<PAGE> 1
- --------------------------------------------------------------------------------
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 2000.
REGISTRATION NO. ___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------
COLLEGIATE PACIFIC INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 5091 22-2795073
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
13950 SENLAC, SUITE 200 MICHAEL J. BLUMENFELD
FARMERS BRANCH, TEXAS 75234 CHIEF EXECUTIVE OFFICER
(972) 243-8100 13950 SENLAC, SUITE 200
FARMERS BRANCH, TEXAS 75234
(972) 243-8100
(Address and telephone number of principal (Name, address and telephone number of agent for
executive offices and principal place of service)
business)
</TABLE>
COPIES TO:
Alan J. Bogdanow
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
(214) 939-5500
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
------------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED PROPOSED
CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock Purchase Warrants 4,237,748(2) -- -- --
Common Stock, $.01 par value 4,237,748(3)(4) $10.00 $42,377,480 $11,187.65
Common Stock, $.01 par value 677,267(3)(5) $ 3.30 $ 2,235,000 $ 590.04
Common Stock, $.01 par value 40,000(6) $12.50 $ 500,000 $ 132.00
Common Stock, $.01 par value 507,500 $ 2.25 $ 5,709,375 (7)
Total Registration Fee: $11,909.69
</TABLE>
(1) Estimated solely for calculating the registration fee.
(2) To be issued as a dividend to all holders of Common Stock, $.01 par
value, on a pro rata basis.
(3) Pursuant to Rule 416 of the Securities Act of 1933, as amended, there
are also being registered such additional shares of Common Stock as may
become issuable for anti-dilution purposes.
(4) Issuable upon exercise of Common Stock Purchase Warrants that have an
exercise price of $10.00 per warrant.
(5) Issuable upon conversion of Subordinated Convertible Promissory Notes
at a conversion price of $3.30 per share.
(6) Issuable upon exercise of Common Stock Purchase Warrants that have an
exercise price of $12.50 per warrant.
(7) No registration fee is required as securities were previously
registered by Form SB-2 Registration Statement, No. 333-64471,
effective as of October 26, 1998. Pursuant to Rule 429, this is a
combined registration statement that relates to the securities
previously registered by the earlier registration statement and the
securities being registered by this registration statement. The amount
to be registered reflects the number of shares taking into account the
one-for-five reverse stock split, effective January 19, 2000.
------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1993, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
Pursuant to Rule 429, this is a combined registration statement that relates to
the securities previously registered by Form SB-2 Registration Statement, No.
333-64471, effective as of October 26, 1998, and the securities being registered
by this registration statement.
COLLEGIATE PACIFIC INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 ITEM NO. AND CAPTION PROSPECTUS CAPTION
<S> <C> <C>
Item 1. Front of Registration Statement and Outside Front Cover of Prospectus Outside Front Cover
Item 2. Inside Front Cover and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Pages
Item 3. Summary Information and Risk Factors Summary, Risk Factors
Item 4. Use of Proceeds Summary -- Use of Proceeds
Item 5. Determination of Offering Price Not Applicable
Item 6. Dilution Not Applicable
Item 7. Selling Security Holders Summary -- Selling Shareholders
Item 8. Plan of Distribution Summary -- Plan of Distribution
Item 9. Legal Proceedings The Company -- Legal Proceedings
Item 10. Directors, Executive Officers, Promoters and Control Persons Management -- Executive Officers and
Directors
Item 11. Security Ownership of Certain Beneficial Owners and Management Management -- Security Ownership of
Certain Beneficial Owners and Management
Item 12. Description of Securities Description of Securities
Item 13. Interest of Named Experts and Counsel Not Applicable
Item 14. Disclosure of Commission Position on Indemnification For Securities Act Indemnification
Liabilities
Item 15. Organization Within Last Five Years Not Applicable
Item 16. Description of Business The Company -- Business
Item 17. Management's Discussion and Analysis or Plan of Operation Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Item 18. Description of Property The Company -- Property
Item 19. Certain Relationship and Related Transactions Management -- Certain Relationships and
Related Transactions
Item 20. Market For Common Equity and Related Stockholder Matters Market For Common Equity and Related
Stockholder Matters
Item 21. Executive Compensation Management -- Executive Compensation
Item 22. Financial Statements Index To Consolidated Financial Statements
Item 23. Changes in and Disagreements With Accountants on Accounting and Not Applicable
Financial Disclosure
</TABLE>
<PAGE> 3
COLLEGIATE PACIFIC INC.
4,237,748 COMMON STOCK PURCHASE WARRANTS
5,462,515 SHARES OF COMMON STOCK
------------------------------------------
This Prospectus relates to an offering of up to:
o 4,237,748 Common Stock Purchase Warrants to be issued as a
special dividend to each record holder of Common Stock as of
May 26, 2000.
o 4,955,015 shares of Common Stock consisting of:
o 3,560,481 shares of Common Stock issuable upon
exercise of the Company's Common Stock Purchase
Warrants.
o 677,267 shares of Common Stock issuable upon
conversion of the Company's Subordinated Convertible
Promissory Notes
o 677,267 shares of Common Stock issuable upon exercise
of the Company's Common Stock Purchase Warrants,
which would be issuable assuming conversion of all of
the Company's Subordinated Convertible Promissory
Notes prior to the record date of the special
dividend.
o 40,000 shares of Common Stock issuable upon exercise
of the Company's Common Stock Purchase Warrants
issued to Mike Farkus and Christopher Haupt.
Each record holder of Common Stock as of May 26, 2000 will receive a
special dividend from the Company of one Warrant for each share of Common Stock
owned by the record holder. Each Warrant will entitle the holder to purchase one
share of Common Stock at an initial exercise price of $10.00 per share, subject
to adjustment, at any time prior to May 26, 2005.
The Company privately sold Notes in the principal amount of $2,235,000
to certain officers and directors of the Company and certain third parties. Each
Note will be convertible into shares of Common Stock at a conversion price of
$3.30 per share, subject to adjustment, at any time prior to January 31, 2005.
The Company issued a total of 40,000 Common Stock Purchase Warrants to
Mike Farkus and Christopher Haupt in connection with a License Agreement with
On-Line Sports, Inc. Each Warrant entitles the holder to purchase one share of
Common Stock at an initial exercise price of $12.50 per share.
In addition, this Prospectus relates to an offering of up to 507,500
shares of Common Stock by certain stockholders of Collegiate Pacific Inc. The
stockholders acquired these shares in the following transactions:
o Michael J. Blumenfeld acquired 400,000 shares through a Stock
Purchase Agreement dated as of August 18, 1997 by and between
Mr. Blumenfeld, Adam Blumenfeld and the Company.
o Richard Hershorin and Patti Hershorin acquired 27,500 shares
pursuant to an Agreement for Purchase and Sale of Stock dated
as of April 14, 1998 by and between the Hershorins and the
Company.
o Cary W. Bawcum, Stanley Graber, Frank A. Jones, and Joel W.
Brown each acquired 20,000 shares pursuant to a Plan and
Agreement of Merger dated as of May 31, 1998 by and among
Vantage Products International, Inc., Messrs. Bawcum, Graber,
Jones and Brown, and the Company.
These 507,500 shares are offered for the account of the Selling
Shareholders. Collegiate Pacific Inc. will not receive any proceeds from the
sale of these shares.
The Common Stock is quoted on the Over-The-Counter Bulletin Board under
the symbol "BEEZ." The Warrants will be quoted on the Over-The-Counter Bulletin
Board under the symbol "BEEZW." On April 6, 2000, the bid and ask price of the
Common Stock was $10.125 and $13.875 per share.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 8 IN THIS PROSPECTUS.
------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April __, 2000.
1
<PAGE> 4
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus in connection with the offering made hereby and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, any of the securities offered hereby to
anyone in any jurisdiction to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any time
subsequent to the dates as of which such information is furnished.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information.................................................. 3
Summary................................................................ 4
Risk Factors........................................................... 8
The Company............................................................ 14
Management............................................................. 17
Market for Common Stock and Related Stockholder Matters................ 21
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 22
Description of Securities.............................................. 26
Legal Matters.......................................................... 33
Experts................................................................ 33
Indemnification........................................................ 33
Index To Consolidated Financial Statements............................. 34
</TABLE>
- --------------------------------------------------------------------------------
Collegiate Pacific Inc. is a Delaware corporation. Our executive offices are
located at 13950 Senlac, Suite 200, Farmers Branch, Texas 75234, and our
telephone number is (972) 243-8100. In this Prospectus, the "Company,"
"Collegiate Pacific," "we," "us," and "our" refer to Collegiate Pacific Inc. and
its subsidiaries. The term "Warrants" refers to the Company's common stock
purchase warrants. The term "Notes" refers to the Company's Subordinated
Convertible Promissory Notes. In addition, "Common Stock" refers to our common
stock, $.01 par value per share. The term "Selling Shareholders" refers to Mr.
Blumenfeld, the Hershorins, and Messrs. Bawcum, Graber, Jones and Brown. In
addition, "Common Stock" refers to our common stock, $.01 par value per share.
You should rely only on the information contained in this Prospectus.
We have not authorized anyone to provide you with information different from
that contained in this Prospectus. The information contained in this Prospectus
is accurate only as of the date of this Prospectus, regardless of the time of
delivery of this Prospectus or of any sale of the Common Stock.
UNLESS OTHERWISE PROVIDED IN THIS PROSPECTUS, ALL REFERENCES TO SHARES
OF COMMON STOCK TAKE INTO ACCOUNT THE ONE-FOR-FIVE REVERSE STOCK SPLIT THAT
BECAME EFFECTIVE JANUARY 19, 2000.
2
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and we
file annual, quarterly and other reports and other information with the
Securities and Exchange Commission (the "Commission"). These materials may be
inspected and copied at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549-1004,
at its Northeast Regional Office located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at its West Regional Office located at 5670
Wilshire Boulevard, Los Angeles, California 90036. You can obtain copies of
these materials at prescribed rates from the Public Reference Section of the
Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a Web site that contains reports, proxy statements,
information statements and other information regarding the Company. The
Commission's Web site address is http://www.sec.gov.
The Company is a publicly held corporation and its Common Stock is
traded on the Bulletin Board under the symbol "BEEZ."
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as it
may determine to furnish or as may be required by law.
We have filed Registration Statements on Form SB-2 (the "Registration
Statements") under the Securities Act of 1933 (the "Securities Act") with the
Commission, with respect to the Common Stock offered in this Prospectus. This
Prospectus does not contain all information set forth in the Registration
Statements. We omitted certain parts of the Registration Statements in
accordance with the rules and regulations of the Commission. For further
information about us and the Common Stock being offered in this Prospectus, you
should read the Registration Statements and their exhibits and schedules, which
you may read without charge at the public reference rooms at the offices of the
Commission.
3
<PAGE> 6
SUMMARY
CERTAIN INFORMATION IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS." ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE
"FORWARD-LOOKING STATEMENTS" FOR PURPOSES OF THESE PROVISIONS.
THESE STATEMENTS INCLUDE:
o ANY PROJECTIONS OF EARNINGS, REVENUES OR OTHER FINANCIAL
ITEMS;
o ANY STATEMENTS OF THE PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS;
o ANY STATEMENTS CONCERNING PROPOSED NEW PRODUCTS OR SERVICES;
o ANY STATEMENTS REGARDING FUTURE ECONOMIC CONDITIONS OR
PERFORMANCE; AND
o ANY STATEMENT OF ASSUMPTIONS UNDERLYING ANY OF THE FOREGOING.
IN SOME CASES, FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE
OF TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECTS," "BELIEVES", "PLANS,"
"ANTICIPATES," "ESTIMATES," "POTENTIAL," OR "CONTINUE," AND VARIATIONS ON SUCH
WORDS AND SIMILAR EXPRESSIONS.
ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN ITS
FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT THESE
EXPECTATIONS OR ANY FORWARD-LOOKING STATEMENTS WILL PROVE TO BE CORRECT. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS WE PROJECTED OR ASSUMED IN OUR
FORWARD-LOOKING STATEMENTS. THE COMPANY'S FUTURE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, AS WELL AS ANY FORWARD-LOOKING STATEMENTS, ARE SUBJECT TO
INHERENT RISKS AND UNCERTAINTIES, SOME OF WHICH ARE SUMMARIZED IN THE SECTION
TITLED "RISK FACTORS" BEGINNING ON PAGE 8.
THE COMPANY
We are in the business of the mail order marketing of sports equipment.
We sell our products primarily to institutional customers located throughout the
United States. Our principal customers include country clubs, schools, YMCAs,
YWCAs and similar recreational organizations, municipal recreation departments,
and other governmental agencies. We offer 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 we also
provide after-sale customer service through toll-free numbers.
We believe that prompt delivery of a broad range of products at
competitive prices, coupled with prompt, accessible customer service,
distinguishes Collegiate Pacific from its competitors. We currently market about
2,500 sports and recreational related equipment and products to over 200,000
potential institutional, retail, mass merchant, and team dealer customers. Since
commencing operations, we have sold products to approximately 20,000 customers.
Our master mailing list currently includes over 200,000 potential
customers, and we intend to distribute approximately 700,000 catalogs and fliers
to this audience during Fiscal Year 2000. Michael Blumenfeld, the Chief
Executive Officer of the Company with 25 years of experience in the industry,
supervised the development of this mailing list, and it is carefully maintained,
screened, and cross-checked. We subdivided this mailing list into various
combinations designed to place catalogs in the hands of the individuals making
the purchase decisions. The master mailing list is also subdivided by relevant
product types, seasons, and customer profiles. We also use other forms of
solicitations such as trade shows, telemarketing, broadcast fax programs, and
the Internet.
Collegiate Pacific Inc. was incorporated in Pennsylvania in 1987, and
reincorporated in Delaware in 1999. The Company's executive offices are located
at 13950 Senlac, Suite 200, Farmers Branch, Texas 75234, and its telephone
number at that location is (972) 243-8100.
RECENT DEVELOPMENTS
On October 25, 1999 we acquired certain assets of Mark One Inc., a
distributor of camping and sporting good related equipment for the recreation,
military, and municipal markets.
4
<PAGE> 7
On January 14, 2000 our shareholders approved an amendment to the
Company's Articles of Incorporation authorizing a one-for-five reverse stock
split, which became effective on January 19, 2000.
On February 7, 2000 we entered into licensing and distribution
agreements with the Edwards Sports Company, a manufacturer of tennis nets and
tennis court equipment.
On February 29, 2000 we issued $2,235,000 of Subordinated Convertible
Promissory Notes to certain officers and directors of the Company and certain
third parties. Approximately $995,000 of such Notes were issued in exchange for
an equal amount of subordinated notes held by Michael J. Blumenfeld. The
remaining Notes were sold for approximately $1.4 million in cash. We are using
the cash proceeds to repay our outstanding commercial bank debt, to expand
working capital, and to finance stock repurchases.
SELLING SHAREHOLDERS
The following table sets froth the names of each of the Selling
Shareholders, the number of shares of Common Stock beneficially owned by each
Selling Shareholder as of February 29, 2000, the number of shares that each may
offer, and the number of shares of Common Stock beneficially owned by each
Selling Shareholder upon completion of the offering, assuming all of the shares
offered are sold. The number of shares sold by each Selling Shareholder may
depend upon a number of factors, including, among other things, the market price
of the Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering(1) After Offering
------------------------------------------ --------------------------
Number of Percent of Shares to be Number of Percent of
Name of Beneficial Owner Shares(2) Class(3) Sold Shares(2) Class
- ------------------------ --------- --------- ---- --------- -----
<S> <C> <C> <C> <C> <C>
Michael J. Blumenfeld, 4,416,134(4) 70.8% 3,057,612(5) 4,416,134 70.8%
Chief Executive Officer
of the Company
Richard M. Hershorin TTEE 55,000(6) 1.6% 27,500 27,500 0.8%
FBO R. Hershorin Rev. Trust
U/A/D 04/21/89
Cary W. Bawcum 40,000(7) 1.1% 20,000 20,000 0.6%
Stanley Graber (8) 40,000(9) 1.1% 20,000 20,000 0.6%
Frank A. Jones 40,000(10) 1.1% 20,000 20,000 0.6%
Joel W. Brown 40,000(11) 1.1% 20,000 20,000 0.6%
</TABLE>
- ------------------
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated.
(2) As required by SEC regulations, the number of shares shown as
beneficially owned includes shares that could be purchased by such
shareholder within 60 days after the date of this prospectus. The table
shows the estimated total of the shares which would be issued on the
conversion of all of outstanding Notes and the exercise of all Warrants
to acquire shares of Common Stock described in this Prospectus. The
actual number of shares of Common Stock issuable upon the conversion of
the Notes and exercise of the Warrants is subject to adjustment and
could be materially less than the number estimated in this table. This
variation is due to factors that cannot be predicted by us at this
time. The most significant of these factors is the future market price
of our Common Stock.
5
<PAGE> 8
(3) The percentage of each Selling Shareholder is based on the beneficial
ownership of that Selling Shareholder divided by the sum of the current
outstanding shares of Common Stock plus the additional shares, if any,
that would be issued to that Selling Shareholder (but not any other
shareholder) when converting Notes or exercising any Warrant or other
right in the future.
(4) Consists of 1,748,522 shares of Common Stock, 10,000 shares issuable
upon exercise of an option expiring February 24, 2009, 1,748,522 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 454,545
shares issuable upon conversion of a Note maturing on January 31, 2005,
and 454,545 shares issuable upon exercise of a Warrant expiring May 26,
2005 that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(5) Consists of 400,000 shares being registered by Mr. Blumenfeld with the
intention that the sale or placement of these shares will be for the
benefit of the Company. The shares and/or the majority of net proceeds
of a sale could be used in acquisitions, debt repayments, working
capital advances or other such circumstances that may accrue to the
benefit of the Company. shares of Common Stock. Also includes 1,748,522
shares issuable upon exercise of a Warrant expiring May 26, 2005,
454,545 shares issuable upon conversion of a Note maturing on January
31, 2005, and 454,545 shares issuable upon exercise of a Warrant
expiring May 26, 2005 that will be issued if the Note maturing on
January 31, 2005 is converted prior to the record date of the special
dividend of Warrants
(6) Consists of 27,500 shares of Common Stock, and 27,500 shares issuable
upon exercise of a Warrant expiring May 26, 2005.
(7) Consists of 20,000 shares of Common Stock, and 20,000 shares issuable
upon exercise of a Warrant expiring May 26, 2005.
(8) Mr. Graber is the brother-in-law of Michael J. Blumenfeld.
(9) Consists of 20,000 shares of Common Stock, and 20,000 shares issuable
upon exercise of a Warrant expiring May 26, 2005.
(10) Consists of 20,000 shares of Common Stock, and 20,000 shares issuable
upon exercise of a Warrant expiring May 26, 2005.
(11) Consists of 20,000 shares of Common Stock, and 20,000 shares issuable
upon exercise of a Warrant expiring May 26, 2005.
PLAN OF DISTRIBUTION
The Warrants offered in this Prospectus will be issued to each of the
Company's stockholder's on a pro rata basis as a special dividend.
The sale of the Shares offered in this Prospectus may be made from time
to time directly by the Selling Shareholders, by the stockholders who exercised
their Warrants or Note holders who opt to convert their Notes into shares of
Common Stock, or by one or more broker-dealers or agents.
Shareholders selling their Shares or Warrants will act independently of
the Company in making decisions with respect to the timing, manner and size of
each sale. The Shares and the Warrants may be sold in one or more transactions
on the Bulletin Board, in negotiated transactions, or through a combination of
such methods of distribution, at prices related to prevailing market prices or
at negotiated prices.
In the event one or more broker-dealers or agents agree to sell the
Shares or the Warrants, they may do so by purchasing the Shares or Warrants as
principals or by selling the Shares or the Warrants as agent for the
shareholders selling their shares. These broker-dealers may be compensated in
the form of discounts, concessions, or commissions from these shareholders or
the purchasers of the Shares or the Warrants. A particular broker-dealer's
compensation may be in excess of customary compensation.
Under applicable Exchange Act rules and regulations, any person engaged
in a distribution of the Shares or the Warrants may not simultaneously engage in
market-making activities with respect to the Company's Common Stock or Warrants
for the applicable period under Regulation M of the Exchange Act prior to the
commencement of such distribution. In addition, shareholders selling their
shares are subject to applicable provisions, rules and regulations of the
Exchange Act, including Regulation M, which may limit the timing of purchases
and sales of the Shares and the Warrants by these shareholders. All of the
foregoing may affect the marketability of the Shares and the Warrants.
6
<PAGE> 9
To comply with applicable states' securities laws, the Shares and the
Warrants will be sold in such jurisdictions only through registered or licensed
brokers or dealers. Additionally, the Shares and the Warrants may not be sold in
certain states unless the Shares and the Warrants has been registered or
qualified for sale in these states, or an exemption from registration or
qualification is available and is complied with.
The 400,000 shares being registered by Mr. Blumenfeld are being done so
with the intention that the sale or placement of these shares will be for the
benefit of the Company. The shares and/or the majority of net proceeds of a sale
could be used in acquisitions, debt repayment, working capital advances or other
such circumstances that may accrue to the benefit of the Company.
USE OF PROCEEDS
The Company will not receive any consideration for the issuance of the
Warrant, or any proceeds from the sale of Warrants by the Warrant holders.
The Company will receive proceeds only if the Warrants are duly
exercised and paid by the Warrant holders. There can be no assurance that the
Warrant holders will exercise all or any portion of the Warrants. If all the
Warrants are exercised, the Company will receive $42,877,480. The Company
currently plans to use any proceeds received upon exercise of the Warrants as
working capital for general corporate purposes. These general corporate purposes
may include working capital, acquisitions, and debt repayment.
The Company will not receive any proceeds from the conversion of the
Notes into shares of Common Stock. However, the conversion of the Notes will
constitute a reduction of the Company's outstanding debt. The Note holder will
have the right at any time to convert all or any part of the outstanding
principal amount and the accrued interest on the Notes into shares of Common
Stock at a conversion price equal to $3.30 per share. There can be no assurance
that the Note holders will convert all or any portion of the Notes. If all the
Notes are converted, the Company's outstanding debt will be reduced by
$2,235,000.
The 400,000 shares that have been registered by Mr. Blumenfeld are
being done so with the intention that the sale or placement of these shares will
be for the benefit of the Company. The shares and/or the majority of net
proceeds of a sale could be used in working capital, acquisitions, debt
repayment, or other circumstances that may accrue to the benefit of the Company.
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by the Selling Stockholders.
DESCRIPTION OF DIVIDEND WARRANTS
The Company will issue the Warrants pursuant to a Warrant Agreement
between the Company and Continental Stock Transfer and Trust Company, Inc. (the
"Warrant Agent"). Each record holder of Common Stock as of May 26, 2000 will
receive a special dividend from the Company of one Warrant for each share of
Common Stock owned by the record holder.
Each Warrant entitles the registered holder to purchase from the
Company, for cash, one share of Common Stock at $10.00 per share. The number of
shares purchasable upon exercise of each Warrant and price per share may be
adjusted under certain conditions.
Holders may exercise the Warrants at any time on or before May 26,
2005, unless extended by the Company. The Warrants are callable and cancelable
at a cancellation price of $.10 per share of Common Stock purchasable upon
exercise of the Warrants (the "Cancellation Price"). If the Company calls the
Warrants for cancellation, holders may exercise the Warrants at any time prior
to the close of business on the business day preceding the date fixed for
cancellation.
7
<PAGE> 10
DESCRIPTION OF ON-LINE SPORTS WARRANTS
The Company issued a total of 40,000 Common Stock Purchase Warrants to
Mike Farkus and Christopher Haupt in connection with a License Agreement by and
between the Company and On-Line Sports, Inc., dated April 24, 1999.
The Warrants entitled Messrs. Farkus and Haupt to purchase from the
Company, for cash, one share of Common Stock at $12.50 per share. The exercise
price and number of shares purchasable upon exercise of each Warrant and price
per share may be adjusted under certain circumstances.
Messrs. Farkus and Haupt may exercise the Warrants at any time on or
before April 24, 2004. The Company does not have the right to call the Warrants
for cancellation.
DESCRIPTION OF NOTES
The Notes were sold to certain officers and directors of the Company
and certain other third parties not affiliated with the Company (the "Note
Holders") pursuant to a Purchase Agreement between the Company and the Note
Holders (the "Purchase Agreement"), dated as of February 29, 2000. The Company
and the Note Holders also executed a Subordination Agreement with Chase Bank of
Texas, National Association (the "Subordination Agreement"), subordinating the
indebtedness represented by the Notes to the prior payment in full of all Senior
Indebtedness.
The Notes:
o Are general obligations of ours limited to $2,235,000 in
aggregate principal amount;
o Are unsecured and do not have the benefit of a sinking fund
for the retirement of principal;
o Are subordinated in right of payment to all of our current or
future Senior Indebtedness or liabilities that are not
expressly by their terms subordinate or equal in right of
payment to the Notes;
o Interest will accrue at a variable rate equal to the Prime
Rate plus 2 1/2 percentage points, payable monthly on the 10th
day of each month, commencing March 10, 2000, and will cease
to accrue upon redemption under the terms and subject to the
conditions of the Purchase Agreement and upon conversion of
the Notes into shares of Common Stock.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND CAUTIONARY
WARNINGS BEFORE INVESTING IN THE COMMON STOCK OFFERED IN THIS PROSPECTUS. THE
FOLLOWING RISKS AND UNCERTAINTIES ARE NOT THE ONLY ONES FACING THE COMPANY.
THERE ARE ADDITIONAL RISKS AND UNCERTAINTIES THAT WE ARE EITHER UNAWARE OF OR
THAT WE CURRENTLY THINK ARE IMMATERIAL; HOWEVER, THESE RISKS AND UNCERTAINTIES
MAY ALSO IMPAIR THE COMPANY'S BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION, OR RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED.
IN SUCH CASE, THE TRADING PRICE OF THE COMMON STOCK COULD DECLINE, AND INVESTORS
COULD LOSE ALL OR PART OF ANY INVESTMENT IN THE COMMON STOCK.
YOU SHOULD ALSO REFER TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, INCLUDING THE COMPANY'S FINANCIAL STATEMENTS AND THE RELATED NOTES.
LIMITED OPERATING HISTORY:
We have a limited operating history upon which to base an evaluation of
the Company and its prospects.
8
<PAGE> 11
Collegiate Pacific only recently entered into the catalog and
mail-order distribution of sporting goods, and it incurred losses of
approximately $31,000 and $680,000 for the years ended June 30, 1999 and 1998,
respectively, which includes operating losses, the merger, and developmental
expenses, and losses of approximately $423,000 and $212,000 for the six months
ended December 31, 1999 and 1998 respectively.
Our prospects must be considered in light of the risks, expenses, and
difficulties frequently encountered by start-up companies in the marketing
industry. To address these risks, we must, among other things:
o Effectively develop new relationships and maintain existing
relationships with our suppliers, advertisers and customers;
o Provide products at competitive prices; o Respond to
competitive developments; and
o Attract, retain, and motivate qualified personnel.
We cannot assure you that we will succeed in addressing such risks. Our
failure to do so could have a material adverse effect on the Company's business,
financial condition, or results of operations.
In addition, our limited operating history makes it difficult or
impossible to predict future operating results. We cannot give you any assurance
that our revenues will increase or even continue at their current level, or that
we will attain profitability or generate cash from operations in the future.
COMPETITION
The sports goods and related equipment market in which we participate
is highly competitive and it is without a significant barrier to entry.
We compete principally in the institutional market with local sporting
goods dealers and other direct mail companies. Collegiate Pacific is a recent
entrant in this market and we had sales of about $6.8 million for the year ended
June 30, 1999.
Most of our direct mail competitors have:
o Substantially greater financial resources;
o A larger customer base; and
o Greater name recognition within the industry.
In addition, our competitors may have larger technical, sales, and
marketing resources.
