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U. S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
COMMISSION FILE NUMBER 0-17293
COLLEGIATE PACIFIC INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
PENNSYLVANIA 22-2795073
------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
13950 SENLAC, SUITE 200, FARMERS BRANCH, TEXAS 75235
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(972) 243-8100
-------------------------
Issuer's Telephone Number
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE
-----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended June 30, 1998 were
$3,283,825.
The aggregate market value at September 25, 1998 of shares of the Common
Stock held by non-affiliates was $17,336,439 based upon the bid price of the
Issuer's Common Stock as reported by the National Association of Securities
Dealers in the OTC Bulletin Board. Solely for the purpose of this calculation,
shares held by certain principal shareholders named in Item 11 hereof, as well
as shares held by directors and officers of the Issuer, have been excluded.
Such exclusion should not be deemed a determination or an admission by the
issuer that such shareholders or individuals are, in fact, affiliates of the
issuer.
On September 24, 1998, there were 17,016,833 shares of the issuer's
Common Stock, $0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
NONE
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Collegiate Pacific Inc.
FORM 10-KSB
Fiscal Year Ended June 30, 1998
TABLE OF CONTENTS
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PART I
Item 1 Description of Business 3
Item 2 Description of Property 4
Item 3 Legal Proceedings 4
Item 4 Submission of Matters to a Vote of Security Holders 4
PART II
Item 5 Market for Common Equity and Related Stockholder Matters 5
Item 6 Management's Discussion and Analysis or Plan of Operations 6
Item 7 Financial Statements 8
Item 8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 22
PART III
Item 9 Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act 22
Item 10 Executive Compensation 23
Item 11 Security Ownership of Certain Beneficial Owners and
Management 24
Item 12 Certain Relationships and Related Transactions 25
PART IV
Item 13 Exhibits, List and Reports on Form 8-K 26
Signatures 28
</TABLE>
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PART 1
ITEM 1 DESCRIPTION OF BUSINESS
General
From August 1989 to June 16, 1997, Collegiate Pacific Inc. (the
"Company") was engaged in the business of developing and marketing drug testing
products under the name of Drug Screening Systems, Inc. On June 16, 1997, the
Company sold substantially all of its assets, changed its name to DSSI, and
thereafter had no formal operations.
On February 17, 1998, the Company's stockholders authorized the Company
to enter into the business of distributing sports equipment, which was effected
through (a) the sale of 10,000,000 shares of Common Stock, a controlling
interest in the Company, to Michael J. Blumenfeld (9,800,000 shares) and Adam
Blumenfeld (200,000 shares), at $.20 per share (the average of the bid and ask
price of the Common Stock on August 18, 1997, the date of the Stock Purchase
Agreement between the Company and Michael and Adam Blumenfeld), or an aggregate
purchase price of $2,000,000, and (b) the sale by Michael J. Blumenfeld to the
Company, at cost, of all of the assets, including the corporate name, of
Collegiate Pacific Inc. f/k/a as Nitro Sports Inc., a Texas corporation, which
company was formed in 1997 to engage in the catalog and mail order distribution
of sports equipment. The Company changed its name to Collegiate Pacific Inc.
at that time.
The Company was incorporated in Pennsylvania in 1987. The Company's
executive offices are located at 13950 Senlac, Suite 200, Farmers Branch, Texas
75235, and its telephone number at that location is (972) 243-8100.
The Company is in the business of the mail order marketing of sports
equipment primarily to institutional customers located throughout the United
States. The Company's principal customers include country clubs, schools,
YMCAs and YWCAs (and similar recreational organizations), municipal recreation
departments, and other governmental agencies. The Company offers a broad line
of sporting equipment, including inflatable balls, nets for various sports,
standards and goals for sports, weight lifting equipment, and other
recreational products, and provides after sale customer service through toll-
free numbers. The Company believes that prompt delivery of a broad range of
products at competitive prices, coupled with prompt, accessible customer
service, differentiates the Company from its competitors. The Company
currently markets approximately 500 sports related equipment products to over
200,000 potential institutional, retail, mass merchant, and team dealer
customers. Since commencing operations, the Company has sold products to
approximately 10,000 customers.
The Company currently has a master mailing list of over 200,000
potential customers and intends to distribute approximately 700,000 catalogs
and fliers to this audience during Fiscal Year 1999. This mailing list, which
has been developed under the supervision of the President of the Company from
his 25 years of experience in the industry, is carefully maintained, screened,
and cross-checked. The master mailing list is subdivided into various
combinations designed to place catalogs in the hands of individual purchase
decision makers. The master mailing list is also subdivided by relevant product
types, seasons, and customer profiles. The Company also uses other forms of
solicitations such as trade shows, telemarketing, broadcast fax programs, and
the Internet.
The Company's revenues are not dependent upon any one or a few major
customers. The Company's institutional customers typically receive annual
appropriations for sports related equipment, which appropriations are generally
spent in the period preceding the season in which the sport or athletic
activity occurs. While institutions are subject to budget constraints, once
allocations have been made, aggregate levels of expenditures are typically not
reduced.
A majority of the Company's products are purchased from suppliers in the
Far East. In addition, the Company believes that many of the products
purchased from domestic suppliers are produced by foreign manufacturers. The
international supply of products is subject to risks, including shipment
delays, fluctuation in
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exchange rates, changes in custom regulations, adverse economic conditions in
foreign countries, and political turmoil, which may affect the Company's
ability to deliver its products in a timely and competitive manner.
Although the vast majority of products to be distributed are purchased
in final form, a small percentage of the items require minor fabrication to
complete. The Company has welding machines and an assortment of tools to aid
in this fabrication process. The raw materials used in this process are in the
form of shipping supplies, nuts and bolts, and other commercially available
products. The Company believes there are multiple suppliers for these products
nationwide.
Seasonal Nature of Business
The Company anticipates that its revenues will peak in the second and
third calendar quarters of each year due primarily to the budgeting procedures
of many of its customers and the seasonal demand for the products offered by
the Company. The fourth calendar quarter generally experiences lower revenues
due to lessening customer demand as a result of decreased sports activities,
adverse weather conditions inhibiting customer demand, holiday seasons, and
school recesses.
Competition
The Company competes in the institutional market with other direct mail
marketers of sporting equipment, local sporting goods dealers, and retail
sporting goods stores, which collectively dominate the institutional market.
The Company competes in the institutional market principally on the basis of
price, product availability, and customer service. The Company believes that
it has an advantage on the institutional market over traditional sporting goods
retailers because its selling prices do not include comparable price markups
attributable to wholesalers, manufacturers, and/or distributors. In addition,
the Company believes that it has an advantage over other direct mail marketers
of sporting goods because it believes that it offers superior products, coupled
with prompt and accessible service, at the most competitive prices.
Employees
The Company currently employs 14 persons. None of the Company's
employees are represented by a union, and the Company believes its relations
with such employees are good.
ITEM 2 DESCRIPTION OF PROPERTY
The Company leases an approximately 30,000 square foot corporate
headquarters and warehouse facility located in Farmers Branch, Texas. The
facility is under a lease that expires in Fiscal Year 2003. The Company
believes that this facility will be adequate for its business needs for the
foreseeable future. The Company does not own any real property.
ITEM 3 LEGAL PROCEEDINGS
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5 MARKET FOR THE COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market
The following table sets forth, for the periods indicated, the quarterly
range of the high and low bid prices of the Common Stock as reported by the
NASD on the Bulletin Board:
<TABLE>
<CAPTION>
Fiscal 1998 Quarter Ended Low High
- ------------------------- --- ----
<S> <C> <C>
September 30, 1997 $0.172 $1.63
December 31, 1997 1.63 2.25
March 31, 1998 2.31 2.56
June 30, 1998 2.35 2.69
Fiscal 1997 Quarter Ended
- -------------------------
September 30, 1996 $0.250 $0.750
December 31, 1996 0.125 0.500
March 31, 1997 0.063 0.328
June 30, 1997 0.094 0.172
</TABLE>
The foregoing quotations reflect inter-dealer prices, without mark-up, mark-
down or commissions, and may not reflect actual transactions.
Holders
As of September 24, 1998, there were 484 holders of record of Common
Stock, and there were 17,016,833 shares of Common Stock issued and outstanding.
Dividends
The Company did not declare or pay any cash or stock dividends on the
Common Stock during the fiscal year ended June 30, 1998. The Company currently
does not anticipate paying any cash dividends in the foreseeable future. Any
future determination to pay dividends will be at the discretion of the Company's
Board of Directors and will be dependent upon then existing conditions,
including the Company's financial condition, results of operations, contractual
restrictions, capital requirements, business prospects, and such other factors
as the Board deems relevant.
Recent Sales of Unregistered Securities
The following sets forth information as of June 30, 1998 regarding all
sales of unregistered securities of the Registrant during the past three years.
All such shares were exempt from registration under the Securities Act by
reason of Section 4(2) of the Securities Act.
On February 17, 1998, the Company sold 10,000,000 shares of Common Stock
to Michael J. Blumenfeld (9,800,000 shares) and Adam Blumenfeld (200,000
shares) for $.20 per share (the average of the bid and ask price of the Common
Stock on August 18, 1997, the date of the Stock Purchase Agreement between the
Company and Mr. Blumenfeld), or an aggregate purchase price of $2,000,000, in
cash pursuant to the terms and subject to the conditions of that certain Stock
Purchase Agreement dated August 18, 1997 by and between the Company and Mike
Blumenfeld and Adam Blumenfeld.
On February 17, 1998, in connection with the Stock Purchase Agreement
set forth above, the Company sold (i) 100,000 shares of Common Stock to Arthur
J. Coerver, who became a director of the Company upon consummation of the Stock
Purchase Agreement, at $.20 per share, (ii) 70,000 shares of Common Stock to
Robert W. Philip, who became a director of the Company upon consummation of the
Stock Purchase Agreement, at $.20
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per share, and (iii) 70,000 shares of Common Stock to William A. Watkins, Jr.,
who became a director of the Company upon consummation of the Stock Purchase
Agreement, at $.20 per share.
On February 24, 1998, the Company issued 100,000 shares of Common Stock
to Equipmart, Inc., a Texas corporation, in consideration of Equipmart, Inc.
entering into a Distribution Agreement with the Company.
On March 7, 1998, the Company issued 33,333 shares of Common Stock to
FunNets, Inc. in consideration of FunNets, Inc. entering into a Distribution
Agreement with the Company.
On April 14, 1998, the Company issued Richard and Patti Hershorin
137,500 shares of Common Stock as partial consideration for the acquisition by
the Company of all of the issued and outstanding common stock of Product
Merchandising, Inc. pursuant to the terms and subject to the conditions of that
certain Agreement for Purchase and Sale of Stock dated April 14, 1998 by and
between the Company, Product Merchandising, Inc., and Richard and Patti
Hershorin.
On May 31, 1998, the Company issued 400,000 shares of Common Stock to
Cary Bawcum, Stanley Graber, Frank A. Jones, and Joel W. Brown as consideration
for the acquisition by the Company of Vantage Products International, Inc.
pursuant to the terms and subject to the conditions of that certain Plan and
Agreement of Merger dated as of May 31, 1998 by and between the Company,
Vantage Products International, Inc., and the stockholders of Vantage Products
International, Inc.
In connection with each of the foregoing transactions, each purchaser
was provided access to all relevant information regarding the Company and
represented to the Company that they were "sophisticated" investors purchasing
the shares for investment purposes only and with no view toward distribution.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
The Company was incorporated on April 10, 1997 and began business during
the latter part of June 1997. Effective February 7, 1998, Collegiate Pacific
Inc. entered into a reverse acquisition agreement with DSSI, Inc. ("DSSI"), a
publicly held shell corporation. On April 14, 1998, the Company acquired all of
the issued and outstanding common stock of another entity. This transaction was
accounted for as a purchase, and, accordingly, the results and operations of
this entity have been included in the Company's results of operations commencing
on April 14, 1998. The Company also completed an acquisition of another entity
on May 31, 1998 by issuing common stock for all of the issued outstanding common
stock of that entity. This acquisition was accounted for as a pooling of
interests and, accordingly, the results of operations of the Company include the
results of operations of the pooled entity for the entire fiscal year.
The Company solicits customers from a variety of catalogs designed for
specific uses, including summer camps, baseball, and general sports and
recreation. The Company intends to distribute approximately 700,000 catalogs
to current and prospective customers during Fiscal Year 1999. The Company also
solicits customers through trade shows, road salesmen, broadcast fax programs,
telemarketing, and the Internet.
There were no operations prior to June 30, 1997, and accordingly this
discussion covers the year ended June 30, 1998, only.
Results of Operations
The Company generated $3,283,825 in revenue for Fiscal Year 1998. The
gross margin and gross margin percentage for Fiscal Year 1998 were $1,177,244
and 36% respectively. The gross margin percentage is expected to improve in
Fiscal Year 1999. $1,900,000 of the Fiscal Year 1998 revenues were generated
in the last three months of Fiscal Year 1998. The Company expects that its
current business will produce Fiscal Year 1999 revenues of $8-10 million.
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The Company incurred selling, general and administrative ("SG&A")
expenses of $1,704,859 during Fiscal Year 1998. A portion of these expenses
were incurred prior to any significant start up in operations. The Company
expects the ratio of SG&A to revenue to decrease as the revenue volumes
continue to increase.
Interest expense for Fiscal Year 1998 amounted to $172,027. All of
this interest relates to interest payable on the note to Mr. Blumenfeld. (See
"Liquidity and Capital Resources," below)
Liquidity and Capital Resources
Cash used in operations amounted to $2,761,611. The significant
components of the cash used in operations includes: (a) funding an increase in
accounts receivable of $634,862; (b) funding an increase in inventory of
$2,149,020; (c) an increase in accounts payable and accrued expenses of
$645,528; and (d) a net loss of $678,905.
The Company generated $246,434 in cash from financing activities.
Significant components included: (a) $582,660 in cash in the public entity upon
completion of the reverse acquisition; (b) $182,963 used in a business
acquisition; and (c) $128,263 used to purchase property and equipment. The
Company expects to spend comparable amounts on property and equipment for Fiscal
Year 1999.
The Company generated cash of $754,671 from financing activities from a
note payable to Mr. Blumenfeld, and cash of $2,275,000 from the sale of common
stock, such stock being sold in connection with the recapitalization of the
Company.
Management believes that the Company has adequate resources to satisfy
its cash requirements over the next 12 months. There are no material capital
commitments planned or pending. As of June 30, 1998, the Company had no
commercial bank debt, approximately $514,000 in cash, and approximately
$686,000 due from customers in accounts receivables. Since its inception in
1998, Michael J. Blumenfeld has made loans to the Company in an aggregate
amount approximating $755,000, which are payable on demand and bear interest at
the rate of 12% per annum. As of June 30, 1998, the aggregate amount
outstanding for such loans (including accrued interest) was $899,836. The
Company is in various stages of discussions with several commercial lenders to
arrange financing of inventories and accounts receivables as the situation
merits. The Company is actively involved in seeking expansion through
acquisitions and/or joint ventures, and the success of such efforts may require
additional bank, debt, or equity financings.
The Company currently employs 14 people and believes that this
employment is satisfactory for its financial performance during Fiscal Year
1999.
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ITEM 7 CONSOLIDATED FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
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Index to Consolidated Financial Statements . . . . . . . . . . . . . . 8
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . 10
Consolidated Balance Sheet as of June 30, 1998 (audited) . . . . . . . 11
Consolidated Statement of Operations for the year ended
June 30, 1998 (audited) . . . . . . . . . . . . . . . . . . . . . . . . 12
Consolidated Statement of Stockholders' Equity for the year
ended June 30, 1998 (audited) . . . . . . . . . . . . . . . . . . . . . 13
Consolidated Statement of Cash Flows for the year ended
June 30, 1998 (audited) . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 16
</TABLE>
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1998
WITH
REPORT OF INDEPENDENT AUDITORS
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REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of COLLEGIATE
PACIFIC INC. AND SUBSIDIARIES as of June 30, 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES as of June 30, 1998, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
SUTTON FROST LLP
Arlington, Texas
August 25, 1998
10
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 514,494
Accounts receivable 685,974
Inventory 2,149,020
Prepaid expenses and other current assets 40,064
-----------
Total current assets 3,389,552
Property and equipment, net 120,626
Other assets:
License agreements (net of accumulated amortization of $12,408) 279,258
Goodwill (net of accumulated amortization of $7,590) 544,156
Other assets, net 54,552
-----------
$ 4,388,144
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 552,618
Accrued expenses 192,066
Note payable to stockholder 754,671
Other current liabilities 54,965
-----------
Total current liabilities 1,554,320
Deferred rent 4,400
-----------
Total liabilities 1,558,720
-----------
Commitments and contingencies (Notes 9 and 10)
Stockholders' equity:
Common stock, $.01 par value; authorized 20,000,000
shares; 17,016,833 shares issued and outstanding 170,168
Additional paid-in capital 3,320,804
Accumulated deficit (629,928)
-----------
2,861,044
Less notes receivable from stockholders (31,620)
-----------
Total stockholders' equity 2,829,424
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$ 4,388,144
===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
Sales $ 3,283,825
Cost of sales 2,106,581
-----------
Gross profit 1,177,244
Selling, general and administrative expenses 1,704,859
-----------
Operating loss (527,615)
-----------
Other income (expense):
Interest expense (172,027)
Interest income 20,737
-----------
Total other income (expense) (151,290)
-----------
Net loss $ (678,905)
===========
Weighted average shares of common stock outstanding 7,270,711
===========
Net loss per share of common stock (basic and diluted) $ (0.09)
===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock
--------------------------- Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 1,000 $ 10 $ 990 $ -- $ 1,000
Effect of recapitalization and
reverse split (Note 1) 16,000,000 160,000 2,699,306 -- 2,859,306
Issuance of stock for purchase
of Vantage Products
International, Inc. 400,000 4,000 16,000 48,977 68,977
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1997,
as restated 16,401,000 164,010 2,716,296 48,977 2,929,283
Issuance of stock for cash 345,000 3,450 65,550 -- 69,000
Issuance of stock for
purchase of Product
Merchandising, Inc. 137,500 1,375 273,625 -- 275,000
Issuance of stock for
license agreements 133,333 1,333 265,333 -- 266,666
Net loss -- -- -- (678,905) (678,905)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1998 17,016,833 $ 170,168 $ 3,320,804 $ (629,928) $ 2,861,044
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
Reconciliation of net loss to net cash used by
operating activities:
Net loss $ (678,905)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 23,606
Amortization 26,420
Change in assets and liabilities, net of effects of business
acquisitions:
Accounts receivable (634,862)
Inventory (2,149,020)
Prepaid expenses and other current assets (40,064)
Other assets, net 48,029
Accounts payable 455,477
Accrued expenses 190,051
Other liabilities (6,743)
Deferred rent 4,400
-----------
Net cash used by operating activities (2,761,611)
-----------
Cash flows from investing activities:
Purchase of property and equipment (128,263)
Cash in public entity in connection with reverse acquisition 582,660
Cash paid for licenses (25,000)
Cash used in business acquisition net of cash acquired (182,963)
-----------
Net cash provided by investing activities 246,434
-----------
Cash flows from financing activities:
Net proceeds from note payable to stockholder 754,671
Proceeds from issuance of common stock 2,275,000
-----------
Net cash provided by financing activities 3,029,671
-----------
Increase in cash 514,494
Cash and cash equivalents at beginning of year --
-----------
Cash and cash equivalents at end of year $ 514,494
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(Continued)
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
(Continued)
<TABLE>
<S> <C>
Noncash investing activities:
Common stock issued to stockholders for notes receivable $ 31,620
=========
Common stock issued for license agreements $ 266,666
=========
Common stock issued for purchase of subsidiary $ 275,000
=========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1 - GENERAL AND BACKGROUND
Collegiate Pacific Inc. ("CPI") was incorporated on April 10, 1997 and began
business in June 1997. The Company is a Pennsylvania corporation and is
primarily engaged in the mail order marketing of professional sports equipment
to schools, colleges and other organizations throughout the United States.
Effective February 17, 1998 CPI entered into a reverse acquisition agreement
with DSSI, Inc. ("DSSI"), a publicly held "shell" corporation. DSSI issued
9,800,000 (approximately 62.5%) shares of DSSI's voting common stock in exchange
for all of the outstanding shares of CPI (a tax free organization). The public
entity then changed its name to Collegiate Pacific, Inc. The year end was
previously December 26, but changed to June 30, the public entities year end.
For accounting purposes, the reorganization of CPI and the public company is
regarded as an acquisition by a public company of all of the outstanding stock
of CPI and is accounted for as a recapitalization of CPI, with CPI as the
acquirer (a reverse acquisition). Accordingly, the financial statements prior to
the reverse acquisition date included herein are those of CPI.
Of the $678,905 loss for the year ended June 30, 1998, $50,026 related to
non-cash charges resulting from amortization and depreciation expense. As the
result of the February 17, 1998 reverse acquisition with DSSI, the Company
incurred acquisition related expenses including the operating losses incurred by
DSSI. The Company also expensed approximately $337,000 of advertising, postage
and catalog expenses incurred during the year ended June 30, 1998.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The consolidated financial statements include the accounts of CPI and its wholly
owned subsidiaries Product Merchandising, Inc. ("PMI") and Vantage Products,
Inc. ("VPI") (collectively referred to as the "Company"). Significant
intercompany accounts and transactions have been eliminated.
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS
Financial instruments which are potentially subject to concentrations of credit
risk consist principally of cash and accounts receivable. Cash deposits are
placed with high credit quality financial institutions to minimize risk.
Accounts receivable are unsecured.
(Continued)
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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Continued)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing consolidated financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosures of contingent assets and liabilities, and the reported amounts
of revenues and expenses. Actual results could vary from the estimates used in
preparing the accompanying consolidated financial statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are carried at the lower of cost or market using the average cost
method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives (5 to 7 years). The cost of
maintenance and repairs is charged to expense as incurred; significant renewals
and betterments are capitalized.
GOODWILL
Goodwill is the difference between the purchase price paid and liabilities
assumed over the estimated fair market value of assets acquired from PMI.
Goodwill acquired in connection with this acquisition amounted to approximately
$552,000 and is being amortized using the straight-line method over 15 years.
Amortization expense amounted to $7,590 for the year ended June 30, 1998. On an
on-going basis management reviews recoverability, the valuation and
amortization of goodwill. As a part of this review, the Company considers the
undiscounted projected future net earnings in evaluating the goodwill. If the
undiscounted future net earnings were less than the stated value, goodwill
would be written down to fair value.
LICENSE AGREEMENTS
License agreements represent amounts paid to acquire exclusive distribution
rights for specific products and are amortized over their estimated useful life
ranging from 3 to 15 years. Amortization expense was $12,408 for the year ended
June 30, 1998.
(Continued)
17
<PAGE> 18
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Continued)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STOCK BASED COMPENSATION
The Company measures compensation cost for its stock based compensation plans
under the provisions of Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees". The difference, if any, between the
fair value of the stock on the date of grant over the amount received for the
stock is accrued over the related vesting period. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
("SFAS 123") requires companies electing to continue to use APB 25 to account
for its stock-based compensation plan to make pro forma disclosures of net
income and earnings per share as if SFAS 123 had been applied.
INCOME TAXES
The Company utilizes the asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
ADVERTISING
The Company expenses the cost of advertising as incurred or when such
advertising initially takes place. No advertising costs were capitalized at June
30, 1998. Advertising expense approximated $337,000 for the year ended June 30,
1998.
LOSS PER SHARE
Loss per common share was computed by dividing the net loss by the weighted
average number of shares of common stock outstanding. The effect of outstanding
options on the computation of net loss per share would be anti-dilutive and
therefore is not included in the computation of weighted average shares.
(Continued)
18
<PAGE> 19
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Continued)
3 - BUSINESS ACQUISITIONS
VANTAGE PRODUCTS INTERNATIONAL, INC.
On May 31, 1998, the Company issued 400,000 shares of its common stock in
exchange for all the outstanding shares of VPI common stock. This transaction
was accounted for as a pooling-of-interests and, accordingly, common stock,
additional paid-in capital and accumulated deficit at June 30, 1997 have been
adjusted.
PRODUCT MERCHANDISING, INC.
On April 14, 1998, the Company acquired all of the issued and outstanding
common stock of PMI for $200,000 cash and 137,500 shares of CPI common stock
valued at a fair market value of $2.00 per share. The acquisition has been
accounted for as a purchase and, accordingly, the net assets and results of
operations of PMI have been included in the Company's consolidated financial
statements commencing on April 14, 1998. The total acquisition cost exceeded
the fair value of the net assets acquired by approximately $552,000.
4 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1998 consist of the following:
<TABLE>
<S> <C>
Displays $ 1,237
Leasehold improvements 6,178
Fixtures and equipment 167,927
Automobile 11,700
---------
Total property and equipment 187,042
Less accumulated depreciation (66,416)
---------
Property and equipment, net $ 120,626
=========
</TABLE>
5 - NOTE PAYABLE TO STOCKHOLDER
The note payable to stockholder (also the president of the Company) is payable
on demand, uncollateralized, and bears interest at an annual rate of 12%.
Accrued interest on this note totaled $145,165 at June 30, 1998, and is included
in accrued expenses.
(Continued)
19
<PAGE> 20
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Continued)
6 - FEDERAL INCOME TAXES
As of June 30, 1998, the Company had a net operating loss carryforward of
approximately 680,000 to offset future federal and state taxable income. The
loss expires in 2013. No deferred tax asset for the net operating loss has been
included in the accompanying consolidated balance sheet due to the uncertainty
of future results of operations. As of June 30, 1998, there are no other
significant deferred tax assets or liabilities.
As of June 30, 1997, DSSI had net operating loss carryforwards of approximately
$14,200,000. The utilization of such net operating losses is subject to
limitation due to a change in the ownership of DSSI during the year ended June
30, 1998 of greater than 50%. The utilization of net operating losses may be
further limited should future ownership changes occur.
7 - RELATED PARTY TRANSACTIONS
Included in accounts payable at June 30, 1998 is $100,000 due to the prior owner
of PMI. This amount was paid subsequent to June 30, 1998.
8 - STOCK OPTIONS
On September 22, 1994, DSSI established a non-qualified stock option plan which
provides for the granting of non-qualifying stock options to purchase up to
500,000 shares of common stock at the fair market value at the date of grant.
There were 345,000 options outstanding at June 30, 1998. No shares were granted,
exercised or cancelled during the year ended June 30, 1998.
A summary of the Company's option and warrant activity for the year ended June
30, 1998 follows:
<TABLE>
<CAPTION>
Warrants Warrants Options
issued in issued to Warrants issued to
connection with Directors, Officers issued to Officers and
Rights Offering and Employees Other Parties Employees
--------------- ------------------- ------------- ------------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1997 182,808 144,681 88,540 345,000
Options and warrants expired (182,808) (144,681) (88,540) --
------------ ------------ ------------- ------------
Outstanding at June 30, 1998 -- -- -- 345,000
============ ============ ============= ============
Exercise price of outstanding options -- -- -- $.025-$0.62
</TABLE>
(Continued)
20
<PAGE> 21
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(CONTINUED)
8 - STOCK OPTIONS (CONTINUED)
At June 30, 1998, 210,000 shares are exercisable at $0.25 and 135,000 are
exercisable at $0.625. The remaining contractual life for the $0.25 options is
1.6 years and the remaining contractual life for the $0.625 options is 1.1
years. All of these options are currently exercisable.
9 - LEASES
The Company leases office and warehouse facilities located in Dallas, Texas and
Memphis, Tennessee under the terms of operating leases which expire at various
dates through 2003. Rent expense approximated $90,000 for the year ended
June 30, 1998.
Future minimum lease commitments on all operating leases with terms in excess of
one year are as follows:
<TABLE>
<S> <C>
1999 $ 100,470
2000 94,890
2001 104,000
2002 105,000
2003 8,750
</TABLE>
10 - PURCHASE COMMITMENT
Pursuant to an exclusive license agreement with a supplier, the Company has a
commitment at June 30, 1998 to purchase approximately $180,000 worth of product
from the supplier through February 1999. If the Company fails to purchase this
amount, the supplier will have the right to terminate the agreement.
21
<PAGE> 22
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
For the period ended August 22, 1997, the Company's auditors were
Watkins, Watkins & Keenan. For the year ended June 30, 1998, the Company's
auditors were Sutton Frost LLP. The reason for this change was the lack of
independence of William A. Watkins, Jr., a partner of Watkins, Watkins &
Keenan, and a director of the Company since February 1998.
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
As of September 28, 1998, the directors and executive officers of the Company
were:
<TABLE>
<CAPTION>
Positions and Offices Held
Name Age With the Company
- ----------------------------------- --- --------------------------------------------
<S> <C> <C>
Michael J. Blumenfeld ............ 52 Chairman of the Board, President, and Chief
Executive Officer
Arthur J. Coerver ................ 55 Chief Operating Officer and Director
Jeff Davidowitz .................. 41 Director
Robert W. Philip ................. 62 Director
William A. Watkins, Jr. .......... 55 Director
</TABLE>
All directors hold office until the next Annual Meeting of Shareholders
of the Company or until their successors have been duly elected and qualified.
Mr. Davidowitz was elected at the Annual Meeting of Shareholders on June 16,
1997; and Messrs. Blumenfeld, Coerver, Philip and Watkins were appointed to the
Board of Directors on February 17, 1998.
Each executive officer of the Company will serve until the first meeting
of the Board of Directors following the next Annual Meeting of Shareholders or
until the Board otherwise directs.
Family Relationships
There are no family relationships among any of the directors or
executive officers of the Company.
