<PAGE i>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DSSI CORPORATION
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
DSSI CORPORATION
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] 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:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
- ---------------------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE ii>
DSSI Corporation
P.O. Box 1570
West Chester, PA 19380
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
December 29, 1997
To the shareholders of DSSI Corporation
Notice is hereby given that a Special Meeting of
Shareholders of DSSI Corporation (the "Company") will be held at
the offices of Wachtel & Masyr, LLP, 110 East 59th Street, New
York, New York, on Monday, December 29, 1997, at 2:00 o'clock in
the afternoon for the following purposes:
(1) To authorize the Company to enter the business of
distributing sports equipment, which action will be effected
through: (a) the sale of 10,000,000 shares of the Company's
Common Stock, $0.01 par value (the "Common Stock"), which shares
will constitute a controlling interest in the Company, to
Michael J. Blumenfeld at $.20 per share or an aggregate purchase
price of $2,000,000 and (b) the sale by Mr. Blumenfeld to the
Company, at cost, of the assets (including corporate name) of
Collegiate Pacific Inc. f/k/a Nitro Sports Inc., which company
is commencing engagement in the business of distributing sports
equipment to the institutional markets.
(2) To authorize the change of name of the Company from
DSSI Corporation to Collegiate Pacific Inc., but only if the
prior proposal is approved and the sale to Mr. Blumenfeld is
consummated.
Each shareholder of record at the close of business on
Wednesday, December 10, 1997, is entitled to cast, in person by
proxy, one vote for each share of the Common Stock held by such
shareholder on such date.
By order of the Board of Directors
Patrick J. Brennan, CPA
Secretary
Dated: December 12, 1997
___________________________________________________________________
YOUR PROXY IS IMPORTANT NO MATTER NOW MANY SHARES YOU OWN.
PLEASE FILL-IN, DATE, SIGN AND MAIL IT TODAY IN THE ACCOMPANYING
SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
____________________________________________________________________
<PAGE 1>
DSSI Corporation
P.O. Box 1570
West Chester, PA 19380
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
To be held on December 29, 1997
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of DSSI
Corporation (the "Company"), a Pennsylvania corporation which,
pending the acquisition of a new business, uses the residence of
its Chief Financial Officer as its principal office, the mailing
address of which is P.O. Box 1570, West Chester, Pennsylvania
19380, for use at a Special Meeting of Shareholders to be held
on Monday, December 29, 1997, or at any adjournment or
adjournments thereof. Only shareholders of record at the close
of business on Wednesday, December 10, 1997 (the "Record Date"),
are entitled to vote at the meeting. Proxy material is first
being mailed on or about Friday, December 12, 1997, to the
Company's shareholders of record on the Record Date.
VOTING SECURITIES
The voting securities at the meeting will consist of
4,446,017 shares of Common Stock, $0.01 par value (the "Common
Stock"). Each shareholder of record is entitled to cast, in
person or by proxy, one vote for each share of the Common Stock
held by such shareholder at the close of business on the Record
Date.
Shareholders who execute proxies retain the right to revoke
them by notifying the Company at any time before they are voted.
Such revocation may be effected by execution of a subsequently
dated proxy or by a letter to the Company, sent to the attention
of the Secretary at the address of the Company's principal
office set forth above in the introductory paragraph of this
Proxy Statement or delivered at the Meeting, revoking the proxy.
Unless so revoked, the shares represented by proxies solicited
by the Board of Directors of the Company will be voted at the
Meeting in accordance with the direction given therein. If no
direction is given, a properly executed proxy will be voted in
favor of the two proposals set forth in the Notice of Special
Meeting to authorize the Company (1) to enter the new business
of distributing sports equipment and (2) to change its name from
DSSI Corporation to Collegiate Pacific Inc. The latter
proposal, if approved by the shareholders, will be implemented
only if the first proposal is approved and the sale of shares to
Michael J. Blumenfeld as described in the succeeding paragraph
is consummated and will be effected by the filing of a
Certificate of Amendment to the Company's Articles of
Incorporation.
A majority of the votes cast at the Meeting shall be
necessary to approve each of the proposals set forth in the
Notice of Special Meeting to authorize (1) the Company to enter
the business of distributing sports equipment, which action will
be effected through (a) the sale of 10,000,000 shares of the
Common Stock to Michael J. Blumenfeld at $.20 per share or an
aggregate purchase price of $2,000,000, which shares will
constitute a controlling interest in the Company, and (b) the
sale by Mr. Blumenfeld to the Company, at his cost (estimated to
be $400,000), of the assets (including cash advances and the
corporate name) of Collegiate Pacific
<PAGE 2>
Inc. f/k/a Nitro Sports Inc.; and (2) the change of the name of the
Corporation from DSSI Corporation to Collegiate Pacific Inc. Abstentions
and broker non-votes will be counted for the purpose of determining
a quorum at the Meeting and will not be counted as a vote for or
against the proposal. Simultaneously with the closing of the
sale to Mr. Blumenfeld, two current directors of the Company
(Jeff Davidowitz and John Pappajohn, their affiliates and
designees and a non-affiliated 5% beneficial shareholder (James
A. Gordon) will purchase an aggregate of 1,500,000 shares also
at $.20 per share or an aggregate purchase price of $300,000.
If the sale to Mr. Blumenfeld is consummated, he will have the
right to designate a majority of the directors. See "Proposal
One: To Enter a New Business - Sale to Michael J. Blumenfeld."
There is no affiliation between Mr. Blumenfeld and his
affiliates, on the one hand, and the Company, its management and
affiliates of both, on the other hand. As of the Record Date,
Mr. Blumenfeld owned 49,100 shares of the Common Stock, all
purchased subsequent to his entering into an agreement with the
Company. See "Proposal One: To Enter A New Business-Sale to
Michael J. Blumenfeld."
A shareholder shall not have the right to receive payment
for his, her or its shares of the Common Stock as a result of
shareholder approval of either of the proposals. As indicated
under "Securities Ownership of Certain Beneficial Owners and
Management," the two directors of the Company, the father of one
such director, a former director and a non-affiliated beneficial
owner therein named may vote an aggregate of 2,722,820 shares of
the Common Stock or 61.2% of the outstanding shares of the
Common Stock as of the Record Date (without giving effect to any
stock options or Common Stock purchase warrants held by them)
and have committed themselves to vote for the two proposals.
Assuming that these commitments are kept, the two proposals will
be approved even if all of the other shareholders vote against
such proposals. Under the Business Corporation Law of the
Commonwealth of Pennsylvania (the "BCL"), no shareholders'
approval is required as to either proposal. In addition, in the
Company's Proxy Statement dated May 23, 1997 (the "Prior Proxy
Statement") for the Annual Meeting of the Shareholders held on
June 16, 1997, the Board committed itself that "any proposal for
entering into new operations will be presented to the
shareholders for approval at either an annual or special
shareholders' meeting" and that, at the time the Company
commences new operations, the "directors will consider a more
desirable name relating to the type of business and submit the
same to the shareholders for their approval." Section 5.01(g)
of the Stock Purchase Agreement with Mr. Blumenfeld (see
"Proposal One: To Enter A New Business - Sale to Michael J.
Blumenfeld") requires shareholder approval. Even though their
votes may not change the outcome of the vote, the Board urges
all shareholders to vote on the two proposals which are
important to the future of the Company and recommends a vote in
favor of both proposals for the reasons set forth in this Proxy
Statement. Assuming that the two proposals submitted herewith
are approved, all future proposals regarding the operations of
the Company will be submitted for vote by the shareholders only
as required by the BCL or other applicable law.
The two current directors, the father of one such director
and the non-affiliated beneficial owner referred to in the
second preceding paragraph have an interest in the two proposals
only to the extent that, if Mr. Blumenfeld consummates his
purchase of the 10,000,000 shares of the Common Stock, each
director and such beneficial owner, or the affiliates or
designees thereof, will have the right, at the closing with
respect to the sale to Mr. Blumenfeld, to purchase 500,000
shares of the Common Stock at $.20 per share. See "Proposal
One: To Enter A New Business-Sale to Others."
<PAGE 3>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of
the Record Date with respect to (1) all persons who are known to
the Company to own beneficially, or exercise voting or
dispositive control over, 5% or more of the outstanding shares
of the Common Stock, (2) each current and a former director, (3)
the former acting chief executive officer of the Company and the
other executive officer of the Company whose compensation
exceeded $100,000 during the fiscal year ended June 30, 1997
("Fiscal 1997") and (4) all directors and officers as a group.
Each beneficial owner, except James A. Gordon and William
Davidowitz, has advised the Company that he has sole voting and
investment power with respect to his shares except as to those
shares still subject to exercise of a stock option or a Common
Stock purchase warrant as to which there are no voting rights
until the option or warrant is exercised. The information in
the table as to each of Mr. Gordon and Mr. William Davidowitz
was derived from a Schedule 13D filed by him pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The table also sets forth the shares of the Common Stock
to be owned, if (1) Michael J. Blumenfeld acquires the
10,000,000 shares after shareholder approval and (2) certain
persons acquire up to 1,500,000 shares at the same closing for
which they have subscribed, as if such shares were beneficially
owned as of the Record Date. See the sections "Sale to Michael
J. Blumenfeld" and "Sale to Others" under the caption "Proposal
One: To Enter A New Business."
<TABLE>
Before Transactions After Transactions
------------------------------ ------------------------------
Number of Shares Number of Shares
Name and Address of of Common Stock Percent of of Common Stock Percent of
Beneficial (1) Owner Beneficially Owned Class (1) Beneficially Owned Class (2)
- -------------------- ------------------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
James A. Gordon 785,093 17.7% 1,285,093 8.1%
Edgewater Private Equity
Fund L.P.
666 Grand Avenue,
Suite 200
De Moines, IA 50309
John Pappajohn (3) 1,436,408(4) 31.3% 1,988,224(5) 12.1%
c/o Pappajohn Capital
Resources
2116 Financial Center
Des Moines, IA 50309
Jeff Davidowitz (3) 410,000(5) 9.2% 610,000(7) 3.8%
c/o JIBS Equities
Line and Grove Streets
P.O. Box 87
Nanticoke, PA 18634
William Davidowitz 260,000 5.8% 360,000(8) 2.3%
c/o JIBS Equities
Line and Grove Streets
P.O. Box 87
Nanticoke, PA 18634
Stephen C. Turner (9) 26,000(6) nil 26,000 nil
c/o Oncor, Inc.
209 Perry Parkway
Gaithersburg, MD 20877
<PAGE 4>
Before Transactions After Transactions
------------------------------ ------------------------------
Number of Shares Number of Shares
Name and Address of of Common Stock Percent of of Common Stock Percent of
Beneficial Owner Beneficially Owned Class (1) Beneficially Owned Class (2)
- ------------------- ------------------ ---------- ------------------ ----------
Joseph R. Shaya (10) 150,000(11) 3.3% 150,000 nil
1951 Sage Drive
Golden, CO 80401
Patrick J. Brennan (12) 50,000(13) 1.1% 50,000 nil
1341 Greenhill Road
Westchester, PA 19380
Michael J. Blumenfeld 49,100 nil 10,049,100(14) 63.0%
Collegiate Pacific, Inc.