We compete on a number of factors, including price, relationships with
customers, name recognition, product availability, and quality of service. We
cannot give you any assurance that we will compete successfully against our
competitors in the future. If we fail to compete successfully, our business,
financial condition, and results of operations will be materially and adversely
affected.
RAW MATERIALS
The general economic conditions in the U.S. or international countries
with which we do business could affect pricing of raw materials such as metals
and other commodities used by suppliers of our finished goods. We cannot assure
you that any price increase incurred by the Company for its products can be
passed to its customers without adversely affecting the Company's operating
results.
ACCOUNTS RECEIVABLE
We monitor the credit worthiness of our customer base on an ongoing
basis, and we have not experienced an abnormal increase in losses in our
accounts receivable portfolio. We believe that allowances for losses
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<PAGE> 12
adequately reflect the risk of loss. However, a change in the economic condition
or in the make-up of our customer base could have an adverse affect on losses
associated with the credit terms the we give to our customers.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of our
control.
We anticipate that our revenues will peak in the third and fourth
quarters of each fiscal year due primarily to the budgeting procedures of many
of our customers and the seasonal demand for the products. The first and second
quarters generally experience lower revenues and higher expenses as a percentage
of sales due to lessening customer demand because of decreased sports
activities, adverse weather conditions inhibiting customer demand, holiday
seasons, and school recesses. Therefore, we do not believe that
quarter-to-quarter comparisons of operating results for preceding quarters are
necessarily meaningful. You should not rely on the results of one quarter as an
indication of our future performance.
MANAGING POTENTIAL GROWTH
We experienced a period of significant growth, and our continued
expansion may significantly strain our management, financial, and other
resources. We believe that improvements in management and operational controls,
and operational, financial and management information systems could be needed to
manage future growth.
We cannot assure you that:
o These resources will be available or in a cost-effective form
to the Company which will allow it to sustain growth at the
same levels;
o Our current personnel, systems, procedures, and controls will
be adequate to support our future operations;
o We will identify, hire, train, motivate, or manage required
personnel; or
o That we will successfully identify and exploit existing and
potential market opportunities.
Our failure to have these resources in sufficient form or quantity
during a period of significant growth could have an adverse affect on our
operating results.
FUTURE CAPITAL REQUIREMENTS
Our cash flow from existing operations may not support an expansion of
operations or future acquisitions.
We incurred losses of approximately $31,000 and $680,000 for the years
ended June 30, 1999, and 1998, respectively. We funded our operations primarily
from the sale of stock to Michael Blumenfeld and others in February and March of
1998 and with working capital loans from Mr. Blumenfeld. In addition, on
September 14, 1999 we obtained a $2 million revolving line of credit from Chase
Bank of Texas, N.A. Notes. On February 29, 2000 we received approximately $1.4
million in cash from the sale of the Notes. We may need to seek additional
third-party financing to raise additional capital needed to support any future
growth.
We cannot give you any assurance that such additional funding will be
available on acceptable terms, if at all. If we cannot obtain adequate funds
from third parties we may have to forego strategic decisions or delay, scale
back, or eliminate certain aspects of our operations. This could have a material
adverse effect on our business, financial condition, and results of operations.
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<PAGE> 13
DEPENDENCE ON KEY PERSONNEL
Our performance is substantially dependent on the skills, experience,
and performance of its Chief Executive Officer, Michael J. Blumenfeld, as well
as our ability to retain and motivate other officers and key employees, certain
of whom would be difficult to replace.
The Company does not have an employment agreement with Mr. Blumenfeld.
The Company does not have "key person" life insurance policies on any of its
officers or other employees.
The loss of services of certain of these executives and personnel could
have a material adverse effect on the Company. We cannot assure you that the
services of our personnel will continue to be available to us. In addition, we
believe that our success in attracting and retaining additional qualified
employees, and our failure to recruit such skilled personnel as needed, could
have a material adverse effect on the Company.
RISKS RELATED TO INTERNATIONAL SUPPLIERS
A significant amount of our revenues depends upon products purchased
from foreign suppliers, located primarily in the Far East. In addition, we
believe that many of the products we purchase from our domestic suppliers are
manufactured overseas.
Accordingly, we are subject to the risks of this international
component, including:
o Shipment delays;
o Fluctuation in exchange rates;
o Increases in import duties;
o Changes in customs regulations;
o Adverse economic conditions in foreign countries; and
o Political turmoil.
The occurrence of any one or more of the foregoing could materially and
adversely affect our business, financial condition, and result of operations.
RELIANCE ON THIRD PARTY CARRIERS
Our operations depend upon third party carriers to deliver our catalogs
and products to our customers.
We ship our products using common carriers, primarily UPS. The
operations of such carriers are outside the Company's control. Accordingly, our
business reputation and operations are subject to many risks, including:
o Shipment delays caused by such carriers;
o Labor strikes by the employees of such carriers;
o Increases in delivery cost, postage rate increases; and
o Other adverse economic conditions.
The occurrence of any one or more of the foregoing could adversely
affect our business, financial condition, and results of operations due to an
inability to make timely shipment to our customers or by utilizing other more
costly carriers or means of shipping.
CONTROL BY MAJOR STOCKHOLDER
Michael J. Blumenfeld, Chairman, President and Chief Executive Officer
of Collegiate Pacific, currently owns 1,748,522 shares or 49.0% of Common Stock,
and holds options, a Warrant, and a Note convertible into 2,667,612 shares of
the Company's outstanding voting Common Stock. As a result, Mr. Blumenfeld has
the power to initiate or block corporate actions such as an amendment to the
Company's Articles of Incorporation, the
11
<PAGE> 14
consummation of any merger, or the sale of all or substantially all of the
assets of the Company. In addition, Mr. Blumenfeld may control the election of
directors and any other action requiring stockholder approval.
VOLATILITY OF STOCK PRICE
Historically, the stock market has been highly volatile.
The price of the Common Stock is determined in the marketplace and may
be influenced by many factors, including:
o The depth and liquidity of the market for the Common Stock;
o Investor perception of the Company and the industry within
which it competes;
o Quarterly variations in operating results; and
o General economic and market conditions.
Historically, the weekly trading volume of the Common Stock has been
relatively small. Any material increase in public float could have a significant
impact on the price of the Common Stock. In addition, the stock market has
occasionally experienced extreme price and volume fluctuations that often
affected market prices for smaller companies. These extreme price and volume
fluctuations often are unrelated or disproportionate to the operating
performance of the affected companies, and the price of the Common Stock could
be affected by such fluctuations.
OTC BULLETIN BOARD
There are significant consequences associated with our stock trading on
the NASD Over-The-Counter Bulletin Board rather than a national exchange.
The effects of not being able to list our securities on a national
exchange include:
o Limited release of the market prices of our securities;
o Limited news coverage of the company;
o Limited interest by investors in our securities;
o Increased difficulty in selling our securities in certain
states due to "blue sky" restrictions; and
o Limited ability to issue additional securities or to secure
additional financing.
LISTING ON NATIONAL OR REGIONAL EXCHANGES
We have no assurance of future listing on any national or regional
stock exchanges.
We are currently applying for listing of the Common Stock on the
American Stock Exchange and the Nasdaq SmallCap Market.
The American Stock Exchange's quantitative criteria for initial
inclusion include, without limitation:
o Pre-tax income of $750,000 during the latest fiscal year, or 2
of most recent 3 fiscal years;
o A public float with a market value of at least $3 million;
o A minimum bid price of $3.00; and
o Stockholders' equity of $4 million.
The Nasdaq SmallCap Market's quantitative criteria for initial
inclusion include, without limitation:
o A public float of one million shares with a market value of at
least $5 million;
o A minimum bid price of $4.00;
o Three market makers;
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<PAGE> 15
o At least 300 stockholders holding 100 shares or more; and
o Either:
o Net tangible assets of $4 million;
o Market capitalization of $50 million; or
o Net income of $750,000.
We can give you no assurance that we will achieve the quantitative criteria
required by the American Stock Exchange or the Nasdaq SmallCap Market or that,
even if we do, our listing application would be approved by the American Stock
Exchange or Nasdaq.
OUTSTANDING STOCK OPTIONS
Outstanding options may have an effect on the price of our securities.
There are 5,000 options, each to purchase one share of our Common
Stock, issued by DSSI Corporation under the Drug Screening Systems, Inc. Stock
Option Plan of 1994 that are still outstanding. In addition, we have granted
41,500 options, each to purchase one share of our Common Stock, to key
employees, officers, and directors under our 1998 Collegiate Pacific Inc. Stock
Option Plan. These outstanding options could have a significant adverse effect
on the trading price of our common stock, especially if a significant volume of
the options were exercised and the stock issued were immediately sold into the
public market.
THE CONVERSION OF SUBORDINATED CONVERTIBLE PROMISSORY NOTES COULD HAVE A
DILUTIVE EFFECT
The conversion of our Subordinated Convertible Promissory Notes,
assuming a conversion price of $3.30 per share, would result in the issuance of
at least 677,267 shares of Common Stock, or approximately 18.9% of the
outstanding shares.
Any such conversion could have an immediate negative effect on the
market price of our Common Stock, and will have a dilutive impact on other
shareholders.
THE EXERCISE OF OUTSTANDING WARRANTS AND OPTIONS COULD HAVE A DILUTIVE EFFECT
As of April 6, 2000, there were outstanding options and warrants to
purchase approximately 85,500 shares of Common Stock. Upon distribution of the
Warrants, there will be 4,323,248 outstanding options and warrants held by
shareholders to purchase shares of Common Stock. The options and warrants have
exercise prices ranging from $1.25 per share to $12.50 per share. The exercise
of warrants or options and the sale of the underlying shares of common stock (or
even the potential of such exercise or sale) could have a negative effect on the
market price of our common stock, and will have a dilutive impact on other
shareholders.
If we attempt to raise additional capital through the issuance of
equity or convertible debt securities, the terms upon which we will be able to
obtain additional equity capital, if at all, may be negatively affected since
the holders of outstanding warrants and options can be expected to exercise
them, to the extent they are able, at a time when we would, in all likelihood,
be able to obtain any needed capital on terms more favorable than those provided
in such warrants or options.
DEPENDENCE OF WARRANT HOLDERS ON MAINTENANCE OF CURRENT REGISTRATION STATEMENT;
POSSIBLE LOSS OF VALUE OF WARRANTS.
Before exercising the Warrants, a current registration statement (or an
exemption therefrom) must be in effect with the Commission and with the various
state securities authorities in the states where Warrant holders reside. We
intend to keep effective a registration statement covering the Warrants and the
underlying Shares while the Warrants are exercisable. However, we expect to
incur substantial continuing expenses for legal and accounting
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<PAGE> 16
fees in doing so. There can be no assurance that we will be able to maintain a
current registration statement while the Warrants are exercisable. Our inability
to maintain an effective registration statement and qualification in appropriate
states (or exemptions therefrom) covering the underlying shares would render the
Warrants unexercisable and may deprive them of all or a portion of their value.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS.
We may redeem each Warrant at $.10 per Warrant after the occurrence of
certain preconditions. Redemption of the Warrants could force the Warrant
holders to exercise the Warrants at a time when it may be disadvantageous for
the holders to do so or to sell the Warrants at their then current market price
when the holders might otherwise wish to hold the Warrants for possible
appreciation. Any holders who do not exercise warrants prior to their expiration
or redemption, as the case may be, will forfeit the right to purchase the shares
of Common Stock underlying the Warrants. See "Description of Securities - Common
Stock Purchase Warrants".
THE COMPANY
BUSINESS
The Company was originally incorporated in Pennsylvania in 1987. From
August 1989 to June 16, 1997, the Company developed and marketed 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
Corporation, 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. This change in our
business was accomplished through the following steps:
o The Company sold 2,000,000 shares of Common Stock, a
controlling interest in the Company. The price of the shares
was $1.00 per share, which was the average of the bid and ask
price of the Common Stock on August 18, 1997, the date of the
Stock Purchase Agreement, or a total price of $2 million.
Michael J. Blumenfeld purchased 1,960,000 shares, and Adam
Blumenfeld purchased 40,000 shares.
o Michael J. Blumenfeld sold all of the assets, including the
corporate name, of Collegiate Pacific Inc. f/k/a Nitro Sports
Inc., a Texas corporation, to the Company, at cost. Mr.
Blumenfeld formed that company in 1997 to engage in the
catalog and mail order distribution of sports equipment.
o The Company changed its name to Collegiate Pacific Inc. at
that time.
We then entered into exclusive distribution agreements with the
following companies:
o Equipmart, Inc., a manufacturer of rollers and component parts
for the tennis industry, on February 24, 1998
o FunNets, Inc., a manufacturer of plastic frames and nets used
as soccer goals and other related purposes, on March 7, 1998
o Pro Gym Equipment, Inc., a manufacturer of weight lifting and
exercise equipment and other recreational and sporting goods,
on March 21, 1998
o Edwards Sports Products Limited, a manufacturer of tennis nets
and court equipment, on February 7, 2000
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On April 14, 1998, the Company acquired Product Merchandising, Inc., a
mail order distribution company that distributes products and equipment for
summer camps.
On May 31, 1998, we merged with Vantage Products International, Inc., a
distributor of baseball netting and other related baseball products.
On December 11, 1998, the Company's stockholders approved the
reincorporation of the Company from the Commonwealth of Pennsylvania to the
State of Delaware, pursuant to a merger agreement with a newly formed Delaware
corporation. The merger and reincorporation as a Delaware corporation was
effective on July 21, 1999.
On September 14, 1999 we obtained a $2 million revolving line of credit
from Chase Bank of Texas, N.A. We may need to seek additional third-party
financing to raise additional capital needed to support any future growth.
On October 25, 1999 we acquired certain assets of Mark One Inc., a
distributor of camping and sporting good related equipment as well as numerous
items for the recreation, military and municipal markets.
On January 14, 2000 our shareholders approved an amendment to the
Company's Articles of Incorporation authorizing a one-for-five reverse stock
split, which became effective on January 19, 2000.
On February 7, 2000 we obtained licensing and distribution agreements
with the Edwards Sports Company, a manufacturer of tennis nets and court
equipment.
On February 29, 2000 we issued $2,235,000 of Subordinated Convertible
Promissory Notes to certain officers and directors of the Company and certain
third parties. Approximately $995,000 of such Notes were issued in exchange for
an equal amount of subordinated notes held by Michael J. Blumenfeld. The
remaining Notes were sold for approximately $1.4 million in cash. We are using
the cash proceeds to repay our outstanding commercial bank debt, to expand
working capital, and to finance stock repurchases.
We are in the business of the mail order marketing of sports equipment.
We sell our products primarily to institutional customers located throughout the
United States. Our principal customers include country clubs, schools, YMCAs,
YWCAs and similar recreational organizations, municipal recreation departments,
and other governmental agencies. We offer 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 we also
provide after-sale customer service through toll-free numbers.
We believe that prompt delivery of a broad range of products at
competitive prices, coupled with prompt, accessible customer service,
distinguishes Collegiate Pacific from its competitors. We currently market about
2,500 sports and recreational related equipment and products to over 200,000
potential institutional, retail, mass merchant, and team dealer customers. Since
commencing operations, we have sold products to approximately 20,000 customers.
Our master mailing list currently includes over 200,000 potential
customers, and we intend to distribute approximately 700,000 catalogs and fliers
to this audience during Fiscal Year 2000. Michael Blumenfeld, the Chief
Executive Officer of the Company with 25 years of experience in the industry,
supervised the development of this mailing list, and it is carefully maintained,
screened, and cross-checked. We subdivided this mailing list into various
combinations designed to place catalogs in the hands of the individuals making
the purchase decisions. The master mailing list is also subdivided by relevant
product types, seasons, and customer profiles. We also use other forms of
solicitations such as trade shows, telemarketing, broadcast fax programs, and
the Internet.
Our revenues are not dependent upon any one or a few major customers.
Our institutional customers typically receive annual appropriations for sports
related equipment, which 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.
We derive a significant portion of our revenues from the sale of
products purchased directly from suppliers in the Far East. Accordingly, we are
subject to the risks of this international component that may affect the our
ability to deliver products in a timely and competitive manner. These risks
include:
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o Shipment delays;
o Fluctuation in exchange rates;
o Increases in import duties;
o Changes in customs regulations;
o Adverse economic conditions in foreign countries; and
o Political turmoil.
As a result, we attempt to maintain a three to six week supply of
critical inventory items in stock.
Although the vast majority of products we distribute are purchased in
final form, a small percentage of the items require minor fabrication to
complete. We have 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. We
believe there are multiple suppliers for these products nationwide.
SEASONAL NATURE OF BUSINESS
We anticipate that our revenues will peak in the third and fourth
quarters of each fiscal year due primarily to the budgeting procedures of many
of our customers and the seasonal demand for the products. The first and second
quarters generally experience lower revenues and higher expenses as a percentage
of sales due to lessening customer demand because of decreased sports
activities, adverse weather conditions inhibiting customer demand, holiday
seasons, and school recesses.
COMPETITION
We compete principally in the institutional market with local sporting
goods dealers and other direct mail companies, which collectively dominate the
institutional market. We compete on a number of factors, including price,
relationships with customers, name recognition, product availability, and
quality of service. We believe that we have an advantage on the institutional
market over traditional sporting goods retailers because our selling prices do
not include comparable price markups attributable to wholesalers, manufacturers,
and distributors. In addition, we believe that we have an advantage over other
direct mail marketers of sporting goods because we offer superior products,
coupled with prompt and accessible service, at the most competitive prices.
EMPLOYEES
We currently employ 31 people on a full-time basis. In addition, we may
hire temporary employees as seasonal increases in demand occur. None of our
employees are represented by a union, and we believe our relations with our
employees are good.
PROPERTIES
We lease our corporate headquarters and a warehouse facility located in
Farmers Branch, Texas, with approximately 30,000 square feet. The lease for this
facility expires in Fiscal Year 2003. We believe that this facility will be
adequate for our business needs for the foreseeable future. We do not own any
real property.
LEGAL PROCEEDINGS
None.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Positions and Offices Held
Name Age With the Company
- ---------------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Michael J. Blumenfeld......................... 54 Chairman of the Board and Chief Executive Officer
Adam Blumenfeld............................... 29 President and Director
Arthur J. Coerver............................. 57 Chief Operating Officer and Director
Harvey Rothenberg............................. 56 Vice President Marketing and Director
William R. Estill............................. 51 Chief Financial Officer, Secretary and Treasurer
Chad H. Edlein................................ 29 Vice President Corporate Development
Jeff Davidowitz............................... 44 Director
Robert W. Philip.............................. 64 Director
William A. Watkins, Jr........................ 57 Director
</TABLE>
Michael J. Blumenfeld has served as Chairman of the Board and Chief
Executive Officer of the Company since February 1998, and he served as President
of the Company from February 1998 to January 2000. 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 New York Stock Exchange company engaged in the direct mail marketing of
sports related equipment.
Adam Blumenfeld joined the Company in January 2000 as President and a
director. From January 1998 through 1999, Mr. Blumenfeld was Vice President of
Sales and Marketing of Sport Supply Group, Inc., a New York Stock Exchange
company engaged in the direct mail marketing of sports related equipment. Mr.
Blumenfeld's other positions with Sport Supply Group included Vice President of
Youth Sales from January 1995 to January 1998, and Director of Youth Sales from
August 1993 to December 1994. Mr. Blumenfeld is Michael Blumenfeld's son.
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 New York Stock
Exchange company engaged in the direct mail marketing of sports related
equipment.
Harvey Rothenberg joined the Company in February 1998 as Vice President
of Marketing and Secretary, and has served on the Board of Directors since
December 1998. In August 1999, Mr. Rothenberg resigned as Secretary. From 1977
to 1998 Mr. Rothenberg served as Vice President of Sales for Sport Supply Group,
Inc., a New York Stock Exchange company engaged in the direct mail marketing of
sports related equipment.
William R. Estill joined the Company in July 1999 as Chief Financial
Officer and Treasurer, and has been Secretary since August 1999. From December
1997 until February 1999, Mr. Estill served as Vice President of Finance for
FWT, Inc., a manufacturer of telecommunication structures. From May 1996 to
November 1997, Mr. Estill served as Chief Financial Officer of Bearcom, Inc.
From April 1985 to May 1996, Mr. Estill served as Vice President, Chief
Financial Officer, Secretary and Treasurer for Sport Supply Group, Inc., a New
York Stock Exchange company engaged in the direct mail marketing of sports
related equipment. Mr. Estill was also a member of the Board of Directors during
his tenure with Sport Supply Group, Inc. Mr. Estill holds a Bachelor of Business
Administration degree in Accounting from the University of Texas at Arlington
and passed the CPA exam in 1983.
Chad H. Edlein joined the Company in July 1997. From 1994 to 1997 Mr.
Edlein served as Marketing Manager for Sport Supply Group, Inc., a New York
Stock Exchange company engaged in the direct mail marketing of sports related
equipment.
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Jeff Davidowitz has served as a director of the Company since June
1994. Mr. Davidowitz also serves as President of Penn Footwear, a private
investment company, since January 1, 1991. Prior to that, Mr. Davidowitz was
Vice President of Penn Footwear.
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 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.
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation for the
1999 and 1998 fiscal years of the Chief Executive Officer, and each executive
officer of the Company who earned over $100,000 (a "Named Executive Officer").
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
------------------------------------------ ----------------------------
Other Securities All Other
Annual Restricted Under- Compen-
Compen- Stock lying sation
Name and Principal Salary Bonus sation Award(s) Options ($)
Position Year ($) ($) ($) ($) (#)
- ------------------------ ------- ------------- --------- ----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Blumenfeld
Chairman, & Chief
Executive Officer (1) 1999 $ 78,000.00 $93,750.00 10,000
1998 $ 77,000.00 -- -- -- -- --
Arthur J. Coerver
Chief Operating
Officer & 1999 $108,000.00 $46,875.00 5,000
Director (2) 1998 $112,500.00 -- -- -- -- --
</TABLE>
(1) Mr. Blumenfeld became Chairman, President, and Chief Executive Officer
on February 17, 1998, and ceased to be President on January 14, 2000.
(2) Mr. Coerver became Chief Operating Officer on February 17, 1998.
DIRECTOR COMPENSATION
Directors receive $7,500.00 per year 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.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None.
18
<PAGE> 21
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 February
29, 2000 for:
o All persons who are beneficial owners of 5% or more of the
Company's Common Stock;
o Each director and nominee for director;
o The Company's Chief Executive Officer and the other Named
Executive Officer in the Summary Compensation Table above; and
o All executive officers and directors as a group.
<TABLE>
<CAPTION>
Executive Officers and Directors(1) Number of Shares Beneficially Owned(2) Percent of Class(3)
- ----------------------------------- -------------------------------------- -------------------
<S> <C> <C>
Michael J. Blumenfeld 4,416,134(4) 70.9%
Adam Blumenfeld 493,800(5) 13.0%
Arthur J. Coerver 81,780(6) 2.3%
Harvey Rothenberg 16,864(7) *
William R. Estill -- *
Chadd Edlein 29,500(8) *
Jeff Davidowitz 305,606(9) 8.2%
Robert W. Philip 48,302(10) 1.3%
William A. Watkins, Jr. 88,606(11) 2.5%
Executive Officers and Directors 5,480,592 79.9%
as a Group (9 persons)
</TABLE>
*Less than 1%
(1) The address for each person listed is 13950 Senlac, Suite 200, Farmers
Branch, Texas 75234.
(2) As required by SEC regulations, the number of shares shown as
beneficially owned includes shares that could be purchased within 60
days after the date of this prospectus. The table shows the estimated
total of the shares which would be issued on the conversion of all of
outstanding Notes and the exercise of all Warrants to acquire shares of
Common Stock described in this Prospectus. The actual number of shares
of Common Stock issuable upon the conversion of the Notes and exercise
of the Warrants is subject to adjustment and could be materially less
than the number estimated in this table. This variation is due to
factors that cannot be predicted by us at this time. The most
significant of these factors is the future market price of our Common
Stock.
(3) The percentage of each shareholder is based on the beneficial ownership
of that shareholder divided by the sum of the current outstanding
shares of Common Stock plus the additional shares, if any, that would
be issued to that shareholder (but not any other shareholder) when
converting Notes or exercising any Warrant or other right in the
future.
(4) Consists of 1,748,522 shares of Common Stock, 10,000 shares issuable
upon exercise of an option expiring February 24, 2009, 1,748,522 shares
issuable upon exercise of a Warrant expiring May 26, 2005, and 454,545
shares issuable upon conversion of a Note maturing on January 31, 2005,
and 454,545 shares issuable upon exercise of a Warrant expiring May 26,
2005 that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(5) Consists of 246,900 shares of Common Stock, and 246,900 shares issuable
upon exercise of a Warrant expiring May 26, 2005.
(6) Consists of 23,240 shares of Common Stock, 5,000 shares issuable upon
exercise of an option expiring February 24, 2009, 23,240 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 6,060 shares
held in trust for the benefit of Mr. Coerver issuable upon conversion
of a Note maturing on January 31, 2005, 6,060 shares held in trust for
the benefit of Mr. Coerver issuable upon exercise of a Warrant expiring
May 26, 2005 that will be issued if the Note maturing on January 31,
2005 is converted prior to the record date of the special dividend of
Warrants, 1,212 shares held in trust for the benefit of Mr. Coerver's
spouse issuable upon conversion of a Note maturing on January 31, 2005,
1,212 shares held in trust for the benefit of Mr. Coerver's spouse
issuable upon exercise of a Warrant expiring May 26, 2005 that will be
issued if the Note maturing on January 31, 2005 is converted prior to
the record date of the special dividend of
19
<PAGE> 22
Warrants, 7,878 shares issuable upon conversion of a Note maturing on
January 31, 2005, and 7,878 shares issuable upon exercise of a Warrant
expiring May 26, 2005 that will be issued if the Note maturing on
January 31, 2005 is converted prior to the record date of the special
dividend of Warrants.
(7) Consists of 200 shares of Common Stock, 1,687 shares of Common Stock
held in trust for the benefit of Mr. Rothenberg's child, 3,000 shares
issuable upon exercise of an option expiring February 24, 2009, 1,000
in shares issuable upon exercise of an option expiring February 24,
2009 held by the spouse of Mr. Rothenberg, and 1,887 shares issuable
upon exercise of a Warrant expiring May 26, 2005, 3,030 shares held in
trust for the benefit of Mr. Rothenberg issuable upon conversion of a
Note maturing on January 31, 2005, 3,030 shares held in trust for the
benefit of Mr. Rothenberg issuable upon exercise of a Warrant expiring
May 26, 2005, that will be issued if the Note maturing on January 31,
2005 is converted prior to the record date of the special dividend of
Warrants, and 1,515 shares issuable upon conversion of a Note maturing
on January 31, 2005, 1,515 shares issuable upon exercise of a Warrant
expiring May 26, 2005 that will be issued if the Note maturing on
January 31, 2005 is converted prior to the record date of the special
dividend of Warrants.
(8) Consists of 14,000 shares of Common Stock, 1,500 shares issuable upon
exercise of an option expiring February 24, 2009, and 14,000 shares
issuable upon exercise of a Warrant expiring May 26, 2005.
(9) Consists of 122,000 shares of Common Stock, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 122,000 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 30,303
shares issuable upon conversion of a Note maturing on January 31, 2005,
and 30,303 shares issuable upon exercise of a Warrant expiring May 26,
2005 that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(10) Consists of 8,500 shares of Common Stock, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 8,500 shares issuable
upon exercise of a Warrant expiring May 26, 2005, 15,151 shares
issuable upon conversion of a Note maturing on January 31, 2005, and
15,151 shares issuable upon exercise of a Warrant expiring May 26, 2005
that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(11) Consists of 13,500 shares of Common Stock, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 13,500 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 30,303
shares held in trust for the benefit of Mr. Watkins issuable upon
conversion of a Note maturing on January 31, 2005, and 30,303 shares
held in trust for the benefit of Mr. Watkins issuable upon exercise of
a Warrant expiring May 26, 2005 that will be issued if the Note
maturing on January 31, 2005 is converted prior to the record date of
the special dividend of Warrants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 17, 1998, the Company sold 1,960,000 shares of Common Stock
to Michael J. Blumenfeld and 40,000 shares to Adam Blumenfeld for $1.00 per
share, or an aggregate purchase price of $2,000,000, in cash, pursuant to the
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.
