SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SPORTS GROUP INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
SPORTS GROUP INTERNATIONAL, INC.
NOTICE OF 2000
ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
SPORTS GROUP INTERNATIONAL, INC.
November 20, 2000
Dear Stockholder:
On behalf of the Board of Directors, it is my pleasure to invite you to
attend the Annual Meeting of Stockholders of Sports Group International, Inc. on
December 28, 2000 at 10:00 a.m., at the law offices of Ryley, Carlock &
Applewhite, P.A. in Phoenix, Arizona. Information about the meeting is presented
on the following pages.
In addition to the formal items of business to be brought before the
meeting, members of management will report on the Company's operations and
answer stockholder questions.
Your vote is very important. Please ensure that your shares will be
represented at the meeting by completing, signing, and returning your proxy card
in the envelope provided, even if you plan to attend the meeting. Sending us
your proxy will not prevent you from voting in person at the meeting should you
wish to do so.
Sincerely,
/s/ Kevin Blackwell
Kevin Blackwell
Chairman of the Board, President & C.E.O.
<PAGE>
SPORTS GROUP INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To our Shareholders:
The Annual Meeting of Stockholders of Sports Group International, Inc. (the
"Company") will be held at the law offices of Ryley, Carlock & Applewhite, P.A.
at 101 N. 1st Ave., Suite 2700, Phoenix, Arizona 85003 on December 28, 2000, at
10:00 a.m. local time, for the following purposes:
1. To elect the directors of the Company to serve for the ensuing year;
2. To approve and ratify the selection of King, Weber & Associates, P.C. as
independent auditors for the Company for the 2000 fiscal year;
3. To approve an Amendment to the Company's Articles of Incorporation to
effectuate a name change;
4. To approve an Amendment to the Company's Articles of Incorporation to
authorize 160,000 shares of an additional series of the Company's Preferred
Stock;
5. To approve an Amendment to the Company's 1999 Stock Option Plan (the
"Plan") to allow an additional 3,000,000 shares of Common Stock to be issued
under the Plan;
6. To transact any other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on November 15,
2000,as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting. Shares of common stock can be voted at the
Annual Meeting only if the holder is present at the Annual Meeting in person or
by valid proxy.
YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL
MEETING, YOU ARE REQUESTED TO PROMPTLY DATE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of The Board of Directors,
/s/ Kathryn Blackwell
Kathryn Blackwell
Secretary
Scottsdale, Arizona
November 20,2000
<PAGE>
SPORTS GROUP INTERNATIONAL, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sports Group International, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held at the time and place and for the purposes set forth in the foregoing
Notice of Annual Meeting of Stockholders. THE ENCLOSED PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY. If not otherwise specified, all proxies
received pursuant to the solicitation will be voted FOR the nominees named below
in the election of Directors, FOR the ratification of King, Weber & Associates,
P.C. as the Company's independent auditors for the 2000 fiscal year, FOR the
amendment to the Company's Articles of Incorporation to effectuate a name change
and to authorize 160,000 shares of an additional series of Preferred Stock, and
FOR the Amendment to the Company's 1999 Stock Option Plan to increase the number
of common shares authorized for issuance by 3,000,000. The address of the
Company's principal executive offices is 7730 E. Greenway Rd., Suite 104,
Scottsdale, Arizona 85260. This Proxy Statement, proxy card, and the Company's
Annual Report on Form 10-KSB are being mailed on or about December 1, 2000 to
the shareholders of record as of the close of business on November 15, 2000 (the
"Record Date").
REVOCABILITY OF PROXY AND VOTING OF PROXY
Returning your Proxy now will not interfere with your right to attend the
Annual Meeting or to vote your shares personally at the Annual Meeting, if you
wish to do so. A proxy given by a stockholder may be revoked at any time before
it is exercised by giving another proxy bearing a later date, by notifying the
Secretary of the Company in writing of such revocation at any time before the
proxy is exercised, or by attending the meeting in person and casting a ballot.
Any proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated on the proxy,
the proxy will be voted for the election of the nominees for Directors named
herein and in favor of all other proposals described herein. Because abstentions
with respect to any matter are treated as shares present or represented and
entitled to vote for the purposes of determining whether that matter has been
approved by the stockholders, abstentions have the same effect as negative
votes. Broker non-votes and shares as to which proxy authority has been withheld
with respect to any matter are not deemed to be present or represented for
purposes of determining whether shareholder approval of that matter has been
obtained. A broker non-vote occurs when a nominee voting shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to the item and has not received voting
instructions from the beneficial owner.
<PAGE>
The Company knows of no reason why any of the nominees for the Board of
Directors named herein would be unable to serve. In the event, however, that any
nominee named should, prior to the election, become unable to serve as a
director, the proxy will be voted in accordance with the best judgments of the
persons named therein. The Board of Directors knows of no matters, other than as
described herein, that are to be presented at the meeting, but if matters other
than those herein mentioned properly come before the meeting, the proxy will be
voted by the persons named in a manner that such persons, in their judgment,
consider to be in the best interests of the Company.
COST OF PROXY SOLICITATION
The Company will bear the cost of the solicitation of proxies, which will
be nominal and will include reimbursements for the charges and expenses of
brokerage firms and others for forwarding solicitation material to beneficial
owners of the outstanding common stock and preferred stock of the Company.
Proxies will be solicited my mail, and may be solicited personally by directors,
officers, or regular employees of the Company, who will not be compensated for
their services.
RECORD DATE AND VOTING SECURITIES OUTSTANDING
Only stockholders of record at the Record Date are entitled to vote at the
Annual Meeting, either in person or by valid proxy. Ballots cast at the Annual
Meeting will be counted by the Inspector of Elections, and the results of all
ballots cast will be announced at the Annual Meeting.
As of the Record Date, there were 10,710,052 shares of the Company's common
stock issued and outstanding ("Common Stock"), 575,000 shares of Series A
Preferred Stock issued and outstanding ("Series A Preferred"), and 650,000
shares of Series B Preferred Stock issued and outstanding ("Series B
Preferred"). Shareholders of the Common Stock are entitled to one vote for each
share of Common Stock held as of the Record Date. Shareholders of the Series A
Preferred and Series B Preferred are entitled to 13 1/3 and 10 votes,
respectively, for each preferred share held as of the Record Date.
2
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ANNUAL REPORT ON FORM 10-KSB
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999 (the "Annual Report"), which is being mailed to stockholders
with this Proxy Statement, contains financial and other information about the
Company, but is not incorporated into this Proxy Statement and is not to be
considered a party of these proxy soliciting materials or subject to Regulations
14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company will provide to each
stockholder as of the Record Date a copy of any exhibits listed in the Annual
Report, upon receipt of a written request and a check for $20.00 to cover the
Company's expense in furnishing such exhibits. Any such requests should be
directed to the Company's Secretary at the Company's executive offices set forth
in this Proxy Statement.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Six Directors of the Company are to be elected to hold office until the
next annual meeting and until their successors shall be duly elected an
qualified.
VOTE REQUIRED AND RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock, Series A
Preferred, and Series B Preferred present or represented by proxy and voting at
the Annual Meeting of Stockholders is required for approval of this proposal.
For purposes of this proposal, abstentions shall be treated as negative votes,
and broker non-votes shall not be deemed present or represented in determining
shareholder approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR ALL SIX OF THE DIRECTOR NOMINEES.
DIRECTOR POSITIONS AND
NOMINEE NAME AGE SINCE OFFICES HELD
------------- --- -------- -------------
Kevin Blackwell 45 1999 President, CEO, & Director
Kathryn Blackwell 35 1999 Secretary & Director
Robert Corliss 47 1999 Director
David Guarino 36 1999 Vice President & Director
Don Plato 45 1999 Director
Haresh Shah 42 n/a n/a
3
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BIOGRAPHICAL INFORMATION RELATED TO DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
Information about each nominee for director is given below:
KEVIN BLACKWELL has been President and a Director of the Company since
March 15, 1999. Prior to March 1999, Mr. Blackwell was President and Director of
Surf City Squeeze, now a wholly owned subsidiary of the Company, for more than
five years. Mr. Blackwell, and his wife Kathryn, founded the Surf City Squeeze
juice bar concept in 1981. Mr. Blackwell also serves on the Company's
Compensation Committee. Mr. Blackwell attended Eastern Washington University,
where his studies emphasized mathematics and business law.
