreement or to recover damages for the breach thereof; (2)
repossess any or all units of Equipment without prejudice to any remedy or claim
hereinafter refereed to; (3) elect to sell any or all units Equipment after
giving 15 days notice to Lessee, at one or more public or private sales and
recover from Lessee as liquidated damages for Lessee's default hereunder an
amount equal to the amount, if any, by which (A the sum of (1) the aggregate
Casualty Value of such units of Equipment on the date such notice is given, (ii)
all rent owing hereunder to and including the rent payment date immediately
preceding the date such a notice is given, (iii) all costs and expenses incurred
in searching for, removing, storing, repairing, and selling such units of
Equipment; (iv) all other amounts owing by Lessee hereunder, and (v) all costs
and expenses, including (without limitation) reasonable legal fees and expenses,
<PAGE>
incurred by Lessor as a result of Lessee'S default hereunder, exceeds (B. the
amount received by Lessor upon the sale(S) of such units of Equipment; (4) upon
notice to Lessee receive prompt payment from Lessee of an amount equal to the
aggregate Casualty Value on the date such notice is given of all units of
Equipment which have not been sold be Lessor pursuant to clause (3) above plus,
to the extent not otherwise recovered from Lessee pursuant to said clause (3)
all amounts and expenses of the types referred to in terms (iii)-(iv) of (A) of
said clause (3) which have been incurred by Lessor as a result of Lessee'S
default hereunder; (5) by notice to Lessee declare this Agreement terminated
without prejudice to Lessor'S rights in respect to obligations then accrued and
remaining unsatisfied; or (6) avail itself of any other remedy or remedies
provided for by any statue or otherwise available at law, in equity, or in
bankruptcy or insolvency proceedings. The remedies herein set forth or referred
to shall be cumulative.
11. SUBLEASE AND ASSIGNMENT. Lessee shall not without Lessor'S prior
written consent, assign any right or interest in or to this Agreement
or any Equipment or sublet or otherwise relinquish possession of any
unit of Equipment.
Lessor and any direct or remote assignee of any right, title or interest of
Lessor hereunder shall have the right at any time or from time to time to assign
part or all of its right, title and interest in an to this Agreement or, subject
to Lessee'S rights hereunder, to sell or grant a security interest in any
unit(S) of Equipment. Lessor may obtain financing through a financial
institution and secure such financial institution ("Secured Party") by granting
a security interest or other lien on any or all of the Equipment, this Agreement
and sums due under this Agreement. In such event (a) the security agreement or
lien instrument will specifically provide that it is subject to Lessee'S rights
as herein provided; (b) such assignment of this Agreement will not relieve
Lessor from its obligations hereunder or be construed to be an assumption by
Secured {arty of such obligations hereunder of such obligations (but Secured
Party may perform at its option, some or all of Lessor'S obligations); (c) upon
request by Secured Party, Lessee will make all payments of rent and other
amounts due hereunder directly to Secured Party; (d) Lessee hereby agrees for
the benefit of Secured Party that Lessee'S obligations hereunder, including
(without limitations) its obligation to pay rent and other amounts due
hereunder, shall not be subject to any reduction, abatement, defense, set off,
counter-claim or recoupment for any reason whatsoever; and (e) Lessee will not,
after obtaining knowledge of any such assignment, consent to any modification of
this Agreement without the consent of Secured Party. Only that counterpart
hereof labeled "Lease Original" shall be effective by delivery to transfer any
rights of Lessor hereunder to a Secured Party.
12. LESSOR'S RIGHTS TO PERFORM. If Lessee fails to make any payments or to
perform any of its other covenants. The amount of any such payment ans Lessor'S
expenses, including (without limitation) reasonable legal fees and expenses in
connection therewith and with such performance, shall thereupon become payable
by Lessee to Lessor upon demand as additional rent hereunder.
13. FURTHER ASSURANCES, FINANCIAL STATEMENTS. Lessee agrees, at its expense,
promptly upon Lessor'S written request, to execute and deliver such instruments
and to take such other action as may reasonably be necessary in the opinion or
the Lessor to protect Lessor'S interest, including without limitation landlord
and mortgage waivers and easements and Uniform Commercial Code financing
statements. Lessee agrees to furnish Lessor, upon request, with copies of
Lessee'S annual audit reports and such other financial information as Lessor may
reasonably request.
<PAGE>
14. NOTICES. Any notice hereunder shall be in writing and, if mailed, shall be
deemed to be given when sent by first class mail, postage prepaid, and addressed
to the parties at their respective addresses shown above or at such other
address as either party may designate as its address for purposes of notice
hereunder.
15. CASUALTY VALUE. The "Casualty Value" of any unit or units of
Equipment shall mean as of any rent payment date the sum of (I)j the
aggregate unpaid rent payments for the remaining full lease term of
such unit or units hereunder.
16. MISCELLANEOUS. If this Agreement or any provision hereof shall
be deemed invalid, illegal or unenforceable in any respect or in any
jurisdiction, the validity, legality, and enforceability of this
Agreement in other respects and other jurisdictions shall not be in any way
impaired or affected thereby. No breach or default by Lessee or waiver of any of
Lessor'S rights hereunder. Lessee hereby waives any right to assert that Lessor
cannot enforce this Agreement or that this Agreement is invalid because of any
failure of Lessor to qualify to do business in any jurisdiction. In the event
that the commencement date for rent payments in Section 3 hereof is left blank
at the time this Agreement is signed, Lessee hereby authorizes Lessor to insert
in the signed copies of this Agreement in its possession the appropriate
commencement date based on the Lessee'S date of acceptance of the units of
Equipment leased hereunder. If more than one party shall sign this Agreement as
Lessee, all such parties shall be binding upon Lessor and Lessee and their
respective successors and assigns, and shall inure to the benefit of Lessor and
Lessee and the Successors and assigns of LESSOR.
Executed on July 1, 1995 Accepted on July 1, 1995
Cadcom, Inc. (Lessee) Synercom, Inc. (Lessor)
By: S/ By: S/
Title: Vice President Title: Vice President
<PAGE>
EXHIBIT 10.10
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("Franchise Agreement") is entered into as of
_______________, 19___ (the "Effective Date"), by and between the United States
Basketball League, Inc., a Delaware corporation ("Franchisor" or "USBL", "We",
"we", "us" or "our"), and _________________
____________________________________________________________ ("Franchisee" or
"You", "you," or "your") (together the "Parties") as follows:
W I T N E S S E T H:
We have developed and we supervise a franchise system (the "USBL System")
under certain "Trademarks" and/or "Marks" (as defined in Section 1.03(c) hereof)
for the operation of professional basketball teams in a basketball league known
as the United States Basketball League ("USBL") whereby you will operate such a
USBL team as part of the USBL System in which other USBL teams will participate
(individually referred to as a "USBL Franchise" and collectively referred to as
the "USBL Franchises");
We are the owner of the USBL System and the Trademarks and all rights in
respect thereto;
You acknowledge that we have developed substantial good will in respect to
use of the Trademarks and that we have operated under and developed a distinct
identity with said Trademarks;
The USBL System, mutually conducted by the franchisees thereof, in
accordance with the provisions of this Franchise Agreement and our Operations
Manual, as amended from time to time (the "Operations Manual"), is intended to
enable such USBL Franchises to benefit from our expertise and operate
effectively in their respective market places. We have formulated a method of
training and assisting such USBL Franchises, as well as centralized programs for
use by these franchises;
You acknowledge that we provided you with a copy of the Uniform Franchise
Offering Circular relating to the offer and sale of our franchises at the
earliest of (a) the first personal meeting between you and our representatives,
(b) ten (10) business days before the signing of this Agreement or any related
agreement, or (c) ten (10) business days before any payment from you to us in
connection with this Agreement. You further acknowledge that you received a full
and complete copy of this Agreement as herein constituted at least five (5)
business days prior to signing this Agreement;
You hereby acknowledge that you have read our Uniform Franchise Offering
Circular, the Operations Manual and this Agreement and you understand and accept
the terms and conditions contained herein; and
You desire to be licensed (Franchise) by us to utilize the USBL System,
including our Trademarks and good will to conduct a USBL Franchise. We are
willing to grant to you a Franchise, in accordance with the provisions of this
Agreement and the Operations Manual, at the location and for the terms set forth
below.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements written in this Agreement, and for other good and
valuable consideration, the receipt, adequacy and sufficiency whereof being
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hereby acknowledged by the parties hereto, the Parties do hereby mutually
covenant and agree as follows:
ARTICLE 1 - GRANT OF FRANCHISE
1.01 Grant of Franchise. We grant to you, and you hereby accept from us the
exclusive Franchise to operate a USBL Team in the "Exclusive Franchised Area"
described in Section 2.01 of this Agreement, and to participate with other teams
in the professional basketball league known as the USBL. During the "Initial
Term" and any "Renewal Term" hereof, as respectively defined in Sections 5.01
and 5.02 hereof, such USBL Franchise shall be conducted in strict accordance
with (I) this Agreement and any addendum or other ancillary written agreement
relating hereto, and (ii) the Operations Manual. Notwithstanding any other
provision of this Agreement to the contrary, nothing contained in this Agreement
shall accord you any right, title or interest in and to the Trademarks, the USBL
System, or the methods of operation or good will of USBL except such rights as
may be expressly granted hereunder.
1.02 Grant of Licensed Rights. We hereby grant to you, during the term
hereof, the right to use our USBL System and to use and display the Trademarks,
in accordance with the provisions contained herein and in the Operations Manual,
solely in connection with the operation of the USBL Franchise (the "Licensed
Rights"). You agree to supervise all of your employees and agents in order to
ensure the proper usage and display of the Trademarks in accordance with Section
7.05 hereof. You shall not use or display the Trademarks in connection with the
operation of any other business or the performance of any other service not
contained within the scope of the USBL Franchise. Notwithstanding any other
provision of this Agreement to the contrary, nothing contained herein shall give
you any right, title or interest in or to the USBL System or any of the
Trademarks, except a mere privilege and license during the Initial Term or any
Renewal Term hereof to use and display the same according to the limitations
provided in (I) this Agreement, and (ii) the Operations Manual.
1.03 Definitions.
(a) Fiscal Year. The term "Fiscal Year" shall mean, for the first such
Fiscal Year, the period commencing with the Effective Date and ending on
December 31st, and thereafter shall mean each successive calendar year.
(b) Gross Receipts. The term "Gross Receipts" shall mean the total amount
of receipts from all sources for all products and services sold in, on, about or
from the USBL Franchise, directly or indirectly, by you and any of your
affiliates and subsidiaries involved with such products and services, including,
but not limited to, ticket sales, advertising sales, sale of merchandise, media
payments and the fair market value of any goods, services, barter transactions,
and/or evidence of indebtedness accepted in lieu of cash. In arriving at Gross
Receipts, the following items shall be excluded: (I) amounts received for
capital interests in your Franchised Business or for the bulk sale of your
Franchised business; (ii) any loan proceeds; (iii) any refunds from suppliers;
(iv) any payments received from us or arising from contracts negotiated by us,
including, but not limited to, league sponsors and media revenue; (v) any tax
refunds; or (vi) any sales/admissions taxes collected under requirements of
federal, state and local tax authorities.
(c) Trademarks. The term "Trademarks" shall include, without limitation,
(I) those proprietary marks for which an application for registration has been
filed with the United States Patent and Trademark Office; (ii) those proprietary
marks on the Principal Register of the United States Patent and Trademark
Office, including, but not limited to, Registration Number 1,348,637,
Registration Number 1,375,316, Registration Number 1,381,843, Registration
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Number 1,425,992, and Registration Number 1,502,588, and (iii) any and all
trademarks, trade names, service marks, logo types, insignias, designs and other
commercial symbols which we now use or will hereafter use to identify the USBL
System.