Also on February 17, 1998, in connection with the Stock Purchase
Agreement, the Company sold:
o 20,000 shares of Common Stock to Arthur J. Coerver;
o 13,500 shares of Common Stock to Robert W. Philip; and
o 13,500 shares of Common Stock to William A. Watkins, Jr.
These shares were sold at $1.00 per share, and Messrs. Coerver, Philip
and Watkins became directors of the Company upon consummation of the Stock
Purchase Agreement.
Since April 14, 1997, Michael J. Blumenfeld has made loans, net of
repayments, to the Company in an aggregate amount approximating $755,000. These
loans were payable on demand and bore interest at the rate of 12% per annum. The
aggregate amount outstanding for such loans (including accrued interest) at June
30, 1999 and June 30, 1998 was $980,720 and $899,836, respectively. On February
1, 2000, the aggregate outstanding amount
20
<PAGE> 23
under the note payable was $994,307, and pursuant to the Purchase Agreement, Mr.
Blumenfeld exchanged his outstanding loans for an equal amount of Notes.
MARKET FOR 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, and adjusted to reflect the Company's
one-for-five reverse stock split:
<TABLE>
<CAPTION>
Fiscal 2000 Quarter Ended Low High
- ------------------------- --- ----
<S> <C> <C>
March 31, 2000 $ 8.19 $ 10.15
December 31, 1999 7.55 8.50
September 30, 1999 9.20 14.20
Fiscal 1999 Quarter Ended Low High
- ------------------------- --- ----
June 30, 1999 8.75 13.45
March 31, 1999 8.15 12.20
December 31, 1998 8.15 11.25
September 30, 1998 8.15 10.65
Fiscal 1998 Quarter Ended Low High
- ------------------------- --- ----
June 30, 1998 11.75 13.45
March 31, 1998 11.55 12.80
December 31, 1997 8.15 11.25
September 30, 1997 0.86 8.15
</TABLE>
The foregoing quotations reflect inter-dealer prices, without mark-up, mark-down
or commissions, and may not reflect actual transactions.
On January 14, 2000 our shareholders approved an amendment to the
Company's Articles of Incorporation authorizing a one-for-five reverse stock
split, which became effective on January 19, 2000.
HOLDERS
As of April 4, 2000, there were 368 holders of record of Common
Stock, and there were 3,567,341 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, 1999. 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.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was originally incorporated in Pennsylvania in 1987. From
August 1989 to June 16, 1997, the Company developed and marketed 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
Corporation and thereafter had no formal operations.
Michael J. Blumenfeld formed Collegiate Pacific Inc. as a Texas
corporation on April 10, 1997. That company was originally named Nitro Sports
Inc. and it began business during the latter part of June 1997. Effective
February 7, 1998, Collegiate Pacific Inc. entered into a reverse acquisition
agreement with DSSI Corporation, which was then a publicly held shell
corporation.
On April 14, 1998, we acquired all of the issued and outstanding common
stock of Product Merchandising, Inc. We accounted for this transaction as a
purchase, and, accordingly, the results and operations of this entity were
included in the Company's results of operations commencing on April 14, 1998.
The Company also acquired Vantage Products International, Inc. on May 31, 1998
by issuing common stock for all of the issued outstanding common stock of that
entity. We accounted for this acquisition 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.
We solicit customers from a variety of catalogs designed for specific
uses, including summer camps, baseball, and general sports and recreation, and
we distributed approximately 550,000 catalogs to current and prospective
customers during Fiscal Year 1999. After the end of Fiscal Year 1999, the
Company entered into a supply agreement with the General Services Administration
of the federal government to furnish certain products to government agencies.
There were no sales to any federal government agencies in Fiscal Year 1999, and
sales to those agencies in Fiscal Year 2000 as of December 31, 1999 were
immaterial. We also solicit customers through trade shows, road salesmen,
broadcast fax programs, telemarketing, and the Internet.
Collegiate Pacific had no operations prior to June 30, 1997, and
accordingly this discussion covers subsequent periods.
RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1999 AND
1998
Sales
Revenues for the six months ended December 31, 1999 increased by
approximately $967,000 (41%) as compared to the same period in 1998. The Company
attributes the growth in revenues to an increase in marketing activity,
expansion of products offered to its existing customer base, and the growth in
its customer base. As the result of expanded operations and marketing
activities, we believe that future revenues will continue to exhibit growth from
current levels. We also believe that seasonality in revenues will continue to be
a factor in future periods as revenues during the third and fourth quarters of
the Company's fiscal year are typically higher due to the order pattern of the
Company's customer base.
Gross Profit
The Company's gross profit for the six months ended December 31, 1999,
increased by approximately $356,000 (45%) as compared to the same period in
1998. As a percentage of sales the gross profit increased to 34.7% as compared
to 34% for the same period in 1998. The increase was the result of a slight
increase in sales from the Company's inventories, as opposed to the sale of
products shipped directly from vendors.
22
<PAGE> 25
Selling, General, and Administrative Expense
Selling, general and administrative expenses for the six months ended
December 31, 1999 increased by approximately $539,000 (56%) as compared to the
same period in 1998. As a percentage of sales, selling, general and
administrative expenses increased to 45% from 41%. The increase in selling,
general, and administrative expense in dollars and as a percentage of sales is
due to the Company's increased personnel-related cost to manage the increased
sales volume and an increase in advertising related expenses as the Company
slightly increased its catalog mailings.
We recently changed the compensation structure for our outside sales
force from receiving a salary to commission-only compensation. Rather than seek
to expand this sales force as originally planned, we are now seeking alliances
with several team dealers who employ larger and more experienced sales forces.
In the short term, this change in marketing plans will reduce or eliminate the
previously anticipated revenues from our in-house sales force, and will reduce
or eliminate the expenses associated with this sales force as well. The company
believes that the new marketing alliances will have a greater short and long
term benefit to revenues and earnings.
RESULTS OF OPERATIONS - COMPARISON OF THE YEAR ENDED JUNE 30, 1999 TO THE YEAR
ENDED JUNE 30, 1998
Net Sales
Net sales for the fiscal year ended June 30,1999 increased by
approximately $3.5 million (107%) as compared to the period ended June 30, 1998.
The increase in net sales of approximately 33% reflects the addition of the camp
catalog to the Company's lines of business. The balance of the increase is due
to higher volume in the our primary catalog sales. We believe this trend in
increased sales volume will continue in future periods, however no assurances
can be made that the increased sales level will be as high.
Gross Profit
Gross profit for the fiscal year ended June 30, 1999 increased by
approximately $1.3 million (107%) as compared to the period ended June 30,1998.
As a percentage of sales, the gross profit was approximately 36% for both
periods ended June 30, 1999 and 1998.
Selling, General, and Administrative Expense
Selling, general, and administrative expense for the period ended June
30,1999 increased by approximately $640,000 as compared to the period ended June
30, 1998. As a percentage of net sales, the selling, general, and administrative
expense decreased to approximately 34% for the period ended June 30, 1999, as
compared to 52% for the period ended June 30,1998. The increase in the selling,
general, and administrative expense was due primarily to the following:
o An increase in salaries and personnel related cost of
approximately $200,000 as the Company staffed additional
personnel in the camp-related business and to manage the
increase in the primary catalog sales.
o An increase in advertising of approximately $160,000 due to
mailing catalogs to the camp-related customers and an increase
in catalogs and fliers to baseball and other primary catalog
customers.
o An increase in shipping cost of approximately $70,000 due to
the increased sales activity.
o An increase in amortization expense of approximately $52,000
due to the amortization of the cost in excess of net tangible
assets acquired in late Fiscal Year 1998.
o An increase in warehouse-related expense of approximately
$50,000 due to the increased sales activity.
23
<PAGE> 26
Operating Profit
Operating profit increased by approximately $630,000 for the period
ended June 30,1999 as compared to the period ended June 30, 1998. As a
percentage of net sales, the operating profit increased to approximately 2% as
compared to a 16% operating loss for the period ended June 30, 1998. The
increase is attributable to the increase in net sales.
Interest Expense
Interest expense decreased by approximately $60,000 for the period
ended June 30,1999 as compared to the period ended June 30, 1998. As a
percentage of sales, interest expense decreased to approximately 2% for the
period ended June 30, 1999 as compared to 5% for the period ended June 30, 1998.
The decrease reflects the lower borrowing requirements due to decreased
inventory purchases made in Fiscal Year 1999. All of the interest incurred in
Fiscal Years 1999 and 1998 relates to interest paid on the note to Mr.
Blumenfeld. (See "Liquidity and Capital Resources")
Provision for Income Taxes
The provision for taxes increased by $33,580 for the period ended June
30, 1999 as compared to the period ended June 30,1998. The increase is the
result of the Company and its subsidiaries filing separate returns during the
period ending June 30, 1999.
Net Loss
The net loss decreased by approximately $648,000 for the period ended
June 30, 1999 as compared to the period ended June 30, 1998. As a percentage of
sales, the net loss as a percentage of sales, decreased to approximately 1/2%
for the period ended June 30, 1999 as compared to 21% for the same period ended
June 30, 1998. The decrease is primarily due to the increase in net sales and
the resulting increase in gross profit and lower selling, general and
administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations for the period ended December 31, 1999 was
approximately $1,166,000 as compared to approximately $254,000 for the same
period in 1998. The increase was due primarily to the Company's net loss, the
purchase of additional inventories in anticipation of an increase in selling
activities in future periods and the addition of products offered by the
Company, and an increase in prepaid expense.
We generated approximately $864,000 from financing activities. The cash
from financing activities was approximately $821,000 in proceeds from the
Revolving Credit Facility with the Company's primary lender, and approximately
$43,000 from the issuance of common shares upon the exercise of stock options.
Cash used in operations for the period ended June 30, 1999 was
approximately $190,000 as compared to $2.7 million for the period ended June 30,
1998. The decrease of approximately $2.6 million was primarily due to lower
purchases after the initial buildup, when operations commenced, and lower
inventory levels as a result of the increased sales volume, as well as the
decrease in net loss, and was partially offset by an increase in accounts
receivable also due to the increased sales.
For the period ended December 31, 1999, we used approximately $131,000
in cash for investing activities. The primary use of cash in investing
activities was for the acquisition of certain assets of a camp sporting goods
related business, and the purchase of property and equipment. The company
expects to spend a comparable amount for capital expenditures in Fiscal Year
2000.
On March 31,1999 the Company amended the Promissory Note to Mr.
Blumenfeld. The amended note reflected a maturity date of April 10, 2001 and
borrowings under the note bore an interest rate of 12% per annum. As of June 30,
1999 the aggregate outstanding amount under the note payable was $980,720. On
February 29, 2000,
24
<PAGE> 27
the aggregate outstanding amount under the note payable was $994,307, and
pursuant to the Purchase Agreement, Mr. Blumenfeld exchanged his outstanding
loans for an equal amount of Notes.
On September 14, 1999, the Company agreed to terms for a $2,000,000
Revolving Line of Credit with Chase Bank of Texas, N.A. The Revolving Line of
Credit allows the Company to borrow funds based upon a certain percentages of
accounts receivable and inventories, will mature on October 31, 2001, and
includes a provision for letters of credit. Borrowings under the Revolving Line
of Credit will bear interest at the prevailing prime rate plus 1/4% or LIBOR
plus 2 1/2%. Mr. Blumenfeld guarantees the Revolving Line of Credit up to
$1,000,000.
We believe that the Company will satisfy its short term and long-term
liquidity needs from borrowings under the new Revolving Line of Credit and the
proceeds of the Notes, and from cash flows from operations. We may experience
periods of higher borrowing under the credit facility due to the seasonal nature
of the Company's business cycle. We are actively seeking expansion through
acquisitions and/or joint ventures, and the success of such efforts may require
additional bank debt, equity financing, or private financing.
On February 3, 2000, a former DSSI Corporation executive exercised
common stock purchase warrants for 98,974 shares of Common Stock. These warrants
were granted to the warrant holder during his tenure as a DSSI Corporation
executive. The Company received $499,819 or $5.05 per share.
YEAR 2000 IMPACT
The Year 2000 issue is the result of computer programs written using
two digits rather than four digits to define "date" fields. Information systems
have time sensitive operations that, as a result of this data field limitation,
could disrupt activities in the normal business cycle. We purchased and
implemented new information systems in Fiscal Year 1999, which brought the
information systems into Year 2000 compliance.
We are not currently aware of any material year 2000 problem relating
to any of our material internal system or applications. We have not discussed
the Year 2000 issue with our customers and suppliers. There can be no assurance
that the systems of these other companies were timely converted, and the failure
of our significant suppliers and customers to make necessary Year 2000
modifications could have a material adverse impact on the our results and
operations.
We believe that, absent a systemic failure outside our control, such as
a prolonged loss of electrical or telecommunications service, year 2000 problems
at third parties will not have a material impact on our operations. The failure
of our internal systems or the systems of third parties to be year 2000 ready
could temporarily prevent us from providing service to our customers, issuing
invoices and could require us to devote significant resources to correct such
problems. The costs associated with remediating any year 2000 problems have not
been material to date. Although we do not anticipate that these costs will be
material in the future, we cannot assure you that these costs will not be
material.
25
<PAGE> 28
DESCRIPTION OF SECURITIES
GENERAL
As of the closing of the offering, the Company's authorized capital
stock will consist of 50,000,000 shares of Common Stock, par value $.01 per
share and 1,000,000 shares of Preferred Stock, par value $.01 per share.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote per
share on all matters to be voted on by stockholders. The holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of legally available funds. See
"Dividends." In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
As of the date of this Prospectus, there are no outstanding shares of
Preferred Stock. The Board of Directors may authorize the issuance of Preferred
Stock in one or more series and may determine, with respect to any such series,
the designations, powers, preferences, and rights of such series, and its
qualifications, limitations, and restrictions, including, without limitation:
o The designation of the series;
o The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the
designations for such series) increase or decrease (but not
below the number of shares of such series then outstanding);
o Whether dividends, if any, will be cumulative or noncumulative
and the dividend rate of the series;
o The conditions upon which and the dates at which dividends, if
any, will be payable, and the relation that such dividends, if
any, will bear to the dividends payable on any other class or
classes of stock;
o The redemption rights and price or prices, if any, for shares
of the series;
o The terms and amounts of any sinking fund provided for the
purchase or redemption of share of the series;
o The amounts payable on and the preferences, if any, of shares
of the series, in the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the
Company;
o Whether the shares of the series will be convertible into
shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the
specification of such other class or series or such other
security, the conversion price or prices or rate or rates, any
adjustments, the date or dates as of which such shares will be
convertible and all other terms and conditions upon which such
conversion may be made; and
o The voting rights, if any, of the holders of shares of such
series.
COMMON STOCK PURCHASE WARRANTS
Special Dividend of Warrants
Each Warrant entitles the holder to purchase one share of Common Stock
at an exercise price of $10.00 per share. Warrants are exercisable through May
26, 2005 provided that at the time of exercise the Common Stock is qualified for
sale or exempt from qualification under applicable state securities laws. The
Company has the right at
26
<PAGE> 29
any time to call the Warrants for cancellation by giving at least 30 days, but
not more than 90 days, notice, at a price of $.10 per Warrant. Holders of
Warrants automatically forfeit their rights to purchase the shares of Common
Stock issuable upon exercise of such Warrants unless the Warrants are exercised
before the close of business on the business day immediately prior to the date
set for redemption. A notice of redemption shall be mailed to each of the
registered holders of the Warrants by First Class mail, postage prepaid, at
least 30 days before the date fixed for redemption. The notice of redemption
shall specify the redemption price, the date fixed for redemption, the place
where the Warrant certificates shall be delivered and the redemption price to be
paid, and that the right to exercise a Warrant shall terminate at 5:00 p.m. (New
York City time) on the business day immediately preceding the date fixed for
redemption.
The Warrants may be exercised upon surrender of the Warrant
certificate(s) on or prior to the expiration or the redemption date at the
offices of Continental Stock Transfer & Trust Company, the Company's warrant
agent (the "Warrant Agent") with the subscription form on the reverse side of
the certificate(s) completed and executed as indicated, accomplished by payment
(in the form of a certified or cashier's check payable to the order of the
Company) of the full exercise price for the number of warrants being exercised.
The exercise price and number and kind of shares of Common Stock or
other securities or assets purchasable on exercise of the Warrants and the
Cancellation Price are subject to adjustment if the Company:
o Combines or subdivides its outstanding shares of Common Stock,
including stock splits effected through a dividend; or
o Merges or consolidates with another corporation.
There will be no adjustment to the Warrants if the Company:
o Makes any cash dividends or asset distributions with respect
to outstanding shares of Common Stock;
o Sells additional shares of Common Stock; or
o Sells all or substantially all of its assets.
In the event of any other type of recapitalization or reorganization of
the Company, the Company may, at its option, provide for adjustment to the
Warrants' terms.
The Company is not required to issue fractional shares of Common Stock,
and, in lieu of a fractional share, the Company will make a cash payment based
upon the current market value of such fractional shares. The Warrants holder
will not have any right as a shareholder of the Company unless or until the
holder exercises the Warrants.
On-Line Sports, Inc. Warrants
On April 24, 1999, the Company issued Mike Farkus and Christopher Haupt
Warrants to purchase an aggregate of 40,000 shares of Common Stock. The Company
issued these Warrants in connection with a License Agreement with On-Line
Sports, Inc. Each Warrant entitles Messrs. Farkus and Haupt to purchase one
share of Common Stock at an exercise price of $12.50 per share. The Warrants are
exercisable through April 24, 2004. The Company does not have the right to call
these Warrants for cancellation.
Messrs. Farkus and Haupt may only transfer the Warrants to Immediate
Family Members, defined as:
o The Warrant holder and his spouse;
o The Warrant holder's lineal descend and their spouses; or
o Any entity established by one or more of the above persons for
charitable or estate planning purposes.
27
<PAGE> 30
The Warrants may be exercised upon the delivery to the Company of a
notice of exercise, payment of the exercise price, and the Warrant.
The exercise price and number of shares of Common Stock are subject to
adjustment if there is a stock split, stock dividend, reverse stock split, or
other subdivision of the Common Stock.
The Company is not required to issue fractional shares of Common Stock,
and the Warrant holder will be entitled to receive, in lieu of any fraction
shares, either:
o A cash payment equal to the excess of the fair market value
for the fractional share; or
o A whole share if the Warrant holder pays the exercise price
for one whole share.
The Warrant holders will not have any rights as a shareholder of the
Company unless and until the holder exercises the Warrants.
SUBORDINATED CONVERTIBLE PROMISSORY NOTES
GENERAL. The Notes are general obligations of ours limited to
$2,235,000 in aggregate principal amount that mature on January 31, 2005, unless
redeemed earlier, which we may do at our option without penalty. See "Redemption
of Notes." The Notes bear interest at a variable rate equal to the Prime Rate
plus 2 1/2 percentage points per year. We will pay interest monthly on the 10th
day of each month commencing on April 10, 2000. We will compute interest on the
Notes on the basis of the actual number of days based on a 365 or 366 day year,
as the case may be.
The Notes are denominated in U.S. dollars, and payments of principal
and interest on the Notes are in U.S. dollars. The Notes may be presented for
transfer or exchange and shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the registrar and duly executed
by the Note Holder or his attorney duly authorized in writing. The registered
holder of a Note will be treated as its owner for all purposes.
28
<PAGE> 31
NOTE HOLDERS. The following table and accompanying footnotes identify
each of the Note Holders based upon information provided to the Company, set
forth as of February 29, 2000. This information also states the principal amount
of the Notes, the number of shares the Notes are initially convertible into,
shares beneficially held by or acquired by, as the case may be, each Note
Holder. Beneficial ownership is stated as of immediately prior to this offering.
Percentages are based on 3,567,341 shares of Common Stock outstanding on
February 29, 2000.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Principal Amount Issuable Upon Conversion Beneficially
Name of Note Holder of Note of Note(1) Owned(2) Percent of Class(3)
- ---------------------------- ---------------- ------------------------ ---------------- --------------------
<S> <C> <C> <C> <C>
Michael J. Blumenfeld, $1,500,000 454,545 4,416,134(4) 70.9%
Chief Executive Officer of
the Company
Watkins Brothers Trust $ 100,000 30,303 88,606(5) 2.4%
Arthur J. Coerver, IRA $ 20,000 6,060 81,780(6) 2.3%
Arthur J. Coerver $ 26,000 7,878 81,780(6) 2.3%
Colleen C. Coerver, IRA $ 4,000 1,212 81,780(6) 2.3%
Penn Footwear Retirement $ 50,000 15,151 305,606(7) 8.2%
Trust
Davidowitz Foundation Inc. $ 50,000 15,151 32,302(8) 0.9%
JIBS Equities, L.P. $ 50,000 15,151 305,606(7) 8.2%
William Davidowitz $ 100,000 30,303 110,660(9) 3.0%
Robert W. Philip or Sharon $ 50,000 15,151 48,302(10) 1.3%
A. Philip Joint Tenants
with Right of Survivorship
Myrna G. Kulp(11) $ 100,000 30,303 65,926 1.8%
Harvey Rothenberg and $ 5,000 1,515 16,864(12) 0.5%
Elizabeth Rosenberg
Harvey Rothenberg, IRA $ 10,000 3,030 16,864(12) 0.5%
H. I. Schendle IRA Rollover $ 50,000 15,151 48,902(13) 1.4%
Eric Green GST Trust $ 120,000 36,363 72,726 2.0%
Total $2,235,000 677,267
- -----
</TABLE>
- ----------------------
(1) The number of shares issuable upon conversion of the Notes is based on
a conversion price equal to $3.30 per share, with the Note Holder
receiving a cash payment in lieu of any fractional shares that would
otherwise be issued.
(2) As required by SEC regulations, the number of shares shown as
beneficially owned includes shares that could be purchased within 60
days after the date of this Prospectus. The table shows the estimated
total of the shares which would be issued on the conversion of all of
outstanding Notes and the exercise of all Warrants to acquire shares of
Common Stock described in this Prospectus. The actual number of shares
of Common Stock issuable upon the conversion of the Notes and exercise
of the Warrants is subject to
29
<PAGE> 32
adjustment and could be materially less than the number estimated in
this table. This variation is due to factors that cannot be predicted
by us at this time. The most significant of these factors is the future
market price of our Common Stock.
(3) The percentage of each Selling Shareholder is based on the beneficial
ownership of that Selling Shareholder divided by the sum of the current
outstanding shares of Common Stock plus the additional shares, if any,
that would be issued to that Selling Shareholder (but not any other
shareholder) when converting Notes or exercising any Warrant or other
right in the future.
(4) Consists of 1,748,522 shares of Common Stock, 10,000 shares issuable
upon exercise of an option expiring February 24, 2009, 1,748,522 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 454,545
shares issuable upon conversion of a Note maturing on January 31, 2005,
and 454,545 shares issuable upon exercise of a Warrant expiring May 26,
2005 that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(5) Consists of 13,500 shares of Common Stock, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 13,500 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 30,303
shares held in trust for the benefit of Mr. Watkins issuable upon
conversion of a Note maturing on January 31, 2005, and 30,303 shares
held in trust for the benefit of Mr. Watkins issuable upon exercise of
a Warrant expiring May 26, 2005 that will be issued if the Note
maturing on January 31, 2005 is converted prior to the record date of
the special dividend of Warrants.
(6) Consists of 23,240 shares of Common Stock, 5,000 shares issuable upon
exercise of an option expiring February 24, 2009, 23,240 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 6,060 shares
held in trust for the benefit of Mr. Coerver issuable upon conversion
of a Note maturing on January 31, 2005, 6,060 shares held in trust for
the benefit of Mr. Coerver issuable upon exercise of a Warrant expiring
May 26, 2005 that will be issued if the Note maturing on January 31,
2005 is converted prior to the record date of the special dividend of
Warrants, 1,212 shares held in trust for the benefit of Mr. Coerver's
spouse issuable upon conversion of a Note maturing on January 31, 2005,
1,212 shares held in trust for the benefit of Mr. Coerver's spouse
issuable upon exercise of a Warrant expiring May 26, 2005 that will be
issued if the Note maturing on January 31, 2005 is converted prior to
the record date of the special dividend of Warrants, 7,878 shares
issuable upon conversion of a Note maturing on January 31, 2005, and
7,878 shares issuable upon exercise of a Warrant expiring May 26, 2005
that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(7) Consists of 122,000 shares of Common Stock, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 122,000 shares
issuable upon exercise of a Warrant expiring May 26, 2005, 30,303
shares issuable upon conversion of a Note maturing on January 31, 2005,
and 30,303 shares issuable upon exercise of a Warrant expiring May 26,
2005 that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(8) Consists of 1,000 shares of Common Stock, 1,000 shares issuable upon
exercise of a Warrant expiring May 26, 2005, 15,151 shares issuable
upon conversion of a Note maturing on January 31, 2005, and 15,151
shares issuable upon exercise of a Warrant expiring May 26, 2005 that
will be issued if the Note maturing on January 31, 2005 is converted
prior to the record date of the special dividend of Warrants.
(9) Consists of 8,500 shares of Common Stock, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 8,500 shares issuable
upon exercise of a Warrant expiring May 26, 2005, 15,151 shares
issuable upon conversion of a Note maturing on January 31, 2005, and
15,151 shares issuable upon exercise of a Warrant expiring May 26, 2005
that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the special dividend of Warrants.
(10) Consists of 25,000 shares of Common Stock, 25,000 shares issuable upon
exercise of a Warrant expiring May 26, 2005, 30,303 shares issuable
upon conversion of a Note maturing on January 31, 2005, and 30,303
shares issuable upon exercise of a Warrant expiring May 26, 2005 that
will be issued if the Note maturing on January 31, 2005 is converted
prior to the record date of the special dividend of Warrants.
(11) Myrna G. Kulp is Michael J. Blumenfeld's sister-in-law.
(12) Consists of 200 shares of Common Stock, 1,687 shares of Common Stock
held in trust for the benefit of Mr. Rothenberg's child, 3,000 shares
issuable upon exercise of an option expiring February 24, 2009, 1,000
shares issuable upon exercise of an option expiring February 24, 2009
held by Mr. Rothenberg's spouse, 1,887 shares issuable upon exercise of
a Warrant expiring May 26, 2005, 3,030 shares held in trust for the
benefit of Mr. Rothenberg issuable upon conversion of a Note maturing
January 31, 2005, 3,030 shares held in trust for the benefit of Mr.
Rothenberg issuable upon exercise of a Warrant expiring May 26, 2005
that will be issued if the Note maturing on January 31, 2005 is
converted prior to the record date of the
30
<PAGE> 33
special dividend of Warrants, 1,515 shares issuable upon conversion of
a Note maturing on January 31, 2005, and 1,515 shares issuable upon
exercise of a Warrant expiring May 26, 2005 that will be issued if the
Note maturing on January 31, 2005 is converted prior to the record date
of the special dividend of Warrants.
(13) Consists of 9,300 shares of Common Stock, 9,300 shares issuable upon
exercise of a Warrant expiring May 26, 2005, 15,151 shares issuable
upon conversion of a Note maturing on January 31, 2005, and 15,151
shares issuable upon exercise of a Warrant expiring May 26, 2005 that
will be issued if the Note maturing on January 31, 2005 is converted
prior to the record date of the special dividend of Warrants.
REDEMPTION OF NOTES. We may prepay the Notes at our option, in whole or
in part, at any time after February 28, 2002, by payment of all principal and
accrued interest. We must give the Note Holders' 10 days' prior notice of our
intent to prepay the Notes, and the Note Holders have the right to convert their
Notes into shares of Common Stock in lieu of the prepayment.
No sinking fund is provided for the Notes.