KATHRYN BLACKWELL has been Secretary and a Director of the Company since
March 15, 1999. Prior to March 1999, Ms. Blackwell was Vice-President and
Secretary of Surf City Squeeze for more than five years, and a director of Surf
City Squeeze from its inception to January 1998. Ms. Blackwell completed four
years of study at San Jose University in 1988, where she concentrated on
business management and international business.
ROBERT CORLISS has been President and CEO of Athlete's Foot Group, Inc.
from August 1998 to the present. Prior to August 1998, he was President and CEO
of Infinity Sports, and prior to that, he was President and CEO of Herman's
Sporting Goods, Inc. Mr. Corliss is also serves as a director of Xdogs.com (OTC:
SNOW). Mr. Corliss also serves on the Company's Audit and Compensation
Committees.
DAVID GUARINO is currently Vice-President-Chief Financial Officer and a
director of the Company. From March 15, 1999 to October 12, 1999, Mr. Guarino
was a consultant to the Company. From April 1997 to March 1999, and again from
December 1995 to July 1996, Mr. Guarino served as Vice-President-Chief Financial
Officer of Surf City Squeeze. Mr. Guarino was also a director of Surf City
Squeeze from January 1998 to March 1999, and from December 1995 to July 1996.
Prior to his employment with Surf City Squeeze, Mr. Guarino served as Senior
Vice-President - Principal Financial Officer of TLC Beatrice International
Holdings, Inc. Mr. Guarino graduated from the University of Denver in 1985 with
a Masters and a Bachelors of Science degree in accounting.
DON PLATO has been Chairman of Builder's National, Inc., a commercial and
residential general contractor, for more than five years. Mr. Plato and his wife
founded Builders National in 1993. Mr. Plato was also a member of Surf City
Squeeze's Official Committee of Unsecured Creditors ("Unsecured Committee") from
January 1997 to November 1997. Since November 1997, Mr. Plato has been a member
4
<PAGE>
of Surf City Squeeze's Creditors' Representative Committee, which is the
successor to the Unsecured Creditor's Committee. Mr. Plato also serves on the
Company's Audit and Compensation Committees.
HARESH SHAH is and has been an entrepreneur and private investor for the
past five years. Mr. Shah has vast holdings, including ownership of franchised
motels, franchised retail food outlets, convenience stores, and apartment
complexes throughout the midwestern United States. Mr. Shah is also President of
Rilwala Foods, Inc., an area developer of certain of the Company's franchise
concepts.
Kevin and Kathryn Blackwell are husband and wife. Otherwise, there are no
family relationships among the directors, officers and significant employees of
the Company. Mr. Blackwell, Ms. Blackwell, and Mr. Guarino were each officers of
Surf City Squeeze, Inc., which filed for Chapter 11 bankruptcy on January 13,
1997. Surf City Squeeze, Inc. is currently operating under its Plan of
Reorganization approved by the applicable bankruptcy court.
MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
During 1999, the Board of Directors held two (2) meetings. All of the
Board's five members attended both of the meetings, constituting a quorum. The
Compensation Committee held two (2) meetings, at which all three members were
present. In addition to regularly scheduled meetings, all of the Directors were
involved in numerous informal discussions with management, offering advice,
guidance, and suggestions on a broad range of corporate matters.
The independent members of the Company's Board of Directors (directors who
are not employees or 10% shareholders of the Company) automatically receive, as
compensation for their services, a nonqualified stock option to purchase 10,000
shares of the Company's Common Stock at a price equal to 85% of the Common
Stock's fair market value on the date the option is granted. This option grant
is made upon the independent director's election to the Board of Directors. Upon
their election to the Company's Board of Directors in October, 1999, Mr. Corliss
and Mr. Plato were each granted a nonqualified option to purchase 10,000 shares
of the Company's Common Stock at $0.16 per share (calculated as 85% of the
Company's Common Stock market price on the date of grant). The independent
directors are also paid all reasonable travel expenses to attend the Company's
Board meetings, wherever held. Otherwise, directors of the Company receive no
additional compensation for their services, including participation on
committees and special assignments.
5
<PAGE>
AUDIT COMMITTEE AND COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors was created on October
12, 1999, and for the remainder of 1999, was composed of Mr. Kevin Blackwell,
Mr. Robert Corliss, and Mr. Don Plato. The Compensation Committee met twice
during 1999. The first meeting, on November 17, 1999, was to approve the
Company's grant of stock options to certain key employees, other than Mr.
Blackwell and Mr. Guarino. The second meeting, on December 10, 1999, was to
approve the Company's granting of stock options to Mr. Blackwell and Mr.
Guarino, and to approve and ratify their respective employment agreements with
the Company. Mr. Blackwell did not vote at the second meeting of the
Compensation Committee; Mr. Corliss and Mr. Plato, the Company's independent
directors, were the sole voting members of the Compensation Committee at such
meeting. The Compensation Committee reviews all aspects of compensation of
executive officers of the Company, and makes recommendations on such matters to
the full Board of Directors.
The Audit Committee of the Board of Directors was also created on October
12, 1999, and for the remainder of 1999, was composed of Mr. Robert Corliss and
Mr. Don Plato. Members of the Audit Committee communicated with the Company's
independent auditors during the fourth quarter of 1999. The Audit Committee
makes recommendations to the Board of Directors concerning the selection of
independent public accountants, reviews the Company's financial reports,
earnings records, reports filed with the Securities and Exchange Commission and
consolidated financial statements, the Company's internal controls, and
considers such other matters in relation to the external and internal audit and
the financial affairs of the Company as may be necessary or appropriate in order
to facilitate accurate and timely financial reporting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers (including a person performing a policy-making
function) and persons who own more than 10% of a registered class of our equity
securities ("10% Holders") to file with the Securities and Exchange Commission
("SEC") initial reports of ownership and reports of changes in ownership of the
Company's common stock and other equity securities. Directors, officers and 10%
Holders are required by SEC regulations to furnish the Company with copies of
all of the Section 16(a) reports they file. Based solely upon such reports, we
believe that during the fiscal year ending December 31, 1999, all of the
Company's directors, advisors, officers and 10% Holders complied with all filing
requirements under Section 16(a) of the Exchange Act.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of November 10, 2000, the number and
percentage of outstanding shares of Company Common Stock, assuming the Company's
Series A and B Preferred Stock are converted to Common Stock at their respective
conversion ratios, beneficially owned by each person known by the Company to
beneficially own more than 5% of such stock, by each director and named
executive officer of the Company, and by all directors and executive officers of
the Company as a group. The percentage of beneficial ownership is based on
25,876,718 shares outstanding on November 10, 2000, plus, for each person or
group, any securities that person or group has a right to acquire within sixty
(60) days thereof, pursuant to options, warrants, conversions, privileges or
other rights. Unless otherwise indicated, the following persons or groups have
sole voting and investment power with respect to the number of shares set forth
opposite their names:
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ --------- -----
R.E.M. Petersen Living Trust 9,970,846 38.5%
6420 Wilshire Blvd., 20th Floor
Los Angeles, CA 90048 (1,2)
Weider Health & Fitness Corp. (3) 1,442,692 5.6%
21100 Erwin Street
Woodland Hills, CA 91367
Kevin Blackwell(3) 4,200,674 16.2%
7730 E. Greenway Rd., Suite 104
Scottsdale, AZ 85260
David Guarino(3) 4,401,173 17.0%
7730 E. Greenway Rd., Suite 104
Scottsdale, AZ 85260
Robert Corliss(3) 195,225 0.8%
7730 E. Greenway Rd., Suite 104
Scottsdale, AZ 85260
All Named Executive Officers and Directors 8,797,072 34.0%
as a Group (five persons)
----------
1. Mr. Robert E. Petersen, and his wife, Margaret M. Petersen, are the
beneficiaries of the R.E.M. Petersen Living Trust, (the "Petersen Trust").
2. The Petersen Trust owns 650,000 of Series B Preferred Stock that is
convertible into the Company's Common Stock at the ratio of 10 common
shares for each share of Series B Preferred Stock. The Petersen Trust also
holds an immediately exercisable warrant to purchase 1,000,000 common
shares of the Company at the price of $0.40 per share (the "Petersen
Warrant") at any time prior to May 20, 2007. The Petersen Trust's
beneficial ownership shown here assumes its Series B Preferred Stock is
converted into Common Stock and that the Petersen Warrant is fully
exercised.