Business History
Michael J. Blumenfeld has served as Chairman of the Board, President,
and Chief Executive Officer of the Company since February 1998. From July 1997
until February 1998, Mr. Blumenfeld served as President and Chief Executive
Officer of Collegiate Pacific, Inc., a Texas corporation that sold all of its
assets to the Company in February 1998. From 1992 until November 1996, Mr.
Blumenfeld served as Chairman of the Board and Chief Executive Officer of Sport
Supply Group, Inc., a public company engaged in the direct mail marketing of
sports related equipment.
Arthur J. Coerver joined the Company in February 1998 as Chief Operating
Officer and a director. From 1991 through 1997, Mr. Coerver was Vice
President, Sales and Marketing, of Sport Supply Group, Inc., a public company
engaged in the direct mail marketing of sports related equipment.
Jeff Davidowitz has served as a director of the Company since June 1994.
Mr. Davidowitz also serves as President of Penn Footwear, a private company
that manufactures shoes, since January 1, 1991. Prior to that, Mr. Davidowitz
was Vice President of Penn Footwear.
22
<PAGE> 23
Robert W. Philip has served as a director of the Company since February
1998. Mr. Philip served as 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. has served as a director since February 1998.
Mr. Watkins has been a partner of Watkins, Watkins and Keenan, a certified
public accounting firm, since December 1971.
Mr. Philip (as indicated above) is the only director to serve as a
director of another company which has a security registered under Section 12(b)
or (g) of the Exchange Act. No director serves as a director of another
company which is registered as an investment company under the Investment
Company Act of 1940, as amended.
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 furnished to the Company
under Rule 16a-3(e) promulgated under the Exchange Act with respect to Fiscal
1997, the Company is not aware of any director or officer of the Company who
failed to file on a timely basis, as disclosed in such forms, reports required
by Section 16(a) of the Exchange Act during Fiscal 1998 or prior years. The
Company is not aware of any beneficial owner of 10% or more of the outstanding
shares of the Common Stock, which is the only security of the Company
registered under Section 12 of the Exchange Act, other than Michael Blumenfeld
who is a director of the Company. See Item 11 to this Report.
ITEM 10 EXECUTIVE COMPENSATION
Executive Compensation
The Summary Compensation Table below shows compensation for the 1998
fiscal year of each person who is a "Named Executive Officer" (as that term is
defined in Item 402 of Regulation S-K to the Securities Act of 1933, as
amended).
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------- Awards
---------------------------
Other Securities
Annual Restricted Under- All Other
Name and Principal Compen- Stock lying Compen-
Position Salary Bonus sation Award(s) Options sation
Year ($) ($) ($) ($) (#) ($)
- ----------------------------- ------ ------ ----- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Blumenfeld
Chairman, President
& Chief Executive
Officer (1).............. 1998 $77,000.00 -- -- -- -- --
</TABLE>
(1) Mr. Blumenfeld became Chairman, President, and Chief Executive Officer
on February 17, 1998.
Director Compensation
Directors receive no cash compensation for their service on the Board of
Directors or any committee of the Board of Directors. Directors are reimbursed
for their reasonable out-of-pocket expenses associated with attending Board of
Directors and committee meetings.
23
<PAGE> 24
Employment Contracts and Change in Control Agreements
None
Stock Option Plan of 1994
On September 22, 1994, the Board of Directors ratified the adoption of
the Drug Screening Systems, Inc. Stock Option Plan of 1994 (the "1994 Option
Plan") which provides for the granting of non-qualified stock options to
purchase up to 500,000 shares of the Common Stock, subject to possible
adjustment in the event of stock dividends, stock splits and similar
transactions. Pursuant to the 1994 Option Plan, options may be granted to key
employees, officers, directors, consultants and advisers of the Company and, if
later incorporated, subsidiaries; the options may become exercisable in
installments; the exercise price of an option may not necessarily be at the
fair market value of the Common Stock at its date of grant; the expiration date
of an option may be five to ten years after its date of grant; and there is a
provision permitting exercise if there is a "change of control" (which
definition does not include a transaction approved by the then current
directors).
Pursuant to the 1994 Option Plan, options to purchase an aggregate of
270,000 shares of the Common Stock at $0.625 a share (the fair market value at
the date of grant) were granted on July 29, 1994 and an option to purchase
25,000 shares at $1.375 a share (the fair market value at the date of grant)
was granted on September 22, 1994 (subsequently reduced to $.0625 to reflect
current market). During its December 1995 meeting, the Board further reduced
the exercise price for options granted to active officers and its consultant to
$0.25 to reflect an additional drop in the market price. Options to purchase
an aggregate of 50,000 shares of the Common Stock at $0.25 a share (the fair
market value at the date of grant) were granted on June 16, 1997. These
options are exercisable on the respective date of grant and expire five years
from the respective date of grant.
The stock options still outstanding are as follows:
<TABLE>
<CAPTION>
Name of Optionee Position with Company Number of Shares
- ---------------- --------------------- ----------------
<S> <C> <C>
Granted July 29, 1994
Joseph Shaya Consultant (resigned 6/27/97) 125,000
Robert G. Wallace Sales Consultant 50,000
Anthony Ian Newman Director (resigned 2/17/98) 25,000
Jeff Davidowitz Director 25,000
Stephen Turner Director (resigned 2/17/98) 25,000
Kenneth S. Carpenter Vice President (resigned 7/26/96) 10,000
Jeffrey M. Bachrach Consultant 10,000
Granted September 22, 1994
Patrick J. Brennan Vice President, Chief Financial 25,000
Officer and Secretary (resigned
2/17/98)
Granted June 16, 1997
Joseph Shaya Consultant (resigned 6/27/97) 25,000
Patrick J. Brennan Vice President, Chief Financial 25,000
Officer and Secretary (resigned
2/17/98)
</TABLE>
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information known to the Company
with respect to beneficial ownership of shares of Common Stock as of June 30,
1998 for (i) all persons who are beneficial owners of five
24
<PAGE> 25
percent or more of the Company's Common Stock, (ii) each director and nominee
for director, (iii) the Company's Chief Executive Officer and the other
executive officers named in the Summary Compensation Table above, and (iv) all
executive officers and directors as a group:
<TABLE>
<CAPTION>
Executive Officers and Directors(1) Number of Shares Beneficially Owned Percent of Class (2)
----------------------------------- ----------------------------------- --------------------
<S> <C> <C>
Michael J. Blumenfeld(3) 9,800,000 57.6%
Arthur J. Coerver 100,000 *
Jeff Davidowitz(4) 410,000 2.4%
Robert W. Philip 70,000 *
William A. Watkins, Jr. 70,000 *
Executive Officers and Directors as a 10,450,000 61.4%
Group (5 persons)
</TABLE>
*Less than 1%
(1) The address for each person listed is 13950 Senlac, Suite 200, Farmers
Branch, Texas 75235.
(2) Percentages are based on the total number of shares of Common Stock
outstanding at September 24, 1998, plus the total number of outstanding
options held by each person that are exercisable within 60 days of such
date. Shares of Common Stock issuable upon exercise of outstanding
options, however, are not deemed outstanding for purposes of computing
the percentage ownership of any other person. Except as otherwise noted
in the following footnotes, other than shared property rights created
under joint tenancy or marital property laws as between the Company's
directors and executive officers and their respective spouses, each
stockholder named in the table has sole voting and investment power with
respect to the shares of Common Stock set forth opposite such
stockholder's name.
(3) Mr. Blumenfeld is registering 2,000,000 shares pursuant to a
Registration Statement being filed on Form SB-2, which are not intended
for resale to the public. Instead, the shares are being registered for
the purposes of collateralizing commercial bank lines or other forms of
credit for the benefit of the Company.
(4) Includes 25,000 shares issuable upon exercise of an option expiring July
28, 1999.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 17, 1998, the Company sold 10,000,000 shares of Common Stock
to Michael J. Blumenfeld (9,800,000 shares) and Adam Blumenfeld (200,000
shares) for $0.20 per share, or an aggregate purchase price of $2,000,000, in
cash pursuant to the terms and subject to the conditions of that certain Stock
Purchase Agreement dated August 18, 1997 by and between the Company and Michael
and Adam Blumenfeld. Adam Blumenfeld is the son of Mr. Blumenfeld. Mr.
Blumenfeld was not an officer or director of the Company at the time of the
execution of the Stock Purchase Agreement. The consideration paid by Mr.
Blumenfeld for the Common Stock was based on the average of the high and low
bid price of the Common Stock as reported by the NASD on August 18, 1997, the
date of the Stock Purchase Agreement.
On February 17, 1998, in connection with the Stock Purchase Agreement
set forth above, the Company sold (i) 100,000 shares of Common Stock to Arthur
J. Coerver, who became a director of the Company upon consummation of the Stock
Purchase Agreement, at $.20 per share, (ii) 70,000 shares of Common Stock to
Robert W. Philip, who became a director of the Company upon consummation of the
Stock Purchase Agreement, at $.20 per share, and (iii) 70,000 shares of Common
Stock to William A. Watkins, Jr., who became a director of the Company upon
consummation of the Stock Purchase Agreement, at $.20 per share.
Since April 14, 1997, Michael J. Blumenfeld has made loans, net of
repayments, to the Company in an aggregate amount approximating $755,000, which
are payable on demand and bear interest at the rate of 12% per annum. As of
June 30, 1998, the aggregate amount outstanding for such loans (including
accrued interest) was $899,836.
25
<PAGE> 26
PART IV
ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed below which are marked with a footnote reference were filed
with a prior registration statement filed under the Securities Act of 1933, as
amended or in a periodic report or proxy statement filed under the Exchange Act
and are incorporated herein by this reference. The exhibits listed below which
are not marked with a footnote reference are filed with this Form 10-KSB.
Number Exhibit
2.1 Purchase and Sale Agreement dated March 14, 1997 for the sale of the
majority of the Company's assets and business to Casco Standards, Inc.
(7)
2.2 Stock Purchase Agreement dated August 18, 1997 with Michael J.
Blumenfeld. (9)
3.1 Copy of Articles of Incorporation of the Company. (1)
3.2 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed on December 29, 1987. (1)
3.3 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed on December 24, 1991. (1)
3.4 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed on May 5, 1993. (2)
3.5 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed June 30, 1997.(8)
3.6 Copy of By-Laws of the Company. (1)
4.1 Specimen Certificate of Common Stock, $0.01, par value, of the Company.
10.1 Copy of Warrant Agency Agreement dated as of June 4, 1993 between the
Company and Continental Stock Transfer & Trust Company, as Warrant
Agent. (3)
10.2 Proof of Redeemable Warrant expiring June 3, 1996 of the Company. (3)
10.3 Form of Underwriter's Unit Purchase Warrant of the Company. (4)
10.4 Form of Underwriter's Warrant of the Company. (4)
10.5 Copy of the 1988 Stock Option Plan of the Company. (1)
10.6 Copy of the 1994 Stock Option Plan of the Company. (6)
10.7 Copy of Employee Restricted Stock Plan of the Company. (5)
26
<PAGE> 27
10.8 Copy of Lease dated July 1, 1997 between the Company, as tenant, and
Post-Valwood, Inc., as landlord.
10.9 Copy of exclusive Distribution Agreement dated February 24, 1998,
between the Company and Equipmart, Inc.
10.10 Copy of exclusive Distribution Agreement dated March 7, 1998, between
the Company and FunNets, Inc.
10.11 Copy of exclusive Distribution Agreement dated March 21, 1998, between
the Company and Pro Gym Equipment, Inc.
10.12 Copy of the Stock Acquisition Agreement dated April 14, 1998, between
the Company and Product Merchandising, Inc.
10.13 Copy of the Agreement and Plan of Merger dated May 31, 1998, between the
Company and Vantage Products International, Inc.
- --------------------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-
18, File No. 33-19770-NY.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1993.
(3) Filed as an exhibit to the Company's Form 8-A dated June 28, 1993.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
July 12, 1993.
(5) Filed as an exhibit to a Post-Effective Amendment to the Company's
Registration Statement on Form S- 18, File No. 33-19770-NY.
(6) Filed as an exhibit to the Company's Annual Report on Form 10- KSB for
the year ended June 30, 1994.
(7) Filed as an exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting held on June 16, 1997.
(8) Filed as an exhibit to the Company's Annual Report on Form 10- KSB for
the year ended June 30, 1997.
(9) Filed as an exhibit to the Company's Form 8-K/A filed on September 11,
1997.
(b) Reports on Form 8-K
None
27
<PAGE> 28
SIGNATURES
In accordance with Sections 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COLLEGIATE PACIFIC INC.
By: /s/ MICHAEL J. BLUMENFELD
----------------------------------------------
Michael J. Blumenfeld,
Chairman, President, Chief Executive Officer
and Director (Principal Executive Officer)
Dated: September 28, 1998
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. BLUMENFELD Chairman, President, Chief Executive September 28, 1998
- --------------------------- Officer, and Director
Michael J. Blumenfeld (Principal Executive Officer)
/s/ ARTHUR J. COERVER Chief Operating Officer and Director September 28, 1998
- --------------------------- (Principal Financial and Accounting Officer)
Arthur J. Coerver
/s/ JEFF DAVIDOWITZ Director September 28, 1998
- ---------------------------
Jeff Davidowitz
/s/ ROBERT W. PHILIP Director September 28, 1998
- ---------------------------
Robert W. Philip
/s/ WILLIAM A. WATKINS, JR. Director September 28, 1998
- ---------------------------
William A. Watkins, Jr.
</TABLE>
28
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Exhibit
- ------ -------
<S> <C>
2.1 Purchase and Sale Agreement dated March 14, 1997 for the sale of the
majority of the Company's assets and business to Casco Standards, Inc.
(7)
2.2 Stock Purchase Agreement dated August 18, 1997 with Michael J.
Blumenfeld. (9)
3.1 Copy of Articles of Incorporation of the Company. (1)
3.2 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed on December 29, 1987. (1)
3.3 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed on December 24, 1991. (1)
3.4 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed on May 5, 1993. (2)
3.5 Copy of Certificate of Amendment to Articles of Incorporation of the
Company filed June 30, 1997.(8)
3.6 Copy of By-Laws of the Company. (1)
4.1 Specimen Certificate of Common Stock, $0.01, par value, of the Company.
10.1 Copy of Warrant Agency Agreement dated as of June 4, 1993 between the
Company and Continental Stock Transfer & Trust Company, as Warrant
Agent. (3)
10.2 Proof of Redeemable Warrant expiring June 3, 1996 of the Company. (3)
10.3 Form of Underwriter's Unit Purchase Warrant of the Company. (4)
10.4 Form of Underwriter's Warrant of the Company. (4)
10.5 Copy of the 1988 Stock Option Plan of the Company. (1)
10.6 Copy of the 1994 Stock Option Plan of the Company. (6)
10.7 Copy of Employee Restricted Stock Plan of the Company. (5)
</TABLE>
<PAGE> 30
<TABLE>
<S> <C>
10.8 Copy of Lease dated July 1, 1997 between the Company, as tenant, and
Post-Valwood, Inc., as landlord.
10.9 Copy of exclusive Distribution Agreement dated February 24, 1998,
between the Company and Equipmart, Inc.
10.10 Copy of exclusive Distribution Agreement dated March 7, 1998, between
the Company and FunNets, Inc.
10.11 Copy of exclusive Distribution Agreement dated March 21, 1998, between
the Company and Pro Gym Equipment, Inc.
10.12 Copy of the Stock Acquisition Agreement dated April 14, 1998, between
the Company and Product Merchandising, Inc.
10.13 Copy of the Agreement and Plan of Merger dated May 31, 1998, between the
Company and Vantage Products International, Inc.
</TABLE>
- --------------------
(1) Filed as an exhibit to the Company's Registration Statement on Form
S-18, File No. 33-19770-NY.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1993.
(3) Filed as an exhibit to the Company's Form 8-A dated June 28, 1993.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
July 12, 1993.
(5) Filed as an exhibit to a Post-Effective Amendment to the Company's
Registration Statement on Form S-18, File No. 33-19770-NY.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1994.
(7) Filed as an exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting held on June 16, 1997.
(8) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1997.
(9) Filed as an exhibit to the Company's Form 8-K/A filed on September 11,
1997.
<PAGE> 1
EXHIBIT 4.1
SPECIMEN CERTIFICATE OF COMMON STOCK, $0.01, PAR VALUE, OF THE COMPANY
[CERTIFICATE OF INCORPORATION OF COLLEGIATE PACIFIC INC.-STATE OF PENNSYLVANIA]
COMMON STOCK COMMON STOCK
NUMBER NUMBER
CP
COLLEGIATE PACIFIC INC.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
See reverse for certain definitions
THIS CERTIFIES THAT
is the owner and registered holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF $.01 OF
=========================== COLLEGIATE PACIFIC INC. ===========================
transferable only on the books of the corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal and facsimile signatures of its duly authorized
officers.
Dated:
[SEAL]
COLLEGIATE PACIFIC INC. CORPORATE SEAL
1987
PENNSYLVANIA
SECRETARY PRESIDENT
AUTHORIZED OFFICER
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
<PAGE> 1
LEASE INDEX
<TABLE>
<CAPTION>
Section Subject
------- -------
<S> <C>
1 Basic Lease Provisions
2 Demised Premises
3 Term
4 Base Rent
5 Security Deposit
6 Operating Expenses and Additional Rent
7 Use of Demised Premises
8 Insurance
9 Utilities
10 Maintenance and Repairs
11 Tenant's Personal Property; Indemnity
12 Tenant's Fixtures
13 Signs
14 Reserved
15 Governmental Regulations
16 Environmental Matters
17 Construction of Demised Premises
18 Tenant Alterations and Additions
19 Services by Landlord
20 Fire and Other Casualty
21 Condemnation
22 Tenant's Default
23 Landlord'S Right of Entry
24 Lender's Rights
25 Estoppel Certificate
26 Landlord's Liability
27 Notices
28 Brokers
29 Assignment and Subleasing
30 Termination or Expiration
31 Reserved
32 Late Payments
33 Rules and Regulations
34 Quiet Enjoyment
35 Miscellaneous
36 Special Stipulations
37 Lease Date
38 Authority
39 No Offer Until Executed
</TABLE>
Exhibit "A" Demised Premises
Exhibit "B" Preliminary Plans and Specifications
Exhibit "C" Special Stipulations
Exhibit "D" Rules and Regulations
Exhibit "E" Certificate of Authority
Exhibit "F" Confidentiality Covenant
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<PAGE> 2
EXHIBIT 10.8
INDUSTRIAL LEASE AGREEMENT
BETWEEN
POST-VALWOOD, INC.
AS LANDLORD
AND
NITRO SPORTS CORP., INC.
AS TENANT
<PAGE> 3
INDUSTRIAL LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made as of the "Lease Date" (as
defined in Section 37 herein) by and between POST-VALWOOD. INC., a Texas
corporation ("Landlord"), and NITRO SPORTS CORP., INC., a Texas corporation
("Tenant") (the words "Landlord" and "Tenant" to include their respective legal
representatives, successors and permitted assigns where the context requires or
permits).
W I T N E S S E T H:
1. Basic Lease Provisions. The following constitute the basic provisions
of this Lease:
(a) Demised Premises Address: 13950 Sonlac Drive, Suite 200
Farmers Branch, Texas 75234
(b) Demised Promises Square Footage: approximately 30,000 sq. ft.
(c) Building Square Footage: approximately 116,000 sq. ft.
(d) Annual Base Rent:
Lease Year 1 $ 93,000.00
Lease Year 2 $ 93,000.00
Lease Year 3 $ 93,000.00
Lease Year 4 $105,000.00
Lease Year 5 $105,000.00
(e) Monthly Base Rent Installments:
Lease Year 1 $ 7,750.00
Lease Year 2 $ 7,750.00
Lease Year 3 $ 7,750.00
Lease Year 4 $ 8,750.00
Lease Year 5 $ 8,750.00
(f) Lease Commencement Date: August 1, 1997
(g) Base Rent Commencement Date: August 1, 1997
(h) Expiration Date: July 31, 2002
(i) Term: 60 months
(j) Tenant's Operating Expense Percentage: 25.86%
(k) Security Deposit: $8,750.00
(l) Permitted Use: Office, sales and distribution of sporting goods
equipment and related items and accessories.
<PAGE> 4
(m) Address for notice:
Landlord: Post-Valwood, Inc.
c/o Invesco
5400 LBJ Freeway, Suite 1200
Dallas, Texas 75240
Attn: Kevin Johnson
with a copy to: Industrial Developments International, Inc.
1640 Century Center Parkway, Suite 10 1
Memphis, Tennessee 38134
Attn: Property Management
Tenant: Nitro Sports Corp., Inc.
9017 Briarwood
Dallas, Texas 75209
Attn: Michael J. Blumenfeld
with a copy to:
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Attn:
----------------------------------------
(n) Address for rental payments:
Industrial Developments International, Inc.
P.O. Box 930199
Atlanta, Georgia 31193
(o) Broker(s): J.T. Evans Company
(p) Guarantor: Michael J. Blumenfeld
Reena G. Blumenfeld
9017 Briarwood Lane
Dallas, Texas 75209
2. Demised Premise. For and in consideration of the rent hereinafter
reserved and the mutual covenants hereinafter contained, Landlord does hereby
lease and demise unto Tenant, and Tenant does hereby hire, lease and accept,
from Landlord all upon the terms and conditions hereinafter set forth the
following premises, referred to as the "Demised Premises", as outlined on
Exhibit A attached hereto and incorporated herein: approximately 30,000 square
feet of space, approximately 3,000 square feet of which is office space, having
an address as set forth in Section 1(a), located within Building C (the
"Building"), which contains a total of approximately 116,000 square feet and is
located within Valwood Distribution Center (the "Project"), located in Dallas
County, Texas.
3. Term. To have and to hold the Demised Premises for a preliminary term
(the "Preliminary Term") commencing on the Lease Date and ending an the Lease
Commencement Date as set forth in Section 1(f), and a primary term (the "Term")
commencing on the Lease Commencement Date and terminating on the Expiration Date
as set forth in Section 1(h), as the Lease Commencement Date and the Expiration
Date may be revised pursuant to Section 17(b). The term "Lease Year" shall mean
each one (1) year period or the Term (or portion thereof if the last Lease Year
of the Term is less than one (1) full year) beginning on the Lease Commencement
Date, and each anniversary thereof, and ending on the day immediately prior to
the next succeeding anniversary of the Lease Commencement Date.
4. Base Rent. Tenant shall pay to Landlord at the address set forth in
Section 1(n), as base rent for the Demised Premises, commencing on the Base
Rent Commencement Date and continuing throughout the Term in lawful money of the
United States, the annual amount set forth in Section 1(d) payable in equal
monthly installments as set forth in Section 1(e) (the "Base Rent"), payable in
advance without demand and without abatement, reduction, set-off or deduction,
on the first day of each calendar month during the Term. If the Base Rent
Commencement Date shall fall on a day other than the first day of a calendar
month, the Base Rent shall be apportioned pro rata on a per diem basis for the
period between the Base Rent Commencement Date and the first day of the
following calendar month. No payment by Tenant or receipt by Landlord of rent
hereunder shall be deemed to be other than on account of the amount due, and no
endorsement or statement on any check or any letter accompanying any check
-2-
<PAGE> 5
LEASE INDEX
Exhibit "A" Demised Premises
Exhibit "B" Preliminary Plans and Specifications
Exhibit "C" Special Stipulations
Exhibit "D" Rules and Regulations
Exhibit "E" Certificate of Authority
Exhibit "F" Confidentiality Covenant
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<PAGE> 6
or payment of rent shall be deemed an accord and satisfaction, and Landlord may
accept such check as payment without prejudice to Landlord's right to recover
the balance of such installment or payment of rent or pursue any other remedies
available to Landlord.
5. Security Deposit. Upon Tenant's execution of this Lease, Tenant will pay
to Landlord the sum set forth in Section 1(k) (the "Security Deposit") as
security for the full and faithful performance by Tenant of each and every term,
covenant and condition or this Lease. The acceptance by Landlord of the Security
Deposit paid by Tenant shall not render this Lease effective unless and until
Landlord shall have executed and delivered to Tenant a fully executed copy of
this Lease. The Security Deposit may be commingled with Landlord's other funds
or held by Landlord in a separate interest bearing account, with interest paid
to Landlord, as Landlord may elect. In the event that Tenant is in default under
this Lease, Landlord may retain the Security Deposit for the payment of any sum
due Landlord or which Landlord may expend or be required to expend by reason of
Tenant's default or failure to perform, provided, however, that any such
retention by Landlord shall not be or be deemed to be an election of remedies by
Landlord or viewed as liquidated damages, it being expressly understood and
agreed that Landlord shall have the right to pursue any and all other remedies
available to it under the terms of this Lease or otherwise. In the event all or
any portion of the Security Deposit is so retained by Landlord, Tenant shall,
within five (5) days of demand therefor from Landlord, replenish the Security
Deposit to the full amount set forth in Section 1(k). In the event that Tenant
shall comply with all of the terms, covenants and conditions of this Lease, the
Security Deposit shall be returned to Tenant within thirty (30) days after the
later of (a) the Expiration Date or (b) the date that Tenant delivers possession
of the Demised Premises to Landlord. In the event of a sale of the Building,
Landlord shall have the right to transfer the Security Deposit to the purchaser,
and upon acceptance by such purchaser, Landlord shall be released from all
liability for the return of the Security Deposit. Tenant shall not assign or
encumber the money deposited as security, and neither Landlord nor its
successors or assigns shall be bound by any such assignment or encumbrance.
6. Operating Expenses and Additional Rent.
(a) Tenant agrees to pay as Additional Rent (as defined in Section 6(b)
below) its proportionate share of Operating Expenses (as hereinafter defined).
"Operating Expenses" shall be defined as all reasonable expenses for operation,
repair, replacement and maintenance as necessary to keep the Building and the
common areas, driveways, and parking areas associated therewith (collectively,
the "Building Common Area") in good order, condition and repair, including but
not limited to, utilities for the Building Common Area, expenses associated with
the driveways and parking areas (including sealing and restriping, and snow,
trash and ice removal), security systems, fire detection and prevention systems,
lighting facilities, landscaped areas, walkways, directional signage, curbs,
drainage strips, sewer lines, all charges assessed against or attributed to the
Building pursuant to any applicable easements, covenants, restrictions,
agreements, declaration of protective covenants or development standards,
property management fees, painting and caulking, all real property taxes and
special assessments imposed upon the Building, the Building Common Area and the
land on which the Building and the Building Common Area are constructed, all
costs of insurance paid by Landlord with respect to the Building and the
Building Common Area, and costs of improvements to the Building and the Building
Common Area required by any law, ordinance or regulation applicable to the
Building and the Building Common Area generally (and not because of the
particular use of the Building or the Building Common Area by a particular
tenant), which cost shall be amortized on a straight line basis over the useful
life of such improvement, as reasonably determined by Landlord. Operating
Expenses shall also include the operating expenses of the common areas of the
Project, if any, which expenses shall be proportionately allocated among the
completed buildings of the Project, based on the square footage of each building
or as otherwise provided by the applicable covenants, restrictions, agreements
or declaration of protective covenants for the Project. Operating Expenses shall
not include expenses for the costs of any maintenance and repair required to be
performed by Landlord at its own expense under Section (10)(b). Further,
Operating Expenses shall not include the costs for capital improvements unless
such costs are incurred for the purpose of causing a material decrease in the
Operating Expenses of the Building or are made with respect to improvements made
to comply with laws, ordinances or regulations as described above. The
proportionate share of Operating Expenses to be paid by Tenant shall be a
percentage of the Operating Expenses based upon the proportion that the square
footage of the Demised Premises bears to the total square footage of the
Building (such figure referred to as "Tenant's Operating Expense Percentage"
and set forth in Section 1(j)). Prior to or promptly after the beginning of each
calendar year during the Term, Landlord shall estimate the total amount of
Operating Expenses to be paid by Tenant during each such calendar year and
Tenant shall pay to Landlord one-twelfth (1/12) of such sum on the first day of
each calendar month during each such calendar year, or part thereof, during the
Term. Within a reasonable time after the end of each calendar year, Landlord
shall submit to Tenant a statement of the actual amount of Operating Expenses
for such calendar year, and the actual amount owed by Tenant, and within thirty
(30) clays after receipt of such statement, Tenant shall pay any deficiency
between the actual amount owed and the estimates paid during such calendar year,
or in the event of overpayment, Landlord shall credit the amount of such
overpayment toward the next installment of Operating Expenses owed by Tenant or
remit such overpayment to Tenant if the Term has expired or has been terminated
and no Event of Default exists hereunder. If the Lease Commencement Date shall
fall on other than the first day of the calendar year, and/or if the Expiration
Date shall fall on other than the last day of the calendar year, Tenant's
proportionate share of the Operating Expenses for such calendar year shall be
apportioned prorata.
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<PAGE> 7
(b) Any amounts required to be paid by Tenant hereunder (in addition
to Base Rent) and any charges or expenses incurred by Landlord an behalf of
Tenant under the terms of this Lease shall be considered "Additional Rent"
payable in the same manner and upon the same terms and conditions as the Base
Rent reserved hereunder except as set forth herein to the contrary. Any failure
on the part of Tenant to pay such Additional Rent when and as the same shall
become due shall entitle Landlord to the remedies available to it for
non-payment of Base Rent. Tenant's obligations for payment of Additional Rent
shall begin to accrue on the Lease Commencement Date regardless of the Base Rent
Commencement Date.
