In re Minnesota Kicks, Inc.
| Decision Date | 19 March 1985 |
| Docket Number | Bankruptcy No. 4-81-2310. |
| Citation | 48 BR 93 |
| Parties | In re MINNESOTA KICKS, INC., Debtor. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
COPYRIGHT MATERIAL OMITTED
Allen I. Saeks, Michael A. Nekich, Leonard, Street & Deinard, Minneapolis, Minn., for petitioner.
Mark R. Miller, Keith D. Simmons, Hessian, McKasy & Soderberg, Minneapolis, Minn., for respondent.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER ALLOWING CLAIM NUMBER 121
This matter came on for trial on the trustee's objection to claim number 121 filed by Etablissement Oberberg. Allen I. Saeks and Michael A. Nekich appeared on behalf of Etablissement Oberberg. Mark R. Miller and Keith D. Simmons appeared on behalf of the trustee, Edward W. Bergquist.
Based on the evidence adduced at trial, the stipulation of the parties, the arguments of counsel and the entire record, I make the following:
FINDINGS OF FACT1
1. Prior to 1980 Ralph Sweet, an English entrepreneur, was the vice chair, shareholder and active manager of a British professional football2 club.
2. In early 1980 Sweet began investigating opportunities to acquire the franchise for a soccer team in the United States.
3. Sweet learned from an English solicitor, Jack Dunnett, that the Minnesota Kicks franchise was for sale. Dunnett had learned about this opportunity through Kicks' president, Freddie Goodwin.
4. Prior to October 31, 1980, Minnesota Soccer, Inc., a Minnesota corporation, owned and operated a professional soccer team known as "Minnesota Kicks".
5. Minnesota Soccer, Inc., owned and operated the "Minnesota Kicks" team as a holder of a franchise from the North American Soccer League (NASL).
6. To finance the acquisition of the Minnesota Kicks, Sweet required the participation of additional investors. In June of 1980 Sweet arranged for Arthur Wood, James Christopher Collins and himself to finance the purchase. Pursuant to their agreement the three parties would become shareholders of a corporation to be formed with contributions (30%, 30% and 40%, respectively) commensurate to their shares. The parties understood that Sweet would be active in the management of the franchise and that Wood and Collins, although officers and directors, would be passive investors.
7. Transfer of the franchise from Minnesota Soccer, Inc. to the debtor required the approval of the NASL.
8. As a condition of the transfer of a franchise the NASL required the posting of a bond or guarantee for $500,000.00 for each of the first three years the new franchisor operated the franchise. In addition the NASL required each franchise to post a $150,000.00 performance bond or letter of credit at the beginning of each season. Failure to post a bond could lead to termination of the franchise. According to the NASL constitution, performance bonds are required to "assure full satisfaction of club responsibilities."
9. In late September of 1980, in anticipation of satisfying these requirements to acquire the Kicks franchise, Sweet contacted Dudley Sanger, the London representative of Etablissement Oberberg, a Liechtenstein investment concern with which he had had previous dealings. Sweet and Sanger discussed the NASL requirements as well as the need to secure a $700,000.00 line of credit with the Marquette National Bank for operating funds.
10. Prior to October 20, 1980, Sanger discussed the Kicks investment opportunity with his superiors. He advised Sweet of the terms on which Oberberg would provide the guarantees and Sweet verbally accepted.
11. On October 20, 1980, Sanger sent Sweet a letter confirming certain terms of their agreement and asking Sweet for a written acknowledgment of his acceptance. That letter read:
Yours sincerely D.B. Sanger London Representative Etablissment Oberberg
12. Ralph Sweet negotiated and entered into the agreement as a representative and in his capacity as an officer and director of Minnesota Kicks, Inc.
13. The facility fee of $100,000.00 set forth in the October 20, 1980 letter was a consideration for the guarantees given by the letters of credit.
14. Oberberg did not require the Kicks to post any collateral or security in connection with the letters of credit from the Swiss Banking Corporation (SBC).
15. The October 20, 1980 letter does not contain the complete verbal agreement the parties had previously negotiated. The parties also agreed that checks to pay the "running fees" would be made out to the Swiss Bank but mailed to Sanger at his London office. This was intended to simplify the depositing process.
16. It was agreed that Oberberg would arrange for the Swiss Bank to issue the letters of credit rather than Oberberg itself because the parties were concerned that Oberberg's credit did not have the international recognition of the Swiss Bank.
17. Without the $150,000.00 letter of credit and the $500,000.00 letter of credit issued by the SBC on October 30, 1980 to the NASL, the NASL would not have approved the transfer of the franchise to the debtor.
18. The $500,000.00 letter of credit to the NASL (No. 146034-CL) was in the form and amount specified and required by the NASL for all member teams.
19. The $500,000.00 letter of credit to the NASL (No. 146033-CL) was in the form and amount specified and required by the NASL for all franchises during the first three years after a transfer of ownership.
20. A $700,000.00 letter of credit (No. 146205-CL) was issued by the New York branch of the Swiss Bank Corporation in favor of Marquette National Bank of Minneapolis on November 12, 1980. The Bank had specifically required that this letter of credit be issued by a bank located in the United States to avoid the complications of collecting from a foreign bank.
21. Minnesota Kicks, Inc. (debtor) was incorporated as a Minnesota corporation on October 16, 1980.
22. The debtor was established for general business purposes and was authorized to engage in any and all lawful business.
23. On October 31, 1980, the debtor entered into an agreement with Minnesota Soccer, Inc., whereby the debtor purchased certain of the assets of Minnesota Soccer, Inc. That agreement was later amended by letter agreement of November 7, 1980.
24. On November 10, 1980, a total of $1.2 million, the amount paid by the owners of Minnesota Kicks, Inc. to purchase the assets of Minnesota Soccer, Inc., was deposited in Minnesota Soccer, Inc.'s account at the Marquette National Bank (Bank). Funds from this account were subsequently paid out to the creditors and shareholders of Minnesota Soccer, Inc.
25. The assets acquired by the debtor from Minnesota Soccer, Inc., pursuant to the agreement referenced in number 23 above, consisted of the following:
(A) NASL membership, franchise
and marketing stock $200,000.00
(B) Player contracts $920,000.00
(C) Lease agreements $ 5,000.00
(D) Indoor soccer playing surface $ 12,000.00
(E) Other fixed assets and personal
property $ 25,000.00
(F) Trademarks and intangible
property $ 18,000.00
(G) Soccer novelty items $ 20,000.00
No cash or receivables were acquired by the debtor (except for ticket sales for games to be played after the closing date)3.
26. The Articles of Incorporation of the debtor named Ralph Sweet, James Christopher Collins, Arthur Wood, James Rubin and Freddie Goodwin as the first Board of Directors.
27. By an October 19, 1980 written action of the Board of Directors, Frederick Goodwin was made President; James Christopher Collins, Vice President; Michael Trucano, Secretary; and Ralph Sweet, Treasurer. In this action the Board also accepted the subscriptions of Collins and Wood as trustees for a Delaware corporation, Kicks Holding Co., which was in turn held by Sweet and several Gibraltar investment concerns of Collins and Wood. After acceptance Sweet held 40% of the available shares and Collins and Wood each held 30% pursuant to their earlier agreement.
28. The October 19, 1980 written action contains the following resolutions:
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