(d) Abandoning. The term "Abandoning" shall include, but shall not be
limited to, a failure on your part at any time during the Initial Term or any
Renewal Term thereof, to keep the USBL Franchise open and operating for a period
of five (5) consecutive business days without our prior written consent, unless
such failure to operate is due to fire, flood, earthquake or other similar acts
of God beyond your control.
ARTICLE 2 - LOCATION OF FRANCHISE
2.01 Exclusive Franchised Area. It is understood and agreed that you will
have the exclusive right to operate a USBL Franchise and to use the USBL System
and Trademarks in the USBL Franchise operated within the following geographical
area (the "Exclusive Franchised Area"):
________________________________________________. The Exclusive Franchised Area
will comprise an area within a twenty-five (25) mile radius of your Franchised
Location (Exclusive Franchised Area). You shall establish and maintain an office
within such Exclusive Franchised Area. During the term of this Agreement, we
will not, without your prior written consent, establish or operate or grant a
franchise to establish or operate a USBL Franchise within the Exclusive
Franchised Area other than pursuant to this Agreement. USBL franchises which
visit the Exclusive Franchised Area to play basketball games are permitted to
participate therein in advertising and promotion.
2.02 Lease of Franchisee's Approved Arena. As soon as practical after the
execution of this Franchise Agreement, you shall arrange a lease in a suitable
arena in the Exclusive Franchised Area, subject to approval by USBL of such
arena, and such arena upon said approval shall be referred to as the "Approved
Arena" in which your home games will be played. We may provide, at your request,
assistance in the negotiation of your Approved Arena. Upon completion of
negotiation of the lease for the Approved Arena, you shall submit said lease to
us for approval before being executed by us. Said lease of the Approved Arena
shall include provisions that (I) USBL is not a party, a surety or guarantor for
the lease and shall have no obligation or responsibility of any kind whatsoever
in connection with the lease, and (ii) in the event you shall be deemed to be in
default under such lease, we, at our sole option, shall have the right to cure
such default and by virtue thereof become the lessee under such lease.
Notwithstanding any other provision of this Franchise Agreement to the contrary,
nothing contained herein shall be construed to permit your Franchised USBL team
to play its home games outside the Exclusive Franchised Area.
ARTICLE 3 - SERVICES BY FRANCHISOR
We agree that during the term of this Franchise Agreement, USBL shall use
its best efforts to maintain the excellent reputation of all USBL Franchises
and, in connection therewith, shall make available to you the following:
3.01 Initial Training. USBL shall provide initial training in the USBL
System, including standards, methods, procedures and techniques, for each person
identified in Section 4.01 hereof, at such times and places as USBL may, in its
sole discretion, designate for its training program, and subject to the other
terms of Article 4 hereof.
3.02 Set-up of USBL Franchise. We shall provide to you such
assistance as we determine may be required in the set up of a USBL Franchise.
We may assist you in
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leasing the Approved Arena.
3.03 Opening of USBL Franchise. We may provide you such assistance as we
determine you may require in connection with the opening of the USBL Franchise,
including assistance by USBL personnel in the planning and development of
initial marketing programs.
3.04 Operations Manual. We shall provide you with a copy of the
Operations
Manual, and any other manuals or training aids, as may be created or revised
from time
to time by USBL.
3.05 Marketing. USBL shall provide to you such marketing and other data,
advice, or materials as may from time to time be developed by USBL and deemed by
us to be helpful to you in the operation of the USBL Franchise.
3.06 Periodic Assistance. We shall provide to you with such periodic,
continuing individual or group advice, consultation and assistance rendered by
personal visit or telephone, or by newsletters or bulletins made available from
time to time to all franchisees of USBL, as USBL, in its sole discretion, may
deem necessary or appropriate.
3.07 Bulletins, Guidelines and Reports. USBL shall provide to you such
bulletins, guidelines, and reports as may from time to time be developed by us
regarding our plans, policies, research, development and activities as USBL in
its sole discretion, may deem appropriate.
3.08 Resources Developed in the Future. We shall provide to you such
special techniques and other operational developments as may be developed from
time to time by USBL and deemed by us to be helpful in the operation of USBL
Franchises.
3.09 Accounting System. USBL shall provide to you a standardized
accounting and reporting system as part of the Operations Manual.
3.10 On-going Support Services. USBL at its sole discretion and expense
will make on-site visits to USBL location in the Exclusive Franchised Area
throughout the term of this Agreement. The purpose of these visits will be to
assist you with your day-to-day operations, techniques and methods and to
provide periodic review of and assistance with your USBL Franchise. These
periodic visits shall additionally serve, when necessary, as in-field training
sessions for the purpose of communicating new techniques and procedures to you.
3.11 Rules and Regulations. USBL shall provide you with a copy of the USBL
Rules and Regulations to be utilized by all USBL teams and shall update such
Rules and Regulations from time to time.
3.12 Scheduling. USBL shall perform all scheduling for pre-season,
regular season, and post-season games.
3.13 All Star Team. USBL may at its sole discretion assemble,
promote and pay travel expenses for an All Star Team to play in an All Star
Game each season.
3.14 Officials. USBL shall recruit, screen, select and provide
officials to referee all games at no cost to you.
3.15 Player Draft. We will coordinate a player draft prior to each
season and shall pay all expenses associated with conducting said draft except
for your travel and living expenses.
3.16 Sponsors and Media Contracts. USBL shall exert its best efforts to
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negotiate and execute promotional and media contracts and shall manage and
monitor all league sponsors and league media contracts. We will pay you your
portion of any such revenue in accordance with the League wide Revenue Sharing,
page 7.
3.17 Statistics. We will organize and summarize all game and player
statistics received from USBL teams and distribute them to the media and the
teams.
3.18 Media Promotion. We will from time to time develop and
distribute promotional material, information and stories to the media regarding
the USBL, teams, owners, management, officials, coaches and players.
3.19 National Basketball Association. We will use our best efforts
to promote and develop cooperation and relationships with the National
Basketball Association ("NBA") and NBA teams.
3.20 League Meetings. We will conduct meetings of franchisees from
time to time and you shall be required to attend such meetings at your own
expense.
3.21 League wide Revenue Sharing Plan
We have established a media revenue sharing plan which may occur in regard to
profits remaining from revenue obtained through media sales and sponsorship
sales during each season. These payments are only distributed to franchisees
after all commissions are deducted and paid and after all television or radio
production costs are deducted paid and it is therefore based on the net profit
from television sponsors. Each franchise (current in royalty payments, fines,
etc. with USBL) in the USBL will receive their percentage or Unit* payments of
the remaining income or profit directly attributable to the profits generated on
an annual basis from the League wide "USBL Game of the Week" television package.
The Unit* payments to teams will be paid based on the following schedule with
each season schedule beginning from a threshold of $50,000.00 profit basis and
at USBL's sole discretion.
$50,000 up to $250,000 - 70% to Teams on a Unit basis,
in profits after commissions and expenses - 30% to USBL,
Inc.
for television costs and for production and related costs.
$250,001 up to $500,000 - 60% to Teams on a Unit basis,
in profits after commissions and expenses - 40% to USBL,
Inc.
for television costs and
production and related costs.
$500,001 and up - 50% to Teams on a Unit basis,
in profits after commissions and expenses - 50% to USBL, Inc.
for television costs and
production and related costs.
Based on profits remaining after expenses which occur in any one individual
year.
*Unit = one year of service as a USBL team in total compliance with all
criteria i.e. royalties, dues, fines, etc. included in the Uniform Franchise
Agreement.
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ARTICLE 4 - FRANCHISOR'S TRAINING PROGRAM
4.01 Training Program. USBL conducts managerial training programs at
various times for the benefit of new and existing franchisees. During our
initial training program of three (3) days presented by the USBL Commissioner
and staff at the USBL offices, the Operations Manual is reviewed and discussed,
including, but not limited to, generation of revenue, ticket sales, promotions,
community support, media communications, contract negotiations, player
relations, travel, sponsors, league draft, league meetings and USBL Rules and
Regulations. The following persons shall satisfy all the conditions established
by USBL from time to time for admission to, and graduation from, our initial
training program at the training school designated by us, and such persons, at
your sole expense, shall attend and satisfactorily complete the initial training
program and any additional training programs which may in the future be
established by USBL:
(a) You, if you are an individual.
(b) Each person who is actively involved in the management of the
Franchised business or the operation of the USBL Franchise.
(c) Each person who has an interest in the Franchised Business (if you are
a group of individuals, a corporation, a partnership, an unincorporated
association or a similar entity), if such person is requested in writing by you
to so comply.
4.02 Successfully Complete Training Program. Each person designated in
Section 4.01 hereof shall successfully complete our initial training program to
our satisfaction, and upon your failure or any other person designated in
Section 4.01 hereof to complete the initial training program successfully for
any reason whatsoever, a substitute trainee, satisfactory to USBL, shall attend
and successfully complete the initial training program and shall thereafter
operate or supervise the operation of the USBL Franchise if we, at our sole
option, so direct.
ARTICLE 5 - TERM AND RENEWAL
5.01 Initial Term. The "Initial Term" of this Franchise Agreement shall be
ten (10) years from the Effective Date hereof, unless sooner terminated pursuant
to Section 13.02 hereof. You specifically acknowledge and agree that in the
event the term of the lease which you negotiate for the Approved Arena does not
equal the Initial Term of the Franchise Agreement, you shall bear the total risk
of not being permitted to remain at the Approved Arena for the entire Initial
Term of the Franchise Agreement. In the event you are not permitted to remain at
the Approved Arena for the entire Initial Term of the Franchise Agreement, we
will use our best efforts to assist you in finding another location to serve as
the Approved Arena for the remainder of the Initial Term of the Franchise
Agreement; however, it is specifically understood and agreed to by you that we
are under no obligation whatsoever to actually find or provide another location
to serve as the Approved Arena and we have made no representation that we will
be able to find or provide such other location to serve as the Approved Arena
for the remainder of the Initial Term of the Franchise Agreement. You further
specifically acknowledge and agree that in the event you are not permitted to
remain at the Approved Arena for the entire Initial Term of the Franchise
Agreement, whether or not we have been able to find or provide such other
location to serve as the Approved Arena for the remainder of the Initial Term of
the Franchise Agreement, you shall not be entitled to a refund of any of the
Initial Franchise Fee paid by you to USBL pursuant to Section 4.01 hereof.
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5.02 Renewal Term. Subject to the terms and conditions contained in this
Section 5.02, you shall have the right to renew this Agreement for additional
consecutive "Renewal Term(s)" of ten (10) years each upon the following terms
and conditions:
(a) Upon your written request received by us not more than twelve (12)
months nor less than six (6) months prior to the expiration of the Initial Term
hereof, or any subsequent Renewal Term, we will notify you of the expiration
date of the then current term of this Franchise Agreement and shall transmit to
you a copy of the then current franchise agreement used by USBL in connection
with the issuance of new franchises.
(b) Within thirty (30) days after receipt by you of said notice and
franchise agreement, you shall execute and deliver two (2) executed copies of
the franchise agreement and payment of the Renewal Fee (as shown in Section
6.03) to us; we shall then execute both copies thereof and return one (1) copy
to you. If you fail or refuse to execute and deliver such renewal of the
franchise agreement within the thirty (30) day period shall be deemed an
election by you not to renew the franchise.
(c) Your right to renew this Agreement shall be subject to and conditioned
upon the following conditions:
(I) At the time that you execute any new franchise agreement in
connection with the franchise renewal process and at the time of the
commencement of any such Renewal Term, you shall not be in default and
shall have fully performed all of your obligations under this Agreement and
any and all other applicable written agreements then in force and effect
between you and us.
(ii) In the event we determine not to renew this Agreement by reason
of a default by you under this Agreement or the failure by you to fully
perform your obligations under this Agreement and any and all other
applicable agreements, then and in such event, we must give you notice of
our intention not to renew within thirty (30) days after the date you give
notice of your intention to renew.
If an act, event, omission or occurrence which would give us the right not
to renew this Agreement occurs subsequent to the renewal date, we shall have the
right to terminate this Agreement as renewed in accordance with the provisions
of Article 13 hereof.