3. There are 575,000 shares of Series A Preferred Stock that are convertible
into the Company's Common Stock at the ratio of 13 1/3 common shares for
each share of Series A Preferred Stock. The Series A Preferred Stock is
owned as follows: Mr. Blackwell (225,000 shares), Mr. Guarino (237,500
shares), Weider Health & Fitness Corporation (100,000 shares) and
Mr.Corliss (12,500 shares). The beneficial ownership reported above assumes
the Series A Preferred Stock is converted into the Company's Common Stock.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary compensation information for Mr. Kevin Blackwell, the Company's
President and Chief Executive Officer for the year ended December 31, 1999 and
1998. Mr. Blackwell is the Company's only "named executive officer" within the
meaning of Regulation S-B, Item 402(a)(2), Instruction (1), as detailed below:
<TABLE>
<CAPTION>
SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPLE POSITION YEAR SALARY($) BONUS COMPENSATION STOCK AWARD(S)($) OPTION/SARS(#) PAYOUTS($) COMPENSATION($)
------------------ ---- --------- ----- ------------ ----------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin Blackwell 12/31/98 109,375 0 0 0 0 0 0
President and CEO 12/31/99 100,000 0 0 0 300,000 0 0
</TABLE>
The Company had no operations, employees or paid executive officers during
fiscal year 1998. Mr. Kevin Blackwell, the President and CEO of the Company
since March 15, 1999, served as President and CEO of Surf City Squeeze
Acquisition Corp. II ("SCAC") during all of fiscal year 1998. The Company
purchased SCAC on March 15, 1999 through a reverse merger, with Mr. Blackwell
and his management team immediately succeeding to the day-to-day control of the
Company. Accordingly, SCAC is the entity for which Executive Compensation is
disclosed for the 1998 fiscal year. Mr. Blackwell, as President and CEO of SCAC,
received $109,375 in compensation during fiscal year 1998. All of Mr.
Blackwell's compensation for fiscal year 1998 was paid by Surf City Squeeze,
Inc., a wholly owned subsidiary of the Company. No other employee of SCAC
received more than $100,000 in annual compensation during fiscal year 1998.
Additionally, other than Mr. Blackwell, no other employee of the Company
received more than $100,000 in annual compensation during fiscal year 1999.
OPTION GRANTS TO NAMED EXECUTIVE OFFICERS IN 1999 FISCAL YEAR
The following table sets forth stock options granted to Named Executive
Officers and other key employees of the Company during 1999:
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARS GRANTED
OPTIONS/ SARS TO EMPLOYEES EXERCISE OF EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR BASE PRICE($/SH) DATE
---- ---------- -------------- ---------------- ----
Kevin Blackwell 300,000 24% 1.00 09/30/04
John Brunn 100,000 8% 0.50 09/30/09
Jerry Conklin 125,000 10% 0.50 09/30/09
David Guarino 300,000 24% 1.00 09/30/04
One-third of all options granted to the Named Officers above and others in
1999 vest on each of the first, second, and third anniversary of the grant date
if the optionee is still employed by the Company on that date. Vested options
terminate if not exercised ten years after grant (or five years in the case of
an optionee who controls more than 10% of the total combined voting power of all
classes of stock of the Company) or 90 days after an employee leaves the
Company.
8
<PAGE>
EMPLOYMENT CONTRACTS
The Company currently has two employment agreements in effect with its
Named Executive Officers. The Company is a party to a three-year employment
contract, beginning October 1, 1999, with Mr. Kevin Blackwell for his services
as President and CEO of the Company and Mr. David Guarino for his services as
Vice-President-Chief Financial Officer of the Company. Both of these employment
agreements have been approved and ratified by both of the independent directors
of the Board of Director's Compensation Committee.
Both employment contracts provide for an annual base salary of $150,000, of
which $100,000 is paid by Surf City Squeeze, Inc., an automobile allowance set
by the Company's Board of Directors, and other fringe benefits that are also
made available to other employees of the Company. Both employment contracts also
provide for two years of severance pay upon termination of the employment
agreements for any reason other than "for cause", as such term is defined in the
employment agreements, in exchange for restrictive covenants regarding the
confidentiality of the Company's proprietary information and the return of such
information to the Company upon termination.
Except as detailed above, the Company has no additional employment
agreements, severance agreements, or change in control agreements with its Named
Executive Officers.
PROPOSAL NUMBER TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
King Weber & Associates, P.C., independent public accountants ("King
Weber") was the principal accounting firm used by the Company during the fiscal
year ended December 31, 1999. King Weber has served as the Company's independent
public accountant since 1998. The Board of Directors has appointed King Weber as
the principal independent accounting firm to be used by the Company during the
current fiscal year. A representative of King Weber is expected to be present at
the Annual Meeting with an opportunity to make a statement if such
representative desires to do so, and is expected to respond to appropriate
questions.
9
<PAGE>
VOTE REQUIRED AND RECOMMENDATIONS
The affirmative vote of a majority of the shares of Common Stock, Series A
Preferred Stock, and Series B Preferred Stock present at the Annual Meeting or
represented by Proxy is required for approval of this proposal. For purposes of
this proposal, abstentions shall be treated as negative votes, and broker
non-votes shall not be deemed present or represented in determining shareholder
approval. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE BOARD OF DIRECTOR'S APPOINTMENT OF KING WEBER & ASSOCIATES,
P.C. as the Company's independent certified public accountants for the fiscal
year ending December 31, 2000.
PROPOSAL NUMBER THREE
APPROVAL OF AMENDMENT TO COMPANY'S ARTICLES OF
INCORPORATION TO EFFECTUATE A NAME CHANGE
On March 15, 1999, the Company entered into a Merger Agreement and Plan of
Reorganization (the "Merger Agreement") with Sports Group International, Inc., a
Delaware corporation ("SGI"). According to the terms of the Merger Agreement,
the merger was to close on or before May 30, 1999, if certain conditions were
met. These conditions included the truth of all representations and warranties
in the Merger Agreement, and no substantial adverse change in the financial
condition or operation of SGI. During March, 1999 in anticipation of the merger
with SGI being completed, the Company changed its name to Sports Group
International, Inc., a Florida corporation.
On May 30, 1999, SGI was unable to meet the necessary conditions for the
merger to close. As such, the Merger Agreement was terminated by the Company. A
lawsuit followed this termination with the Court ruling in April, 2000 that the
Company and SGI did not merge, that the Company was justified in rejecting the
proposed merger with SGI, and that the Company and SGI were separate and
distinct entities.
Since the Company selected the Sports Group International, Inc. name solely
in anticipation of the failed merger detail above, the Company's Board of
Directors has determined that it will be in the best interests of the Company to
change its own name to avoid any confusion and/or association with SGI and to
better reflect its current business operations. After significant study,
management has recommended and the Board of Directors has unanimously approved
that the Company's name be changed to "Kahala Corp." By approving this proposal,
the shareholders will authorize the Board of Directors to amend the Company's
Articles of Incorporation accordingly. The amendment to the Company's Articles
of Incorporation will take the following form: "Article I is replaced with a new
Article I - The name of the Corporation shall be Kahala Corp."
10
<PAGE>
Management expects the formal implementation of the name change with the
Florida Secretary of State to be completed by the end of March, 2001 after
shareholder approval at the Annual Meeting; however, transitional use of the
"Sports Group International, Inc." name by the Company may continue for several
months in order to minimize the risk of shareholder and franchisee confusion.
There will be no adverse tax consequences associated with this name change.
Implementation costs during fiscal year 2001 are not expected to be material.
VOTE REQUIRED AND RECOMMENDATIONS
The affirmative vote of a majority of the shares of Common Stock, Series A
Preferred Stock, and Series B Preferred Stock present at the Annual Meeting or
represented by Proxy is required for approval of this proposal. For purposes of
this proposal, abstentions shall be treated as negative votes, and broker
non-votes shall not be deemed present or represented in determining shareholder
approval. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO EFFECTUATE A NAME CHANGE
FROM SPORTS GROUP INTERNATIONAL, INC. TO KAHALA CORP.
PROPOSAL NUMBER FOUR
APPROVAL OF AMENDMENT TO COMPANY'S ARTICLES OF
INCORPORATION TO AUTHORIZE 160,000 SHARES OF
SERIES C CONVERTIBLE PREFERRED STOCK
The Board of Directors has approved and recommends to the shareholders that
they approve an amendment to the Company's Articles of Incorporation to
authorize 160,000 shares of a new Series C of convertible preferred stock in the
Company (the "Series C Preferred Stock"). The Board of Directors believes that
the availability of additional authorized but unissued shares of preferred stock
will provide the Company with the ability to raise additional equity capital
and/or make additional acquisitions through the use of its preferred stock.
