OUTLOOK SPORTS TECHNOLOGY, INC.
100 GRAND STREET, 5TH FLOOR
NEW YORK, NY 10013
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about November 19,
1999 by Outlook Sports Technology, Inc., a Delaware corporation (the "Company"),
to the holders of record of shares (the "Shares") of common stock, par value
$.01 per share, of the Company. You are receiving this Information Statement in
connection with the possible election of persons designated by Madison & Wall
Financial Services, Inc., a Florida corporation ("Madison & Wall" or "Parent"),
to a majority of the seats on the Board of Directors of the Company (the "Board"
or "Board of Directors").
The Company has entered into preliminary discussions with Madison &
Wall whereby Madison & Wall would exchange all of its outstanding capital stock
in exchange for 9,000,000 shares of common or securities convertible into
9,000,000 shares of common stock of the Company. No definitive documents
regarding the prospective transaction have been executed. Assuming the
transaction described herein is consummated Madison & Wall would own in excess
of 50% of the outstanding common stock of the Company and could in effect
control the management of the Company.
Simultaneously with the execution of the proposed agreement, Madison &
Wall will purchase substantially all of the assets of Continental Capital &
Equity Corporation ("CCEC"), a company engaged in the business of financial
public relations.
The proposed transaction further contemplates that the entire current
Board of Directors of the Company would resign upon the consummation of such
transaction and the Board of Directors would be replaced in its entirety by
directors designated by Madison & Wall (the "Madison & Wall Designees"). The
Company is taking all action necessary to cause the designees of Madison & Wall
to be elected to the Board in the event the contemplated transaction is
consummated.
This Information Statement is being mailed to stockholders of the
Company pursuant to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are
not, however, required to take any action with respect to the election of the
Madison & Wall Designees.
The information contained in this Information Statement concerning
Madison & Wall and the Madison & Wall Designees has been furnished to the
Company by Madison & Wall. The Company assumes no responsibility for the
accuracy or completeness of such information.
<PAGE>
CERTAIN INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. As of November 19, 1999, 4,468,2661 Shares were outstanding and
entitled to one vote per Share. In addition, 1,174,506 Shares were reserved for
issuance on that date upon the exercise of certain warrants and options that are
outstanding; and 1,227,927 Shares were reserved for issuance on that date under
the Company's existing stock option plans as of July 31, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company common stock immediately prior to this
proposed transaction, and as adjusted to reflect the issuance of the shares of
common stock pursuant to this proposed transaction by:
o each person known to beneficially own more than five percent of the
Common Stock
o each director of the Company
o all directors and executive officers as a group
<TABLE>
<CAPTION>
Beneficial Ownership
Prior to Beneficial Ownership
Proposed Transaction After Proposed Transaction
Number Percent (1) Number (2)(3) Percent (2)(3)
Name and Address
<S> <C> <C> <C> <C> <C>
PAUL H. BERGER.................................. 1,327,947 15.7% 739,125 4.31%(4)
Outlook Sports Technology, Inc.
100 Grand Street
5TH Floor
New York, NY 10013
JAMES G. DODRILL II............................. 525,277 6.1% 98,467 0.06%(5)
Outlook Sports Technology, Inc.
100 Grand Street
5TH Floor
New York, NY 10013
All directors and executive
officers as a group (3 persons) 1,871,382 22.0% 837,592 4.37%
</TABLE>
(1) Assumes exercise of 3,693,422 warrants and options. The shares
underlying these warrants and options were included in a registration
statement dated November 16, 1999.
(2) Assumes issuance of 9,000,000 shares of the Company's common stock upon
completion of proposed agreement between the Company and Madison &
Wall.
(3) Assumes 168,255 warrants transferred to Madison & Wall from James
Dodrill immediately exercisable at $3.00 per share.
(4) Assumes Mr. Berger owns 700,000 shares of common stock and 39,125
immediately exercisable warrants exercisable at $6.67 per share (see
below).
(5) Assumes Mr. Dodrill owns 75,000 shares of common stock and 23,467
immediately exercisable warrants exercisable at $6.67 per share (see
below).
- ------
1) Does not include shares of common stock underlying 3,693,422 warrants and
options registered pursuant to a Registration Statement dated November 16, 1999.
<PAGE>
The shares of common stock owned by Messrs. Berger and Dodrill
represent shares of Class A common stock received by Messrs. Berger and Dodrill
on or about June 22, 1999 in exchange for an equal number of shares of Class B
common stock owned by them. The shares of Class B common stock previously owned
by Messrs. Berger and Dodrill automatically converted into shares of Class A
common stock when, by the terms of the Class B common stock, the closing market
price for the Class A common stock was greater than $8 for a period of 10
consecutive trading days.