SUBORDINATION. As set forth in the Subordination Agreement, the Notes
are subordinate in right of payment to the holders of all existing and future
Senior Indebtedness. Subordination of the Notes will not prevent the occurrence
of any event of default under the Notes.
By reason of the subordination, if any of the events of default occur,
holders of Senior Indebtedness may receive more, ratably, than the Company's
other creditors. For the same reason, the Note Holders may receive less,
ratably, than the Company's other creditors.
At December 31, 1999, the Company had approximately $1,993,081 of
Senior Indebtedness and other liabilities, including trade and other payables,
outstanding, but excluding intercompany liabilities and liabilities of a type
not required to be reflected on a balance sheet in accordance with generally
accepted accounting principles, to which the Notes would have been effectively
subordinated.
The Subordination Agreement does not limit the amount of additional
indebtedness, including Senior Indebtedness, that the Company can incur, assume
or guarantee. Furthermore, the Subordination Agreement does not limit the amount
of indebtedness that any subsidiary can incur, assume, or guarantee.
DEFAULTS AND REMEDIES. The Notes provide that, if an event of default
specified in the Note has happened and is continuing, the following will be
immediately due and payable:
o The principal amount of the Notes; plus
o Interest on the Notes, accrued and unpaid to the date of the
declaration.
Under the Notes, events of default are defined as:
o The Company fails to make any payment under the Notes
when due and such default continues for 30 days;
o The Company fails to perform any of its covenants or
agreements under the Notes and such failure continues
for 30 days after receipt of written notice of such
default from any Note Holder;
o The Company
o Applies for or consents to the appointment
of a receiver, trustee, custodian,
intervenor or liquidator of the Company or
of all or a substantial part of its assets;
o Files a voluntary petition in bankruptcy,
admits in writing that it is unable to pay
its debts as they become due or generally
does not pay its debts as they become due;
o Makes a general assignment for the benefit
of creditors;
31
<PAGE> 34
o Files a petition or answer seeking
reorganization or an arrangement with
creditors or to take advantage of any
bankruptcy or insolvency laws;
o Files an answer admitting the material
allegations of, or consents to, or defaults
in answering, a petition filed against it in
any bankruptcy, reorganization or insolvency
proceeding; or
o Takes corporate action for the purpose of
effecting any of the foregoing;
o An involuntary petition or complaint is filed against
the Company seeking bankruptcy or reorganization or
the appointment of a receiver, custodian, trustee,
intervenor or liquidator of the Company, or of all or
substantially all of its assets; and
o Such petition or complaint is not dismissed
within 90 days of the filing thereof; or
o An order, order for relief, judgment or
decree is entered by any court of competent
jurisdiction or other competent authority
approving a petition or complaint seeking
reorganization of the Company or appointing
a receiver, custodian, trustee, intervenor
or liquidator of the Company, or of all or
substantially all of its assets.
SENIOR INDEBTEDNESS. As used in this Prospectus, the term Senior
Indebtedness means:
o All indebtedness, liabilities and obligations or the Company
under the Revolving Promissory Note, evidencing the Company's
obligations under the $2,000,000 Revolving Line of Credit with
Chase Bank of Texas, N.A. (the "Loan"), or any other document
or instrument evidencing, securing, guaranteeing or in any way
pertaining to the Loan; and
o All other indebtedness owed by the Company to Chase Bank of
Texas, N.A.
WARRANT AGENT, STOCK TRANSFER AGENT AND REGISTRAR
The warrant agent, stock transfer agent and registrar for the Common
Stock is Continental Stock Transfer & Trust Company.
STOCKHOLDER REPORTS
The Company furnishes its stockholders with annual reports containing
audited financial statements and may furnish its stockholders quarterly or
semi-annual reports containing unaudited financial information.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Section 203 of the Delaware General Corporation Law
The Company is subject to the provisions of Delaware General
Corporation Law ("DGCL") Section 203 (the "Anti-takeover Law") regulating
corporate takeovers. The Anti-takeover Law prevents certain Delaware
corporations from engaging, under certain circumstances, in a "business
combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with any "interested stockholder" (defined as a
stockholder who acquires 15% or more of the corporation's outstanding voting
stock without the prior approval of the corporation's Board of Directors) for
three years following the date that such stockholder became an "interested
stockholder". A Delaware corporation may "opt out" of the Anti-takeover Law with
an express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from an
amendment approved by at least a majority of the outstanding voting shares. The
Company has not "opted out" of the application of the Anti-takeover Law.
32
<PAGE> 35
LEGAL MATTERS
The validity of the Shares and the Warrants offered hereby will be
passed upon for the Company by Hughes & Luce, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company as of June 30,
1999 and June 30, 1998, and for the years then ended, are included in the
Registration Statement of which this Prospectus is a part in reliance on the
reports of, respectively, GRANT THORNTON LLP and SUTTON FROST LLP, independent
auditors, which reports are included herein. The consolidated financial
statements audited by GRANT THORNTON LLP and SUTTON FROST LLP have been included
herein in reliance on their reports given on their authority as experts in
accounting and auditing.
INDEMNIFICATION
The Company's Bylaws provide that any officer or director who is made a
party to or is threatened to be made a party to or is otherwise involved in any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was an officer or a director of the Company or is or was serving at the
request of the Company as a director or an officer of another entity shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the DGCL against all expense, liability, and loss reasonably incurred or
suffered by such person in connection therewith. The right to indemnification
includes the right to be paid by the Company for expenses incurred in defending
any such proceeding in advance of its final disposition. Officers and directors
are not entitled to indemnification if such persons did not meet the applicable
standard of conduct set forth in the DGCL for officers and directors.
DGCL Section 145 provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that the person is or was a
director, officer, employee or agent of the Company, or is or was serving at the
Company's request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding. The power to indemnify applies (a) if such person is successful
on the merits or otherwise in defense of any action, suit or proceeding, or (b)
if such person acted in good faith and in a manner he reasonably believed to be
in the best interest, or not opposed to the best interest, of the Company and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The power to indemnify applies to actions
brought by or in the right of the Company as well, to the extent of expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Company, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Company, unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The indemnification provisions contained in the Company's Bylaws are
not exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise.
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
33
<PAGE> 36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Consolidated Financial Statements.................................................... 34
Reports of Independent Auditors............................................................... F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998...................................... F-3
Consolidated Statements of Operations for the year ended June 30, 1999 and 1998............... F-5
Consolidated Statement of Stockholders' Equity for the year ended June 30, 1999 and 1998...... F-6
Consolidated Statements of Cash Flows for the year ended June 30, 1999 and 1998............... F-7
Notes to Consolidated Financial Statements.................................................... F-9
Condensed Consolidated Balance Sheets as of December 31, 1999 (Unaudited) and June 30, F-19
1999..........................................................................................
Condensed Consolidated Statements of Operations for the six months ended
December 31, 1999 and 1998 (Unaudited)........................................................ F-20
Condensed Consolidated Statements of Cash Flows for the six months ended December 31,
1999 and 1998 (Unaudited)..................................................................... F-21
Notes to Condensed Consolidated Financial Statements (Unaudited).............................. F-22
</TABLE>
34
<PAGE> 37
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
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, 1999, 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, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Dallas, Texas
August 25, 1999
(except for Note 10,
as to when the date is
January 14, 2000)
F-1
<PAGE> 38
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
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
F-2
<PAGE> 39
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 518,844 $ 514,494
Accounts Receivable, less allowance for doubtful accounts of
$38,806 in 1999 and $-0- in 1998 1,142,708 685,974
Inventory 1,843,820 2,149,020
Prepaid Expenses and other Current Assets 23,581 40,064
------------- --------------
Total Current Assets 3,528,953 3,389,552
Property and Equipment, net of accumulated depreciation of
$98,785 in 1999 and $50,155 in 1998 150,585 120,626
Other Assets:
License Agreements, net of accumulated amortization of
$50,030 in 1999 and $12,408 in 1998 253,586 279,258
Cost in Excess of Net Tangible Assets Acquired, net of
accumulated amortization of $42,373 in 1999 and $7,590
in 1998 509,373 544,156
Other Assets, net 54,409 54,552
------------- --------------
$ 4,496,906 $ 4,388,144
============= ==============
</TABLE>
F-3
<PAGE> 40
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 537,056 $ 552,618
Accrued Expenses 51,181 192,066
Note Payable to Stockholder -- 754,671
Other Current Liabilities 86,826 59,365
----------- -----------
Total Current Liabilities 675,063 1,558,720
Note Payable to Stockholder 980,720 --
----------- -----------
Total Liabilities 1,655,783 1,558,720
----------- -----------
Commitments and Contingencies -- --
Stockholders' Equity:
Common Stock, $.01 par value; authorized 20,000,000
shares; issued and outstanding: 3,440,366 in 1999 and
3,403,366 in 1998 34,404 34,034
Additional Paid-in Capital 3,506,568 3,456,938
Accumulated Deficit (660,462) (629,928)
Treasury Shares, at Cost; 900 shares in 1999 (10,982) --
----------- -----------
2,869,528 2,861,044
Less: Notes Receivable from Stockholders (28,405) (31,620)
----------- -----------
Total Stockholders' Equity 2,841,123 2,829,424
----------- -----------
$ 4,496,906 $ 4,388,144
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE> 41
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 6,813,333 $ 3,283,825
Cost of Sales 4,367,382 2,106,581
----------- -----------
Gross Profit 2,445,951 1,177,244
Selling, General and Administrative Expenses 2,343,434 1,704,859
----------- -----------
Operating Profit (Loss) 102,517 (527,615)
----------- -----------
Other Income (Expense):
Interest Expense (110,534) (172,027)
Interest Income 11,373 20,737
----------- -----------
Total Other Income (Expense) (99,161) (151,290)
----------- -----------
Income(Loss) Before Provision for Taxes 3,356 (678,905)
Provision for Taxes 33,890 --
----------- -----------
Net loss $ (30,534) $ 678,905)
=========== ===========
Weighted average shares of common stock outstanding 3,409,257 3,321,205
Net loss per share of common stock (basic and diluted) $ (0.01) $ (0.20)
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
<PAGE> 42
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
NOTES
TREASURY RECEIVABLE
ADDITIONAL RETAINED SHARES FROM
SHARES AMOUNT PAID-IN CAPITAL EARNINGS/(DEFICIT) AT COST STOCKHOLDERS TOTAL
--------- ----------- --------------- --------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1997 3,280,200 $ 32,802 $ 2,847,504 $ 48,977 $ -- $ (31,620) $ 2,897,663
Issuance of stock for cash 69,000 690 68,310 -- -- -- 69,000
Issuance of stock for
purchase of Product 27,500 275 274,725 -- -- -- 275,000
Merchandising, Inc.
Issuance of stock for
license agreements 26,666 267 266,399 -- -- -- 266,666
Net loss -- -- -- (678,905) -- -- (678,905)
--------- ----------- ----------- ----------- ----------- ---------- -----------
Balance at June 30, 1998 3,403,366 34,034 3,456,938 (629,928) -- (31,620) 2,829,424
Issuance of stock for cash 37,000 370 49,630 -- -- -- 50,000
Purchase of 900 shares of
stock for cash -- -- -- -- (10,982) -- (10,982)
Repayments on Notes Receivable
from Stockholders -- -- -- -- -- 3,215 3,215
Net loss -- -- -- (30,534) -- -- (30,534)
--------- ----------- ----------- ----------- ----------- ---------- -----------
Balance at June 30, 1999 3,440,366 $ 34,404 $ 3,506,568 $ (660,462) $ (10,982) $ (28,405) $ 2,841,123
========= =========== =========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-6
<PAGE> 43
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (30,534) $ (678,905)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation 32,367 23,606
Amortization 75,618 26,420
Change in assets and liabilities, net of effects of business
acquisitions:
Accounts Receivable (456,734) (634,862)
Inventory 305,200 (2,149,020)
Prepaid Expenses and Other Current Assets 16,483 (40,064)
Other Assets, net (3,070) 48,029
Accounts Payable (15,562) 455,477
Accrued Expenses (140,885) 190,051
Other Liabilities 27,461 (2,343)
----------- -----------
Net cash used by operating activities (189,656) (2,761,611)
----------- -----------
Cash flows from investing activities:
Purchase of Property and Equipment (62,326) (128,263)
Cash in public entity in connection with reverse acquisition -- 582,660
Cash paid for Licenses (11,950) (25,000)
Cash paid for Treasury Shares (10,982)
Cash received from Notes Receivable from Stockholders 3,215
Cash used in business acquisition net of cash acquired -- (182,963)
----------- -----------
Net cash provided by(used in) investing activities (82,043) 246,434
----------- -----------
</TABLE>
(Continued)
The accompanying notes are an integral
part of these consolidated financial statements.
F-7
<PAGE> 44
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash flow from financing activities
Net proceeds from Notes Payable to Stockholder 226,049 754,671
Proceeds from issuance of Common Stock 50,000 2,275,000
---------- ----------
Net cash provided by financing activities 276,049 3,029,671
Increase in cash 4,350 514,494
Cash and cash equivalents at beginning of year 514,494 --
---------- ----------
Cash and cash equivalents at end of year $ 518,844 $ 514,494
========== ==========
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
========== ==========
Cash Payments for:
Income taxes $ 26,020 $ --
========== ==========
Interest $ 255,699 $ --
========== ==========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-8
<PAGE> 45
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 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 Delaware 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
1,960,000 (approximately 62.5%) shares of DSSI's voting common stock in exchange
for all of the outstanding shares of CPI (a tax free reorganization). 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 entity's year-end.
For accounting purposes, the transaction was treated 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. The recapitalization has been given retroactive effect to July 1,
1997.
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
International, 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. The fair value of these financial instruments
and notes payable approximate their carrying values.
RECLASSIFICATIONS
Certain amounts for June 30, 1998 have been reclassified to conform to the
current year classifications.
F-9
<PAGE> 46
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
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, which consist of goods held for resale, 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.
COST IN EXCESS OF NET TANGIBLE ASSETS ACQUIRED
Cost in excess of net tangible assets acquired is the difference between the
purchase price paid and liabilities assumed over the estimated fair market value
of assets acquired. Cost in excess of net tangible assets acquired in connection
with acquisitions is amortized using the straight-line method over 15 years.
Amortization expense relating to cost in excess of net tangible assets amounted
to $36,542 and $7,590 for the years ended June 30, 1999 and 1998. On an on-going
basis management reviews recoverability, the valuation and amortization of cost
in excess of net tangible assets. As a part of this review, the Company
considers the undiscounted projected future net cash flows in evaluating the
recoverability of cost in excess of net tangible assets. If the undiscounted
future net cash flows were less than the stated value, cost in excess of net
tangible assets would be written down to fair value.
F-10
<PAGE> 47
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 relating to license agreements
was $37,622 and $12,408 for the year ended June 30, 1999 and 1998, respectively.
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 excess, if any, of the fair
value of the stock on the date of grant over the amount to be paid 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. See Note 8.
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. Advertising expense approximated $489,000 and
$337,000 for the years ended June 30, 1999 and 1998, respectively.
F-11
<PAGE> 48
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. Loss per share for fiscal
1998 has been restated from the previously reported of $.20, to properly reflect
the capital structure of DSSI for the entire year. 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.
3 - BUSINESS ACQUISITIONS
VANTAGE PRODUCTS INTERNATIONAL, INC.
On May 31, 1998, the Company issued 80,000 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 retained earnings at July 1, 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 27,500 shares of CPI common stock valued at a
fair market value of $2 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.
F-12
<PAGE> 49
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Displays $ 1,237 $ 1,237
Leasehold improvements 6,178 6,178
Fixtures and equipment 230,255 167,927
Automobile 11,700 11,700
--------- ---------
Total property and equipment 249,370 187,042
Less accumulated depreciation (98,785) (66,416)
--------- ---------
Property and equipment, net $ 150,585 $ 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, which was paid in full in Fiscal Year 1999 and
totaled $145,165 at June 30, 1998, and is included in accrued expenses for the
period ended June 30,1998. On March 31,1999 the note payable to stockholder was
renewed with a maturity date of April 30, 2001.
6 - FEDERAL INCOME TAXES
CPI and its subsidiaries file separate income tax returns. Deferred tax assets
and liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets
Accrued expenses $ -- $ 65,222
Net operating loss carry forward 714,000 656,000
Other 5,018 17,399
--------- ---------
Total deferred tax assets 719,018 738,621
Valuation allowance (719,018) (738,621)
--------- ---------
Net deferred tax assets $ -- $ --
========= =========
</TABLE>
F-13
<PAGE> 50
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
6 - FEDERAL INCOME TAXES (Continued)
The Company has provided a valuation allowance against deferred tax assets
because their recovery is uncertain. Following is a reconciliation of income
taxes at the federal statutory rate to income tax expense:
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Tax benefit at statutory rate $ 1,114 $ 230,828
Loss for which benefits were not used (1,114) (230,828)
Taxes attributable to filing on a separate return 23,896 --
basis
State income taxes 9,994 --
--------- ---------
Income tax expense $ 33,890 $ --
========= =========
</TABLE>
At June 30, 1999, the Company had net operating loss carryovers of approximately
$2,100,000, of which approximately $900,000 were carryforwards of DSSI. Because
of the ownership change rules, use of the DSSI carryforwards are limited to
approximately $80,000 per year.
The carryovers of CPI and its subsidiaries expire from 2013 through 2019. The
DSSI carryovers expire through 2011.
F-14
<PAGE> 51
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
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 in full subsequent to June 30, 1998. See Note 5
regarding stockholders loans.
8 - STOCK OPTIONS AND WARRANTS
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
100,000 shares of common stock at the fair market value at the date of grant.
There were 69,000 options outstanding at June 30, 1998. No options were granted,
exercised or canceled during the year ended June 30, 1998, and approximately
37,000 shares were exercised and no additional shares were granted or cancelled
under the terms of this plan during the year ended June 30, 1999.
On December 11, 1998, the Company's stockholders approved a new stock option
plan, ("1998 Collegiate Pacific Inc. Stock Option Plan"). The new plan
authorizes the Company's Board of Directors to grant employees, directors and
consultants of the Company up to an aggregate of 400,000 shares of the Company's
common stock, $0.01 par value per share. Pursuant to the approval of the stock
option plan by the Company's stockholders, the Company's Board of Directors on
February 24, 1999 granted 41,500 shares to employees and non-employee directors
of the Company at the closing price of the Company's common stock, which was
$9.40. These options vested at date of grant.
F-15
<PAGE> 52
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
8 - STOCK OPTIONS AND WARRANTS (Continued)
A summary of the Company's option and warrant activity for the years ended June
30, 1998 and 1999 follows:
<TABLE>
<CAPTION>
WARRANTS ISSUED OPTIONS
TO DIRECTORS WARRANTS ISSUED TO WEIGHTED
OFFICERS ISSUED TO OFFICERS AND AVERAGE
AND EMPLOYEES OTHER PARTIES EMPLOYEES EXERCISE PRICE
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1997 28,936 54,269 69,000 $ 8.35
Options and warrants expired (28,936) (54,269) -- --
---------- ---------- ----------- ------------
Outstanding and exercisable at June 30, 1998 -- -- 69,000 2.00
Options and warrants granted -- -- 41,500 9.40
Options and warrants exercised -- -- (37,000) 1.35
Options and warrants expired -- -- -- --
---------- ---------- ----------- ------------
Outstanding and exercisable at June 30, 1999 -- -- 73,500 $ 6.20
========== ========== =========== ============
</TABLE>
The weighted average fair value of options granted in Fiscal 1999 was $6.15 per
share.
The Company has adopted the disclosure provisions of Statement No. 123, as
discussed in Note 2, and continues to apply Opinion 25 for stock options granted
to employees. If the Company had recognized compensation expense based upon the
fair market at the date of grant for options granted to employees, the effect on
net loss and loss per share for the year ended June 30, 1999 would have been as
follows:
<TABLE>
<CAPTION>
<S> <C>
Net loss
As reported $ (30,534)
Pro forma (285,000)
Loss per common share
As reported $ (0.01)
Pro forma (0.08)
</TABLE>
The fair value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: expected volatility of 140%; risk free interest rate of 5.50%; no
dividend yield; and expected lives of seven years.
F-16
<PAGE> 53
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
8 - STOCK OPTIONS AND WARRANTS (Continued)
The following table summarizes additional information about stock options at
June 30,1999:
<TABLE>
<CAPTION>
OUTSTANDING AND EXERCISABLE
---------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED
CONTRACTUAL AVERAGE
LIFE EXERCISE
EXERCISE PRICE SHARES (IN YEARS) PRICE
- -------------- ------ ---------- -----
<S> <C> <C> <C>
$ 1.25 12,000 3.0 $ 1.25
3.15 20,000 0.1 3.15
9.40 41,500 9.7 9.40
------ -------
73,500 $ 6.20
====== =======
</TABLE>
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, and $107,000 for the year ended June 30, 1999.
Future minimum lease commitments on all operating leases with terms in excess of
one year are as follows:
2000 $ 94,890
2001 104,000
2002 105,000
2003 8,750
----------
$ 312,640
==========
F-17
<PAGE> 54
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
10 - STOCK SPLIT
On January 14, 2000, the stockholders of the Company approved a one-for-five
reverse stock split of the Company's $.01 par value common stock. As a result of
the reverse stock split additional paid in capital was increased by $137,614 and
136,134 for the periods ended June 30, 1999 and 1998, respectively, and common
stock was reduced by the same amount. All references in the accompanying
financial statements to the numbers of shares of Common Stock and the per-share
amounts have been restated to reflect the reverse stock split.
11 - SUBSEQUENT EVENTS (UNAUDITED)
On September 14, 1999 the Company agreed to terms for a new $2,000,000 Revolving
Line of Credit with Chase Bank of Texas, N.A. The new Revolving Line of Credit
will allow the Company to borrow funds based upon certain percentages of
accounts receivable and inventories. The Revolving Credit Facility matures on
October 31, 2001 and includes a provision for letters of credit. Borrowings
under the Revolving Line of Credit will bear interest at the prevailing Prime
Rate plus 1/4% or LIBOR plus 2-1/2%. The Note Payable to Stockholder is
subordinate to the Revolving Line of Credit, and the Revolving Line of Credit is
partially guaranteed by the Stockholder holding the existing Note Payable.
F-18
<PAGE> 55
COLLEGIATE PACIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
December 31, 1999 June 30, 1999
----------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 86,049 $ 518,844
Accounts receivable, net of the allowance for doubtful accounts of $50,533
and $38,806, respectively 662,114 1,142,708
2,412,323 1,843,820
Inventories 253,272 23,581
--------------- ---------------
Prepaid expenses and other assets 3,413,758 3,528,953
Total current assets 264,198 249,370
PROPERTY AND EQUIPMENT (119,244) (98,785)
--------------- ---------------
Less accumulated depreciation 144,954 150,585
OTHER ASSETS
License agreements, net of accumulated amortization of $70,633 and
$50,030, respectively 244,620 253,586
Cost in excess of net tangible assets acquired, net of accumulated
amortization of $59,765 and $42,373, respectively 606,525 509,373
Other assets, net 54,647 54,409
--------------- ---------------
$ 4,464,504 $ 4,496,906
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 103,126 $ 537,056
Accrued expenses 71,013 51,181
Other current liabilities 17,590 86,826
--------------- ---------------
Total current liabilities 191,729 675,063
Note payable to stockholder 994,307 980,720
Note payable 807,045 --
--------------- ---------------
Total liabilities 1,993,081 1,655,783
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 50,000,000 shares; issued and
outstanding, 3,468,367 and 3,440,367 shares, respectively 34,684 34,404
Additional paid-in capital 3,549,413 3,506,568
Accumulated deficit (1,083,617) (660,462)
Treasury shares; at cost 1,460 and 900 shares, respectively (17,932) (10,982)
--------------- ---------------
2,482,548 2,869,528
Less notes receivable from stockholders (11,125) (28,405)
--------------- ---------------
Total stockholders' equity 2,471,423 2,841,123
--------------- ---------------
$ 4,464,504 $ 4,496,906
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
F-19
<PAGE> 56
COLLEGIATE PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
December 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Revenues $ 3,315,971 $ 2,349,025
Cost of sales 2,162,521 1,551,846
--------------- ---------------
Gross margin 1,153,450 797,179
Selling, general and administrative expenses 1,503,285 964,081
Operating loss (349,835) (166,902)
Interest expense (75,255) (49,582)
Other income 1,935 3,999
--------------- ---------------
Net loss $ (423,155) $ (212,485)
C
Net loss per share - basic and diluted $ (0.12) $ (0.06)
=============== ===============
Shares used in computing net loss per share (basic 3,460,659 3,406,568
and diluted)
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
F-20
<PAGE> 57
COLLEGIATE PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
December 31,
----------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Operating activities
Net earnings (loss) $ (423,155) $ (212,485)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 60,059 49,872
Changes in operating assets and liabilities (802,778) (91,150)
-------------- ---------------
Net cash used in operating activities (1,165,874) (253,763)
Investing activities
Purchase of property and equipment (14,828) (40,314)
Cash paid for licenses (11,637) --
Cash paid for treasury shares (6,950) --
Cash used in business acquisition, net of cash acquired (114,543) --
Cash received for notes receivable from stockholders 17,780 --
-------------- ---------------
Net cash used in investing activities (130,678) (40,314)
Financing activities
Proceeds from borrowings 820,632 164,806
Proceeds from issuance of common stock 43,125 6,250
-------------- ----------------
Net cash provided by financing activities 863,757 171,056
============== ===============
Net decrease in cash and cash equivalents 432,795) (123,021)
Cash and cash equivalents at beginning of period 518,844 514,494
-------------- ---------------
Cash and cash equivalents at end of period $ 86,049 $ 391,473
============= ===============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 65,312 $ 59,260
============= ===============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
F-21
<PAGE> 58
NOTE 1 - GENERAL AND BACKGROUND
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
The condensed consolidated financial statements as of December 31, 1999 and the
periods ended December 31, 1999 and 1998 are unaudited and reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the interim
period. The condensed financial statements should be read in conjunction with
the consolidated financial statements and notes thereto, for the year ended June
30, 1999 together with management's discussion and analysis of financial
condition and results of operations, contained in the 10-KSB filed with the
Securities and Exchange Commission. The results of operations for the three and
six months ended December 31, 1999 are not necessarily indicative of the results
for the entire fiscal year.
The consolidated financial statements for the period ended December 31, 1999
include the accounts of Collegiate Pacific Inc. and its wholly owned subsidiary
Product Merchandising, Inc., (collectively referred to as the "Company").
NOTE 2 - BUSINESS COMBINATIONS
On October 22, 1999, the Company acquired certain assets of Mark One
Distributors, Inc. in an all cash transaction. The purchased assets related to
sales and distribution activities by Mark One in the camp sporting goods
business. The acquisition was accounted for as a purchase, and accordingly, the
net assets and results of operation of Mark One's camping related business have
been included in the Company's consolidated financial statements commencing on
October 22, 1999.
NOTE 3 - EQUITY
On January 14, 2000, the stockholders of the Company approved a 1 for 5 reverse
stock split of the Company's $.01 par value common stock (the "Common Stock").
As a result of the reverse stock split additional paid in capital was increased
by $138,735, and common stock was reduced by the same amount. All references in
the accompanying financial statements to the number of shares of Common Stock
and the per-share amounts have been restated to reflect the reverse stock split.
NOTE 4 - RELATED PARTY TRANSACTION
During the period the Company purchased certain inventory items from a
manufacturing supplier which is also owned by the majority stockholder of the
Company. Purchases for the period from the manufacturing supplier were $555,674
for the six month period ended on December 31, 1999 and the Company had an
outstanding payable of $17,341 to the supplier at the end of the period.
F-22
<PAGE> 59
NOTE 5 - NOTE PAYABLE TO STOCKHOLDER
The note payable to stockholder (also the Chief Executive Officer of the
Company) is uncollateralized, due April 10, 2001 and bears interest at an annual
rate of 12%. Accrued interest on this note totaled $9,943 at December 31, 1999,
and is included in accrued expenses.