The following summarizes the significant rights and features of the 160,000
shares of proposed Series C Preferred Stock:
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The dividend rate for the Series C Preferred Stock shall be ten percent
(10%) per annum of the $10.00 par value for each share. Dividends on the Series
C Preferred Stock are to be paid only in the Company's Common Stock. Such
dividends on the Series C Preferred Stock shall be payable quarterly, and are
cumulative from the date of issuance. No dividends may be paid or set apart for
payment on any shares junior to the Series C Preferred Stock unless and until
all accrued and unpaid dividends on the Series C Preferred Stock have been
declared and paid.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series C Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Company
available for distribution to its shareholders, an amount per share of $10.00,
plus an amount equal to the unpaid cumulative dividends, without interest,
before any payment shall be made to the holders of any Common Stock or stock of
the Company ranking junior to the Series C Preferred Stock. For purposes of
liquidation, Series C Preferred Stock ranks junior to the Company's Series A and
B Preferred Stock.
The holders of Series C Preferred Stock shall have the right, at their
option, to convert their shares into Common Stock at any time after the date of
issue, in the ratio of one share of Series C Preferred Stock to 10 shares of
Common Stock. A minimum of 1,000 shares of Series C Preferred Stock must be
converted; there are no maximum limitations.
Holders of the Series C Preferred Stock shall have a general right to vote
and are entitled to notice of the meetings of shareholders of the Company, and
to participate in such meetings. Shareholders of Series C Preferred Stock are
entitled to 10 votes for each share of Series C Preferred Stock held. In
addition to these general voting rights, holders of Series C Preferred Stock
have special voting rights. If any shares of the Series C Preferred Stock are
outstanding, the Company may not (i) without the affirmative vote of at least
one-half of the votes entitled to be cast by all shares of the Series C
Preferred Stock at the time outstanding, amend or change any terms of the Series
C Preferred Stock in Article IV of the Company's Amended and Restated Articles
of Incorporation or other provisions of the Amended and Restated Articles of
Incorporation generally applicable to the Series C Preferred Stock, so as to
affect materially and adversely any such terms; (ii) without the affirmative
vote of at least one-half of the votes entitled to be cast by shares of the
Series C Preferred Stock at the time outstanding, (a) increase the authorized
number of shares of Series C Preferred Stock in excess of 160,000; (b) authorize
shares of any other class of stock ranking on a parity with or superior to
shares of Series C Preferred Stock as to dividends or assets; or (c) change the
conversion features of the Series C Preferred Stock.
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Appendix "A" attached to this Proxy Statement sets forth the proposed
amendment to the Company's Articles of Incorporation to authorize this 160,000
shares of Series C Preferred Stock.
VOTE REQUIRED AND RECOMMENDATIONS
The affirmative vote of a majority of the shares of Common Stock, Series A
Preferred Stock, and Series B Preferred Stock present at the Annual Meeting or
represented by Proxy is required for approval of this proposal. For purposes of
this proposal, abstentions shall be treated as negative votes, and broker
non-votes shall not be deemed present or represented in determining shareholder
approval. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO AUTHORIZE 160,000 SHARES
OF SERIES C CONVERTIBLE PREFERRED STOCK IN THE COMPANY.
PROPOSAL NUMBER FIVE
AUTHORIZATION TO INCREASE THE NUMBER OF SHARES ISSUEABLE
UNDER THE COMPANY'S 1999 STOCK OPTION PLAN
The Board of Directors has approved and recommends to the shareholders that
they approve an amendment to the Company's 1999 Stock Option Plan (the "Plan")
to increase the aggregate number of shares of Common Stock that may be issued
under the Plan by 3,000,000 shares, for a total of 5,000,000 shares of Common
Stock that may be issued under the Plan. Specifically, Section 6(a) of the Plan
shall be amended to allow up to 5,000,000 shares to be available for the grant
of options under the Plan. Under the original plan, only 2,000,000 shares were
available. The Company anticipates filing a Form S-8 Registration Statement with
the Securities Exchange Commission in mid-2001 to register the aggregate number
of shares of Common Stock that may be issued under the Plan.
The Board of Directors believes that the Plan has played, and will continue
to play, a major role in enabling the Company to attract and/or retain certain
officers, directors and other key employees. Options granted to such individuals
through the Plan provide personnel with long-term incentives that are consistent
with the Company's compensation policy of providing compensation that is closely
related to the performance of the Company. As of December 31, 1999, 1,240,000 of
the options available for grant under the Plan had been granted, leaving 760,000
available for grant. To allow the Company to continue to obtain the benefit of
incentives available under the Plan, the Company's Board of Directors has
adopted and recommended for submission to the shareholders for their
ratification a proposal to increase the number of shares that may be issued upon
the exercise of options granted under the Plan. The Board of Directors considers
the Plan typical of comparable plans commonly utilized by similar companies. The
Plan, including the proposed amendment, is set forth in Appendix "B" to this
Proxy Statement.
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VOTE REQUIRED AND RECOMMENDATIONS
The affirmative vote of a majority of the shares of Common Stock,
Series A Preferred Stock, and Series B Preferred Stock present at the Annual
Meeting or represented by Proxy is required for approval of this proposal. For
purposes of this proposal, abstentions shall be treated as negative votes, and
broker non-votes shall not be deemed present or represented in determining
shareholder approval. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE AUTHORIZATION TO INCREASE THE NUMBER OF SHARES ISSUEABLE UNDER THE
COMPANY'S 1999 STOCK OPTION PLAN.
SHAREHOLDER PROPOSALS
The Board of Directors will consider proposals from shareholders for items
to be presented as the Company's 2001 Annual Meeting of Stockholders. To be
considered, the proposal(s) must be received by the Company by no later than
January 15, 2001. Shareholder proposals should be mailed via certified mail,
return receipt requested, and addressed to Kathryn Blackwell, Secretary, Sports
Group International, Inc., 7730 E. Greenway Rd., Suite 104, Scottsdale, Arizona
85260.
The Board of Directors will consider nominees to the Board of Directors
recommended by stockholders. To have a nominee considered for the 2001 Annual
Meeting of Shareholders, stockholders must provide the Company's current Board
of Directors with the name of the nominee being proposed, together with a resume
of the proposed nominee setting forth the nominee's qualifications to serve as a
Director of the Company, on or before January 15, 2001. Shareholder nominees for
the Board of Directors should be mailed via certified mail, return receipt
requested, and addressed to Kathryn Blackwell, Secretary, Sports Group
International, Inc., 7730 E. Greenway Rd., Suite 104, Scottsdale, Arizona 85260.
OTHER MATTERS
The Board of Directors does not intent to present at the Annual Meeting any
matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
SPORTS GROUP INTERNATIONAL, INC.
By: /s/ Kevin Blackwell
President, Chief Executive Officer,
and Director
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APPENDIX A
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF SPORTS GROUP INTERNATIONAL, INC.
The Board of Directors of Sports Group International, Inc. (the "Company")
has approved the following First Amendment to the Company's Amended and Restated
Articles of Incorporation, to be filed with the Florida Secretary of State, for
submission to the shareholders of the Company for their consideration and
action:
1. Article 4 of the Articles of Incorporation of the Company is amended by
the addition of the following paragraphs:
C. SERIES C PREFERRED STOCK.
1. DESIGNATION AND INITIAL NUMBER. The Class of shares of Preferred Stock
hereby classified shall be designated as "Series C Preferred Stock." The initial
number of authorized shares of the Series C Preferred Stock shall be 160,000.
2. DIVIDENDS. The dividend rate for the Series C Preferred Stock shall be
ten percent (10%) per annum of the face value of $10.00 per share, and no more.
Dividends on the Series C Preferred Stock shall be payable only in shares of the
Company's common stock on a quarterly basis each calendar year. Dividends on
shares of Series C Preferred Stock shall commence and accrue and shall be
cumulative from the date in which the Series C Preferred Stock is issued. No
dividends shall be paid or set apart for payment on any shares ranking junior to
the Series C Preferred Stock unless and until all accrued and unpaid dividends
on the Series C Preferred Stock shall have been declared and paid or a sum
sufficient for payment thereof set apart.
3. LIQUIDATION OR DISSOLUTION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of Series C
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Company available for distribution to its stockholders, an amount per
share equal to Ten Dollars ($10.00) per share (plus an amount equal to unpaid
cumulative dividends) without interest and no more, before any payment shall be
made to the holders of any common stock or stock of the Company ranking junior
to Series C Stock. For purposes of this provision, the Series C Preferred Stock
shall rank junior to the Series A Preferred Stock and Series B Preferred Stock.
