APSE FIRST AMENDED COMPLAINT

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DISTRICT COURT, CITY AND COUNTY OF COLORADO Court Address: 1437 Bannock Street, Room 256 Denver, Co 80202 (702) 865-8301

PLAINTIFF: ALL PRO SPORTS AND ENTERTAINMENT, INC., a Colorado corporation,

v.

DEFENDANTS: PETER J. SCHAFFER, an individual, JOHN RICKERT a/k/a JR RICKERT, an individual, and AUTHENTIC ATHLETIX, LLC, a Colorado limited liability company.

COURT USE ONLY

Attorneys for Plaintiff All Pro Sports And Entertainment, Inc.: Richard G. Sander, #12504 Christopher Noecker #39462 Sander Ingebretsen & Wake, P.C. 1660 17th Street, Suite 450 Denver, CO 80202 Phone No.: (303) 285-5300 Fax No.: (303) 285-5301 Email: [email protected]; [email protected]

Case No. 2011CV6443 Division 203

FIRST AMENDED COMPLAINT

COMES NOW Plaintiff, All Pro Sports And Entertainment, Inc. (hereinafter “APSE”), by and through undersigned counsel, and for its First Amended Complaint for the following causes of action against Defendants, Peter J. Schaffer (“Schaffer”) and John Rickert a/k/a JR Rickert (“Rickert”) (collectively “parties”), in the above-captioned matter, states as follows:

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JURISDICTION AND VENUE

1. The Court has jurisdiction over the parties and the subject matter of this action because they are either residents of Colorado, have transacted business in Colorado, and/or committed tortious acts in Colorado.

2. Venue is proper in this Court pursuant to C.R.C.P. 98 because the parties agreed that all litigation would be in this county and because it is designated by Plaintiff.

PARTIES

3. APSE, is a corporation organized under the laws of the State of Colorado with its principal place of business in Denver, Colorado.

4. APSE was located at all times herein mentioned at 36 Steele Street, Suite 100, Denver, Colorado 80206.

5. Defendant, Peter J. Schaefer (“Schaffer”), at times relevant hereto, was an officer and director of APSE Schaffer is a resident of the State of Colorado.

6. Defendant, John Rickert a/k/a JR Rickert (“Rickert”), contracted with APSE and at all times herein mentioned is believed to have been residing at 16 Brendan Lane, Niskayuna, New York 12309. Since 2004, Rickert has conducted business in the State of Colorado by virtue of his relationship with APSE, as described below.

7. Defendant Authentic Athletix, LLC (“Authentic Athletix”) is a Colorado limited liability company that was formed on or about August 24, 2011, and has its principal place of business located at 400 S. Steele Street, Suite 47, Denver, Colorado 80209. Upon information and belief, Schaffer is the sole, or principle shareholder of Authentic Athletix.

FACTUAL ALLEGATIONS

A. All Pro Sports and Entertainment, Inc.

8. C. Lamont Smith (“Smith”), and others, incorporated APSE in 1987. APSE’s agents have represented sports and entertainment professionals for more than two decades. Their clients include professional athletes, coaches, and broadcasters. APSE’s agents assist their clients negotiate and enforce their contracts with various sports clubs and organizations. In return for their services, APSE’s agents receive a percentage of their client’s compensation from the employing club or firm.

9. Among its varied clientele, APSE represents players in the National Football League Players Association (the “NFLPA”). The NFLPA is the labor union comprised of players in the National Football League (the “NFL”).

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B. Schaffer’s Contractual and Fiduciary Relationship with APSE

10. Between the founding of APSE in 1987 and 2003, Smith worked diligently to make APSE a world-class sports management firm that specializes in the representation of sports professionals. Clients of APSE include some of the NFL’s greatest players such as Barry Sanders, Eddie George and Jerome Bettis.

11. Schaffer joined APSE in 1988. At that time Schaffer became a 12% shareholder of APSE and was appointed APSE’s vice president and a member of APSE’s board of directors.

12. In late 2003, Schaffer was given greater opportunities and responsibilities at APSE. At that time he became its COO and treasurer. In addition, his interest in APSE was increased from 12% to 30%.