(d) Subsequent to the date that you sign any franchise agreement which
shall operate to extend or renew this Franchise Agreement, and prior to the
effective date thereof, you shall bring each USBL Franchise which you operate
into compliance with the standards then applicable to new USBL Franchises, as
specified in the Operations Manual.
ARTICLE 6 - PAYMENTS BY FRANCHISEE
6.01 Payment for Franchise. Simultaneously with the execution of this
Agreement, you shall pay to USBL an initial franchise fee (the "Initial
Franchise Fee") in the amount of Three Hundred Thousand Dollars ($300,000.00).
Upon acceptance of this Agreement by USBL, said Initial Franchise Fee shall be
deemed fully earned and non-refundable as consideration for expenses incurred by
us and for our lost or deferred opportunity to franchise others.
6.02 Annual Continuing Royalty. In addition to the Initial Franchise Fee,
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for each Fiscal Year, or fraction thereof, during the term of this Agreement,
you shall pay to us an "Annual Continuing Royalty" equal to the greater of (I)
five percent (5%) of its Gross Receipts for such Fiscal Year, or fraction
thereof, or (ii) Thirty Thousand Dollars ($30,000.00).
The Annual Continuing Royalty shall be payable from the date the USBL
Franchise commences operation. Payment of the Annual Continuing Royalty during
the term of this Agreement shall be made by you to USBL in installments of Two
Thousand Five Hundred Dollars ($2,500.00) each on or before the fifteenth (15th)
day of each of the following months: January, February, March, April, May, June,
July, August, September, October, November and December of each Fiscal Year. Any
additional amount due in excess of Thirty Thousand Dollars ($30,000.00) shall be
due and payable on December 31st of each Fiscal Year. Any payment not made when
due shall be considered delinquent if not received within thirty (30) days after
the due date. If you are more than thirty (30) days late in paying any amount
due during the term of this Agreement, interest at the lesser of the rate of
eighteen percent (18%) per annum or the maximum rate of interest permitted by
law and shall be due and payable on the unpaid balance from the date such
payment was due until the date paid. Time is of the essence of this Agreement
and, in the event any sum due to be paid hereunder by you to us is collected or
enforced by law or through an attorney-at-law or under advice therefrom, you
shall pay to us, in addition to any and all sums due hereunder, all costs and
expenses of collection, including fifteen percent (15%) of the then outstanding
amount thereof and interest thereon, as attorneys' fees.
In addition, upon our request, you shall obtain and maintain a Letter of
Credit or other guaranty of payment acceptable to us in the amount of One
Hundred Thousand Dollars ($100,000.00) from February 1st through August 31st of
each Fiscal Year. Any Annual Continuing Royalty payment not paid when due will
be paid from such Letter of Credit or guaranty immediately upon request of USBL.
6.03 Renewal Fee. The "Renewal Fee" for each Renewal Term shall be the
greater of (I) ten percent (10%) of the then current initial franchise fee being
charged to new franchisees or (ii) Fifty Thousand Dollars ($50,000.00).
6.04 Training Fee. The "Training Fee" is a $4,000.00 fee to be
paid by you to us for each person(s) attending the initial program. You shall
be responsible for transportation for each person who attends the initial
training program.
ARTICLE 7 - LIMITATION OF FRANCHISE SYSTEM AND LICENSED RIGHTS
You acknowledge and agree that:
7.01 Franchise System and Licensed Rights. The USBL System and Licensed
Rights granted hereunder are for your use only and cannot be sold, assigned or
transferred, in whole or in part, except as set forth in Article 14 hereof.
7.02 No Unauthorized Use of Franchise System and Licensed Rights. USBL is
the exclusive owner of the Licensed Rights and of the identification schemes,
sign facia, standards, specifications, operating procedures and other concepts
embodied in the USBL System as granted pursuant to this Franchise Agreement. You
will use the USBL System and the Licensed Rights strictly in accordance with the
terms of this Agreement and the Operations Manual. Any unauthorized use of the
USBL System and the Licensed Rights is, and shall be deemed to be, an
infringement of our rights. Except as expressly provided in this Agreement and
any other franchise agreement entered into between you and us, you shall acquire
no right, title or interest in or to the USBL System or the Licensed Rights. Any
and all good will associated with the USBL System and the Licensed Rights shall
inure
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exclusively to our benefit, and upon the expiration or termination of this
Agreement, no monetary amount shall be assigned as attributable to any good will
associated with your use of the USBL System and the Licensed Rights. You will at
no time take any action whatsoever to contest the validity or ownership of the
USBL System and the Licensed Rights and the good will associated therewith.
7.03 Franchisor's Name. You shall have no right to use in its corporate
name the words "United States Basketball League" or "USBL" or "League of
Opportunity" or any other names used by us in our corporate name. Upon
termination or expiration of this Agreement for any reason whatsoever, and if
you has heretofore obtained permission to use any such words in your corporate
name, you shall immediately take all steps necessary to eliminate any such
reference or use.
7.04 Team Name. You shall select a name for your basketball team, and may
select logos, insignias or other related materials to identify the team. Such
name, logos, insignias or other related materials shall be submitted to us for
our prior written approval before you commences use of such name, logos,
insignias or other related materials. Upon our request at your sole expense, you
shall arrange to have such name, logos, insignias or other related materials
registered to become the property of USBL, and you agree to use such name,
logos, insignias or other related materials only as permitted pursuant to this
Franchise Agreement.
7.05 Franchise System and Licensed Rights Are Non-Exclusive. Except as
provided in Article 1 hereinabove, the USBL System and the Licensed Rights
granted hereunder are nonexclusive, and we retain the right, in our sole
discretion:
(a) To continue to open and operate other USBL Franchises and to use the
USBL System and the Licensed Rights at any location outside the Exclusive
Franchised Area, and to license others to do so.
(b) To develop, use and franchise the rights to any trade names,
trademarks, service marks, trade symbols, emblems, signs, slogans, insignia or
copyrights not designated by us as Licensed Rights.
7.06 Proprietary Marks Are Solely Owned by USBL. You specifically
acknowledge and agree that the names "United States Basketball League" and
logos, names and designs and "USBL" (included in the Trademarks) are valid
service marks or trademarks solely owned by USBL, and that only USBL, or its
designated franchisees, shall have the right to use such service marks,
trademarks and such other Trademarks as may presently exist or be acquired by us
and licensed for your use, along with all ancillary signs, symbols or other
indicia used in connection or conjunction with the Trademarks. You further
acknowledge that valuable good will is attached to the Trademarks and that you
will use the Trademarks only in the manner and to the extent specifically
permitted by this Agreement.
You specifically understand and agree that your rights under the Trademarks
are nonexclusive and that USBL, in its sole discretion, has the right to operate
locations under the Trademarks and to grant to others rights in, to and under
such Trademarks on any terms and conditions as we may deem appropriate.
You expressly covenant that during the term of this Franchise Agreement,
and after the expiration or termination thereof, you shall not, directly or
indirectly, contest or aid in contesting the validity or ownership of the
Trademarks.
You agree to promptly notify us of any claim, demand, or suit based upon or
arising from, or any attempt by any other individual or entity, to use the
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Trademarks in which we have a proprietary interest.
7.07 Monitoring by Franchisee. You shall carefully monitor the performance
of any person who is actively involved in the management or operation of the
USBL Franchise.
7.08 Inspection. In order to maintain a consistent image, we or its
representatives shall have the right to conduct periodic inspections of the USBL
Franchise and to take all actions we deem necessary to maintain the standards of
the USBL System.
7.09 Franchise Variations. We acknowledge that there may be peculiarities
of a particular site or circumstance, density of population, business potential,
population of trade area, existing business practices or some other condition
which we deem to be of importance to the successful operation of a franchisee's
business and that such condition may warrant us to vary our standard
specifications and practices with respect to a particular franchisee. You shall
not be entitled to require us to grant to you a like or similar variation
hereunder. Nothing contained in this Section 7.09 shall be construed, however,
to permit us during the term of this Agreement to vary or amend any term or
condition of this Agreement, including, but not limited to, the Exclusive
Franchised Area.
7.10 Sole Responsibility of Franchisee. You shall be solely responsible for
the performance of all obligations arising out of the operation of your USBL
Franchise pursuant to this Franchise Agreement, including, but not limited to,
the payment when due of any and all taxes levied or assessed by reason of such
operation.
7.11 Ability to Operate Business of Franchisee. You, and each person who is
actively involved in the management or operation of the USBL Franchise, shall
continuously demonstrate to us your ability to operate the USBL Franchise
pursuant to the terms of this Agreement.
7.12 Independent Ownership of Franchisee's Business. You shall clearly
indicate in all public records, in your relationship with other persons, and in
any offering circular, prospectus or similar document, the independent ownership
of your USBL Franchise and that the operation of your USBL Franchise is separate
and distinct from the operation of our business.
ARTICLE 8 - TIME WITHIN WHICH TO ESTABLISH THE USBL
FRANCHISE
8.01 Pursue Diligently the Establishment of USBL Franchise. You agree to
pursue diligently the establishment of the USBL Franchise, and you agree that
such USBL Franchise shall be established and operational within one hundred
twenty (120) days from the date of signing this Agreement (but not later than
February 1 of the Fiscal Year in which the next USBL season begins), except when
delays are due to Acts of God, strikes, or other circumstances wholly beyond
your control. The USBL Franchise shall be maintained and operated in compliance
with all applicable laws, regulations and ordinances. An office with an address,
phone and staff is required to be open for twelve months a year.
8.02 Operational Within Time Period. If the USBL Franchise is not
established and in operation within the time period specified in Section 8.01
hereof, or any other time during the ownership of the Franchise, you shall have
the right to terminate this Franchise Agreement and the provisions of Section
13.05 hereof shall govern.
<PAGE>
8.03 Deviation From Approved Method of Operation. You shall not deviate
from any approved method of operation of the USBL Franchise without the prior
written consent and approval of USBL. If, at any time, we determine that you are
not maintaining and operating the USBL Franchise substantially in accordance
with the methods of operation approved by us, we shall, in addition to any other
remedies, have the right to obtain an injunction from a court of competent
jurisdiction against the continued operation of the USBL Franchise.
ARTICLE 9 - STANDARDS AND UNIFORMITY OF OPERATION
9.01 Operate in Accordance with Operations Manual. Your uniformity of
method of operation, and adherence to the Operations Manual, a copy of which you
acknowledge having received on loan from us, are essential to the image of the
USBL Franchise. In recognition of the mutual benefits accruing from maintaining
uniformity of service and marketing procedures, and in order to protect the USBL
System and to maintain uniform standards of operation under the Licensed Rights,
you shall operate the USBL Franchise in accordance with the Operations Manual
for the term of this Agreement and any renewal thereof. You understand and
acknowledge that we may, at any time and from time to time, revise the contents
of the Operations Manual to implement new or different operating requirements
applicable to all USBL Franchises, including any USBL Franchise owned by you,
and you expressly agree to comply with each changed requirement within such
reasonable time as we may require. You shall at all times ensure that your copy
of the Operations Manual and any other manual given to you by us are kept
current and up to date, and, in the event of any dispute as to the contents
thereof, the terms of the master copy of the Operations Manual maintained by
USBL at its principal place of business shall be controlling.
(a) Treat as Confidential. You shall at all times treat as confidential,
and shall not at any time disclose, copy, duplicate, record or otherwise
reproduce or permit to be reproduced, in whole or in part, or otherwise make
available to any person or source unauthorized by us, the contents of the
Operations Manual.
(b) Sole Property of Franchisor. The Operations Manual shall at all times
remain the sole property of USBL and shall be promptly returned by you to us
upon the expiration or other termination of this Franchise Agreement.