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4. SINKING FUND. The shares of Series C Preferred Stock may, at the
discretion of the Board of Directors, be subject to the operation of a purchase,
retirement or sinking fund.
5. CONVERSION PRIVILEGE. The holders of shares of Series C Preferred Stock
shall have the right at their option to convert their shares into common stock
at any time after the date of issue, on and subject to the following terms and
conditions:
5.1 One share of Series C Preferred Stock may be converted into 10 shares
of Common Stock at any time. A minimum of 1000 shares of Series C Preferred
Stock must be converted with no maximum.
5.2 No fraction of shares of stock of any class of the Company at any time
authorized shall be issuable upon any conversion of the Series C Stock. In lieu
of any such fraction of a share, the person entitled to an interest in respect
to such fraction shall be entitled to an additional share to round up the
fraction to the next whole share.
5.3 Any conversion of Series C Preferred Stock shall be made by the
surrender to the Company, at the office of any Transfer Agent for the Series C
Preferred Stock and at such other office or offices as the Board of Directors
may designate, of the certificate or certificates representing the share or
shares of Series C Preferred Stock to be converted, duly endorsed or assigned
(unless such endorsement or assignment be waived by the Company, together with a
written request for conversion). All shares which may be issued upon conversion
of shares of the Series C Preferred Stock shall upon issue be fully paid and
non-assessable by the Company and free from all taxes, liens, charges and
security interests with respect to the issue thereof. The Company shall not
however, be required to pay any tax which may be payable in respect to any
transfer involved in the issue and delivery of shares of Common Stock upon
conversion in a name other than that of the holder of the shares of the Series C
Preferred Stock converted, and the Company shall not be required to issue or
deliver any such share unless and until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of any such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
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5.4 All shares of Series C Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall forthwith cease except only the right
to the holders thereof to receive Common Stock in exchange therefor. No payment
or adjustment shall be made upon any conversion on account of any dividends
accrued on the shares of the Series C Preferred Stock surrendered for conversion
or on account of any dividends on the Common Stock issued upon such conversion.
6. ADJUSTMENTS TO CONVERSION RATIO. The ratio for the conversion of Series
C Preferred Stock into Common Stock (the "Conversion Ratio") shall be subject to
adjustment from time to time as follows:
6.1 In the event the Company should at any time or from time to time after
the issuance of the Series C Preferred Stock fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock without
payment of any consideration by such holder for the additional shares of Common
Stock, then, as of such record date (or the date of such dividend, distribution,
split or subdivision, if no record date is fixed), the Conversion Ratio shall be
appropriately adjusted so that the number of shares of Common Stock issuable on
conversion of each share of the Series C Preferred Stock shall be increased in
proportion to such increase of outstanding shares.
6.2 If the number of shares of Common Stock outstanding at any time after
the issuance of the Series C Preferred Stock is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Ratio shall be appropriately adjusted so that the
number of shares of Common Stock issuable on conversion of each share of such
Series C Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
6.3 OTHER DISTRIBUTIONS. In the event the Company shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Company or other persons, or assets (excluding cash dividends),
then, in each such case for the purpose of this subsection 6.3, the holder of
Series C Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Company into which their shares of Series C Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Company entitled to receive such distribution.
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6.4 RECAPITALIZATION. If, at any time or from time to time there shall be a
recapitalization of the Common Stock (other then a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 6),
provisions shall be made so that the holders of Series C Preferred Stock shall
thereafter be entitled to receive upon conversion of their Preferred Stock the
number of shares of stock or other securities or property of the Company or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 6
with respect to the rights of the holders of Series B Preferred Stock after the
recapitalization to the end that the provisions of this Section 6 (including
adjustment of the Series C Preferred Stock Conversion Price then in effect and
the number of shares purchasable upon conversion of Series C Preferred Stock)
shall be applicable after the event as nearly equivalent as may be practicable.
6.5 NO IMPAIRMENT. The Company will not by amendment of its Certificate of
the Company or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series B Preferred Stock against impairment
6.6 NO FRACTIONAL SHARES AND CERTIFICATES AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon conversion of the Series C
Preferred Stock and the number of shares of Common Stock to be issued
shall be rounded up to the nearest whole share.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Ratio pursuant to this Section 6, the Company, at its
expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each
holder of Series C Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any holder of Series C Preferred Stock,
furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment (B) the Conversion
Ratio at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time
would be received upon the conversion of a share of Series C Preferred
Stock.
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(iii) If any adjustment in the number of shares of Common Stock into which
each share of Series C Preferred Stock may be converted required
pursuant to this Section 6 would result in an increase or decrease of
less than 1% in the number of shares of Common Stock into which each
share of Series C Preferred Stock is then convertible, the amount of
any such adjustment shall be carried forward and adjustment with
respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of Series C
Preferred Stock is then convertible. All calculations under this
paragraph (iii) shall be made to the nearest one-hundredth of a share.
6.7 NOTICES OF RECORD DATE. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, the Company shall mail to each holder of Series
C Preferred Stock, at least 20 days prior to the date specified therein, notice
for specifying the date on which any such record is to be taken for the purpose
of such dividend or distribution.
6.8 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purpose of effecting the conversion of the shares of
Series C Preferred Stock such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
Series C Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Series C Preferred Stock, in addition to such
other remedies as shall be available to the holder of such Series C Preferred
Stock, the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
6.9 NOTICES. Any notice required by the provisions of this Section 6 to be
given to the holders of shares of Series C Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Company.
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6.10 MERGER, CONSOLIDATION. If at any time there is a merger or
consolidation of the Company with or into another Company or other entity or
person, or any other corporate reorganization, in which the Company shall not be
the continuing or surviving entity of such merger, consolidation or
reorganization, or the sale of all or substantially all of the Company's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of the Series C Preferred Stock shall be entitled to receive (on a
per share basis), prior to any distribution to holders of Common Stock, the
number of shares of stock or other securities or property to be issued to the
Company or its stockholders resulting from such reorganization, merger,
consolidation or sale in an amount per share equal to the applicable Liquidation
Price for the Series C Preferred Stock plus a further amount equal to any
dividends declared but unpaid on such shares.
7. VOTING RIGHTS. Holders of shares of Series C Preferred Stock shall have
a general right to vote and shall be entitled to notice of the meetings of the
stockholders of the Company, and to participate in such meetings. At general
meetings of the stockholders, Holders of Series C Preferred Stock shall be
entitled to ten (10) votes for each share of Series C Stock. Holders of shares
of Series C Preferred Stock shall be permitted to special voting rights set
forth in the following sub- paragraph 7.1 below.
7.1 So long as any shares of the Series C Preferred Stock are outstanding,
the Company shall not (a) without the affirmative vote of at least one-half of
the votes entitled to be cast by all shares of the Series C Preferred Stock at
the time outstanding amend or change any terms of the Series C Preferred Stock
in Article IV of the Articles of Incorporation of the Company or other
provisions of the Articles of Incorporation generally applicable to the Series C
Stock, so as to affect materially and adversely any such terms, (b) without the
affirmative vote of at least one-half of the vote entitled to be cast by shares
of the Series C Preferred Stock at the time outstanding, (i) increase the
authorized number of shares of Series C Preferred Stock in excess of 160,000;
(ii) authorize shares of any other class of stock ranking on a parity with or
superior to shares of Series C Preferred Stock as to dividends or assets; or
(iii) change the conversion features of the Series C Preferred Stock.
8. General Provisions. In addition to the above provisions with respect to
the Series C Stock, such Series C Preferred Stock shall be subject to and be
entitled to the benefits of, the provisions set forth in the Company's Articles
of Incorporation with respect to the Preferred Stock generally.
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APPENDIX "B"
1999 STOCK OPTION PLAN
SPORTS GROUP INTERNATIONAL, INC.
AS PROPOSED TO BE APPROVED AT THE 2000 ANNUAL MEETING
(reflecting proposed amendment)
1. PURPOSE
The Board of Directors of SPORTS GROUP INTERNATIONAL, INC., a Florida
corporation (the "Company"), wishes to adopt the 1999 Stock Option Plan
effective as of September 2, 1999 (the "1999 Stock Option Plan" or the "Plan").
The Plan will provide certain key employees of the Company (as defined below)
with an opportunity to purchase voting common stock of the Company as an
incentive to continue as employees of the Company and to work for the growth,
development, and financial success of the Company.
2. DEFINITIONS
The following terms shall have the meanings set forth below, unless context
otherwise requires.