The amounts shown in the "Beneficial Ownership Prior to Proposed
Transaction" column for Paul H. Berger include 58,702 shares of common stock
issuable to Mr. Berger upon the exercise of options and warrants which are
immediately exercisable. The amounts shown in the "Beneficial Ownership Prior to
Proposed Transaction" column for James G. Dodrill include 359,977 shares of
common stock issuable to Mr. Dodrill upon the exercise of options and warrants
which are immediately exercisable.
The amounts shown in the "Beneficial Ownership After Proposed
Transaction" column assumes that all the shares of Common Stock registered in
the Registration Statement dated November 16, 1999 are outstanding.
The amounts shown in the "Beneficial Ownership After Proposed
Transaction" column assume that Paul Berger will return such number of shares of
common stock to the Company so that his ownership would equal 700,000 shares of
common stock. In addition, Paul Berger would reduce his warrant holdings so that
he would own 39,125 immediately exercisable warrants at an exercise price of
$6.67 per share.
The amounts shown in the "Beneficial Ownership After Proposed
Transaction" column assume that James Dodrill will return such number of shares
of common stock to the Company so that his ownership would equal 75,000 shares
of common stock. In addition, Mr. Dodrill would reduce his warrant holdings so
that he would own 23,467 immediately exercisable warrants at an exercise price
of $6.67 per share. Mr. Dodrill would also transfer 168,255 warrants exercisable
at $3.00 per share to Madison & Wall, which warrants are immediately
exercisable.
The common stock shown in the "Beneficial Ownership after proposed
transaction" column are all subject to a pledge agreement under which shares
will be held in escrow to indemnify and hold harmless the Shareholders and their
respective officers, directors and agents from and against any and all losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
reasonable counsel fees and all costs and expenses of enforcing such right of
indemnification against Shareholders), and any penalties suffered or paid,
directly and indirectly, by any Shareholder Indemnitee, as a result of or
arising out of the breach by OST of any its representations, warranties and
covenants contained in the proposed Transaction Document.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions, as of the
date of this prospectus, of all of the Company's officers and directors. Also
set forth below is information as to the principal occupation and background for
each person in the table.
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE
<S> <C> <C>
Paul H. Berger.................................. 31 Chairman of the Board and Chief Executive Officer
James G. Dodrill II............................. 33 President, General Counsel and Director
William Barthold................................ 31 Vice President
</TABLE>
MR. BERGER was one of the Company's co-founders along with Mr. Dodrill and
Mr. Barthold. Mr. Berger has served as Chairman of the Board and Chief Executive
Officer since inception. From 1994 to 1995, Mr. Berger was the Special Projects
Manager for Designs, Inc., of which his father is the Chairman of the Board. Mr.
Berger assisted in repositioning Designs from a single brand apparel chain to a
multi-brand operation. He also assisted with the acquisition by Designs of
Boston Trading Ltd., a high quality men's and women's apparel manufacturer. From
1993 to 1994, Mr. Berger served as an attorney with Designs. Mr. Berger is a
graduate of the George Washington University and the University of Miami School
of Law. Mr. Berger is licensed to practice law in the Commonwealth of
Massachusetts and the State of Florida. Mr. Berger resigned as Chief Executive
Officer of the Company on November 19, 1999.
MR. DODRILL was one of the Company's co-founders along with Mr. Berger and
Mr. Barthold. Mr. Dodrill has served as President, General Counsel and director
since inception. From 1993 to 1996, Mr. Dodrill was an associate at the law firm
of Latham & Watkins, practicing in the corporate area with an emphasis on
securities offerings, acquisitions, finance and general corporate
representation. From 1988 to 1990, Mr. Dodrill worked for Davis Polk & Wardwell
conducting research and coordinating administrative efforts regarding corporate
reorganization and recapitalization transactions and mergers and acquisitions.
Mr. Dodrill graduated from Brown UNIVERSITY AND THE UNIVERSITY OF MIAMI SCHOOL
OF LAW, MAGNA CUM LAUDE. Mr. Dodrill is licensed to practice law in the States
of New York and Florida.
MR. BARTHOLD was one of the Company's co-founders along with Mr. Dodrill
and Mr. Berger. Mr. Barthold has served as Vice President since August 1999, and
has been Logistics Manager since November 1996. From 1994 to 1996, Mr. Barthold
was the Purchasing Manager of S&K Products International, Inc. From 1992 to
1994, Mr. Barthold was the Purchasing Manager of Quark, Inc.
The Company currently has two directors, Paul Berger and James Dodrill.
The Board of Directors is divided into three classes. One class of directors is
elected each year at the annual meeting of stockholders. Each class serves for a
three-year term of office. All directors hold their positions until the annual
meeting of stockholders at which their term expires, and until their respective
successors are elected and qualified. Paul Berger serves in the class whose term
expires in 2000. James Dodrill serves in the class whose term expires in 2002.