(c) If applicable in the jurisdiction where the Demised Premises are
located, Tenant shall pay and be liable for all rental, sales, use and inventory
taxes or other similar taxes, if any, on the amounts payable by Tenant hereunder
levied or imposed by any city, state, county or other governmental body having
authority, such payments to be in addition to all other payments required to be
paid Landlord by Tenant under the terms of this Lease. Such payment shall be
made by Tenant directly to such governmental body if billed to Tenant, or if
billed to Landlord, such payment shall be paid concurrently with the payment of
the Base Rent, Additional Rent, or such other charge upon which the tax is
based, all as set forth herein.
7. Use or Demised Premises.
(a) The Demised Premises shall be used for the Permitted Use set forth
in Section 1 (1) and for no other purpose.
(b) Tenant will permit no liens to attach or exist against the Demised
Premises, and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal purposes,
and Tenant shall not allow, suffer, or permit any vibration, noise, odor, light
or other effect to occur within or around the Demised Premises that could
constitute a nuisance or trespass for Landlord or any occupant of the Building
or an adjoining building, its customers, agents, or invitees. Upon notice by
Landlord to Tenant that any of the aforesaid prohibited uses are occurring,
Tenant agrees to promptly remove or control the same.
(d) Tenant shall not in any way violate any law, ordinance or
restrictive covenant affecting the Demised Premises, and shall not in any manner
use the Demised Premises so as to cause cancellation of, prevent the use of, or
increase the rate of, the fire and extended coverage insurance policy required
hereunder. Landlord makes no (and does hereby expressly disclaim any) covenant,
representation or warranty as to the Permitted Use being allowed by or being in
compliance with any applicable laws, rules, ordinances or restrictive covenants
now or hereafter affecting the Demised Premises, and any zoning letters, copies
of zoning ordinances or other information from any governmental agency or other
third party provided to Tenant by Landlord or any of Landlord's agents or
employees shall be for informational purposes only, Tenant hereby expressly
acknowledging and agreeing that Tenant shall conduct and rely solely on its own
due diligence and investigation with respect to the compliance of the Permitted
Use with all such applicable laws, rules, ordinances and restrictive covenants
and not on any such information provided by Landlord or any of its agents or
employees.
(e) In the event insurance premiums pertaining to the Demised
Premises, the Building, or the Building Common Area, whether paid by Landlord or
Tenant, are increased over the least hazardous rate available due to the nature
of the use of the Demised Premises by Tenant, Tenant shall pay such additional
amount as Additional Rent.
8. Insurance
(a) Tenant covenants and agrees that from and after the Lease
Commencement Date or any earlier date upon which Tenant enters or occupies the
Demised Premises or any portion thereof, Tenant will carry and maintain, at its
sole cost and expense, the following types of insurance, in the amounts
specified and in the form hereinafter provided for:
(i) Liability insurance in the Commercial General Liability form
(or reasonable equivalent thereto) covering the Demised Premises and Tenant's
use thereof against claims for bodily injury or death, property damage and
product liability occurring upon, in or about the Demised Premises, such
insurance to be written on an occurrence basis (not a claims made basis), to be
in combined single limits amounts not less than $1,000,000.00 and to have
general aggregate limits of not less than $2,000,000 for the first policy year
during the Term and not less than $3,000,000.00 for each subsequent policy year.
The insurance Coverage required under this Section 8(a)(i) shall, in addition,
extend to any liability of Tenant arising out of the indemnities provided for in
Section 11 and, if necessary, the policy shall contain a contractual endorsement
to that effect.
(ii) Insurance covering (A) all of the items included in the
leasehold improvements constructed in the Demised Premises by or at the expense
of Landlord (collectively, the "Improvements"), including but not limited to
demising walls and the heating, ventilating and air conditioning system and (B)
Tenant's trade fixtures, merchandise and personal property from time to time
-5-
<PAGE> 8
in, on or upon the Demised Premises, in an amount not less than one hundred
percent (100%) of their full replacement value from time to time during the
Term, providing protection against perils included within the standard form of
"all-risks" fire and casualty insurance policy, together with insurance
against sprinkler damage, vandalism and malicious mischief. Any policy proceeds
from such insurance relating to the Improvements shall be used solely for the
repair, construction and restoration or replacement of the Improvements damaged
or destroyed unless this Lease shall cease and terminate under the provisions of
Section 20.
(b) All policies of the insurance provided for in Section 8(a) shall
be issued in form reasonably acceptable to Landlord by insurance companies with
a rating of not less than "A," and financial size of not less than Class VIII,
in the most current available "Best's Insurance Reports", and licensed to do
business in the state in which the Building is located. Each and every such
policy:
(i) shall name Landlord, Lender (as defined in Section 24), and
any other party reasonably designated by Landlord, as an additional insured. In
addition, the coverage described in Section 8(a)(ii)(A) relating to the
Improvements shall also name Landlord as "loss payee";
(ii) shall be delivered to Landlord, in the form of an insurance
certificate acceptable to Landlord as evidence of such policy, on or prior to
the Lease Commencement Date and thereafter within thirty (30) days prior to the
expiration of each such policy, and, as often as any such policy shall expire or
terminate. Renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent;
(iii) shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least fifteen (15) days notice in
writing in advance or any material change, cancellation, termination or lapse,
or the effective date of any reduction in the amounts of insurance; and
(iv) shall be written as a primary policy which does not
contribute to and is not in excess of coverage which Landlord may carry.
(c) In the event that Tenant shall fail to carry and maintain the
insurance coverages set forth in this Section 8, Landlord may upon thirty (30)
days notice to Tenant (unless such coverages will lapse in which event no such
notice shall be necessary) procure such policies of insurance and Tenant shall
promptly reimburse Landlord therefor.
(d) Landlord and Tenant hereby waive any rights each may have against
the other on account of any loss or damage occasioned to Landlord or Tenant, as
the case may be, their respective property, the Demised Premises, its contents
or to the other portions of the Building, arising from any risk covered by all
risks fire and extended coverage insurance of the type and amount required to be
carried hereunder, provided that such waiver does not invalidate such policies
or prohibit recovery thereunder. The parties hereto shall cause their respective
insurance companies insuring the property of either Landlord or Tenant against
any such loss, to waive any right or subrogation that such insurers may have
against Landlord or Tenant, as the case may be.
9. Utilities. During the Term, Tenant shall promptly pay as billed to
Tenant all rents and charges for water and sewer services and all costs and
charges for gas, steam, electricity, fuel, light, power, telephone, heat and any
other utility or service used or consumed in or servicing the Demised Premises
and all other costs and expenses involved in the care, management and use
thereof. To the extent reasonably possible, such utilities shall be separately
metered and billed to Tenant. Any utilities which are not separately metered
shall be billed to Tenant by Landlord at Landlord's actual cost. In the event
Tenant's use of any utility not metered is in excess of the average use by other
tenants, Landlord shall have the right to install a meter for such utility, at
Tenant's expense, and bill Tenant for Tenant's actual use. If Tenant fails to
pay any utility bills or charges, Landlord may, at its option and upon
reasonable notice to Tenant, pay the same and in such event, the amount of such
payment, together with interest thereon at the Interest Rate as defined in
Section 32 from the date of such payment by Landlord, will be added to Tenant's
next due payment as Additional Rent.
10. Maintenance and Repair.
(a) Tenant shall, at its own cost and expense, maintain in good
condition and repair the interior of the Demised Premises, including but not
limited to the heating, air conditioning and ventilation systems, glass, windows
and doors, sprinkler, all plumbing and sewage systems, fixtures, interior walls,
floors (including floor slabs), ceilings, storefronts, plate glass, skylights,
all electrical facilities and equipment including, without limitation, lighting
fixtures, lamps, fans and any exhaust equipment and systems, electrical
motors, all other appliances and equipment of every kind and nature located
in, upon or about the Demised Premises, except as to such maintenance and repair
as is the obligation of Landlord pursuant to Section 10(b). During the Term,
Tenant shall maintain in full force and effect a service contract for the
maintenance of the heating, ventilation and air conditioning systems with an
entity reasonably acceptable to Landlord. Tenant shall deliver to Landlord (i) a
copy of said service contract on or prior to the Lease Commencement Date, and
(ii) thereafter, a copy of a renewal or substitute service contract within
thirty (30) days prior to the expiration of the existing service contract.
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<PAGE> 9
Tenant's obligation shall exclude any maintenance and repair required because of
the act or negligence of Landlord, its employees, contractors or agents, which
shall be the responsibility of Landlord.
(b) Landlord shall, at its own cost and expense, maintain in good
condition and repair the roof, foundation (beneath the floor slab) and
structural frame of the Building. Landlord's obligation shall exclude the cost
of any maintenance or repair required because of the act or negligence of Tenant
or Tenant's agents, contractors, employees and invitees (collectively,
"Tenant's Affiliates"), the cost of which shall be the responsibility of Tenant.
(c) Unless the same is caused solely by the negligent action or
inaction of Landlord, its employees or agents, and is not covered by the
insurance required to be carried by Tenant pursuant to the terms of this Lease,
Landlord shall not be liable to Tenant or to any other person for any damage
occasioned by failure in any utility system or by the bursting or leaking of any
vessel or pipe in or about the Demised Premises, or for any damage occasioned by
water coming into the Demised Premises or arising from the acts or neglects of
occupants of adjacent property or the public.
11. Tenant's Personal Property; Indemnity. All of Tenant's personal
property in the Demised Premises shall be and remain at Tenant's sole risk.
Landlord, its agents, employees and contractors, shall not be liable for, and
Tenant hereby releases Landlord from, any and all liability for theft thereof or
any damage thereto occasioned by any act of God or by any acts, omissions or
negligence of any persons. Landlord, its agents, employees and contractors,
shall not be liable for any injury to the person or property of Tenant or other
persons in or about the Demised Premises. Tenant expressly agreeing to indemnify
and save Landlord, its agents, employees and contractors, harmless, in all such
cases, except to the extent caused by the negligence of Landlord, its agents,
employees and contractors. Tenant further agrees to indemnify and reimburse
Landlord for any costs or expenses, including, without limitation, reasonable
attorneys' fees, that Landlord reasonably may incur in investigating, handling
or litigating any such claim against Landlord by a third person, unless such
claim arose from the negligence of Landlord, its agents, employees or
contractors. The provisions of this Section 11 shall survive the expiration or
earlier termination of this Lease with respect to any damage, injury or death
occurring before such expiration or termination.
12. Tenant's Fixtures. Tenant shall have the right to install in the
Demised Premises trade fixtures required by Tenant or used by it in its
business, and if installed by Tenant, to remove any or all such trade fixtures
from time to time during and upon termination or expiration of this Lease,
provided no Event of Default, as defined Section 22, then exists; provided,
however, that Tenant shall repair and restore any damage or injury to the
Demised Premises (to the condition in which the Demised Premises existed prior
to such installation) caused by the installation and/or removal of any such
trade fixtures.
13. Signs. No sign, advertisement or notice shall be inscribed, painted,
affixed, or displayed on the windows or exterior walls of the Demised Premises
or on any public area of the Building, except in such places, numbers, sizes,
colors and styles as are approved in advance in writing by Landlord, and which
conform to all applicable laws, ordinances, or covenants affecting the Demised
Premises. Any and all signs installed or constructed by or on behalf Tenant
pursuant hereto shall be installed, maintained and removed by Tenant at Tenant's
sole cost and expense.
14. Reserved
15. Governmental Regulation. Tenant shall promptly comply throughout the
Term, at Tenant's sole cost and expense, with all present and future laws,
ordinances and regulations of all applicable governing authorities relating to
(a) all or any part of the Demised Premises, and (b) to the use or manner of use
by Tenant of the Demised Premises and the Building Common Area. In the event
that such law, ordinance or regulation requires a renovation, improvement or
replacement to the Demised Premises or the Building Common Area, then Tenant
shall be required to make such renovation, improvement or replacement at
Tenant's sole cost and expense only if such law, ordinance or regulation is
applicable because of Tenant's particular use of the Demised Premises or the
Building Common Area, and is not applicable to the Project in general. In
addition, if the renovation, improvement or replacement is required to comply
with a law, ordinance or regulation that was not in effect or did not require
compliance at the time the leasehold improvements were constructed in the
Demised Premises pursuant to Section 17 and is not related to Tenant's
Particular use of the Demised Premises, then the cost of such renovation,
improvement or replacement shall be amortized on a straight-line basis over the
useful life of the item in question, as reasonably determined by Landlord, and
Tenant shall be obligated to pay for the portion of such costs attributable to
the remainder of the Term, including any extensions thereof. Tenant shall also
observe and comply with the requirements of all policies of public liability,
fire and other policies of insurance at any time in force with respect to the
Demised Premises.
16. Environmental Matters.
(a) For purposes of this Lease:
(i) "Contamination" as used herein means the presence of or
release of Hazardous Substances (as hereinafter defined) into any environmental
media from, upon, within, below, into or on any portion of the Demised Premises,
the Building, the Building Common Area or the Project so as to require
remediation, cleanup or investigation under any applicable Environmental Law (as
hereinafter defined).
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<PAGE> 10
(ii) "Environmental Laws" as used herein means all federal,
state, and local laws, regulations, orders, permits, ordinances or other
requirements, concerning protection of human health, safety and the environment,
all as may be amended from time to time.
(iii) "Hazardous Substances" as used herein means any
hazardous or toxic substance, material, chemical, pollutant, contaminant or
waste as those terms are defined by any applicable Environmental Laws
(including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq. ("CERCLA") and the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. ["RCRA"] and any
solid wastes, polychlorinated biphenyls, urea formaldehyde, asbestos,
radioactive materials, radon, explosives, petroleum products and oil.
(b) Landlord represents that, except as revealed to Tenant in writing
by Landlord, Landlord has not treated, stored or disposed of any Hazardous
Substances upon or within the Demised Premises, the Building or the Project,
nor, to Landlord's actual knowledge, has any predecessor owner of the Demised
Premise, the Building or the Project.
(c) Tenant covenants that all its activities, and the activities of
Tenant's Affiliates (as defined in Section 10(b)), on the Demised Premises, the
Building, or the Project during the Term will be conducted in compliance with
Environmental Laws. Tenant warrants that it is currently in compliance with all
applicable Environmental Laws and that there are no pending or threatened
notices of deficiency, notices of violation, orders, or judicial or
administrative actions involving alleged violations by Tenant of any
Environmental Laws. Tenant, at Tenant's sole cost and expense, shall be
responsible for obtaining all permits or licenses or approvals under
Environmental Laws necessary for Tenant's operation of its business on the
Demised Premises and shall make all notifications and registrations required by
any applicable Environmental Laws. Tenant, at Tenant's sole cost and expense,
shall at all times comply with the terms and conditions of all such permits,
licenses, approvals, notifications and registrations and with any other
applicable Environmental Laws. Tenant warrants that it has obtained or will
obtain on or prior to the Lease Commencement Date all such permits, licenses or
approvals and made all such notifications and registrations required by any
applicable Environmental Laws necessary for Tenant's operation of its business
on the Demised Premises.
(d) Tenant shall not cause or permit any Hazardous Substances to be
brought upon, kept or used in or about the Demised Premises, the Building, or
the Project without the prior written consent of Landlord, which consent shall
not be unreasonably withheld; provided, however, that the consent of Landlord
shall not be required for the use at the Demised Premises of cleaning supplies,
toner for photocopying machines and other similar materials, in containers and
quantities reasonably necessary for and consistent with normal and ordinary use
by Tenant in the routine operation or maintenance of Tenant's office equipment
or in the routine janitorial service, cleaning and maintenance for the Demised
Premises. For purposes of this Section 16, Landlord shall be deemed to have
reasonably withheld consent if Landlord determines that the presence of such
Hazardous Substance within the Demised Premises could result in a risk of harm
to person or property or otherwise negatively affect the value or marketability
of the Building or the Project.
(e) Tenant shall not cause or permit the release of any Hazardous
Substances by Tenant or Tenant's Affiliates into any environmental media such as
air, water or land, or into or on the Demised Premises, the Building or the
Project in any manner that violates any Environmental Laws. If such release
shall occur, Tenant shall (i) take all steps reasonably necessary to contain and
control such release and any associated Contamination, (ii) clean up or
otherwise remedy such release and any associated Contamination to the extent
required by, and take any and all other actions required under, applicable
Environmental Laws and (iii) notify and keep Landlord reasonably informed of
such release and response.
(f) Regardless of any consents granted by Landlord pursuant to Section
16(d) allowing Hazardous Substances upon the Demised Premises, Tenant shall
under no circumstances whatsoever cause or permit (i) any activity on the
Demised Premises which would cause the Demised Premises to become subject to
regulation as a hazardous waste treatment, storage or disposal facility under
RCRA or the regulations promulgated thereunder, (ii) the discharge of Hazardous
Substances into the storm sewer system serving the Project or (iii) the
installation of any underground storage tank or underground piping on or under
the Demised Premises.
(g) Tenant shall and hereby does indemnify Landlord and hold Landlord
harmless from and against any and all expense, loss, and liability suffered by
Landlord (with the exception of those expenses, losses, and liabilities arising
from Landlord's own negligence or willful act), by reason of the storage,
generation, release, handling, treatment, transportation, disposal, or
arrangement for transportation or disposal, of any Hazardous Substances (whether
accidental, intentional. or negligent) by Tenant or Tenant's Affiliates or by
reason of Tenant's breach of any of the provisions of this Section 16. Such
expenses, losses and liabilities shall include, without limitation, (i) any and
all expenses that Landlord may incur to comply with any Environmental Laws; (ii)
any and all costs that Landlord may incur in studying or remedying any
Contamination; at or arising from the Demised Premises, the Building, or the
Project, (iii) any and all costs that Landlord may incur in studying, removing,
disposing or
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otherwise addressing any Hazardous Substances: (iv) any and all fines, penalties
or other sanctions assessed upon Landlord; and (v) any and all legal and
professional fees and costs incurred by Landlord in connection with the
foregoing. The indemnity contained herein shall survive the termination or
expiration of this Lease.
17. Construction of Demised Premises.
(a) Within thirty (30) days after the Lease Date, Landlord shall
prepare, at Landlord's sole cost and expense, and submit to Tenant a set of
plans and specifications and/or construction drawings (collectively, the "Plans
and Specifications") based on the preliminary plans and specifications and/or
preliminary floor plans set forth on Exhibit B attached hereto and incorporated
herein, covering all work to be performed by Landlord in constructing the
Improvements (as defined in Section 8(a)(ii)). Tenant shall have five (5)
business days after receipt to approve the Plans and Specifications. If Tenant
fails to approve the Plans and Specifications by such date or if Tenant requests
any changes to the Plans and Specifications, and, as a result thereof,
completion of construction of the Improvements is delayed beyond the Lease
Commencement Date, the Term and Tenant's obligation to pay rent hereunder shall
nevertheless begin on the Lease Commencement Date and the Base Rent Commencement
Date, as the case may be. After Tenant has approved the Plans and
Specifications, any subsequent changes to the Plans and Specifications requested
by Tenant shall be at Tenant's sole cost and expense and subject to Landlord's
written approval.
(b) Landlord shall use reasonable speed and diligence to
substantially complete the Improvements in a good and workmanlike manner, at
Landlord's sole cost and expense, and have the Demised Premises ready for
occupancy on or before the Lease Commencement Date set forth in Section 1(f). If
the Demised Premises are not substantially complete on that date, such failure
to complete shall not in any way affect the obligation of Tenant hereunder
except that the Lease Commencement Date, the Base Rent Commencement Date, and
the Expiration Date shall be postponed one day for each day substantial
completion is delayed until the Demised Premises are substantially complete,
unless the delay is caused by Tenant's failure to approve the Plans and
Specifications as set forth in Section 17(a) or by change orders requested by
Tenant after approval of the Plans and Specifications. No liability whatsoever
shall arise or accrue against Landlord by reason of its failure to deliver or
afford possession of the Demised Premises, and Tenant hereby releases and
discharges Landlord from and of any claims for damage, loss, or injury of every
kind whatsoever as if this Lease were never executed.
(c) Upon substantial completion of the Demised Premises, a
representative of Landlord and a representative of Tenant together shall inspect
the Demised Premises and generate a punchlist of defective or uncompleted items
relating to the completion of construction: of the Improvements (the
"Punchlist"). Landlord shall, within a reasonable time after the Punchlist is
prepared and agreed upon by Landlord and Tenant, complete such incomplete work
and remedy such defective work as is set forth on the Punchlist. All
construction work performed by Landlord shall be deemed approved by Tenant in
all respects except for items of said work which are not completed or do not
conform to the Plans and Specifications and which are included on the Punchlist.
(d) Upon substantial completion of the Demised Premises and the
creation of the Punchlist, Tenant shall execute and deliver to Landlord a letter
of acceptance in which Tenant (i) accepts the Demised Premises subject only to
Landlord's completion of the items listed on the Punchlist and (ii) confirms
that the Lease Commencement Date, the Base Rent Commencement Date and the
Expiration Date remain as set forth in Section 1, or if revised pursuant to the
terms hereof, setting forth such dates as so revised.
(e) Landlord hereby warrants to Tenant that the materials and
equipment furnished by Landlord's contractors in the completion of the
Improvements will be of good quality and new, that during the one (1) year
period following the Lease Commencement Date, such materials and equipment and
the work of such contractors shall be free from defects not inherent in the
quality required or permitted hereunder, and that such work will conform to the
Plans and Specifications. This warranty shall exclude damages or defects caused
by Tenant or Tenant's Affiliates, improper or insufficient maintenance, improper
operation, or normal wear and tear under normal usage.
18. Tenant Alterations and Additions. Except for non-structural, interior
alterations or improvements totaling $5,000 individually and $15,000 in the
aggregate, Tenant shall not make or permit to be made any alterations,
improvements, or additions to the Demised Premises (a "Tenant's Change"),
without first obtaining on each occasion Landlord's prior written consent (which
consent Landlord agrees not unreasonably to withhold) and Lender's prior written
consent (if such consent is required). As part of its approval process, Landlord
may require that Tenant submit plans and specifications to Landlord, for
Landlord's approval or disapproval, which approval shall not be unreasonably
withheld. All Tenant's Changes shall be performed in accordance with all legal
requirements applicable thereto and in a good and workmanlike manner with
first-class materials. Tenant shall maintain insurance reasonably satisfactory
to Landlord during the construction of all Tenant's Changes. If Landlord at the
time of giving its approval to any Tenant's Change notifies Tenant in writing
that approval is conditioned upon restoration, then Tenant shall, at its sole
cost and expense and upon the termination or expiration of this Lease, remove
the same and restore the Demised Premises to its condition prior to such
Tenant's Change. No Tenant's Change shall be structural in nature or impair the
structural strength of the Building or
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<PAGE> 12
reduce its value. Tenant shall pay the full cost of any Tenant's Change and
shall give Landlord such reasonable security as may be requested by Landlord to
insure payment of such cost. Except as otherwise provided herein and in Section
12, all Tenant's Changes and all repairs and all other property attached to or
installed on the Demised Premises by or on behalf of Tenant shall immediately
upon completion or installation thereof be and become part of the Demised
Premises and the property of Landlord without payment therefor by Landlord and
shall be surrendered to Landlord upon the expiration or earlier termination of
this Lease.
19. Services by Landlord. Landlord shall be responsible for providing for
maintenance of the Building Common Area and as required by Section 10(b), and
for no other services whatsoever. Tenant, by payment of Tenant's share of the
Operating Expenses, shall pay Tenant's pro rata share of the expenses incurred
by Landlord hereunder.
20. Fire and Other Casualty. In the event the Demised Premises are damaged
by fire or other casualty insured by Landlord, Landlord agrees to promptly
restore and repair the Demised Premises at Landlord's expense, including the
Improvements to be insured by Tenant but only to the extent Landlord receives
insurance proceeds therefor, including the proceeds from the insurance required
to be carried by Tenant on the Improvements. Notwithstanding the foregoing, in
the event that the Demised Premises are (i) in the reasonable opinion of
Landlord, so destroyed that they cannot be repaired or rebuilt within two
hundred seventy (270) days after the date of such damage, or (ii) destroyed by a
casualty which is not covered by Landlord's insurance, or if such casualty is
covered by Landlord's insurance but Lender or other party entitled to insurance
proceeds fails to make such proceeds available to Landlord in an amount
sufficient for restoration of the Demised Premises, then Landlord shall give
written notice to Tenant of such determination (the "Determination Notice")
within sixty (60) days of such casualty. Either Landlord or Tenant may terminate
and cancel this Lease effective as of the date of such casualty by giving
written notice to the other party within thirty (30) days after Tenant's receipt
of the Determination Notice. Upon the giving of such termination notice, all
obligations hereunder with respect to periods from and after the effective date
of termination shall thereupon cease and terminate. If no such termination
notice is given, Landlord shall, to the extent of the available insurance
proceeds, make such repair or restoration of the Demised Premises to the
approximate condition existing prior to such casualty, promptly and in such
manner as not to unreasonably interfere with Tenant's use and occupancy of the
Demised Premises (if Tenant is still occupying the Demised Premises). Base Rent
and Additional Rent shall proportionately abate during the time that the Demised
Premises or any part thereof are unusable by reason of any such damage thereto.
21. Condemnation.
(a) If all of the Demised Premises is taken or condemned for a public
or quasi-public use, or if a material portion of the Demised Premises is taken
or condemned for a public or quasi-public use and the remaining portion thereof
is not usable by Tenant in the reasonable business judgment of Tenant, this
Lease shall terminate as of the earlier of the date title to the condemned real
estate vests in the condemnor or the date on which Tenant is deprived of
possession of the Demised Premises. In such event, the Base Rent herein reserved
and all Additional Rent and other sums payable hereunder shall be apportioned
and paid in full by Tenant to Landlord to that date, all Base Rent. Additional
Rent and other sums payable hereunder prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant, and neither party shall thereafter
have any liability hereunder, except that any obligation or liability of either
party, actual or contingent, under this Lease which has accrued on or prior to
such termination date shall survive.
(b) If only part of the Demised Premises is taken or condemned for a
public or quasi-public use and this Lease does not terminate pursuant to Section
21(a), Landlord shall, to the extent of the award it receives, restore the
Demised Premises to a condition and to a size as nearly comparable as reasonably
possible to the condition and size thereof immediately prior to the taking, and
there shall be an equitable adjustment to the Base Rent and Additional Rent
according to the value of the Demised Premises before and after the taking.
(c) Landlord shall be entitled to receive the entire award in any
proceeding with respect to any taking provided for in this Section 21, without
deduction therefrom for any estate vested in Tenant by this Lease, and Tenant
shall receive no part of such award. Nothing herein contained shall be deemed to
prohibit Tenant from making a separate claim, against the condemnor, to the
extent permitted by law, for the value of Tenant's moveable trade fixtures,
machinery and moving expenses, provided that the making of such claim shall not
and does not adversely affect or diminish Landlord's award.
(d) If a material portion of the Building Common Area is taken or
condemned for a public or quasi-public use (regardless of whether any portion of
the Demised Premises is so taken) such that the Demised Premises or the
remaining portion thereof is not usable by Tenant in the reasonable business
judgment of Tenant, Tenant may elect by giving written notice to Landlord to
terminate this Lease, whereupon this Lease shall terminate and Base Rent,
Additional Rent and other sums payable hereunder shall be apportioned as
provided in Section 21(a).
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<PAGE> 13
22. Tenant's Default.
(a) The occurrence of any one or more or the following events shall
constitute an "Event of Default" of Tenant under this Lease:
(i) if Tenant fails to pay Base Rent or any Additional
Rent hereunder as and when such rent becomes due and such failure shall continue
for more than ten (10) days after receipt of written notice from Landlord of
such failure; provided, however, that if Tenant fails to pay Base Rent or any
Additional Rent on time more than three (3) times in any period of twelve (12)
months, Landlord shall not be obligated to notify Tenant of such additional
failure and Tenant shall not have any cure period during the remainder of such
twelve (12) month period;
(ii) Reserved;
(iii) Reserved;
(iv) if Tenant permits to be done anything which creates a
lien upon the Demised Premises and fails to discharge or bond such lien, or post
security with Landlord acceptable to Landlord within thirty (30) days after
receipt by Tenant of written notice thereof;
(v) if Tenant fails to maintain in force all policies of
insurance required by this Lease and such failure shall continue for more than
ten (10) days after Landlord gives Tenant written notice of such failure;
(vi) if any petition is filed by or against Tenant or any
guarantor of this Lease under any present or future section or chapter of the
Bankruptcy Code, or under any similar law or statute of the United States or
any state thereof (which, in the case of an involuntary proceeding, is not
permanently discharged, dismissed, stayed, or vacated, as the case may be,
within sixty (60) days of commencement), or if any order for relief shall be
entered against Tenant or any guarantor of this Lease in any such proceedings;
(vii) if Tenant or any guarantor of this Lease becomes
insolvent or makes a transfer in fraud of creditors or makes an assignment for
the benefit of creditors;
(viii) if a receiver, custodian, or trustee is appointed
for the Demised Premises or for all or substantially all of the assets of
Tenant or of any guarantor of this Lease, which appointment is not vacated
within sixty (60) days following the date of such appointment; or
(ix) if Tenant fails to perform or observe any other term
of this Lease and such failure shall continue for more than thirty (30) days
after Landlord gives Tenant written notice of such failure, or, if such failure
cannot be corrected within such thirty (30) day period, if Tenant does not
commence to correct such default within said thirty (30) day period and
thereafter diligently prosecute the correction of same to completion within a
reasonable time.