13950 Sernlac Drive
Suite 200
Dallas, TX 75234
All Executive Officers and 1,896,408(15) 40.6% 2,648,224(16) 16.4%
Directors as a Group (3
Persons)
</TABLE>
__________________________
[FN]
(1) The percentages are based upon 4,446,017 shares of the
Common Stock being outstanding on the Record Date and,
where appropriate, effect is given to the exercise of stock
options or Common Stock purchase warrants as required by
Rule 13d-3(d)(1)(i) under the Exchange Act.
<PAGE 5>
(2) The percentages are based on 15,946,017 shares of the
Common Stock being assumed to be outstanding on the Record
Date as set forth in the introduction to this table and,
where appropriate, effect is given to the exercise of stock
options or Common Stock purchase warrants as required by
Rule 13d-3(d)(1)(i). In addition, in Note (5) to the
table, effect is given to anti-dilution provisions of the
Common Stock purchase warrants as if the 11,250,000 shares
had been issued.
(3) A director of the Company.
(4) The shares reported in the table include an aggregate of
144,681 shares, after giving effect to anti-dilution
provisions, issuable upon the exercise of Common Stock
purchase warrants expiring February 17, 1998, March 11,
1998 and March 30, 1998 granted to Mr. Pappajohn in
connection with a loan guaranty and pledge.
(5) The shares reported in the table include (a) 486,497 shares
issuable upon the exercise of the Common Stock purchase
warrants reported in Note (4) to this table and (b) 210,000
shares as to which Mr. Pappajohn has subscribed.
(6) The shares reported in the table reflect or include 25,000
shares issuable upon exercise of a stock option expiring
August 9, 1999.
(7) The shares reported in the table include, in addition to
those reported in Note (6) to this table, 200,000 shares as
to which affiliates of Mr. Jeff Davidowitz have subscribed.
(8) The shares reported in the table include 100,000 shares as
to which Mr. William Davidowitz has subscribed.
(9) Mr. Turner resigned as a director effective October 17,
1997 for personal reasons.
(10) Mr. Shaya served as a consultant to the Company from June
1, 1994 to June 27, 1997, during which period he served as
the Acting President and Chief Executive Officer of the
Company.
(11) The shares reported in the table reflect 125,000 shares
issuable upon exercise of a stock option expiring August 9,
1999 and 25,000 shares issuable upon the exercise of an
option expiring June 16, 2002.
(12) Mr. Brennan is the Vice President, Finance, the Secretary,
the Chief Financial Officer and the Chief Accounting
Officer of the Company.
(13) The shares reported in the table reflect 25,000 shares
issuable upon the exercise of each of two stock options,
one expiring August 9, 1999 and the other expiring June 16,
2002.
(14) The shares reported in the table include the 10,000,000
shares which Mr. Blumenfeld has agreed to purchase subject
to shareholder approval.
(15) The shares reported in the table reflect those reported for
a director elsewhere in the table (see the text relating to
Notes (4) and (6)) and for the sole executive
<PAGE 6>
officer (see the text relating to Note (13) for Mr. Brennan). The
shares reported in the table do not include those for each
of Messrs. Turner and Shaya because he was not a director
and an executive officer, respectively, on the Record Date.
(16) The shares reported in the table include those reported in
Notes (4), (5), (6), (7) and (15) to this table.
PROPOSAL ONE: TO ENTER A NEW BUSINESS
Background
From August 1989 to June 16, 1997, the Company was engaged
in the business of developing and marketing tests for cocaine,
opiates (heroin, morphine and codeine), methamphetamine, THC
(marijuana), barbiturates, PCP (phencyclidine), amphetamines and
benzodiazepines using urine samples. As a result of the
Company's net losses and negative cash flow from these
operations and the Board's recognition that the Company had not
been able to become a competitive force in the on-site drug
testing industry because it is an emerging market requiring a
significant amount of on-going resources, which the Company was
unable to raise, while all of the industry competition were
substantially better funded than the Company and thus able to
invest more money and people in the process of getting products
to market, the Company's Board of Directors initiated a search
for a suitable strategic partner or a purchaser, which search,
after a two-year period, culminated in a purchase and sale
agreement dated March 17, 1997 (the "Sales Agreement") with
Casco Standards, Inc. ("Casco"), a Wisconsin corporation with
its principal offices at 500 Riverside Industrial Parkway,
Portland, ME 04103-1418. Casco is a subsidiary of Erie
Scientific, which is a subsidiary of Sybron International
Corporation, a publicly traded company (NYSE: SYB). On June 16,
1997, after receiving shareholder approval at the Annual Meeting
of Shareholders held on the same day, the Company sold the
business and substantially all of its assets (other than cash
and accounts receivable) to Casco for $1,950,000. In addition,
the Company agreed to furnish to Casco a six-month supply of
products for which Casco agreed to pay the Company's standard
charges. Pursuant to the Sales Agreement, the Company paid
$600,000 to AccuScreen Labs, Inc. ("AccuScreen") to terminate
the Company's exclusive license and distributorship agreement
with AccuScreen, which agreement Casco did not want to assume
and for which termination Casco had increased the purchase price
from $1,600,000 to $1,950,000.
As a result of the sale to Casco, the Company became a
shell corporation and, after the payment to AccuScreen, the
payment of closing costs and the payment of some of the then
existing liabilities, became a publicly held company with
$305,559 in liabilities, a cash reserve of $801,979, subject to
collection of accounts receivable (which, as indicated above,
were not part of the assets sold to Casco and which were $4,411
(net a reserve of $50,000) as of September 30, 1997), the
collection of the holdback of $160,000 as part of the Casco
purchase and the incurrence of expenses relating to a company
registered under Section12(g) of the Exchange Act, including
completion of the audit for Fiscal 1997. From July 1, 1997 to
September 30, 1997, the Company had collected $51,629 of the
accounts receivable with $1,414 still to be collected. After
the sale, the Board of Directors initiated a search for
strategic opportunities so that the Company could enter a new
business not related to drug testing. As previously reported in
the Prior Proxy Statement, the directors were of the opinion
that the shareholders would have a better opportunity to realize
more though the
<PAGE 7>
Company entering a new business than by liquidating the Company
(estimated then that the shareholders would receive $.23 per share
on liquidation). The principal action which the directors took to
ascertain the availability of possible new businesses, in addition to
speaking to persons in the investment banking industry with whom they
were previously familiar, was to place an advertisement in The Wall Street
Journal, to which they received 1ten0 inquiries of interest.
Four of the inquirers requested written information relating to
the Company and they were mailed copies of the Company's'Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1996,
subsequent quarterly reports and the proxy statement relating to
the asset sale to Casco. Three responded to such information by
sending copies of their business plans to the Company, which
were reviewed by the staff of John Pappajohn, a director of the
Company who is engaged in venture capital and related investment
activities. The examiner reviewed these business plans from the
point of view of management experience, financial capability and
the likelihood of the proposed business producing revenues and
profits at an early date. The Board rejected two of these three
submissions because they were likely to propose a highly
leveraged offer and to give a lesser percentage of ownership to
existing shareholders than the offer which was ultimately
accepted and the business plans did not offer, in the reviewer's
opinions, a reasonable expectation as to profitability within an
acceptable (i.e., short-term) time frame, a criteria the Board
deemed important in view of the past history of the Company.
The remaining parties who had responded to the advertisement
were interviewed by telephone and, because none requested
additional data relating to the Company, furnished a business
plan for the Company to review or made an offer to be
considered, they were eliminated from consideration. Among
those responding to the advertisement and who was active in
making available information as to his business plans and who
was the only one to make a specific offer to the Company was
Michael J. Blumenfeld (see the succeeding section "Sale to
Michael J. Blumenfeld").
The Company's directors readily recognized that each of the
prospective inquirers was only interested in the Company because
it was a public company with no operations, with no indebtedness
and its principal asset being cash. While this interest seemed
the basis for placing some value on the public nature of the
Company, the directors did not do so as a result of the fact
that several of the prospective acquirers, even those dating
back to the time of the Casco offer and subsequent sale,
indicated that they had no interest in the Company because its
Common Stock was neither a listed nor a Nasdaq SmallCap
security. Because the Company was barred by its agreement with
Casco from re-entering its former business of drug testing, the
Company's tax loss carryforwards were not deemed significant to
attract a potential acquirer. Accordingly, the Board decided to
focus on what person or entity would seem to offer the best
opportunity to obtain profitability at the earliest date and to
make his, her or its own investment in the business. As
indicated below, the Blumenfeld offer seemed to the directors to
meet best such criteria.
After the sale to Casco, Patrick J. Brennan, Vice
President, Chief Financial Officer and Secretary of the Company,
and John G. Connolly were employed full time until the audit for
Fiscal 1997 was completed. All other employees were terminated.
Mr. Brennan has continued to serve the Company on a part-time
basis, with responsibility for all necessary filings under the
federal securities laws and federal, state and local tax laws.
The monthly costs for these services are approximately $3,500,
which outlay is largely offset by interest income from the sale
proceeds. In addition, the Company continues to incur stock
transfer agent fees and expenses
<PAGE 8>
and has continued its directors' and officers' liability insurance, all other
insurance coverages being terminated as a result of the sale of
assets to Casco.
Sale to Michael J. Blumenfeld
As a result of its search, the Board received an offer from
Michael J. Blumenfeld to purchase 10,000,000 shares of the
Common Stock at $.20 per share or an aggregate purchase price of
$2,000,000. Mr. Blumenfeld was the founder, chief executive
officer (serving as such for 25 years) and largest individual
shareholder of Sport Supply Group, Inc. ("Sport Supply") (NYSE:
GYM) until December 1996, at which time control of Support
Supply was sold to Emerson Radio Corp. ("Emerson") (ASE: MSN).
Sport Supply is recognized as the nation's largest supplier of
sports equipment to the institutional markets. Subsequently,
Mr. Blumenfeld incorporated a corporation named Collegiate
Pacific Inc. ("CPI"), a Delaware corporation in which he owns
100% of the stock, engaged a staff, prepared sales brochures and
entered the business of distributing sports equipment to the
institutional markets. He has advised the Company that he has
no non-compete arrangements with either Sport Supply or Emerson,
so that there are no restrictions on him operating CPI or, after
consummation of the proposed sale by the Company to him of the
controlling shares, for the Company to enter the same business.
After the initial response from Mr. Blumenfeld to the
Company's advertisement in The Wall Street Journal, Jeff
Davidowitz and John Pappajohn, both directors, met with Mr.
Blumenfeld to review the proposed business plan for his sport
supply distribution business which was not as yet operational so
as to seek customers and to negotiate the terms of the
acquisition. This meeting in person was followed by a series of
telephone conversations exploring the subject further. When the
discussions began, between the Company and Mr. Blumenfeld, the
bid and asked prices of the Common Stock were fluctuating
between $.10 and $.15 per share. During the discussions the
parties agreed that the purchase price should be the then fair
market value of the Common Stock and, accordingly, should
approximate the then market price of the Common Stock. See the
discussion at the end of this section "Sale to Michael J.