NOTE 6 - SUBSEQUENT EVENTS
On January 14, 2000, the stockholders of the Company approved a 1 for 5 reverse
stock split of the Company's $.01 par value common stock. As a result of the
reverse stock split additional paid in capital was increased by $138,735, and
common stock was reduced by the same amount. All references in the accompanying
financial statements to the number of shares of Common Stock and the per-share
amounts have been restated to reflect the reverse stock split.
In February 2000, a former executive of the DSSI Corporation ("DSSI"), which was
the predecessor of the Company, exercised common stock warrants for 98, 974
shares of Common Stock. The warrants were originally granted to the warrant
holder during his tenure as an executive of DSSI. The terms of the warrants were
extended at the February 18, 1998 meeting of the Board of Directors of DSSI.
Although the extension of the terms of the warrants was not disclosed to the
Company's current management, the Company accepted the exercise of the warrants
and the Company received funds for the exercise of the warrants in the amount of
$499,819 or $5.05 per share.
In February 2000, the Company agreed to exchange the note payable to stockholder
for a subordinated convertible note. In addition, the Company solicited and
received additional subscriptions from Company directors and officers including
the holder of the existing note payable to stockholder, and third party
investors for approximately $1.3 million in subordinated convertible notes. The
subordinated convertible notes will bear interest at the prevailing Prime Rate
plus 2.5%, will be non-callable by the Company for a period of two years, and
will be convertible to the Company's common stock at $3.30 per share, which was
set by a formula equal to 110% of the closing price of the common stock on
January 17, 2000. The subordinated convertible notes will be subordinate to the
Company's Revolving Line of Credit with Chase Bank of Texas, N.A.
In January 2000, the Company declared a special warrant divided to the holders
of Company's Common Stock. One warrant will be issued for each share of Common
Stock held and would entitle the warrant holder to purchase, for cash, one share
of Common Stock at $10 per share. The Company has not set a record date for the
distribution of the warrants.
F-23
<PAGE> 60
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide that any officer or director who is made a
party to or is threatened to be made a party to or is otherwise involved in any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was an officer or a director of the Company or is or was serving at the
request of the Company as a director or an officer of another entity shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the Delaware General Corporation Law ("DGCL") against all expense, liability,
and loss reasonably incurred or suffered by such person in connection therewith.
The right to indemnification includes the right to be paid by the Company for
expenses incurred in defending any such proceeding in advance of its final
disposition. Officers and directors are not entitled to indemnification if such
persons did not meet the applicable standard of conduct set forth in the DGCL
for officers and directors.
DGCL Section 145 provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that the person is or was a
director, officer, employee or agent of the Company, or is or was serving at the
Company's request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding. The power to indemnify applies (a) if such person is successful
on the merits or otherwise in defense of any action, suit or proceeding, or (b)
if such person acted in good faith and in a manner he reasonably believed to be
in the best interest, or not opposed to the best interest, of the Company and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The power to indemnify applies to actions
brought by or in the right of the Company as well, to the extent of expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Company, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Company, unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The indemnification provisions contained in the Company's Bylaws are
not exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise.
II-1
<PAGE> 61
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
Registration fee $11,909.69
Accounting fees and expenses $ 4,000.00*
Legal fees and expenses $15,000.00*
Miscellaneous expenses $ 3,000.00*
----------
Total: $33,909.69*
</TABLE>
- ---------------
* Estimated
All of the above expenses will be paid by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth information as of February 29, 2000 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 2,000,000 shares of Common Stock
to Michael J. Blumenfeld (1,960,000 shares) and Adam Blumenfeld (40,000 shares)
for $1.00 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 Michael
Blumenfeld and Adam Blumenfeld.
On February 17, 1998, in connection with the Stock Purchase Agreement
set forth above, the Company sold (i) 20,000 shares of Common Stock to Arthur J.
Coerver, who became a director of the Company upon consummation of the Stock
Purchase Agreement, at $1.00 per share, (ii) 13,500 shares of Common Stock to
Robert W. Philip, who became a director of the Company upon consummation of the
Stock Purchase Agreement, at $1.00 per share, and (iii) 13,500 shares of Common
Stock to William A. Watkins, Jr., who became a director of the Company upon
consummation of the Stock Purchase Agreement, at $1.00 per share.
On February 24, 1998, the Company issued 20,000 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 6,667 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
27,500 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 80,000 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.
On September 2, 1998, Mr. Stephen Turner was issued 5,000 shares of
Common Stock in connection with the exercise of options issued under the terms
of the Drug Screen Systems, Inc. Stock Option Plan of 1994 (the "DSSI SOP").
II-2
<PAGE> 62
On June 14, 1999, Mr. Joseph Shaya was issued 30,000 shares of Common
Stock in conjunction with the exercise of options issued under the terms of the
DSSI SOP.
On June 14, 1999, Mr. Jeffery M. Bachrach was issued 2,000 shares of
Common Stock in conjunction with the exercise of options issued under the terms
of the DSSI SOP.
On July 14, 1999, Mr. Kenneth Carpenter was issued 2,000 shares of
Common Stock in conjunction with the exercise of options issued under the terms
of the DSSI SOP.
On July 21, 19994, Mr. Robert G. Wallace was issued 10,000 shares of
Common Stock in conjunction with the exercise of options issued under the terms
of the DSSI SOP.
On July 27, 1999, Mr. Anthony I. Newman was issued 5,000 shares of
Common Stock in conjunction with the exercise of options issued under the terms
of the DSSI SOP.
On July 28, 1999, Mr. Jeff Davidowitz was issued 5,000 shares of Common
Stock in conjunction with the exercise of options issued under the terms of the
DSSI SOP.
On August 6, 1999, Ms. Cara Lundberg was issued 1,000 shares of Common
Stock in conjunction with the exercise of options issued under the terms of 1998
Collegiate Pacific Inc. Stock Option Plan.
On September 13, 1999, Mr. Patrick J. Brennan was issued 5,000 shares
of Common Stock in conjunction with the exercise of options issued under the
terms of the DSSI SOP.
On February 3, 2000, Mr. John Pappajohn was issued 98,974 shares of
Common Stock in connection with the exercise of common stock purchase warrants
issued by Drug Screening Systems, Inc.
On February 29, 2000 we closed the Purchase Agreement for the sale of
Subordinated Convertible Promissory Notes in the principal amount of $2.25
million to certain officers and directors of the Company and certain third
parties.
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 27. EXHIBITS.
The Exhibits to this Registration Statement are listed in the Index to
Exhibits of this Registration Statement, which Index is incorporated herein by
reference.
ITEM 28. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information
II-3
<PAGE> 63
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 64
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on April 7, 2000.
COLLEGIATE PACIFIC INC.
By: /s/ MICHAEL J. BLUMENFELD
-----------------------------------------------
Michael J. Blumenfeld,
Chairman, Chief Executive Officer
and Director (Principal Executive Officer)
Each person whose signature appears below hereby constitutes and
appoints Michael J. Blumenfeld and Arthur J. Coerver, and each of them, his or
her true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him or her and in his or her name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement or amendment thereto has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. BLUMENFELD Chairman, Chief Executive Officer, and April 7, 2000
- ------------------------------------ Director
Michael J. Blumenfeld (Principal Executive Officer)
/s/ ADAM BLUMENFELD President and Director April 7, 2000
- ------------------------------------
Adam Blumenfeld
/s/ ARTHUR J. COERVER Chief Operating Officer and Director April 7, 2000
- ------------------------------------
Arthur J. Coerver
/s/ JEFF DAVIDOWITZ Director April 6, 2000
- ------------------------------------
Jeff Davidowitz
/s/ William R. Estill Chief Financial Officer, Secretary, and April 7, 2000
- ------------------------------------ Treasurer (Principal Accounting and
William R. Estill Financial Officer)
/s/ ROBERT W. PHILIP Director April 6, 2000
- ------------------------------------
Robert W. Philip
/s/ HARVEY ROTHENBERG Vice President Marketing and Director April 7, 2000
- ------------------------------------
Harvey Rothenberg
/s/ WILLIAM A. WATKINS, JR. Director April 6, 2000
- ------------------------------------
William A. Watkins, Jr.
</TABLE>
II-5
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<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. (1)
2.2 Stock Purchase Agreement dated August 18, 1997 with Michael J. Blumenfeld. (2)
2.3 Agreement and Plan of Merger dated July 20, 1999 for the reincorporation of the
Company in Delaware. (3)
3.1 Intentionally omitted.
3.2 Intentionally omitted.
3.3 Intentionally omitted.
3.4 Intentionally omitted.
3.5 Intentionally omitted.
3.6 Intentionally omitted.
3.7 Copy of Articles of Incorporation of the Company filed on December 15, 1998. (4)
3.8 Copy of Certificate of Merger of the Company filed on July 20, 1999. (4)
3.9 Copy of By-Laws of the Company. (4)
3.10 Copy of Certificate of Amendment to Articles of Incorporation of the Company filed
on January 18, 2000
4.1 Intentionally omitted.
4.2 Specimen Certificate of Common Stock, $0.01, par value, of the Company. (4)
4.3 Specimen Common Stock Purchase Warrant of the Company*
5.1 Opinion of Hughes & Luce, L.L.P.
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. (5)
10.2 Proof of Redeemable Warrant expiring June 3, 1996 of the Company. (5)
10.3 Form of Underwriter's Unit Purchase Warrant of the Company. (6)
10.4 Form of Underwriter's Warrant of the Company. (6)
10.5 Copy of the 1988 Stock Option Plan of the Company. (7)
10.6 Copy of the 1994 Stock Option Plan of the Company. (8)
10.7 Copy of Employee Restricted Stock Plan of the Company. (9)
10.8 Copy of Lease dated July 1, 1997 between the Company, as tenant, and Post-Valwood,
Inc., as landlord. (10)
10.9 Copy of exclusive Distribution Agreement dated February 24, 1998, between the
Company and Equipmart, Inc. (10)
10.10 Copy of exclusive Distribution Agreement dated March 7, 1998, between the Company
and FunNets, Inc. (10)
10.11 Copy of exclusive Distribution Agreement dated March 21, 1998, between the Company
and Pro Gym Equipment, Inc. (10)
10.12 Copy of the Stock Acquisition Agreement dated April 14, 1998, between the Company
and Product Merchandising, Inc. (10)
10.13 Copy of the Agreement and Plan of Merger dated May 31, 1998, between the Company
and Vantage Products International, Inc. (10)
10.14 Copy of the 1998 Collegiate Pacific Inc. Stock Option Plan. (3)
10.15 Copy of Credit Agreement, dated as of June 30, 1999, between Chase Bank of Texas,
National Association, and the Company for a $2,000,000 line of credit, and related
documents. (11)
10.16 Copy of the Promissory Note dated March 31, 1999 from the Company to Michael J.
Blumenfeld in the principal amount of $1,082,648.75. (11)
10.17 Copy of Warrant Agreement dated as of May 26, 2000 between the Company and
Continental Stock Transfer & Trust Company, as Warrant Agent, with the form of
Common Stock Purchase Warrant attached.
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
10.18 Copy of Purchase Agreement dated as of February 29, 2000,
between the Company and the Note Holders, with the form of
Subordinated Convertible Promissory Note attached as an
exhibit.
23.1 Consent of Hughes & Luce, L.L.P. (included in Exhibit 5.1)
23.2 Consent of SUTTON FROST LLP
23.3 Consent of GRANT THORNTON LLP
24.1 Power of Attorney (included in Part II of this Registration Statement)
</TABLE>
- --------------------
(1) Filed as an exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting held on June 16, 1997.
(2) Filed as an exhibit to the Company's Form 8-K/A filed on
September 11, 1997.
(3) Filed as an exhibit to the Company's Definitive Proxy Statement for its
Annual meeting held on December 11, 1998.
(4) Filed as an exhibit to the Company's Form 8-A dated September 9, 1999.
(5) Filed as an exhibit to the Company's Form 8-A dated June 28, 1993.
(6) Filed as an exhibit to the Company's Current Report on Form 8-K filed
on July 12, 1993.
(7) Filed as an exhibit to the Company's Registration Statement on Form
S-18, File No. 33-19770-NY.
(8) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1994.
(9) Filed as an exhibit to a Post-Effective Amendment to the Company's
Registration Statement on Form S- 18, File No. 33-19770-NY.
(10) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1998.
(12) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the year ended June 30, 1999.
* To be filed by amendment.
<PAGE> 1
EXHIBITS 5.1 AND 23.1
[HUGHES & LUCE, L.L.P. LETTERHEAD]
April 6, 2000
Collegiate Pacific Inc.
13950 Senlac, Suite 200
Dallas, Texas 75234
Ladies and Gentlemen:
We have acted as counsel to Collegiate Pacific Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of (i) 4,237,748
Common Stock Purchase Warrants (the "Dividend Warrants") to be issued to the
Company's shareholders on a pro rata basis as a special dividend; (ii) 4,277,748
shares (the "Warrant Shares") of the Company's common stock, par value $.01 per
share, issuable upon exercise of the Company's common stock purchase warrants
(the "Warrants"); and (iii) 677,267 shares (the "Note Shares") of Common Stock,
issuable upon conversion of certain Subordinated Convertible Promissory Notes
(the "Notes"), which shares are being registered, pursuant to a Registration
Statement on Form SB-2 to be filed with the Securities and Exchange Commission
(the "Commission") on April 7, 2000 (the "Registration Statement").
In rendering this opinion, we have examined and relied upon executed
originals, counterparts, or copies of such documents, records, and certificates
(including certificates of public officials and officers of the Company) as we
considered necessary or appropriate for enabling us to express the opinions set
forth herein. In all such examinations, we have assumed the authenticity and
completeness of all documents submitted to us as originals and the conformity to
originals and completeness of all documents submitted to us as photostatic,
conformed, notarized, or certified copies.
Based on the foregoing, we are of the opinion that:
(1) The Dividend Warrants have been duly and validly authorized.
(2) The Warrant Shares have been duly and validly authorized and
reserved for issuance and, when the Warrant Shares have been
issued and sold in accordance with the terms of the Warrants
and the Warrant Agreement, will be validly issued, fully paid,
and nonassessable.
(3) The Note Shares have been duly and validly authorized for
issuance and, when issued upon conversion in accordance with
the terms of the Notes, will be validly issued, fully paid and
nonassessable.
This opinion may be filed as an exhibit to the Registration Statement.
We also consent to the reference to this firm as having passed on the validity
of such Shares under the caption "Legal Matters" in the prospectus that
constitutes a part of the Registration Statement. In giving this consent, we do
not admit that we are included in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
HUGHES & LUCE, L.L.P.
<PAGE> 1
EXHIBIT 10.17
COLLEGIATE PACIFIC INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Warrant Agent
---------------------------------------
WARRANT AGREEMENT
Dated as of May 26, 2000
---------------------------------------
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PARTIES ....................................................................................... 1
RECITALS ....................................................................................... 1
Section 1. Representations and Warranties of the Company.................................... 1
Section 2. Appointment of Warrant Agent..................................................... 2
Section 3. Form of Warrant.................................................................. 2
Section 4. Countersignature and Registration................................................ 2
Section 5. Transfers and Exchanges.......................................................... 3
Section 6. Duration and Exercise of Warrants................................................ 3
Section 7. Mutilated or Missing Warrants.................................................... 4
Section 8. Reservation and Registration of Common Stock..................................... 5
Section 9. Warrant Price; Adjustments....................................................... 5
Section 10. Fractional Interests............................................................. 8
Section 11. Notice to Warrantholders......................................................... 8
Section 12. Disposition of Proceeds on Exercise of Warrants.................................. 9
Section 13. Extension of Expiration Date..................................................... 9
Section 14. Cancellation of Warrants......................................................... 9
Section 15. Merger or Consolidation or Change of Name of Warrant Agent....................... 11
Section 16. Duties of Warrant Agent.......................................................... 11
Section 17. Change of Warrant Agent.......................................................... 13
Section 18. Identity of Transfer Agent....................................................... 14
Section 19. Notices.......................................................................... 14
Section 20. Supplements and Amendments....................................................... 15
Section 21. Successors....................................................................... 15
Section 22. Merger or Consolidation of the Company........................................... 15
Section 23. Delaware Contract................................................................ 15
Section 24. Benefits of this Agreement....................................................... 16
Section 25. Counterparts..................................................................... 16
SIGNATURES ...................................................................................... 17
EXHIBIT A (Forms of Warrant, Election to Purchase, and Assignment).............................. A-1
</TABLE>
- --------
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
<PAGE> 3
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, is dated as of May 26, 2000, by and between
Collegiate Pacific Inc., a Delaware corporation (the "Company"), and Continental
Stock Transfer & Trust Company, a New York corporation, or its successor in
interest, as warrant agent (the "Warrant Agent").
WHEREAS, the Company desires to issue Common Stock Purchase Warrants
(the "Warrants") as a special dividend to its stockholders on a pro rata basis
which Warrants would entitle the holders thereof to purchase shares of the
Company's common stock, $.01 par value per share (the "Common Stock"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
registration, transfer, exchange, and exercise of Warrants;
NOW, THEREFORE, the parties hereto agree as follows:
1. Representations and Warranties of the Company.
(a) The Company has all requisite corporate power and
authority, and has taken all necessary corporate action, to:
(i) Execute, deliver and perform this Warrant
Agreement;
(ii) Issue and deliver the Warrants; and
(iii) Authorize and reserve for issuance, and, upon
payment from time to time of the Warrant Price (as defined
below), to issue and deliver the shares of Common Stock
issuable upon exercise of the Warrants.
(b) This Agreement has been duly executed and delivered by the
Company, and is a valid and binding agreement of the Company,
enforceable in accordance with its terms.
(c) The Warrants, upon delivery in accordance with this
Warrant Agreement, will be fully authorized, executed, and delivered,
and will be legal, valid, and binding obligations of the Company,
enforceable in accordance with their terms. The shares of Common Stock
issuable upon exercise of the Warrants will, upon issuance, be duly
authorized and validly issued and outstanding, fully paid and
nonassessable, and free of preemptive rights.
(d) The execution and delivery of this Warrant Agreement and
the consummation of the transactions contemplated hereby will not
result in a breach or violation of, or constitute a default or an event
permitting acceleration under, any statute,
- 1 -
<PAGE> 4
the Certificate of Incorporation, the Bylaws of the Company, or any
mortgage, lease, indenture or any other agreement, order, rule, or
regulation to which the Company is subject or a party.
2. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as the exclusive agent for the Company with respect to the
Warrants in accordance with the instructions set forth in this Agreement, and
the Warrant Agent hereby accepts such appointment.
3. Form of Warrant.
(a) The text of the Warrant, the form of Election to Exercise
Warrant and Purchase Shares of Common Stock (the "Election to
Purchase"), and the form of assignment to be printed on the reverse
thereof, shall be substantially as set forth in Exhibit A attached
hereto.
(b) The Warrant Price to purchase one share of Common Stock
shall be as provided and defined in Section 9.
(c) The Warrants shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman
of the Board, President, or Vice President of the Company, under its
corporate seal, affixed or in facsimile, attested by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company.
4. Countersignature and Registration.
(a) The Warrant Agent shall maintain books for the transfer
and registration of the Warrants.
(b) The Warrants shall be countersigned by the Warrant Agent
(or by any successor to the Warrant Agent then acting as warrant agent
pursuant to this Agreement) and shall not be valid for any purpose
unless so countersigned. The Warrants may be so countersigned, however,
by the Warrant Agent (or by its successor as warrant agent) and be
delivered by the Warrant Agent, notwithstanding that the persons whose
manual or facsimile signatures appear thereon as proper officers of the
Company shall have ceased to be such officers at the time of such
countersignature or delivery.
(c) Prior to due presentment for registration of transfer of
the Warrant, the Company and the Warrant Agent may deem and treat the
registered holder thereof as the absolute owner of the Warrant
(notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Company or the Warrant Agent) for the
purpose of any exercise thereof, or any distribution to the holder
thereof and for all other
- 2 -
<PAGE> 5
purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
5. Transfers and Exchanges.
(a) The Warrant Agent shall transfer, from time to time, any
outstanding Warrants upon the books to be maintained by the Warrant
Agent for that purpose (the "Warrant Register"), upon surrender thereof
for transfer properly endorsed or accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant shall
be issued to the transferee and the surrendered warrant shall be
cancelled by the Warrant Agent. Warrants so cancelled shall be
delivered by the Warrant Agent to the Company from time to time.
(b) The Warrants may be exchanged at the option of the holder
thereof when surrendered at the office in New York, New York of the
Warrant Agent for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock. The Warrant
Agent is hereby irrevocably authorized to countersign in accordance
with Section 4 the new Warrants required pursuant to the provisions of
this Section 5, and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Warrants duly executed on
behalf of the Company for such purpose.
(c) The Company or the Warrant Agent may require the payment
of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any exchange or transfer of any Warrants.
6. Duration and Exercise of Warrants.
(a) Upon issuance by the Company, the Warrants will be
immediately exercisable and will cease to be exercisable at the close
of business on May 26, 2005 (the "Expiration Date"), except as provided
herein, at which time all rights evidenced by the Warrants shall cease
and the Warrants shall become void.
(b) Subject to the provisions of this Agreement, each
registered holder of Warrants shall have the right to purchase from the
Company (and the Company shall issue and sell to such registered holder
of Warrants) the number of fully paid and nonassessable shares of
Common Stock specified in such Warrants, upon surrender of such
Warrants to the Company at the principal office in New York, New York
of the Warrant Agent, with the form of Election to Purchase on the
reverse thereof duly completed and executed, and upon payment to the
Warrant Agent, as provided in Section 6(b)(i), for the account of the
Company of the Warrant Price for the number of shares of Common Stock
in respect of which such Warrants are then exercised and any applicable
taxes.
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<PAGE> 6
(i) Payment shall be made by cashier's check, payable
in United States dollars, to the order of "Continental Stock
Transfer & Trust Co." or, if a successor to the Warrant Agent
is then acting as warrant agent pursuant to this Agreement, as
directed by such successor Warrant Agent. No adjustment shall
be made for any cash dividends on any shares of Common Stock
issuable upon exercise of the Warrants.
(ii) Upon such surrender of the Warrants, and payment
of the Warrant Price, the Company shall issue and cause to be
delivered to or upon the written order of the registered
holder of such Warrants and in such name or names as such
registered holder may designate, a certificate or certificates
for the number of shares of Common Stock so purchased upon the
exercise of such Warrants, together with cash as provided in
Section 10 in respect of any fraction of a share of such
Common Stock otherwise issuable upon such surrender. Such
certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall
be deemed to have become a holder of record of such shares of
Common Stock as of the date of the surrender of such Warrants
and payment of the Warrant Price. If, at the date of surrender
of such Warrants and payment of the Warrant Price, the
transfer books for the Common Stock or other class of stock
purchasable upon the exercise of such Warrants shall be
closed, the certificates for the shares in respect of which
such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened and until such
date the Company shall be under no duty to deliver any
certificate for such shares; provided, however, that the
transfer books, unless otherwise required by law, shall not be
closed at any one time for a period longer than 20 days.
(iii) The rights of purchase represented by the
Warrants shall be exercisable, at the election of the
registered holders thereof, either as an entirety or from time
to time for part only of the shares specified therein and, in
the event that any Warrant is exercised in respect of less
than all of the shares specified therein, a new Warrant or
Warrants will be issued for the remaining number of shares
specified in the Warrant so surrendered, and the Warrant Agent
is hereby irrevocably authorized to countersign and to deliver
the required new Warrants pursuant to the provisions of this
Section 6 and of Section 4 and the Company, whenever required
by the Warrant Agent, will supply the Warrant Agent with
Warrants duly executed on behalf of the Company for such
purpose.
7. Mutilated or Missing Warrants. In case any of the Warrants shall be
mutilated, lost, stolen, or destroyed, the Company will issue and the Warrant
Agent will countersign and deliver in exchange and substitution for and upon
cancellation of the mutilated warrant, or in lieu of and substitution for the
Warrant lost, stolen, or destroyed, a new Warrant of like tenor and representing
an equivalent right or interest, but only upon receipt of an affidavit of lost
warrant certificate and indemnity bond issued and delivered by a recognized
surety company satisfactory to the Company and the Warrant Agent of such loss,
theft, or destruction of such Warrant.
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<PAGE> 7
Applicants for such substitute Warrants shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company or
the Warrant Agent may prescribe.
8. Reservation and Registration of Common Stock.
(a) There have been reserved, and the Company shall at all
times keep reserved, out of the authorized and unissued shares of
Common Stock, a number of shares sufficient to provide for the exercise
of the rights to purchase represented by the Warrants, and the transfer
agent for the Common Stock and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any
of the rights to purchase represented by the Warrants are hereby
irrevocably authorized and directed at all times to reserve such number
of authorized and unissued shares as shall be requisite for such
purpose.
(i) The Company will keep a copy of this Agreement on
file with the transfer agent for the Common Stock and with
every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants.
(ii) The Warrant Agent is hereby irrevocably
authorized to requisition from time to time such transfer
agent for stock certificates required to honor outstanding
Warrants. The Company will supply such transfer agent with
duly executed stock certificates for such purpose and will
itself provide or otherwise make available any cash which may
be payable as provided in Section 10.
(iii) All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant
Agent and shall thereafter be delivered to the Company, and
such cancelled Warrants shall constitute sufficient evidence
of the number of shares of stock which have been issued upon
the exercise of such Warrants.
(b) The Company covenants and agrees that it shall register, under the
Securities Act of 1933, as amended, the shares of Common Stock issuable upon
exercise of the Warrants and use all reasonable efforts to maintain the
effectiveness of such registration during the entire period in which the
Warrants are exercisable, and that it will use all reasonable efforts to qualify
such Common Stock for sale under the securities laws of such states of the
United States as may be necessary to permit the free exercise of the Warrants
and sale of the Common Stock purchased upon such exercise and to maintain such
qualifications during the entire period in which the Warrants are exercisable.
9. Warrant Price; Adjustments.
(a) The price at which Common Stock shall be purchasable upon
exercise of the Warrants (the "Warrant Price") shall be $10.00 per
share of Common Stock or, if adjusted as provided in this section,
shall be such price as so adjusted.
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<PAGE> 8
(b) In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares or
effect a stock dividend or stock split, the Warrant Price in effect
immediately prior to such subdivision, dividend, or split shall be
proportionately reduced and, in case the outstanding shares of the
Common Stock of the Company shall be combined into a smaller number of
shares (through a reverse stock split or otherwise), the Warrant Price
in effect immediately prior to such combination shall be
proportionately increased.
(c) Upon each adjustment of the Warrant Price pursuant to the
provisions of this Section 9, the number of shares issuable upon the
exercise of each Warrant shall be adjusted to a number of shares equal
to the Warrant Price in effect prior to the adjustment multiplied by
the number of shares of Common Stock covered by the Warrant and
dividing the product so obtained by the adjusted Warrant Price.
(d) Irrespective of any adjustment or change in the Warrant
Price or the number of shares of Common Stock actually purchasable
pursuant to the Warrants, the Warrants theretofore and thereafter
issued may continue to express the Warrant Price per share and the
number of shares purchasable thereunder as the Warrant Price per share
and the number of shares purchasable were expressed in the Warrants
when initially issued.
(e) If any reorganization or reclassification of the shares of
Common Stock of the Company (other than a stock dividend or stock split
as set forth in Section 9(b)) shall be effected, then, at the option of
the Company, adequate provision may be made whereby the holder of each
Warrant then outstanding will thereafter have the right to purchase and
receive on exercise of such Warrant such shares of stock, securities,
or assets as may be issued or payable with respect to or in exchange
for that number of outstanding shares of Common Stock equal to the
number of shares of such Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented
by each such Warrant had such reorganization or reclassification not
taken place.