The Company's executive officers are elected annually by the Board of Directors
and serve at the discretion of the Board of Directors or until their successors
are elected and qualified. The Company has not entered into employment
agreements with any of its executive officers.
RIGHT TO DESIGNATE DIRECTORS;
THE MADISON & WALL DESIGNEES
The proposed agreement provides that, subject to compliance with
applicable law, all of the current directors of the Company will resign and
Madison & Wall will be entitled to designate the entire Board of Directors. The
Company will take all action necessary to cause the Madison & Wall Designees to
be elected or appointed to the Board of Directors, including, without
limitation, increasing the number of directors and seeking and accepting
resignations of incumbent directors. Notwithstanding the foregoing, until the
Merger is effective, the Company will retain as members of the Board of
Directors at least two persons who were directors of the Company on the date of
the agreement.
<PAGE>
Set forth below is certain information with respect to the Madison &
Wall Designees:
<TABLE>
<CAPTION>
Name and Business Address Age
<S> <C>
Dodi B. Zirkle 36
195 Wekiva Springs Road
Suite 200
Longwood, Florida 32779
James Schnorf 45
195 Wekiva Springs Road
Suite 200
Longwood, Florida 32779
Ivan Berkowitz 53
195 Wekiva Springs Road
Suite 200
Longwood, Florida 32779
William Schwartz 66
195 Wekiva Springs Road
Suite 200
Longwood, Florida 32779
</TABLE>
DODI B. ZIRKLE
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Prior to joining CCEC, Ms. Zirkle served as General Sales Manager of Direct
Response Marketing, Inc. (DRM) from November 1989 to June 1993 and later
DataBase Direct, Inc., (which was acquired by DRM), two of the largest direct
marketing and lettershop firms in the Southeast, where she was responsible for
managing the direct marketing needs of national clientele including the National
Republican Congressional Campaign Committee in Washington, D.C., TimeWarner
Cable, Universal Studios - Florida and Premier Cruise Lines (The Big Red
Boat(R)).
She was also employed by Donnelley Directory as an account manager/sales
representative. Immediately following a three year tour of duty with the U.S.
Army, she was an Executive Assistant to the Vice Chairman of the Board of three
New York Stock Exchange companies., Rollins, Inc., Rollins Communications, Inc.,
and RPC Energy, Inc.
Since joining CCEC in 1993, Ms. Zirkle has served in a variety of capacities
involving the Company's operations. Initially, she was responsible for
overseeing all production and operational aspects of the Company's Inside Wall
Street campaigns, in addition to managing all database marketing and list rental
services. In 1995, she was promoted to Vice President of Operations where she
was responsible for creating many of the logistical operating systems employed
by the Company today. In 1997, Ms. Zirkle was promoted to Vice President of
Corporate Sales where she assisted CCEC's Chairman and CEO with multiple
managerial tasks, the negotiation and direction of high-profile client
campaigns, the development and enhancement of CCEC's debt/equity financing
source network, and the implementation of internal expansion efforts. These
activities included the development of the Broker Relations Department, the
enhancement of the Company's Financial Consulting division, and the research and
development of CCEC's Market Access Program. In 1998, Ms. Zirkle was promoted to
Chief Operating Officer and has since led the management buy-out of CCEC from
the original founder and sole owner via the creation of Madison & Wall Financial
Services, Inc.
<PAGE>
JAMES SCHNORF
CHIEF FINANCIAL OFFICER; TREASURER AND CORPORATE SECRETARY; DIRECTOR
Mr. Schnorf joined the executive management team of CCEC in February 1998 to
oversee all financial and operational concerns of the Company. Mr. Schnorf
brings to CCEC experience in the design and coordination of activities involving
financing, taxes, risk management, strategic agreements, mergers/acquisitions,
and human resource matters. He has recently joined Ms. Zirkle in the management
buy-out of Continental Capital and in the founding of Madison & Wall Financial
Services, Inc.
Mr. Schnorf's experience includes controllership responsibilities for a division
of Sequa Corp., a New York Stock Exchange entity specializing in the aerospace
industry. He also possesses approximately ten years' experience in various
executive managerial capacities at Caterpillar, Inc., a Fortune 100 manufacturer
of earth moving equipment and diesel engines.
Previously, Mr. Schnorf was the Chief Executive Officer of Cardinal Capital,
L.L.C., a limited liability company responsible for managing a fund that
provides mezzanine financing and which takes controlling interest positions in
emerging growth companies. From 1988 through 1995, Mr. Schnorf served as Chief
Financial Officer and Secretary-Treasurer of Stevens Industries, Inc., a large
manufacturer/distributor of laminated wood products.