Blumenfeld." Mr. Blumenfeld gave these two directors a number
of references in investment banking, banking and other
businesses, all of which names were recognizable. The two
directors then checked these references, all of which were
highly favorable as to Mr. Blumenfeld's business record and
business ethics. Mr. Davidowitz then made a two-day trip to
Dallas in August 1997 where he met with the key members of the
CPI management team, was shown the then preliminary operations
at the temporary office facility of CPI and visited the current
CPI facility which was then being renovated. Both he and Mr.
Pappajohn, as well as the latter's staff, reviewed the initial
sales catalog then being prepared by CPI.
After completing its "due diligence" as described in the
preceding two paragraphs, the Board of Directors approved the
sale on August 12, 1997 and the Company entered into a Stock
Purchase Agreement dated as of August 18, 1997 (the "Stock
Purchase Agreement" ) with Mr. Blumenfeld. A copy of the Stock
Purchase Agreement is annexed to this Proxy Statement as
Appendix A and is incorporated herein by this reference. The
directors unanimously concluded that, in view of Mr.
Blumenfeld's over 25 years of experience as an executive officer
of Sports Supply, a listed company, the strong endorsements he
had received from persons in the banking, investment banking and
other businesses and the revenues and profitability which Sport
Supply had achieved in the sport supply industry, combined with
the capital infusion he would make, this was the type of
strategic
<PAGE 9>
opportunity for a new business for the Company for
which they had been searching. The directors recognized that
CPI represented only a start-up operation with no guaranty of
success, but concluded that Mr. Blumenfeld's track record at
Sport Supply (during his 25 years as Chief Executive Officer at
Sport Supply, such company completed 75 acquisitions, grew to a
company with no customers to one with 120,000 customers offering
over 7,000 products and had 25 years of uninterupted revenue
growth, with an operating loss in only one year), his experience
at the head of a listed company and his willingness to infuse
$2,000,000 of his own money into the Company made such a risk
worth taking and different from the other expressions of
interest in the Company had received. Two of the directors
(Messrs. Davidowitz and Pappajohn) concluded that they, together
with their affiliates and designees, would show their support of
Mr. Blumenfeld's proposed operations by agreeing to invest
(together with an unaffiliated major shareholder) $300,000. See
the section "Sale to Others" under this caption "Proposal One:
To Enter A New Business." In making their decision to accept
Mr. Blumenfeld's offer, the directors considered that the
business was substantially different from the drug testing
business the Company had sold to Casco, so that there would be
no violation of the non-competition clause under the Sales
Agreement with Casco. The directors also noted that none of the
other inquiries of interest had actively pursued the issue as
did Mr. Blumenfeld or offered the same type of qualifications as
described above in this paragraph. In addition, the
directors, although satisfied with the Blumenfeld offer,
asked themselves as a matter of reassurance whether it would be
appropriate to reject the same and institute a new search at a
later date for other opportunities. However, the directors
concluded, in view of the old adage that "a bird in the hand is
worth two in the bush," that there could be no real assurance
that a better offer would be made by another party in the future
and, in the interim, if Mr. Blumenfeld succeeded in this start-
up business, as to which there can be no assurance, the Minority
Shareholders could benefit from this effort. See
"Recommendation for Approval of Both Proposals."Proposals," for
an explanation as to why such success, if attained, as to which
there can be no assurance, may be beneficial to the Minority
Stockholders.
The Stock Purchase Agreement provides that, if the sale to
Mr. Blumenfeld is consummated, the Board of Directors shall
consist of one designee of the existing Board (which designee is
expected to be Jeff Davidowitz) and at least two designees of
Mr. Blumenfeld. Information with respect to his three proposed
nominees is given under "Proposed Nominees for Directorships."
The Stock Purchase Agreement also provides that Mr. Brennan's
services on behalf of the Company will be phased out during the
30-day period following the closing of the stock transaction.
One of the other conditions to closing is that shareholder
approval be obtained.
As indicated under "Recommendation for Approval of Both
Proposals," the Minority Stockholders were already in a minority
to vote with respect to the election of directors and the other
matters to be submitted to a shareholder vote so that the sale
of a controlling interest to Mr. Blumenfeld would have no
significant effect on their voting rights. As also indicated
therein and later in this section the contemplated sale will
have no effect on the payment of dividends because of the
historical losses and the intention to use the Company's cash to
fund the acquisition of inventory and otherwise to grow the
business. Management is not aware of any other potential
disadvantage to the Minority Stockholders. In addition, by
selling a controlling interest to Mr. Blumenfeld, the Company
will become committed to succeed in the sport supply business,
as to which there can be no assurance. However, the Board did
not consider this to be
<PAGE 10>
a disadvantage to the Minority Stockholders in that such risk would
be possible no matter which new business the Company entered and
the directors' review seemed to support the view that there was a
reasonable chance to succeed in the sport supply business.
As of the Record Date, there were 4,446,017 shares of the
Common Stock outstanding and there were reserved an aggregate of
916,029 shares of the Common Stock consisting of (1) an
aggregate of 345,000 shares reserved for issuance upon the
exercise of stock options (the "Options") granted under the
Company's 1994 Stock Option Plan (the "Option Plan"), (2) an
aggregate of 155,000 shares reserved for issuance upon the
exercise of the Options to be granted under the Option Plan and
(3) an aggregate of 416,029 shares reserved for issuance upon
the exercise of outstanding Common Stock purchase warrants (the
"Warrants"). If the 10,000,000 shares are sold to Mr.
Blumenfeld and the 1,500,000 shares are sold to the other
prospective purchasers (see the section "Sales to Others" under
this caption "Proposal One: To Enter A New Business"), Mr.
Blumenfeld will own 63.0% of the outstanding shares assuming
that no Options and Warrants are exercised and 59.3% assuming
that the outstanding Options and Warrants are exercised. The
Stock Purchase Agreement provides that the Board of Directors
will reserve an additional 400,000 shares of the Common Stock
for issuance to members of the Board of Directors designated by
Mr. Blumenfeld at a price not less than the fair market value of
such shares.
The proposed purchase price represented approximately the
market price of the Common Stock at the time Mr. Blumenfeld's
offer was made and accepted by the Board of Directors on August
12, 1997. Even if the purchase price had represented a discount
to then market price, the Board believed that the shares to be
purchased by Mr. Blumenfeld, as "restricted securities" (as such
term is defined in Rule 144(a)(3) under the Securities Act),
thereby restricting their resaleability, would have been
entitled to a discount from the then market price as is common
in private transactions pursuant to Section 4(2) of the
Securities Act. The following were the high and low bid prices
of the Common Stock as reported in the OTC Bulletin Board by the
National Association of Securities Dealers, Inc. on the dates
indicated:
Bid Prices(1)
-------------------
Date High Low
- ---- ---- ---
8/7/97 $0.25 $0.25
8/8/97 0.203 0.203
8/11/97 0.25 0.203
8/12/97 0.203 0.203
8/13/97 0.250 0.203
8/14/97 0.250 0.203
8/15/97 0.328 0.250
8/18/97(2) 0.563 0.281
___________________
(1) The foregoing quotations reflect inter-dealer prices,
without mark-up, mark-down or commissions, and may not
represent actual transactions.
<PAGE 11>
(2) The date of the Stock Purchase Agreement.
Sale to Others
At the closing for the sale to Mr. Blumenfeld, the Company
will sell an aggregate of 1,500,000 shares of the Common Stock
to persons other than Mr. Blumenfeld, also at $.20 per share or
an aggregate purchase price of $300,000. The prospective
purchasers are:
1. John Pappajohn, a director of the Company and his
designees, as to 500,000 shares. As of the Record Date, Mr.
Pappajohn was the beneficial owner of 1,436,408 shares of the
Common Stock, which amount includes 144,681 shares issuable upon
the exercise of Warrants and constitutes 31.3% of the
outstanding shares (29.1% of the voting shares at this Meeting).
2. Jeff Davidowitz, a director of the Company, William
Davidowitz, his father, and
their designees, as to 500,000 shares. As of the Record Date,
Jeff Davidowitz was the beneficial owner of 410,000 shares of
the Common Stock, which amount includes 25,000 shares issuable
upon the exercise of an Option and constitutes 9.2% of the
outstanding shares (8.7% of the voting shares at this Meeting),
and William Davidowitz was the beneficial owner of 260,000
shares of the Common Stock or 5.8% of the outstanding shares.
3. James A. Gordon, a beneficial owner of 5% or more of
the outstanding shares of the Common Stock as of the Record
Date, and his designees as to 500,000 shares. As of the Record
Date, Mr. Gordon through Edgewater Private Equity Fund L.P.,
owned 785,093 shares of the Common Stock or 17.7% of the
outstanding shares.
Accordingly, the prospective purchasers include the persons
who own sufficient shares of the Common Stock to approve the two
proposals at this Meeting no matter how the other shareholders
vote with respect thereto and also constitute two of the three
current directors who approved the transaction. Only Stephen C.
Turner, who resigned as a director effective October 17, 1997,
is not participating in the purchase.
As a result of these prospective purchases of an aggregate
of 1,500,000 shares of the Common Stock, Messrs. Pappajohn,
Davidowitz and Mr. Gordon and their affiliates and designees
will own beneficially (a) 4,221,820 shares or 26.5% of the
outstanding shares without giving effect to their outstanding
Options and Warrants and (b) 4,391,501 shares or 27.5% of the
outstanding shares when such effect is given.
The result of the sales to Mr. Blumenfeld and the persons
named in this section is to further dilute the stock ownership
of persons other than the current directors and their affiliates
(the "Minority Shareholders") as indicated in the following
table which does not give effect to the outstanding Options and
Warrants:
<PAGE 12>
Minority
Shareholders'
Date Outstanding Shares Number of Shares Percentages
- ---- ------------------ ---------------- -----------
Before sale 4,446,017 1,723,197 38.8%
After sales 15,946,017 1,723,197 10.8%
Because of the above-contemplated purchases of shares of
the Common Stock, the directors considered whether to require
that a majority of the shares of the Minority Shareholders vote
affirmatively, but concluded that such an action was not
required under Pennsylvania law and, accordingly, the possible
benefits of seeking such a vote did not justify the expenditure
of engaging a proxy solicitor to obtain the same.
Purchase of Collegiate Pacific, Inc.
If the sale of 10,000,000 shares of the Common Stock to Mr.