(f) In the event of a consolidation or merger of the Company
with another corporation, as a condition to such consolidation or
merger, lawful and adequate provision shall be made whereby the holder
of each Warrant then outstanding shall thereafter solely have the right
to purchase and receive upon the basis and upon the terms and
conditions specified herein and in the Warrants, and in lieu of the
shares of Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented
by each such Warrant, such shares of stock, securities, or assets as
may be issued or payable with respect to or in exchange for that number
of shares of Common Stock equal to the number of shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of
the rights represented by each such Warrant had such consolidation or
merger not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of
each Warrant then outstanding to the end that the provisions hereof
(including without limitation provisions for adjustment of the Warrant
Price and of the number of shares
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<PAGE> 9
purchasable upon the exercise of each Warrant then outstanding) shall
thereafter be applicable, as nearly as might be in relation to any
shares of stock, securities, or assets thereafter deliverable upon the
exercise of each Warrant.
(g) The Company may, at any time, in its sole discretion
reduce the Warrant Price and such price reduction will be in effect for
a minimum period of 10 business days or such other period as may be
required by applicable law or regulation.
(h) Whenever the Warrant Price is adjusted as herein provided,
the Company shall:
(i) File with the Warrant Agent a certificate signed
by the Chairman of the Board or the President or Vice
President of the Company and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Company:
(A) Stating that the Warrant Price has been
adjusted and the adjusted Warrant Price; and
(B) Showing in detail the facts requiring
such adjustment and the adjusted Warrant Price and
the number of shares of Common Stock purchasable upon
exercise of the Warrant after such adjustment; and
(ii) Cause a notice stating that such adjustment has
been effected and stating the adjusted Warrant Price and the
number of shares of Common Stock purchasable upon exercise of
the Warrants to be sent by first class mail, postage prepaid,
to each registered holder of Warrants at his address appearing
on the Warrant Register.
The Warrant Agent shall have no duty with respect to any such
certificate filed with it except to keep the same on file and available
for inspection by holders of Warrants during the Warrant Agent's
regular business hours. The Warrant Agent shall not at any time be
under any duty or responsibility to any holder of a Warrant to
determine whether any facts exist which may require any adjustment of
the Warrant Price, or with respect to the nature or extent of any
adjustment of the Warrant Price when made, or with respect to the
method employed in making such adjustment. In determining whether any
adjustment to the Warrant Price is appropriate, the Warrant Agent shall
be entitled to rely on the certificate of the Company referred to in
this Section 9(h).
(i) The Company may retain a firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) selected by
the Board of Directors of the Company or a committee thereof and
approved by the Warrant Agent, to make any computation required under
this Section 9, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under
this Section 9.
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<PAGE> 10
10. Fractional Interests. The Company shall not issue fractions of
shares of Common Stock in connection with the exercise of the Warrants. If any
fraction of a share of Common Stock is issuable on the exercise of any Warrant
(or specified portions thereof), the Company will purchase such fraction for an
amount in cash equal to the current value of such fraction:
(a) Computed, if the Common Stock is listed or admitted to
unlisted trading privileges on any national securities exchange, on the
basis of the closing sale price of the Common Stock on such exchange
(as reported in The Wall Street Journal, Central Edition) on the last
business day prior to the date of exercise upon which sale shall have
been effected (or, if the Common Stock is listed or admitted to
unlisted trading privileges on more than one exchange, on the basis of
such price on the exchange designated from time to time for such
purpose by the Board of Directors of' the Company); or
(b) Computed, if the Common Stock shall not be listed or
admitted to unlisted trading privileges, on the basis of the last
reported sales price, or if the last reported sales price is not
available, on the basis of the average of the high and low bid prices,
for the Common Stock in the over-the-counter market, on the last
business day prior to the date of exercise or conversion as reported by
the National Quotation Bureau, Inc., or any successor thereto.
11. Notice to Warrantholders.
(a) Nothing contained in this Agreement or in any of the
Warrants shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of
the Company or any other matters, or any rights whatsoever as
stockholders of the Company; provided, however, that in the event that
a meeting of stockholders shall be called to consider and take action
on a proposal for the voluntary dissolution of the Company, or a
consolidation, merger, or sale of all or substantially all of its
assets (collectively, the "Notice Events"), then and in the event of
each such Notice Event the Company shall cause a notice thereof to be
sent by first-class mail, postage prepaid, at least 15 days prior to
the date fixed as a record date or the date of closing the transfer
books in connection with each Notice Event, to each registered holder
of Warrants at his address appearing on the Warrant Register. Failure
to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection
with a Notice Event. If such notice shall have been so given and if a
voluntary dissolution shall be authorized at such meeting or any
adjournment thereof, then from and after the date on which such
voluntary dissolution shall have been duly authorized by the
stockholders, the purchase rights represented by the Warrants and other
rights with respect thereto shall cease and terminate. Until the
Warrant Agent receives written notice from the Company of the
authorization of voluntary dissolution by the stockholders, the Warrant
Agent shall be authorized to act in accordance with the terms of this
Agreement.
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<PAGE> 11
(b) If the Company shall make any distribution on, or to
holders of, its Common Stock (or other property which may be
purchasable in lieu thereof upon the exercise of Warrants) of any
property (other than cash dividends or dividends payable solely in
Common Stock), the Company shall cause a notice of its intention to
make such distribution to be sent by first-class mail, postage prepaid,
at least 15 days prior to the date fixed as a record date or the date
of closing the transfer books in connection with such distribution, to
each registered holder of Warrants at his address appearing on the
Warrant Register. Failure to mail or to receive such notice or any
defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such distribution.
12. Disposition of Proceeds on Exercise of Warrants. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all moneys received by the Warrant Agent for the
purchase of shares of the Company's Common Stock through the exercise of such
Warrants.
13. Extension of Expiration Date. The Company may, at any time at its
sole discretion, extend the Expiration Date. Notice of any change in the
Expiration Date shall be given by first-class mail, postage prepaid, mailed not
less than 10 days prior to the Expiration Date to each registered holder of
Warrants, at his address appearing in the Warrant Register and to the Warrant
Agent. Notice of changes in the Expiration Date of Warrants at the election of
the Company shall be given by the Company, or, at the Company's request, by the
Warrant Agent in the name and at the expense of the Company.
14. Cancellation of Warrants.
(a) At any time the Company may, at its option, call for
cancellation of all or a portion of the outstanding Warrants by payment
of $.10 for each share of Common Stock purchasable upon exercise of
such Warrants (the "Cancellation Price"). In the event of an adjustment
in the Warrant Price pursuant to Section 9, the Cancellation Price
shall also be automatically adjusted in a proportionate amount (rounded
to the nearest one cent).
(b) The election of the Company to call for cancellation of
the Warrants shall be evidenced by a duly authorized resolution of the
Board of Directors of the Company.
(c) Warrants may be exercised at any time prior to the close
of business on the business day preceding the date fixed for
cancellation (the "Cancellation Date").
(d) Notice of cancellation shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 90 days prior to
the Cancellation Date, to each registered holder of Warrants, at his
address appearing in the Warrant Register. All notices of cancellation
shall state:
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<PAGE> 12
(i) The Cancellation Date;
(ii) That on the Cancellation Date the Cancellation
Price will become due and payable;
(iii) The place where such Warrants are to be
surrendered for cancellation and payment of the Cancellation
Price; and
(iv) The current Warrant Price of the Warrants, the
place or places where such Warrants may be surrendered for
exercise, and the time at which the right to exercise the
Warrants will terminate in accordance with this Agreement.
(e) Notice of cancellation of the Warrants at the election of
the Company shall be given by the Company, or, at the Company's
request, by the Warrant Agent in the name and at the expense of the
Company.
(f) The Company may pay the Cancellation Price in cash or
Common Stock, at its option.
(i) If the Cancellation Price is paid in cash, prior
to any Cancellation Date, the Company shall deposit with the
Warrant Agent an amount of money sufficient to pay the
Cancellation Price of all the Warrants that are to be
cancelled on that date.
(ii) If the Cancellation Price is paid with Common
Stock, the Company shall issue and cause to be delivered to or
upon the written order of the registered holder of such
Warrants and in such name or names as such registered holder
may designate, a certificate or certificates for the number of
shares of Common Stock so issued, together with cash as
provided in Section 10 in respect of any fraction of a share
of such Common Stock otherwise issuable upon such
cancellation. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of
such shares of Common Stock as of the Cancellation Date. In
addition, if required under applicable law, the Company's
registration obligations under Section 8(b) shall extend to
shares of Common Stock used to pay the Cancellation Price.
(iii) If any Warrant is exercised pursuant to Section
6, any money so deposited with the Warrant Agent for the
cancellation of such Warrant shall be paid to the Company.
(g) Notice of cancellation having been given, the Warrants to
be cancelled shall, on the Cancellation Date, become cancellable at the
Cancellation Price therein specified, and on such date (unless the
Company shall default in the payment of the
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<PAGE> 13
Cancellation Price), such Warrants shall cease to be exercisable and
thereafter represent only the right to receive the Cancellation Price.
15. Merger or Consolidation or Change of Name of Warrant Agent.
(a) Any corporation into which the Warrant Agent may be merged
or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent shall be a
party, or any corporation succeeding to the corporate trust business of
the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant
agent under the provisions of Section 17. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by
this Agreement and at such time any of the Warrants shall have been
countersigned but not delivered, any such successor to the Warrant
Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrants so countersigned; and in case at the time any of
the Warrants shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrants either in the name of the
predecessor warrant agent or in the name of the successor warrant
agent; and in all such cases such Warrants shall have the full force
provided in the Warrant and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrants so
countersigned; and in case at that time any of the Warrants shall not
have been countersigned, the Warrant Agent may countersign such
Warrants whether in its prior name or in its changed name; and in all
such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
16. Duties of Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed on it by this Agreement upon the following terms and
conditions:
(a) The statements contained herein and in the Warrants shall
be taken as statements of the Company, and the Warrant Agent assumes no
responsibility and shall incur no liability for the correctness of any
of the same except such as describe the Warrant Agent or action taken
or to be taken by it. The Warrant Agent assumes no responsibility with
respect to the distribution of the Warrants except as herein otherwise
provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this
Agreement or in the Warrants to be complied with by the Company.
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<PAGE> 14
(c) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it to perform any duty hereunder
either itself or by or through its attorneys, agents, or employees.
(d) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to
any holder of any Warrant in respect of any action taken, suffered, or
omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel, provided the Warrant Agent shall
have exercised reasonable care in the selection and continued
employment of such counsel.
(e) The Warrant Agent shall incur no liability or
responsibility to the Company, or to any holder of any Warrant for any
action taken in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document, or instrument believed by
it to be genuine and to have been signed, sent, or presented by the
proper party or parties.
(f) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent pursuant to
this Agreement, to reimburse the Warrant Agent for all reasonable
expenses, taxes, and governmental charges and other charges of any kind
and nature incurred by the Warrant Agent pursuant to this Agreement
(except for taxes, governmental charges and other charges imposed on or
measured by the compensation paid to the Warrant Agent pursuant to this
Section 16(f)), and to indemnify and hold harmless the Warrant Agent,
its officers, directors, employees, and agents against any and all
liabilities, joint or several, including, without limitation,
judgments, costs, losses, claims, and damages and reasonable counsel
fees, as and when incurred, for anything done or omitted by the Warrant
Agent or such other persons pursuant to this Agreement or otherwise,
except as a result of the Warrant Agent's or such other persons' gross
negligence or bad faith. Notwithstanding the foregoing, to the extent
that a court in which any action or suit is brought to determine such
liability or indemnity shall determine upon application by the Warrant
Agent that, despite the adjudication of the liability resulting from
the Warrant Agent's or such other persons' negligence, and in view of
all circumstances of the case, the Warrant Agent or such other persons
are fairly and reasonably entitled to indemnity for such liabilities
which such court shall deem proper, the indemnity provided for herein
will be enforceable.
(g) The Warrant Agent shall be under no obligation to
institute any action, suit, or legal proceeding or to take any other
action likely to involve expense unless the Company or one or more
registered holders of Warrants shall furnish the Warrant Agent with
reasonable security and indemnity for any cost and expense which may be
incurred, and the failure by the Warrant Agent to take any such action
without such security and indemnity shall not be an act of negligence
or bad faith. However, this provision shall not affect the power of the
Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All
rights or action under this Agreement or under any of the Warrants may
be enforced by the
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<PAGE> 15
Warrant Agent without the possession of any of the Warrants or the
production thereof at any trial or other proceeding relative thereto,
and any such action, suit, or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent, and any recovery
of judgment shall be for the ratable benefit of the registered holders
of the Warrants, as their respective rights or interests may appear.
(h) The Warrant Agent and any stockholder, director, officer,
or employee of the Warrant Agent may buy, sell, or deal in any of the
Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for any thing which it may do or
refrain from doing in connection with this Agreement except for its own
gross negligence or bad faith.
(j) The Warrant Agent shall keep copies of' this Agreement
available for inspection by holders of warrants during normal business
hours at its principal office in New York, New York.
17. Change of Warrant Agent.
(a) The Warrant Agent may resign its duties under this
Agreement by giving to the Company and to the registered holders of
Warrants notice of such resignation in writing, specifying a date when
such resignation shall take effect, at least 30 days prior to the date
so specified. The Warrant Agent may be discharged from its duties under
this Agreement by the Company by like notice to the Warrant Agent and
to the holders of Warrants from the Company.
(b) If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it
has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the registered holder of
a Warrant (who shall with such notice submit his Warrant for inspection
by the Company), then the registered holder of a Warrant may apply to
any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent.
(c) Any successor warrant agent, whether appointed by the
Company or by a court of competent jurisdiction, shall:
(i) Be a bank or trust company; and
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<PAGE> 16
(ii) Have capital and surplus as shown by its last
published report to its stockholders of at least $10,000,000.
(d) After appointment, the successor warrant agent shall be
vested with the same powers, rights, duties, and responsibilities as if
it had been originally named as warrant agent without further act or
deed; but the former Warrant Agent shall deliver and transfer to the
successor warrant agent any property at the time held by it hereunder,
and execute and deliver any further reasonable assurance, conveyance,
act, or deed necessary for the purpose.
(e) Failure to provide any notice provided for in this
section, however, or any defect therein or in the mailing thereof,
shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor warrant agent,
as the case may be.
18. Identity of Transfer Agent. Upon the appointment of any transfer
agent for the Common Stock or of any subsequent transfer agent for shares of the
Common Stock or other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants, the Company will
file with the Warrant Agent a statement setting forth the name and address of
such transfer agent.
19. Notices.
(a) Any notice pursuant to this Agreement to be given or made
by the Warrant Agent or the Company to any registered holder of any
Warrant to the Company shall be sufficiently given or made when sent by
first-class mail, postage prepaid.
(b) Any notice pursuant to this Agreement to be given or made
by the Warrant Agent or the registered holder of any Warrant to the
Company shall be sufficiently given or made when (i) sent by
first-class mail, postage prepaid, (ii) delivered by hand (with written
confirmation of receipt), (iii) telecopier (with written confirmation
of receipt), or (iv) when received by the addressee, if sent by a
nationally recognized overnight delivery service, in each case to the
appropriate addresses and telecopier numbers set forth below (until
another address or telecopier number is filed in writing by the Company
with the Warrant Agent) as follows:
Collegiate Pacific Inc.
13950 Senlac Drive, No. 200
Farmers Branch, Texas 75234
Attention: Chief Executive Officer
Telecopier: (972) 243-8424
- 14 -
<PAGE> 17
(c) Any notice pursuant to this Agreement to be given or made
by the Company or the registered holder of any Warrant to the Warrant
Agent shall be sufficiently given or made when (i) sent by first-class
mail, postage prepaid, (ii) delivered by hand (with written
confirmation of receipt), (iii) telecopier (with written confirmation
of receipt), or (iv) when received by the addressee, if sent by a
nationally recognized overnight delivery service, in each case to the
appropriate addresses and telecopier numbers set forth below (until
another address or telecopier number is filed in writing by the Warrant
Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Telecopier: (212) 509-5150
20. Supplements and Amendments. The Company and the Warrant Agent may
from time to time supplement or amend this Agreement without the approval of any
holders of Warrants in order to cure any ambiguity or to correct or supplement
any provision contained herein which may, be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and which shall not adversely affect the interests of the
holders of Warrants.
21. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns.
22. Merger or Consolidation of the Company. The Company shall not
effect any consolidation or merger with any other corporation unless the
corporation resulting from such merger (if not the Company) or consolidation
shall expressly assume, by execution and delivery of a supplemental agreement
satisfactory in form to the Warrant Agent, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
23. Delaware Contract. THIS AGREEMENT AND EACH WARRANT ISSUED HEREUNDER
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE
AND FOR ALL PURPOSES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING
EFFECT TO ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT RESULT IN THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION).
- 15 -
<PAGE> 18
24. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent, and the registered holders of the Warrants any legal or equitable
right, remedy, or claim under this Agreement. This Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent, and the registered
holders of the warrants.
25. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
- 16 -
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
COLLEGIATE PACIFIC INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
- 17 -
<PAGE> 20
EXHIBIT A
[FORM OF WARRANT]
For the Purchase
of _______ Shares
CUSIP 194589 20 6
COLLEGIATE PACIFIC INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT _________________________ is entitled to purchase
from COLLEGIATE PACIFIC INC., a Delaware corporation (the "Company"), upon the
surrender of this Warrant to the Company at the principal office in New York,
New York of the Warrant Agent hereinafter mentioned (or of its successor as
Warrant Agent), at any time on and after the date hereof, and before the close
of business on May 26, 2005 (the "Expiration Date"), unless such date is
extended by the Company as provided below, the number of fully paid and
nonassessable shares of Common Stock, par value $.01 per share (the "Common
Stock"), set forth above, evidenced by a certificate therefor, upon payment of
$10.00 per share (the "Warrant Price") for the number of shares in respect of
which this Warrant is exercised; provided, however, that under certain
conditions set forth in the Warrant Agreement, the number of shares of Common
Stock purchasable upon the exercise of this Warrant may be increased or reduced
and the Warrant Price may be adjusted, or property other than shares of Common
Stock may become purchasable pursuant to this Warrant. The Warrant Price shall
be payable by cashier's check, in United States dollars, to the order of the
Warrant Agent. No adjustment shall be made for any cash dividends on any shares
of stock issuable upon exercise of this Warrant. The right of purchase
represented by this Warrant is exercisable, at the election of the registered
holder hereof, either as an entirety or from time to time for part only of the
shares specified herein and, in the event that this Warrant is exercised in
respect of less than all of such shares, a new Warrant for the remaining number
of such shares will be issued on such surrender.
The Warrant is issued under, and the rights represented hereby are
subject to, the terms and provisions contained in a Warrant Agreement dated as
of May 26, 2000, between the Company and Continental Stock Transfer & Trust
Company, a New York corporation, or its successor, as Warrant Agent, to all
terms and provisions of which the registered holder of this Warrant, by
acceptance hereof, assents. Reference is hereby made to the Warrant Agreement
for a more complete statement of the rights and limitations of rights of the
registered holder hereof and the rights and duties of the Warrant Agent and the
rights and obligations of the Company thereunder. Copies of the Warrant
Agreement are on file at the office of the Warrant Agent. The Company shall not,
upon the exercise of this Warrant, issue fractions of shares, but shall make
adjustment therefor in cash as provided in the Warrant Agreement.
The Company may extend the Expiration Date hereof or any subsequent
Expiration Date at any time by giving at least 10 days' written notice to extend
the Expiration Date by first-class mail to the holders of record at such
holder's address as it appears on the Warrant Register.
A-1
<PAGE> 21
This Warrant may be called for cancellation by the Company, at its
option, at any time by giving at least 30 but not more than 90 days' written
notice by first class mail to the holders of record at each such holder's
address as it appears on the Warrant Register and by payment in cash or with
Common Stock in an amount equal to $.10 per share of Common Stock purchasable
upon the exercise hereof. The cancellation price is subject to adjustment based
on adjustments to the Warrant Price. This Warrant may not be exercised after the
close of business on the business day preceding the cancellation date.
The Warrant is transferable at the principal office in New York, New
York of the Warrant Agent (or its successor as Warrant Agent) by the registered
holder hereof in person or by attorney duly authorized in writing, but only in
the manner and subject to the limitations provided in the Warrant Agreement, and
upon surrender of this Warrant. Upon any such transfer, a new Warrant, or new
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of shares of Common Stock will be
issued to the transferee in exchange for this Warrant.
This Warrant and similar Warrants when surrendered at the principal
office in New York, New York, of the Warrant Agent (or its successor as Warrant
Agent) by the registered holder in person or by attorney duly authorized in
writing may be exchanged, in the manner and subject to the limitations provided
in the Warrant Agreement, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock..
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Common Stock or other class of stock
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for shares
purchasable upon such exercise until the date of the reopening of the transfer
books.
This Warrant shall not be valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, Collegiate Pacific Inc. has caused to be printed
hereon the facsimile signature of its Chief Executive Officer and the facsimile
of its corporate seal attested by the facsimile signature of its Secretary.
Date:
---------------------------
COLLEGIATE PACIFIC INC.
By:
--------------------------------------
Name: Michael J. Blumenfeld
Title: Chief Executive Officer
A-2
<PAGE> 22
ATTEST:
-----------------------------------------
William R. Estill, Secretary
Countersigned:
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY, AS WARRANT AGENT
Authorized Officer
A-3
<PAGE> 23
TO BE EXECUTED UPON ELECTION TO EXERCISE
WARRANT AND PURCHASE SHARES OF COMMON STOCK
TO: COLLEGIATE PACIFIC INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT- ____________, Custodian for ____________
(Cust) (Minor)
under Uniform Gifts to Minors
Act __________
(State)
Additional abbreviations may also be used, though not in the above
list, as set forth in the Warrant Agreement.
The undersigned holder of the within Warrant hereby (1) irrevocably
elects to exercise the right of purchase represented by the within Warrant for,
and to purchase hereunder __________ shares of Common Stock which the
undersigned is entitled to purchase thereunder, (2) tenders the full payment
therefor called for by the within Warrant, and (3) directs that the certificates
for such shares be issued as set forth below:
Name
---------------------------------------------------------------------------
Address
------------------------------------------------------------------------
Taxpayer Identification Number
-------------------------------------------------
and be delivered to at
------------------------------------------------- -------
and, if said number of shares shall not be all of the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be delivered to the undersigned at the
address below:
Date: , 200
------------------------ --
Address:
-----------------------------------------------------------------------
Signature:
---------------------------------------------------------------------
Note: The signature to the above Election to Purchase must correspond with the
name as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
A-4
<PAGE> 24
FORM OF ASSIGNMENT TO BE EXECUTED UPON TRANSFER OF WARRANT
FOR VALUE RECEIVED_____________________________________________________
hereby sells, assigns, and transfers to [Taxpayer ID Number]____________________
the within Warrant, together with all rights, title, and interest therein, and
does hereby irrevocably constitute and appoint _________________________________
attorney to transfer such Warrant on the books on the warrant register of the
within named Company, with full power of substitution.
Date: , 19 .
------------------------- ------
Signature:
------------------------------------------------------------
Note: The signature to the above Assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
A-5
<PAGE> 1
EXHIBIT 10.18
PURCHASE AGREEMENT
Between
COLLEGIATE PACIFIC, INC.
And
[NAME OF PURCHASER]
February 29, 2000
<PAGE> 2
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of February 29, 2000 (this
"Agreement"), between Collegiate Pacific, Inc., a corporation organized under
the laws of the State of Delaware (the "Company"), and
__________________________ (the "Purchaser"). The Purchaser and each of the
other purchasers of the Notes referred to herein are collectively referred to
herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company up to
an aggregate principal amount of $2,400,000.00 of the Company's Convertible
Subordinated Promissory Notes, due January 31, 2005 (the "Notes"), which are
convertible into shares of the Company's common stock, $.01 par value per share
(the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF NOTES; CLOSING
(a) The Closing.
(i) Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchasers and each
Purchaser shall, severally and not jointly, purchase from the Company
the principal amount of Notes set forth on Schedule 1 attached hereto
for an aggregate purchase price of up to $2,400,000.00 (the "Purchase
Price"). The closing of the purchase and sale of the Notes (the
"Closing") shall take place at the offices of the Company immediately
following the execution hereof or such later date as the parties hereto
shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) At the Closing the parties hereto shall deliver, in
accordance with and subject to the terms and conditions of this
Agreement, the following: (i) the Company shall deliver or cause to be
delivered Notes in the aggregate principal amount equal to the Purchase
Price, registered in the names of the Purchasers as set forth on
Schedule 1 attached hereto; (ii) each Purchaser shall deliver or cause
to be delivered its portion of the Purchase Price set forth on Schedule
1 in United States dollars; and (iii) each party hereto shall deliver
or cause to be delivered all other executed instruments, agreements and
certificates as are required to be delivered by or on their behalf at
the Closing.
(b) Form of Notes. The Notes shall be in the form of Exhibit A hereto.
(c) Certain Definitions. For purposes of this Agreement the following
terms shall have the following meanings:
"Closing Date" has the meaning set forth in Section 1.1(a) of
this Agreement.
"Closing" has the meaning set forth in Section 1.1(a) of this
Agreement.
"Commission" means the Securities and Exchange Commission.
PURCHASE AGREEMENT
- 2 -
<PAGE> 3
"Conversion Date" has the meaning assigned to such term in
Exhibit A.
"Conversion Price" has the meaning assigned to such term in
Exhibit A.
"Disclosure Materials" has the meaning set forth in Section
2.1(j) of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Entity" means any court, administrative agency
or commission or other governmental authority or agency, domestic or foreign,
including local authorities.
"Investment Letter" means the subscription agreement,
questionnaire and investment representations to be executed and delivered to the
Company by each Purchaser in substantially the same form as Exhibit B hereto.
"Liens" means all liens, encumbrances and other claims of any
kind.
"Material Adverse Effect" has the meaning set forth in Section
2.1(a) of this Agreement.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind
"Purchase Price" has the meaning set forth in Section 1.1(a)
of this Agreement.
"Registration Rights" means the registration rights as
described in Exhibit A.
"SEC Documents" has the meaning set forth in Section 2.1(j) of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities" means the Notes and Underlying Shares.
"Senior Debt" has the meaning set forth in Exhibit A.
"Subordination Agreement" means the form of agreement between
the Company and Chase Bank of Texas, National Association attached hereto as
Exhibit C. Each Purchaser shall be required to become a signatory to a
Subordination Agreement as a condition to the purchase of the Notes.
"Subsidiaries" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Transaction Documents" means this Agreement, the Notes and
Investment Letter.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Notes.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
(a) Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(i) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its
PURCHASE AGREEMENT
- 3 -
<PAGE> 4
incorporation, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as
currently conducted. The Company has one wholly-owned subsidiary,
Product Merchandising, Inc., a Florida corporation, (the "Subsidiary").
The Subsidiary is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Florida, with the
full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiary is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, could not, individually or in the
aggregate, (x) adversely affect the legality, validity or
enforceability of the Transaction Documents, (y) have a material
adverse effect on the results of operations, assets, prospects, or
condition (financial or otherwise) of the Company and the Subsidiary,
taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any Transaction
Document (any of the foregoing, a "Material Adverse Effect").
(ii) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation
by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each of
the Transaction Documents has been duly executed by the Company and
when delivered in accordance with the terms hereof shall constitute the
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its
respective articles of incorporation, certificate of incorporation,
by-laws or other charter documents.
(iii) Capitalization. The authorized, issued and outstanding
capital stock of the Company consists of 50,000,000 shares of Common
Stock, par value $.01 per share and 1,000,000 shares of preferred
stock, par value $.01 per share. As of the date hereof (after giving
effect to the reverse stock split hereinafter described), 3,468,366
shares of Common Stock are issued and outstanding and no shares of
preferred stock are outstanding. At the Company's annual meeting held
on January 14, 2000, the shareholders approved a reverse stock split of
the Company's Common Stock whereby each five shares of the Company's
Common Stock then outstanding became one share of the Company's new
Common Stock. No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.l(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a
result of the purchase and sale of the Notes hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by
which the Company or any Subsidiary is or may become bound to issue
PURCHASE AGREEMENT
- 4 -
<PAGE> 5
additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock.