Mr. Schnorf earned a BS degree in Accounting from Eastern Illinois University
and an MBA from the University of Illinois. Certified as a CPA and CMA, Mr.
Schnorf is an active member of the Mensa Society, the Institute of Certified
Management Accountants, the American Institute of Certified Public Accountants,
and the Financial Executives Institute. Mr. Schnorf is a Past President of
the Eastern Illinois University School of Business Advisory Board and is a
member of the University of Illinois Executive MBA Alumni Association
Board of Directors. Mr. Schnorf also sits on the Board of Directors of Aarica
Holdings, Inc., a privately-held athletic footwear manufacturer.
IVAN BERKOWITZ
DIRECTOR
During his 30-year career as an investment banker, Mr. Berkowitz has advised
multinational corporations on corporate structure, transfer pricing, EEC
anti-trust law, mergers and international syndication. He has also served on the
Board of Directors of several listed and unlisted companies. Currently, he
serves as a Director of the following public companies: Migdalei Shekel (Tel
Aviv); Propierre (Paris); HMG Worldwide (Nasdaq/NMS: HMGC) and PolyVision
Corporation (AMEX:PLI); IAT Resources Corporation (Nasdaq: IATR). He also serves
in an advisory capacity to THCG, Inc. (Nasdaq/NMS: THCG), a publicly-traded
investment banking firm.
Since 1983, Mr. Berkowitz has served as Managing General Partner of Steib &
Company, a privately-held New York based investment company. Additionally, since
1989, Mr. Berkowitz has served as President of Great Court Holdings Corporation,
also a privately held New York -based investment company. Between 1995 and 1997,
Mr. Berkowitz served as Chief Executive Officer of PolyVision Corporation. Mr.
Berkowitz has also been involved as a general partner in partnerships engaged in
the development and purchase of hotels, subsidized senior citizens housing,
retirement centers, condominiums, office buildings and shopping centers.
Mr. Berkowitz holds a BA (cum laude) from Brooklyn College, an MBA in Finance
from Baruch College, City University of New York, and a PhD in International Law
from Cambridge University, England. He frequently lectures and seminars at
Brooklyn College, Cambridge University, Whittier College School of Law, Young
Presidents Organization, and the New York Society of Security Analysts, and is a
published writer having made contributions to the Cambridge Law Journal, Mergers
and Acquisitions, Medical Dimensions and Juris Doctor and the Los Angeles Times.
Mr. Berkowitz is a life member of the Cambridge Union, American Representative
of the Research Center for International Law at Cambridge University and a board
member of numerous educational institutions and charities.
<PAGE>
WILLIAM SCHWARTZ
DIRECTOR
Mr. Schwartz has enjoyed a distinguished professional career spanning nearly 50
years. Currently, he is of counsel to the law firm Cadwalader, Wickersham & Taft
(New York, Washington, Los Angeles, Charlotte and London); University Professor
of Yeshiva University; Chairman of the Board and Director of U.S. Trust
Corporation; and Chairman of the Executive Compensation Committee and Director
of Viacom, Inc. one of the world's largest media companies and Director of
Viacom International, Inc. Mr. Schwartz also serves on the Advisory Council of
WCI Steel, Inc., a major steel manufacturer, and is a member of the Legal
Advisory Committee of the New York Stock Exchange. In addition, Mr. Schwartz is
a trustee and advisor to trusts with assets in excess of $250 million.
Mr. Schwartz has served as Dean, Boston University of School of Law (1980-1988);
Director, Feder Center for Estate Planning (1988-1991); Professor of Law
(1955-1991); Austin B. Fletcher Professor of Law, Boston University (1968-1970);
Roscoe Pound Professor of Law, Boston University (1970-1973); Faculty Member,
Francis Glessner Lee Institute, Harvard Medical Center; General Director, The
Association of Trial Lawyers of America (1968-1973); Lecturer, New England Trial
Judges Conference (1968); Faculty Member, National College of Probate Judges
(1976-1979); Estate Planning Lecturer, Mass. Continuing Legal Education, Harvard
Law School (1975); Note Editor, Boston University Law Review (1954); Property
Editor, Annual Survey of Massachusetts Law (1960-present); Lecturer, University
of Miami Estate Planning Institute (1979); Of Counsel, Swartz and Swartz,
Boston, Massachusetts (1973-1980); Director, Massachusetts Probate Study;
American Bar Foundation (1978-Present); Chairman, Massachusetts Bar Association
Task Force on Tort Liability and Insurance; General Director (Chief Executive
and Financial Officer), The Association of Trial Lawyers of America (the world's
largest trial bar association), (1968-1973); Director, the Sperry and Hutchinson
Company (1979-1981); and Vice President for Academic Affairs (Chief Academic
Officer), Yeshiva University (1993-1998).