Blumenfeld is consummated, he will sell to the Company, at his
cost (currently estimated to approximate $400,000), the assets
(including cash advances and the corporate name) of Collegiate
Pacific, Inc. ("CPI") f/k/a Nitro Sports, Inc., a Delaware
corporation. The property to be acquired by the Company from
CPI, based on CPI's most recent balance sheet (i.e., as of
September 26, 1997) used in the preparation of the pro forma
balance sheet included in this Proxy Statement under the caption
"Unaudited Pro Forma Balance Sheet," will be primarily inventory
(72% of the purchase) which will be used in the Company's
business. Capital equipment accounts for an additional 17% and
the remaining 11% consists of trademarks, deposits,
organizational costs and other immaterial assets. All of these
percentages may, of course, vary at the date of the actual
closing. Because all of the assets of CPI were purchased during
recent months, the Company believes that the costs incurred
therefor represent fair consideration for the assets. The
Company will not also assume any the liabilities of CPI except
for unpaid invoices for inventory., CPI currently occupies
30,000 square feet of warehouse and office space located at
13950 Semlac Drive, Suite 200, Dallas, Texas 75234. CPI's
telephone number is (972) 243-8100. CPI's management believes
that these facilities will be adequate for the foreseeable
future. CPI employs five persons and intends to increase this
employment to approximately eight persons when and if business
conditions justify, as to which there can be no assurance. CPI,
of which Mr. Blumenfeld owns 100% of the outstanding shares of
stock, was incorporated on April 14, 1997 under the laws of the
State of Delaware.
CPI intends to engage in the mail order marketing of sports
equipment primarily to institutional locations throughout the
United States. These accounts will include country clubs,
schools, YMCAs and YWCAs (or similar organizations), municipal
recreation departments and other governmental agencies. CPI has
created a master mailing list of some 200,000 potential
customers and intends to distribute approximately 500,000
catalogs and fliers to this audience during 1998. CPI also
intends to utilize other forms of solicitations such as trade
shows, telemarketing, road salesmen and broadcast fax programs.
While CPI management believes that the vast majority of products
to be distributed by CPI will be purchased in finished form, a
small percentage of the items may require fabrication to
complete. CPI anticipates capital expenditures of no more than
$50,000 to purchase welding machines and an assortment of tools
and thereby set up its fabrication process. The raw material
used in the proposed fabrication process are in the form of
shipping supplies, nuts and bolts and other commercially
available components. CPI believes that there are multiple
suppliers nationwide for these products. For information as to
contemplated products, see the section "Change of Business"
under this caption "Proposal One: To Enter A New Business."
<PAGE 13>
Between April and October 1997, CPI did market research as
to potential products to offer and prepared a limited product
sales catalog based on such research. CPI first commenced test
marketing product catalogs in early October 1997 and has
received approximately 300 orders which it has filled, thereby
deriving its first revenues of $60,000. For seasonal reasons
(i.e., the Christmas holiday), CPI's management has not
anticipated additional orders until January 1998. CPI
management intends to mail a catalog in November 1997 offering
a greater variety of products and a master catalog will be
designed and mailed throughout 1998 which will offer some 300
products. CPI has installed several incoming toll free phone
and fax lines to support the anticipated level of revenues and
has purchased, installed and tested a multistation computer
system which will maintain inventory and financial record
keeping and controls. CPI has purchased and has in current
inventory a substantial percentage of the products it intends
to offer and sell during 1998. CPI has expended approximately
$160,770 through September 26, 1997 related to market research,
inventory acquisition, marketing brochures and engaging
personnel. CPI has fully expensed all items necessary to
operate its business and anticipates no additional costs to
generate additional revenues except the purchase of additional
inventory to fill specific product orders. CPI believes that
it can process an estimated $400,000 per month in orders with
only a minimal increase in overhead and personnel. There can be
no assurance that CPI will attain such level of orders; however,
as indicated in the next paragraph, CPI's management believes
that the Company will be able to meet its financial requirements
for the next 12 months.
If the proposal for a change in business is approved at the
meeting and the sale to Mr. Blumenfeld subsequently consummated,
the products will be distributed by the Company and not by CPI.
CPI's management believes that, with the investment by Mr.
Blumenfeld of $2,000,000 ($2,300,000 if the sale to others is
consummated as well, see the section "Sale to Others" under this
caption "Proposal One: To Enter A New Business"), the Company
will be able to satisfy its cash requirements and will not
require additional financing during the 12 months following the
closing.
There can be no assurance that CPI and, after the sale, the
Company will be able to achieve the anticipated goals set forth
in the preceding four paragraphs.
Mr. Blumenfeld currently serves as the President and Chief
Executive Officer of CPI and will serve in such capacities with
the Company after his purchase of the controlling shares.
Certain information with respect to current executive officers
of CPI who will hold similar officerships in the Company after
the sale is as follows:
Arthur Coerver, age 55, is the Chief Operating Officer of
CPI. From 1981 until 1997, Mr. Coerver was Vice President,
Sales and Marketing, of Sports Supply. Mr. Coerver graduated
from the University of Texas at Austin in 1965 with a BS in
Mechanical Engineering.
Chad Edlein, age 26, is the Vice President of Corporate
Development of CPI. From 1994 until 1997, Mr. Edlein was
Marketing Manager at Sports Supply. Mr. Edlein graduated from
the University of North Texas in 1994.
<PAGE 14>
Under the Stock Purchase Agreement, Mr. Blumenfeld is to
submit an itemized statement of his costs to the Board promptly
after the closing at which he purchases the 10,000,000 shares of
the Common Stock. The Board is obligated to meet within five
business days of the receipt of such statement and the Company
is obligated to make such purchase within three business days
after the Board approves the purchase price (including any
resolutions as to items in dispute). Based upon its current
information, the Company believes that the purchase of the
assets of CPI will be treated as a purchase for accounting
purposes and that there will be no federal income tax
consequences to the Company or its shareholders as a result
thereof.
Change of Business
If the first proposal set forth in the Notice of Special
Meeting is approved and, subsequently, the sale of the
controlling stock interest in the Company is purchased by Mr.
Blumenfeld, the Company will enter the business of distributing
sports equipment, including inflatable balls, nets for all
sports, standards and goals for sports requiring such, weight
lifting equipment and recreational products such as frisbees and
horseshoes, to the institutional markets. For additional
information as to the contemplated operations of the Company, see
the section "Sale to Michael J. Blumenfeld" under this caption
"Proposal One: To Enter A New Business." Mr. Blumenfeld has been
engaged in the sports equipment business for over 25 years.
During his 25 years as a Chief Executive Officer of Sports Supply
or its predecessors, such company completed 75 acquisitions and
grew to have over 100,000 customers and to offer nearly 5,000
products. If the proposal is approved and the sale of stock is
consummated, Mr. Blumenfeld intends to pursue a policy of
strategic acquisitions, new licensing programs and corporate
joint ventures in an attempt to grow the Company's business. He
anticipates that the Company will be initially offering 300
products by 1998. There can be no assurance that these
acquisitions, licenses or joint ventures will be effectuated or
obtained or as to the number of products to be offered by the
Company. Furthermore, there can be no assurance that the sports
equipment business or any other business hereafter entered into
by the Company will be profitable or successful.
Except for compliance with Section 14(a) of the Exchange
Act and Regulation 14A promulgated thereunder relating to this
Proxy Statement and the accompanying proxy, there are no federal
or state regulatory requirements as to which the Company must
comply or any approvals obtained in order for the Company to
enter into the business of distributing sports equipment.
Whenever the Company will hereafter elect to commence
fabricating manufacturing sports equipment, compliance with
certain federal and state regulatory requirements may become
applicable to the Company.
PROPOSAL TWO: CHANGE OF CORPORATE NAME
The Stock Purchase Agreement requires the Company to change
its name from DSSI Corporation to Collegiate Pacific, Inc. As
indicated in the Prior Proxy Statement, the name DSSI
Corporation was adopted only temporarily, because the name Drug
Screening Systems, Inc. was sold to Casco, until a more
desirable name relating to the new business could be adopted.
Although the BCL does not require shareholder approval of a
change in corporate name, the Board had agreed in the Prior
Proxy Statement to seek such approval.
<PAGE 15>
RECOMMENDATION FOR APPROVAL OF BOTH PROPOSALS
The Board of Directors unanimously recommends that
shareholders approve the proposals to enter the business of
distributing sports equipment (including the sale of a
controlling interest) and to change the corporate name to
Collegiate Pacific Inc. because they believe that this new
business, under the leadership of Mr. Blumenfeld, will afford
the Minority Shareholders an opportunity to recoup potentially
their investment in the Company and for the Company to realize
future profits, as to neither of which results there can be any
assurance. The Board also believes that the Minority
Shareholders will realize a greater return on their investment
more than if the Company were liquidated rather than
consummating the transaction with Mr. Blumenfeld. As of
September 30, 1997, the book value of the Company was $721,933
or $.16 per share and the liquidation value (after paying all
liquidating expenses) was estimated by management to be $.14 per
share. While the Board does not make any recommendation as to
whether a Minority Shareholder should hold or sell his, her or
its shares of the Common Stock, it notes that, based on the high
and low sales prices of $1.19 and $1.08, respectively, on
NovemberDecember 2, 1997, a Minority Shareholder would realize
more by a sale than the estimated liquidation value; however,
there can be no assurance as to what the market price of the
Common Stock will be when a Minority Shareholder chooses to
sell. Reference is made to the lower market prices at the time
the Stock Purchase Agreement was negotiated as set forth under
"Proposal One: To Enter A New Business-Sale to Michael J.
Blumenfeld."
The Board is also of the opinion that, after the
transactions are consummated, so that the Company again has
operations and if these new operations result in profitability,
there should be greater interest in the Common Stock, thereby
not only helping to increase its market value but hopefully also
increase its liquidity. However, there can be no assurance that
(1) the Company will achieve profitability, either as to when or
if at all; (2) there will continue to be a rise in the market
price of the Common Stock; or (3) there will be an improvement
in the liquidity of the Common Stock.
The book value of the Common Stock assuming the occurrence
of all of the transactions described in this Proxy Statement to
be taken after shareholder approval is $0.19 per share and the
liquidation value would be approximately the same amount
(unrounded, the numbers would be $0.192 and $0.186,
respectively). Although directors reviewed these values prior
to reaching their decision, their primary focus was on the
potential future earnings of the new entity as a means of
enhancing the market value of the Common Stock rather than on
the book value of the shares immediately after consummation of
the sale to Mr. Blumenfeld and the subsequent purchase of CPI's
assets. In addition, although the directors did not believe
that the future earnings were quantifiable, they concluded that
Mr. Blumenfeld's past results in the intended market gave a good
indication of the potential for growth. There can be, of
course, no assurance that the Company will operate at a profit
or achieve any significant amount of revenues or that these
results, if achieved, will result in a higher market value for
the Common Stock.
Although, as indicated under the section "Sales to Others"
under the caption "Proposal One: To Enter A New Business," the
percentage of ownership of the shareholders who are not
affiliated with the current directors and James A. Gordan (i.e.,
the Minority Shareholders) would be reduced, the Board does not
consider this to be a material reason for the Minority
Shareholders to vote against either proposal. Because of its
history of continuing losses when
<PAGE 16>
the Company was engaged in the drug testing business, no dividends were
ever paid nor was there a likely chance of such dividends because of
the continuing cash requirements of the Company. Although the directors
believe that, as a result of the Company's entry into the sports
equipment business, the Company will achieve profitability at an
earlier date that the Company would have (if at all) in the drug
testing business, thereby permitting legally the payment of
dividends, Mr. Blumenfeld has advised the directors that any
earnings will be used to develop the business and, accordingly,
no dividends are currently contemplated even if the Company
achieves his expectations. In addition, the prior percentage
ownership did not permit the Minority Shareholders to effect the
vote on the election of directors or on any other matters so
long as the directors and the 5% beneficial owner voted
together. Accordingly, the further reduction in their
percentage ownership caused by the transactions contemplated by
this Proxy Statement will not deprive the Minority Stockholders
of a voting right which they currently have. There will be no
other changes in the rights of the Minority Shareholders.