9.02 Protection of Good Will. In further recognition of the mutual benefits
accruing from maintaining uniformity of service and marketing procedures, and in
order to protect the USBL System, the Licensed Rights and the good will
associated therewith, you will:
(a) Operate under the name "USBL" and advertise only under the Licensed
Rights designated by us for use for a particular purpose and will use such
rights without prefix or suffix, except (I) in conjunction with your team name,
and (ii) where such use may conflict with a prior registration or use, in which
event you shall operate and advertise only under such other names as we have
previously approved in writing.
(b) Use the Licensed Rights solely in the manner prescribed by us.
(c) Observe such reasonable requirements with respect to service marks,
trade names, Trademarks, and fictitious name registrations and copyright notices
as may be required by law or as we may at any time and from time to time direct
in writing.
9.03 Signs. You agree to display our names and Trademarks only in the
manner authorized by USBL. You agree to maintain and display signs reflecting
our current logo. The color, size, design and location of such signs shall be as
<PAGE>
specified by us.
9.04 Manner of Operations. You shall at all times conduct your USBL
Franchise in such a fashion as to reflect favorably on us and the USBL System
and the good name, good will and reputation thereof, and shall avoid all
deceptive, misleading and unethical practices.
9.05 Accounting. You shall maintain at all times during the term of this
Agreement a standardized accounting and reporting system in accordance with the
Operations Manual.
9.06 Compliance With Laws, Ordinances and Regulations. You will strictly
comply with all laws, ordinances and regulations affecting the operation of the
USBL Franchise. Without limiting the generality of the foregoing, you hereby
specifically agree to strictly comply with all applicable safety laws,
ordinances and regulations so as to be rated in the highest available safety
classification by appropriate governmental authorities, and to furnish to us
within ten (10) days of your receipt thereof, copies of all inspection reports,
warnings, certificates and ratings issued by any governmental agency which
reflect your failure to meet and maintain the highest applicable ratings, or
your non-compliance or less than full compliance with any applicable law, rule
or regulation.
9.07 Notification of Court Action. You shall notify us, in writing, within
ten (10) days of the commencement thereof, of any claim, action, suit or
proceeding, and of the issuance of any order, writ, injunction, award or decree
of any court, agency or other governmental instrumentality, which may adversely
affect your financial condition or ability to meet your obligation under this
Agreement.
9.08 Right of Entry and Inspection. You will permit our authorized
personnel to enter the USBL Franchise at any time during normal business hours
for the purpose of inspecting and examining your operations and facilities. You
shall cooperate with your representatives during such inspections by rendering
such assistance as your representatives may reasonably request. Upon written
notice from us or our agents, you shall immediately take such steps as may be
necessary to correct any deficiencies detected during any such inspection
including, without limitation, immediately ceasing to use any methods,
procedures or advertising materials which do not conform to our then current
specifications, standards or requirements.
9.09 Obligation to Purchase from Approved Vendors; Alternate Vendors. All
forms, brochures, signs, displays, stationery, equipment, inventory, products,
goods, merchandise and other items (collectively "Materials") permitted or
required to be used in the operation of the USBL Franchise or permitted or
required to be sold from the USBL Franchise must conform to our specifications
as set forth in the Operations Manual as may be amended from time to time. All
Materials may be purchased from us (if offered by us), suppliers approved by us
or suppliers selected by you and not disapproved in writing by USBL. If you
desire to purchase Materials from a supplier other than us or a supplier
approved by us, (I) we will, upon your request, furnish specifications if same
are not included in the Operations Manual for any such Materials which you
desire to so purchase, and (ii) you shall submit to USBL a written request for
such approval, providing the name and address of any such proposed supplier, or
shall request the supplier to do so. If we fail to disapprove such supplier
within thirty (30) days from receipt of your written request, you may purchase
from such supplier unless and until we withdraw such approval. In connection
with the purchase of any goods bearing our Trademarks, we will authorize
qualified manufacturers of such items to imprint the Trademarks, provided such
manufacturers execute a license agreement in a form satisfactory to us. We from
time to time may receive consideration from suppliers with respect to the
<PAGE>
purchase of supplies and materials by franchisees of USBL.
9.10 Timely Payment. You will pay, before delinquency or threat of
collection action, for all products and other items used in the operation of the
USBL Franchise. You are aware that failure to make prompt payment to your
suppliers may cause irreparable harm to the reputation and credit of USBL and
other franchisees of USBL. If you fail to make payments to either us or any
creditors, your Franchise will be in default.
9.11 Accounting and Reports. You shall maintain and preserve, for the
entire term of this Agreement, full, complete and accurate books, records and
accounts in accordance with generally accepted accounting principles applied on
a consistent basis in the form prescribed in the Operations Manual. You shall
execute and submit to us such financial statements and reports showing your
Gross Receipts in the form prescribed in the Operations Manual and any
additional information which we may reasonably request. You shall permit our
authorized personnel to inspect and examine your books and records at any
reasonable time and from time to time. In addition, you shall permit certified
public accountants designated by us to audit your books of account at any
reasonable time and from time to time. If such audit discloses that your
reported Gross Receipts have been understated, you shall immediately pay to us
the amount due, unreported or understated, together with interest thereon at the
maximum rate permitted by law. In addition, you shall reimburse us for any and
all expenses connected with the audit, including, without limitation, the
charges of any independent certified public accountant and the travel expenses,
room, board and compensation of our employees, if such audit discloses that your
reported Gross Receipts have been understated to the extent of five percent (5%)
or more for the period audited, or if your financial records require substantial
effort on behalf of our auditors to be placed in a condition conducive to audit.
The foregoing remedies shall be in addition to any other remedies we may have.
All reports required by Section 9 of this Agreement shall be treated as
confidential by us, and shall not be disclosed by us without your written
consent unless it is required to do so by law, regulation or court order, or
unless such disclosure is made to a creditor or prospective creditor of ours in
connection with a loan to USBL.
ARTICLE 10 - MARKETING AND PROMOTION
10.01 Marketing and Promotion. You agree to use and honor any promotional
materials or programs which we issue or sponsor. You acknowledge and agree that
we will be the exclusive negotiating party for the USBL and shall have the sole
and exclusive right to enter into all regional and national promotional and
media contracts. You shall conduct, at your own expense, marketing and
advertising activities in the local market, and USBL may offer, from time to
time, to provide you with approved local marketing plans and materials and other
promotional and marketing materials at a price equal to our cost. In addition,
you may solicit promotional and media contracts in your local market and such
contracts shall contain a provision allowing for their termination or revision
should they conflict with prior or subsequent national or regional contracts
which may be secured by a third party of USBL. All media coverage, television
(cable broadcasts) and radio must not intrude into other franchised "Exclusive
Franchised Areas". The only time coverage may exceed the "Exclusive Franchised
Area" is if there are no additional teams within a twenty-five (25) mile radius
of home arena. This would terminate as soon as a new franchise has been sold in
that area. Any such contracts and samples of all local marketing materials not
prepared or previously approved by us or our designated agents shall be
submitted in writing to us for approval, which approval shall not be
unreasonably withheld. If written disapproval is not received by you within
fifteen (15) days from the date of receipt by us of such contracts or materials,
we shall be deemed to have approved such contracts or the use of such materials,
<PAGE>
provided that you shall discontinue the use thereof within a reasonable time if
we subsequently request such discontinuance in writing. We reserve the right to
require you to cooperate with other franchisees in connection with regional and
national advertising and marketing activities. All contracts involving more than
one team are subject to approval by USBL and may require a substantial License
Fee to the USBL. All local advertising in any form or shape which promotes the
USBL Franchise including, but not limited to, radio, television, and print,
shall prominently display the name of "USBL" and/or the USBL logo. Except as
permitted herein and in the Operations Manual, you shall not use or cause to be
used any Trademarks in any advertising or promotion without receiving our prior
written approval.
ARTICLE 11 - INDEMNIFICATION; INSURANCE
11.01 Franchisee to Indemnify Franchisor. You do hereby covenant and agree
to indemnify and hold us harmless from and against any and all claims, demands,
liabilities, obligations, costs, losses and expenses of every kind and nature,
including, but not limited to, court costs and reasonable attorneys' fees, which
we shall ever suffer or incur by reason of or in connection with this Franchise
Agreement, the USBL System, the Licensed Rights or the ownership, maintenance,
or operation of the USBL Franchise by you; provided, however, that the foregoing
indemnification shall exclude, and you shall not be held to have indemnified us
for, any such claims, demands, liabilities, obligations, costs, losses and
expenses that may have been caused by the gross negligence of, or the breach of
this Franchise Agreement by, USBL or its agents or employees.
11.02 Protect Franchise. Notwithstanding the foregoing, we agree to
cooperate with you to protect you against the infringement of the USBL System
and the Licensed Rights by third parties, including, but not limited to, the
defense or prosecution of any law suits, if, in the judgment of our counsel,
such action is necessary or advisable.
11.03 Franchisee to Maintain Insurance. You agree to maintain
insurance of the kinds and in the amounts as specified below:
(a) All policies of insurance required hereunder, other than those set
forth in Section 11.03(c) hereof, shall contain a separate endorsement naming us
and any other third party designated by us, as an additional insured and may not
be subject to cancellation or modification except on thirty (30) days prior
written notice to USBL.
(b) General liability insurance shall be maintained against claims (I) for
personal injury, (ii) for personal injury relating to death or property damage
suffered by others upon, in or about the USBL Franchise or occurring as a result
of the maintenance or operation by you of any automobiles, trucks or other
vehicles or airplanes or other facilities, (iii) as a result of the use of
products sold by you or services rendered, (iv) arising out of your Franchised
Business pursuant to this Agreement, or (v) in connection with the operation of
the USBL Franchise, in amounts not less than required by any applicable lease
and in any event not less than Five Hundred Thousand Dollars ($500,000.00) per
person and One Million Dollars ($1,000,000.00) per occurrence for bodily injury
and Three Hundred Thousand Dollars ($300,000.00) property damage.
(c) Worker's compensation, unemployment compensation, disability insurance,
social security and other insurance coverages shall be maintained in such
amounts as may now or hereafter be required by any applicable law.
(d) You shall cause certificates of insurance evidencing your compliance
with the above requirements to be delivered to us annually and upon renewal, and
at such other times as we may reasonably request.
<PAGE>
All such policies shall insure you and us as their interests may appear,
and shall protect you and us against any liability which may accrue by reason of
this Franchise Agreement, the USBL System, the Licensed Rights or the ownership,
maintenance or operation by you of the USBL Franchise. You shall enter into any
waiver or waivers of subrogation as requested by us from time to time and shall
notify your insurance carriers as to the fact that you entered into such waiver
or waivers of subrogation.
11.04 Franchisee's Obligation Not Limited by Insurance Maintained by
Franchisor. Your obligation to obtain and maintain the foregoing policy or
policies of insurance shall not be limited in any way by reason of any insurance
which may be maintained by us, nor shall your performance of this obligation
relieve you of any liability under the indemnity provision set forth in Section
11.01 hereof.
ARTICLE 12 - OPERATIONS MANUAL
12.01 Operate in Accordance with Operations Manual. In order to protect the
reputation and good will associated with the USBL System and to maintain the
uniform standards of operation thereunder, you shall operate the USBL Franchise
in strict accordance with the Operations Manual.
12.02 Treat as Confidential. You shall at all times treat as confidential,
and shall not at any time disclose, copy, duplicate, record or otherwise
reproduce or permit to be reproduced, in whole or in part, or otherwise make
available to any unauthorized person or source, the contents of the Operations
Manual.
12.03 Sole Property of Franchisor. The Operations Manual shall at
all times remain the sole property of USBL and shall be returned promptly by
you upon the expiration or other termination of this Franchise Agreement.
12.04 Revise Contents. We may, at any time and from time to time, revise
the contents of the Operations Manual so as to convey to you advancements and
new developments in products, marketing, techniques and other items and
procedures relevant to the operation of the USBL Franchise.