(b) Upon the occurrence of any one or more Events of Default,
Landlord may, at Landlord's option, without any demand or notice whatsoever
(except as expressly required in this Section 22):
(i) Terminate this Lease by giving Tenant notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination and all rights of Tenant under this
Lease and in and to the Demised Premises shall terminate. Tenant shall remain
liable for all obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Demised Premises to Landlord on the
date specified in such notice; or
(ii) Terminate this Lease as provided in Section 22(b)(i)
hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, an amount which, at the date of
such termination, is calculated as follows: (1) the value of the excess, if
any, of (A) the Base Rent, Additional Rent and all other sums which would have
been payable hereunder by Tenant for the period commencing with the day
following the date of such termination and ending with the Expiration Date had
this Lease not been terminated (the "Remaining Term"), over (B) the aggregate
reasonable rental value of the Demised Premises for the Remaining Term (which
excess, if any shall be discounted to present value at the "Treasury Yield" as
defined below for the Remaining Term); plus (2) the costs of recovering
possession of the Demised Premises and all other expenses incurred by Landlord
due to Tenant's default, including, without limitation, reasonable attorney's
fees; plus (3) the unpaid Base Rent and Additional Rent earned as of the date of
termination plus any interest and late fees due hereunder, plus other sums of
money and damages owing on the date of termination by Tenant to Landlord under
this Lease or in connection with the Demised Premises. The amount as calculated
above shall be deemed immediately due and payable. The payment of the amount
calculated in subparagraph (ii)(1) shall not be deemed a penalty but shall
merely constitute payment of liquidated damages, it being understood and
acknowledged by Landlord and Tenant that actual damages to Landlord are
extremely difficult, if not impossible, to ascertain. "Treasury Yield" shall
mean the rate of return in percent per annum of Treasury Constant Maturities for
the length of time specified as published in document
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<PAGE> 14
H.15(519) (presently published by the Board of Governors of the U.S. Federal
Reserve System titled "Federal Reserve Statistical Release") for the calendar
week immediately preceding the calendar week in which the termination occurs. If
the rate of return of Treasury Constant Maturities for the calendar week in
question is not published on or before the business day preceding the date of
the Treasury Yield in question is to become effective, then the Treasury Yield
shall be based upon the rate of return of Treasury Constant Maturities for the
length of time specified for the most recent calendar week for which such
publication has occurred. If no rate of return for Treasury Constant Maturities
is published for the specific length of time specified, the Treasury Yield for
such length of time shall be the weighted average of the rates of return of
Treasury Constant Maturities most nearly corresponding to the length of the
applicable period specified. If the publishing of the rate of return of Treasury
Constant Maturities is ever discontinued, then the Treasury Yield shall be based
upon the index which is published by the Board of Governors of the U.S. Federal
Reserve System in replacement thereof or, if no such replacement index is
published, the index which, in Landlord's reasonable determination, most nearly
corresponds to the rate of return of Treasury Constant Maturities. In
determining the aggregate reasonable rental value pursuant to subparagraph
(ii)(1)(B) above, the parties hereby agree that, at the time Landlord seeks to
enforce this remedy, all relevant factors should be considered, including, but
not limited to, (a) the length of time remaining in the Term, (b) the then
current market conditions in the general area in which the Building is located,
(c) the likelihood of reletting the Demised Premises for a period of time equal
to the remainder of the Term, (d) the net effective rental rates then being
obtained by landlords for similar type space of similar size in similar type
buildings in the general area in which the Building is located, (e) the vacancy
levels in the general area in which the Building is located, (f) current levels
of new construction that will be completed during the remainder of the Term and
how this construction will likely affect vacancy rates and rental rates and (g)
inflation; or
(iii) Intentionally Omitted
(iv) Without terminating this Lease, in its own name but
as agent for Tenant, enter into and upon and take possession of the Demised
Premises or any part thereof. Any property remaining in the Demised Premises may
be removed and stored in a warehouse or elsewhere at the cost of, and for the
account of, Tenant without Landlord being deemed guilty of trespass or becoming
liable for any loss or damage which may be occasioned thereby unless caused by
Landlord's negligence. Thereafter, Landlord may, but shall not be obligated to,
lease to a third party the Demised Premises or any portion thereof as the agent
of Tenant upon such terms and conditions as Landlord may deem necessary or
desirable in order to relet the Demised Premises, unless Landlord is required to
mitigate its damages by law and then only to the extent required by law. The
remainder of any rentals received by Landlord from such reletting, after the
payment of any indebtedness due hereunder from Tenant to Landlord, and the
payment of any costs and expenses of such reletting, shall be held by Landlord
to the extent of and for application in payment of future rent owed by Tenant,
if any, as the same may become due and payable hereunder. If such rentals
received from such reletting shall at any time or from time to time be less than
sufficient to pay to Landlord the entire sums then due from Tenant hereunder,
Tenant shall pay any such deficiency to Landlord. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for any such previous default provided same has not been
cured; or
(v) Without terminating this Lease, and with or without
notice to Tenant, enter into and upon the Demised Premises and, without being
liable for prosecution or any claim for damages therefor, maintain the Demised
Premises and repair or replace any damage thereto or do anything or make any
payment for which Tenant is responsible hereunder. Tenant shall reimburse
Landlord immediately upon demand for any expenses which Landlord incurs in thus
effecting Tenant's compliance under this Lease and Landlord shall not be liable
to Tenant for any damages with respect thereto; or
(vi) Without liability to Tenant or any other party and
without constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant any property, material, labor, utilities or
other service, wherever Landlord is obligated to furnish or render the same so
long as an Event of Default exists under this Lease; or
(vii) With or without terminating this Lease, allow the
Demised Premises to remain unoccupied and collect rent from Tenant as it comes
due, unless Landlord is required to mitigate its damages by law and then only to
the extent required by law; or
(viii) Pursue such other remedies as are available at law or
equity.
(c) If this Lease shall terminate as a result of or while there
exists an Event of Default hereunder, any funds of Tenant held by Landlord may
be applied by Landlord to any damages payable by Tenant (whether provided for
herein or by law) as a result of such termination or default.
(d) Landlord may bring successive actions against Tenant to recover
rents as they accrue.
(e) No agreement to accept a surrender of the Demised Premises and no
act or omission by Landlord or Landlord's agents during the Term shall
constitute an acceptance or surrender of
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<PAGE> 15
the Demised Premises unless made in writing and signed by Landlord. No re-entry
or taking possession of the Demised Premises by Landlord shall constitute an
election by Landlord to terminate this Lease unless a written notice of such
intention is given to Tenant. No provision of this Lease shall be deemed to have
been waived by either party unless such waiver is in writing and signed by the
party making such waiver. Landlord's acceptance of Base Rent or Additional Rent
in full or in part following an Event of Default hereunder shall not be
construed as a waiver of such Event of Default. No custom or practice which may
grow up between the parties in connection with the terms of this Lease shall be
construed to waive or lessen either party's right to insist upon strict
performance of the terms of this Lease, without a written notice thereof to the
other party.
(f) If an Event of Default shall occur, Tenant shall pay to Landlord,
on demand, all expenses incurred by Landlord as a result thereof, including
reasonable attorneys' fees, court costs and expenses actually incurred.
23. Landlord's Right of Entry. Tenant agrees to permit Landlord and the
authorized representatives of Landlord and of Lender to enter upon the Demised
Premises at all reasonable times for the purposes of inspecting the Demised
Premises and Tenant's compliance with this Lease, and making any necessary
repairs thereto; provided that, except in the case of an emergency, Landlord
shall give Tenant reasonable prior notice of Landlord's intended entry upon the
Demised Premises. Nothing herein shall imply any duty upon the part of Landlord
to do any work required of Tenant hereunder, and the performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
it. Landlord shall not be liable for inconvenience, annoyance, disturbance or
other damage to Tenant by reason of making such repairs or the performance of
such work in the Demised Premises or on account of bringing materials, supplies
and equipment into or through the Demised Premises during the course thereof,
and the obligations of Tenant under this Lease shall not thereby be affected;
provided however, that Landlord shall use reasonable efforts not to disturb or
otherwise interfere with Tenant's operations in the Demised Premises in making
such repairs or performing such work. Landlord also shall have the right to
enter the Demised Premises at all reasonable times upon prior notice to Tenant
to exhibit the Demised Premises to any prospective purchaser or mortgagee, and
during the final six (6) months of the Term, to prospective tenants.
24. Lender's Rights.
(a) For purposes of this Lease:
(i) "Lender" as used herein means the current holder of
a Mortgage;
(ii) "Mortgage" as used herein means any or all
mortgages, deeds to secure debt, deeds of trust or other instruments in the
nature thereof which may now or hereafter affect or encumber Landlord's title to
the Demised Premises, and any amendments, modifications, extensions or renewals
thereof.
(b) This Lease and all rights of Tenant hereunder are and shall be
subject and subordinate to the lien and security title of any Mortgage. Tenant
recognizes and acknowledges the right of Lender to foreclose or exercise the
power of sale against the Demised Premises under any Mortgage. Notwithstanding
anything to the contrary contained in this Section 24, this Lease and all rights
of Tenant hereunder are and shall be subject and subordinate to the lien and
security title of any Mortgage created after the Lease Date provided that the
holder of said Mortgage agrees not to disturb Tenant's possession of the Demised
Premises so long as Tenant is not in default hereunder, as evidenced by a
subordination and non-disturbance agreement signed by said holder which
agreement may include (i) the conditions contained in Section 24(e) below,
(ii) a requirement that said holder be given notice and opportunity to cure a
landlord default and (iii) other provisions customarily required by lenders.
Tenant shall promptly execute such a subordination and non-disturbance agreement
upon Landlord's request.
(c) Tenant shall, in confirmation of the subordination set forth in
Section 24(b) and notwithstanding the fact that such subordination is
self-operative, and no further instrument or subordination shall be necessary,
upon demand, at any time or times, execute, acknowledge, and deliver to Landlord
or to Lender any and all instruments requested by either of them to evidence
such subordination.
(d) At any time during the Term, Landlord may, by written notice to
Tenant, make this Lease superior to the lien of any Mortgage. If requested by
Lender, Tenant shall, upon demand, at any time or times, execute, acknowledge,
and deliver to Lender, any and all instruments that may be necessary to make
this Lease superior to the lien of any Mortgage.
(e) If Lender (or Lender's nominee, or other purchaser at
foreclosure) shall hereafter succeed to the rights of Landlord under this Lease,
whether through possession or foreclosure action or delivery of a new lease,
Tenant shall, if requested by such successor, attorn to and recognize such
successor as Tenant's landlord under this Lease without change in the terms and
provisions of this Lease and shall promptly execute and deliver any instrument
that may be necessary to evidence such attornment, provided that such successor
shall not be bound by (i) any payment of Base Rent or Additional Rent for more
than one month in advance, except prepayments in the nature of security for the
performance by
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<PAGE> 16
Tenant of its obligations under this Lease, and then only if such prepayments
have been deposited with and are under the control of such successor, (ii) any
provision of any amendment to the Lease to which Lender has not consented, (iii)
the defaults of any prior landlord under this Lease except defaults of which
Lender had been notified prior to succeeding to Landlord's interest, or (iv) any
offset rights arising out of the defaults of any prior landlord under this Lease
except defaults of which Lender had been notified prior to succeeding to
Landlord's interest. Upon such attornment, this Lease shall continue in full
force and effect as a direct lease between each successor landlord and Tenant,
subject to all of the terms, covenants and conditions of this Lease.
(f) In the event there is a Mortgage at any time during the Term,
Landlord shall use its good faith efforts to cause the Lender to enter into a
subordination, nondisturbance and attornment agreement with Tenant reasonably
satisfactory to Tenant and consistent with this Section 24.
25. Estoppel Certificate. Landlord and Tenant agree, at any time, and from
time to time, within fifteen (15) days after written request of the other, to
execute, acknowledge and deliver a statement in writing in recordable form to
the requesting party and/or its designee certifying that: (i) this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that the same is in full force and effect, as modified), (ii) the dates to which
Base Rent, Additional Rent and other charges have been paid, (iii) whether or
not, to the best of its knowledge, there exists any failure by the requesting
party to perform any term, covenant or condition contained in this Lease, and,
if so, specifying each such failure, (iv) (if such be the case) Tenant has
unconditionally accepted the Demised Premises and is conducting its business
therein, and (v) and as to such additional matters as may be requested, it being
intended that any such statement delivered pursuant hereto may be relied upon by
the requesting party and by any purchaser of title to the Demised Premises or by
any mortgagee or any assignee thereof or any party to any sale-leaseback of the
Demised Premises, or the landlord under a ground lease affecting the Demised
Premises.
26. Landlord Liability. No owner of the Demised Premises, whether or not
named herein, shall have liability hereunder after it ceases to hold title to
the Demised Premises, except for the Security Deposit (unless transferred
pursuant to Section 5 of this Lease). Neither Landlord nor any officer,
director, shareholder, partner or principal of Landlord, whether disclosed or
undisclosed, shall be under any personal liability with respect to any of the
provisions of this Lease. In the event Landlord is in breach or default with
respect to Landlord's obligations or otherwise under this Lease, Tenant shall
look solely to the equity of Landlord in the Building for the satisfaction of
Tenant's remedies. It is expressly understood and agreed that Landlord's
liability under the terms, covenants, conditions, warranties and obligations of
this Lease shall in no event exceed the loss of Landlord's equity interest in
the Building.
27. Notices. Any notice required or permitted to be given or served by
either party to this Lease shall be deemed given when made in writing, and
either (i) personally delivered, (ii) deposited with the United States Postal
Service, postage prepaid by registered or certified mail, return receipt
requested, or (iii) delivered by licensed overnight delivery service providing
proof of delivery, properly addressed to the address set forth in Section 1(m)
(as the same may be changed by giving written notice of the aforesaid in
accordance with this Section 27). If any notice mailed is properly addressed
with appropriate postage but returned for any reason, such notice shall be
deemed to be effective notice and to be given on the date of mailing.
28. Brokers. Tenant represents and warrants to Landlord that, except for
those parties set forth in Section 1(o) (the "Brokers"), Tenant has not engaged
or had any conversations or negotiations with any broker, finder or other third
party concerning the leasing of the Demised Premises to Tenant who would be
entitled to any commission or fee based on the execution of this Lease. Tenant
hereby further represents and warrants to Landlord that Tenant is not receiving
and is not entitled to receive any rebate, payment or other remuneration, either
directly or indirectly, from the Brokers, and that it is not otherwise sharing
in or entitled to share in any commission or fee paid to the Brokers by Landlord
or any other party in connection with the execution of this Lease, either
directly or indirectly. Tenant hereby indemnifies Landlord against and from any
claims by persons claiming by, through or under Tenant for any brokerage
commissions (except those payable to the Brokers, all of which are payable by
Landlord pursuant to a separate agreement) and all costs, expenses and
liabilities in connection therewith, including, without limitation, reasonable
attorneys' fees and expenses, for any breach of the foregoing. Landlord hereby
indemnifies Tenant against and from any claims by persons claiming by, through
or under Landlord under written agreements with Landlord for any brokerage
commissions and all costs, expenses and liabilities in connection therewith,
including, without limitation, reasonable attorneys' fees and expenses. The
foregoing indemnifications shall survive the termination of this Lease for any
reason.
29. Assignment and Subleasing. (a) Tenant may not assign, mortgage,
pledge, encumber or otherwise transfer this Lease, or any interest hereunder, or
sublet the Demised Premises, in whole or in part, without on each occasion first
obtaining the prior express written consent of Landlord, which consent Landlord
shall not unreasonably withhold. Any change in control of Tenant resulting from
a merger, consolidation, stock transfer or asset sale shall be considered an
assignment or transfer which requires Landlord's prior written consent.
Notwithstanding the foregoing, Tenant may assign this Lease or sublet the
Demised Premises, in whole or in part, to a corporation or other entity
controlled by or under common control with Tenant; moreover, a transfer of
beneficial interests in Tenant to family members (or trust(s) for the benefit of
family members) of the current shareholders of Tenant shall not be subject to
Landlord's consent. For purposes of this Section 29, by way of example and not
limitation, Landlord shall
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<PAGE> 17
be deemed to have reasonably withheld consent if Landlord determines that (i)
the prospective assignee or subtenant is not of a financial strength similar to
Tenant as of the Lease Date, (ii) that the prospective assignee or subtenant
has a poor business reputation, (iii) that the proposed use of the Demised
Premises by such prospective assignee or subtenant (including, without
limitation, a use involving the use or handling of Hazardous Substances) will
negatively affect the value or marketability of the Building or the Project or
(iv) the prospective assignee or subtenant is a current tenant in the Project
or is a bona-fide third-party prospective tenant.
(b) If Tenant desires to assign this Lease or sublet the Demised
Premises or any part thereof, Tenant shall give Landlord written notice no later
than forty-five (45) days in advance of the proposed effective date of any
proposed assignment or sublease, specifying (i) the name and business of the
proposed assignee or sublessee, (ii) the amount and location of the space within
the Demised Premises proposed to be subleased, (iii) the proposed effective date
and duration of the assignment or subletting and (iv) the proposed rent or
consideration to be paid to Tenant by such assignee or sublessee. Tenant shall
promptly supply Landlord with financial statements and other information readily
available to Tenant as Landlord may reasonably request to evaluate the proposed
assignment or sublease. Landlord shall have a period of thirty (30) days
following receipt of such notice and other information requested by Landlord
within which to notify Tenant in writing that Landlord elects: (i) to permit
Tenant to assign or sublet such space; provided, however, that, if the rent rate
agreed upon between Tenant and its proposed subtenant is greater than the rent
rate that Tenant must pay Landlord hereunder for that portion of the Demised
Promises, or if any consideration shall be promised to or received by Tenant in
connection with such proposed assignment or sublease (in addition to rent), then
one half (1/2) of such excess rent and other consideration (after payment of
brokerage commissions, attorneys' fees and other disbursements reasonably
incurred by Tenant for such assignment and subletting if acceptable evidence of
such disbursements is delivered to Landlord) shall be considered Additional Rent
owed by Tenant to Landlord, and shall be paid by Tenant to Landlord, in the case
of excess rent, in the same manner that Tenant pays Base Rent and, in the case
of any other consideration, within ten (10) business days after receipt thereof
by Tenant; or (ii) to refuse, in Landlord's reasonable discretion (taking into
account all relevant factors including, without limitation, the factors set
forth in the Section 29(a) above), to consent to Tenant's assignment or
subleasing of such space and to continue this Lease in full force and effect as
to the entire Demised Premises. If Landlord should fail to notify Tenant in
writing of such election within the aforesaid thirty (30) day period, Landlord
shall be deemed to have elected option (ii) above. Tenant agrees to reimburse
Landlord for reasonable legal fees and any other reasonable costs incurred by
Landlord in connection with any requested assignment or subletting, and such
payments shall not be deducted from the Additional Rent owed to Landlord
pursuant to subsection (i) above. Tenant shall deliver to Landlord copies of all
documents executed in connection with any permitted assignment or subletting,
which documents shall be in form and substance reasonably satisfactory to
Landlord and which shall require such assignee to assume performance of all
terms of this Lease on Tenant's part to be performed.
(c) No acceptance by Landlord of any rent or any other sum of money
from any assignee, sublessee or other category of transferee shall be deemed to
constitute Landlord's consent to any assignment, sublease, or transfer.
Permitted subtenants or assignees shall become liable directly to Landlord for
all obligations of Tenant hereunder, without, however, relieving Tenant of any
of its liability hereunder. No such assignment, subletting, occupancy or
collection shall be deemed the acceptance of the assignee, tenant or occupant,
as Tenant, or a release of Tenant from the further performance by Tenant of
Tenant's obligations under this Lease. Any assignment or sublease consented to
by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's
consent to any subsequent assignment or sublease.
30. Termination or Expiration.
(a) No termination of this Lease prior to the normal ending thereof,
by lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
(b) At the expiration or earlier termination of the Term of this
Lease, Tenant shall surrender the Demised Premises and all improvements,
alterations and additions thereto, and keys therefor to Landlord, clean and
neat, and in the same condition as at the Lease Commencement Date, excepting
normal wear and tear, condemnation and casualty other than that required to be
insured against by Tenant hereunder.
(c) If Tenant remains in possession of the Demised Premises after
expiration of the Term, with or without Landlord's acquiescence and without any
express agreement of the parties, Tenant shall be a tenant-at-sufferance at one
hundred fifty Percent (150%) of the Base Rent in effect at the end of the
Term. Tenant shall also continue to pay all other Additional Rent due hereunder,
and there shall be no renewal of this Lease by operation of law. In addition to
the foregoing, Tenant shall be liable for all damages, direct and consequential,
incurred by Landlord as a result of such holdover. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Demised Premises shall reinstate, continue or extend the
Term or Tenant's right of possession.
31. Reserved.
32. Late Payments. In the event any Installment of rent, inclusive of Base
Rent, or Additional Rent or other sums due hereunder, if any, is not paid (i)
within five (5) days after
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<PAGE> 18
Tenant's receipt of written notice of such failure to pay on the first occasion
during any twelve (12) month period, or (ii) as and when due with respect to any
subsequent late payments in any twelve (12) month period. Tenant shall pay an
administrative fee equal to five percent (5%) of such past due amount, plus
interest on the amount past due at the lesser of (i) the maximum interest rate
allowed by law or (ii) a rate of fifteen percent (15%) per annum (the "Interest
Rate") to defray the additional expenses incurred by Landlord in processing such
payment.
33. Rules and Regulations. Tenant agrees to abide by the rules and
regulations set forth on Exhibit D attached hereto, as well as other rules and
regulations reasonably promulgated by Landlord from time to time, so long as
such rules and regulations are uniformly enforced against all tenants of
Landlord in the Building. In the event of any inconsistency or conflict between
such rules and regulations and the terms and provisions of this Lease, the terms
and provisions of this Lease shall be controlling.
34. Quiet Enjoyment. So long as Tenant has not committed an Event of
Default hereunder, Landlord agrees that Tenant shall have the right to quietly
use and enjoy the Demised Premises for the Term.
35. Miscellaneous.
(a) The parties hereto hereby covenant and agree that Landlord shall
receive the Base Rent, Additional Rent and all other sums payable by Tenant
hereinabove provided as net income from the Demised Premises, without any
abatement (except as set forth in Section 20 and Section 21), reduction,
set-off, counterclaim, defense or deduction whatsoever.
(b) If any clause or provision of this Lease is determined to be
illegal, invalid or unenforceable under present or future laws effective during
the Term, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and that in lieu of
such illegal, invalid or unenforceable clause or provision there shall be
substituted a clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
(c) All rights, powers, and privileges conferred hereunder upon the
parties hereto shall be cumulative, but not restrictive to those given by law.
(d) TIME IS OF THE ESSENCE OF THIS LEASE.
(e) No failure of Landlord or Tenant to exercise any power given
Landlord or Tenant hereunder or to insist upon strict compliance by Landlord or
Tenant with its obligations hereunder, and no custom or practice of the parties
at variance with the terms hereof shall constitute a waiver of Landlord's or
Tenant's rights to demand exact compliance with the terms hereof.
(f) This Lease contains the entire agreement of the parties hereto as
to the subject matter of this Lease and no representations, inducements,
promises or agreements, oral or otherwise, between the parties not embodied
herein shall be of any force and effect. The masculine (or neuter) pronoun,
singular number shall include the masculine, feminine and neuter gender and the
singular and plural number.
(g) This Lease shall create the relationship of landlord and tenant
between Landlord and Tenant; and is not assignable by Tenant except as
expressly set forth herein.
(h) Landlord and Tenant agree to execute, upon request of the other,
a memorandum of this Lease in recordable form and the requesting party shall pay
the costs and charges for the recording of such memorandum of lease. Under no
circumstances shall Tenant have the right to record this Lease.
(i) The captions of this Lease are for convenience only and are not a
part of this Lease, and do not in any way define, limit, describe or amplify
the terms or provisions of this Lease or the scope or intent thereof.
(j) This Lease may be executed in multiple counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same agreement.
(k) This Lease shall be interpreted under the laws of the State where
the Demised Premises are located.
(l) The parties acknowledge that this Lease is the result of
negotiations between the parties, and in construing any ambiguity hereunder no
presumption shall be made in favor of either party. No inference shall be made
from any item which has been stricken from this Lease other than the deletion of
such item.
36. Special Stipulations. The Special Stipulations, if any, attached
hereto as Exhibit C, are incorporated herein and made a part hereof, and to the
extent of any conflict between the foregoing provisions and the Special
Stipulations, the Special Stipulations shall govern and control.
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<PAGE> 19
37. Lease Date. For purposes of this Lease, the term "Lease Date" shall
mean the later date upon which this Lease is signed by Landlord and Tenant.
38. Authority. If Tenant is not a natural person. Tenant shall cause its
corporate secretary or general partner, as applicable, to execute the
certificate attached hereto as Exhibit E. Tenant is authorized by all required
corporate or partnership action to enter into this Lease and the individual(s)
signing this Lease on behalf of Tenant are each authorized to bind Tenant to its
terms.
39. No Offer Until Executed. The submission of this Lease to Tenant for
examination or consideration does not constitute an offer to lease the Demised
Premises and this Lease shall become effective, if at all, only upon the
execution and delivery thereof by Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
under seals, the day and year first above written.
LANDLORD:
Date: July 1, 1997 POST-VALWOOD INC., a Texas corporation
-------------
By: /s/ DAVID N. FARMER
-----------------------------------
Name: David N. Farmer
---------------------------------
Title: President
--------------------------------
TENANT:
Date: June 26, 1997 NITRO SPORTS CORP., INC., a Texas corporation
-------------
By: /s/ MICHAEL BLUMENFELD
-----------------------------------
Name: Michael Blumenfeld
---------------------------------
Title: President
--------------------------------
Attest: /s/ REENA BLUMENFELD
------------------------------
Name: Reena Blumenfeld
---------------------------------
Title: Secretary
--------------------------------
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<PAGE> 20
ATTESTATION
Landlord - Corporation:
STATE OF Texas
-------------
COUNTY OF Dallas
------------
BEFORE ME, a Notary Public in and for said County, personally
appeared David N. Farmer, known to me to be the person(s) who, as President of
Post-Valwood, Inc., the corporation which executed the foregoing instrument in
its capacity as Landlord signed the same, and acknowledged to me that they did
so sign said instrument in the name and upon behalf of said corporation as
officers of said corporation, that the same is their free act and deed as such
officers, respectively, and they were duly authorized thereunto by its board of
directors, and that the seal affixed to said instrument is the corporate seal of
said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and
affixed my official seal, this 1st day of July, 1997.
[SEAL] /s/ EMILY GARZA
---------------------
Notary Public
My Commission Expires:
Tenant - Corporation:
STATE OF Texas
-------------
COUNTY OF Dallas
------------
BEFORE ME, a Notary Public in and for said County, personally
appeared Michael Blumenfeld and Reena Blumenfeld, known to me to be the
person(s) who, as President and Secretary respectively, of Nitro Sports Corp.,
Inc., the corporation which executed the foregoing instrument in its capacity as
Tenant, signed the same, and acknowledged to me that they did so sign said
instrument in the name and upon behalf of said corporation as officers of said
corporation, that the same is their free act and deed as such officers,
respectively, and they were duly authorized thereunto by its board of
directors; and that the seal affixed to said instrument is the corporate seal
of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and
affixed my official seal, this 26th day of June, 1997.
/s/ LESLIE M. CUTHRELL
-----------------------
Notary Public
My Commission Expires:
[SEAL]
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<PAGE> 21
EXHIBIT A
VALWOOD DISTRIBUTION CENTER
30,000 SF
[DIAGRAM]
<PAGE> 1
EXHIBIT 10.9
DISTRIBUTION AGREEMENT
This Distribution Agreement, dated as of February 24, 1998 (this
"Agreement"), is entered into by and between Collegiate Pacific Inc., a
Pennsylvania corporation ("CPI" or "Distributor"), and Equipmart, Inc., a Texas
corporation ("Seller").
BACKGROUND
Seller is in the business of manufacturing rollers (and component parts
and related accessories) designed for the tennis industry, which are used in
the removal of water from tennis courts.
Seller desires Distributor to be the exclusive and perpetual distributor
of all rollers manufactured by Seller on the terms and subject to the
conditions set forth in this Agreement, and Distributor desires to distribute
the rollers manufactured by Seller on the terms and subject to the conditions
set forth in this Agreement.
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, Seller and Distributor
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 The term "Affiliate" shall mean, with respect to each of
the parties, any other person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common control with such
party. The term "Control" as used with respect to any person or party means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or party, whether
through the ownership of voting securities, by contract, or otherwise.
Section 1.2 The term "Agreement" shall mean this Distribution
Agreement.
Section 1.3 The term "Custom Roller" shall mean that certain 48-inch
roller and complete 48-inch unit designed and manufactured by Seller for the
removal of water from tennis courts.
Section 1.4 The term "Roller" shall mean all rollers, along with all
component parts and related accessories, designed and manufactured by Seller
for the removal of water from tennis courts, including the Custom Roller.
Section 1.5 The term "Territory" shall mean the world.
ARTICLE II
APPOINTMENT OF DISTRIBUTOR
Section 2.1 Appointment of CPI as Exclusive Distributor. Seller
hereby appoints CPI as the exclusive and perpetual marketer, seller,
distributor, and sales representative for all sales in the Territory of
Seller's Rollers.
Section 2.2 Consideration. In consideration for being appointed the
exclusive distributor of Seller's Rollers, Distributor agrees to deliver to
Seller on the date hereof (a) the aggregate amount of $25,000 in immediately
available funds and (b) certificates representing 100,000 shares (the "Shares")
of CPI common stock, $.01 par value per share.