PROPOSED NOMINEES FOR DIRECTORSHIPS
If the first proposal set forth in the Notice of Special
Meeting is approved and Mr. Blumenfeld subsequently purchases
the controlling stock interest in the Company, he intends to
designate to the current Board the three persons hereinafter
named for election as directors of the Company and, pursuant to
the Stock Purchase Agreement, the Board will elect them as
permitted by the BCL and the Company's By-Laws. In addition,
one current director (currently expected to be John Pappajohn)
will resign and one current director (expected to be Jeff
Davidowitz) will continue to serve.
Certain information with respect to Mr. Blumenfeld's
designees for election as directors is as follows:
Michael J. Blumenfeld, age 51, will serve as the President
and Chief Executive Officer of the Company, currently serving in
such capacities for CPI. From 1992 until November 1996, he was
the Chairman of the Board and Chief Executive Officer of Sports
Supply, from which public company he resigned in November 1996.
Robert W. Philip, age 62 was an Executive in Residence and
Lecturer in the Department of Accounting of the College of
Business Administration at the University of North Texas in
Denton, Texas from September 1989 until May 1994. Prior to that
time, Mr. Philip served as an audit partner with Arthur
Andersen, S.C. for approximately 18 years. Mr. Philip is also a
director of Medical Control, Inc. (Nasdaq: MDCL), a health care
cost management company. Mr. Philip is currently retired from
the University of North Texas and Arthur Andersen, S.C.
William A. Watkins, Jr., age 55, has been a partner of
Watkins, Watkins and Keenan, a certified public accounting firm,
since December 1971. He also serves as a director of Aurora
Electronics, Inc. (AMEX: AUR), a provider of specialized
distribution and materials support services to the electronics
industry.
There are no family relationships between any of the
foregoing designees and the current directors or between the
foregoing designees and the officers named under "Proposal One:
To Enter A New Business-Purchase of Collegiate Pacific, Inc."
<PAGE 17>
FINANCIAL STATEMENTS
The following audited financial statements appear in the
Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997 (the "Annual Report"), a copy of which
Annual Report accompanies the Proxy Statement, and are
incorporated herein by this reference.
Page in
Item Form 10-KSB
---- -----------
Independent Auditors' Report 10
Balance Sheets as of June 30, 1997 and 1996 11
Statements of Operations for the years ended June 30,
1997 and 1996 12
Statements of Changes in Stockholders' Equity for the
years ended June 30, 1997 and 1996 13
Statements of Cash Flows for the years ended June 30, 1997
and 1996 14
Notes to Financial Statements 15
The following Items in the Annual Report are also
incorporated herein by this reference: 1 (Description of
Business), 2 (Description of Property), 3 (Legal Proceedings),
4 (Market for Common Equity and Related Stockholder Matters), 6
(Management's Discussion and Analysis or Plan of Operations)
and 8 (Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures).
The following unaudited financial statements appear in the
Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997 (the "Quarterly Report"), a copy of which
Quarterly Report accompanies the Proxy Statement, and are
incorporated herein by this reference.
Page in
Item Form 10-QSB
---- -----------
Balance Sheets as of September 30 and June 30, 1997 4
Page in
Item Form 10-KSB
---- -----------
Statements of Operations and Accumulated Deficit for the
three months ended September 30, 1997 and 1996 5
Statements of Cash Flows for the three months ended
September 30, 1997 and 1996 6
Notes to Financial Statements 7
Periodic reports and proxy material relating to the Company
can be inspected and copies made at the public reference
facilities of the Commission at Room 104, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as the following regional
offices of the Commission: 7 World Trade Center, Suite 1300,
New York, New York, 10048 and Northwestern Atrium Center,
<PAGE 18>
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. A copy of the Company's periodic reports and proxy
statements can also be obtained at prescribed rates from the
Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web Site that contains reports, proxy and
information statements and information regarding registrants
like the Company that file electronically with the Commission at
the following Web site address: http://www/sec.gov. A copy can
also be obtained from the Company by writing Mr. Brennan at the
address shown in the introductory heading to this Proxy
Statement or by calling him at (610) 696-3479.
UNAUDITED PRO FORMA BALANCE SHEET
The following Unaudited Pro Forma Balance Sheet of the
Company is prepared as if CPI acquired the Company, except no
good will or other tangible assets are recorded.
The Unaudited Pro Forma Balance Sheet gives effect to the
sale of the shares to Michael J. Blumenfeld and others
as if the sale had occurred as of September 30, 1997.
The Unaudited Pro Forma Balance Sheet should be read in
conjunction with the historical financial statements of the
Company, including the notes thereto. The Unaudited Pro Forma
Balance sheet does not purport to represent what the Company's
or CPI's actual financial position would have been if the sale
of shares in fact occurred on such date or to project the
Company's or CPI's financial position at any future date. The
Unaudited Pro Forma Balance Sheet does not give effect to any
transactions other than the sale of an aggregate of 11,250,000
shares of the Common Stock for an aggregate purchase price of
$2,300,000 and the proposed subsequent acquisition of CPI for an
estimated cost of $400,000 ($327,323 based on the assets of CPI
as of September 26, 1997 as shown in an unaudited balance sheet
of CPI as of September 26, 1997).
No pro forma statement of operations is included because
CPI is a start-up operation, having realized no revenues until
October and November 1997 and incurring only expenses prior
thereto related to doing market research, acquiring inventory,
preparing sales catalogs and engaging personnel. No additional
revenues are anticipated for CPI until January 1998.
<PAGE 19>
COLLEGIATE PACIFIC, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 1997
CPI Pro Forma Pro Forma
Historical Adjustments As Adjusted
------------ ----------- -----------
Assets
Current Assets:
Cash $ 509,076 $2,225,000(1) $2,713,765
- 606,203(2) -
- (626,514)(3) -
Accounts receivable, not of
allowance of $50,000 at
September 30, 1997 2,042 160,411(2) 162,453
Inventory 344,400(2) - 344,401
Prepaid expenses and other 458 19,912(2) 20,370
-------- -------- ---------
Total Current Assets 855,977 2,385,012 3,240,989
Equipment and improvements, net 80,783 1,380(2) 82,163
<PAGE 20>
Other Assets:
Deposits 10,648 150(2) 10,797
Patents or Trademark 42,382 - 42,382
________ _________ _________
Total Assets $989,789 $2,386,542 $3,376,331
======== ========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term
debt and capital leases $787,283 $ 10,388(2) $10,388
- (787,283)(3) -
Accounts payable and accrued
expenses 149,608 55,735(2) 205,343
-------- --------- -------
Total Current Liabilities 936,891 (721,160) 215,731
Long Term Debt 213,667 - 213.667
Stockholders' Equity
Class "A" preferred stock,
$0.01 par value; 2,000
Shares authorized; none issued
Common stock, $0.01 par value;
20,000,000 - - -
Shares authorized: 4,446,017
shares at June 30, 1997
issued and outstanding - 44,460(2) 159,460
- 115,000(1) -
Additional paid-in-capital - 15,118,555(2) 17,228,555
- 2,110,000(1) -
Accumulated deficit (160,769) (14,441,082)(2) (14,441,082)
- 160,769(3) -
--------- ----------- ----------
Total Stockholders' Equity (160,769) 3,107,702 2,946,933
Total Liabilities and
Stockholders' Equity $ 989,789 $2,386,542 $3,376,331
========== ========== ==========
_______________________
(1) This amount represents the gross purchase price for
11,500,000 shares of the Common Stock less a reduction of
$75,000 for the expenses relating to the proposed sales of
shares of the Common Stock.
(2) These amounts represent the acquisition of the Company and
the resulting recapitalization of CPI to reflect the
acquisition and currently outstanding shares.
(3) These amounts are returns to the CPI sole owner of his
investment amounts and related cash and deficit.
<PAGE 21>
MISCELLANEOUS
Costs of Solicitation
The expenses in connection with the solicitation of
proxies, including the cost of preparing assembling and mailing
this Proxy Statement and the related material, will be borne by
the Company. The Company will pay brokers and other custodians,
nominees and fiduciaries their reasonable expenses for sending
proxy materials to principals and obtaining their proxies. In
addition to solicitations by mail, proxies may be solicited
personally or by telephone or telegraph by directors and the
sole officer of the Company, who will receive no additional
compensation therefor.
Annual Report to Shareholders
A copy of the Annual Report accompanies this Proxy
Statement and its financial statements and certain items are
incorporated herein by this reference under "Financial
Statements.". A copy of any exhibits to the Annual Report may
be obtained by written or oral request to Patrick J. Brennan,
Vice President, Chief Financial Officer and Secretary of the
Company, at the principal office of the Company, the address of
which is set forth in the introductory paragraph heading to this
Proxy Statement. A reasonable fee for duplicating and mailing
will be charged if a copy of any exhibit is requested.
Shareholder Proposals
Shareholder proposals for inclusion in the Company's Proxy
Statement for the next Annual Meeting of Shareholders must be
received not later than a reasonable time before the proxy
material for such meeting is mailed.
DSSI CORPORATION
Patrick J. Brennan, CPA
Secretary
Dated: December 12, 1997
<PAGE 22>
APPENDIX A-1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered
into as of August 18, 1997 by and between DSSI Corporation, a
Pennsylvania corporation (the "Company"), and Michael J.
Blumenfeld ("Purchaser").
Background
Purchaser, on the terms and subject to the conditions of
this Agreement, desires to purchase from the Company, and the
Company desires to issue and sell to Purchaser, 10,000,000
shares of the Company's common stock, $.01 par value per share
(the "Company Common Stock"), for an aggregate purchase price of
$2,000,000.
Therefore, in consideration of the foregoing and the
respective representations, warranties, covenants, and
agreements set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which all
parties mutually acknowledge, the Company and Purchaser hereby
agree as follows:
Article I
The Purchase and Sale of the Shares
1.01 Purchase and Sale of the Shares. At the Closing (as
defined below), and subject to the terms and conditions set
forth in this Agreement, Purchaser will purchase from the
Company, and the Company will issue and sell to Purchaser,
10,000,000 shares of the Company Common Stock (the "Shares"),
free and clear of any liens, encumbrances, pledges, restrictive
agreements, or adverse claims of any nature.
1.02 Purchase Price. The aggregate purchase price for the
Shares will be $2,000,000 (the "Purchase Price") in immediately
available funds.