ARTICLE 13 - DEFAULT; TERMINATION
13.01 Occurrence of Default by Franchisee. The occurrence of any of
the following events shall constitute a default by you under this Franchise
Agreement:
(a) If you shall misuse (i) the USBL Franchise, (ii) any rights
granted thereunder, (iii) any other names, marks, systems, insignia, symbols
or rights provided by USBL to you, or otherwise materially impair the good will
associated therewith or our rights therein, or (iv) if you shall use at,
upon or in connection with the USBL Franchise, any names, marks, systems,
insignia or symbols not authorized by USBL.
(b) If you shall fail to remit to us any payment, when due,
including, but not limited to, royalty payments.
(c) If you shall fail to remit to us any financial or other information
which may be required under this Franchise Agreement.
(d) If you shall fail to operate the USBL Franchise in accordance with the
<PAGE>
Operations Manual or any other manuals which may be distributed by USBL, or if
you shall fail to use methods of operation which conform to the specifications
and standards of USBL or if you shall fail in any other way to maintain our
standards of organization and business practice in connection with the operation
of the USBL Franchise.
(e) If you shall purport to effect any assignment other than as set
forth in Article 14 hereof.
(f) If you make, or have made, any misrepresentation to us in
connection with obtaining this Franchise Agreement or in conducting the
Franchised Business.
(g) If you fail to obtain any prior written approval or consent as
expressly required by this Agreement.
(h) If you default in the performance of any other condition or
obligation under this Agreement or under any other franchise agreement entered
into at any time whatsoever between you and us.
(i) If you shall default on the lease of your Approved Arena.
(j) If you, or any person controlling, controlled by or under
common control with you, shall be convicted under any law of a felony as
defined by that law.
(k) If your USBL Franchised Team ceases operation without the prior written
consent of USBL for any reason whatsoever.
(l) If you or a partner or guarantor thereof becomes insolvent (as revealed
by its, his or her records or otherwise); or if you file a voluntary petition of
bankruptcy, or if an involuntary petition is filed against you and such petition
is not dismissed within thirty (30) days; or if you make an assignment for the
benefit of creditors; or if a receiver or trustee in bankruptcy or similar
officer, temporary or permanent, is appointed to take charge of your affairs or
any of its, his or her property, or if any judgment against you remains
unsatisfied or unbonded of record for fifteen (15) days (the enforceability of
this provision depends upon judicial interpretation of the Federal Bankruptcy
Act and rules and regulations promulgated thereunder).
(m) If an audit or investigation discloses that you have knowingly
withheld the reporting of any Gross Receipts.
(n) If you, or any person controlling, controlled by or under common
control with you, fails to conduct the USBL Franchise in full compliance with
any applicable law or regulation.
(o) If you, or any person controlling, controlled by or under common
control with you, shall disclose any Confidential Information of USBL to any
third party.
13.02 Termination of Franchise Agreement by Franchisor. Upon the occurrence
of any of the events of default as set forth above, we may, without prejudice to
any other rights or remedies contained in this Franchise Agreement or provided
by law or equity, terminate this Franchise Agreement. Such termination shall be
effective five (5) days after written notice is given by USBL to you of any of
the events set forth in Subsections 13.01(a) through (c) hereof, if such
defaults are not cured within such five (5) day period. Such termination shall
be effective fifteen (15) days after written notice is given by USBL to you of
any of the events set forth in Subsections 13.01(d) through (I) hereof, if such
<PAGE>
defaults are not cured within such fifteen (15) day period. Termination shall be
effective immediately and without notice, however, upon the occurrence of any or
all of the events specified in Subsections 13.01(j) through (o) hereof, each of
which shall be deemed an incurable material breach of this Franchise Agreement.
13.03 Description of Default by Franchisee. The description of any default
in any notice served by USBL upon you shall in no way preclude us from
specifying additional or supplemental defaults in any action, arbitration,
hearing or suit relating to this Franchise Agreement or the termination thereof.
13.04 Statutory Limitations of Franchisor's Rights. Notwithstanding
anything to the contrary contained in this Article 13, in the event any valid,
applicable law or regulation of a competent governmental authority having
jurisdiction over this Agreement or the parties hereto shall limit our rights of
termination hereunder or shall require longer notice periods than those set
forth above, this Agreement shall be deemed amended to conform to the minimum
notice periods required by such law and regulation.
13.05 Franchisee's Obligation Upon Termination by Franchisor. Upon
termination of this Agreement by us for any reason, or upon the expiration of
the Initial Term or any Renewal Term hereof, you agree:
(a) To pay immediately to us the full amount of all sums due us by
you under this Franchise Agreement.
(b) To cease immediately from using the USBL System, all of the Licensed
Rights provided hereunder by USBL, and all confusingly similar names, marks,
systems, insignia, symbols or other rights, procedures or methods.
(c) To immediately return all property of USBL, including the Operations
Manual and all other manuals, materials, plans, standards and specifications,
designs, records and data supplied to you by us as part of the USBL Franchise.
(d) To cease immediately from holding itself out in any way as a franchisee
of USBL or from doing anything which would indicate any relationship between you
and USBL.
(e) To permit our agents to enter the premises of your Franchised Business
and to remove or permanently cover all signs or advertisements identifiable in
any way with our name or image.
(f) Upon our request, to immediately notify and make arrangements with your
local telephone company that the telephone number then currently assigned to
your USBL Franchise should revert to and become the property of USBL at our
option.
13.06 Separate Franchise Agreements Not Affected by Termination by
Franchisor. Termination of this Agreement by us shall not affect the rights of
you to operate other USBL Franchises in accordance with the terms of any other
franchise agreements until and unless such other franchise agreements, or any of
them, are terminated in accordance with their rights.
13.07 USBL Retains Fees Upon Termination by Franchisor. Notwithstanding
anything to the contrary contained in this Agreement, upon termination of the
Franchise by us, we shall retain any and all fees paid us by you, including,
without limitation, the Initial Franchise Fee paid us pursuant to Section 6.01
hereof.
13.08 Franchisor's Right to Cure Upon Default by Franchisee.
<PAGE>
Notwithstanding anything to the contrary contained herein, in the event you
default in the performance of any of your obligations under this Agreement, we
may, but shall not be obligated to, cure such default for the account and on
your behalf. The cost incurred by us in connection with curing such default,
including attorneys' fees, will be due and payable by you to us on demand.
Failure to immediately pay such amount shall be deemed a default by you under
this Agreement. By curing such default, we is not waiving its right to terminate
this Franchise Agreement by virtue of any subsequent default by you.
13.09 Occurrence of Default by Franchisor. The occurrence of any of
the following events shall constitute a default by us under this Franchise
Agreement:
(a) If we make, or have made, any misrepresentation to you in
connection with obtaining this Agreement.
(b) If we default in the performance of any condition or obligation
under this Agreement.
(c) If we, or any person controlling, controlled by or under common control
with USBL, shall be convicted under any law of a felony as defined by that law.
(d) If we become insolvent; or if we file a voluntary petition of
bankruptcy, or if an involuntary petition is filed against us and such petition
is not dismissed within thirty (30) days; or if we make an assignment for the
benefit of creditors; or if a receiver or trustee in bankruptcy or similar
officer, temporary or permanent, is appointed to take charge of our affairs or
any of our property, or if any judgment against us remains unsatisfied or
unbonded of record for fifteen (15) days (the enforceability of this provision
depends upon judicial interpretation of the Federal Bankruptcy Act and rules and
regulations promulgated thereunder).
13.10 Termination of Franchise Agreement by Franchisee. Upon the occurrence
of any of the events of default as set forth above, you may, without prejudice
to any other rights or remedies contained in this Agreement or provided by law
or equity, terminate this Agreement. Such termination shall be effective thirty
(30) days after written notice is given by you to us of any of the events set
forth in Subsections 13.09(a) or (b) hereof, if such defaults are not cured
within such thirty (30) day period. Termination shall be effective immediately
and without notice, however, upon the occurrence of any or all of the events
specified in Subsections 13.09(c) or (d) hereof, each of which shall be deemed
an incurable material breach of this Agreement.
13.11 Description of Default by Franchisor. The description of any default
in any notice served by you upon us shall in no way preclude you from specifying
additional or supplemental defaults in any action, arbitration, hearing or suit
relating to this Agreement or the termination thereof.
13.12 Statutory Limitations of Franchisee's Rights. Notwithstanding
anything to the contrary contained in this Article 13, in the event any valid,
applicable law or regulation of a competent governmental authority having
jurisdiction over this Agreement or the parties hereto shall limit your rights
of termination hereunder or shall require longer notice periods than those set
forth above, this Agreement shall be deemed amended to conform to the minimum
notice periods required by such law and regulation.
13.13 Franchisee's Obligation Upon Termination by Franchisee. Upon
termination of the Franchise by you for any reason, or upon the expiration of
the Initial Term or any Renewal Terms hereof, you agree:
<PAGE>
(a) To cease immediately from using the USBL System, all of the Licensed
Rights provided hereunder by USBL, and all confusingly similar names, marks,
systems, insignia, symbols or other rights, procedures or methods.
(b) To immediately return all property of USBL, including the Operations
Manual and all other manuals, materials, plans, standards and specifications,
designs, records and data supplied to you by us as part of the USBL Franchise.
(c) To cease immediately from holding yourself out in any way as a
franchisee of USBL or from doing anything which would indicate any relationship
between you and us.
(d) To permit our agents to enter your Franchised Premises and to remove or
permanently cover all signs or advertisements identifiable in any way with our
name or image.
13.14 Separate Franchise Agreements Not Affected by Termination by
Franchisee. Termination of the Franchise by you shall not affect the rights of
USBL under any other franchise agreement between us and you until and unless
such other franchise agreements, or any of them, are terminated in accordance
with their terms.
13.15 USBL Retains Fees Upon Termination by Franchisee. Notwithstanding
anything to the contrary contained in this Agreement, upon termination of this
Agreement by you, we shall retain any and all fees which you paid us, including,
without limitation, the Initial Franchise Fee paid us pursuant to Section 6.01
hereof.
ARTICLE 14 - ASSIGNMENT; CONDITIONS AND
LIMITATIONS
14.01 Term "Franchisee" Defined for Purposes of this Article. The term
"Franchisee" or "You" as used in this Article 14 shall be deemed to include the
person or persons who control your Franchised Business as disclosed to us in
writing upon the execution of this Franchise Agreement, which disclosure is
attached hereto as Exhibit "A."
14.02 Franchise Not Assignable. You shall neither sell, assign, transfer
nor encumber the USBL Franchise or this Franchise Agreement, the Licensed Rights
or any other interest created hereunder, nor suffer or permit any such
assignment, transfer or encumbrance to occur by operation of law or otherwise,
without the prior written consent of USBL, which consent we agree we will not
unreasonably withhold; provided, however, such consent will be contingent upon
you and the proposed transferee complying with certain obligations as set forth
in this Article 14.
14.03 Franchisee a Corporation, Partnership or Unincorporated Association.
If you are a corporation, partnership, unincorporated association or similar
entity, the terms of this Article shall be deemed to apply to any sale, resale,
pledge, assignment, transfer or encumbrance of the voting stock of, or other
ownership interest in, your Franchised Business, which would alone or together
with other related previous or proposed transfers result in a change of
"control" of Franchisee within the meaning of the Securities Exchange Act of
1934, 15 U.S.C. Section 78 et. seq., and the regulations thereunder.
14.04 Death or Disability of Franchisee. If you are an individual, in the
event of your death, disability or permanent incapacity, we shall not
unreasonably withhold our consent to the transfer of all of the interest of
Franchisee to his or her spouse, heirs or relatives, by blood or marriage,
whether such transfer is made by will or by operation of law, provided that the
<PAGE>
requirements of this Article have been met, and such spouse, heirs or relatives
conform to the guidelines then currently in effect for the acceptance of new
franchisees. In the event that your heirs do not obtain the consent of USBL as
prescribed herein, the personal representative of Franchisee shall have a
reasonable time to dispose of your interest hereunder, which disposition shall
be subject to all the terms and conditions for transfers under this Agreement.