<PAGE> 2
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement will commence on the
date hereof and continue until terminated by Distributor on thirty (30) days
advance written notice to Seller.
ARTICLE IV
OPERATING PROCEDURES
Section 4.1 Additional Consideration with Respect to Custom Rollers.
For a period beginning on the date of this Agreement and ending on the third
anniversary of this Agreement, Distributor, in addition to any other
consideration to be delivered under this Agreement, agrees to pay and deliver
to Seller for each Custom Roller actually sold by Distributor an amount equal
to 5% of the net revenue from sales (the "Custom Roller Royalty") actually
collected by Distributor with respect to such Custom Rollers.
Section 4.2 Cost of Rollers. At any time during the term of this
Agreement, Seller may submit to Distributor a written statement outlining the
manufacturing cost increases or decreases, if any, in producing Rollers and the
corresponding per unit sales price increase or decrease, if any, for each
Roller. Notwithstanding anything in the foregoing to the contrary, each party
agrees to use good faith efforts to resolve any disputes regarding any price
increases or decreases in existing products or in the establishment of prices
for new Rollers that are developed and manufactured by Seller.
Section 4.3 Purchase Orders; Invoices. Purchase orders and invoices
will be submitted and paid in a timely manner that is consistent with each
party's ordinary course of business and past business practice.
Section 4.4 Seller as Exclusive Manufacturer of Rollers. During the
term of this Agreement, Seller agrees to use all commercially reasonable
efforts to maintain its exclusive rights to manufacture Rollers as currently
manufactured, and will not sell or otherwise license such right to any third
party without the prior written consent of Distributor.
Section 4.5 Failure of Seller to Deliver Rollers. At any time during
the term of this Agreement, if Seller fails to deliver any Roller ordered by
CPI for any reason whatsoever, including, without limitation, the bankruptcy or
insolvency of Seller, force majeure, fire, breakdown of machinery, delay in
supply and/or transit of materials, labor disturbance, or any other reason,
then, in such event, CPI shall have the right to acquire replacement products
from any third party as CPI may require to meet its needs.
ARTICLE V
ACQUISITION OPTION
Section 5.1 Acquisition Option. Seller hereby grants to Distributor
the option (the "Option") to purchase all of Seller's manufacturing assets,
intellectual property (including, without limitation, all trade names,
trademarks, patents, know-how, and other forms of intellectual property), and
all other items related to the design and manufacture of Rollers (collectively,
the "Assets") for a cash purchase price equal to the greater of (a) $5,000 or
(b) the actual cost of such Assets minus $25,000. The Option shall commence on
the date of this Agreement and continue throughout the term of this Agreement.
Section 5.2 Exercise of Option; Closing. Distributor may exercise
this Option at any time during the term of this Agreement by delivering to
Seller a written notice (the "Exercise Notice") of Distributor's intent to
exercise the Option. Upon receipt of the Exercise Notice, Seller shall
promptly deliver to Distributor an itemized statement detailing the actual cost
of the Assets. The closing of the purchase and sale of the Assets shall take
<PAGE> 3
place at a mutually agreed upon time and place, provided, however, that the
closing of the Option shall take place no later than 30 days from the date of
the Exercise Notice.
ARTICLE VI
PROVISIONS RELATED TO THE SHARES
Section 6.1 Restrictions on Transfer. The Shares issued pursuant to
the terms of this Agreement will be subject to the following restrictions on
transfer: (i) Seller will not sell or offer to sell any of the Shares in the
absence of an effective registration statement for such Shares under the
Securities Act of 1933, as amended (the "Securities Act"), or an opinion of
counsel reasonably acceptable to CPI to the effect that such registration is
not required; and (ii) CPI will not be obligated to recognize any purported
transfer in violation of this Section 6.1(i), and, unless it elects to do
otherwise, CPI may treat any such purported transfer as null, void, and of no
effect.
Section 6.2 Legend on Stock. Each certificate representing the Shares
to be issued pursuant to the terms of this Agreement will bear substantially
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE APPLICABLE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REQUIREMENTS OF SUCH LAWS.
Section 6.3 Piggyback Registration Rights in Underwritten Offerings.
(a) In the case of an underwritten offering by CPI of
securities, CPI shall, with respect to the number of Shares that Seller
then desires to sell, enter into an underwriting agreement with the same
underwriters engaged by CPI with respect to securities being offered by
CPI and cause such underwriters to include in any such underwriting all
of the Shares that Seller then desires to sell; provided, however, that
such underwriting agreement is in substantially the same form as the
underwriting agreement that CPI enters into in connection with the
primary offering it is making.
(b) If the managing underwriter with respect to an offering
pursuant to this Section 6.3 requests that the number of Shares of
Seller that are entitled to be registered pursuant to this Section 6.3
be reduced because of marketing factors, then the Shares of Seller that
Seller wishes to register pursuant to this Section 6.3 shall be reduced
by such amount as the managing underwriter may determine.
Section 6.4 Investment Intent. Seller hereby confirms that the Shares
issued and to be issued pursuant to the terms of this Agreement will be
acquired for investment for his own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof in a manner which
would violate the registration provisions of the Securities Act or any
applicable state securities laws.
ARTICLE VII
MISCELLANEOUS
Section 7.1 No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
Section 7.2 Entire Agreement. This Agreement constitutes the entire
agreement among the parties related to the subject matter hereof and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, that may have related in any way to the subject
matter hereof.
Section 7.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns.
<PAGE> 4
Section 7.4 Assignment. No party may assign or otherwise transfer any
of its rights or obligations under this Agreement, by operation of law or
otherwise, without the prior written consent of the other parties, which
consent shall not be unreasonably withheld. Any purported or attempted
assignment contrary to the terms hereof shall be null and void and of no force
or effect. Notwithstanding the foregoing, Distributor may assign this
Agreement to an Affiliate without Seller's prior written consent.
Section 7.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 7.6 Notices. All notices, demands, requests, and other
communications to be given or made under this Agreement shall be in writing and
shall be (a) personally delivered with signed receipt obtained acknowledging
delivery; (b) transmitted by postage prepaid registered mail, return receipt
requested (air mail if international); (c) transmitted by telex or facsimile,
subject to confirmation of receipt by the addressee; or (d) sent by overnight
express mail, to the parties at the addresses set forth on the signature page.
Any notice, demand, request, or other communication shall be effective only if
and when it is received by the addressee.
SECTION 7.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, UNITED
STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CONFLICTS-OF-LAW RULES OR
PRINCIPLE THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
Section 7.8 Amendments and Wavier. This Agreement may be amended,
modified, superseded, or canceled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may be waived only by
an instrument in writing signed by (or by some person duly authorized by) all
of the parties hereto or, in the case of a waiver, by the party waiving
compliance.
Section 7.9 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
SECTION 7.10 ARBITRATION. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT,
THE PARTIES AGREE THAT ANY CLAIMS, INCLUDING ANY STATUTORY CLAIMS, ARISING OUT
OF OR RELATING TO THIS AGREEMENT WILL BE SUBJECT TO BINDING ARBITRATION
CONDUCTED BY AND IN ACCORDANCE WITH THE RULES OF AN INDEPENDENT,
NATIONALLY-RECOGNIZED DISPUTE RESOLUTION ORGANIZATION SELECTED BY CPI. THE
ARBITRATION PROCEEDING WILL BE CONDUCTED IN DALLAS, TEXAS. NO PARTY WILL BE
LIABLE TO THE OTHER FOR PUNITIVE DAMAGES FOR ANY SUCH CLAIMS AND EACH HEREBY
WAIVES ANY CLAIMS FOR SUCH DAMAGES.
[remainder of page intentionally left blank]
<PAGE> 5
IN WITNESS WHEREOF, the parties have hereunto have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
COLLEGIATE PACIFIC INC.,
a Pennsylvania corporation
By: /s/ MICHAEL J. BLUMENFELD
---------------------------------------
Name: Michael J. Blumenfeld
Title: President
Address: 13950 Senlac, Suite 200
Farmers Branch, Texas 75235
EQUIPMART INC.,
a Texas corporation
By: /s/ RAY NEWMAN
---------------------------------------
Name: Ray Newman
Title: President
Address: 7731 Long Point, #16
Houston, Texas 77055
<PAGE> 1
EXHIBIT 10.10
DISTRIBUTION AGREEMENT
This Distribution Agreement, dated as of March 7, 1998 (this
"Agreement"), is entered into by and between Collegiate Pacific Inc., a
Pennsylvania corporation ("CPI" or "Distributor"), and FunNets, Inc., a
Delaware corporation ("Seller").
BACKGROUND
Seller is in the business of manufacturing plastic frames and nets,
which are used as soccer goals and other related purposes and sold under the
trade name of "FunNets" (all such frames and nets, along with all component
parts and related accessories, manufactured by Seller are collectively referred
to herein as "FunNets").
Seller desires Distributor to be the exclusive distributor of all
FunNets manufactured by Seller on the terms and subject to the conditions set
forth in this Agreement, and Distributor desires to distribute the FunNets
manufactured by Seller on the terms and subject to the conditions set forth in
this Agreement.
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, Seller and Distributor
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 The term "Affiliate" shall mean, with respect to each of
the parties, any other person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common control with such
party. The term "Control" as used with respect to any person or party means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or party, whether
through the ownership of voting securities, by contract, or otherwise.
Section 1.2 The term "Agreement" shall mean this Distribution
Agreement.
Section 1.3 The term "FunNets" shall mean all plastic frames and nets,
which are used as soccer goals and other related purposes, along with all
component parts and related accessories, manufactured by Seller and sold under
the trade name of "FunNets."
Section 1.4 The term "Territory" shall mean the world.
ARTICLE II
APPOINTMENT OF DISTRIBUTOR
Section 2.1 Appointment of CPI as Exclusive Distributor. Seller
hereby appoints CPI as the exclusive marketer, seller, distributor, and sales
representative for all sales in the Territory of Seller's FunNets.
Section 2.2 Consideration. In consideration for being appointed the
exclusive distributor of Seller's FunNets, Distributor agrees to deliver to
Seller on the date hereof certificates representing 33,333 shares (the
"Shares") of CPI common stock, $.01 par value per share.
<PAGE> 2
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement will commence on the
date hereof and continue until terminated by Distributor on thirty (30) days
advance written notice to Seller.
ARTICLE IV
OPERATING PROCEDURES
Section 4.1 Purchase Commitments. During the first year of this
Agreement, Distributor agrees to order from Seller, and Seller agrees to
manufacture for Distributor, an amount of FunNets equal to the aggregate unit
volume of FunNets sold by Seller during the immediately preceding twelve (12)
month period prior to this Agreement, as set forth on Exhibit A hereto (the
"Minimum Annual Order"), at a per unit purchase price equal to the current
price of FunNets as set forth on Exhibit A hereto. In the event Distributor
does not order the Minimum Annual Order of FunNets from Seller, Seller shall
have the right to terminate this Agreement and retain the Shares as liquidated
damages.
Section 4.2 Cost of FunNets. During the first year of this Agreement,
the per unit cost of FunNets to be charged to Distributor will be an amount not
to exceed the per unit prices set forth on Exhibit A. Unless this Agreement
has been terminated by Distributor, on or prior to the forth-fifth (45th) day
prior to each anniversary of this Agreement, Seller will submit to Distributor
a written statement outlining the manufacturing cost increases or decreases, if
any, in producing FunNets and the corresponding per unit sales price increase
or decrease, if any, for each FunNet, which price will govern this Agreement
for the ensuing twelve (12) month period. Notwithstanding anything in the
foregoing to the contrary, each party agrees to use good faith efforts to
resolve any disputes regarding any price increases or decreases in existing
products or in the establishment of prices for new FunNet products developed
and manufactured by Seller.
Section 4.3 Purchase Orders; Invoices. Purchase orders and invoices
will be submitted and paid in a timely manner that is consistent with each
party's ordinary course of business and past business practice.
Section 4.4 Seller as Exclusive Manufacturer of FunNets. During the
term of this Agreement, Seller agrees to use all commercially reasonable
efforts to maintain its exclusive rights to manufacture FunNet products, and
will not sell or otherwise license such right to any third party without the
prior written consent of Distributor.
Section 4.5 Failure of Seller to Deliver FunNets. At any time during
the term of this Agreement, if Seller fails to deliver any FunNet ordered by
CPI for any reason whatsoever, including, without limitation, the bankruptcy or
insolvency of Seller, force majeure, fire, breakdown of machinery, delay in
supply and/or transit of materials, labor disturbance, or any other reason,
then, in such event, CPI shall have the right to acquire replacement products
from any third party as CPI may require to meet its needs.
ARTICLE V
PROVISIONS RELATED TO THE SHARES
Section 5.1 Restrictions on Transfer. The Shares issued pursuant to
the terms of this Agreement will be subject to the following restrictions on
transfer: (i) Seller will not sell or offer to sell any of the Shares in the
absence of an effective registration statement for such Shares under the
Securities Act of 1933, as amended (the "Securities Act"), or an opinion of
counsel reasonably acceptable to CPI to the effect that such registration is
not required; and (ii) CPI will not be obligated to recognize any purported
transfer in violation of this Section 5.1(i), and, unless it elects to do
otherwise, CPI may treat any such purported transfer as null, void, and of no
effect.
Section 5.2 Legend on Stock. Each certificate representing the Shares
to be issued pursuant to the terms of this Agreement will bear substantially
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
<PAGE> 3
THE APPLICABLE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF EXCEPT
IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH LAWS.
Section 5.3 Piggyback Registration Rights in Underwritten Offerings.
(a) In the case of an underwritten offering by CPI of
securities, CPI shall, with respect to the number of Shares that Seller
then desires to sell, enter into an underwriting agreement with the same
underwriters engaged by CPI with respect to securities being offered by
CPI and cause such underwriters to include in any such underwriting all
of the Shares that Seller then desires to sell; provided, however, that
such underwriting agreement is in substantially the same form as the
underwriting agreement that CPI enters into in connection with the
primary offering it is making.
(b) If the managing underwriter with respect to an offering
pursuant to this Section 5.3 requests that the number of Shares of
Seller that are entitled to be registered pursuant to this Section 5.3
be reduced because of marketing factors, then the Shares of Seller that
Seller wishes to register pursuant to this Section 5.3 shall be reduced
by such amount as the managing underwriter may determine.
Section 5.4 Investment Intent. Seller hereby confirms that the Shares
issued and to be issued pursuant to the terms of this Agreement will be
acquired for investment for his own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof in a manner which
would violate the registration provisions of the Securities Act or any
applicable state securities laws.
ARTICLE VI
MISCELLANEOUS
Section 6.1 No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
Section 6.2 Entire Agreement. This Agreement constitutes the entire
agreement among the parties related to the subject matter hereof and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, that may have related in any way to the subject
matter hereof.
Section 6.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns.
Section 6.4 Assignment. No party may assign or otherwise transfer any
of its rights or obligations under this Agreement, by operation of law or
otherwise, without the prior written consent of the other parties, which
consent shall not be unreasonably withheld. Any purported or attempted
assignment contrary to the terms hereof shall be null and void and of no force
or effect. Notwithstanding the foregoing, Distributor may assign this
Agreement to an Affiliate without Seller's prior written consent.
Section 6.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 6.6 Notices. All notices, demands, requests, and other
communications to be given or made under this Agreement shall be in writing and
shall be (a) personally delivered with signed receipt obtained acknowledging
delivery; (b) transmitted by postage prepaid registered mail, return receipt
requested (air mail if international); (c) transmitted by telex or facsimile,
subject to confirmation of receipt by the addressee; or (d) sent by overnight
express mail, to the parties at the addresses set forth on the signature page.
Any notice, demand, request, or other communication shall be effective only if
and when it is received by the addressee.
<PAGE> 4
SECTION 6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, UNITED
STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CONFLICTS-OF-LAW RULES OR
PRINCIPLE THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
Section 6.8 Amendments and Wavier. This Agreement may be amended,
modified, superseded, or canceled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may be waived only by
an instrument in writing signed by (or by some person duly authorized by) all
of the parties hereto or, in the case of a waiver, by the party waiving
compliance.
Section 6.9 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
SECTION 6.10 ARBITRATION. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT,
THE PARTIES AGREE THAT ANY CLAIMS, INCLUDING ANY STATUTORY CLAIMS, ARISING OUT
OF OR RELATING TO THIS AGREEMENT WILL BE SUBJECT TO BINDING ARBITRATION
CONDUCTED BY AND IN ACCORDANCE WITH THE RULES OF AN INDEPENDENT,
NATIONALLY-RECOGNIZED DISPUTE RESOLUTION ORGANIZATION SELECTED BY CPI. THE
ARBITRATION PROCEEDING WILL BE CONDUCTED IN DALLAS, TEXAS. NO PARTY WILL BE
LIABLE TO THE OTHER FOR PUNITIVE DAMAGES FOR ANY SUCH CLAIMS AND EACH HEREBY
WAIVES ANY CLAIMS FOR SUCH DAMAGES.
[remainder of page intentionally left blank]
<PAGE> 5
IN WITNESS WHEREOF, the parties have hereunto have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
COLLEGIATE PACIFIC INC.,
a Pennsylvania corporation
By: /s/ MICHAEL J. BLUMENFELD
-----------------------------------
Name: Michael J. Blumenfeld
Title: President
Address: 13950 Senlac, Suite 200
Farmers Branch, Texas 75235
FUNNETS INC.,
a Delaware corporation
By: /s/ RAY QUINLAN
-----------------------------------
Name: Ray Quinlan
Title: President
Address: 2 Extrusion Drive
Pawatuck, Connecticut 06379
(800) 343-NETS
(860) 599-0502 (fax)
<PAGE> 1
EXHIBIT 10.11
DISTRIBUTION AGREEMENT
This Distribution Agreement, dated as of March 21, 1998 (this
"Agreement"), is entered into by and between Collegiate Pacific Inc., a
Pennsylvania corporation ("CPI" or "Distributor"), and Pro Gym Equipment, Inc.,
a _______ corporation ("Seller").
BACKGROUND
Seller is in the business of manufacturing and distributing weight
lifting and exercise equipment and other recreational and sporting goods (all
such equipment and sporting goods, along with all component parts and related
accessories, manufactured by Seller are collectively referred to herein as "Pro
Gym Equipment").
CPI is in the business of distributing sporting goods and related
equipment. From time to time, CPI will request that Seller modify some of its
Pro Gym Equipment for distribution to CPI's customers (all such Pro Gym
Equipment that is modified by Seller at the request of CPI and manufactured by
Seller is collectively referred to herein as the "Modified Pro Gym Equipment").
Seller desires Distributor to be the exclusive distributor of all
Modified Pro Gym Equipment and New Pro Gym Equipment manufactured by Seller on
the terms and subject to the conditions set forth in this Agreement, and
Distributor desires to distribute the Modified Pro Gym Equipment and New Pro
Gym Equipment manufactured by Seller on the terms and subject to the conditions
set forth in this Agreement.
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, Seller and Distributor
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 The term "Affiliate" shall mean, with respect to each of
the parties, any other person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common control with such
party. The term "Control" as used with respect to any person or party means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or party, whether
through the ownership of voting securities, by contract, or otherwise.
Section 1.2 The term "Agreement" shall mean this Distribution
Agreement.
Section 1.3 The term "Modified Pro Gym Equipment" shall mean all Pro
Gym Equipment that is manufactured by Seller with those certain modifications
as requested by CPI.
Section 1.4 The term "New Pro Gym Equipment" shall mean all Pro Gym
Equipment products that are designed and developed after the date of this
Agreement and manufactured by Seller.
Section 1.5 The term "Non-Exclusive House Accounts" shall mean those
certain geographic areas set forth on Exhibit A to this Agreement.
Section 1.6 The term "Pro Gym Equipment" shall mean all weight lifting
and exercise equipment and other recreational and sporting goods, along with
all component parts and related accessories, manufactured by Seller.
<PAGE> 2
Section 1.7 The term "Territory" shall mean the world.
ARTICLE II
APPOINTMENT OF DISTRIBUTOR
Section 2.1 Appointment of CPI as Exclusive Distributor. Seller
hereby appoints CPI as the exclusive marketer, seller, distributor, and sales
representative for all sales in the Territory (except for sales in the Non-
Exclusive House Accounts) of Seller's Modified Pro Gym Equipment and New Pro
Gym Equipment.
Section 2.2 Consideration. In consideration for being appointed the
exclusive distributor of Seller's Modified Pro Gym Equipment and New Pro Gym
Equipment, Distributor agrees to market and sell such Modified Pro Gym
Equipment and New Pro Gym Equipment in accordance with its ordinary course and
past business practices.
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement will commence on the
date hereof and continue for a period to end on the fifth (5th) anniversary of
the date of this Agreement. This Agreement may be renewed prior to its
termination upon the mutual written consent of Seller and Distributor.
ARTICLE IV
OPERATING PROCEDURES
Section 4.1 Purchase Commitments. Distributor will order from Seller,
and Seller agrees to manufacture for Distributor, an amount of Modified Pro Gym
Equipment and New Pro Gym Equipment as required by Distributor in its sole
discretion.
Section 4.2 Cost of Equipment. During the first year of this
Agreement, the per unit cost of all Modified Pro Gym Equipment to be charged to
Distributor will be an amount not to exceed the per unit prices set forth on
Exhibit B. On or prior to the forty-fifth (45th) day prior to each anniversary
of this Agreement, Seller will submit to Distributor a written statement
outlining the manufacturing cost increases or decreases, if any, in producing
Pro Gym Equipment and Modified Pro Gym Equipment and the corresponding per unit
sales price increase or decrease, if any, for each piece of Pro Gym Equipment
and Modified Pro Gym Equipment, respectively, which price will govern this
Agreement for the ensuing twelve (12) month period. Notwithstanding anything
in the foregoing to the contrary, each party agrees to use good faith efforts
to resolve any disputes regarding any price increases or decreases in existing
products or in the establishment of prices for New Pro Gym Equipment and
Modified Pro Gym Equipment developed and manufactured by Seller. After the per
unit price of New Pro Gym Equipment is established by Seller and Distributor,
the price of such New Pro Gym Equipment shall remain the same until modified in
accordance with this Section 4.2.
Section 4.3 Purchase Orders; Invoices. Purchase orders and invoices
will be submitted and paid in a timely manner that is consistent with each
party's ordinary course of business and past business practice.
Section 4.4 Seller as Exclusive Manufacturer of Pro Gym Equipment.
During the term of this Agreement, Seller agrees to use all commercially
reasonable efforts to maintain its exclusive rights to manufacture all Pro Gym
Equipment products, and will not sell or otherwise license such right to any
third party without the prior written consent of Distributor.
Section 4.5 Failure of Seller to Deliver Equipment. At any time
during the term of this Agreement, if Seller fails to deliver any Pro Gym
Equipment, Modified Pro Gym Equipment or New Pro Gym Equipment ordered by CPI
for any reason whatsoever, including, without limitation, the bankruptcy or
insolvency of Seller, force majeure, fire, breakdown of machinery, delay in
supply and/or transit of materials, labor disturbance, or any other reason,
then, in such event, CPI shall have the right to acquire replacement products
from any third party as CPI may require to meet its needs.
<PAGE> 3
Section 4.6 Covenant of Seller. Promptly upon execution of this
Agreement, Seller agrees to submit a "GSA" letter to all appropriate
governmental agencies or offices which identifies CPI as an approved government
supplier of products manufactured by Seller.
ARTICLE V
OPTION TO APPOINT CPI AS EXCLUSIVE DISTRIBUTOR FOR PRO GYM EQUIPMENT
Section 5.1 Mutual Option to Appoint CPI as Exclusive Distributor for
Pro Gym Equipment. At any time during the term of this Agreement, Seller and
CPI may mutually agree (the "Agreed Option") to make CPI the exclusive and
perpetual distributor of all Pro Gym Equipment. The Agreed Option shall
commence on the date of this Agreement and continue throughout the term of this
Agreement.
Section 5.2 Exercise of Agreed Option. If Seller and CPI both elect
to exercise the Agreed Option, then Seller and CPI shall promptly enter into a
new Distribution Agreement for the exclusive and perpetual distribution of all
Pro Gym Equipment by CPI, which agreement will contain similar terms and
provisions as this Agreement.
Section 5.3 Consideration. Seller and CPI hereby agree that the
consideration to be paid to Seller in the event that the Agreed Option is
exercised and a new distribution agreement for all Pro Gym Equipment is
executed by Seller and CPI shall be $100,000, which will be payable either (a)
in cash or (b) by a number of shares of CPI common stock with a fair market
value equal to $100,000. The form of consideration for the new distribution
agreement for Pro Gym Equipment shall be determined by CPI in its sole
discretion. If CPI determines to issue Seller stock, Seller agrees to provide
CPI with such representations and other information as may be required to
ensure that such stock issuance is exempt from registration under federal or
any applicable state securities laws.
ARTICLE VI
MISCELLANEOUS
Section 6.1 No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
Section 6.2 Entire Agreement. This Agreement constitutes the entire
agreement among the parties related to the subject matter hereof and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, that may have related in any way to the subject
matter hereof.
Section 6.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns.
Section 6.4 Assignment. No party may assign or otherwise transfer any
of its rights or obligations under this Agreement, by operation of law or
otherwise, without the prior written consent of the other parties, which
consent shall not be unreasonably withheld. Any purported or attempted
assignment contrary to the terms hereof shall be null and void and of no force
or effect. Notwithstanding the foregoing, Distributor may assign this
Agreement to an Affiliate without Seller's prior written consent.
Section 6.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 6.6 Notices. All notices, demands, requests, and other
communications to be given or made under this Agreement shall be in writing and
shall be (a) personally delivered with signed receipt obtained acknowledging
delivery; (b) transmitted by postage prepaid registered mail, return receipt
requested (air mail if
<PAGE> 4
international); (c) transmitted by telex or facsimile, subject to confirmation
of receipt by the addressee; or (d) sent by overnight express mail, to the
parties at the addresses set forth on the signature page. Any notice, demand,
request, or other communication shall be effective only if and when it is
received by the addressee.
SECTION 6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, UNITED
STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CONFLICTS-OF-LAW RULES OR
PRINCIPLE THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
Section 6.8 Amendments and Wavier. This Agreement may be amended,
modified, superseded, or canceled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may be waived only by
an instrument in writing signed by (or by some person duly authorized by) all
of the parties hereto or, in the case of a waiver, by the party waiving
compliance.
Section 6.9 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
SECTION 6.10 ARBITRATION. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT,
THE PARTIES AGREE THAT ANY CLAIMS, INCLUDING ANY STATUTORY CLAIMS, ARISING OUT
OF OR RELATING TO THIS AGREEMENT WILL BE SUBJECT TO BINDING ARBITRATION
CONDUCTED BY AND IN ACCORDANCE WITH THE RULES OF AN INDEPENDENT,
NATIONALLY-RECOGNIZED DISPUTE RESOLUTION ORGANIZATION SELECTED BY CPI. THE
ARBITRATION PROCEEDING WILL BE CONDUCTED IN DALLAS, TEXAS. NO PARTY WILL BE
LIABLE TO THE OTHER FOR PUNITIVE DAMAGES FOR ANY SUCH CLAIMS AND EACH HEREBY
WAIVES ANY CLAIMS FOR SUCH DAMAGES.
[remainder of page intentionally left blank]
<PAGE> 5
IN WITNESS WHEREOF, the parties have hereunto have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
COLLEGIATE PACIFIC INC.,
a Pennsylvania corporation
By: /s/ MICHAEL J. BLUMENFELD
------------------------------------
Name: Michael J. Blumenfeld
Title: President
Address: 13950 Senlac, Suite 200
Farmers Branch, Texas 75235
PRO GYM EQUIPMENT INC.,
a _________ corporation
By: /s/ GREG MACH
------------------------------------
Name: Greg Mach
Title: President
Address:
-------------------------------
-------------------------------
( )
-------------------------------
( ) (fax)
-------------------------------
<PAGE> 1
EXHIBIT 10.12
AGREEMENT FOR PURCHASE AND SALE OF STOCK
AGREEMENT FOR PURCHASE AND SALE OF STOCK, dated as of April 14, 1998
(this Agreement"), by and among Collegiate Pacific Inc., a Pennsylvania
corporation ("CPI"), and Richard Hershorin and Patti Hershorin, the sole
stockholders (collectively "Stockholder") of Product Merchandising Inc., a
Delaware corporation (the "Company").
BACKGROUND
Stockholder is the record and beneficial owner of all of the issued and
outstanding capital stock of the Company, consisting of 100 shares (the
"Stock") of common stock, no par value per share (the "Company Common Stock").
CPI desires to purchase and Stockholder desires to sell all, but not
less than all, of the Stock, upon the terms and subject to the conditions set
forth in this Agreement.
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 parties, intending
to be legally bound, agree as follows:
ARTICLE I
THE PURCHASE AND SALE OF STOCK
SECTION 1.01. Purchase and Sale of Stock. At the Closing (as defined
below), Stockholder will sell, transfer, assign, and deliver to CPI, and CPI
will purchase, accept, assume, and receive the Stock, free and clear of any
liens, encumbrances, pledges, restrictive agreements, or adverse claims of any
nature whatsoever.
SECTION 1.02. Purchase Price. The aggregate purchase price for the
Stock will be $475,000 (the "Purchase Price"), which will be payable as
follows:
(a) $100,000 in immediately available funds delivered at Closing (the
"Initial Payment");
(b) $100,000 in immediately available funds to be delivered on or
before the ninetieth day following Closing (the "Subsequent
Payment"); and
(c) 137,500 shares (the "CPI Shares") of CPI common stock, $.01 par
value per share ("CPI Common Stock"), to be delivered within 10
days after Closing.