"Board of Directors" or "Board" means the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Compensation Committee of the Board of Directors,
which shall be appointed in accordance with the procedures described in Section
5.
"Company" means Sports Group International, Inc., a Florida corporation,
and any subsidiary that is treated as a "subsidiary" under section 425 of the
Code.
"Effective Date" means September 2, 1999.
"ISO" means an incentive stock option granted a Participant under this Plan
and which qualifies as an incentive stock option under section 422 of the Code.
"Independent Director" means a director of the Company who is not an
officer, employee, or holder of 10% or more of any class of the Company's common
or preferred stock.
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"NSO" means any option granted under this Plan that is not an ISO.
"Participant" means any employee, Independent Director, or consultant of
the Company who has been selected by the Committee to participate in the Plan.
"Plan" means the Company's 1999 Stock Option Plan, effective as of
September 2, 1999.
"Stock" means the common stock of Company, par value $0.001 per share.
"Stock Option" means any ISO or NSO granted to a Participant under this
Plan, which is evidenced by a writing executed by the Participant and by an
authorized member of the Committee.
"Stock Grant" means the grant of a Stock Option.
3. STOCK GRANTS
The Committee may make Stock Grants to a Participant (including, without
limitation, "ISO"s or "NSO"s) under this Plan, in any combination. At the time a
Stock Grant is awarded under this Plan, the Committee shall designate whether
such grant is an ISO or NSO Stock Grant. Any Stock Grant made by the Committee
hereunder shall be administered pursuant to, and in accordance with, this Plan,
and shall be subject to all restrictions set forth herein.
4. ELIGIBILITY
The Committee, subject to the following limitations, shall from time to
time designate from among the Company's employees those persons who will be
Participants in the Plan. Only full- time employees of the Company at the time a
Stock Option is granted, who, in the sole judgment of the Committee, (i) are
qualified by position, training, ability, and responsibility to contribute
substantially to the progress of the Company; (ii) have a material, positive
effect on the results of the operations of the Company; or (iii) are key
employees or critical line employees shall be eligible to participate in the
Plan. Notwithstanding the foregoing, Independent Directors of the Company and
any consultant to the Company who has been designated by the Board as performing
a critical function for the Company are eligible to be Participants in the Plan.
Only employees of the Company shall be eligible to receive ISOs.
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5. ADMINISTRATION
(a) ADMINISTRATIVE COMMITTEE. This Plan shall be administered by the
Compensation Committee ("Committee"). The Committee shall be appointed
by the Board of Directors. At such time as the Company has at least
two independent directors, a majority of the Committee shall be
appointed from independent members of the Board of Directors. Members
of the Committee shall serve at the pleasure of the Board, and the
Board may, from time to time, remove members from, or add members to,
the Committee. Vacancies on the Committee, however caused, shall be
filled by the Board. No member of the Committee shall participate in
or take any action with respect to any Stock Grant made with respect
to such member, except as otherwise provided herein. The Committee
shall select one of its members as Chairman and shall hold meetings at
such times and places as it may determine. A majority of the Committee
at a meeting at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the Committee,
shall be valid acts of the Committee. The Committee shall have the
sole, final, and conclusive authority to interpret this Plan, to
determine the rights and obligations of Participants under the Plan,
and to determine matters relating to the employment of a Participant,
including, without limitation, the time at which a Participant
terminates employment. No member of the Board or the Committee shall
be liable for any action or determination made in good faith with
respect to this Plan or any option granted hereunder.
(b) ADMINISTRATION OF PLAN. The Committee may adopt rules and procedures
for administration of the Plan, to the extent such rules and
procedures are not inconsistent herewith, which shall be of general
application to all Participants and the Stock Options granted pursuant
to the Plan. Subject to the provisions of this Plan, the Committee
shall have the sole, final, and conclusive authority to determine:
(1) Those employees who will become Participants and the terms and
conditions of their eligibility;
(2) The Participants to whom Stock Grants are to be made and the
nature and amount of such Stock Grants;
(3) All terms and conditions of each Stock Grant, including, without
limitation:
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i. The number of shares of Stock (as hereinafter defined) for
which a Stock Grant is made;
ii. The price to be paid for Stock upon exercise of a Stock
Grant;
iii. The terms and conditions of the exercise;
iv. The terms of payment of the exercise price of a grant;
v. Any conditions to which the grant or its exercise may be
subject;
vi. Any restrictions or limitations placed on Stock issued
pursuant to the exercise of a Stock Grant; and
vii. Any vesting schedule applicable to any Stock Grant.
6. SHARES OF STOCK SUBJECT TO PLAN
(a) SHARES RESERVED FOR OPTION GRANTS. There shall be reserved for the
Stock Grants pursuant to this Plan (including Stock Grants made under
Section 8) 5,000,000 shares of the presently authorized but unissued
Stock. ISOs or NSOs, or any combination thereof, may be granted
pursuant to this Plan from such shares, up to such total limitation;
provided, however, that in no event shall the aggregate number of
shares of Stock subject to all Stock Grants made under this Plan
exceed 5,000,000 shares of Stock, except as described in paragraph (b)
below.
(b) ADJUSTMENT TO SHARES. The aggregate number of shares of Stock which
may be issued under paragraph (a) of this Section 6 pursuant to Stock
Grants made under this Plan shall be automatically adjusted, without
further action by the Board or the shareholders of the Company, to
reflect changes in the capitalization of the Company, such as stock
dividends, stock splits, reverse stock splits, subdivisions,
reorganizations or reclassification, or any similar recapitalization
that affects or modifies the number of shares of Stock issued and
outstanding at any time.
(c) NUMBER OF STOCK GRANTS; PARTIAL EXERCISE. More than one Stock Grant
may be made to the same Participant, and Stock Grants may be subject
to partial exercise. If any Stock Grant made under this Plan expires
or is terminated without being exercised, or after being partially
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exercised, the shares of Stock allocated to the unexercised portion of
a Stock Grant shall revert to the pool of shares reserved in paragraph
(a) of this Section for grants made hereunder and shall again be
available for Stock Grants made under this Plan.
(d) ISOS. The aggregate fair market value of Stock subject to an ISO
granted under this Plan (determined without regard to this paragraph)
exercisable for the first time by any Participant during any calendar
year (under all plans of the Company) shall not exceed $100,000. The
preceding sentence shall be applied by taking ISO Options into account
in the order in which they were granted hereunder. If any ISO is
granted that exceeds the limitations of this paragraph at the first
time it is exercisable, it shall not be invalid, but shall constitute
and be treated as an NSO to the extent of such excess. For purposes of
this Plan, the fair market value of the Stock subject to any ISO shall
be determined by the Committee without regard to any restriction other
than a restriction which, by its terms, will never lapse.
7. TERMS AND CONDITIONS OF GRANTS
(a) GRANT AGREEMENT. Each Stock Grant made under this Plan shall be
evidenced by a written agreement ("Stock Grant Agreement") and shall
be executed by the Company and the Participant. The Stock Grant
Agreement shall contain any terms and conditions required by this Plan
and such other terms and conditions as the Committee, in its sole
discretion, may require that are not inconsistent with the Plan.
(b) NUMBER OF SHARES AND NOTICE OF OPTION. Each Stock Grant shall state
the number of shares of Stock subject to the grant and shall state
whetherthe action is for an ISO or NSO.
(c) OPTION OR PURCHASE PRICE. Each Stock Option shall state the exercise
price of the option, which, in the case of an ISO, shall not be less
than 100% of the fair market value of the optioned Stock on the date
the Stock Option is granted. In the case of a Participant who, at the
time the ISO is granted, owns shares of Stock possessing more than 10%
of the total combined voting power of all classes of stock of the
Company (or any parent or subsidiary), the exercise price of such ISO
shall be not less than 110% of the fair market value of Stock on the
date the option is granted, and, in no event shall such option be
exercisable after the expiration of five years from the date such
option is granted. The exercise price for any share of stock subject
to an NSO Stock Grant shall not be less than 85% of the fair market
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<PAGE>
value of a share of the Stock as of the date of grant. The fair market
value of a share of the Company's Stock shall equal the closing price
for such stock on the day preceding the date of grant, as reported by
the National Association of Securities Dealers Automated Quotation
System (NASDAQ) (National Market) or THE WALL STREET JOURNAL. If for
any reason the Company's stock is not publicly traded on a national
securities market or not listed on NASDAQ, the Committee shall
evaluate all factors which the Committee believes are relevant in
determining the fair market value of a share of Stock and, the
Committee, in good faith and exercising its business judgment, shall
establish the fair market value of the Stock as of the date an option
is granted.