14.05 Offer to Purchase Franchise. If you receive from a third person and
desire to accept a bona fide written offer to purchase your Franchised Business,
the Licensed Rights and the other interests granted hereunder; USBL, or its
nominee, shall have the option, exercisable within forty-five (45) days after
written notice and receipt of a copy of such offer and receipt of the other
information set forth herein, to purchase such business, Licensed Rights and
other interests on the same terms and conditions as offered by said third party,
or for the same purchase price payable in cash as offered by said third party.
In order that we may have information sufficient to enable us to determine
whether to exercise our option, you shall deliver to us certified financial
statements as of the end of your most recent fiscal year and such other
information about the Franchised Business and your operations as you have
provided to such third party. If we do not exercise our option, you may, within
sixty (60) days from the expiration of the aforesaid forty-five (45) day period,
sell, assign and transfer our business, franchise, Licensed Rights and other
interests granted hereunder to said third party, provided we have consented to
such transfer as required by this Article. Any material change in the terms of
the offer or any change in the offering price prior to closing of the sale to
such third party shall constitute a new offer, subject to the same rights of
first refusal by USBL or its nominee as in the case of an initial offer. If and
when the Franchise is sold and accepted by us for a price of more than two times
the original price paid by you then 20% of the amount above the 100%
appreciation must be paid to the us within five (5) business days or the sale
will not be accepted by USBL. (EXAMPLE: If franchise is sold originally to you
for $300,000.00 and resold five years later for $700,000.00 the payment to us
will be $20,000.00, i.e. $300,000.00 original price 100% appreciation to
$600,000.00 and then 20% of remaining $100,000.00 is payable within five
business days to USBL). Failure by us to exercise the option afforded by this
Section 14.05 hereof shall not constitute a waiver of any other provision of
this Agreement. No Franchise may be sold if the original owners are not in full
compliance with the USBL Franchise Agreement, Team Dues, Fines, etc.
14.06 Restriction on Transfer to Appear on Securities or Partnership
Shares. In the event you or your successor is a corporation or partnership or
similar entity, it is agreed as follows:
(a) The Articles of Incorporation (the "Articles") and the By-Laws (the
"By-Laws") of such corporation, or the Partnership Agreement (the "Partnership
Agreement") of such partnership, respectively, shall reflect that the issuance
and transfer of voting stock, partnership shares or other ownership interest
therein (collectively, the "Securities or Partnership Shares"), are restricted
by the terms of this Agreement. You shall furnish us at the time of execution of
this Agreement or at the time of any subsequent transfer or assignment of this
Agreement to a corporation or partnership, an agreement executed by all
stockholders or partners of Franchisee, stating that no stockholder or partner
will sell, assign or transfer voluntarily or by operation of law any Securities
or Partnership Shares of Franchisee to any person or entity other than existing
stockholders or partners (and then only to the extent permitted hereunder)
without the prior written consent of USBL. All Securities or Partnership Shares
issued by you will bear the following legend which shall be printed legibly and
conspicuously on each stock certificate, evidence of partnership interest, or
other evidence of ownership interest:
<PAGE>
"The transfer of these securities [partnership shares] is subject
to the terms and conditions of a Franchise Agreement with the
United States Basketball League, Inc., a Delaware corporation
("Franchisor"), dated _______________. Reference should be made to
said Franchise Agreement and to the restrictive provisions of the
Articles and By-Laws of this corporation [of the Partnership
Agreement of this partnership], copies of which are on file in our
principal office located at 46 Quirk Road, Milford, Connecticut
06460."
A stop transfer order shall be in effect against the transfer of any
Securities or Partnership Shares on your records, except transfers permitted by
this Article 14.
(b) In the event that you ever desire to sell your Securities or
Partnership Shares to the public, you shall present any offering circular or
prospectus to USBL for our review within a reasonable time, and in no event less
than sixty (60) days prior to such offering becoming effective. You agree not to
offer your Securities or Partnership Shares by use of the name "the United
States Basketball League, Inc." or any name similar thereto. However, you may
make appropriate reference to the fact that you are a franchisee of USBL.
14.07 Restrictions on Transfer Reasonable. By entering into this Franchise
Agreement, you acknowledge and agree that the restrictions on transfer imposed
herein are reasonable and are necessary to protect the USBL System and the
Licensed Rights, as well as our reputation and image, and are for the protection
of USBL, you and other franchisees. Any assignment or transfer permitted by this
Article shall not be effective until we receive a fully executed copy of all
transfer documents and consent thereto in writing.
14.08 Consent to Transfer Not Unreasonably Withheld. We agree not to
unreasonably withhold our consent to a sale, assignment or transfer by you
hereunder. Consent to any such transfer otherwise permitted or permissible as
reasonable may be refused unless we determine that:
(a) All of your obligations created by this Agreement and all other
franchise documents and agreements, and the relationship created hereunder, are
expressly assumed by the transferee ("Transferee"), and Transferee expressly
agrees to perform such obligations.
(b) All of your ascertained or liquidated debts to us are paid.
(c) You are not in default under this Agreement or any other
franchise or other agreement between you and USBL.
(d) Transferee satisfactorily completes the training required of
new franchisees on our then current terms prior to the date of transfer
(current charge $4,000.00 per trainee).
(e) Transferee, at the time of transfer, sale or assignment, is financially
responsible and economically capable of performing the obligations of Franchisee
under this Agreement and Transferee meets all of the requirements of USBL for
new franchisees, including, but not limited to, good reputation and character,
business acumen, operational ability, financial strength, Letter of Credit and
other business considerations.
(f) Transferee executes or, in appropriate circumstances, causes all
necessary parties to execute, our standard form of the then current Franchise
Agreement for the USBL Franchise and such other then current ancillary
<PAGE>
agreements being required by USBL of new franchisees.
(g) At either our or your request, you and USBL shall execute general
releases in a form satisfactory to us, of any and all claims each may have
against the other and their respective officers, directors, shareholders and
employees, in their corporate and individual capacities, including, without
limitation, all claims arising under any federal, state or local law, rule or
ordinance.
(h) You or transferee pays to us a transfer fee, in addition to the
Assignment Fee set forth in Section 14.09 hereof, in an amount sufficient to
cover our reasonable costs in effecting the transfer and in providing training
and other initial assistance to Transferee.
14.09 Assignment Fee. If you elect to assign this Franchise Agreement
(which assignment is subject to our approval as set forth in this Article), you
will be required to pay us an amount equal to the greater of (i) two percent
(2%) of the then current initial franchise fee being charged to new franchisees,
or (ii) Five Thousand Dollars ($5,000.00) as an assignment review fee (the
"Assignment Fee"); provided, however, that no Assignment Fee will be charged to
you if such assignment results from (i) a corporate or partnership
reorganization in which no third party shareholders or partners obtain or
acquire an interest in Franchisee, or (ii) under circumstances wherein you
changes its form only and no resulting change in ownership effectively occurs
(if for example, you are a sole proprietor incorporating with all shares of the
newly-formed corporation owned by the sole proprietor).
14.10 Franchise Agreement Assignable by USBL. This Agreement shall inure to
the benefit of USBL, its successors and assigns, and we shall have the right to
transfer or assign this Agreement to any other person, firm or legal entity. In
the event of such assignment, we will be relieved of all obligations or
liabilities relating to this Agreement.
ARTICLE 15 - NON-COMPETITION; CONFIDENTIALITY
15.01 No Ownership in Competing Business. You and persons
controlling, controlled by or under common control with you, will not, directly
or indirectly, without our prior written consent:
(a) Have, during the Initial Term of this Franchise Agreement, or any
Renewal Term hereof, and for a period of five (5) years following termination or
expiration of this Agreement, any interest, direct or indirect, in the ownership
or operation of any business engaged in operating a professional basketball team
which is not part of the USBL System.
(b) At any time during the Initial Term of this Franchise Agreement, or any
Renewal Term hereof, or at any time thereafter, use, in connection with the
operation of any business wherever located, other than the subject licensed USBL
Franchise, any of the Licensed Rights or any other trademarks, trade names,
marks, systems, insignia or symbols, licensed by us to you pursuant to this
Agreement.
15.02 Right of Inspection. During the term of this Agreement, any officer,
area supervisor or designee of USBL shall have the right to inspect any business
involved in basketball in which you have an interest and any books and records
relating to any such business, which inspections shall occur at reasonable times
<PAGE>
and during normal business hours, to the extent reasonably necessary to
determine whether the conditions of this Article are being satisfied.
15.03 Non-Disclosure. You and your agents, employees, representatives and
officers shall hold in confidence and shall cause to be held in confidence, the
USBL System and all parts thereof and shall not disclose or permit the
disclosure of the USBL System or any part thereof to any person, corporation or
other entity whatsoever. It is understood and agreed that the USBL System is a
comprehensive program of accounting, management systems, techniques and business
operations and systems that would, if used by other persons, firms or
corporations, negate a substantial competitive advantage which is presently
enjoyed by USBL. You accordingly agree that you shall not at any time, without
our prior written consent, disclose or permit the disclosure of (except to such
employees or agents as must have access to such information in order to operate
the USBL Franchise), or use or permit the use of, the USBL System, or any part
thereof, except as may be required by applicable law or authorized by this
Franchise Agreement.
15.04 Confidentiality. You and your agents, employees, representatives and
officers shall at all times treat as confidential the Operations Manual, any
other manuals or materials designated for use with the USBL System and such
other information as we may designate from time to time for confidential use
with the USBL System, including, without limitation, pricing information,
sources of inventory supply and purchase, price structure information from
vendors, marketing and advertising strategies and channels of distribution (as
well as all other trade secrets and confidential information, knowledge and
know-how concerning the operation of the USBL Franchise that may be imparted to,
or acquired by you from time to time in connection with this Franchise
Agreement). You and your agents, employees, representatives and officers shall
use all reasonable efforts to keep such information confidential. You
acknowledge that the unauthorized use or disclosure of such confidential
information will cause substantial damage and irreparable injury to USBL.
Accordingly, you agree that you shall not at any time, without our prior written
consent, disclose or permit the disclosure of (except to such employees or
agents as must have access to such information in order to develop or operate
the USBL Franchise), or use, or permit the disclosure or use (except as may be
required by applicable law or authorized by this Agreement), of such
information, in whole or in part, or otherwise make the same available to any
unauthorized person or source. Any and all information, knowledge and know-how
not generally known about the USBL System and our services, standards,
specifications, systems, procedures and techniques, and such other information
or material as we may designate as confidential, shall be deemed confidential
for purposes of this Agreement, except information which you can demonstrate
came to your attention prior to disclosure thereof by USBL, or which is or has
become a part of the public domain through lawful publication or communication
by others. The Operations Manual, any other manuals or materials designated for
use with the USBL System, and all confidential information shall at all times be
deemed, and shall remain, the sole property of USBL, and you shall acquire no
rights, title or interest therein by virtue of your authorization pursuant to
this Agreement to possess and use the same.
ARTICLE 16 - GENERAL MATTERS
16.01 No Personal Liability. It is understood and agreed that neither the
shareholders, directors, officers, agents or employees of USBL shall have any
<PAGE>
personal liability whatsoever for the discharge of our responsibilities
hereunder, or for any default by USBL, and that with respect to any and all
claims, demands, liabilities or obligations whatsoever arising out of or in
connection with this Agreement, you shall look solely to us for any redress in
accordance with the terms of this Agreement.
16.02 Designation of Representatives. For so long as this Franchise
Agreement shall remain in effect, you shall maintain on file with us a written
designation of one or more individuals who shall have authority to act for and
on your behalf in connection with the matters contemplated by this Agreement. It
is understood and agreed that the initial such representatives shall be those
identified on Exhibit "A" as "Franchisee Representatives" and that such
individuals shall continue to be your designated representatives unless and
until such designation is changed by written notice signed by you to USBL. It is
further understood and agreed that we shall have the full and absolute right to
rely on any and all statements or communications by or from any of said
designated representatives, and shall be completely protected by you in relying
thereon.