ARTICLE II
THE CLOSING
SECTION 2.01. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the offices
of CPI, 13950 Senlac, Suite 200, Farmers Branch, Texas 75235 on April 14, 1998
or as soon as practicable after the satisfaction or waiver of the conditions
set forth in Article VII, or at such other date not later than April 30, 1998,
time, and place as CPI and Stockholder agree. The date on which the Closing
takes place is referred to as the "Closing Date."
<PAGE> 2
SECTION 2.02. Deliveries by CPI. CPI will deliver or cause to be
delivered the following at Closing, and it will be a condition to the
Stockholder's obligations under this Agreement that all of the following be
delivered at Closing:
(a) A wire transfer for the Initial Payment in immediately available
funds to an account established for the benefit of Stockholder as
directed in writing by Stockholder.
(b) Executed Guaranty of Michael J. Blumenfeld for the benefit of
Stockholder guaranteeing CPI's obligations for the Subsequent
Payment and CPI's obligations under Section 3.02 and Section
3.03(c) hereof, substantially in the form of Exhibit A.
(c) Such other documents and instruments as may be necessary or
appropriate to carry out the transactions contemplated by this
Agreement.
SECTION 2.03. Deliveries by Stockholder. Stockholder will deliver or
cause to be delivered the following at Closing, and it will be a condition to
CPI's obligations under this Agreement that all of the following be delivered
at Closing:
(a) Certificates, with fully executed stock powers and signature
guarantees, evidencing the Stock and any other documentation
necessary or appropriate to effect the transfer of ownership
thereof to CPI.
(b) Resignations from all of the Company's directors.
(c) Such other endorsements, instruments, or documents as may be
necessary to carry out the transactions contemplated hereby.
<PAGE> 3
ARTICLE III
PROVISIONS RELATING TO THE CPI SHARES
SECTION 3.01. Legend on CPI Shares. Each certificate representing the
CPI Shares to be issued pursuant to the terms of this Agreement will bear
substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
REQUIREMENTS OF SUCH LAWS.
SECTION 3.02. Registration of CPI Shares. Within six months after the
Closing Date, CPI covenants and agrees that it will use commercially reasonable
efforts to cause the preparation and filing of a registration statement on Form
S-3 (the "Resale Registration Statement") with the Securities and Exchange
Commission (the "SEC") for the purpose of registering the CPI Shares.
Stockholder shall cooperate with CPI in good faith in the registration process
including by assisting in the preparation of any information or financial
statements with respect to the Company required to be included in the Resale
Registration Statement. All costs of preparing and filing the registration
statement with the SEC will be borne by CPI. If the Resale Registration
Statement is not declared effective by the SEC within 210 days after the
Closing Date, Stockholder shall have the right to sell to CPI, and CPI shall
purchase from Stockholder upon three trading days prior written notice from
Stockholder of its election to sell to CPI, up to 20,000 shares of CPI Common
Stock at $2.00 per share (together with interest thereon at 9.5% per annum from
and including the day which is 211 days after the Closing Date) each month
thereafter until the Resale Registration Statement is declared effective.
SECTION 3.03. Restrictions on Transfer of CPI Shares.
(a) Except for Stockholder's right to sell CPI shares to CPI as
described in Section 3.02, Stockholder hereby covenants and
agrees that, during any time in which the Resale Registration
Statement has not been declared effective by the SEC, (i)
Stockholder will not sell or offer to sell or otherwise transfer
any of the CPI Shares received hereunder in the absence of an
effective registration statement for such CPI Shares under the
Securities Act of 1933, as amended (the "Securities Act"), or an
opinion of counsel reasonably acceptable to CPI to the effect
that such registration is not required; and (ii) CPI will not be
obligated to recognize any purported transfer in violation of
this Section 3.03(a), and, unless it elects to do otherwise, CPI
may treat any such purported transfer as null, void, and of no
effect.
(b) Stockholder hereby covenants and agrees that, for any period
during which the Resale Registration Statement is effective,
Stockholder will not, unless otherwise consented to by CPI, sell
or otherwise transfer more than 3,000 shares of CPI Common Stock
per trading day.
(c) Notwithstanding anything in the foregoing to the contrary, CPI
hereby covenants and agrees that, for a period beginning on the
date that the Resale Registration Statement is declared effective
by the SEC (the "Effective Date") and continuing until the forty-
sixth trading day after the Effective Date, CPI agrees that CPI
will deliver to Stockholder within three trading days of the end
of such forty-six day period in immediately available funds an
amount equal to (A) the amount by which the net sales proceeds
per share of CPI Common Stock (after deducting any customary
commissions) sold during such period is less than $2.00 times (B)
the number of shares of CPI Common Stock sold by Stockholder
during such period (which, in any event, shall not be more than
3,000 shares of CPI Common Stock sold on each trading day during
such period).
<PAGE> 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to CPI as follows:
SECTION 4.01 Validity of Stock. The Stock is duly authorized, validly
issued, fully paid and nonassessable and was not issued in violation of any
preemptive subscription or other right of any Person to acquire securities of
the Company.
SECTION 4.02 Title to Stock. Stockholder has good and marketable title
to the Stock, and the Stock is, and when transferred to CPI under this
Agreement will be, free and clear of all claims, security interests, liens,
pledges, charges, escrows, options, proxies, rights of first refusal, security
agreements or any other limitation, encumbrance or restriction of any kind.
SECTION 4.03. Charter and Bylaws. Stockholder has furnished to CPI
true, complete, and correct copies of the certificate of incorporation and
bylaws of the Company, as amended or restated to the date of this Agreement.
The Company is not in violation of any of the provisions of its certificate of
incorporation or bylaws and such certificates and bylaws remain in full force
and effect.
SECTION 4.04. Capitalization.
(a) The authorized capital stock of the Company consists of 1,000
shares of Company Common Stock, of which 100 shares are issued
and outstanding. No 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 of the Company subject to) any preemptive or similar rights
under the certificate of incorporation or bylaws of the Company,
federal or state securities laws, or any agreement to which the
Company is a party or by which it is bound.
(b) The Company does not (i) directly or indirectly own, (ii) have
any agreement to purchase or otherwise acquire, or (iii) hold any
interest convertible into or exchangeable or exercisable for, any
equity interest in any Person.
(c) There are no options, warrants, or other rights, agreements,
arrangements, or commitments of any character 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. There are no agreements,
arrangements, or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to
receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of the Company. There are no
voting trusts, proxies, or other agreements or understandings to
which the Company or Stockholder is a party or by which the
Company or Stockholder is bound with respect to the voting of any
shares of capital stock of the Company. Stockholder is the
record owner of all of the outstanding shares of Company Common
Stock, and no other Person has any options, warrants, claims, or
other rights, agreements or commitments, either from the Company
or Stockholder, to acquire any shares of Company Common Stock.
(d) No dividends, distributions or stock repurchases have been made
or are payable by the Company since December 31, 1997.
SECTION 4.05. Authority. Stockholder has full legal authority and
capacity to execute and deliver this Agreement, to perform his obligations
hereunder, and to consummate the transactions contemplated hereby. This
<PAGE> 5
Agreement has been duly executed and delivered by Stockholder and constitutes
the legal, valid, and binding obligations of Stockholder, enforceable in
accordance with its terms.
SECTION 4.06. Affiliates. The Company has no Subsidiaries. "Subsidiary"
means any corporation or other business entity, a majority of whose outstanding
equity securities is at the time owned, directly or indirectly, by the Company
and/or one or more subsidiaries of the Company.
SECTION 4.07. No Conflict. The execution and delivery of this Agreement
by Stockholder does not, and the consummation of the transactions contemplated
hereby will not, (i) conflict with or violate the certificate of incorporation
or bylaws, as amended or restated to the date of this Agreement, of the
Company; or (ii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
give to any other Person any rights of termination, amendment, acceleration, or
cancellation of, or require payment under, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, or other instrument or obligation to which the Company is a
party or by or to which the Company or any of its properties are bound or
subject.
SECTION 4.08. Financial Statements. Stockholder has delivered to CPI
true, correct, and complete copies of unaudited financial statements of the
Company as of and for the year ended December 31, 1996 and 1997 and as of and
for the two months ended February 28, 1997 and 1998, including balance sheets
and statements of income, cash flows, and changes in stockholders' equity
(collectively, the "Financial Statements"). The Financial Statements present
fairly, in all material respects, the financial position of the Company at the
dates shown and the results of operations and cash flows for the periods
covered in accordance with generally accepted accounting principles applied on
a consistent basis. Except for liabilities reflected in the Financial
Statements, the Company has no material liabilities of any sort, whether
absolute or contingent, due or to become due, known or unknown, asserted or
unasserted.
SECTION 4.09. Absence of Certain Changes or Events. Since December 31,
1997, the Company has conducted its business only in the ordinary course and in
a manner consistent with past practice, and there has not been any change,
effect, or condition that, individually or when taken together with all other
such changes, effects, or conditions, would be materially adverse to the
business, operations, assets, financial condition, results of operations, or
prospects of the Company.
SECTION 4.10. Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, or arbitration of any kind, at law or in equity,
including actions or proceedings seeking injunctive relief (collectively,
"Litigation"), pending and, to the knowledge of Stockholder, there is no
Litigation or investigation threatened, against the Company or any properties
or rights of the Company.
SECTION 4.11. Compliance. To the knowledge of Stockholder, the Company
is not in conflict with or in default or violation of any Law applicable to the
Company or by or to which any of its properties are bound or to which they may
be subject. The Company has not received any written notice with respect to
possible conflicts, defaults, or violations of Laws from any governmental
entity.
SECTION 4.12. Taxes. All returns and reports (the "Tax Returns") of or
with respect to any Tax that are required to be filed by or with respect to the
Company or its business or activities have been duly and timely filed. All
items of income, gain, loss, deduction, and credit or other items required to
be included in each such Tax Return have been included, and all information
provided in each such Tax Return is true, correct, and complete. All Taxes
that have been shown to be due on the Tax Returns have been timely paid in
full. All withholding Tax requirements imposed on or with respect to the
Company have been satisfied in full in all respects. No penalty, interest, or
other charge is due with respect to the late filing of any such Tax Return or
late payment of any such Tax. There are no pending undisclosed audits,
actions, proceedings, investigations, disputes, or claims with respect to or
against the Company for or with respect to any Taxes. The Company is a
Subchapter S corporation for Federal income tax purposes.
<PAGE> 6
SECTION 4.13. Properties. The Company does not own any real estate.
Except for liens arising in the ordinary course of business after the date of
this Agreement and properties and assets disposed of in the ordinary course of
business after December 31, 1997, the Company has good and marketable title,
free and clear of all liens and adverse claims, to all of their respective
properties and assets, whether tangible or intangible, reflected in the
Financial Statements as being owned by the Company as of such date or purported
to be owned on the date of this Agreement. All buildings and all fixtures,
equipment, and other property and assets that are material to the business of
the Company and are held under leases by the Company are held under valid
instruments enforceable by the Company in accordance with their respective
terms. The properties and equipment of the Company (a) have been well
maintained and are in good and serviceable condition, reasonable wear and tear
excepted, and (b) are adequate for the uses to which they are being put and,
following the sale of Stock and the consummation of the other transactions
contemplated hereby, will have sufficient capacity to conduct the Company's
business in the same manner and with the same degree of profitability as such
business is presently conducted.
SECTION 4.14 Contracts and Customers. None of the contracts of the
Company is terminable as the result of, or requires the consent or other
approval of any other Person with respect to or as a result of, the
transactions contemplated by this Agreement. The Company is in compliance in
all material respects under all leases, licenses, agreements, contracts,
permits, plans, and commitments by which any of its properties or assets is
bound and no event has occurred that constitutes a material violation or
material breach of or a material default (with the passage of time or the
giving of notice or both) in respect of any thereof, and each of the other
parties thereto or bound thereby has performed all the obligations required to
be performed by it to date and is not in default thereunder. Stockholder does
not know or have reason to know that any material client or customer intends to
terminate its relationship with the Company as a result of the sale of Stock or
any of the related transactions.
SECTION 4.15. Investment Intent and Access. Without intending to limit
Stockholder's rights under Section 3.02 and Section 3.03(c), Stockholder hereby
represents and warrants that (a) the CPI Shares are not being acquired with a
view to the resale or distribution of any part thereof in a manner which would
violate the registration provisions of the Securities Act or any applicable
state securities laws, (b) the Stockholder has received the Proxy Statement
dated January 30, 1998 from CPI, and (c) the Stockholder has had sufficient
access to the Company and its officers to ask questions related to such Proxy
Statement and the Company's business and operations.
SECTION 4.16. Information Supplied. Without limiting any of the
representations and warranties contained in this Agreement, no representation
or warranty of Stockholder, as of the date of such representation, warranty, or
statement, contains any untrue statement of material fact, or omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which such statements were made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CPI
CPI hereby represents and warrants to Stockholder as follows:
SECTION 5.01. Authority. CPI has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and the consummation by CPI of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action, and no other corporate proceedings on the part of CPI is
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
CPI and, assuming the due authorization, execution, and delivery of this
Agreement by Stockholder, constitutes the legal, valid, and binding obligations
of CPI, enforceable in accordance with its respective terms.
SECTION 5.02. No Conflict. The execution and delivery of this Agreement
by CPI does not, and the consummation of the transactions contemplated hereby
will not, conflict with or violate the certificate of incorporation or bylaws,
as amended or restated to the date of this Agreement, of CPI or any material
agreement of CPI.
<PAGE> 7
SECTION 5.03 Resale Registration Statement. CPI is not aware of any
fact that would prevent the timely filing or effectiveness of the Resale
Registration Statement.
SECTION 5.04. Information Supplied. Without limiting any of the
representations and warranties contained in this Agreement, no representation
or warranty of CPI, as of the date of such representation, warranty, or
statement contains any untrue statement of material fact, or omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which such statements were made, not
misleading.
ARTICLE VI
COVENANTS
SECTION 6.01 Release of the Stockholder. Effective upon the Closing,
Stockholder, for himself and his heirs, executors, administrators, successors,
and assigns, hereby fully and unconditionally releases and forever discharges
and holds harmless the Company and its employees, officers, directors,
successors, and assigns from any and all Claims of every kind and nature
whatsoever, whether or not now existing or known, relating in any way, directly
or indirectly, to the Company or the Stock, that such Stockholder may now have
or may hereafter claim to have against the Company or any of its employees,
officers, directors, successors, or assigns, arising prior to Closing.
<PAGE> 8
SECTION 6.02. Noncompetition.
(a) Stockholder acknowledges that this Section 6.02 is entered into
in connection with the sale of the Stock. Stockholder also
acknowledges that the nature of the business of CPI and the
Company is not confined by geography and that current technology
and business and communications methods enable and will enable
CPI and the Company to offer services, conduct business, make
contacts with customers, potential customers, vendors, potential
vendors, fellow employees, and other Persons having business
dealings with CPI and the Company without regard to geographic
location. Accordingly, and as a material inducement to CPI to
purchase the Stock and to enter into this Agreement, Stockholder
agrees to the provisions of this Section 6.02.
(b) Stockholder covenants and agrees, for a period beginning on the
Closing and ending on the first anniversary of the Closing (the
"Section 6.02(b) Applicable Date"), except with the prior written
consent of CPI, Stockholder will not engage, directly or
indirectly (whether as owner, partner, stockholder, investor
(except that he or she may beneficially own less than 3% of the
common equity of a publicly traded company), employee, advisor,
consultant, contracting party, or referring source, or
otherwise), in any business that is similar to or in competition
with the business conducted by the Company or CPI at any time
prior to the Section 6.02(b) Applicable Date, including, but not
limited to, the distribution of sporting goods equipment, in any
county or similar jurisdiction in the United States of America
(the "Protection Area"). In addition, and without limiting the
generality of the foregoing, Stockholder agrees for a period
beginning on the Closing Date and ending on the Section 6.02(b)
Applicable Date, he will not, without the prior express written
consent of CPI, directly or indirectly, solicit, attempt to
solicit, or accept within the Protection Area any business or
employment from any Person that such Stockholder or the Company
called upon, solicited, or conducted business with as of or prior
to the Section 6.02(b) Applicable Date, or recruit or hire,
attempt to or assist in any attempt to, recruit or hire, or
discuss employment or hiring with any Person who was or is an
employee of the Company or CPI.
(c) Stockholder's obligations under this Section 6.02 may not be
enforced by CPI if (i) the Subsequent Payment or any other
payment due under Section 3.02 or Section 3.03 is not paid when
due and such default continues for five days thereafter and (ii)
Stockholder is not already in breach of this Section 6.02 or in
breach of any other material provision of this Agreement.
(d) If any provision of this Section 6.02 should be found by any
court of competent jurisdiction to be unreasonable by reason of
its being too broad as to the period of time, territory, and/or
scope, then, and in that event, such provision will nevertheless
remain valid and fully effective, but will be considered to be
amended so that the period of time, territory, and/or scope set
forth will be changed to be the maximum period of time, the
largest territory, and/or the broadest scope, as the case may be,
which would be found reasonable and enforceable by such court.
SECTION 6.03. CPI Indemnification of Stockholder. CPI will indemnify
and hold Stockholder harmless from any and all Claims that Stockholder may
suffer or incur as a result of or relating to Stockholder's personal
endorsement on any contract by and between the Company and any vendor of the
Company dated as of or prior to this Agreement. Stockholder agrees to give CPI
prompt written notice upon the occurrence of any indemnifiable Claim or the
assertion of any Claim or the commencement of any proceeding or action in
respect of which such a Claim may reasonably be expected to occur. CPI may
elect to assume and control the defense of any Claim, including the employment
of counsel. In such event, CPI may settle such Claim without the consent of
Stockholder.
SECTION 6.04. Transaction Costs. Each party will pay prior to the
Closing all attorneys', accountants', finders', brokers', investment banking,
and other fees, costs and expenses incurred by such party in connection with
the preparation, negotiation, execution, and performance of this Agreement, or
any of the transactions contemplated by this Agreement.
<PAGE> 9
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of CPI. The obligations of CPI
to purchase the Stock and the other transactions contemplated by this Agreement
are subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in writing in the
absolute discretion of the CPI, in whole or in part:
(a) Each of the representations and warranties of Stockholder
contained in this Agreement must be true and correct in all
material respects as of the Closing Date as though made on and as
of the Closing Date.
(b) Stockholder must have performed or complied with all agreements
and covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing Date.
(c) All contractual and governmental consents, approvals, and
notifications required must have been obtained or given.
(d) Each of the required items set forth in Section 2.03 hereof must
have been executed and delivered.
SECTION 7.02. Conditions to Obligations of Stockholder. The obligations
of Stockholder to effect the sale of Stock and the other transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing Date of the following conditions, any or all of which may be waived
in writing in the absolute discretion of Stockholder, in whole or in part:
(a) Each of the representations and warranties of CPI contained in
this Agreement must be true and correct in all material respects
as of the Closing Date as though made on and as of the Closing
Date.
(b) CPI must have performed or complied with all agreements and
covenants required by this Agreement to be performed or complied
with by them on or prior to the Closing Date.
(c) All contractual and governmental consents, approvals, and
notifications must have been obtained or given.
(d) Each of the required items set forth in Section 2.02 hereof must
have been executed and delivered.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Survival. All representations and warranties made in or
pursuant to this Agreement will survive until the second anniversary of the
Closing. 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.
SECTION 8.02. 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.
<PAGE> 10
SECTION 8.03. Further Assurances. Each party agrees to execute any and
all documents and to perform such other acts as may be necessary or expedient
to further the purposes of this Agreement and the transactions contemplated by
this Agreement.
SECTION 8.04. 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.
SECTION 8.05. Certain Definitions. For the purposes of this Agreement,
the following terms have the meanings specified:
(a) "Affiliate" means a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned Person.
(b) "Control" (including the terms "controlling," "controlled,"
"controlled by," and "under common control with") means the
possession, directly or indirectly, or as trustee or executor, of
the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of
securities, or as trustee or executor, by contract or credit
arrangement or otherwise.
(c) "Claim" means any and all liabilities, obligations, claims,
damages, diminution in value, costs and expenses (including all
court costs and reasonable attorneys fees) that any Person may
suffer.
(d) "Person" will be broadly construed to include to mean an
individual, corporation, partnership, association, trust,
unincorporated organization, Governmental Entity, other entity or
group (as used in Section l3(d) of the Exchange Act).
(e) "Tax" or "taxes" means any and all taxes, charges, fees, levies,
assessments, duties, or other amounts payable to any federal,
state, local, or foreign taxing government, authority, or agency,
including, without limitation, (i) income, franchise, profits,
gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding,
disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, excise, stamp,
windfall profits, transfer, and gains taxes; (ii) customs,
duties, imposts, charges, levies, or other similar assessments of
any kind; and (iii) interest, penalties, and additions to tax
imposed with respect thereto.
SECTION 8.06. Notices. All demands, notices, and communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, delivered by a national overnight delivery service,
telecopy or mailed by first class mail, postage prepaid, to the address of each
party set forth on the signature page of this Agreement, which address is the
principal place of business of such party unless otherwise indicated.
SECTION 8.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated by
Stockholder or CPI, without the prior written consent of the other party. This
Agreement is not intended to confer any rights or benefits to any Person other
than the parties to this Agreement.
SECTION 8.08. Entire Agreement. This Agreement contains the entire
understanding of the parties relating to the subject matter hereof and
supersedes 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.
<PAGE> 11
SECTION 8.09. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
under this Agreement, including, without limitation, failure to take all
actions as are necessary on its part to consummate the sale of Stock, will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
under this Agreement. Purchaser and Seller hereby waive the requirement of
posting of any bond to such court in connection with the issuance of injunctive
relief hereunder.
SECTION 8.10. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND THE
OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF. EACH OF THE PARTIES EXPRESSLY CONSENTS TO THE PERSONAL
JURISDICTION OF THE COURTS OF THE STATES OF DELAWARE, TEXAS AND FLORIDA.
[remainder of page intentionally left blank]
<PAGE> 12
SECTION 8.11. Remedies. Each party to this Agreement agrees that (a)
all rights and remedies under this Agreement are cumulative and that no
election or exercise of any right or remedy will be deemed an exclusion of any
other right or remedy; and (b) unless expressly stated, no right under this
Agreement will be deemed a limitation on any other right or remedy.
IN WITNESS WHEREOF, each of the parties to this Agreement has caused
this Agreement to be duly executed as of the date first written above.
COLLEGIATE PACIFIC INC.,
a Pennsylvania corporation
By: /s/ MICHAEL J. BLUMENFELD
--------------------------------------
Name: Michael J. Blumenfeld
Title: President
Address: 13950 Senlac, Suite 200
Farmers Branch, Texas 75235
STOCKHOLDER
/s/ RICHARD HERSHORIN
-----------------------------------------
Richard Hershorin
Address:
---------------------------------
---------------------------------
---------------------------------
/s/ PATTI HERSHORIN
-----------------------------------------
Patti Hershorin
Address:
---------------------------------
---------------------------------
---------------------------------
<PAGE> 13
EXHIBIT A
GUARANTY OF MICHAEL J. BLUMENFELD
GUARANTY
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is
hereby acknowledged, the undersigned (the "Guarantor") guarantees personally
and unconditionally the full and prompt performance and payment of the
Subsequent Payments ($375,000), including subsequent the $100,000 cash payment
and the $275,000 stock value, under the Agreement for Purchase and Sale of
Stock dated as of April 14, 1998 (the "Agreement") by and between Collegiate
Pacific Inc., a Pennsylvania corporation, and Richard Hershorin and Patti
Hershorin (collectively, "Stockholder"). Capitalized terms used herein but not
defined shall have the meaning assigned to such terms in the Agreement.
Guarantor represents to Stockholder that his net worth is sufficient to
meet his obligations under this Guaranty; acknowledges and represents that he
is receiving direct and indirect financial and other benefits as a result of
this Guaranty and the obligations secured hereunder; represents to Stockholder
that after giving effect to this Guaranty and the contingent obligations
evidenced hereby he is, and will be, solvent, and that he will use reasonable
efforts to maintain a net worth that is sufficient to meet his obligations
hereunder; acknowledges that this Guaranty is operative and binding as to him;
and acknowledges that Stockholder has not made any representation, warranty, or
statement to Guarantor to induce it to execute this Guaranty.
Notwithstanding any provision in the Agreement to the contrary,
Guarantor agrees to pay on demand all costs and expenses of every kind incurred
by Stockholder: (a) in enforcing this Guaranty, (b) in collecting on any
obligations of Guarantor, (c) in realizing upon or protecting any collateral
for this Guaranty, and (d) for any other purpose related to the this Guaranty.
This Guaranty shall inure to the benefit of and be binding upon
Stockholder and Guarantor and their respective successors and assigns.
THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS, AND REMEDIES PURSUANT TO THIS
GUARANTY SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT GIVING EFFECT
TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. GUARANTOR EXPRESSLY CONSENTS TO
THE PERSONAL JURISDICTION OF THE COURTS OF THE STATES OF DELAWARE, TEXAS AND
FLORIDA.
Executed and delivered as of the 14th day of April, 1998.
GUARANTOR
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Michael J. Blumenfeld
WITNESS
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EXHIBIT 10.13
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER, dated as of May 31, 1998 (this "Agreement"), by
and among:
COLLEGIATE PACIFIC, INC., a Pennsylvania corporation ("CPI");
VANTAGE PRODUCTS INTERNATIONAL, INC., a Tennessee corporation ("Company");
and
CARY W. BAWCUM ("Bawcum"), STANLEY GRABER ("Graber"), FRANK A. JONES
("Jones") and JOEL W. BROWN ("Brown"), such persons being the sole
stockholders (collectively "Stockholders"; individually, a "Stockholder") of
the Company.
RECITALS
A. Stockholders are the record and beneficial owners of all of the issued and
outstanding capital stock of the Company, consisting of 1,200 shares of common
stock, no par value (the "Company Common Stock").
B. For good and sound reasons germane to the business of the parties hereto, CPI
and the Company believe it to be in the best interests of such corporations and
their respective shareholders for the Company to be merged with and into CPI
with the Stockholders receiving shares of voting common stock of CPI, par value
$0.01 per share ("CPI Common Stock") in exchange for the Company Common Stock
(the "Merger"), all upon the terms and subject to the conditions set forth in
this Agreement.
AGREEMENTS
THEREFORE, in consideration of the foregoing Recitals (which comprise a part
of this Agreement), the mutual 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 parties, intending to be legally bound, agree as follows:
ARTICLE I
THE PLAN OF MERGER
SECTION 1.1 The Merger. At the Effective Time (as defined in Section 1.3
hereof), in accordance with this Agreement and Pennsylvania and Tennessee law,
the Company shall be merged with and into CPI pursuant to the Articles of Merger
to be entered into by the Company and CPI in substantially the form attached
hereto as Exhibit A (the "Articles of Merger"), the separate existence of the
Company shall cease, and CPI shall continue as the
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surviving corporation under the corporate name it possesses immediately prior to
the Effective Time. CPI, as at the Effective Time and thereafter, hereinafter
may sometimes be referred to as the "Surviving Corporation."
SECTION 1.2 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be that (i) the Surviving Corporation shall possess all the rights,
privileges, powers and franchises possessed by each of CPI and the Company, (ii)
all of the property and assets of whatsoever kind or description of each of CPI
and the Company, and all debts due on whatever account to any of them, including
subscriptions for shares or other choses in action belonging to any of them,
shall be taken and be deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed, and (iii) the Surviving Corporation
shall be responsible for and subject to all of the restrictions, liabilities and
obligations of each of CPI and the Company, as provided by applicable law, in
the same manner as if the Surviving Corporation had itself incurred such
restrictions, liabilities or obligations; but the liabilities of CPI and the
Company, or of their shareholders, directors or officers, shall not otherwise be
affected, nor shall the rights of the creditors thereof, or of any persons
dealing with such corporations be impaired, by the Merger, and any claim
existing, or action or proceeding pending, by or against either of CPI or the
Company may be prosecuted to judgment as if the Merger had not taken place, or
the Surviving Corporation may be proceeded against, or substituted, in place of
CPI or the Company, as the case may be.
SECTION 1.3 Consummation of the Merger. The Merger will be closed in
accordance herewith (the "Closing") on that date (the "Closing Date") provided
for hereinbelow, subject to the satisfaction or waiver of each condition set
forth in Article VIII below. The parties hereto will cause the Merger to be
consummated by filing with the Secretary of State of each of the Commonwealth of
Pennsylvania and the State of Tennessee on the Closing Date appropriate Articles
of Merger. The "Effective Time" shall be 5:00 p.m., Memphis, Tennessee time, on
the date of such filing. The Closing will take place at 10:00 a.m., Memphis,
Tennessee time, on the Closing Date, at the offices of the Company in Memphis,
Tennessee, or at such other mutually agreeable time or place.
SECTION 1.4 Articles of Incorporation; Bylaws; Directors and Officers. The
Articles of Incorporation of CPI, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation after the Effective Time until thereafter amended as provided
therein and under Pennsylvania law. The Bylaws of CPI, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
after the Effective Time until thereafter amended as provided therein and under
Pennsylvania law. The directors and officers of CPI immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
after the Effective Time until their successors are elected and qualified.