13. On December 31, 2003, Schaffer executed an Employment Agreement setting forth the terms and conditions of his employment with APSE. Also, on December 31, 2003, Schaffer executed a Shareholders Agreement. A copy of Schaffer’s Employment Agreement and the Shareholder Agreement are Exhibits A and B hereto, respectively.

14. Schaffer continued in his capacity as an officer and director of APSE until August 28, 2011.

15. The NFLPA requires NFL players to sign agency agreements directly with their agents, as opposed to the agent’s firm (“Agency Agreement”) and requires the use of a Standard Representation Agreement with players. Accordingly, the shareholders of APSE, including Schaffer, structured APSE’s business model to accommodate the NFLPA’s requirement that the Agency Agreements be between the individual agent and players.

16. To accomplish this, APSE’s agents, including both Smith and Schaffer, assigned to APSE all right, title and interest in each of the Agency Agreements they entered into with their clients, including but not limited to an assignment to APSE of the right to receive any and all revenue flowing to Smith or Schaffer generated by their Agency Agreements. The assignment of the Agency Agreement is set forth within an agreement titled Assignment of Contract Rights. A true and accurate copy of Schaffer’s Assignment of Contract Rights (the “Assignment Contract”) is attached hereto as Exhibit C.

17. Schaffer signed the Assignment Contract in December 2003. The effect of the Assignment Contract is that all revenue due Schaffer (and Smith by virtue of the Assignment Contract he signed) flowing from the Agency Agreements has been assigned to APSE. The Assignment Contract provides that all revenue flowing from the Agency Agreements is to be paid to APSE even if Schaffer no longer is employed by APSE so long as Schaffer was an APSE employee at the time he entered into an Agency Agreement with the player.

18. Specifically, in the Assignment Contract, Schaffer assigned “all his right title and interest in …all fees generated by, and rights of enforcement of, all contracts between

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professional athletes…and Schaffer” entered into while Schaffer was an employee of APSE.

19. The term of the Assignment Contract commenced on the date it was signed and “shall continue so long as Schaffer is an employee of APSE.” However, “the expiration of the term or any other early termination of [the Assignment Contract] shall not affect the assignment[.]”

20. In Shaffer’s Employment Agreement, Schaffer agreed to “devote [his] full professional time and attention to the performance of [his] obligations under this Agreement, and [to] at all times faithfully, industriously, and to the best of [his] ability, experience, and talent perform all [his] obligations hereunder.”

C. Schaffer’s Improper Conduct

21. In December 2010, Schaffer began to underperform as an employee, officer, and director of APSE. Schaffer failed to perform his job functions at APSE. The failures included, but were not limited to, the following examples: (i) failure to supervise employees; (ii) failure to respond to telephone calls; (iii) failure to sign APSE checks in his capacity as COO and treasurer; (iv) failure to recruit prospective clients; (v) failure to strategize regarding APSE business matters; and (vi) failure to collect fees due, loans made and expenses advanced to clients that were subject to recoupment.

22. Despite Schaffer’s failure to discharge his duties as an employee of APSE Schaffer continued to collect salary and benefits from APSE.

23. During the December, 2010 to July, 2011 timeframe, Schaffer was meeting with prospective clients who would be eligible for the 2012 NFL draft. APSE paid all travel and entertainment expenses incurred in connection with these meetings. Upon information and belief, during this timeframe, Schaffer was acting in his own interest and not the interest of APSE, notwithstanding that at this time he was an employee, officer and director of APSE at this time.

24. On July 20, 2011, in an email to Smith, Schaffer attempted to terminate his employ with APSE. Schaffer claimed that his termination from employment at APSE was effective immediately. In truth, pursuant to the express terms of the Employment Agreement, Schaffer’s termination was not effective at that time.

25. Schaffer, however, does not dispute that he remained an officer, director, and shareholder in APSE through August 28, 2011, when he sent an email to APSE resigning as an officer and director. Prior to August 28, 2011, Shaffer owed APSE fiduciary duties since he was both an officer and director of APSE.