The author of eighteen books and 53 published articles, Mr. Schwartz has been
recognized as a "Who's Who in America," "Who's Who In American Law," Who's Who
In The World," and "Who's Who In Finance and Industry." He has been honored with
the Homer Albers Award; John Ordronaux Prize; Distinguished Service Award (RZA
1977); Phi Beta Kappa; The Treat Award; and the William O. Douglas First
Amendment Freedom Award. Mr. Schwartz is very active in both civic and
charitable organizations
He holds a Juris Doctor, Magna Cum Laude (graduated first in his class) from
Boston University School of Law; completed post graduate Special Legal Studies
at Harvard Law School; earned his Master of Arts from Boston University Graduate
School; Doctor of Humane Letters from Hebrew College and a Doctor of Humane
Letters from Yeshiva University.
CERTAIN TRANSACTIONS
AMENDMENT OF CERTIFICATE OF INCORPORATION AND CONVERSION OF COMMON STOCK
On October 7, 1998, the Company amended its certificate of
incorporation to create two classes of common stock:
o 15,000,000 shares of Class A common stock, and
o 5,000,000 shares of Class B common stock
All shares of common outstanding prior to the amendment were converted
into shares of Class A common stock, except for 1,464,953 shares of common
equity owned by Paul Berger and James Dodrill, which were converted into Class B
common stock. The Class A and Class B common stock have identical rights,
including voting rights. Each share of Class B common stock held by Messrs.
Berger and Dodrill automatically converted into a share of Class A common stock
on or about June 22, 1999.
<PAGE>
TRANSACTIONS INVOLVING PAUL BERGER
From August 21, 1996 to the date of this Information Statement, Paul
Berger, the Company's Chairman of the Board of Directors and Chief Executive
Officer, made a number of advances to the Company. The advances include the
following:
o On August 21, 1996, Mr. Berger advanced $10,000 to the Company
and received a note with a term of six years, earning 7.5%
interest annually and an option to purchase 19,577 shares of
the Company's Class A common stock at a price of $0.225 per
share.
o Mr. Berger made four advances to the Company using proceeds
from sales of his own stock to other individuals, some of whom
were affiliates, at lower prices than contemporaneous sales of
stock by the Company to third-party investors.
o On October 17, 1997, Mr. Berger advanced $50,000 to
the Company after selling 100,000 shares of his stock to
Synergy Group International, Inc. at the price of $0.50 per
share. The Company issued to Mr. Berger a promissory note
for this advance bearing an annual interest rate of 12.5%.
o On October 28, 1997, Mr. Berger advanced $50,000 to the
Company after selling 100,000 shares of his stock to Carol
Dodrill, James Dodrill's mother, and Bill Powell at the price
of $0.50 per share. The Company issued to Mr. Berger a
promissory for this advance bearing an annual interest rate of
12.5%.
o On November 11, 1997, Mr. Berger advanced $2,500 to the
Company after selling 3,333 shares of his stock to Rodger
Berman at the price of $0.75 per share. The Company issued to
Mr. Berger a promissory note for this advance bearing an
annual interest rate of 12.5%.
o On January 23, 1998, Mr. Berger advanced $50,000 to the
Company after selling 50,000 shares of his stock to Andrew
Holder and Marc Roberts at the price of $1.00 per share. The
Company issued to Mr. Berger a promissory note for this
advance bearing an annual interest rate of 12.5%.
o The preceding four transactions were contemporaneous with the
Company's sale of the Company's Class A common stock at $2.10
per share.
o On July 31, 1998, Mr. Berger advanced $17,500 to the Company.
The Company issued to Mr. Berger a promissory note for this
advance bearing an annual interest rate of 12.5%.
o In January 1999, Mr. Berger exchanged an aggregate of $170,000
principal amount of indebtedness plus accrued interest for an
aggregate of 39,125 shares of Class A common stock and 39,125
warrants.
o In April 1999, Mr. Berger advanced $250,000 to the Company in
exchange for notes payable bearing interest at the prime rate
of interest. The first $100,000 of this advance is due on of
March 1, 2000 and the remainder of this advance is due on the
earlier of April 20, 2004 or is payable to Mr. Berger within
five days following the closing of a public offering of the
Company's equity securities resulting in gross proceeds equal
to or greater than $5,000,000.
<PAGE>
o Between July 1999 and August 1999, the Company borrowed an
aggregate of approximately $133,000 from Mr. Berger in
exchange for notes payable at an interest rate equal to the
prime rate. These notes are payable on December 1, 1999.