Article II
The Closing
2.01 Closing; Closing Date. Unless this Agreement has been
terminated pursuant to Section 7.01, and subject to the
satisfaction or waiver of the conditions set forth in Article V,
the issuance and sale of the Shares contemplated by this
Agreement (the "Closing") will take place at the offices of the
Company on September 2, 1997 (provided, that the conditions set
forth in Article V have been satisfied or waived at or prior to
such time) or as soon as practicable (but not later than five
business days) after satisfaction of the conditions set forth in
Article V, or at such time, date, and place as the Company and
Purchaser agree. The date on which the Closing takes place is
referred to as the "Closing Date".
<PAGE 23>
2.02 Deliveries by Purchaser. Purchaser will deliver or
cause to be delivered the following at Closing, and it will be a
condition to the Company's obligations under this Agreement that
all of the following be delivered at Closing:
(a) A wire transfer for the Purchase Price in immediately
available funds to the account established for the
benefit of the Company, titled "DSSI Corporation d/b/a
Collegiate Pacific Inc.", at BankOne Texas, N.A. in
Dallas, Texas.
(b) Such other documents and instruments as may be
necessary to carry out the transactions contemplated
by this Agreement.
2.03 Deliveries by the Company. The Company will deliver
or cause to be delivered the following at Closing, and it will
be a condition to Purchaser's obligations under this Agreement
that all of the following be delivered at Closing:
(a) A certificate or certificates representing the Shares,
in such denominations and registered in such names as
Purchaser shall request at least two days prior to the
Closing Date.
(b) Opinion of counsel for the Company, substantially in
the form of Exhibit A.
(c) A certificate of the secretary of the Company,
substantially in the form of Exhibit B.
(d) A closing certificate executed by an officer of the
Company, substantially in the form of Exhibit C.
(e) Such other documents and instruments as may be
necessary to carry out the transactions contemplated
by this Agreement.
Article III
Representations and Warranties of the Company
The Company hereby represents and warrants to Purchaser that
the statements in this Article III are true and correct as of
the date of this Agreement.
3.01 Organization, Good Standing, and Qualification. The
Company is a corporation duly organized, validly existing, and
in good standing under the laws of the Commonwealth of
Pennsylvania, has all requisite corporate power and authority to
own, lease, and operate its properties and to carry on its
business as presently conducted. The Company is qualified to do
business and is in good standing in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
As used in this Agreement, "Material Adverse Effect" means a
material adverse effect on, or a material adverse change in, or
a group of such effects on or changes in, the business,
operations, financial condition, results of operations, assets,
or liabilities of the Company.
3.02 Authorization. The Company has all requisite power
and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions
<PAGE 24>
contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized
by all necessary corporate action, and no other corporate
proceedings on the part of the Company are required to authorize
the transactions contemplated hereby. This Agreement
constitutes a legal, valid, and binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except as may be limited by (a) applicable bankruptcy,
insolvency, reorganization, or other laws of general application
relating to or affecting the enforcement of creditors' rights
generally and (b) the effect of rules of law governing the
availability of equitable remedies.
3.03 Capitalization.
(a) The authorized capital stock of the Company consists
of (i) 20,000,000 shares of the Company Common Stock,
of which 4,446,017 are issued and outstanding, and
(ii) 2,000 shares of Class "A" Preferred Stock, $.01
par value per share, none of which are issued and
outstanding. At Closing, in addition to the issuance
and sale of the Shares to Purchaser, the Company will
issue and sell 1,500,000 shares of the Company Common
Stock, at a purchase price of $.20 per share, to
persons other than Purchaser.
The Company has reserved 500,000 shares of the Company
Common Stock for issuance under the Company's 1994
Stock Option Plan under which options to purchase
345,000 shares are outstanding. The Company has
issued and outstanding warrants to purchase an
aggregate of 408,998 shares of the Company Common
Stock. Except for shares reserved for issuance under
the 1994 Stock Option Plan and for the outstanding
warrants, no other shares of capital stock of the
Company are reserved for any purpose. Each of the
outstanding shares of capital stock of the Company is
duly authorized, validly issued, and fully paid and
nonassessable, and has not been issued in violation of
(nor are any of the authorized shares of capital stock
subject to) any preemptive or similar rights.
(b) Except as provided in this Agreement or as set forth
in Schedule 3.03(b), there are no options, warrants,
or other rights, agreements, or commitments of any
nature to which the Company is a party or by which it
is bound relating to the issued or unissued capital
stock or other securities of the Company or obligating
the Company to grant, issue, or sell any shares of its
capital stock or other securities. Except as set
forth in Schedule 3.03(b), there are no agreements,
arrangements, or commitments of any nature pursuant to
which any person or entity is or may be entitled to
receive any payment based on the revenues or earnings,
or calculated in accordance therewith, of the Company.
(c) There are no obligations, contingent or otherwise, of
the Company to (i) repurchase, redeem, or otherwise
acquire any shares of the Company Common Stock or
other capital stock or securities of the Company; or
(ii) provide material funds to, or make any material
investment in (in the form of a loan, capital
contribution, or otherwise), or provide any guarantee
with respect to the obligations of any person or
entity.
<PAGE 25>
3.04 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, association, or
other entity.
3.05 No Conflict. The execution, delivery, and performance
of this Agreement, and the consummation by the Company of the
transactions contemplated hereby, do not and will not (i)
contravene or conflict with the Articles of Incorporation or
Bylaws of the Company; (ii) constitute a violation of any
provision of any federal, state, local, or foreign law binding
upon or applicable to the Company; or (iii) constitute a default
or require any consent under, give rise to any right of
termination, cancellation or acceleration of, or to a loss of
any benefit to which the Company is entitled under, or result in
the creation or imposition of any lien, claim, or encumbrance on
any assets of the Company under, any contract to which the
Company is a party or any permit, license, or similar right
relating to the Company or by which the Company may be bound or
affected.
3.06 Valid Issuance of Stock. The Shares, when issued,
sold, and delivered in accordance with the terms of this
Agreement for the consideration provided for herein, will be
duly and validly issued, fully paid and nonassessable.
3.07 Governmental Consents. Except as provided in Section
5.01(f) and Section 5.01(g), no consent, approval, order, or
authorization of, or registration, qualification, designation,
declaration, or filing with, any federal, state, or local
governmental authority on the part of the Company is required in
connection with the consummation of the transactions
contemplated by this Agreement.
3.08 Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration, or investigation of any
kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of the
Company, threatened against the Company or any properties or
rights of the Company, or relating to this Agreement or the
transactions contemplated by this Agreement, including, without
limitation, any claims for indemnification raised by Casco
Standards, Inc. against the Company pursuant to the Purchase and
Sale Agreement dated March 14, 1997. The Company is not subject
to any continuing order of, consent decree, settlement
agreement, or other similar written agreement with, or
continuing investigation by, any governmental entity, or any
judgment, order, writ, injunction, decree, or award of any
governmental entity or arbitrator.
3.09 Permits; Compliance. The Company is in possession of
all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates,
approvals, and orders necessary to own, lease, and operate its
properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), and there is no
action, proceeding, or investigation pending or threatened
regarding suspension or cancellation of any of the Company
Permits.
3.10 Compliance with Law and Charter Documents. The
Company is not in violation or default of any provisions of its
Articles of Incorporation or Bylaws, both as amended to date.
The Company has complied and is in compliance in all material
respects with all applicable statutes, laws, regulations, and
executive orders of the United States of America and all states,
<PAGE 26>
foreign counties, and over governmental bodies and agencies
having jurisdiction over the Company's business or properties.
3.11 Registration Rights. The Company is not currently
subject to any grant or agreement to grant to any person or
entity any rights (including piggyback registration rights) to
have any securities of the Company registered with the United
States Securities and Exchange Commission ("SEC") or any other
governmental authority.
3.12 Title to Property and Assets. Except as set forth on
Schedule 3.12, the Company does not own any real property and
does not have any assets. With respect to the property and
assets it leases, the Company is, except as set forth in
Schedule 3.12, in compliance with such leases in all material
respects.
3.13 Material Contracts. The Company has no (a) agreement,
contract, or other arrangement, whether written or oral,
providing for the payment by the Company of $25,000 or more or
(b) other agreement, contract, or other arrangement that is
material to the business of the Company.
3.14 SEC Documents.
(a) The Company has furnished to Purchaser copies of the
Company's Annual Report on Form 10-KSB for the year
ended June 30, 1996, the Company's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1997, and
the Company's Proxy Statement for the Annual Meeting
of the Shareholders dated May 23, 1997 (collectively,
the "SEC Documents"). Each of the SEC Documents, as
of the respective date thereof, did not, and each of
the registration statements, reports, and proxy
statements filed by the Company with the SEC after the
date thereof and prior to the Closing will not, as of
the date thereof, contain any untrue statement of a
material fact or omit to state a material fact
necessary in order to make the statements made
therein, in light of the circumstances under which
they are made, not misleading. The Company is not a
party to any material contract, agreement, or other
arrangement which was required to have been filed as
an exhibit to the SEC Documents that is not so filed.
(b) The SEC Documents include the Company's audited
financial statements (the "Audited Financial
Statements") for the year ended June 30, 1996 and its
unaudited financial statements as of and for the nine-
month period ended March 31, 1997 (the "Balance Sheet
Date"). Since the Balance Sheet Date, the Company has
duly filed with the SEC all registration statements,
reports, and proxy statements required to be filed by
it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Securities Act
of 1933, as amended (the "Securities Act"). The
audited and unaudited financial statements of the
Company included in the SEC Documents filed prior to
the date hereof fairly present, in conformity with
generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be
indicated in the notes thereto), the financial
position of the Company as at the date thereof and the
results of their
<PAGE 27>
operations and cash flows for the
periods then ended (subject to normal year and audit
adjustments in the case of unaudited interim financial
statements).
(c) Except as and to the extent reflected or reserved
against in the Company's unaudited financial
statements for the nine-month period ending March 31,
1997 (including the notes thereto), the Company has no
liabilities (whether accrued or unaccrued, liquidated
or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested,
executory, determined or determinable) other than: (i)
liabilities incurred in the ordinary course of
business since the Balance Sheet Date, and (ii)
liabilities with respect to agreements listed in
Schedule 3.14(c).
3.15 Employees; Employee Benefits.
(a) The Company has no employees other than those listed
on Schedule 3.15(a). The Company has not received any
notice, and has no knowledge of any threatened labor
or civil rights dispute, controversy, or grievance or
any other unfair labor practice proceeding or breach
of contract claim or action with respect to claims of,
or obligations to, any present or former employee or
group of employees of the Company.
(b) Except as set forth on Schedule 3.15(b), the Company
does not maintain, sponsor, contribute to, or provide
any benefits under (i) any "employee benefit plan" (as
defined in the Employee Retirement Income Security Act
of 1974, as amended); (ii) any plan or policy
providing for any "fringe benefits"; (iii) any bonus,
incentive, compensation, deferred compensation, profit
sharing, stock, severance, retirement, health, life,
disability, group insurance, employment, stock option,
stock purchase, stock appreciation right, supplemental
unemployment, layoff, consulting, or other similar
plan; or (iv) any agreement, policy, or understanding
(whether written or oral, qualified or nonqualified,
currently effective or terminated) ((i) through (iv)
are collectively referred to as "Employee Plans").