26. Upon information and belief, Schaffer has received payments flowing from Agency Agreements which have been assigned to APSE pursuant to the Assignment Contract and contrary to the express terms of the Assignment Contract, Schaffer has not delivered to, or caused to be delivered to, APSE all amounts it is due, by virtue of the Assignment Contract.

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27. In addition, Schaffer has caused APSE to make loans and incur expenses that are subject to recoupment (under certain circumstances) to certain of Schaffer’s clients. Schaffer has failed and refused to collect such loans and expenses that are subject to recoupment from such clients despite APSE’s repeated demands that he do so.

28. While an employee, officer and director of APSE, Schaffer has also negotiated extensions for player contracts for existing clients and negotiated new contracts for other clients, all of which are subject to the Assignment Contract. Notwithstanding his obligation to ensure that commission payments flowing from Agency Agreements are timely paid to APSE, Shaffer has improperly delayed such payments or, alternatively, received payments from clients pursuant to these new or extended contracts. As a result, APSE has not received funds to which it is entitled.

29. For example, Joe Thomas executed an Agency Agreement with Schaffer before December 2010. The Agency Agreement between Thomas and Schaffer was assigned to APSE pursuant to the Assignment Contract.

30. Thomas is a four-time NFL Pro Bowler with the Cleveland Browns. On August 22, 2011, Thomas signed a seven-year contract extension worth $84 million. Pursuant to the terms of the Assignment Contract, APSE is entitled to any and all commissions flowing from the original Thomas contract and the extension of the Thomas contract.

31. By way of further example, Schaffer negotiated a contract with the New Orleans Saints for Michael Galatas in July 2011. Pursuant to the terms of the Assignment Contract, APSE is entitled to any commissions flowing from the Galatas contract.

D. APSE’s and Schaffer’s Relationship with J.R. Rickert

32. In 2004, Schaffer presented a business opportunity to APSE involving Rickert. APSE believed that Schaffer, as an employee, officer and director of APSE presented this opportunity in good faith and in its best interests.

33. According to an article published in the July 2011 edition of Success Magazine, in July 2000, Rickert met with Schaffer and they “devised a plan” to allow Rickert to act as a sports agent along with Schaffer.

34. Based on Schaffer’s representations that an association with Rickert would benefit APSE, Rickert and APSE entered into a Joint Venture Independent Contract Agreement (the “Joint Venture Agreement”) on May 30, 2004. On his website (http://www.agentjr.com/our-team/), Rickert lists Schaffer as a member of his “team.”

35. The Joint Venture Agreement provides that APSE and Rickert shall share commissions made from players that Rickert recruited during the term of the Joint Venture Agreement.

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36. From May 30, 2004 through July 23, 2011, Rickert recruited, represented, and secured NFL employment contracts for players while subject to the Joint Venture Agreement. Players with whom JR Rickert entered into Agency Agreements include, but are not limited to, Joe Cribbs, Jamaal Jackson, Mike Patterson and Correll Buckhalter.

37. Despite receiving commission payments flowing from his representation of NFL players Rickert represented during the term of the Joint Venture Agreement, Rickert has failed to submit to APSE all amounts that are due APSE as required by the Joint Venture Agreement.

38. Rickert provided APSE with notice of termination of the Joint Venture Agreement by letter dated July 23, 2011.

39. The Joint Venture Agreement requires 30 days advance written notice prior to termination. Accordingly, the earliest the Joint Venture Agreement could have terminated was August 22, 2011.

40. Upon information and belief, Rickert and Schaffer conspired to divert their efforts, business opportunities and funds from APSE for their benefit.

E. Schaffer’s Civil Theft of APSE’s Payment Compensation Payment from Rosenhaus Sports.

41. On December 9, 2010, Schaffer entered into a NFL Players Agreement with NFL player James (“Jimmy”) Smith (“Smith Agency Agreement”).

42. On December 9, 2010, Schaffer was an employee of APSE. Pursuant to the Assignment Contract, Schaffer assigned “all his right title and interest in …all fees generated by, and rights of enforcement of, all contracts between professional athletes…and Schaffer” entered into while Schaffer was an employee of APSE.