TRANSACTIONS INVOLVING JAMES DODRILL
Between September 5, 1996 and January 23, 1998, James Dodrill, the
Company's President and General Counsel, made a number of advances to the
Company, which include the following:
o On September 5, 1996, Mr. Dodrill advanced $30,000 to the
Company and the Company issued to him a note with a term of
six years, earning 7.5% interest annually and an option to
purchase 58,731 shares of the Class A common stock at a price
of $0.225 per share.
o Mr. Dodrill made the following three advances to the Company
using proceeds from sales of his own stock to other
individuals at lower prices than contemporaneous sales of
stock by the Company to third-party investors. These three
transactions were contemporaneous with the Company's sale of
the Company's Class A common stock at $2.10 per share. The
Company issued to Mr. Dodrill notes for all three advances
with an annual interest rate of 12.5%:
1. On October 17, 1997, Mr. Dodrill advanced $50,000 to
the Company after selling 100,000 shares of his stock
to Synergy Group International, Inc. at a price of
$0.50 per share.
2. On November 11, 1997, Mr. Dodrill advanced $2,500 to
the Company after selling 3,333 shares of his stock
to Rodger Berman at the price of $0.75 per share.
3. On January 23, 1998, Mr. Dodrill advanced $50,000 to
the Company after selling 50,000 shares of his stock
to Andrew Holder and Marc Roberts at the price of
$1.00 per share.
o In January 1999, Mr. Dodrill exchanged an aggregate of
$102,500 principal amount of indebtedness plus accrued
interest for an aggregate of 23,467 shares of Class A common
stock and 23,467 warrants.
o Subsequent to the end of July 31, 1999, Mr. Dodrill advanced
$181,500 to the Company in exchange for promissory notes
bearing interest at the prime rate of interest which are due
on December 1, 1999.
<PAGE>
TRANSACTIONS INVOLVING STANLEY BERGER
Between August 13, 1996 and January 16, 1998, Stanley Berger, Paul
Berger's father, made a number of advances to the Company. The following table
summarizes the loans made. For each loan, Mr. Berger received a note with the
loan amount and interest rate set forth in the table. In addition, for all but
the two repaid loans and one loan on October 1, 1997, Mr. Berger also received a
warrant to purchase the number of shares set forth in the table and at the
exercise price set forth in the table. All of these notes, aggregating $510,000,
plus interest, were exchanged in November 1998 for 102,000 shares of Class A
common stock and 102,000 warrants.
<TABLE>
<CAPTION>
Amount Interest Rate Number of Warrant
of Loan Shares Purchasable Exercise Price
Upon Exercise
of Warrant
<S> <C> <C> <C> <C>
August 13, 1996(1)..............$35,000.. --- --- ---
September 26, 1996..............$40,000.. 12.50% 4,400 $1.13
October 8, 1996.................$25,000.. 12.50% 2,750 $1.13
April 30, 1997..................$25,000.. 12.50% 3,437 $0.75
May 27, 1997....................$50,000.. 15.00% 27,708 $0.75
June 19, 1997...................$50,000.. 15.00% 27,708 $0.75
July 3, 1997....................$30,000.. 12.50% 6,000 $2.10
July 10, 1997...................$15,000.. 12.50% 3,000 $2.10
August 27, 1997(1)..............$50,000.. --- --- ---
September 12, 1997..............$50,000.. 12.50% 8,333 $2.10
October 1, 1997(2)..............$25,000.. 12.50% --- ---
October 14, 1997................$50,000.. 12.50% 8,333 $2.10
November 14, 1997...............$50,000.. 12.50% 8,333 $2.10
November 28, 1997...............$30,000.. 12.50% 2,400 $2.10
December 3, 1997................$20,000.. 12.50% 1,600 $2.10
January 16, 1998................$50,000.. 12.50% 4,000 $4.00
Total.......................$595,000. 108,002
</TABLE>
- ----------------------
(1) This note was repaid.
(2) For this loan, the Company granted Mr. Berger a security interest in
all of the Company's accounts receivable.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors and persons who own more than 10% of a registered class
of the Company's equity securities to file reports of their ownership thereof
and changes in that ownership with the Securities and Exchange Commission
("SEC") and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all such reports they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) under the Exchange Act during
fiscal 1999 and Forms 5 and amendments thereto furnished to the Company with
respect to fiscal 1999, the following persons during the last fiscal year failed
to file on a timely basis, as disclosed in the following table, reports required
by such section:
<PAGE>
<TABLE>
<CAPTION>
NUMBER
NAME NUMBER OF REPORTS OF TRANSACTIONS
<S> <C> <C>
Paul H. Berger 4 12
Jim G Dodrill, II 2 2
</TABLE>
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors held 4 meetings during fiscal 1999 and took
action by unanimous written consent in lieu of a formal meeting on all
occasions. Each director attended each Board and committee meeting held during
fiscal 1999 while such person was a member of the Board or that committee.