(iv) Issuance of Notes. The Notes are duly authorized, and,
when issued in accordance with the terms hereof, shall be validly
issued, fully paid and nonassessable, free and clear of all Liens. The
Company has and at all times while the Notes are outstanding will
maintain an adequate reserve of duly authorized shares of Common Stock
to enable it to perform its conversion, exercise and other obligations
under this Agreement and the Notes. When issued in accordance with the
terms of the Notes, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, and free and clear of all
Liens.
(v) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not
(i) conflict with or violate any provision of its articles of
incorporation, bylaws or other charter documents (each as amended
through the date hereof) or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or
affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court
or Governmental Entity to which the Company is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), as could not, individually or
in the aggregate, have or result in a Material Adverse Effect. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for
violations which, individually and in the aggregate, could not have or
result in a Material Adverse Effect.
(vi) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, or make any filing or registration with, any court or other
federal, state, local or other Governmental Entity or other Person in
connection with the execution, delivery and performance by the Company
of the Transaction Documents other than where the failure to obtain
such consent, waiver, authorization or order, or to give or make such
notice or filing, could not have or result in, individually or in the
aggregate, a Material Adverse Effect.
(vii) Litigation; Proceedings. Except as specifically
disclosed in the Disclosure Materials (as hereinafter defined), there
is no action, suit, notice of violation, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or its Subsidiary or any of their respective
properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, individually or in the aggregate, have or
result in a Material Adverse Effect.
(viii) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received
notice of a claim that it is in default under or that it is in
violation of) its articles of incorporation, certificate of
incorporation, by-laws or other charter documents, any indenture,
promissory note, loan or credit agreement or any
PURCHASE AGREEMENT
- 5 -
<PAGE> 6
other agreement or instrument to which it is a party or by which it or
any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is in violation of
any statute, rule or regulation of any Governmental Entity, except as
could not individually or in the aggregate, have or result in,
individually or in the aggregate, a Material Adverse Effect.
(ix) Private Offering. Subject in part to the truth and
accuracy of the Purchasers' representations set forth in Section 2.2,
the offer, sale and issuance of the Securities as contemplated by this
Agreement are exempt from the registration requirement of the
Securities Act, and neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration
requirements of Section 5 of the Securities Act.
(x) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the 12-month period preceding the date
hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials being collectively
referred to herein as the "SEC Documents"). A schedule of such
documents is set forth in Schedule 2.1(j) hereto, and, together with
the Schedules to this Agreement, the Company's Registration Statement
on Form SB-2 as filed with the Commission on January 14, 2000, and
other documents and information furnished by or on behalf of the
Company at any time prior to the Closing, are collectively referred to
herein as the "Disclosure Materials." As set forth in Schedule 2.1(j),
Adam Blumenfeld was elected as an additional director of the Company
and President of the Company on January 14, 2000.
(xi) Investment Company. The Company is not, and is not an
"Affiliate person" of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(xii) Certain Fees. No fees or commissions will be payable by
the Company to any broker, financial advisor, finder, investment
banker, placement agent, or bank with respect to the transactions
contemplated hereby. The Purchasers shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated hereby.
(xiii) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and
sale of the Securities other than the Disclosure Materials and any
amendments and supplements thereto or (ii) solicited any offer to buy
or sell the Securities by means of any form of general solicitation or
advertising.
(xiv) Patents and Trademarks. The Company has, or has the
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and
rights which are necessary for use in connection with its business and
which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). To the best
knowledge of the Company, there is no existing infringement on any of
the Intellectual Property Rights.
(xv) Disclosure. All information relating to or concerning the
Company set forth in the Transaction Documents or provided to the
Purchasers or their respective representatives, agents and counsel in
connection with the transactions contemplated hereby
PURCHASE AGREEMENT
- 6 -
<PAGE> 7
is true and correct in all material respects and does not fail to state
any material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. The Company confirms that it has not provided to any of the
Purchasers or any of their representatives or agents any information
that constitutes or might constitute material non-public information
other than information that has specifically been identified to the
recipient as material non-public information in writing. The Company
understands and confirms that the Purchasers shall be relying on the
foregoing representation in effecting transactions in securities of the
Company.
(xvi) Registration Rights. Except as provided in the Note
attached hereto as Exhibit A, the Company has not granted or agreed to
grant any registration rights, including piggy-back registration
rights, to any Person.
(xvii) Environmental Compliance. To the best knowledge of the
Company (i) the conduct of the business at the Company in connection
with the ownership, use, maintenance or operation of any real property
which has ever been owned or leased by the Company, and the conduct of
business thereon, complies and complied with, and the Company is not in
violation of, any applicable federal, state, county or local statutes,
laws, regulations, rules, ordinances, codes, licenses, permits (granted
to the Company) or orders (naming the Company) of any governmental
authorities relating to environmental matters, including, without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 ("CERCLA"), and any other law, statute, ordinance
or regulation relating to the protection of the public health and/or
the environment, whether promulgated by the United States, any state,
municipality and/or other governmental body, each as amended
(hereinafter collectively referred to as "Environmental Laws"), (ii)
the conduct of the business at the Company is and has at all times been
performed in conformance with all Environmental Laws and regulations
pertaining thereto, and all permits or other documents required for the
conduct of the business in accordance with the Environmental Laws are
and at all times have been in full force and effect; (iii) there are no
notices of violation of any Environmental Laws requiring any work,
repairs, construction, capital expenditures or otherwise with respect
to the business of the Company which have been received by the Company,
and there are no writs, notices, injunctions, decrees, orders, liens or
judgments outstanding, no lawsuits based upon either the Environmental
Laws or the common law, claims, proceedings or investigations pending
relating to the operations of the Company with respect to the disposal
of hazardous wastes or hazardous substances by the Company, and (iv)
there has been no release (as defined in CERCLA) of a hazardous
substance (as defined in CERCLA) or hazardous waste or any similar
hazardous or toxic materials, substances, pollutants, contaminants or
wastes to the extent prohibited by the Environmental Laws, at or on any
premises which have ever been leased or owned by the Company, nor have
such premises been used at any time by any person as a landfill or a
waste disposal site for any hazardous substances or hazardous wastes.
(b) Representations and Warranties of the Purchasers. Each Purchaser
hereby, severally and not jointly, makes the following representations and
warranties to the Company.
(i) Authority. Such Purchaser or its authorized representative
has the requisite power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and to carry
out his obligations thereunder. The acquisition of the Securities to be
acquired hereunder by such Purchaser has been duly authorized by all
necessary action on the part of such Purchaser. This Agreement and
other Transaction
PURCHASE AGREEMENT
- 7 -
<PAGE> 8
Documents have been duly executed by such Purchaser or its authorized
representative and, when delivered by such Purchaser in accordance with
the terms hereof and thereof constitutes the valid and legally binding
obligation of such Purchaser, enforceable against him in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
(ii) Investment Intent. Such Purchaser is acquiring the
Securities to be acquired hereunder by such Purchaser for his own
account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's
right, subject to the provisions of this Agreement and the Note, at all
times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(iii) Experience of Purchaser. Each Purchaser (i) has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of his investment in the
Securities and has the financial ability to assume the monetary risk
associated therewith, (ii) is able to bear the complete loss of his
investment in the Securities, (iii) has received such other documents
and information as he has requested and has had the opportunity to ask
questions of, and receive answers from, the Company and its management
concerning the Company and the terms and conditions of the offering of
the Securities and to obtain additional information, (iv) is not an
entity formed solely to make this investment, (v) is not relying upon
any statements or instruments made or issued by any person other than
the Company and its officers in making his decision to invest in the
Securities, and (iv) will execute and deliver to the Company an
Investment Letter in substantially the form as attached hereto as
Exhibit B.
(iv) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser acknowledges that an investment in the Securities is
speculative and involves a high degree of risk. Such Purchaser is able
to bear the economic risk of an investment in the Securities to be
acquired hereunder by such Purchaser, and, at the present time, is able
to afford a complete loss of such investment.
(v) Access to Information. Such Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that he has been
afforded (i) the opportunity to ask such questions as he has deemed
necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Securities, and the merits and risks of investing in the Securities,
(ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties,
management and prospects sufficient to enable him to evaluate his
investment and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the
Disclosure Materials. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or his
representatives, agents or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of
the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
PURCHASE AGREEMENT
- 8 -
<PAGE> 9
(vi) Reliance. Such Purchaser understands and acknowledges
that (i) the Securities to be acquired by him hereunder are being
offered and sold to him without registration under the Securities Act
in a private placement that is exempt from the registration provisions
of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance. Each Purchaser hereby agrees to
cooperate with the Company if, as required by law or the Commission to
confirm the availability of an exemption from the registration
requirements of the Securities Act for the transactions contemplated
herein, the Company shall reasonably request additional information
from such Purchaser.
ARTICLE 3.
OTHER AGREEMENTS OF THE PARTIES
(a) Transfer Restrictions.
(i) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements thereof. In connection
with any transfer of any Securities other than pursuant to an effective
registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company, hereby consents to and
agrees to register (i) any transfer of Securities by one Purchaser to
another Purchaser, and agrees that no documentation other than executed
transfer documents shall be required for any such transfer, and (ii)
any transfer by any Purchaser to an Affiliate (as such term is defined
under Rule 405 promulgated under the Securities Act) of such Purchaser
or to an Affiliate of another Purchaser, or any transfers among any
such Affiliates. Any such Purchaser or Affiliate transferee shall have
the rights of a Purchaser under this Agreement and the Note.
(ii) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the
Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
PURCHASE AGREEMENT
- 9 -
<PAGE> 10
Underlying Shares shall not contain the legend set forth above
if the conversion of Notes or other issuances of Underlying Shares, as
the case may be, occurs at any time while a registration statement is
effective under the Securities Act or, in the event there is not an
effective registration statement at such time, if in the opinion of
counsel to the Company such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission). The Company
agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from
such legend at such time as such legend is no longer required
hereunder. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section 3.1(b).
(b) Acknowledgment of Dilution. The Company acknowledges that the
issuance of, Underlying Shares upon conversion of the Notes may result in
dilution of the outstanding shares of Common Stock. The Company further
acknowledges that its obligation to issue Underlying Shares in accordance with
the Notes is unconditional and absolute regardless of the effect of any such
dilution.
(c) Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. If at any time prior to the date on which the Purchasers may
resell all of their Underlying Shares without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act (as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the benefit of and enforceable by
the Purchasers) the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act in the time period that
such filings would have been required to have been made under the Exchange Act.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
(d) Increase in Authorized Shares. At such time as the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from converting the full outstanding principal
amount of Notes that remain unconverted at such date due to the unavailability
of a sufficient number of shares of authorized but unissued or re-acquired
Common Stock, the Board of Directors of the Company shall promptly (and in any
case within 45 Business Days from such date) prepare and mail to the
shareholders of the Company proxy materials requesting authorization to amend
the Company's certificate of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least a number of
shares equal to the sum of (i) all shares of Common Stock then outstanding, (ii)
the number of shares of Common Stock issuable on account of all outstanding
warrants, options and convertible securities (other than the Notes) and on
account of all shares reserved under any stock option, stock purchase, warrant
or similar plan, and (iii) 100% of the number of Underlying Shares as would then
be issuable upon a conversion in full of the then outstanding Notes. In
connection therewith, the Board of
PURCHASE AGREEMENT
- 10 -
<PAGE> 11
Directors shall (x) adopt proper resolutions authorizing such increase, (y)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the shareholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (z) within 5 Business Days of obtaining
such shareholder authorization, file an appropriate amendment to the Company's
certificate of incorporation to evidence such increase.
(e) Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities to pay existing bank debt, $994,307.26 of debt owed to Michael
J. Blumenfeld by the Company will be exchanged for $994,307.26 of Notes, with
the remaining proceeds to be used for working capital and general corporate
purposes.
(f) Conversion Obligations of the Company. The Company shall honor
conversions of the Notes and shall deliver Underlying Shares in accordance with
the respective terms and conditions and time periods set forth in the Notes.
(g) Exchange of Shareholder Debt. The Company owes Michael J.
Blumenfeld, a shareholder, officer and director of the Company ("Shareholder"),
the amount of $994,307.26. The Company and Shareholder have agreed at Closing to
exchange the $994,307.26 debt owed to Shareholder for $994,307.26 of Notes.
ARTICLE 4.
CLOSING CONDITIONS
(a) Conditions Precedent to the Obligation of the Company to Sell the
Notes. The obligation of the Company to sell the Notes hereunder is subject to
the satisfaction or waiver by the Company, at or before the Closing, of each of
the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser shall
be true and correct in all material respects as of the date when made
and as of the Closing Date, as though made on and as of such date.
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to
the Closing.
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
(iv) Delivery of Investment Letter. Each Purchaser shall have
executed and delivered to the Company an Investment Letter
substantially in the form of Exhibit B.
(v) Delivery of Subordination Agreement. Each Purchaser shall
have executed and delivered to the Company a Subordination Agreement in
the form of Exhibit C.
(vi) Performance by Shareholder. Shareholder shall execute
such releases and other documents as may be reasonably required to
effect the exchange of Shareholder debt for Notes.
PURCHASE AGREEMENT
- 11 -
<PAGE> 12
(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Notes. The obligation of each Purchaser hereunder to acquire and
pay for the Notes is subject to the satisfaction or waiver by such Purchaser, at
or before the Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in this
Agreement and in the other Transaction Documents shall be true and
correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date.
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing.
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the other Transaction
Documents.
(iv) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, whichever is more recent, last filed prior
to the date of this Agreement, no event which had a Material Adverse
Effect and no material adverse change in the financial condition or
prospects of the Company shall have occurred which is not disclosed in
the Disclosure Materials.
(v) Shares of Common Stock. On or prior to the Closing Date,
the Company shall have duly reserved the number of Underlying Shares
required by the Transaction Documents to be reserved for issuance upon
conversion of the Notes.
(vi) Delivery of Notes. The Company shall have delivered to
each Purchaser, or such Purchaser's designee, the Notes, registered in
the name of such Purchaser, or designee, each substantially in the form
of Exhibit A.
ARTICLE 5.
MISCELLANEOUS
(a) Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Notes pursuant hereto. The Purchasers shall be responsible for their own
respective tax liability that may arise as a result of the investment hereunder
or the transactions contemplated by this Agreement.
(b) Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Notes and the Investment Letter contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
(c) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:00 p.m. (Dallas, Texas
time) on a
PURCHASE AGREEMENT
- 12 -
<PAGE> 13
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in the Purchase Agreement later than 5:00 p.m. (Dallas, Texas
time) on any date and earlier than 11:59 p.m. (Dallas, Texas time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Collegiate Pacific, Inc.
13950 Senlac Drive, Suite 200
Dallas, Texas 75234
Attention: Michael J. Blumenfeld
With copies to:
-------------------------
-------------------------
-------------------------
-------------------------
If to any Purchaser or the Purchasers, to the addresses and facsimiles set forth
on Schedule 1.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person. Non-delivery of copies of any notice as specified above
shall not affect the validity of any notice given to any party to this Agreement
in accordance with the terms of this Agreement.
(d) Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
(e) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns,
including any Persons to whom any Purchaser transfers Notes. The assignment by a
party of this Agreement or any rights hereunder shall not affect the obligations
of such party under this Agreement.
(g) No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to permitted assignees under Section 5.6,
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person. The obligations of the Purchasers under this Agreement and the
other Transaction Documents are several and not joint and no Purchaser shall be
responsible for any obligations of any other Purchaser.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
PURCHASE AGREEMENT
- 13 -
<PAGE> 14
(i) Survival. The representations, warranties, agreements and covenants
contained in this Agreement shall survive the Closing and the conversion of the
Notes.
(j) Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
(k) Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement. In no event will any party
publicly or otherwise disclose the name of any Purchaser without such
Purchaser's prior written consent.
(l) Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
(m) Remedies. Each of the parties to this Agreement acknowledges and
agrees that the other parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions of this
Agreement in any action instituted in any court of the United States of America
or any state thereof having jurisdiction over the parties to this Agreement and
the matter, in addition to any other remedy to which they may be entitled, at
law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this Note Purchase
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
THE COMPANY:
COLLEGIATE PACIFIC, INC.
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
THE PURCHASER:
-----------------------------------------
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
PURCHASE AGREEMENT
- 14 -
<PAGE> 15
AMENDED
SCHEDULE 1
<TABLE>
<CAPTION>
PURCHASER NOTE AMOUNT NOTE NUMBER
- --------- ----------- -----------
<S> <C> <C> <C>
1. Michael J. Blumenfeld $1,500,000.00 01
13950 Senlac Drive, Suite 200
Dallas, Texas 75234
Telephone: (972) 243-8100
Facsimile: (972) 243-8316
2. Watkins Brothers Trust 100,000.00 03
6584 Poplar Street, Suite 200
Memphis, Tennessee 38138
Attention: William H. Watkins, Jr.,
Trustee
Telephone: (901) 761-2720
Facsimile: (901) 763-3094
3. Arthur J. Coerver 26,000.00 04
13950 Senlac Drive, Suite 200
Dallas, Texas 75234
Telephone: (972) 243-8100
Facsimile: (972) 243-8316
4. Arthur J. Coerver, IRA 20,000.00 05
13950 Senlac Drive, Suite 200
Dallas, Texas 75234
Attention: Southwest Securities, Inc.,
Custodian
Telephone: (972) 243-8100
Facsimile: (972) 243-8316
5. Colleen C. Coerver, IRA 4,000.00 06
13950 Senlac Drive, Suite 200
Dallas, Texas 75234
Attention: Southwest Securities, Inc.,
Custodian
Telephone: (972) 243-8100
Facsimile: (972) 243-8316
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
PURCHASER NOTE AMOUNT NOTE NUMBER
- --------- ----------- -----------
<S> <C> <C> <C>
6. Davidowitz Foundation $ 50,000.00 07
Line and Grove Streets
P.O. Box 87
Nanticoke, Pennsylvania 18634
Attention: Jeff Davidowitz,
Trustee
Telephone: (570) 735-3200
Facsimile: (570) 735-0251
7. William Davidowitz 100,000.00 08
Line and Grove Streets
P.O. Box 87
Nanticoke, Pennsylvania 18634
Telephone: (570) 735-3200
Facsimile: (570) 735-0251
8. JIBS Equities, L.P. 50,000.00 09
a Delaware limited partnership
Line and Grove Streets
P.O. Box 87
Nanticoke, Pennsylvania 18634
Attention: Jeff Davidowitz,
General Partner
Telephone: (570) 735-3200
Facsimile: (570) 735-0251
9. Penn Footwear Retirement Trust 50,000.00 10
Line and Grove Streets
P.O. Box 87
Nanticoke, Pennsylvania 18634
Attention: Jeff Davidowitz,
General Partner
Telephone: (570) 735-3200
Facsimile: (570) 735-0251
10. Robert W. Philip or Sharon A. Philip 50,000.00 11
Joint Tenants With Right Of Survivorship
P.O. Box SM30159
Stella Maris, Long Island
Bahamas
Telephone: (242) 338-2013
Facsimile: (242) 338-2013
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
PURCHASER NOTE AMOUNT NOTE NUMBER
- --------- ----------- -----------
<S> <C> <C> <C>
11. Myrna G. Kulp $ 100,000.00 12
2041 N. Magnolia Avenue
Chicago, Illinois 60614
Telephone: (773) 327-0991
Facsimile: (773) 477-8523
12. H.I. Schendle IRA Rollover 50,000.00 14
4061 Hanover Street
Dallas, Texas 75225
Attention: Texas Community Bank &
Trust, N.A., Custodian
Telephone: (214) 265-7300
Facsimile: (214) 890-0088
13. The Eric C. Green GST Trust 120,000.00 15
6511 Riverview Drive
Dallas, Texas 75248
Attention: Eric C. Green, Trustee
Telephone: (214) 599-6305
Facsimile: (214) 599-7511
14. Harvey Rothenberg IRA 10,000.00 16
1242 Jeanette Way
Carrollton, Texas 75006
Attention: Southwest Securities, Inc.,
Custodian
Telephone: (972) 243-8100
Facsimile: (972) 243-8316
15. Harvey Rothenberg and 5,000.00 17
Elisabeth Rothenberg
1242 Jeanette Way
Carrollton, Texas 75006
Telephone: (972) 243-8100
Facsimile: (972) 243-8316 -------------
$2,235,000.00
</TABLE>
<PAGE> 18
SCHEDULE 2.1(c)
COLLEGIATE PACIFIC, INC. (CPI)
OUTSTANDING OPTIONS, WARRANTS, SCRIPT RIGHTS TO CALLS OR COMMITMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WARRANTS OPTIONS OPTIONS
ISSUED TO WARRANTS WARRANTS ISSUED TO ISSUED TO
FORMER ISSUED TO ISSUED TO FORMER EXECUTIVES &
EXECUTIVE OF EXECUTIVE OF LICENSOR OF EXECUTIVES & EMPLOYEES EMPLOYEES
DSSI (2) CPI (3) CPI (4) DSSI (5) CPI (6)
<S> <C> <C> <C> <C> <C>
OUTSTANDING JUNE 30,1999 (1 ) 98,973 - 0 - 40,000 32,000 41,500
OPTIONS AND WARRANTS ISSUED - 0 - 30,000 - 0 - - 0 - - 0 -
OPTIONS AND WARRANTS EXERCISED - 0 - - 0 - - 0 - (27,000) (1,000)
OUTSTANDING JANUARY 31,1999 98,973 30,000 40,000 5,000 40,500
EXERCISE PRICE OF OUTSTANDING
WARRANTS AND OPTIONS $ 5.05 $ 10.00 $ 12.50 $ 1.25 $ 9.38
</TABLE>
(1) ALL THE WARRANT AND OPTIONS HAVE BEEN ADJUSTED TO REFLECT THE 1 FOR 5
REVERSE SPLIT OF THE COLLEGIATE PACIFIC, INC. COMMON STOCK AS APPROVED
BY THE STOCKHOLDERS OF COLLEGIATE PACIFIC, INC. ON JANUARY 14, 1999.
(2) THE WARRANTS WERE ISSUED TO THE FORMER CEO OF DSSI IN CONJUNCTION WITH
HIS ACTIVITIES PRIOR TO THE MERGER OF DSSI AND COLLEGIATE PACIFIC, INC.
THE TERMS OF THE WARRANT WERE EXTENDED AT THE MEETING OF THE
STOCKHOLDERS OF DSSI ON FEBRUARY 17, 1998 TO APPROVE THE MERGER WITH
COLLEGIATE PACIFIC, INC. THE WARRANTS WILL EXPIRE ON MARCH 30, 2000.
(3) THE WARRANTS WERE ISSUED TO THE CEO OF COLLEGIATE PACIFIC, INC. IN
CONNECTION WITH A LOAN GUARANTY AND PLEDGE. THE WARRANTS WILL EXPIRE ON
SEPTEMBER 14, 2004.
(4) THE WARRANTS WERE ISSUED TO A LICENSOR OF COLLEGIATE PACIFIC, INC. IN
CONNECTION WITH THE GRANTING OF A LICENSE TO COLLEGIATE PACIFIC, INC.
FOR WEB RELATED ACTIVITIES. THE WARRANTS WILL EXPIRE ON APRIL 24, 2004.
(5) THE OPTIONS ISSUED TO THE FORMER EXECUTIVES AND EMPLOYEES OF DSSI IN
CONJUNCTION WITH THE 1994 STOCK OPTION PLAN. THE TERMS OF THE OPTIONS
WERE EXTENDED AT THE MEETING OF THE STOCKHOLDERS OF DSSI ON FEBRUARY
17, 1998 TO APPROVE THE MERGER WITH COLLEGIATE PACIFIC, INC. THE
REMAINING OPTIONS WILL EXPIRE ON JULY 16, 2002.
(6) THE OPTIONS ISSUED TO EXECUTIVES AND EMPLOYEES OF DSSI IN CONJUNCTION
WITH THE 1998 COLLEGIATE PACIFIC, INC. STOCK OPTION PLAN. THE OPTIONS
WILL EXPIRE ON FEBRUARY 24, 2009.
<PAGE> 19
SCHEDULE 2.1(j)
<TABLE>
<CAPTION>
FORM FILING DATE
---- -----------
<S> <C>
1. 10QSB February 16, 1999
2. 10QSB/A February 17, 1999
3. 10QSB May 17, 1999
4. 8-K July 22, 1999
5. 8-A12B September 9, 1999
6. 424B3 September 21, 1999
7. 10QSB November 15, 1999
8. 14A December 16, 1999
9. SB-2 January 14, 2000
10. 10-QSB February 14, 2000
</TABLE>
On January 14, 2000, the Board of Directors of the Company expanded the
Board of Directors and elected Adam Blumenfeld as an additional director of the
Company. The Board of Directors also elected Adam Blumenfeld as President of the
Company, replacing Michael J. Blumenfeld. Michael J. Blumenfeld retained his
position as Chairman of the Board and Chief Executive Officer.
Adam Blumenfeld, age 29, is the son of Michael J. Blumenfeld. From 1997
through 1999, Adam Blumenfeld served as Vice President of Sales and Marketing of
Sport Supply Group, Inc., a New York Stock Exchange company engaged in the
direct marketing of sports related equipment. From 1994 through 1997, Adam
Blumenfeld served as Vice President of Youth Sales for Sport Supply Group, Inc.
<PAGE> 20
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF l933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF THE SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 8 HEREIN)
PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THAT CERTAIN SUBORDINATION AGREEMENT
EFFECTIVE AS OF JANUARY 20, 2000 BY COLLEGIATE PACIFIC, INC. AND HOLDER NAMED
HEREIN IN FAVOR OF CHASE BANK OF TEXAS, NATIONAL ASSOCIATION OR THE HOLDER OF
SENIOR INDEBTEDNESS REFERRED TO IN SUCH SUBORDINATION AGREEMENT.
NOTE NO. ____
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
February ___, 2000 $____________
FOR VALUE RECEIVED, the undersigned, Collegiate Pacific Inc., a
Delaware corporation (the "Company"), hereby promises to pay to the order of
____________________ ("Holder"), the principal amount of _____________
($________) in lawful money of the United States of America, together with
interest on the outstanding portion thereof for the period such sums are unpaid,
all in accordance with the provisions of this Note.
1. Payment of Principal and Interest.
(a) The outstanding principal amount of this Note is due and
payable in a single installment on January 31, 2005 (the "Maturity
Date").
(b) Interest hereunder shall be computed on the basis of the
actual number of days elapsed based on a 365 or 366 day year, as the
case may be.
(c) Interest will accrue at a variable rate per annum equal to
the Prime Rate (hereinafter defined) plus two and one-half (2 1/2)
percentage points, payable monthly on the tenth (10th) day of each
calendar month, commencing April 10, 2000 and continuing regularly
thereafter on the tenth (10th) day of each succeeding month and on the
Maturity Date. The Prime Rate will be determined on the date hereof for
the period from the date hereof until April 1, 2000. Thereafter, the
Prime Rate will be determined on the last Business Day (hereinafter
defined) of March 2000 for the calendar quarter from April 1, 2000 to
July 1, 2000 and on the last Business Day of every June, September,
December and March thereafter until the Maturity Date for each of the
respective following calendar quarters.
(i) "Prime Rate" means the "prime rate" published
from time to time in the Money Rates column of The Wall Street
Journal (Central Edition); provided, however, if the Money
Rates column
<PAGE> 21
of The Wall Street Journal (Central Edition) ceases to be
published or otherwise does not designate a "prime rate" as of
any Business Day, "Prime Rate" shall mean the rate of interest
per annum publicly announced by The Chase Manhattan Bank as
its prime rate in effect at its principal office in New York
City; in each case each change in such rate shall be effective
from and including the Business Day such change is published
or announced, as the case may be.