43. Pursuant to the Smith Agency Agreement, APSE appropriately advanced funds to Jimmy Smith for training and other activities. In addition, Schaffer, while compensated as an employee of APSE, provided services to Jimmy Smith. Pursuant to the Addendum to Standard Representation Agreement between APSE and Jimmy Smith, Exhibit D hereto, APSE is entitled to recover funds advanced in the event that Jimmy Smith terminates his Standard Representation Agreement.

44. After December 9, 2010, Jimmy Smith his Standard Representation Agreement and hired sports agent Drew Rosenhaus. Pursuant to NFLPA procedures applicable to agents, and to the terms of the Addendum to Standard Representation Agreement, when this occurs the agent losing the client is reimbursed by the client or the new agent for certain funds advanced and for time expended on behalf of the client.

45. On October 13, 2011, Rosenhaus Sports advised APSE that an agreement was reached between Schaffer, on the one hand, and Rosenhaus Sports and Jimmy Smith on the other

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hand, for repayment of money advanced to Jimmy Smith by APSE and for time expended by Schaffer. Rosenhaus Sports also advised APSE that Jimmy Smith paid the amount as agreed (as opposed to Rosenhaus Sports making the payments).

46. APSE did not receive any of these funds and upon information and belief such funds were paid to Schaffer or his designee.

47. Schaffer knowingly exercised dominion and control and/or ownership over APSE’s property by retaining this money despite the fact this money clearly is the property of APSE.

48. Demand has been made by APSE that Schaffer return this money to APSE (and any other money from APSE clients Schaffer has received but hasn’t paid to APSE) but Schaffer has failed and refused to do so.

F. Authentic Athletix’s Deceptive Trade Practices.

49. The current website for Authentic Athletix can be found at http://agentaa.com/topics/clients. One of the website pages lists as Authentic Athletix’s clients, football players who were, or are, clients of APSE (http://agentaa.com/topics/clients/). Such clients include, but are not limited to, Barry Sanders, Derrick Mason Braylon Edwards Lomas Brown. Authentic Athletix has never represented, most if not all, of the APSE clients listed on its website.

50. The “stock in trade” of a sports agent is the relationships developed and clients represented by the agent. APSE has spent approximately two decades building its client base so that when it recruits new athletes to represent, APSE can point to some of the greatest football players to ever play the game, such as Barry Sanders, Eddie George and Jerome Bettis as its current and former clients.

51. Such prior representation of NFL greats gives APSE great credibility prospects and gives it an advantage over agents and their companies that have not previously represented players of such stature.

52. APSE has made at least two separate demands for Authentic Athletix to cease and desist from its deceptive practice of portraying on its website that it represented ASPE clients, when it did not.

53. By representing that Authentic Athletix represented APSE clients when it did not (indeed Authentic Athletix did not even exist when most of these APSE clients were in the NFL), Authentic Athletix committed, and continues to commit, a deceptive trade practices which damages APSE.

54. Despite the written demands that it cease and desist from this deceptive trade practice, Authentic Athletix has failed to stop its deceptive trade practice and is acting in bad

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faith.

G. Schaffer’s Refusal to Follow Buyout Procedures in Shareholders Agreement.

55. The Shareholders Agreement provides for specific procedures regarding the buyout of a shareholder’s interest in APSE in the event the shareholder no longer is employed by APSE.

56. Pursuant to Section 3 of the Shareholder Agreement, on September 7, 2011, a holder of a majority of the shares in APSE elected to determine the value of APSE by means of the appraisal method, set forth in Section 3.7(b) of the Shareholder Agreement.

57. Notwithstanding the shareholders’ election, which was in compliance with the express terms of the APSE Shareholders Agreement, Schaffer has refused to proceed with the procedures set forth in the Shareholders Agreement for valuing APSE pursuant to the appraisal method.