16.03 Notices. All notices and other communications permitted or required
by the provisions of this Agreement shall be in writing and shall be personally
delivered or sent through the United States Postal Service, or any official
successor thereto, designated as registered or certified mail, return receipt
requested, bearing adequate first class postage and addressed as hereinafter
provided. Notices delivered in person shall be effective upon the date of
delivery. Notices by mail shall be effective upon the receipt thereof by the
addressee or upon the fifth (5th) calendar day subsequent to the postmark date,
whichever is earlier. Rejection or the refusal to accept or the inability to
deliver because of a change in address of which no notice was given as provided
herein shall be deemed to be receipt of the notice sent as of the fifth (5th)
calendar day subsequent to the postmark date. By giving to the other party
hereto at least thirty (30) days' notice thereof, any party hereto shall have
the right from time to time and at any time while this Agreement is in effect to
change the respective addresses thereof and each shall have the right to specify
as the address thereof any other address within the continental United States.
Notices concerning emergency situations may be orally communicated in person or
by telephone or sent by facsimile ("FAX"), but shall be promptly confirmed by
written notice. Each notice to you and USBL shall be addressed, until notice of
change as aforesaid, as follows:
(a) If intended for Franchisee, to:
===============================
===============================
(b) If intended for Franchisor, to:
The United States Basketball League, Inc.
46 Quirk Road
Milford, CT 06460
Attention: President
16.04 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together, shall be deemed to be one and the same instrument.
16.05 Terminology. All personal pronouns in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and the plural shall include the singular.
<PAGE>
16.06 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, which laws shall prevail
in the event of any conflict of laws, except to the extent governed by the
United States Trademark Act of 1946 (Lanham Act, 15 U. S. C. Section 1051 et
seq.). Any and all suits for any breach or other dispute arising from this
Franchise Agreement must be instituted and maintained in the Superior Court of
Ansonia in the County of New Haven, State of Connecticut.
16.07 Arbitration. Except as specifically otherwise provided in this
Agreement, USBL and you agree that disputes arising under the terms of this
Agreement which cannot be amicably settled shall be determined by arbitration,
except for the following disputes: unlawful detainer actions, actions to protect
the Trademarks, willful under-reporting of royalties due and any other willful
fraud actions. Arbitration proceedings shall be conducted in accordance with the
rules then prevailing of the American Arbitration Association and the rules of a
court of equity and shall take place at the office of the American Arbitration
Association nearest the home office of Franchisor. Enforcement of any award must
be in the Superior Court, Judicial District of Ansonia at Milford, Connecticut.
Nothing contained herein shall bar the right of either party to obtain
injunctive relief against threatened conduct that will cause loss or damages
under the usual equity rules, including the applicable rules for obtaining
preliminary injunctions, provided an appropriate bond against damages is
obtained.
16.08 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstances, shall, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the fullest extent permitted
by law.
16.09 No Partnership. You shall not and do not by this Agreement in any way
or for any purpose become a partner of USBL or a joint venturer or a member of
any joint enterprise with USBL. Similarly, we shall not and do not by this
Agreement in any way or for any purpose become your partner of or a joint
venturer or a member of any joint enterprise with you.
16.10 Remedies Cumulative; Waiver; Consents. All rights and remedies of
USBL and of Franchisee enumerated in this Agreement shall be cumulative and,
except as specifically contemplated otherwise by this Agreement, none shall
exclude any other right or remedy allowed at law or in equity and said rights or
remedies may be exercised and enforced concurrently. No waiver by us or by you
of the breach of any covenant or condition of this Agreement to be kept or
performed by the other party shall constitute a waiver of any subsequent breach
of such covenant or condition or authorize such breach or nonobservance on any
other occasion of the same or any other covenant or condition of this Agreement.
Subsequent acceptance by us of any payments due to us hereunder shall not be
deemed to be a waiver by USBL of any preceding breach by you of any terms,
covenants or conditions of this Agreement.
Whenever this Agreement requires our prior approval or consent, you shall
make a timely written request, pursuant to the notice requirements set forth in
Section 16.03 hereof, to USBL, for such approval to be obtained in writing. We
will also consider granting, in our sole discretion, other reasonable requests
individually submitted by you in writing. We make no warranties or guarantees
upon which you may rely, and we assume no liability or obligation to you, by
providing any approval, consent, or suggestion to you in connection with this
Agreement, or by reason of any neglect or delay in granting or making, or by
<PAGE>
reason of any denial of, any request for any such approval, consent or
suggestion.
16.11 Joint and Several Obligation. If Franchisee consists of more than one
person or entity, their liability under this Franchise Agreement shall be deemed
to be joint and several.
16.12 Acknowledgments by Franchisee. YOU ACKNOWLEDGE THAT:
(a) YOU OR YOUR OFFICERS, YOUR PARTNERS OR YOUR PRINCIPALS HAVE CONDUCTED
AN INDEPENDENT INVESTIGATION OF THE BUSINESS CONTEMPLATED BY THIS FRANCHISE
AGREEMENT AND YOU RECOGNIZE THAT THE VENTURE INVOLVES BUSINESS RISKS MAKING THE
SUCCESS OF THE VENTURE LARGELY DEPENDENT UPON YOUR BUSINESS ABILITIES. USBL
EXPRESSLY DISCLAIMS THE MAKING OF, AND YOU ACKNOWLEDGE THAT YOU HAVE NOT
RECEIVED OR RELIED UPON, ANY WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED, AS TO
THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED BY
THIS FRANCHISE AGREEMENT.
(b) NEITHER YOU NOR ANY OF YOUR OFFICERS, YOUR PARTNERS OR YOUR PRINCIPALS
HAVE KNOWLEDGE OF ANY REPRESENTATIONS MADE BY USBL OR YOUR OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES, AGENTS OR SERVANTS, ABOUT THE BUSINESS CONTEMPLATED BY
THIS FRANCHISE AGREEMENT THAT ARE CONTRARY TO THE TERMS OF THIS
FRANCHISE
AGREEMENT, THE DOCUMENTS REFERRED TO HEREIN, OR THE OFFERING CIRCULAR REQUIRED
BY APPLICABLE STATE OR FEDERAL AUTHORITIES, AND YOU FURTHER REPRESENT TO USBL,
AS AN INDUCEMENT TO USBL TO ENTER INTO THIS FRANCHISE AGREEMENT, THAT USBL HAS
MADE NO MISREPRESENTATIONS TO YOU, OTHER THAN AS SET FORTH HEREIN, IN OBTAINING
THIS FRANCHISE AGREEMENT.
(c) YOU OR YOUR OFFICERS, YOUR PARTNERS OR YOUR PRINCIPALS HAVE RECEIVED,
READ AND UNDERSTOOD THIS FRANCHISE AGREEMENT AND ALL OTHER RELATED DOCUMENTS TO
BE EXECUTED BY YOU CONCURRENTLY OR IN CONJUNCTION WITH THE EXECUTION HEREOF; YOU
OR YOUR OFFICERS, YOUR PARTNERS OR YOUR PRINCIPALS HAVE OBTAINED THE ADVICE OF
COUNSEL OR, WITH FULL KNOWLEDGE OF THE CONSEQUENCES, HAVE WAIVED THE ADVICE OF
COUNSEL IN CONNECTION WITH YOU ENTERING INTO THIS FRANCHISE AGREEMENT, THAT YOU
AND YOUR OFFICERS, YOUR PARTNERS OR YOUR PRINCIPALS UNDERSTAND THE NATURE OF
THIS FRANCHISE AGREEMENT; AND YOU AND YOUR OFFICERS, YOUR PARTNERS OR YOUR
PRINCIPALS INTEND TO COMPLY HEREWITH AND BE BOUND HEREBY.
(d) YOU AND YOUR OFFICERS, YOUR PARTNERS OR YOUR PRINCIPALS UNDERSTAND AND
ACKNOWLEDGE THE VALUE TO THE USBL SYSTEM OF UNIFORM AND ETHICAL STANDARDS OF
QUALITY, APPEARANCE AND SERVICE DESCRIBED IN AND REQUIRED BY THE OPERATIONS
MANUAL AND THE NECESSITY OF OPERATING THE USBL FRANCHISE UNDER THE STANDARDS SET
FORTH IN THE OPERATIONS MANUAL. YOU REPRESENT THAT YOU HAVE THE CAPABILITIES,
BOTH FINANCIAL AND OTHERWISE, TO COMPLY WITH THE STANDARDS OF USBL.
(e) YOU ACKNOWLEDGE THAT OUR APPROVAL OR SELECTION OF AN
EXCLUSIVE FRANCHISED AREA OR APPROVED ARENA FOR THE USBL
FRANCHISE DOES NOT IMPLY ANY ASSURANCE OR PREDICTION OF
PROFITABILITY. SUCH APPROVAL OR SELECTION SIMPLY REPRESENTS
<PAGE>
THAT THE PARTICULAR EXCLUSIVE FRANCHISED AREA OR APPROVED ARENA FALLS WITHIN THE
ACCEPTABLE DEMOGRAPHIC AND OTHER CRITERIA THAT WE HAVE ESTABLISHED AS OF THE
TIME PERIOD ENCOMPASSING THE EVALUATION. BOTH YOU AND USBL ACKNOWLEDGE THAT AT
ANY TIME AFTER OUR APPROVAL OR SELECTION OF AN EXCLUSIVE FRANCHISED AREA OR
APPROVED ARENA CERTAIN DEMOGRAPHIC OR ECONOMIC FACTORS INCLUDED IN OR EXCLUDED
FROM OUR EXCLUSIVE FRANCHISED AREA OR APPROVED ARENA CRITERIA COULD CHANGE
EITHER POSITIVELY OR NEGATIVELY, THEREBY ALTERING THE VIABILITY OF THE EXCLUSIVE
FRANCHISED AREA OR APPROVED ARENA. SUCH VARIATIONS ARE BEYOND OUR CONTROL AND WE
WILL NOT BE RESPONSIBLE FOR ANY CHANGES IN THE DESIRABILITY OF THE EXCLUSIVE
FRANCHISED AREA OR APPROVED ARENA.
(f) YOU ACKNOWLEDGE THAT UNLESS YOU EXPRESSLY INFORM US IN WRITING, AT THE
END OF OUR INITIAL TRAINING PROGRAM THAT YOU DO NOT FEEL COMPLETELY TRAINED IN
THE OPERATION OF A USBL FRANCHISE, IF YOU AND ANY MANAGER OF THE USBL FRANCHISE
OPERATED BY YOU COMPLETE ALL PHASES OF THE INITIAL TRAINING PROGRAM TO OUR
SATISFACTION THEY WILL BE DEEMED TO HAVE BEEN SUFFICIENTLY TRAINED IN THE
OPERATION OF A USBL FRANCHISE.
(g) ANY STATEMENT REGARDING THE POTENTIAL OR PROBABLE REVENUES OR PROFITS
OF THE BUSINESS VENTURE OR STATISTICAL INFORMATION REGARDING ANY EXISTING USBL
OWNED OR FRANCHISEE OWNED USBL FRANCHISE THAT IS NOT CONTAINED IN OUR FRANCHISE
OFFERING CIRCULAR IS UNAUTHORIZED, UNWARRANTED AND UNRELIABLE AND SHOULD BE
REPORTED TO USBL IMMEDIATELY.
(h) IF YOU ARE A CORPORATION, YOU ARE DULY INCORPORATED AND
ARE QUALIFIED TO DO BUSINESS IN THE STATE AND ANY OTHER APPLICABLE JURISDICTION
WITHIN THE EXCLUSIVE FRANCHISED AREA. THE OFFICERS OF FRANCHISEE EXECUTING THIS
FRANCHISE AGREEMENT ON YOUR BEHALF HAVE ALL REQUISITE CORPORATE AUTHORITY TO
BIND YOU TO THIS FRANCHISE AGREEMENT.