SECTION 1.5 Merger Consideration; Conversion of Securities. At the Effective
Time, by virtue of the Merger and without any action on the part of CPI, the
Company or the holder of any of the securities of such corporations:
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(a) Merger Consideration. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be canceled and
extinguished and be converted into the right to receive Three Hundred
Thirty-Three and 1/3rd (333-1/3rd) shares of CPI Common Stock. Each of the
Stockholders own three hundred (300) shares of Company Common Stock and,
therefore, shall be entitled to one hundred thousand (100,000) shares of CPI
Common Stock (the "Merger Consideration"); provided, however, that:
(1) Ten percent (10%) of the shares of CPI Common Stock comprising a
part of the Merger Consideration shall be retained in escrow by CPI (the "Escrow
Shares") in accordance with the requirements of Article III of this Agreement.
(2) If, after the date hereof and prior to the Effective Time, the
shares of CPI Common Stock shall be subdivided, by reclassification,
recapitalization, stock dividend, or otherwise, into a greater number of shares
without the actual receipt by CPI of consideration (at least equal to book
value) for the additional number of shares so issued, or the number of shares of
CPI Common Stock shall be reduced, by reclassification, recapitalization,
reduction of capital stock, or otherwise, or the outstanding shares of CPI
Common Stock shall be reclassified or changed other than in such manner, then
the number of shares of CPI Common Stock that each Stockholder shall be deemed
to have the right to receive shall be adjusted accordingly to the nearest whole
share of CPI Common Stock.
(3) No fractional shares of CPI Common Stock shall be issued as part
of the Merger.
(b) Exchange of Shares. At and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company with respect to shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time. If, after the Effective Time, certificates formerly representing shares of
Company Common Stock are presented to CPI or its transfer agent, they shall be
canceled and exchanged for the Merger Consideration as provided in Section
1.5(a).
(c) Dissenters' Rights. But for their execution of this Agreement, the
Stockholders would have the right to dissent from the transactions provided for
in this Agreement and to receive a cash sum equal to the value of their shares
of Company Common Stock determined in accordance with the laws of the State of
Tennessee. Accordingly, by their execution of this Agreement, the Stockholders
waive their dissenter rights as provided for in the Tennessee Business
Corporation Act and acknowledge their receipt of a copy of the applicable
provisions of said statutes as required thereby.
SECTION 1.6 Exchange of Certificates. From and after the Effective Time, all
certificates representing shares of Company Common Stock shall represent the
right to receive shares of CPI Common Stock on the basis set forth above, upon
the terms and conditions of this Agreement, subject to applicable abandoned
property, escheat and similar laws. Upon delivery of certificates representing
shares of Company Common Stock to CPI or its transfer agent, CPI
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shall cause the transfer agent to issue certificates representing the requisite
number of shares of CPI Common Stock for each share of Company Common Stock
represented by the certificates therefor properly delivered. Notwithstanding the
foregoing, neither CPI, its transfer agent nor any party hereto shall be liable
to a holder of shares of Company Common Stock for any of the Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws.
SECTION 1.7 Rights of Stockholders to Dividends. Holders of Company Common
Stock at the Effective Time shall be entitled to receive, subject to applicable
abandoned property, escheat and similar laws, payment of dividends declared by
CPI subsequent to the Closing Date, but delivery of payment of such dividends
will be required of CPI until such persons have delivered their certificates
representing shares of Company Common Stock in exchange for certificates
representing shares of CPI Common Stock in accordance with the provisions of
Section 1.6 above.
ARTICLE II
THE CLOSING
SECTION 2.1 Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place at a location
mutually agreed upon by the Company and CPI, on May 8, 1998 or as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article VIII, or at such other date not later than May 31, 1998 as CPI and
Stockholders may agree. The date on which the Closing takes place is referred to
as the "Closing Date."
SECTION 2.2 Deliveries by CPI. CPI will deliver or cause to be delivered the
following at Closing, and it will be a condition to the Company's and
Stockholders' obligations under this Agreement that all of the following be
delivered at Closing:
(a) Employment Agreement. A fully executed counterpart of an Employment
Agreement between CPI and Cary W. Bawcum in form and content agreed to by said
parties and containing terms and conditions consistent with those set forth on
Exhibit B annexed hereto.
(b) Articles of Merger. A fully executed counterpart of the Articles of
Merger in form and content as required by this Agreement.
(c) Merger Consideration. Certificates for the shares of CPI Common Stock
registered in the names of the Stockholders, with one (1) certificate delivered
to each of the Stockholders evidencing ninety percent (90%) of the shares of CPI
Common Stock to which such Stockholder is entitled, and one (1) certificate
retained by CPI pursuant to the terms of Article III of this Agreement for the
balance of such shares.
(d) Resolutions. A copy of resolutions adopted and actions taken by CPI's
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board of directors and/or shareholders, whichever thereof shall be required to
authorize CPI's execution, delivery and performance of this Agreement, certified
by CPI's chief executive officer and corporate secretary.
(e) Cancelled Guarantee Agreements. The originals of guarantee agreements
executed by any of the Stockholders marked "cancelled", or instruments
cancelling same executed by the holders thereof, or (with the approval of the
guarantor Stockholder) an indemnity by CPI holding such Stockholder harmless
from any claims in respect to such guarantee. A list of those guarantee
agreements which have been executed by any Stockholder is shown on SCHEDULE
2.2(e) delivered herewith.
(f) Other. Such other documents and instruments as may be necessary or
appropriate to carry out the transactions contemplated by this Agreement.
SECTION 2.3 Deliveries By Company And Stockholders. Company and the
Stockholders will deliver or cause to be delivered the following at Closing, and
it will be a condition to CPI's obligations under this Agreement that all of the
following be delivered at Closing:
(a) Share Certificates. Certificates, with fully executed stock powers and
signature guarantees, evidencing all of the Company Common Stock and any other
documentation necessary or appropriate to effect the exchange of ownership
thereof to CPI.
(b) Employment Agreement. A fully executed counterpart of an Employment
Agreement between CPI and Cary L. Bawcum in form and content agreed to by said
parties and containing terms and conditions consistent with those set forth on
Exhibit B annexed hereto.
(c) Articles of Merger. A fully executed counterpart of the Articles of
Merger in form and content as required by this Agreement.
(d) Resignations. Resignations from all of the Company's directors.
(e) Resolutions. A copy of resolutions adopted and actions taken by the
Company's board of directors authorizing the Company's execution, delivery and
performance of this Agreement, certified by the Company's chief executive
officer and corporate secretary.
(f) Stock Powers. A fully executed irrevocable stock power signed in blank
as required to effect the pledge of the Escrow Shares as provided for in this
Agreement.
(g) Other. Such other endorsements, instruments, or documents as may be
necessary to carry out the transactions contemplated hereby.
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ARTICLE III
INDEMNITY AND PLEDGE OF ESCROW SHARES
SECTION 3.1 Indemnity. Subject to the limitations set forth herein, the
Stockholders jointly and severally agree to, and do hereby, indemnify and hold
harmless CPI from and against any and all liabilities, obligations, claims,
damages, diminution in value, costs and expenses (including all court costs and
reasonable attorneys fees) that CPI may suffer or incur as a result of any of
the following (herein, an "Indemnified Loss"): (a) any obligation up to Sixty
Thousand Dollars ($60,000) for taxes incurred by the Company in respect to, or
based on, the importation by the Company prior to the Closing Date of baseball
batting tunnels and their component parts and accessories to the United States
of America, including interest, penalties, and additions to tax imposed with
respect thereto (collectively "Import Duties"); and (b) any breach by the
Company or the Stockholders of any representation or warranty set forth in
Article V hereof (herein, a "Breach").
(a) Exculpation of Stockholders; Limitation of Remedies. Notwithstanding
the foregoing, absent actual fraud, the personal liability of the Stockholders
with respect to the foregoing indemnity and with respect to any Breach of the
representations and warranties set forth in Article V of this Agreement shall be
non-recourse and limited to the Escrow Shares having a "Collateral Value" equal
to the amount of any Indemnified Loss suffered by CPI and, accordingly, the
rights and remedies of CPI against any Stockholder with respect to any Breach or
Import Duties shall be limited to the Escrow Shares; provided that no such limit
on the rights and remedies of CPI shall exist in respect to any Indemnified Loss
resulting from the fraud of any Stockholder or, regardless of intent, for the
Breach by any Stockholder of Section 5.2 of this Agreement. For purposes hereof,
the "Collateral Value" of the Escrow Shares shall be Two Dollars ($2.00) per
share, such being the value per share of the CPI Common Stock used in
calculating the Merger Consideration, plus any dividends, rights and other
property issued in addition to, in substitution or exchange for, or on account
of such Escrow Shares, and adjusted for any reclassification, recapitalization,
stock dividend, stock split or other such act.
(b) Period of Limitations. The foregoing indemnity shall expire: (a) with
respect to any Indemnified Loss based on CPI's or the Company's incurring any
Import Duties, on that date which is one (1) year after the Closing Date; and
(b) with respect to any Indemnified Loss based on a Breach by the Company or any
Stockholder, on that date which is two (2) years after the Closing Date,
provided that (A) any claim for Loss resulting from a Breach of the
representations and warranties set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.5,
5.12 and 5.15 of this Agreement shall survive for the period of any applicable
statute of limitations; and (B) such indemnity shall continue with respect to
any claim by CPI in respect to any Indemnified Loss in respect of which it shall
have given the Stockholders written notice prior to the date on which such
indemnity would otherwise expire.
(c) Threshold. No claim for any Indemnified Loss based on a Breach shall
be actionable by CPI, and CPI shall not assert a claim based on any Breach
resulting in an Indemnified Loss, unless the aggregate amount of all Indemnified
Losses resulting from a Breach
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shall exceed the sum of Ten Thousand Dollars ($10,000); and, then, only to the
extent such Indemnified Loss exceeds that amount.
SECTION 3.2 Pledge of Escrow Shares. As collateral security for any
Indemnified Loss, the Stockholders agree that, at Closing, CPI may retain the
Escrow Shares from the shares of CPI Common Stock which the Stockholders would
otherwise be entitled to hereunder, such Escrow Shares to be retained by CPI in
escrow for the period prescribed herein. At Closing, the Stockholders shall
execute and deliver blank stock powers to be attached to certificates evidencing
the Escrow Shares. Each of the Stockholders hereby grants to CPI a first lien
and perfected security interest in the Escrow Shares and in all of the proceeds
thereof, whether now or hereafter owned or acquired. The Stockholders further
agree that CPI may cancel any shares of CPI Common Stock held hereunder having a
Collateral Value equal to the amount of any Indemnified Loss. During the period
such Escrow Shares are held hereunder by CPI, any dividends paid in respect
thereto shall be retained by CPI subject to all of the provisions hereof
governing the Escrow Shares; and, upon distribution of the Escrow Shares, all
dividends paid and held in respect to such Escrow Shares shall be distributed
therewith. Any Escrow Shares held by CPI hereunder may be voted by the
registered owner thereof.
SECTION 3.3 Third Party Claims. As soon as practicable, and in any event
within such time as is required to avoid prejudice to the Stockholders, CPI will
notify the Stockholders in writing of any claim received by it from any third
person (a "Third Party Claim") the successful prosecution or assertion of which
might reasonably be expected to result in an Indemnified Loss. Such notice
shall, to the extent known, describe in reasonable detail the facts giving rise
to or on which the Third Party Claim is based, the amount of such Third Party
Claim, by whom such Third Party Claim has been made and the manner in which
made. Within thirty (30) days after receipt of such notice, or such shorter
period as is required to avoid prejudice in the defense of any Third Party
Claim, the Stockholders (or any thereof) may elect to defend the Third Party
Claim at their expense.
(a) Defense of Claim. If any Stockholders elect to defend the Third Party
Claim (the "electing Stockholders"), then the electing Stockholders shall do so
with counsel of their choosing. If none of the Stockholders timely elect to
defend the Third Party Claim, then CPI may undertake the defense thereof with
counsel of its choosing. Thereafter, in either case, each of the Stockholders
and CPI (and their respective counsel) shall timely provide to the other
information as shall be reasonably required in order to keep the other apprised
of the status and progress of the defense of such Third Party Claim. Each of CPI
and the Stockholders agree to cooperate in the defense of such Third Party Claim
and, regardless of which party undertakes the responsibility for defending such
claim, the other party shall have the right to participate in such defense with
its own counsel at its own cost.
(b) Settlement of Claim. Unless the Third Party Claim is fully satisfied
and discharged by the Stockholders' authorizing CPI to effect the cancellation
of all the Escrow Shares, or such lesser number of Escrow Shares as possess a
Collateral Value equal to the amount required to be paid in order to effect a
complete release and discharge of CPI from any
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liability in respect to the Third Party Claim, neither party shall compromise or
settle any Third Party Claim, or consent to the entry of any judgment, without
the prior written consent of the other party or parties. Subject to the
foregoing, the right to defend a Third Party Claim shall include the right to
settle or compromise the same.
SECTION 3.4 Release of Escrow Shares.
(a) Claim Regarding Import Duties. If, on or prior to that date which is
one (1) year after the Closing Date, CPI has received, and given the
Stockholders written notice of its receipt of, an assessment or claim by any
taxing authority in respect to any Import Duties, CPI may retain in pledge and
escrow such number of the Escrow Shares as shall possess a Collateral Value
equal to the lesser of (i) Sixty Thousand Dollars ($60,000) or (ii) the amount
of such assessment or claim. Such Escrow Shares shall be retained by CPI until
resolution of such assessment or claim in accordance with the provisions of
Section 3.3, and any Escrow Shares not retained for such purposes shall be
retained by CPI for the purposes set forth in Section 3.3(b) below.
(b) Claim Regarding Breach. If, on or prior to that date which is two (2)
years after the Closing Date, CPI has incurred an Indemnified Loss as a result
of a Breach, or received a Third Party Claim which might result in a Breach, and
given the Stockholders written notice of such Breach or Third Party Claim, CPI
may retain in pledge and escrow such number of the Escrow Shares as shall
possess a Collateral Value equal to the amount of such Indemnified Loss or Third
Party Claim.
(c) Release of Escrow Shares. If, on or prior to that date which is two
(2) years after the Closing Date, CPI has not incurred an Indemnified Loss or
received a Third Party Claim in respect to any Breach and given the Stockholders
written notice of such, then CPI shall release to the Stockholders the Escrow
Shares possessing a Collateral Value in excess of the amount of any such
Indemnified Loss or Third Party Claim of which such notice has been given. Any
Escrow Shares which CPI is authorized to retain after that date which is two (2)
years after the Closing Date may be retained by it until resolution of any
dispute with respect to such Breach; and, thereupon, any of such Escrow Shares
not required to reimburse CPI for any Indemnified Loss to which it is entitled
shall be delivered to the Stockholders.
SECTION 3.5 Disputes. CPI and the Stockholders agree to use good faith
efforts to resolve any disputes regarding the existence of any Breach or Import
Duties forming the basis for an alleged Indemnified Loss, or the amount thereof,
and the release of any Escrow Shares by CPI to the Stockholders. If CPI and the
Stockholders cannot agree to the resolution of a dispute regarding the same,
then such dispute shall be resolved in accordance with the terms of this
Agreement. In no event shall CPI be required to release any Escrow Shares during
the pendency of a good faith dispute between the parties.
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ARTICLE IV
PROVISIONS RELATING TO THE CPI COMMON STOCK
SECTION 4.1 Legend on Certificates. Until registration of such shares, each
certificate representing the shares of CPI Common Stock to be issued pursuant to
the terms of this Agreement will bear substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH
LAWS.
SECTION 4.2 Registration of CPI Common Stock. Within sixty (60) days after
the Closing Date, CPI covenants and agrees that it will cause the preparation
and filing of a registration statement on Form S-3 (the "Resale Registration
Statement"), and to thereafter make effective as soon as practicable, with the
Securities and Exchange Commission (the "SEC") and corresponding agencies of
each State wherein such registration may be requested by the Stockholders for
the purpose of registering the shares of CPI Common Stock. The Stockholders
shall cooperate with CPI in good faith in the registration process, including by
assisting in the preparation of any information or financial statements with
respect to the Company required to be included in the Resale Registration
Statement. All costs of preparing and filing the Resale Registration Statement
will be borne by CPI. CPI shall also, at its cost, prepare and file with the SEC
such amendments and supplements to such Resale Registration Statement and the
prospectus used in connection therewith as may be necessary, and use its best
efforts to cause such to become and remain effective until such time as the
shares of CPI Common Stock are eligible for resale under applicable law.
(a) Notification by Stockholders. Upon CPI's receipt of notification from
any Stockholder of an intent to sell any of the shares of CPI Common Stock
received in the Merger, CPI shall furnish to the notifying Stockholder such
number of copies of the prospectus forming a part of the Resale Registration
Statement (including any preliminary prospectus), in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and such other documents as the Stockholder may reasonably request in order to
facilitate the disposition of the shares of CPI Common Stock owned by the
Stockholder.
(b) Notification by CPI. CPI shall also notify the Stockholders, at any
time when a prospectus relating to the shares of CPI Common Stock is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the prospectus forming a part of such Resale Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein, or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made insofar as same relate to CPI and, at the request of any
Stockholder, prepare and
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furnish to the Stockholder a reasonable number of copies of any supplement to or
any amendment of such prospectus that may be necessary so that such prospectus
shall not include an untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
SECTION 4.3 Restrictions on Transfer of CPI Shares.
(a) Prior to Effective Date of Registration Statement. Each Stockholder
hereby covenants and agrees that, during any time in which the Resale
Registration Statement has not been declared effective by the SEC: (i) such
Stockholder will not sell or offer to sell or otherwise transfer any of the
shares of CPI Common Stock received hereunder in the absence of (x) an effective
registration statement for such shares under the Securities Act, or (y) an
opinion of counsel reasonably acceptable to CPI to the effect that such
registration is not required; and (ii) CPI will not be obligated to recognize
any purported transfer in violation of this Section, and, unless it elects to do
otherwise, CPI may treat any such purported transfer as null, void, and of no
effect.
(b) After Registration Statement Becomes Effective. Each Stockholder
hereby covenants and agrees that, for any period during which the Resale
Registration Statement is effective, the Stockholders will not, unless otherwise
consented to by CPI, sell or otherwise transfer more than an aggregate of fifty
thousand (50,000) shares of CPI Common Stock during any consecutive thirty (30)
day period.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
The Company and the Stockholders hereby represent and warrant to CPI as
follows:
SECTION 5.1 Validity of Company Common Stock. The shares of Company Common
Stock are duly authorized, validly issued, fully paid and nonassessable; and
were not issued in violation of any preemptive, subscription or other right of
any Person (which term, as used in this Agreement, will be broadly construed to
mean and include an individual, corporation, partnership, association, trust,
unincorporated organization, governmental entity, other entity or group (as used
in Section 13(d) of the Securities and Exchange Act of 1934, as amended)) to
acquire securities of the Company.
SECTION 5.2 Title to Stock. The Stockholders have good and marketable title
to the shares of Company Common Stock registered in their respective names, and
such shares, when transferred to CPI under this Agreement, will be free and
clear of all claims, security interests, liens, pledges, charges, escrows,
options, proxies, rights of first refusal, security agreements or any other
limitation, encumbrance or restriction of any kind, except for the security
interest in favor of CPI with respect to the Escrow Shares. Each of the
Stockholders are owners of three hundred (300) shares of Company Common Stock.
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SECTION 5.3 Charter and Bylaws. Attached hereto at SCHEDULE 5.3 is a true,
complete, and correct copy of the certificate of incorporation and bylaws of the
Company, as amended or restated to the date of this Agreement. The Company is
not in violation of any of the provisions of its certificate of incorporation or
bylaws and such certificates and bylaws remain in full force and effect.
SECTION 5.4 Capitalization. The authorized capital stock of the Company
consists of 2,000 shares of Company Common Stock, of which 1,200 shares are
issued and outstanding. No shares of the capital stock of the Company are
reserved for any purpose. Each of the outstanding shares of Company Common Stock
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 of the Company subject to) any preemptive or similar rights under the
certificate of incorporation or bylaws of the Company, federal or state
securities laws, or any agreement to which the Company is a party or by which it
is bound.
(a) Other Rights. There are no options, warrants, or other rights,
agreements, arrangements, or commitments of any charter 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. There are no
agreements, arrangements, or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment based on the revenues or earnings, or calculated in accordance
therewith, of the Company, except that Bawcum has an agreement with the Company
for compensation entitling him to receive a bonus based on the profits of the
Company. There are no voting trusts, proxies, or other agreements or
understandings to which the Company or any Stockholder is a party or by which
the Company or any Stockholder is bound with respect to the voting of any shares
of capital stock of the Company. The Stockholders are the record owners of all
of the outstanding shares of Company Common Stock, and no other Person has any
options, warrants, claims, or other rights, agreements or commitments, either
from the Company or any Stockholder, to acquire any shares of Company Common
Stock.
(b) Transactions Relating to Stock. No dividends, distributions or stock
repurchases have been made or are payable by the Company since December 31,
1997.
(c) Equity Interests. The Company does not (a) directly or indirectly
own, (b) have any agreement to purchase or otherwise acquire, or (c) hold any
interest convertible into or exchangeable or exercisable for, any equity
interest in any Person.
SECTION 5.5 Authority. The Company and each Stockholder has full legal
authority and capacity to execute and deliver this Agreement, to perform his/its
obligations hereunder, and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and each
Stockholder, and constitutes the legal, valid, and binding obligations of the
Company and the Stockholders, enforceable in accordance with its terms.
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SECTION 5.6 Affiliates. The Company has no Subsidiaries. "Subsidiary" means
any corporation or other business entity, a majority of whose outstanding equity
securities is at the time owned, directly or indirectly, by the Company and/or
one or more subsidiaries of the Company.
SECTION 5.7 No Conflict. The execution and delivery of this Agreement by the
Company and each of the Stockholders does not, and the consummation of the
transactions contemplated hereby will not, (a) conflict with or violate the
certificate of incorporation or bylaws, as amended or restated to the date of
this Agreement, of the Company; or (b) result in any breach of or constitute a
default (or an event that which, with notice or lapse of time or both, would
become a default) under, or give to any other Person any rights of termination,
amendment, acceleration, or cancellation of, or require payment under, or result
in the creation of a lien or encumbrance on any of the properties or assets of
the Company pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, or other instrument or obligation
to which the Company is a party or by or to which the Company or any of its
properties are bound or subject.
SECTION 5.8 Financial Statements. Attached hereto at SCHEDULE 5.8 are true,
correct and complete copies of unaudited financial statements of the Company as
of and for the fiscal years ended October 31, 1996 and 1997, and as of and for
the five (5) months ended March 31, 1998, including balance sheets and
statements of income, cash flows, and changes in stockholders' equity
(collectively, the "Financial Statements"). The Financial Statements present
fairly, in all material respects, the financial position of the Company at the
dates shown and the results of operations and cash flows for the periods covered
in accordance with generally accepted accounting principles applied on a
consistent basis. Except for liabilities reflected in the Financial Statements
and those incurred in the ordinary course of business, the Company has no
material liabilities of any sort, whether absolute or contingent, due or to
become due, known or unknown, asserted or unasserted.
SECTION 5.9 Absence of Certain Changes or Events. Since December 31, 1997,
the Company has conducted its business only in the ordinary course and in a
manner consistent with past practice, and there has not been any change, effect,
or condition that, individually or when taken together with all other such
changes, effects, or conditions, would be materially adverse to the business,
operations, assets, financial condition, results of operations or prospects of
the Company.
SECTION 5.10 Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, or arbitration of any kind, at law or in equity,
including actions or proceedings seeking injunctive relief (collectively,
"Litigation"), pending and, to the knowledge of any Stockholder, there is no
Litigation or investigation threatened, against the Company or any properties or
rights of the Company.
SECTION 5.11 Compliance. To the knowledge of the Stockholders, the Company is
not in conflict with or in default or violation of any law applicable to the
Company or by or
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to which any of its properties are bound or to which they might be subject, the
violation of which has, or might reasonably be expected to have, a material
affect on the business, operations, assets, financial condition, results of
operations or prospects of the Company. The Company has not received any written
notice with respect to possible conflicts, defaults, or violations of laws from
any governmental entity.
SECTION 5.12 Taxes. All returns and reports ("Tax Returns") of or with
respect to any Tax (as defined below) that are required to be filed by or with
respect to the Company or its business or activities have been duly and timely
filed. All items of income, gain, loss, deduction, and credit or other items
required to be included in each such Tax Return have been included, and all
information provided in each such Tax Return is true, correct, and complete. All
Taxes that have been shown to be due on the Tax Returns have been timely paid in
full. All withholding Tax requirements imposed on or with respect to the Company
have been satisfied in full in all respects. No penalty, interest, or other
charge is due with respect to the late filing of any such Tax Return or late
payment of any such Tax. There are no pending undisclosed audits, actions,
proceedings, investigations, disputes, or claims with respect to or against the
Company for or with respect to any Taxes. As used in this Agreement, the term
"Tax" or "Taxes" means any and all taxes, charges, fees, levies, assessments,
duties, or other amounts payable to any federal, state, local, or foreign taxing
government, authority, or agency, including, without limitation, (i) income,
franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer, and gains taxes; (ii) customs, duties,
imposts, charges, levies, or other similar assessments of any kind; and (iii)
interest, penalties, and additions to tax imposed with respect thereto.
SECTION 5.13 Properties. The Company does not own any real estate. Except for
liens arising in the ordinary course of business after the date of this
Agreement and properties and assets disposed of in the ordinary course of
business after December 31, 1997, the Company has good and marketable title,
free and clear of all liens and adverse claims, to all of its properties and
assets, whether tangible or intangible, reflected in the Financial Statements as
being owned by the Company as of such date or purported to be owned on the date
of this Agreement. All buildings and all fixtures, equipment, and other property
and assets that are material to the business of the Company and are held under
leases by the Company are held under valid instruments enforceable in all
material respects by the Company in accordance with their respective terms. The
properties and equipment of the Company (a) have been well maintained and are in
good and serviceable condition, reasonable wear and tear excepted, and (b) are
adequate for the uses to which they are being put and, following the
consummation of the Merger and other transactions contemplated hereby, will have
sufficient capacity to conduct the Company's business in the same manner and
with the same prospects for profitability as such business is presently
conducted.
SECTION 5.14 Contracts and Customers. Except for agreements governing the
bank loan secured by the guarantees of the Stockholders which are to be released
at the Closing
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<PAGE> 14
hereunder, none of the material contracts of the Company is terminable as the
result of, or requires the consent or other approval of any other Person with
respect to or as a result of, the transactions contemplated by this Agreement.
The Company is in compliance in all material respects under all leases,
licenses, agreements, contracts, permits, plans, and commitments by which any of
its properties or assets is bound, and no event has occurred that constitutes a
material violation or material breach of or a material default (with the passage
of time or the giving of notice or both) in respect of any thereof, and each of
the other parties thereto or bound thereby has performed all the material
obligations required to be performed by it to date and is not in default
thereunder. The Stockholders do not know or have reason to know that any
material client or customer intends to terminate its relationship with the
Company as a result of the Merger or any of the related transactions.
SECTION 5.15 Investment Intent and Access. Each Stockholder hereby represents
and warrants that (a) the shares of CPI Common Stock are not being acquired with
a view to the resale or distribution of any part thereof in a manner which would
violate the registration provisions of the Securities Act or any applicable
state securities laws, (b) each Stockholder has received the Proxy Statement
dated January 30, 1998 from CPI ("Proxy Statement"), and (c) each Stockholder
has had sufficient access to the Company and its officers to ask questions
related to such Proxy Statement and the Company's business and operations.
SECTION 5.16 Information Supplied. Without limiting any of the
representations and warranties contained in this Agreement, no representation or
warranty of the Company or any Stockholder, as of the date of such
representation, warranty or statement, contains any untrue statement of material
fact, or omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CPI
CPI hereby represents and warrants to the Stockholders as follows:
SECTION 6.1 Organization and Capitalization of CPI. CPI has delivered to the
Stockholders complete and correct copies of its Articles of Incorporation, as
amended, and Bylaws, and current reports filed with the Securities and Exchange
Commission. CPI is a Pennsylvania corporation duly organized and validly
existing in good standing under the laws of Pennsylvania, with full corporate
power and authority to carry on its business as and where conducted and to own
and lease its properties and assets in the places where such properties and
assets are now or will be owned or leased. CPI is not an investment company as
defined in Section 368(a)(2)(f)(iii) and (iv) of the Internal Revenue Code, as
amended ("Code"). As of the date of this Agreement, the authorized capital stock
of CPI consists of 20,000,000 shares of common stock, $0.01 par value per share,
of which 16,900,000 shares are outstanding. All issued and outstanding shares of
CPI capital stock are, and all shares of CPI Common Stock to be
14
<PAGE> 15
issued pursuant to this Agreement will be, validly authorized, duly issued,
fully paid and nonassessable shares of CPI, and such shares have not been, or
will not be, issued in violation of any preemptive or other rights of any
Person. Except as described in the Proxy Statement provided to the Stockholders
by CPI, CPI does not have outstanding any subscriptions, options, warrants or
other arrangements or commitments obligating CPI to issue, deliver or dispose
of, and it is not obligated to issue, deliver to dispose of, any shares of its
capital stock or other securities.
SECTION 6.2 Authority. CPI has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, and the consummation by CPI of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action, and no
other corporate proceedings on the part of CPI is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by CPI and, assuming the due authorization,
execution and delivery of this Agreement by the Company and the Stockholders,
constitutes the legal, valid, and binding obligations of CPI, enforceable in
accordance with its respective terms.
SECTION 6.3 No Conflict. The execution and delivery of this Agreement by CPI
does not, and the consummation of the transactions contemplated hereby will not,
conflict with or violate the certificate of incorporation or bylaws, as amended
or restated to the date of this Agreement, of CPI or any material agreement to
which CPI is a party or by which it is bound.