There is no claim pending arising out of or related to
any Employee Plan by any person or entity (including
any governmental entity) against the Company nor is
any such claim threatened. The Company has no
continuing liability or other obligations arising
under any previously terminated or transferred
Employee Plans.
3.16 Tax Matters.
(a) The Company has filed on a timely basis all Tax
Returns required to have been filed by it and has paid
on a timely basis all Taxes required to be shown
thereon as due. All such Tax Returns are true,
complete, and correct in all material respects. No
director, officer, or employee of the Company having
responsibility for Tax matters has reason to believe
that any Taxing authority has valid grounds to claim
or assess any additional Tax with respect to the
Company in excess of the amounts shown in the
financial statements delivered to Purchaser for the
periods covered thereby. As used in this Agreement,
(l) "Taxes" means (x) all federal, state, local,
foreign, and other net income, gross income, gross
receipts, sales, use,
<PAGE 28>
ad valorem, value added, intangible, unitary, capital gain, transfer,
franchise, profits, license, lease, service, service
use, withholding, backup withholding, payroll,
employment, estimated, excise, severance, stamp,
occupation, premium, property, prohibited
transactions, windfall or excess profits, customs,
duties or other taxes, fees, assessments or charges of
any kind whatsoever together with any interest and any
penalties, additions to tax or additional amounts with
respect thereto, (y) any liability for payment of
amounts described in clause (x) whether as a result of
transferee liability, of being a member of an
affiliated, consolidated, combined, or unitary group
for any period, or otherwise through operation of law,
and (z) any liability for the payment of amounts
described in clauses (x) or (y) as a result of any tax
sharing, tax indemnity or tax allocation agreement or
any other express or implied agreement to indemnify
any other person for Taxes; and the term "Tax" means
any one of the foregoing Taxes; and (2) "Tax Returns"
means all returns, reports, forms, or other
information required to be filed with respect to any
Tax.
(b) With respect to all amounts in respect of Taxes
imposed upon the Company or for which the Company is
or could be liable, whether to Taxing authorities (as,
for example, under law) or to other persons or
entities (as, for example, under tax allocation
agreements), and with respect to all taxable periods
or portions of periods ending on or before the Closing
Date, all applicable Tax laws and agreements have been
fully complied with, and all such amounts required to
be paid by the Company to taxing authorities or others
have been paid.
(c) The Company has not received notice that the Internal
Revenue Service or any other Taxing authority has
asserted against the Company any deficiency or claim
for additional Taxes in connection with any Tax
Return, and no issues have been raised (and are
currently pending) by any taxing authority in
connection with any Tax Return. The Company has not
received notice that it is or may be subject to Tax in
a jurisdiction in which it has not filed or does not
currently file Tax Returns.
3.17 Indebtedness. The Company has no outstanding
indebtedness that the Company has directly or indirectly
created, incurred, assumed, or guaranteed.
3.18 Environmental Matters.
(a) During the period that the Company has leased or owned
its properties or owned or operated any facilities,
there have been no disposals, releases, or threatened
releases of Hazardous Materials (as defined below) on,
from, or under such properties or facilities in
violation of applicable law. The Company has no
knowledge of any presence, disposals, releases, or
threatened releases of Hazardous Materials on, from,
or under any of such properties or facilities, which
may have occurred prior to the Company having taken
possession of any of such properties or facilities in
violation of applicable law. For purposes of this
Agreement, the terms "disposal", "release", and
"threatened release" shall have the definitions
assigned thereto by the Comprehensive Environmental
Response, compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq., as
<PAGE 29>
amended ("CERCLA"). For the purposes of this Section 3.17, "Hazardous
Materials" shall mean any hazardous or toxic
substance, material, or waste which is or becomes
prior to the Closing regulated under, or defined as a
"hazardous substance", "pollutant", "contaminant",
"toxic chemical", "hazardous material", "toxic
substance", or "hazardous chemical" under (1) CERCLA;
(2) the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. Section 11001 et seq.; (3) the
Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq.; (4) the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (5) the
Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 et seq.; or (6) regulations promulgated
under any of the above statutes.
(b) None of the Company's properties or facilities is in
violation of any federal, state, or local law,
ordinance, regulation, or order relating to industrial
hygiene or to the environmental conditions on, under,
or about such properties or facilities, including, but
not limited to, soil and ground water conditions.
During the time that the Company has owned or leased
its properties and facilities, neither the Company
nor, to the Company's knowledge, any third party, has
used, generated, manufactured, or stored on, under, or
about such properties or facilities or transported to
or from such properties or facilities any Hazardous
Materials in violation of applicable law.
(c) During the time that the Company has owned or leased
its properties and facilities, there has been no
litigation brought or threatened against the Company,
or any settlement reached by the Company with, any
party or parties alleging the presence, disposal,
release, or threatened release of any Hazardous
Materials on, from, or under any of such properties or
facilities.
(d) During the period that the Company has owned or leased
its properties and facilities, no Hazardous Materials
have been transported from such properties or
facilities to any site or facility now listed on the
National Priorities List, at 40 C.F.R. Part 300, or
any list with a similar scope or purpose published by
any state authority in violation of applicable law.
3.19 Full Disclosure. The representations and warranties
contained in this Agreement, as modified or qualified by the
Schedules, are true and complete in all material respects and do
not omit to state any materiel fact necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading.
Article IV
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to the Company
that the statements in this Article IV are true and correct as
of the date of this Agreement.
4.01 Investment Intent. Purchaser is acquiring the Shares
for his own account for investment purposes and not with a view to
the distribution thereof within the meaning of the Securities Act.
<PAGE 30>
4.02 Restricted Securities. Purchaser understands that the
Shares constitute "restricted securities" within the meaning of
Rule 144 under the Securities Act and may not be sold, pledged,
or otherwise disposed of unless they are subsequently registered
under the Securities Act and applicable state securities laws or
unless an exemption from registration is available.
4.03 Accredited Investor. Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities
Act.
4.04 Restrictive Legend. Purchaser understands that each
certificate representing the Shares shall be stamped or
otherwise imprinted with a legend substantially in the following
form (in addition to any legend that may now or hereafter be
required by applicable state law):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
4.05 No Non-Competition Obligation. Purchaser is not a
party to any agreement, whether with Sports Supply Group, Inc.
or any other entity, pursuant to which he has agreed not to
compete with such entity or pursuant to which the transactions
contemplated by this Agreement would be prohibited or limited in
any material manner.
Article V
Closing Conditions
5.01 Conditions to Purchaser 's Obligations at Closing.
The obligations of Purchaser to purchase the Shares and the
other transactions contemplated by this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of
the following conditions:
(a) Each of the representations and warranties of the
Company contained in this Agreement must be true and
correct in all material respects on and as of the
Closing Date as though made on and as of the Closing
Date.
(b) The Company must have performed and complied in all
material respects with all agreements, obligations,
and conditions contained in this Agreement that are
required to be performed or complied with by it on or
before the Closing and will have obtained all
approvals, consents, and qualifications necessary to
complete the purchase and sale of the Shares.
<PAGE 31>
(c) Each of the required items set forth in Section 2.03
must have been executed and delivered.
(d) The Company's Board of Directors shall have taken such
actions so that, immediately after the Closing, the
Board of Directors shall consist of one designee of
the existing Board of Directors with the remaining
members to consist of persons designated by Purchaser
(which shall in any event never be less than two
members of the Company's Board of Directors).
(e) The Company's Board of Directors must have taken all
steps required by the Pennsylvania Business
Corporation Law to propose and adopt an amendment to
the Company's Articles of Incorporation changing the
name of the Company from "DSSI Corporation" to
"Collegiate Pacific Inc.", which shall be conditioned
upon and effective at Closing.
(f) The Company shall have complied with its obligations
under Section 14(f) of the Exchange Act.
(g) The Company must have taken all steps required by
applicable law, including the filing of a proxy
statement with the SEC, to seek shareholder approval
of this Agreement and the transactions contemplated
hereby.
(h) The Company must have delivered to Purchaser audited
financial statements for the fiscal year ended June
30, 1997, including balance sheets and statements of
income, cash flow, and changes in stockholders' equity
for such period, prepared in accordance with GAAP
applied on a consistent basis throughout such period,
the results of which are not materially adverse as
compared with the results reported in the Audited
Financial Statements and the unaudited financial
statements of the Company as of and for the nine-month
period ended March 31, 1997.
(i) The Company must have terminated all consulting,
employment, or other agreements, contracts, or
understandings between the Company and any person,
including any agreement, whether written or oral,
between the Company and Patrick J. Brennan, except
that payments to, or on behalf of, Mr. Brennan may be
phased out during the thirty (30) day period following
the Closing Date as also provided in Section 6.06.
5.02 Conditions to the Company's Obligations at Closing.
The obligations of the Company to issue and sell the Shares and
the other transactions contemplated by this Agreement are
subject to the fulfillment or waiver, on or before the Closing,
of each of the following conditions:
(a) Each of the representations and warranties of
Purchaser contained in this Agreement must be true and
correct in all material respects on and as of the
Closing Date as though made on and as of the Closing
Date.
<PAGE 32>
(b) Purchaser must have performed and complied in all
material respects with all agreements, obligations,
and conditions contained in this Agreement that are
required to be performed or complied with by it on or
before the Closing and will have obtained all
approvals, consents, and qualifications necessary to
complete the purchase and sale of the Shares.
(c) Each of the required items set forth in Section 2.02
must have been executed and delivered.
Article VI
Covenants
6.01 Affirmative Covenants of the Company. The Company
hereby covenants and agrees that, prior to the Closing, the
Company, except as otherwise contemplated by this Agreement,
will (a) not purchase any assets in excess of $10,000 or incur
any liabilities in excess of $2,000 per month, except as
provided in Schedule 6.01(a); (b) not take or permit any action
that would cause the conditions on the obligations of the
parties to effect the transactions contemplated by this
Agreement not to be fulfilled, including, without limitation, by
taking or causing to be taken any action that would cause the
representations and warranties made by the Company in this
Agreement not to be true and correct; (c) not increase the
compensation payable to or to become payable to any stockholder,
director, or officer of the Company; (d) not declare or pay any
dividend on, or make any other distribution in respect of,
outstanding shares of capital stock; (e) effect any
reorganization or recapitalization; (f) split, combine, or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock; (g)
not issue, deliver, award, grant, or sell, or authorize or
propose the issuance, delivery, award, grant, or sale (including
the grant of any security interests, liens, claims, pledges,
limitations in voting rights, charges, or other encumbrances)
of, any shares of any class of its capital stock or other
securities (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any such
shares or other securities, or any rights, warrants, or options
to acquire any such shares or other securities; (h) not acquire
or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of,
or by any other manner, any business or any division thereof, or
otherwise acquire or agree to acquire any assets of any other
entity; (i) not adopt or propose to adopt any amendments to its
Articles of Incorporation or bylaws or similar organizational
documents; (j) incur any obligation for borrowed money
indebtedness, whether or not evidenced by a note, bond,
debenture, or similar instrument; and (k) take all reasonable
steps to cause to be fulfilled the conditions precedent to
Purchaser's obligations to consummate the transactions
contemplated by this Agreement that are dependent on the actions
of the Company.