The Board of Directors does not have an Audit Committee, a Nominating
Committee or a Compensation Committee.
LITIGATION
The Company was a defendant in a lawsuit filed by Vardon Golf Company,
Inc. ("Vardon"). Vardon alleged in its complaint that the Company's Tegra woods
and irons infringe one of the claims of Vardon's patent issued on April 12,
1994. Vardon's patent includes claims directed to a number of aspects of a golf
club head and hosel, including claims directed to an extended radius of
gyration, which includes an aspect of the club head extending behind the hosel.
Vardon filed its complaint in the Northern District of Illinois, Eastern
Division, on May 13, 1998, in which Vardon alleges that six golf club
manufacturers, including the Company, have manufactured, sold, offered to sell
and distributed in the United States, specifically in the Northern District of
Illinois, wood-type and iron golf clubs that are covered by at least one claim
of Vardon's patent and a related design patent. Although the Company did not
believe that the Tegra line of clubs infringed any of the claims of Vardon's
patents, the Company settled the lawsuit for $20,000. Such amount remains unpaid
and, if the Company defaults on such payment, Vardon may decide to reinstate its
claim against the Company. If Vardon is successful with its claim, there can be
no assurance that a court will conclude that the Company did not violate these
patents. If Vardon is successful in asserting its patent, it could require the
Company to alter or withdraw existing products, delay or prevent the
introduction of new products, or force the Company to pay damages.
The Company had extensive negotiations with an entity representing
professional golfer Ian Woosnam for in excess of one year. The negotiations were
an attempt to reach an agreement on the terms of a long-term endorsement
contract under which Mr. Woosnam would endorse Tegra golf equipment, apparel and
accessories. While these negotiations were ongoing, Mr. Woosnam used Tegra golf
equipment, apparel and accessories while competing on the US and European PGA
Tours. The Company has not been able to reach agreement with Mr. Woosnam on the
terms of the endorsement contract. As of approximately January 1999,
negotiations have stopped.
The Company has made offers to Mr. Woosnam in an attempt to compensate
Mr. Woosnam for the value of the services he rendered during 1998. Should the
Company be unable to amicably reach an agreement with Mr. Woosnam, he may decide
to pursue legal action against the Company. In the event that Mr. Woosnam does
file a lawsuit against the Company, the Company will assert its defenses
vigorously. However, there can be no assurances that the Company will prevail
and the Company cannot estimate damages which a court may assess against the
Company if Mr. Woosnam were to prevail in any such action.
On August 3, 1999, Merrill Corporation filed a complaint with Supreme
Court of the State of New York, Index No. 603672/99, naming the Company as a
defendant. Merrill Corporation's complaint alleged, among other things, that the
Company failed to pay Merrill Corporation for certain printing services rendered
on the Company's behalf in connection with the Company's initial public
offering. In its complaint, Merrill Corporation seeks damages of $97,518.54. The
Company filed an answer to Merrill Corporation's compliant on September 13,
1999, in which the Company asserted various affirmative defenses to Merrill
Corporation's claims. As of the date this Information Statement, the Company has
reached a tentative agreement to settle this lawsuit for $71,250; however, no
settlement agreement has been executed.
<PAGE>
On September 29, 1999, Clifford Muney, Robert Smiddy and Kim Backus,
three of the Company's former employees, filed a claim with the Supreme Court of
the State of New York alleging, among other things, that the Company owes such
persons back pay and benefits. Such persons have alleged aggregate damages in an
amount that exceeds $600,000. The claims relate to such parties' employment with
Outlook Sports Technology, Inc. and such parties' subsequent termination. As of
the date of this Information Statement, the Company has not filed any responsive
pleadings, however, the Company intends to vigorously contest such claim.
From time to time the Company has been threatened with, or named as a
defendant in, lawsuits in the ordinary course of its business. The Company does
not believe that any of these lawsuits are material. There can be no assurances
that one or more future lawsuits, if decided adversely against the Company,
would not have a material adverse effect on the Company's business, financial
condition or results of operations.
COMPENSATION OF DIRECTORS
The Company's directors will be reimbursed for any out-of-pocket
expenses incurred by them for attendance at meetings of the Board of Directors
or committees thereof.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received by the
Company's Chief Executive Officer and each other executive officer whose total
annual salary and bonus exceeded $100,000 during the fiscal year ended January
31, 1999.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
Year Annual Compensation Other Annual Securities
Name and Principal Position Salary Bonus Compensation Underlying Options
Paul H. Berger, Chairman of the
<S> <C> <C> <C> <C> <C>
Board and Chief Executive Officer 1999 $ 31,249 --- $ --- ---
1998 32,721 --- 7,800 ---
James G. Dodrill II, President,
General Counsel and Director 1999 $ 31,249 --- $ --- ---
1998 32,721 --- 7,800 166,666
</TABLE>
"Other Annual Compensation" consisted of life insurance premiums the
Company paid on behalf of named executive officers.