(d) LIMITATION ON PERIOD IN WHICH TO GRANT OR EXERCISE OPTIONS. No ISO or
NSO shall be granted under this Plan more than 10 years after the
earlier of (i) the date the Plan is adopted by the Board or (ii) the
date the Plan is approved by the shareholders of the Company. Any
Stock Grant other than an ISO made under the Plan may be exercised at
any time permitted by the Stock Option Agreement and may be granted
any time prior to the termination of the Plan.
(e) TRANSFERABILITY. No Stock Grant made under this Plan shall be
transferable by the Participant other than by will or by the laws of
descent and distribution. During a Participant's lifetime, a Stock
Grant made hereunder shall be exercisable only by the Participant and
only if at all times during the period of time beginning on the date
the Stock Grant is made and ending on the day three months (or one
year, in the case of an employee who retires on account of becoming
"permanently and totally disabled" within the meaning of that term
under section 22(e)(3) of the Code) before the date of exercise of
such Stock Grant, such Participant was an employee of the Company (or
a corporation or a parent corporation or subsidiary corporation of a
corporation assuming an option in a transaction to which section
424(a) of the Code applies).
(f) PAYMENT FOR STOCK. The exercise price for any shares of Stock acquired
through the whole or partial exercise of any Stock Grant shall be paid
in cash or immediately available funds, or in Stock with a current
market value equal to all or a part of the exercise price, or both.
(g) COMPLIANCE WITH APPLICABLE LAWS AND Regulations. Stock Grants made
under this Plan shall contain such provisions with respect to
compliance with applicable federal and state law as the Committee,
with the advice of the Company's counsel, may deem appropriate,
including, without limitation, any provision necessary to comply with
state or federal securities laws.
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<PAGE>
(h) DISPOSITION OF ISO STOCK. No Stock issued in connection with a
Participant's exercise of an ISO may be disposed of by the Participant
within two years from the date the option is granted nor within one
year after the date such Stock is issued to the Participant and be
eligible for treatment as an ISO; provided, however, unless otherwise
provided in the Stock Grant Agreement, these holding periods shall not
apply if the Stock Option is exercised after the death of a
Participant by the estate of such Participant, or by a person who
acquired the right to exercise such option by bequest or inheritance
or by reason of the death of a deceased Participant.
(i) TERM OF ISO. In no event shall an ISO granted under this Plan be
exercised after the expiration of 10 years from the date such option
is granted.
(j) INSOLVENT PARTICIPANTS. No disposition of Stock, as described in
Section 422(c)(3) of the Code, acquired pursuant to the exercise of an
ISO shall constitute a disposition of Stock in violation of paragraph
(h) of this Section.
(k) NON-INCENTIVE STOCK OPTION GRANTS. Any provision of this Plan to the
contrary notwithstanding, the Company may, in its sole discretion,
grant any Participant an NSO which, if provided in the granting
agreement, may be exercised after the termination of the Participant's
employment with the Company.
8. STOCK GRANTS TO INDEPENDENT DIRECTORS
There is hereby reserved for Stock Grants made to Independent Directors of
the Company 100,000 shares of Stock. The Stock available exclusively for grants
to Independent Directors shall reduce the number of shares of Stock available
for issuance under Stock Options granted to employees and consultants under
other provisions of this Plan. Only Independent Directors of the Company shall
be eligible for Stock Grants under this Section 8 of the Plan.
(a) Any Independent Director who is appointed or elected to the Board
after the Effective date shall automatically receive an NSO for 10,000
shares of the Company's Stock. The Stock Option shall be subject to
forfeiture if the Director voluntarily resigns within one year after
27
<PAGE>
the date of his election as a Director. Except as otherwise provided
in any written agreement between the Company and the Director, any
Stock Option granted an Independent Director shall expire on the
earlier of (i) ten years after the date of grant; (ii) one year after
the Independent Director terminates his service as a Director of the
Company; or (iii) the Expiration Date stated in the Stock Option
Agreement.
(b) Each Stock Grant made under this Section 8 shall be evidenced by a
written Stock Option Agreement that shall be executed by the Company
and the Independent Director. The Stock Option Agreement shall contain
all terms and conditions required by the Board, which the Board may in
its discretion require, including, without limitation, restrictions on
the transferability of any Stock issued pursuant to this Section 8.
(c) The exercise price of any Stock Option granted to an Independent
Director under this Section shall be 85% of the fair market value of a
share of the Company's Stock as of the date of grant. The fair market
value of the Company's Stock shall be determined in the same manner as
provided in Section 7(c).
(d) No Stock Option granted under this Section shall be transferable by
the Participant, other than by will or the laws of descent and
distribution. During a Participant's lifetime, a Stock Option granted
hereunder shall be exercisable only by the Participant and only if, at
all times during the period, beginning on the date the Stock Option
was granted and ending three years (or one year in the case of a
Director who is permanently disabled within the meaning of Section
22(e)(3) the Internal Revenue Code) before the date of the exercise of
such Stock Option, such Participant was a Director with the Company.
(e) The exercise price of any Stock Option granted hereunder shall be paid
in cash or immediately available funds or in Stock with a current
market value equal to all or part of the exercise price, or both. Any
Stock Option granted to an Independent Director shall not be
exercisable for at least six months following the date such Stock
Option was granted or awarded.
(f) In addition to granting Stock Options to Independent Directors, as
provided herein, a majority of the Board of Directors (exclusive of
any Directors who are Participants in the Plan pursuant to this
Section) may elect to pay the Director's fees of any Independent
Director by the issuance of Common Stock for services rendered;
provided that such Stock shall be valued at its fair market value
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<PAGE>
prior to the date such Director's fee is due and payable. The fair
market value of any Stock issued to an Independent Director under this
Section shall be determined in the same manner as set forth in Section
7(c) of this Plan.
(g) The right to grant Options under this Section 8 shall expire upon the
date this Plan expires.
(h) A Participant, as a condition to the exercise of any Stock Option,
shall execute and deliver to the Company an investment letter in such
form as the Board of Directors, with the advice of legal counsel, may
from time to time determine to be appropriate.
(i) Any funds received pursuant to the exercise option under this Section
8 shall be used for general corporate purposes.
(j) Any options granted under this Section 8 shall be subject to all other
terms and conditions of all other terms and conditions of this Plan
which are not inconsistent with this Section.
9. MERGERS OR CONSOLIDATIONS
If the Company at any time dissolves or undergoes a reorganization,
including, without limitation, a merger or consolidation with any other
corporation, in any manner or form whatsoever, and the Company is not the
surviving corporation and the surviving corporation does not agree to assume the
options granted pursuant to this Plan, or to substitute options in place
thereof, the Stock Grants made under this Plan may be terminated and canceled by
a resolution of the Board of Directors, subject to the procedures set forth in
this Section. Prior to any termination of this Plan or the Stock Grants made
hereunder, each Participant holding an outstanding Stock Grant not yet exercised
shall be notified of such termination and cancellation, and shall be provided a
period of not less than 15 days in which to exercise such Stock Grant prior to
its termination. A Participant's rights under the preceding sentence shall apply
without regard to whether such rights are specifically stated in any Stock
Option Agreement. In connection with any such termination of Stock Grants, the
Committee may, in its sole discretion, prescribe such terms and conditions as
the Committee deems appropriate and authorize the exercise of such Stock Grants
with respect to all shares covered. Any Stock Grant not exercised in accordance
with such prescribed terms and conditions shall terminate as of the date
specified by the Committee, and simultaneously, the Plan itself shall be
terminated, without further action by shareholders of the Company.
29
<PAGE>
10. TERMINATION OF EMPLOYMENT
Except as provided in Section 7(k), any Stock Grant made pursuant to this
Plan shall immediately terminate upon a Participant's termination of employment
with the Company, unless such termination of employment occurs by reason of the
death or retirement (including early retirement) of the Participant or on
account of the permanent and total disability of the Participant (as such term
is defined in Section 22(e)(3) of the Code and the regulations therein). Upon
retirement, a Participant (or the administrator or conservator of the
Participant's estate) may, subject to Section 7(i) of the Plan, exercise any
Stock Option granted in full within three months of retirement or, in the event
the Participant retired or terminated employment on account of "permanent and
total disability" (as that term is defined in Section 22(e)(3) of the Code),
within one year of retirement. Should a Participant die while in the employment
of the Company or within three months after retirement, the Participant's
personal representative of his or her estate or other person who acquired the
right to exercise such option by bequest or inheritance or by reason of the
death of the deceased optionee may, subject to Section 7(i) of the Plan or any
contrary provision of the Stock Grant Agreement, exercise the option in full
within two years from the date of the optionee's death.