FIRST CAUSE OF ACTION (Breach of Contract against both Schaffer and Rickert)

58. APSE re-alleges the above-stated paragraphs and incorporates the same as if alleged in full.

59. Schaffer entered into the Shareholders Agreement, Employment Agreement and the Assignment Contract. In the Shareholders Agreement, Schaffer agreed to follow certain procedures in connection with the buyout of his interest in APSE. In the Employment Agreement, Schaffer promised to commit his “full-time best efforts to APSE.” In the Assignment Contract, Schaffer promised to deliver, or caused to be delivered, certain payments to APSE.

60. Schaffer failed to use his best efforts and to deliver, or cause to be delivered, the promised payments to APSE. In addition, Schaffer agreed to follow certain procedures in connection with the buyout of his interest in APSE and has failed and refused to do so.

61. APSE has substantially performed its part of the Shareholders Agreement, Employment Agreement and the Assignment Contract.

62. APSE had actual damages because of Schaffer’s breaches, in an amount to be proven at trial. APSE is further entitled to disgorgement of all amounts wrongfully withheld by Schaffer and not paid to APSE.

63. Rickert entered into the Joint Venture Agreement, in which he agreed to deliver certain revenues to APSE, not to engage in the business of football sports representation upon termination of the Joint Venture Agreement, and not to solicit APSE’s clients.

64. Rickert failed to deliver these revenues to APSE, engaged in the business of

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football sports representation within the prohibited geographic areas, and solicited APSE’s clients.

65. The non-competition clause in the Joint Venture Agreement was necessary to protect APSE’s trade secrets and as part of a sale of assets to APSE, and is otherwise reasonable in terms of the scope of prohibited activities, its duration, and the covered geographic area.

66. APSE substantially performed its part of the Joint Venture Agreement.

67. APSE has suffered actual damages because of Rickert’s breach of the Joint Venture Agreement, in an amount to be proven at trial.

SECOND CAUSE OF ACTION (Breach of Fiduciary Duty against Schaffer)


69. Schaffer was at all times relevant hereto an officer and director of APSE.

70. Schaffer was at all times relevant hereto an employee of APSE.

71. As an officer, and director, Schaffer owed APSE fiduciary duties including, but not limited to, duties of loyalty, honesty, and care.

72. Schaffer breached these fiduciary duties by, inter alia, converting APSE’s property, usurping APSE’s business opportunities, failing to inform APSE of business opportunities, using APSE’s confidential information to APSE’s detriment and Schaffer’s benefit, failing to deliver revenues from player-club contracts to APSE, and failing to attend APSE’s business.

73. Schaffer’s breach of fiduciary duty caused APSE damages, which damages may include disgorgement of any benefit appreciated by Schaffer as a result of his breach of fiduciary duties.

THIRD CAUSE OF ACTION (Conversion against Schaffer)


75. Schaffer knowingly exercised dominion and control and/or ownership over APSE’s property.

76. APSE demanded return of the property.

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77. Schaffer refused APSE’s demand.

78. As a direct and proximate result of Schaffer’s unlawful conversion of APSE’s property, APSE has suffered damages in an amount to be proven at trial.

FOURTH CAUSE OF ACTION (Misappropriation of Trade Secrets against Schaffer)


80. Schaffer had access to APSE’s trade secretes as its employee, officer, director, and shareholder. These trade secrets include, but are not limited to, the method and manner in which APSE recruits, negotiates and structures player contracts, and APSE’s prospective clients.

81. APSE took measures to protect the secrecy of its information, including but not limited to, requiring employees to sign agreements obligating them to maintain this information in confidence.

82. APSE provided this information to Schaffer in the claim of confidence pursuant to a confidentiality covenant.

83. Schaffer knew he had obtained this information for a limited purpose and had a duty to maintain the confidentiality of this information and to not use this information to the detriment of APSE.

84. Schaffer misappropriated APSE’s trade secrets by using them to APSE’s detriment and his benefit and disclosing them to third parties.

85. APSE has suffered damages as a result of Schaffer’s misappropriation which damages may include disgorgement of any benefit appreciated by Schaffer as a result of his misappropriation of APSE’s trade secrets, and an award of attorney fees and costs.