6.02 Access and Information. The Company has caused and
will, until the Closing Date, continue to cause Purchaser to
have reasonable access to the Company's directors, officers,
employees, agents, assets, and properties and all relevant
books, records, and documents of or relating to the business and
assets of the Company during normal business hours and will
furnish to Purchaser such information, financial records, and
other documents relating to the Company and its operations and
business as Purchaser may reasonably request.
6.03 Supplemental Disclosure. The Company will promptly
supplement or amend each of the Schedules with respect to any
matter that arises or is discovered after the date of this
Agreement that, if existing or known at the date of this
<PAGE 33>
Agreement, would have been required to be set forth or listed in
the Disclosure Schedule; provided that, for purposes of
determining the rights and obligations of the parties under this
Agreement (other than the obligations of the Company under this
Section 6.03), any such supplemental or amended disclosure will
not be deemed to have been disclosed to Purchaser unless
Purchaser otherwise expressly consents in writing.
6.04 Publicity. Purchaser and the Company will cooperate
with each other in the development and distribution of all news
releases and other public disclosures relating to the
transactions contemplated by this Agreement.
6.05 Reservation of Common Stock. Prior to Closing, the
Company will take all actions required by the laws of the
Commonwealth of Pennsylvania and the Company's Articles of
Incorporation and Bylaws to reserve 400,000 shares of the
Company Common Stock to be issued at Purchaser's discretion to
members of the Company's Board of Directors designated by
Purchaser.
Section 6.06 Termination of COBRA Coverage with U.S.
Healthcare. Within thirty (30) days of Closing, the Company
will take all steps required by applicable law to terminate its
agreement with U.S. Healthcare for the provision of COBRA
benefits to Company employees.
Section 6.07 Delivery of Proxy. Simultaneous with the
execution of this Agreement, the Company shall deliver the proxy
from persons representing a majority of the issued and
outstanding shares of Company Common Stock approving this
Agreement and the transactions contemplated hereby, including
the proposed change in Company operations by Purchaser.
Section 6.08 Delivery of Information. Purchaser hereby
covenants and agrees to provide such information as may be
reasonably requested by the Company and as required by
applicable law to enable the Company to fulfill its obligations
as set forth in Section 5.01(g).
Article VII
Miscellaneous
7.01. Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated and abandoned
(a) at any time prior to the Closing by mutual written consent
of the Company and Purchaser; or (b) by either Purchaser, on the
one hand, or the Company, on the other hand, if a condition to
performance by the terminating party or parties under this
Agreement has not been satisfied or waived prior to September
30, 1997. Notwithstanding the foregoing clause (b), (i)
Purchaser may not terminate this Agreement if the event giving
rise to its termination right results from Purchaser's willful
failure to perform or observe any of its covenants or agreements
set forth in this Agreement or if Purchaser is, at such time, in
breach of this Agreement, and (ii) the Company may not terminate
this Agreement if the event giving rise to its termination right
results from the willful failure of the Company to perform or
observe any of its covenants or agreements set forth in this
Agreement or if the Company is, at such time, in breach of this
Agreement. Upon termination of this Agreement pursuant to
Section 7.01, this Agreement (except for Section 7.02, Section
7.04, and Section 7.10) will become void, there will be no
liability on the part of the Purchaser, on the one hand, or
<PAGE 34>
the Company, on the other hand, to the other and all rights and
obligations of each party to this Agreement will cease, except
that nothing in this Agreement will relieve any party of any
liability for any willful breach of such party's
representations, warranties, covenants, or agreements contained
in this Agreement.
7.02 Notices. All notices that are required or may be
given pursuant to this Agreement must be in writing and
delivered personally, by a recognized courier service, by a
recognized overnight delivery service, by telecopy, or by
registered or certified mail, postage prepaid, to the parties at
the following addresses (or to the attention of such other
person or such other address as any party may provide to the
other parties by notice in accordance with this Section 8.02):
If to Purchaser:
Michael J. Blumenfeld
13950 Semlac Drive
Farmers Branch, Texas 75234
Telecopy: (214) 739-1639
with a copy to:
Alan J. Bogdanow
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Telecopy: (214) 939-5849
If to the Company:
DSSI Corporation
P.O. Box 1570
West Chester, Pennsylvania 19380
Attention: Patrick Brennan
Telecopy: (610) 696-3479
with a copy to:
Robert W. Berend
Wachtel & Masyr, LLP
110 E. 59th Street
New York, NY 10022
Telecopy: (212) 909-9455
Any such notice or other communication will be deemed to have
been given and received (whether actually received or not) on
the day it is personally delivered or delivered by courier or
overnight delivery service or sent by telecopy or, if mailed,
when actually received.
<PAGE 35>
7.03 Survival of Representations and Warranties. All
representations and warranties made in or pursuant to this
Agreement will survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby and continue for a period ending on the third anniversary
of this Agreement. All statements contained in any schedule,
certificate, or other writing delivered in connection with this
Agreement or the transactions contemplated by this Agreement
will constitute representations and warranties under this
Agreement. Each party agrees that no other party to this
Agreement will be under any duty, express or implied, to make
any investigation of any representation or warranty made by any
other party to this Agreement, and that no failure to so
investigate will be considered negligent or unreasonable.
7.04 Attorneys' Fees and Costs. If attorneys' fees or
other costs are incurred to secure performance of any
obligations under this Agreement, or to establish damages for
the breach thereof or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party
will be entitled to recover reasonable attorneys' fees and costs
incurred in connection therewith.
7.05 Further Assurances. Each party agrees to execute any
and all documents and to perform such other acts as may be
reasonably necessary or expedient to further the purposes of
this Agreement and the transactions contemplated by this
Agreement.
7.06 No Brokers. Each party to this Agreement represents
to the other party that it has not incurred and will not incur
any liability for brokerage fees or agents' commissions in
connection with this Agreement or the transactions contemplated
by this Agreement, and agrees that it will indemnify and hold
harmless the other party against any claim for brokerage and
finders' fees or agents' commissions in connection with the
negotiation or consummation of the transactions contemplated by
this Agreement.
7.07 Counterparts. This Agreement may be executed in one
or more counterparts for the convenience of the parties to this
Agreement, all of which together will constitute one and the
same instrument.
7.08 Assignment. Neither this Agreement nor any of the
rights, interests, or obligations under this Agreement will be
assigned or delegated by the Company or Purchaser, without the
prior written consent of the other party; provided, however,
that Purchaser may assign its rights, but not the liabilities,
arising under this Agreement to an affiliate of Purchaser
without the prior written consent of the Company. This
Agreement is not intended to confer any rights or benefits to
any person or entity other than the parties to this Agreement.
7.09 Entire Agreement. This Agreement and the related
documents contained as Exhibits and Schedules to this Agreement
or expressly contemplated by this Agreement contain the entire
understanding of the parties relating to the subject matter
hereof and supersede all prior written or oral and all
contemporaneous oral agreements and understandings relating to
the subject matter hereof. This Agreement cannot be modified or
amended except in writing signed by the party against whom
enforcement is sought. The Exhibits and Schedules to this
Agreement are hereby incorporated by reference into and made a
part of this Agreement for all purposes.
7.10 Governing Law. This Agreement will be governed by,
and construed in accordance with, the substantive laws of the
State of Texas, without giving effect to any
<PAGE 36>
conflicts-of-law, rule, or principle that might require the
application of the laws of another jurisdiction.
IN WITNESSES WHEREOF, the parties have entered into this
Agreement as of the date first set forth above.
DSSI CORPORATION,
a Pennsylvania corporation
By: ________________________
Name: ________________________
Title: ________________________
PURCHASER:
_____________________________
Michael J. Blumenfeld
<PAGE 37>
APPENDIX A-2
Addendum to
Stock Purchase Agreement
This Addendum is hereby incorporated into and made a part
of the Stock Purchase Agreement dated August 12, 1997 between
Michael J. Blumenfeld and DSSI Corporation. Capitalized terms
used herein and not otherwise defined shall have the meanings
assigned to such terms in the Stock Purchase Agreement.
The Company and Purchaser hereby agree that any and all
assets owned by Collegiate Pacific Inc. f/k/a Nitro Sports Inc.
("Collegiate Pacific") and acquired by Purchaser on behalf of
Collegiate Pacific after April 1, 1997 will be purchased by the
Company promptly after the Closing at cost. Promptly after
Closing, Purchaser shall submit an itemized statement (the
"Statement") of such assets detailing the cost of such items to
the Board of Directors of the Company who shall meet within five
(5) business days of the Company's receipt of the Statement for
the purpose of reviewing the assets and their value for
purchase. The Company and Purchaser shall use reasonable good
faith efforts to resolve any disputes regarding the value of any
such assets. If such costs are undisputed, the Board of
Directors shall approve the purchase and payment of such assets,
which shall occur within three (3) business days of such Board
approval. Payment for the assets as set forth in the Statement
shall be in immediately available funds to an account designated
in writing by Purchaser to the Company.
Agreed and accepted:
_____________________________
Michael J. Blumenfeld
DSSI CORPORATION
By: _________________________
Title: ________________________
<PAGE I>
PROXY
DSSI CORPORATIOND
P.O. Box 1570, West Chester, PA 19380
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 29, 1997
The undersigned hereby appoints Jeff Davidowitz and John
Pappajohn, or either of them, as Proxy or Proxies of the
undersigned with full power of substitution or revocation to
attend and to represent the undersigned at the Special Meeting of
Shareholders of DSSI Corporation (the "Company") to be held on
December 29, 1997, and at any adjournments thereof, and to vote
thereat the number of shares of Common Stock, $0.01 par value
(the "Common Stock"), of the Company the undersigned would be
entitled to vote if personally present, in accordance with the
directions indicated below.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.
Authorize the Company to enter the business of distributing
sports equipment, which action will be effected through: (1) the
sale of 10,000,000 shares of the Common Stock to Michael J.
Blumenfeld at $.20 per share or an aggregate purchase price of
$2,000,000 and (2) the sale by Mr. Blumenfeld to the Company, at
cost, of the assets (including corporate name) of College Pacific
Inc. f/k/a Nitro Sports Inc.:
[] FOR [] AGAINST [] ABSTAIN
Authorize the change of name of the Company from DSSI
Corporation to Collegiate Pacific Inc., but only if the prior
proposal is approved and the sale to Mr. Blumenfeld is
consummated.
[] FOR [] AGAINST [] ABSTAIN
If no specification is made, this proxy will be voted FOR the
Proposals listed above.
Dated:_________________, 1997
Name:________________________________________
_________________________________________
Please sign exactly
as name appears
above. For joint
accounts, each joint
owner must sign.
Please give full
title if signing in
a representative
capacity.
Please check if you
plan to attend this
pecial Meeting []