(I) THE EXECUTION OF THIS FRANCHISE AGREEMENT BY YOU WILL NOT
CONSTITUTE A VIOLATION OF OR VIOLATE ANY OTHER AGREEMENT OR
COMMITMENT TO WHICH YOU ARE A PARTY.
(j) ANY INDIVIDUAL EXECUTING THIS FRANCHISE AGREEMENT ON YOUR BEHALF IS
DULY AUTHORIZED TO DO SO AND THIS FRANCHISE AGREEMENT SHALL CONSTITUTE A VALID
AND BINDING OBLIGATION OF FRANCHISEE AND, WHERE APPLICABLE, ALL OF ITS PARTNERS
IF YOU ARE A
PARTNERSHIP.
16.13 Titles for Convenience. Article and Section titles used in this
Agreement are for convenience only and shall not be deemed to affect the meaning
or construction of any of the terms, provisions, covenants or conditions of this
Agreement.
16.14 Entire Agreement. This Agreement and the Operations Manual contain
all of the terms and conditions agreed upon by USBL and you with reference to
the subject matter hereof. No other agreements, oral or otherwise, shall be
deemed to exist or to bind any of said parties and all prior agreements and
understandings are superseded hereby. No officer, employee or agent of USBL has
any authority to make any representation or promise not contained in this
Agreement or in any Offering Circular for prospective franchisees required by
applicable law or the Operations Manual except in such manner as may be
described herein or in the Operations Manual. You agree that you have executed
<PAGE>
this Franchise Agreement without reliance upon any such unauthorized
representation or promise. The relationship between USBL and you (including that
documented in this Agreement) cannot be modified or changed except by a written
instrument signed by USBL and you or by our written revisions of the Operations
Manual.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their corporate seals to be affixed hereunto by their respective
duly authorized officers as of the date and year first indicated above.
Franchisor: The United States Basketball League, Inc.
_______________________ By:__________________________
Witness Its:______________________
___________________________ Attest:______________________
Witness Its:__________________
[CORPORATE SEAL]
Franchisee:_________________________
If corporation:
___________________________ By:__________________________
Witness Its:______________________
___________________________ Attest:______________________
Witness Its:__________________
[CORPORATE SEAL]
If partnership:
___________________________ By:__________________________
Witness Its:______________________
If individual:
___________________________ _______________________[SEAL]
Witness
EXHIBIT "A"
PERSON OR PERSONS WHO CONTROL FRANCHISEE:
FRANCHISEE REPRESENTATIVES:
<PAGE>
EXHIBIT 10.11
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT dated November 15, 1995, by and between The United
States Basketball League of 46 Quirk Road, Milford, Connecticut, 06464,
hereinafter referred to as "USBL" and Topaz Selections, Ltd. of The Genesis
Building, Box 61. Grand Cayman, Cayman Islands, hereinafter referred to as
"TOPAZ", or its assigns, and;
WHEREAS USBL is desirous of selling USBL franchises West of the Mississippi
and in acquiring media time on the national television markets for future
expansion and for future advertising as a public company and,
WHEREAS TOPAZ is desirous of acquiring no less than ten (10) USBL
franchises West of the Mississippi, a list of which is attached hereto;
BOTH PARTIES AGREE AS FOLLOWS:
1) PRICE- Based on the planned expansion of the USBL in the Eastern United
States and the USBL commitment to future expansion a price of $4000,000 per
franchise is agreed upon for a total of $$ million.
2) TERMS OF PAYMENT- TOPAZ agrees to pay to USBL $4 million in Advertising
Due Bills on the American Independent Network upon the signing of this agreement
for ten franchises for West of the Mississippi for play after 1997. To be paid
in 2 installments of $21,000,000 February 15, 1996 and $21,000,000 on or before
July 30, 1996.
3) FIDUCIARY- Both parties acknowledge that Blackhawk Financial Group,
Inc., shall serve as fiduciary in transaction and without compensation serve to
exchange the proper documents and assets among the parties.
4) FRANCHISE AGREEMENTS - USBL acknowledges that TOPAZ and or its assigns
will be required to sign appropriate Franchise Agreements for the respective
cities within which they wish to establish their teams and that both parties
acknowledge in good faith that minor adjustments need to be made to said
documents and that USBL, shall in good faith address those concerns which TOPAZ
has and attempt to assist them in adjusting the franchise agreement to
accommodate said changes.
THIS AGREEMENT represents the entire understanding of both parties.
UNITED STATES BASKETBALL LEAGUE TOPAZ SELECTIONS, Ltd.
S/ S/
By: President By: Director
<PAGE>
EXHIBIT 11.0
MEISENHEIMER CAPITAL, INC.
COMPUTATION OF PER SHARE EARNINGS
Fiscal year ended Fiscal quarter ended
Feb. 29, Feb. 28, May 31, May 31,
1996 1995 1996 1995
PRIMARY
Weighted average shares
outstanding 4,340,696 4,268,550 4,469,778 4,268,550
Net effect of dilutive
stock options and warrants 506,187 388,656 535,606 430,000
------- ----------- ---------- --------
Total Shares 4,846,883 4,657,206 5,005,384 4,698,550
--------- --------- --------- ---------
Net income (loss) $44,279 $ (20,647) $ 296,459 $ (47,395)
-------- ---------- -------- ---------
Primary earnings per share $ 0.01 $ (0.00) $0.06 $ (0.01)
---------- -------- ------ -------
FULLY DILUTED
Weighted average shares
outstanding 4,340,696 4,268,550 4,469,778 4,268,550
Net effect of dilutive stock
options and warrants 537,443 430,000 535,606 430,000
-------- ------- -------- --------
Total Shares 4,878,138 4,698,550 5,005,384 4,698,550
--------- --------- ---------
Net Income(loss) $44,279 (20,647) 269,459 $ (47,395)
------- ------- ------- ----------
Fully diluted earnings
per share $ 0.01 $ (0.00) $ 0.06 $ (0.01)
-------- ---------- --------- ----------
<PAGE>
EXHIBIT 16
Michael Racaniello
Certified Public Accountant
170 Post Road, Suite 204
Fairfield, Connecticut 06430
Phone (203) 255-6014
Fax (203) 259-5906
February 4, 1997
Mr. Richard Wulff, Chief
Small Business Review
United States Securities and Exchange Commission
Washington, D.C. 20549
Re: Meisenheimer Capital, Inc. (The
Company)
Form 10-SB Filed October 15, 1996
SEC File No. 0-25147
Dear Mr. Wulff:
The undersigned is furnishing this letter pursuant to Item 304(a)(3) of
regulation S-B.
The undersigned has acted as the independent certified public account for
Meisenheimer Capital, Inc. ("MCI) and its subsidiaries from April 1994, to April
15, 1996.
On April 15, 1996, MCI and its subsidiaries retained the accounting firm of
Holtz, Rubinstein, & Co. LLP, which now serves as MCI's and its subsidiaries'
independent certified public accountants. The undersigned still continues to
perform internal accounting services for MCI and its subsidiaries with the
undersigned regarding any accounting matters, nor were there any disagreements
between the undersigned and the firm of Holtz Rubinstein & Co., LLP.
The undersigned has read the disclosures contained in Item 3 of Form 10-SB of
MCI and its subsidiaries and is in agreement with those disclosures.
Very truly yours,
s/ Michael Racaniello
Michael Racaniello
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EXHIBIT 21.0
LIST OF SUBSIDIARIES
1) CADCOM, INC., A Connecticut Corporation.
2) MEISENHEIMER CAPITAL REAL ESTATE HOLDINGS, INC. A Connecticut
Corporation.
3) THE UNITED STATES BASKETBALL LEAGUE, INC., A Delaware Corporation.
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EXHIBIT 27.0
MEISENHEIMER CAPITAL INC.
FINANCIAL DATA SCHEDULE
YEAR ENDED FEBRUARY 29, 1996
This schedule contains summary financial information extracted from the
financial statements for the year ended February 29, 1996 and is qualified in
its entirety by reference to such financial statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Item
Number Item Description Amount
Period-Type 12-Mos..
Fiscal-Year-End Feb-29-1996
Period -Start Mar-01-1995
Period-End Feb-29-1996
5-02(1) Cash and cash items 278,188
5-02(2) Marketable securities 47,597
5-02(3)(a)(k) Notes and accounts receivable trade 103,017
5-02(4) Allowance for doubtful accounts 0
5-02(6) Inventory 92,370
5-02(9) Total current assets 527,172
5-02(13) Property, plant and equipment 1,100,195
5-02(14) Accumulated depreciation 486,894
5-02(18) Total assets 1,709,834
5-02(21) Total current liabilities 861,716
5-02(22) Bonds, mortgages and similar debt 231,131
5-02(28) Preferred stock-mandatory redemption 0
5-02(29) Preferred stock-no mandatory redemption
0
5-02(30) Common stock 44,695
5-02(31) Other stockholders' equity 412,292
5-02(32) Total liabilities and stockholders' equity
1,709,834
5-03(b)1(a) Net sales of tangible products 735,013
5-03(b)1 Total revenues 1,468,969
5-03(b)2(a) Cost of tangible goods sold 566,332
5-03(b)2 Total costs and expenses applicable to sales and revenues
1,282,886
5-03(b)3 Other costs and expenses 39,804
5-03(b)5 Provision for doubtful accounts and notes
0
5-03(b)8 Interest and amortization of debt discount
47,796
5-03(b)10 Income before taxes and other items 146,279
5-03(b)11 Income tax expense 16,000
5-03(b)14 Income/loss continuing operations 44,279
5-03(b)15 Discontinued operations 0
5-03(b)17 Extraordinary items 0
5-03(b)18 Cumulative effect-changes in accounting principles
0
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
5-03(b)19 Net income or loss 44,279
5-03(b)20 Earnings per share-primary .01
5-03(b)20 Earnings per share-fully diluted .01
</TABLE>
<PAGE>
MEISENHEIMER CAPITAL INC.
FINANCIAL DATA SCHEDULE
THREE MONTHS ENDED MAY 31, 1996
This schedule contains summary financial information extracted*- 00` from the
financial statements for the three months ended May 31, 1996 and is qualified in
its entirety by reference to such financial statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Item
Number Item Description Amount
Period-Type 3-Mos.
Fiscal-Year-End Feb-29-1997
Period -Start Mar-01-1996
Period-End May-31-1996
5-02(1) Cash and cash items 52,622
5-02(2) Marketable securities 71,777
5-02(3)(a)(k) Notes and accounts receivable trade 88,784
5-02(4) Allowance for doubtful accounts 0
5-02(6) Inventory 102,626
5-02(9) Total current assets 343,086
5-02(13) Property, plant and equipment 1,100,195
5-02(14) Accumulated depreciation 508,111
5-02(18) Total assets 2,104,327
5-02(21) Total current liabilities 819,130
5-02(22) Bonds, mortgages and similar debt 205,298
5-02(28) Preferred stock-mandatory redemption 0
5-02(29) Preferred stock-no mandatory redemption 0
5-02(30) Common stock 44,710
5-02(31) Other stockholders' equity 716,191
5-02(32) Total liabilities and stockholders' equity 2,104,327
5-03(b)1(a) Net sales of tangible products 191,057
5-03(b)1 Total revenues 824,995
5-03(b)2(a) Cost of tangible goods sold 145,181
5-03(b)2 Total costs and expenses applicable to sales and revenues 365,827
5-03(b)3 Other costs and expenses 1,309
5-03(b)5 Provision for doubtful accounts and notes 0
5-03(b)8 Interest and amortization of debt discount 10,531
5-03(b)10 Income before taxes and other items 457,859
5-03(b)11 Income tax expense 2,400
5-03(b)14 Income/loss continuing operations 296,459
5-03(b)15 Discontinued operations 0
5-03(b)17 Extraordinary items 0
5-03(b)18 Cumulative effect-changes in accounting principles 0
5-03(b)19 Net income or loss 296,459
5-03(b)20 Earnings per share-primary .06
5-03(b)20 Earnings per share-fully diluted .06
</TABLE>
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