11. EXPIRATION DATE OF PLAN
If not earlier terminated, this Plan shall terminate on September 1, 2009.
In no event shall any Stock Option be granted under this Plan after September 1,
2009. In no event shall any ISO be granted under this Plan after September 1,
2009.
12. ADJUSTMENT TO SHARES SUBJECT TO STOCK OPTION
In the event the issued and outstanding Stock of the Company is increased
or decreased by reason of any stock split, reverse stock split, subdivision,
stock dividend, reorganization, or reclassification, the Stock subject to any
unexercised Stock Grant shall be automatically adjusted, without further action
on the part of any person, to reflect the effect of such event, as if the shares
of Stock subject to such Stock Grant were then issued and outstanding.
13. CORPORATE ACTION
The grant of an option pursuant to this Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of any kind to its capital or business structure or
30
<PAGE>
to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of
its business or assets.
14. RIGHTS AS A SHAREHOLDER
A Participant shall have no rights as a shareholder of the Company with
respect to any shares of Stock subject to a Stock Grant made hereunder until the
date of the issuance of a stock certificate to the Participant for such shares.
Except as provided in Sections 6(b) and 12, no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities, or other
property) or distributions or other rights for which the record date precedes
the date a stock certificate is issued to a Participant upon exercise of a Stock
Grant, except as otherwise provided in this Plan.
15. INVESTMENT PURPOSE
The Stock Grant and the Stock which is subject to any Stock Grant issued
under this Plan have not been registered with the Securities and Exchange
Commission. Each Stock Grant made under this Plan is subject to the condition
that the purchase of Stock hereunder by a Participant is for investment purposes
only, and not with a view to the subsequent resale or distribution of such
Stock, unless such Stock is registered under the Securities Act of 1933, as
amended, or an exemption from registration is available.
16. INVESTMENT LETTER
Any Participant exercising a Stock Grant shall, as a condition to such
exercise, execute and deliver to the Company an investment letter in any form
the Committee may require.
17. AMENDMENT OF THE PLAN
The Board may terminate, suspend, discontinue, modify or amend this Plan in
any respect whatsoever, except that, without approval of the shareholders of the
Company, no such revision or amendment shall change the number of shares of
stock of the Company subject to the Plan, change the designation of the class of
employees eligible to receive options, decrease the price at which options may
be granted or remove the administration of the Plan from the Committee. The
preceding sentence notwithstanding, the Company may not terminate this Plan with
respect to any issued and outstanding Stock Grant unless it gives the
Participant notice of termination and not less than 15 days in which to exercise
such Stock Grant, if such Stock Grant is then exercisable. To the extent this
Plan has authorized the Committee to grant ISOs, this Plan shall be interpreted
31
<PAGE>
and construed so as to qualify as an incentive stock option plan under Section
422 of the Code and the regulations thereunder.
18. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of shares of Stock
pursuant to the exercise of options shall be used for general corporate
purposes.
19. OBLIGATION TO EXERCISE GRANT
A Stock Grant shall impose no obligation upon the grantee to exercise such
grant.
20. APPROVAL OF SHAREHOLDERS; TERMINATION OF PLAN
This Plan shall be effective as of the Effective Date, subject to the
approval of the shareholders of the Company who hold a majority of the issued
and outstanding shares of all classes of stock of the Company, which approval
must occur within the period beginning 12 months before and ending 12 months
after the date the Plan is adopted by the Board of Directors. The Committee may
cause Stock Grants to be made under the Plan, subject to the Plan being approved
by the Company's shareholders within the period described above. If for any
reason the Company's shareholders should fail to approve this Plan within the
time stated, all Stock Grants made hereunder shall be void.
IN WITNESS WHEREOF, the foregoing Plan was approved by the Board of
Directors on September 2, 1999, and by a majority of the shareholders of the
Company on October 12, 1999 and is executed by the undersigned officers of the
Company, being duly authorized to do so.
SPORTS GROUP INTERNATIONAL, INC.,
a Florida corporation
By /s/ Kevin Blackwell
-----------------------------------------
Kevin Blackwell, President & CEO
By /s/ Kathryn Blackwell
-----------------------------------------
Kathryn Blackwell, Secretary
32
<PAGE>
CERTIFICATION OF SPORTS GROUP INTERNATIONAL, INC.
IN WITNESS WHEREOF, this Plan was adopted by the Board of Directors of
Sports Group International, Inc., a Florida corporation ("Sports Group"), on
September 2, 1999, subject to the condition that it be approved by the
shareholders of Sports Group on or before September 1, 2000, and was executed by
the Chairman of the Board of Sports Group and its Secretary as of September 2,
1999. The Plan was approved by a majority of the shareholders of Sports Group on
October 12, 1999.
DATED as of this 13 day of October, 1999.
SPORTS GROUP INTERNATIONAL, INC.,
a Florida corporation
By /s/ Kathryn Blackwell
-----------------------------------------
Kathryn Blackwell, Secretary
33
<PAGE>
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPORTS GROUP INTERNATIONAL, INC. ANNUAL MEETING TO BE HELD ON 12/28/00 FOR
HOLDERS OF RECORD AS OF 11/15/00
CUSIP: 84918W104
THE UNDERSIGNED HEREBY APPOINTS KEVIN BLACKWELL AND KATHRYN BLACKWELL AS
PROXIES, EACH WITH THE POWER TO APPOINT HIS OR HER SUBSTITUTE, AND HEREBY
AUTHORIZES THEM TO REPRESENT AND TO VOTE, AS DESIGNATED, ALL OF THE SHARES OF
COMMON STOCK OF SPORTS GROUP INTERNATIONAL, INC. HELD BY THE UNDERSIGNED ON
NOVEMBER 15, 2000, AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER
28, 2000 AT 10:00 A.M. AT THE LAW OFFICES OF RYLEY, CARLOCK & APPLEWHITE, P.A.,
LOCATED AT 101 N. 1ST AVENUE, SUITE 2700, PHOENIX, ARIZONA OR ANY ADJOURNMENT
THEREOF. IF NO INSTRUCTIONS ARE INDICATED ON THE PROXY, THE PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS NAMED HEREIN AND IN FAVOR OF ALL
PROPOSALS DESCRIBED HEREIN.
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE: [X]
DIRECTORS
1. DIRECTORS RECOMMEND: A VOTE FOR (MARK X FOR ONLY ONE BOX - IF NOT
ELECTION OF THE FOLLOWING DIRECTORS: SPECIFIED, WILL BE VOTED FOR ALL
01: Kevin Blackwell NOMINEES)
02: Kathryn Blackwell [ ] FOR ALL NOMINEES
03: Robert Corliss
04: David Guarino [ ] WITHHOLD ALL NOMINEES
05: Don Plato
06: Haresh Shah [ ] WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE. WRITE NUMBER(S)
OF NOMINEE(S) BELOW. USE NUMBER
ONLY.
__________________________________
DIRECTORS
PROPOSAL(S) RECOMMEND FOR AGAINST ABSTAIN
----------- --------- --- ------- -------
2. TO APROVED AND RATIFY THE SELECTION FOR [ ] [ ] [ ]
OF KING, WEBER & ASSOCIATES, P.C.
AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR
3. THE FISCAL 2000 YEAR TO APPROVE AN FOR [ ] [ ] [ ]
AMENDMENT TO THE COMPANY'S ARTICLES
OF INCORPORATION TO EFFECTUATE A
NAME CHANGE TO KAHALA CORP.;
4. TO APPROVE AN AMENDMENT TO THE FOR [ ] [ ] [ ]
COMPANY'S ARTICLES OF INCORPORATION
TO AUTHORIZE 160,000 SHARES OF AN
ADDITIONAL SERIES OF THE COMPANY'S
PREFERRED STOCK;
5. TO APPROVE AN AMENDMENT TO THE FOR [ ] [ ] [ ]
COMPANY'S 1999 STOCK OPTION PLAN
(THE "PLAN") TO ALLOW AN ADDITIONAL
3,000,000 SHARES OF COMMON STOCK TO
BE ISSUED UNDER THE PLAN; FOR [ ] [ ] [ ]
6. TO TRANSACT ANY OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
--------------------------------------- ------------------------------------
SIGNATURE(S) DATE
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS ON YOUR STOCK CERTIFICATE. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