During fiscal year end 1999, Mr. Berger deferred an additional $93,751
in compensation and Mr. Dodrill deferred an additional $93,751 in compensation.
In March 1998, Mr. Dodrill received options to purchase 166,666 shares of Class
A common stock at $3.00 per share in lieu of $92,279 in deferred compensation.
BENEFIT PLANS
STOCK OPTION PLANS. The 1996 Incentive and Non-Qualified Stock Option Plan
was adopted by the Company's Board of Directors and the Company's shareholders.
Under the 1996 plan, 1,150,000 shares of Class A common stock have been reserved
for issuance upon exercise of options designated as either:
o incentive stock options under the Internal Revenue Code, or
o non-qualified options.
Incentive stock options may be granted under the 1996 plan to the Company's
employees and officers. Non-qualified options may be granted to consultants,
directors and other persons who render services to the Company or any subsidiary
corporation whether or not they are employees.
<PAGE>
The 1998 Incentive and Non-Qualified Stock Option Plan was adopted by
the Company's Board of Directors and shareholders in June 1998. Under the 1998
plan, 800,000 shares of Class A common stock have been reserved for issuance
upon exercise of options designated as either:
o incentive stock options ("ISOs") under the Internal Revenue Code, or
o non-qualified options
Incentive stock options may be granted under the 1998 Plan to the Company's
employees and officers. Non-qualified options may be granted to consultants and
other persons who render services to the Company or any subsidiary corporation,
whether or not they are employees, and to all the Company's directors.
The purpose of the these plans is to provide additional incentive to
the Company's officers and other employees, as well as other persons providing
services on the Company's behalf. Options granted under the plans afford these
people an opportunity to acquire or increase their proprietary interest the
Company through the acquisition of shares of the Company's Class A common stock.
The Company's Board of Directors is responsible for administering the plans. The
1998 plan may also be administered by a committee consisting of at least two
disinterested directors. The Board, within the limitations of each plan, may
determine the following:
o option grants, including to whom grants will be made
o the number of shares to be covered by each option
o whether the options granted are intended to be incentive stock options
o the duration and rate of exercise of each option
o the option purchase price per share and the manner of exercise
o the time, manner and form of payment upon exercise of an option
o whether restrictions such as repurchase rights are to be imposed on
shares underlying options.
Incentive stock options granted under the plans may not be granted at a
price less than the fair market value of the Company's Class A common stock on
the date of grant, or 110% of fair market value in the case of persons holding
10% or more of the voting power of all classes of the Company's stock). The
aggregate fair market value at the time of grant of shares for which incentive
stock options granted to any person are exercisable for the first time by any
person during any calendar year may not exceed $100,000. Options under the plans
may not be granted more than 10 years after each plans' respective effective
date. Options granted to date have seven (7) year terms. The term of each
incentive stock option granted under the plans will expire not more than ten
years from the date of grant. Incentive stock options granted to persons holding
10% or more of the voting power of all classes of the Company's stock expire in
five (5). Options granted under the plans are not transferable during an
Optionee's lifetime but are transferable at death by will or under the laws of
descent and distribution. Including the options summarized in the table below,
incentive stock options and non-qualified options to purchase 722,073 shares of
Class A common stock have been granted to the Company's employees and certain
advisors and remain outstanding.
The following table sets forth as to each named executive officer:
o the total number of shares subject to options granted during the fiscal
year ended January 31, 1999
o exercise prices for such options
o the percentage such grants represent of the total option grants to
employees in the fiscal year ended January 31, 1999
o the expiration date of such option grants
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number Exercise Price Percentage of Expiration Date
of Total Options Granted
Shares Subject to to Employees
Option Grants
Name
<S> <C> <C> <C> <C>
Paul H. Berger..........................0 -- -- --
James G. Dodrill II 166,666 $3.00/share 23% 3/16/05
William Barthold 0 -- -- --
</TABLE>
The following table sets forth certain information concerning the value
of unexercised stock options held by the named executive officers:
<TABLE>
<CAPTION>
Name and Principal Position Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at January 31, 1999 Options at January 31, 1999
Exercisbale Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Paul H. Berger 19,577 0 $ 215,836.40 $0
James G. Dodrill II 58,733 0 $ 647,531.33 $0
111,111 0 1,169,998.83 $0
166,666 0 1,374,994.50 $0
</TABLE>
The value of the unexercised in-the-money options is based upon a market
price of $11.25 per share of Class A common stock.