SECTION 6.4 Resale Registration Statement. CPI is not aware of any fact that
would prevent the filing or effectiveness of the Resale Registration Statement.
SECTION 6.5 Quarterly Reports; Current Reports. CPI shall, between the date
of this Agreement and the Closing Date, promptly provide the Stockholders with
copies of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
its Current Reports on Form 8-K, filed with the SEC.
SECTION 6.6 Information Supplied. Without limiting any of the representations
and warranties contained in this Agreement, no representation or warranty of
CPI, as of the date of such representation, warranty, or statement, contains any
untrue statement of material fact, or omits to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which such statements were made, not misleading.
ARTICLE VII
OTHER AGREEMENTS AND COVENANTS
SECTION 7.1 Mutual Release by Company and the Stockholders. Effective upon
the Closing, the Company, on the one hand, and the Stockholders on the other
hand, for themselves and their respective heirs, executors, administrators,
successors, and assigns, hereby
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<PAGE> 16
fully and unconditionally release and forever discharge each other (and the
employees, officers, directors, successors, and assigns of the other) from any
and all actions, causes of action and claims arising from, or based upon, any
act (including failure to act) or condition existing prior to the Closing Date,
of every kind and nature whatsoever, whether or not now existing or known,
relating in any way, directly or indirectly, to the Company or shares of the
Company Common Stock, or to the conduct of business by, or the properties,
rights and prospects of, the Company; provided that (x) all rights of the
Stockholders to require the Company to pay for transaction costs as set forth in
Section 7.2 are hereby reserved, and (y) Bawcum reserves all rights to any
accrued but unpaid compensation, reimbursements and benefits (to the extent not
otherwise provided for in the Employment Agreement to be entered into by him
with CPI at the Closing).
SECTION 7.2 Transaction Costs. Each party will pay prior to the Closing all
attorneys', accountants', finders', brokers', investment banking, and other
fees, costs and expenses incurred by such party in connection with the
preparation, negotiation, execution, and performance of this Agreement, or any
of the transactions contemplated by this Agreement; provided that the Company
shall pay an amount not exceeding Ten Thousand Dollars ($10,000) for the
services of its or the Stockholders' attorneys and accountants payable in
connection herewith; and, if not paid at or prior to Closing, CPI will cause the
Company to pay same after the Closing, subject to the aforesaid limits.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1 Conditions to Obligations of CPI. The obligations of CPI to
consummate the Merger and the other transactions contemplated by this Agreement
are subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived in writing in the absolute
discretion of CPI, in whole or in part:
(a) Each of the representations and warranties of the Company and the
Stockholders contained in this Agreement must be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date.
(b) The Company and the Stockholders must have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing Date.
(c) All contractual and governmental consents, approvals, and
notifications required must have been obtained or given.
(d) Each of the required items set forth in Section 2.3 hereof must have
been executed and delivered.
SECTION 8.2 Conditions to Obligations of Company and Stockholders. The
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obligations of the Company and the Stockholders to effect the Merger and the
other transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing in the absolute discretion of the Company
and the Stockholders, in whole or in part:
(a) Each of the representations and warranties of CPI contained in this
Agreement must be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date.
(b) CPI must have performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior
to the Closing Date.
(c) All contractual and governmental consents, approvals, and
notifications must have been obtained or given.
(d) Each of the required items set forth in Section 2.2 hereof must have
been executed and delivered.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Survival. All representations and warranties made in or
pursuant to this Agreement will survive the Closing, subject to the limitations
set forth in Section 3.1(b) hereof. 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.
SECTION 9.2 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.
SECTION 9.3 Further Assurances. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated by this
Agreement.
SECTION 9.4 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.
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SECTION 9.5 Notices. All demands, notices, and communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, delivered by a national overnight delivery service, telecopy or
mailed by first class mail, postage prepaid, to the address of each party set
forth on the signature page of this Agreement, which address is the principal
place of business of such party unless otherwise indicated.
SECTION 9.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated by
any party hereto without the prior written consent of the other party. This
Agreement is not intended to confer any rights or benefits to any Person other
than the parties to this Agreement.
SECTION 9.7 Entire Agreement. This Agreement contains the entire
understanding of the parties relating to the subject matter hereof and
supersedes 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.
SECTION 9.8 Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants under this
Agreement, including, without limitation, failure to take all actions as are
necessary on its part to consummate the Merger, will cause irreparable injury to
the other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations under this Agreement. The parties hereby waive
the requirement of posting of any bond to such court in connection with the
issuance of injunctive relief hereunder.
SECTION 9.9 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Texas, except to the extent that the laws of the
Commonwealth of Pennsylvania and/or the State of Tennessee govern with respect
to the Merger, and the obligations, rights, and remedies of the parties
hereunder shall be determined in accordance with the substantive laws thereof
without giving effect to conflict of law principles.
SECTION 9.10 Remedies. Each party to this Agreement agrees that the parties
shall have all of the rights provided for in Section 9.8 and otherwise provided
for at law or equity, all such rights and remedies being cumulative, and that no
election or exercise of any right or remedy will be deemed an exclusion of any
other right or remedy; provided, however, that the sole remedy of CPI in respect
to any action or claim initiated after the Closing shall be limited as set forth
in Section 3.1 of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties to this Agreement has caused this
Agreement to be duly executed as of the date first written above.
COLLEGIATE PACIFIC, INC.,
a Pennsylvania corporation
By: /s/ MICHAEL J. BLUMENFELD
----------------------------------------------
Name: Michael J. Blumenfeld
Title: President
Address: 13950 Senlac, Suite 200
Farmers Branch, Texas 75235
VANTAGE PRODUCTS INTERNATIONAL, INC.,
a Tennessee corporation
By: /s/ CARY W. BAWCUM
----------------------------------------------
Name: Cary W.Bawcum
Title: President
Address: 4646 Poplar Avenue, Suite 228
Memphis, Tennessee 38117-4434
/s/ CARY W. BAWCUM /s/ STANLEY GRABER
- --------------------------------- -----------------------------------
CARY W. BAWCUM STANLEY GRABER
Address: 6848 Briarfield Lane Address: 4646 Poplar Avenue, Suite 245
Bartlett, TN 38135 Memphis, TN 38117
/s/ JOEL W. BROWN /s/ FRANK A. JONES
- --------------------------------- -----------------------------------
JOEL W. BROWN FRANK A. JONES
Address: 4646 Poplar Avenue, Suite 447 Address: 4646 Poplar Avenue, Suite 541
Memphis, TN 38117 Memphis, TN 38117
19
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EXHIBIT A
ARTICLES OF MERGER
<PAGE> 21
ARTICLES OF MERGER
OF
VANTAGE PRODUCTS INTERNATIONAL, INC.
WITH AND INTO
COLLEGIATE PACIFIC, INC.
We, Cary W. Bawcum, the duly elected President of Vantage Products
International, Inc., a Tennessee corporation ("VPI"), and Michael J. Blumenfeld,
the duly elected President of Collegiate Pacific, Inc., a Pennsylvania
corporation ("CPI"), do hereby state on oath that the following information
relating to the merger of VPI with and into CPI is true, correct, and complete
to the best of our knowledge and belief:
ARTICLE I
THE PLAN OF MERGER
Section 1.01. The Merger. At the Effective Time (as defined in Section 1.03
hereof) in accordance with this Plan of Merger and Pennsylvania and Tennessee
law, VPI shall be merged with and into CPI pursuant to this Plan of Merger, the
separate existence of VPI shall cease, and CPI shall continue as the surviving
corporation under the corporate name "Collegiate Pacific, Inc." CPI hereinafter
may sometimes be referred to as the "Surviving Corporation."
(a) The name and the location of the registered office, including street
and number, of the Surviving Corporation in the Commonwealth of Pennsylvania is
as follows: ___________________________________________________________________
________________________________________________________________________.
(b) VPI has no registered office in the Commonwealth of Pennsylvania.
(c) This Plan of Merger was adopted, for CPI, by its Board of Directors
pursuant to the Pennsylvania Business Corporation Law, Section 1922; and, for
VPI, by its Board of Directors and shareholders in accordance with the laws of
the State of Tennessee applicable hereto.
Section 1.02. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be that (i) the Surviving Corporation shall possess all the rights,
privileges, and franchises possessed by each of CPI and VPI, (ii) all of the
property and assets of whatsoever kind or description of each of CPI and VPI,
and all debts due on whatever account to any of them, including subscriptions
for shares or other choses in action belonging to any of them, shall be taken
and be deemed to be transferred to, and vested in, the Surviving Corporation
without further act or deed, and (iii) the Surviving Corporation shall be
responsible for all of the liabilities and obligations of each of CPI and VPI,
as provided by applicable law, in the same
<PAGE> 22
manner as if the Surviving Corporation had itself incurred such liabilities or
obligations; but the liabilities of CPI and VPI, or of their shareholders,
directors, or officers, shall not be affected, nor shall the rights of the
creditors thereof, or of any persons dealing with such corporations be impaired,
by the Merger, and any claim existing, or action or proceeding pending, by or
against either of CPI or VPI may be prosecuted to judgment as if the Merger had
not taken place, or the Surviving Corporation may be proceeded against, or
substituted, in place of CPI or VPI, as the case may be.
Section 1.03. Consummation of the Merger, Effective Time. The parties hereto
will cause the Merger to be consummated by filing with the Secretary of State of
the Commonwealth of Pennsylvania and the State of Tennessee these Articles of
Merger. The "Effective Time" shall be 5:00 p.m., Memphis, Tennessee, time, on
the date of such filings.
Section 1.04. Articles of Incorporation; Bylaws; Directors and Officers. The
Articles of Incorporation of CPI, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation after the Effective Time until thereafter amended as provided
therein and under Pennsylvania law. The Bylaws of CPI, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
after the Effective Time until thereafter amended as provided therein and under
Pennsylvania law. The directors and officers of CPI immediately prior to the
Effective Time shall be the initial directors and officers of the Surviving
Corporation after the Effective Time until their successors are elected and
qualified.
Section 1.05. Merger Consideration; Conversion of Securities. At the
Effective Time, by virtue of the Merger and without any action on the part of
CPI, VPI, or the holder of any of the securities of such corporations:
(a) Each share of the common stock of VPI, no par value ("VPI Stock"),
issued and outstanding immediately prior to the Effective Time (all of the
owners and holders of shares of VPI Stock having agreed hereto after being
apprised of and waiving dissenters' rights in accordance with the requirements
of applicable law) shall be canceled and extinguished and be converted into the
right to receive Three Hundred and Thirty-Three and 1/3rd (333-1/3) shares of
common stock of CPI, $0.01 par value per share ("CPI Stock"), such consideration
being herein referred to as the "Merger Consideration".
(b) No fractional shares of CPI Stock shall be issued as part of the
Merger, and in lieu of fractional shares, the number of shares of CPI Stock
which each holder of shares of VPI Stock shall receive, or have the right to
receive, will be rounded to the nearest whole share.
(c) At and after the Effective Time, there shall be no transfers on the
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stock transfer books of VPI with respect to shares of VPI Stock issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates formerly representing shares of VPI Stock are presented to
CPI or its transfer agent, they shall be canceled and exchanged for the Merger
Consideration as provided in Section 1.06 and the following sections hereof.
(d) Each share of CPI Stock outstanding immediately prior to the Effective
Time shall continue as an identical share of the Surviving Corporation after the
Effective Time; and the shareholders of CPI shall hold in the aggregate shares
of the Surviving Corporation outstanding immediately after the Effective Time
which are entitled to cast at least a majority of the vote entitled to be cast
generally for the election of directors of the Surviving Corporation
Section 1.06. Exchange of Certificates. From and after the Effective Time,
all certificates representing shares of VPI Stock shall represent the right to
receive shares of CPI Stock on the basis set forth above, upon the terms and
conditions of this Plan of Merger, subject to applicable abandoned property,
escheat, and similar laws. Upon delivery of certificates representing shares of
VPI Stock to the transfer agent of CPI, CPI shall cause the transfer agent to
issue certificates representing the requisite number of shares of CPI Stock for
each share of VPI Stock represented by the certificates therefor properly
delivered. Notwithstanding the foregoing, neither CPI's transfer agent nor any
party hereto shall be liable to a holder of shares of VPI Stock for any of the
Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat, and similar laws.
Section 1.07. Rights of VPI Shareholders to Dividends. Holders of VPI Stock
at the Effective Time shall be entitled to receive, subject to applicable
abandoned property, escheat and similar laws, payment of dividends declared by
CPI subsequent to the Closing Date, but delivery of payment of such dividends
will not be required of CPI until such persons have delivered their certificates
representing shares of VPI Stock in exchange for certificates representing
shares of CPI Stock in accordance with the provisions of Section 1.06 above.
Notwithstanding the foregoing, CPI shall not be liable to a holder of shares of
VPI Stock for any such dividends delivered to a public official pursuant to any
abandoned property, escheat and similar laws.
ARTICLE II
APPROVAL OF PLAN OF MERGER
Section 2.01. Approval by Board of Directors. The Plan of Merger incorporated
herein has been adopted by the Board of Directors of each of VPI and CPI. The
Board of Directors of CPI approved and adopted the Plan of Merger at a meeting
held on May __, 1998; and the Board of Directors of VPI approved and recommended
adoption of the Plan of Merger by the shareholders of VPI at a meeting held on
May 5, 1998.
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Section 2.02. Approval by Shareholders.
(a) Pursuant to the Pennsylvania Business Corporation Law, Section
1924(b)(1)(i), shareholder approval of the Plan of Merger was not required by
the shareholders of CPI.
(b) The Plan of Merger was approved by all the shareholders of VPI on May
5, 1998, by unanimous written consent. On the date of approval of the Plan of
Merger, VPI's sole outstanding class of capital stock was common stock, no par
value per share, each share of which was entitled to one vote, and One Thousand
Two Hundred (1,200) shares of which were outstanding.
Section 2.03 Approval by VPI. The foregoing Plan of Merger was authorized,
adopted and approved by VPI in accordance with the laws of the State of
Tennessee, being the jurisdiction in which VPI is incorporated.
IN WITNESS WHEREOF, we have executed these Articles of Merger on May ___,
1998.
VANTAGE PRODUCTS INTERNATIONAL, INC.
By:
-----------------------------------
Cary W. Bawcum, President
COLLEGIATE PACIFIC, INC.
By:
-----------------------------------
Michael J. Blumenfeld, President
4
<PAGE> 25
SCHEDULE 2.2(e): LIST OF GUARANTEES EXECUTED BY STOCKHOLDERS
1. First Tennessee Bank National Association, Memphis, Tennessee
[loan or line of credit]
2. ATEC Athletic Training Equipment Company, 10 Greg St., Sparks, NV
89431, a former vendor
3. GlobalCom, 111 Presidential Ave., Suite 125A, Bala Cynwyd, PA
19004-1005, attn: Adam Levin, the former long distance telephone
supplier of VPI
<PAGE> 26
FILED
RESERVED
STATE OF TENNESSEE
C H A R T E R
1995 NOV - 1 PM 1:52
O F
SECRETARY OF STATE
VANTAGE PRODUCTS INTERNATIONAL
----------------------------------
The undersigned person(s) under the Tennessee Business Corporation Act
adopt(s) the following charter for the above listed corporation:
1. The name of the corporation is VANTAGE PRODUCTS INTERNATIONAL, INC.
---------------------------------------------
- -------------------------------------------------------------------------------.
[NOTE: Pursuant to Tennessee Code Annotated Section 48-14-101(a)(1), each
corporation name must contain the word "corporation", "incorporated" or
"company" or the abbreviation "corp.", "inc." or "co.".]
2. The number of shares of stock the corporation is authorized to issue is
2000
- -------------------------------------------------------------------------------.
3. (a) The complete address of the corporation's initial registered office in
Tennessee is
4646 Poplar Avenue Suite 447 Memphis TN 38117
- -------------------------------------------------------------------------------
Street Address City State, Zip Code
County of Shelby.
------
[NOTE: A street address, a zip code and the county are required by Tennessee
Code Annotated Section 48-12-102(a)(3).]
(b) The name of the initial registered agent, to be located at the address
listed in 3(a), is
Cary W. Bawcum
- -------------------------------------------------------------------------------
4. The name and complete address of each incorporator is:
Cary W. Bawcum 4646 Poplar Ave. Suite 447 Memphis, TN 38117
- -------------------------------------------------------------------------------
Name Address Zip Code
- -------------------------------------------------------------------------------
Name Address Zip Code
- -------------------------------------------------------------------------------
Name Address Zip Code
[NOTE: A street address and a zip code are both required by Tennessee Code
Annotated Section 48-12-102(a)(5).]
5. The complete address of the corporation's principal office is:
4646 Poplar Avenue, Suite 447 Memphis, TN/USA 38117
- -------------------------------------------------------------------------------
Street Address City State/Country Zip Code
[NOTE: A street address and a zip code are both required by Tennessee Code
Annotated section 48-12-102(a)(5).]
6. The corporation is for profit.
7. Other provisions:
[NOTE: Insert here any provision(s) desired and permitted by law. EXAMPLES:
names and addresses of persons serving as the initial board of directors,
business purpose(s) of the corporation, management or regulation of affairs of
the corporation, provision limiting the personal liability of directors for
monetary damages for breach of fiduciary duty, etc. See Tennessee Code
Annotated Section 48-12-402(b).]
October 30, 1995 /s/ CARY W. BAWCUM
- ------------------------------ ---------------------------------------
Signature Date Incorporator's Signature
Cary W. Bawcum
---------------------------------------
Incorporator's Name (typed or printed)
[SEAL]
SS-4417
(Rev. 5/89) RDA 1678
<PAGE> 27
BYLAWS
OF
VANTAGE PRODUCTS INTERNATIONAL INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1 Annual Meeting. The annual meeting of the shareholders shall be
held at such time and place, either within or without this State, as may be
designated from time to time by the directors. Unless the time is otherwise
specified by the directors, said meeting shall be held on the second Tuesday
in April of each year, or as close thereto as practicable.
SECTION 1.2 Special Meetings. Special meetings of the shareholders may be
called by a majority of the board of directors, or by the holders of not less
than one-tenth (1/10) of all the shares entitled to vote at such meeting. The
place of said meetings shall be designated by the directors. Only such business
set forth in the notice of a special meeting shall be conducted thereat.
SECTION 1.3 Notice of Shareholder Meetings. Written or printed notice, or
oral notice as authorized by Tennessee Code Section 48-1-202(a), stating the
place, day and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called and the person or persons
calling the meeting, shall be (a) if oral, communicated in person or by
telephone; or (b) if written, delivered either personally or by mail by or at
the direction of the president, secretary, officer, or person calling the
meeting to each shareholder entitled to vote at the meeting. Such notice shall
be communicated not less than ten (10) days nor more than two (2) months before
the date of the meeting. Written notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid. If delivered personally, such notice shall be delivered not
less than five (5) nor more than sixty (60) days before the date of the meeting,
and shall be deemed delivered when actually received by the shareholder. Oral
notice shall be effective when communicated. Upon the request of any
shareholder, the secretary or other person shall certify that the notice
required by this paragraph has been given.
SECTION 1.4 Waiver of Notice. A shareholder may waive any notice required by
the Tennessee Business Corporation Act, the Charter or these Bylaws before or
after the date and time stated in the notice. The waiver must be in writing, be
signed by the shareholder entitled to notice and be filed in the minutes or
corporate records. A shareholder's attendance at a meeting waives objection to
(a) lack of notice or defective notice of the meeting unless such shareholder
objects at the beginning of the meeting or promptly upon his arrival to holding
the meeting or transacting business at the meeting; and (b) consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless such shareholder objects to considering
the matter when it is presented.
<PAGE> 28
SECTION 1.5 Quorum Requirements. A majority of the shares entitled to vote
on the matter by the voting group (as defined in the Tennessee Business
Corporation Act Section 48-11-201(29)) shall constitute a quorum of that voting
group for the transaction of business on that matter. Once a share is present at
a meeting for any purpose, it shall be deemed present for the remainder of the
meeting for quorum purposes notwithstanding that the owner thereof shall be
absent therefrom and, unless a new record date is set, for any adjournment of
such meeting.
SECTION 1.6 Adjournments. A meeting may be adjourned despite the absence of
a quorum, and the meeting may be held as adjourned without further notice,
except that notice shall be given to new shareholders becoming such before any
new record date for the adjourned meeting. A new record date shall be required
if the adjourned meeting is more than four (4) months after the date of the
original meeting.
SECTION 1.7 Voting and Proxies. Every shareholder entitled to vote at a
meeting may do so either in person or by written proxy, which proxy shall be
filed with the secretary or other officer or agent authorized to tabulate votes
of the meeting before being voted. Such proxy shall entitle the holders thereof
to vote at any adjournment of such meeting, but shall not be valid after the
final adjournment thereof. No proxy shall be valid after the expiration of
eleven (11) months from the date of its execution unless otherwise provided in
the proxy. When a quorum is present at any meeting, action on a matter by a
voting group is approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action, unless the question is one
upon which, by the laws of Tennessee, a larger or different vote is required, in
which case such express provision shall govern the decision of such question.
SECTION 1.8 Voting Subsidiary Stock. Stock in another corporation shall be
voted as the board of directors prescribes.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 Qualification and Election. Directors need not be shareholders or
residents of this State, but must be twenty-one (21) years of age. They shall be
elected by a plurality of the votes cast at the annual meetings of the
shareholders. Each director shall hold office until the next annual meeting of
shareholders following his election, unless elected for a staggered or longer
term. Despite expiration of the term of a director, such term shall continue
until his successor has been elected and qualified, or the number of directors
has been reduced.
SECTION 2.2 Number. The number of directors shall be fixed from time to time
by the shareholders, but shall never be less than the number required by law.
SECTION 2.3 Meetings. No annual meeting of the board of directors shall be
2
<PAGE> 29
required to be held, but the board may designate intervals for regular meetings.
Special meetings may be called at any time by the chairman of the board,
president or a majority of the directors then serving. Meetings may also be held
telephonically, and may be held by consent if all directors consent thereto and
the number of directors whose vote in required in respect to such matter signs a
written consent in favor of the action taken, which writing may be signed in
counterparts.
SECTION 2.4 Notice of Directors' Meetings. Regular meetings of the board of
directors may be held without notice. Special meetings shall be held upon notice
sent by any usual means of communication not less than two (2) days before the
meeting. The notice shall specify the date, time and place of the meeting, but
it shall not be necessary for the notice to describe the purpose of any special
meeting.
SECTION 2.5 Waiver of Notice. A director may waive any notice required by the
Tennessee Business Corporation Act, the charter or these bylaws before or after
the date and time stated in the notice. The waiver must be in writing, be signed
by the director entitled to the notice and be filed with the minutes or
corporate records. A director's attendance at or participation in a meeting
waives any required notice to him of the meeting unless he objects at the
beginning of the meeting or promptly upon his arrival objects to holding the
meeting or transacts business at the meeting and does not thereafter vote for or
assent to action taken at the meeting.
SECTION 2.6 Quorum and Vote. The presence of a majority of the directors
shall constitute a quorum for the transaction of business. A meeting may be
adjourned despite the absence of a quorum, and notice of an adjourned meeting
need not be given if the time and place to which the meeting is adjourned are
fixed at the meeting at which the adjournment is taken, and if the period of
adjournment does not exceed one (1) month in any one adjournment. The vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the board, unless the vote of a greater number is required
by the Charter, these bylaws, or by the laws of Tennessee.
SECTION 2.7 Executive and Other Committees. The board of directors, by a
resolution adopted by a majority of its members, may designate an executive
committee, consisting of one or more directors, and other committees consisting
of one or more persons, who may or may not be directors, and may delegate to
such committee or committees any and all such authority as it deems desirable,
including the right to delegate to an executive committee the power to exercise
all the authority of the board of directors in the management of the affairs and
property of the corporation.
SECTION 2.8 Executive Compensation. All compensation payments to persons who
are shareholders of the Corporation shall be approved by the directors, either
in a regular or special meeting, or by otherwise evidencing their consent such
as by signing the check representing payment.
3
<PAGE> 30
SECTION 2.9 Director Compensation. No director shall be entitled to
compensation for his services as such unless approved by the shareholders;
provided, however, the directors shall have authority to provide for
reimbursements to directors of their direct expenses incurred as a consequence
of their service as a director of the corporation.
ARTICLE III
OFFICERS
SECTION 3.1 Number. The corporation shall have a president and a secretary,
and such other officers as the board of directors shall from time to time deem
necessary. Any two or more offices may be held by the same person, except the
offices of president and secretary. Any officer so named, except the President,
may appoint an assistant to serve in his absence.
SECTION 3.2 Election and Term. The officers shall be elected by the board and
shall serve until the expiration of the term for which he/she is elected, and
thereafter until his/her successor has been elected and qualified.
SECTION 3.3 Duties. All officers shall have such authority and perform such
duties in the management of the corporation as are normally incident to their
offices and as the board of directors may from time to time provide. In
addition, the corporate secretary shall be responsible for preparing minutes of
the directors' and shareholders' meetings and for authenticating records of the
corporation.
ARTICLE IV
RESIGNATIONS, REMOVALS, AND VACANCIES
SECTION 4.1 Resignations. Any director may resign at any time by delivering
written notice to the board of directors, its chairman or the president, or the
corporation. Any such resignation shall take effect when it is delivered unless
the notice specifies a later effective date.
SECTION 4.2 Removal of Officers. Any officer or agent may be removed by the
board whenever in its judgment the best interests of the corporation will be
served thereby and any officer or assistant officer, if appointed by another
officer, may likewise be removed by such officer.
SECTION 4.3 Removal of Directors. Any or all of the directors may be removed
either with or without cause by a proper vote of the shareholders; and may be
removed with cause by a majority vote of the entire board.
SECTION 4.4 Vacancies. Newly created directorships resulting from an increase
4
<PAGE> 31
in the number of directors, and vacancies occurring in any office or
directorship for any reason, including removal of an officer or director, may be
filled by the vote of a majority of the directors then in office, even if less
than a quorum exists.
ARTICLE V
CAPITAL STOCK
SECTION 5.1 Stock Certificates. Every shareholder shall be entitled to a
certificate or certificates of capital stock of the corporation in such form as
may be prescribed by the board of directors. Unless otherwise decided by the
board, such certificates shall be signed by the president or vice president and
the secretary or assistant secretary of the corporation.
SECTION 5.2 Transfer of Shares. Shares of stock may be transferred on the
books of the corporation by delivery and surrender of the proper certificate
duly endorsed for transfer or accompanied by a duly executed assignment or stock
power. The person registered on the books of the corporation as the owner of any
shares of stock shall be entitled to all the rights of ownership with respect to
such shares. It shall be the duty of every shareholder to notify the corporation
of his mailing address.
SECTION 5.3 Loss of Certificates. In the case of the loss, mutilation or
destruction of a certificate of stock, a duplicate certificate may be issued
upon such terms as the board of directors shall prescribe.
ARTICLE VI
ACTION BY CONSENT
Whenever the shareholders or directors are required or permitted to take any
action by vote, such action may be taken without a meeting if all shareholders
or directors consent to taking action without a meeting, and if the number of
shareholders or directors that would be necessary to take the action at a
meeting sign a written consent setting forth the action so taken.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be the calendar year, or such other
time as may be determined by the board of directors.
5
<PAGE> 32
ARTICLE VIII
SEAL
Unless otherwise determined by the board of directors, the corporation will
not have a seal and, in any event, the failure to affix a corporate seal to any
instrument executed by the corporation shall not affect the validity thereof.
ARTICLE IX
INDEMNIFICATION
The corporation shall, to the full extent authorized or permitted by the laws
of the State of Tennessee, indemnify any director, officer, agent or employee,
or the estate of such person, who is made, or threatened to be made, a party to
an action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he is or was a director, officer,
agent or employee of the corporation or served any other enterprise at the
request of the corporation. The corporation may pay for or reimburse the
reasonable expenses incurred by a director who is a party to such a proceeding
in advance of final disposition of the proceeding if such advance payment is
permissible under the Tennessee Business Corporation Act or other laws now in
effect or hereafter enacted of the State of Tennessee.
ARTICLE X
AMENDMENT OF BY-LAWS
These Bylaws may be amended, added to, or repealed either by: (1) a vote of
the holders of a majority of the corporation's outstanding shares entitled to
vote in respect to any matter, or (2) a majority vote of the entire board of
directors. Any change in the Bylaws made by the board of directors, however, may
be amended or repealed by the shareholders.
[END]
6
<PAGE> 33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF COLLEGIATE PACIFIC, INC. AND SUBSIDIARIES
FOR THE YEAR ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 1998 10 KSB FILING.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 514,494
<SECURITIES> 0
<RECEIVABLES> 685,974
<ALLOWANCES> 0
<INVENTORY> 2,149,020
<CURRENT-ASSETS> 3,389,552
<PP&E> 187,042
<DEPRECIATION> 66,416
<TOTAL-ASSETS> 4,388,144
<CURRENT-LIABILITIES> 1,554,320
<BONDS> 0
0
0
<COMMON> 170,168
<OTHER-SE> 2,659,256
<TOTAL-LIABILITY-AND-EQUITY> 4,388,144
<SALES> 3,283,825
<TOTAL-REVENUES> 3,283,825
<CGS> 2,106,581
<TOTAL-COSTS> 2,106,581
<OTHER-EXPENSES> 1,704,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,290
<INCOME-PRETAX> (678,905)
<INCOME-TAX> 0
<INCOME-CONTINUING> (678,905)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (678,905)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