86. Other unnamed persons or entities, and other named persons, may have participated in this unlawful act.

FIFTH CAUSE OF ACTION (Declaratory Judgment against Schaffer and Rickert)


88. Pursuant to C.R.S. § 13-51-105 and C.R.C.P. 57, APSE is a person whose rights, status, or other legal relations are affected by a written contract who seeks to have determined a question of construction under the instruments and to obtain a declaration of rights, status or other legal relations.

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89. An actual and justiciable controversy presently exists between APSE and Schaffer and Rickert as to the proper interpretation of their respective contracts and whether Defendants are obligated to pay, or cause to be paid, revenues to APSE as required by the Assignment Contract and Joint Venture Agreement and the buyout procedures under the Shareholders Agreement.

90. A declaratory judgment will afford relief from the parties’ uncertainty with respect to their rights, status and other legal relations under the parties’ agreements.

SIXTH CAUSE OF ACTION (Civil Theft pursuant to Colo. Rev. Stat. § 18-4-401 against Schaffer)


92. Schaffer knowingly exercised dominion and control and/or ownership over APSE’s property.

93. APSE demanded return of the property.

94. Schaffer refused APSE’s demand.

95. As a direct and proximate result of Schaffer’s unlawful conversion of APSE’s property, APSE has suffered damages in an amount to be proven at trial.

96. Pursuant to Colo. Rev. Stat. § 18-4-406, APSE is entitled to three times its damages plus its attorneys’ fees and costs.

SEVENTH CAUSE OF ACTION (Deceptive Trade Practices pursuant to Colo. Rev. Stat. § 6-1-105 against Authentic Athletix)


98. Authentic Athletix’s deceptive trade practice occurred in the course of its business.

99. Authentic Athletix’s deceptive trade practice significantly impacted the public, including NFL football players and professional athletes.

100. Authentic Athlietix acted in bad faith by deceiving the public by representing that APSE’s clients were its clients.

101. APSE has been damaged in the course of its business as a result of Authentic Athletix’s deceptive trade practice.

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102. The deceptive trade practice caused actual damages or losses to the APSE.

103. APSE is entitled to recover its attorney fees incurred in connection with the pursuing this claim and treble damages as Authentic Athletix’s conduct was in bad faith.

PRAYER FOR RELIEF

WHEREFORE, APSE, prays for relief as follows:

a. An award of damages in the amount of APSE’s entitlement under the parties’ agreements and caused by Defendants’ wrongful conduct set forth herein;

b. Disgorgement of all revenue improperly retained by Defendants;

c. Damages pursuant to C.R.S. § 7-74-104, § 18-4-406 and § 6-1-113;

d. Attorneys’ fees pursuant to C.R.S. § 7-74-105, § 18-4-406 and § 6-1-113 as well as certain of the parties’ agreements, and as otherwise allowable by law;

e. Pre- and post-judgment interest, and moratory interest;

f. A declaration of APSE’s rights under the parties’ agreements;

g. A receiver to account for all monies under the parties’ agreements and to ensure the accuracy of future disbursements;

h. A constructive trust over all Defendants’ improperly retained revenues;

i. An order directing Schaffer to deliver to APSE all revenue to which APSE is entitled under the agreements;

j. Payment to APSE of all lost revenue from Schaffer’s breach of fiduciary duty and breach of contract;

k. Consequential damages in the form of lost revenue from prospective third-party purchasers of APSE; and

l. Such other relief as the court deems equitable or proper under the circumstances.

PLAINTIFF HEREBY DEMANDS A TRIAL BY JURY ON ALL CLAIMS SO ENTITLED.

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Respectfully submitted this 19th day of October, 2011.

By: s/ Richard G. Sander Richard G. Sander, #12504 Christopher Noecker #39462 Sander Ingebretsen & Wake, P.C. 1660 17th Street, Suite 450 Denver, CO 80202 Phone No.: (303) 285-5300 Fax No.: (303) 285-5301

Plaintiff’s address:

36 Steele Street, Suite 100 Denver, CO 80206

EXHIBIT A

EXHIBIT B

EXHIBIT C

EXHIBIT D

Documents

APSE FIRST AMENDED COMPLAINT