(ii) "Business Day" means any day that is not a
Saturday, Sunday or other day on which commercial banks in New
York City, New York or Dallas, Texas are authorized or
required by law to remain closed. If the last or appointed day
for the taking of any action or the expiration of any right
required or granted in this Warrant is not a Business Day,
then such action may be taken or such right may be exercised
on the following Business Day.
(d) Notwithstanding any provision to the contrary contained in
this Note, it is expressly agreed and provided that the total liability
of the Company hereunder for payments in the nature of interest shall
not exceed the maximum lawful rate authorized under the laws of the
State of Texas or such greater rate as may be authorized by other
governmental authority applicable to the indebtedness evidenced hereby
(the "Maximum Rate"), and, without limiting the foregoing, in no event
shall the rate of interest when aggregated with any other sums in the
nature of interest which the Company may be obligated to pay hereunder
exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by law and applicable to this Note is
increased or decreased by statute or any official action of the State
of Texas or the United States of America subsequent to the date hereof,
the new maximum contract rate of interest allowed by law will be the
Maximum Rate of interest applicable to this Note from the effective
date forward, unless such application is precluded by applicable
statute, official action, or rule of law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid to Holder by
the Company in connection with the indebtedness evidenced by this Note,
such excess shall be applied by Holder to the unpaid principal balance
of this Note or be refunded to the Company, the manner of handling such
excess to be at Holder's election.
2. Prepayment. Subject to the prior written approval of Senior Creditor
(as defined in Section 8 of this Note), this Note may be prepaid in whole or in
part, at any time after the second anniversary hereof without penalty or premium
but with interest accrued on the amount being prepaid to the date of prepayment;
provided that Holder shall be entitled to ten (10) Business Days' notice prior
to any prepayment of principal or interest hereunder, and upon receipt of such
notice Holder may elect to convert the Note into the Company's Common Stock,
$.01 par value per share (the "Common Stock") pursuant to the following section
in lieu of receiving such payment. Any payments made to Holder by the Company
hereunder will be applied first to accrued but unpaid interest and then to
principal.
3. Conversion.
(a) Holder shall have the right at any time, at Holder's
option, to convert all or any part of the outstanding principal amount
of, and accrued but unpaid interest on, this Note into shares of Common
Stock at a conversion price equal to $3.30 per share. Holder may
exercise its conversion right hereunder by delivering written notice of
conversion ("Underlying Shares"), together with this original Note, to
the Company, in which case Holder will be deemed for all purposes to be
Holder of the number of shares of Common Stock issuable upon such
conversion as specified in such notice of conversion, and Holder will
be deemed for all purposes to be Holder of a replacement Note on terms
identical to the terms hereof, in the principal amount of that portion
of this Note not converted in such conversion, if any. As soon as
practicable
<PAGE> 22
after receipt of notice of conversion and this Note, the Company will
issue a certificate evidencing the number of shares of Common Stock
into which this Note or a portion of this Note has been converted and a
replacement Note evidencing the remaining principal balance of the Note
outstanding, if any.
(b) The Company will not issue fractional shares upon any
conversion of this Note into shares of Common Stock. In lieu of any
such fractional shares, if Holder would otherwise be entitled to a
fraction of a share of Common Stock upon conversion, it will be
entitled to receive a cash payment (without interest) determined by
multiplying:
(i) The fractional interest to which Holder would
otherwise be entitled; and
(ii) $3.30.
4. Adjustments to Conversion Shares.
(a) If, at any time after the date hereof and before the
conversion of this Note, the Company effects a split, subdivision or
combination of the Common Stock or makes or issues, or fixes a record
date for the determination of holders of its Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Company, then Holder shall be entitled to receive, upon conversion
hereof, the number of shares of Common Stock and other securities that
it would have received had it converted this Note immediately prior to
such event and had thereafter, during the period from the date of such
event to and including the conversion date, retained such shares,
giving application to all adjustments called for during such period
under this Section 4.
(b) If, at any time after the date hereof and before the
conversion of this Note, there is any reclassification of the Company's
securities or any reorganization of the Company or any combination,
merger or consolidation of the Company with or into another person, or
any sale of all or substantially all of the Company's assets to any
other person, then, as a part of such event, provision shall be made so
that Holder is thereafter entitled to receive, upon conversion of this
Note, the number of shares or other securities or property to which a
holder of shares issuable upon conversion immediately prior to such
event would have been entitled on such event. In any such case,
appropriate adjustment shall be made so that the rights of Holder
before and after such event are as nearly equivalent as possible.
5. Certain Legal Restrictions.
(a) The Company shall not be obligated to sell or issue any
shares of Common Stock upon the conversion of this Note or otherwise
unless the issuance and delivery of such shares shall comply with all
relevant provisions of law and other legal requirements including,
without limitation, any applicable federal or state securities laws and
the requirements of any stock exchange upon which shares of the Common
Stock may then be listed. As a condition to the conversion of this Note
or the sale by the Company of any additional shares of Common Stock to
Holder, the Company may require Holder to make such representations and
warranties as may be necessary to assure the availability of an
exemption from the registration requirements of applicable federal or
state securities laws. The Company shall not be liable for refusing to
sell or issue any shares if the Company cannot obtain authority from
the appropriate regulatory bodies deemed by the Company to be necessary
to lawfully sell or issue such shares. In addition, the Company shall
have no obligation to Holder, express or implied, to list, register or
otherwise qualify any of
<PAGE> 23
Holder's shares of Common Stock. The shares of Common Stock issued upon
the conversion of this Note may not be transferred except in accordance
with applicable federal or state securities laws. At the Company's
option, the certificate evidencing shares of Common Stock issued to
Holder may be legended as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Company shall keep at its principal place of business
a register in which the Company shall provide for the registration of
this Note and for the registration of transfer of this Note. Every Note
presented or surrendered for registration or transfer shall be duly
endorsed, or shall be accompanied by a written instrument of transfer
duly executed, by Holder or his attorney duly authorized in writing.
Every Note so made and delivered in exchange for this Note shall in all
other respects be in the same form and have the same terms as this
Note.
(c) This Note will not be transferable, except upon the
conditions specified in this Section 5(c), which conditions, among
other things, are intended to insure compliance with the provisions of
the Securities Act of 1933, as amended (the "Securities Act"). Any
proposed transfer of this Note shall comply with all relevant
provisions of law and other legal requirements including, without
limitation, any applicable federal or state securities laws and the
requirements of any stock exchange upon which shares of the Common
Stock issuable upon conversion of this Note may then be listed. As a
condition to registering the transfer of this Note, the Company may
require Holder to make such representations and warranties as may be
necessary to assure the availability of an exemption from the
registration requirements of applicable federal or state securities
laws.
6. Loss, Theft, Destruction of Notes. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and in the case of any such loss, theft or destruction,
upon receipt of any indemnity bond in such reasonable amount as the Company may
determine, or, in the case of any such mutilation upon surrender for
cancellation of this Note, the Company will make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Note, a new Note of like tenor and
principal amount and dated as of the date to which interest has been paid on the
lost, stolen, destroyed or mutilated Note. Every Note so made and delivered in
replacement for this Note shall in all other respects be in the same form and
have the same terms as this Note.
7. Registered Holders. Prior to due presentment for registration of
transfer of any Note, the Company may deem and treat the registered holder
thereof as the absolute owner thereof for the purposes of receiving payment of
or on account of the principal of and premium, if any, and interest on such Note
and for the purposes of any notices, waivers or consents thereunder, and
payments of any Note shall be made only to or upon the order in writing of the
registered holder thereof.
<PAGE> 24
8. Subordination. The indebtedness represented by this Note and the
payment of the principal and interest on this Note will be subordinated, to the
extent and in the manner provided in that certain subordination agreement
executed by Company, Holder and Senior Creditor (herein defined) dated effective
January 20, 2000 and executed of even date herewith (the "Subordination
Agreement") to the prior payment in full of all Senior Indebtedness, as defined
in the Subordination Agreement.
(a) "Senior Creditor" means Chase Bank of Texas, National
Association, its successors, transferees and assigns.
9. Events of Default. An "Event of Default" will exist hereunder if any
one or more of the following events occurs and is continuing:
(a) The Company fails to make any payment under this Note when
due and such default continues for 30 days;
(b) The Company fails to perform any of its covenants or
agreements hereunder and such failure continues for thirty (30) days
after receipt of written notice of such default from Holder;
(c) The Company
(i) Applies for or consents to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of the
Company or of all or a substantial part of its assets;
(ii) Files a voluntary petition in bankruptcy, admits
in writing that it is unable to pay its debts as they become
due or generally does not pay its debts as they become due;
(iii) Makes a general assignment for the benefit of
creditors;
(iv) Files a petition or answer seeking
reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency laws;
(v) Files an answer admitting the material
allegations of, or consents to, or defaults in answering, a
petition filed against it in any bankruptcy, reorganization or
insolvency proceeding; or
(vi) Takes corporate action for the purpose of
effecting any of the foregoing.
(d) An involuntary petition or complaint is filed against the
Company seeking bankruptcy or reorganization or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of the Company,
or of all or substantially all of its assets, and such petition or
complaint is not dismissed within 90 days of the filing thereof; or an
order, order for relief, judgment or decree is entered by any court of
competent jurisdiction or other competent authority approving a
petition or complaint seeking reorganization of the Company or
appointing a receiver, custodian, trustee, intervenor or liquidator of
the Company, or of all or substantially all of its assets.
10. Remedies. Upon the occurrence of any Event of Default, Holder may,
at its option, declare the entire unpaid balance of principal and accrued
interest (if any) on this Note to be immediately due and payable; provided,
however, upon the occurrence of any of the Events of Default described in
Section 9(b) or (c) above, the entire
<PAGE> 25
unpaid balance of principal and accrued interest on this Note will, without any
action by Holder, immediately become due and payable without demand for payment,
presentment, protest, notice of protest and nonpayment, or other notice of
default, notice of acceleration and intention to accelerate or any other notice,
all of which are expressly waived by the Company. Upon the occurrence of any
Event of Default, Holder will also have all rights and remedies that are granted
to a creditor under the laws of the State of Texas.
11. Waivers. Except as otherwise expressly set forth above, the Company
waives notice, presentment, demand for payment, protest, notice of protest and
nonpayment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other notice
or formalities of any kind, and consents, to all extensions without notice for
any period or periods of time and partial payments before or after maturity, all
without prejudice to Holder.
12. Collection Costs. If this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings at
law or in equity or in bankruptcy, receivership or other court proceedings, the
Company promises to pay all costs and expenses of collection including, but not
limited to, court costs and reasonable attorneys' fees of Holder hereof.
13. Choice of Law. The interpretation, performance and enforcement of
this Note shall be governed by the laws of the State of Texas, as applicable,
without reference to the conflict of laws provisions thereof.
14. Registration Rights.
(a) Optional Registrations.
(i) If the Company decides to register any of its
Common Stock or securities convertible into or exchangeable
for Common Stock under the Securities Act on a form which is
suitable for an offering for cash of shares of the Company
held by third parties and which is not a registration solely
to implement an employee benefit plan or a transaction to
which Rule 145, S-8 or any other similar rule of the
Securities and Exchange Commission (the "Commission") is
applicable, the Company will promptly give written notice to
the Holder, and the Company will use all reasonable efforts to
effect the registration under the Securities Act of all
Underlying Shares that the Holder requests be included in such
registration by a written notice delivered to the Company
within fifteen (15) days after the notice given by the
Company. The Holder agrees that any securities it requests to
be included in a the Company registration pursuant to this
Section 14(a) shall be included by the Company on the same
form of registration statement as has been selected by the
Company for the securities the Company is registering for sale
for its own account.
(ii) If the registration involves an underwritten
public offering, the Company will not be required to register
Underlying Shares in excess of the amount that the principal
underwriter reasonably and in good faith recommends may be
included in such offering (a "Cutback"), which recommendation,
and supporting reasoning, shall be delivered in writing to the
Holder. If such a Cutback occurs, the number of shares that
are entitled to be included in the registration and
underwriting shall first be allocated to the Company for
securities being sold for its own account and thereafter shall
be allocated to the Holder requesting inclusion in the
registration.
(iii) If the Company elects to terminate any
registration filed under this Section 14(a), the Company will
have no obligation to register the securities sought to be
included by the Holder in
<PAGE> 26
such registration. If the Company includes in such
registration any securities to be offered by it, all expenses
of the registration and offering and the reasonable fees and
expenses of not more than one independent counsel for the
Holder will be borne by the Company, except that the Holder
will bear underwriting discounts and commissions attributable
to its Underlying Shares being registered and transfer taxes
on shares being sold by it.
(b) Required Registrations.
(a) Subject to the limitations on registration set
forth in Section 14(e) below, if the Holder notifies the
Company in writing that the Holder intends to offer for public
sale any Underlying Shares, the Company will cause the
Underlying Shares as may be requested by the Holder to be
included in a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"). In connection with
one (1) registration made by the Company pursuant to this
Section 14(b), all expenses of such registration and the
reasonable fees and expenses of not more than one independent
counsel for the Holder will be borne by the Company, except
that the Holder will bear underwriting discounts and
commissions and transfer taxes on shares being sold by the
Holder. The Company shall not be required to file any
registration statement for securities other than shares of
Common Stock, although any conversion of this Note may be
conditioned upon such registration statement becoming
effective, to the extent that the conversion relates to
Underlying Shares covered by the Holder's written notice of an
intended public offering. In connection with all other
registrations made by the Company pursuant to this Section
14(b), all expenses of any such registrations (other than
audit and "blue sky" fees and expenses, which fees and
expenses will be borne by the Company) shall be borne by the
Holder; provided, however, that if the Company for its own
account or any other holder of shares elects to register its
shares under this Section 14(b) as permitted below, the
expenses of such registration shall be borne pro rata by all
parties to the registration based upon the ratio that the
number of such shares being registered by such entity bears to
the total number of shares to be registered pursuant to this
Section 14(b). Except as provided in Section 14(c), this
Section 14(b) will not apply to a request for registration on
Form S-3 (or successor form) which will be governed by Section
14(c). In the event any registration attempted under this
Section 14(b) pursuant to which the Company would be
responsible for the above expenses of the Holder is not
consummated, then the Company shall pay such expenses and
shall remain responsible for the above expenses of the Holder
with respect to one (1) consummated registration under this
Section 14(b).
(c) The registration statement filed pursuant to the request
of the Holder may include other securities of the Company, with respect
to which "piggyback" registration rights have been granted, and may
include securities of the Company being sold for the account of the
Company; provided, however, that if the Company shall request inclusion
in any registration pursuant to this Section 14(b) of the securities
being sold for its own account, or if other persons shall request
inclusion in any registration pursuant to this Section 14(b), the
Holder shall, on behalf of all entities requesting inclusion in such
registration, offer to include such securities in the offering and may
condition such offer on their acceptance of any other reasonable
conditions (including, without limitation, if such offering is
underwritten, that such requesting holders agree in writing to enter
into an underwriting agreement with usual and customary terms).
Notwithstanding any other provisions of this Section 14(b), if the
representative of the underwriters advises the Holder in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting
or registration shall be allocated first to the Holder,
<PAGE> 27
second to the Company and thereafter to the holders requesting
inclusion in the registration on the basis of the number of shares each
requesting holder requests be included bears to the total number of
shares of all requesting holders that have been requested be included
in such registration. If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter or the Holder. The securities so
excluded shall also be withdrawn from registration.
(d) Form S-3.
(i) Once the Company is eligible to effect a
registration of its securities under Form S-3 (or a successor
form), the Holder will have the right to request and have
effected registrations of shares of its Underlying Shares on
Form S-3 as long as the aggregate proposed offering price is
not less than $1,000,000 for any such registration.
(ii) Upon written request of the Holder, the Company
will cause the registration of all Underlying Shares on Form
S-3 or such successor form to the extent requested by the
Holder. All expenses incurred in connection with such
registration requested pursuant to this Section 14(c) shall be
borne by the Holder; provided, however, that if the Company
for its own account or any other holder of shares elects to
register its shares as permitted below, the expenses of such
registration shall be borne pro rata by all parties to the
registration based upon the ratio that the number of such
shares registered by such entity bears to the total number of
shares to be registered; provided, further, however, that if
the Holder elects to treat this request as a required
registration pursuant to Section 14(b) above, then the
Company, if requested by the Holder, will bear all such
expenses as provided in such Section to the extent that it
would be required to pursuant to said Section.
(iii) The registration statement filed pursuant to
the request of the Holder may include other securities of the
Company, with respect to which "piggyback" registration rights
have been granted, and may include securities of the Company
being sold for the account of the Company; provided, however,
that any Cutback shall be dealt with in the same manner as the
second paragraph of Section 8(b).
(e) Procedure for Registration. Whenever the Company is
required under Section 14 to register Common Stock, it agrees to the
following:
(i) Use all reasonable efforts to prepare promptly
for filing with the Commission a registration statement and
such amendments and supplements to said registration statement
and the prospectus as may be necessary to keep the
registration statement effective and to comply with the
provisions of the Securities Act for the period necessary to
complete the proposed public offering, but not more than 180
days;
(ii) Furnish to each selling holder such copies of
each preliminary and final prospectus and such other documents
as such holder may reasonably request to facilitate the public
offering of its Common Stock;
(iii) Enter into any underwriting agreement with
provisions reasonably required by the proposed underwriter for
the selling holders, if any; and
<PAGE> 28
(iv) Use all reasonable efforts to register or
qualify the Common Stock covered by the registration statement
under the securities or "blue-sky" laws of such jurisdictions
as any selling holder may reasonably request, although the
Company will not have to register in any states that require
it to qualify to do business or subject itself to general
service of process, and for a registration under Section
14(a), the Company will not be required to register in more
states than are necessary to permit the sale of the
securities.
(f) Limitation on Registration. The Company is not required to
file a registration statement requested under Sections 14(b) or 14(c)
prior to the earlier of (i) twenty- four (24) months from the date of
this Agreement, or (ii) ninety (90) days following the effective date
of any other registration statement initiated by the Company except for
registrations being initiated solely to implement an employee's benefit
plan. The Company is not required to file a registration statement
requested under Section 14(b) unless requested by holders owning in the
aggregate a majority of the Underlying Shares. The Company may postpone
the filing of any registration statement required under Sections 14(b)
or 14(c) for a reasonable period of time, not to exceed ninety (90)
days, if the Company has been advised by legal counsel that such filing
would require the disclosure of a material fact, and the Company
determines reasonably and in good faith that such disclosure would have
a material adverse effect on the Company. In addition, if (i) in the
good faith judgment of the Board of Directors of the Company, a
required registration under Section 14(b) or 14(c) would be seriously
detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of
such registration statement at such time, and (ii) the Company shall
furnish to the Holder a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company for such registration statement to be filed in the near future
and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer
such filing for a period of not more than one hundred eighty (180) days
after receipt of the request of the Holder, and, provided further, that
the Company shall not defer its obligation in this manner more than
once in any twelve-month period.
(g) Indemnification. Subject to applicable law, the Company
will indemnify each underwriter and the Holder and each person
controlling any of them, against all claims, losses, damages and
liabilities, including legal and other expenses reasonably incurred,
arising out of any untrue or allegedly untrue statement of a material
fact contained in the registration statement, or any omission or
alleged omission to state a material fact required to be stated in the
registration statement or necessary to make the statements not
misleading, or arising out of any violation by the Company of the
Securities Act, any state securities or "blue-sky" laws or any
applicable rule or regulation. This indemnification will not apply to
any claims, losses, damages or liabilities to the extent they may have
been caused by an untrue statement or omission based upon information
furnished in writing to the Company by such underwriter, the Holder, or
controlling person, respectively, expressly for use in the registration
statement. With respect to such untrue statement or omission in the
information furnished in writing to the Company by the Holder, such
person will indemnify the underwriters, the Company, its directors and
officers, the other persons selling securities under the registration
statement and each person controlling any of them against any losses,
claims, damages, expenses or liabilities to which any of them may
become subject as a result of such untrue statement or omission
(including those incurred in connection with investigating or defending
against such claims).
<PAGE> 29
(h) Rule 144 Requirements. The Company will file with the
Commission such information as the Commission may require and will make
available Rule 144 under the Securities Act (or any successor exemptive
rule).
(i) Obligations of Investor and Others in a Registration. The
Holder agrees timely to furnish such information regarding such person
and the securities sought to be registered and to take such other
action as the Company may reasonably request in connection with the
registration, qualification or compliance. The Company agrees that, in
connection with any offering undertaken pursuant to Section 14(b), the
Holder shall have the right if it deems an underwriter or underwriters
necessary or appropriate, to designate such underwriter(s), which
underwriters shall be reasonably acceptable to the Company and subject
to the written approval of the Company, which approval shall not be
unreasonably withheld. If the registration involves an underwriter, the
Holder agrees, upon the request of such underwriter, not to sell any
unregistered securities of the Company for a period of ninety (90) days
following the effective date of the registration statement for such
offering and to enter into an underwriting agreement with such
underwriters containing usual and customary terms and provisions.
(j) Preparation: Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Note, the Company will give the holders
of Underlying Shares registered under such registration statement,
their underwriters, if any, and one counsel or firm of counsel and one
accountant or firm of accountants representing all the holders of
Underlying Shares to be registered under such registration statement,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary in the opinion of such holders' and
such underwriters' respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act.
(k) Rule 144A. The Company agrees that, upon the request of
any holder of Underlying Shares or any prospective purchaser of
Underlying Shares designated by a holder, the Company shall promptly
provide (but in any case within 15 days of a request) to such holder or
potential purchaser, the following information:
(i) a brief statement of the nature of the business
of the Company and any Subsidiaries and the products and
services they offer;
(ii) the most recent consolidated balance sheets and
profit and losses and retained earnings statements, and
similar financial statements of the Company for the two most
recent fiscal years (such financial information shall be
audited, to the extent reasonably available); and
(iii) such other information about the Company, any
Subsidiaries, and their business, financial condition and
results of operations as the requesting holder or purchaser of
such Underlying Shares shall request in order to comply with
Rule 144A, as amended, and the antifraud provisions of the
federal and state securities laws.
The Company hereby represents and warrants to any such requesting
holder and any prospective purchaser of Underlying Shares from such holder that
the information provided by the Company pursuant to this Section 14(j)
<PAGE> 30
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
COLLEGIATE PACIFIC, INC.
By:
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Name:
------------------------------------
Its:
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HOLDER
<PAGE> 31
EXHIBIT B
Name of Purchaser:
-----------------
Amount of Subordinated Convertible
Promissory Note:
-----------------
COLLEGIATE PACIFIC, INC.
SUBSCRIPTION AGREEMENT, QUESTIONNAIRE AND INVESTMENT REPRESENTATION
THE SECURITIES BEING SUBSCRIBED TO HEREBY AND THE UNDERLYING
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER APPLICABLE
STATE SECURITIES LAWS.
FURTHER, THE SECURITIES BEING SUBSCRIBED TO MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO TRANSACTIONS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES
LAWS, OR COMPLIANCE THEREWITH.
1. INSTRUCTIONS. This subscription agreement, questionnaire and
investment representation must be executed and delivered by each prospective
purchaser of the Subordinated Convertible Promissory Notes (the "Note") of
Collegiate Pacific, Inc. (the "Company") being offered (the "Offering") by the
Company.
If the purchaser is a partnership, it must furnish a copy of its
partnership agreement and such further information as may be required to satisfy
the Company that such partnership is a pre-existing business entity which was
not formed specifically for the purpose of making this investment. If the
purchaser is a business trust (IRA, Keogh plan trust, qualified pension and/or
profit sharing plan trust, custodial account or other such account) or a
corporation or other legal entity, unless otherwise indicated, all responses are
being made on behalf of each of the principal beneficiaries of the trust and the
shareholders of the corporation. In addition, you must furnish the Company with
a copy of the instrument (including all amendments) creating the entity.
Your answers will be kept strictly confidential at all times; provided,
however, that the Company may disclose the information provided for the purpose
of proving compliance with any and all applicable laws, including securities and
tax laws.
Any questions regarding this document or your investment should be
directed to Mr. Michael J. Blumenfeld, Collegiate Pacific, Inc., 13950 Senlac,
Suite 200, Dallas, Texas 75234, Telephone: (972) 243-8100.
<PAGE> 32
2. General Information.
Age:
---------------
Residence Address:
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Telephone:
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Social Security No.:
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Occupation:
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Describe Current Employment:
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How Long:
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3. Net Worth and Income.
Net Worth (exclusive of homes, household furnishings and automobiles):
-----------------------------------------------------------------------
Net Worth (inclusive of homes, household furnishings and automobiles):
-----------------------------------------------------------------------
Taxable Income for 1999 and 2000 (estimate):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Please attach any and all documentation which you feel is necessary to
verify your net worth. In addition, you agree upon request of the
Company to deliver to a designated officer of the Company copies of
your 1999 and 2000 (estimate) state (if any) and federal income tax
returns.
<PAGE> 33
4. Knowledge and Experience in Business and Financial Affairs. Briefly
and generally describe all principal positions held during the last ten (10)
years or since your graduation from college, if earlier. (Attach a resume in
lieu of completing this question if you prefer.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Have you invested with the Company previously:
Yes No
------------- -------------
Have you ever invested in any "restricted" stock or unmarketable
securities previously:
Yes No
------------- -------------
If so, please briefly explain the nature of the investments:
-----------------------------------------------------------------------
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(In lieu of answering the two immediately preceding questions, you may
attach such information as you feel is necessary to provide the
information requested.)
5. Consideration for Purchase. The undersigned (the "Purchaser") hereby
agrees to purchase a Note at a purchase price of $____________ and under the
terms and conditions as set forth in the Purchase Agreement dated February 16,
2000 (the "Agreement").
6. Understandings of the Purchaser. The Purchaser acknowledges,
understands and agrees that:
(a) The Company reserves the right to reject all or any part of this
subscription in its sole discretion.
(b) The Purchaser will be promptly notified by the Company whether this
subscription has been accepted, either in whole or in part, and if not accepted
in whole, agrees to accept the return of a proportionate part of the funds
tendered to the Company as a refund or a return, and in either case without
interest or deduction.
(c) The Note will bear a legend restricting transfer as described in
the Agreement.
<PAGE> 34
(d) Neither the Note Stock nor the shares of the Company's Common Stock
into which the Note may be converted have been registered under the Securities
Act of 1933, as amended, or any applicable state law (collectively, the
"Securities Acts"); further, such securities may not be sold, offered for sale,
transferred, pledged, hypothecated or otherwise disposed of except in compliance
with the Securities Acts; further, the legal consequences of the foregoing mean
that the Purchaser must bear the economic risk of the investment in the Note for
an indefinite period of time; further, if the Purchaser desires to sell or
transfer all or any part of the Note or the Common Stock issuable upon
conversion thereof, the Company may require the Purchaser's counsel to provide a
legal opinion that the transfer may be made without registration under the
Securities Acts; further, other restrictions discussed elsewhere herein and in
the Agreement and Note may be applicable; and further, the Purchaser is subject
to the restriction on transfer described herein and in the Agreement and the
Company will issue stop transfer orders with the Company's transfer agent to
enforce such restrictions.
(e) No federal or state agency has made any findings or determination
as to the fairness of an investment in the Company or made any recommendation or
endorsement of this investment.
7. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) My commitment to investments that are not readily marketable is not
disproportionate to my net worth, and my investment in the Note will not cause
such overall commitment to become excessive.
(b) I have the financial ability to bear the economic risks of my
investment, have adequate means of providing for my current needs and personal
contingencies, and have no need for liquidity in this investment.
(c) The aggregated purchase price for the Note does not exceed 10% of
my net worth.
(d) I have evaluated the high risks of investing in the Company and
have such knowledge and experience in financial and business matters in general
and in particular with respect to this type of investment that I am capable of
evaluating the merits and risks of any investment in the Note.
(e) I have carefully read the Agreement, including the exhibits and
schedules thereto, and I have been given the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of this
investment, and to obtain additional information necessary to verify the
accuracy of the information I desired in order to evaluate my investment, and in
evaluating the suitability of this investment I have not relied upon any
representations or other information (whether oral or written), other than that
furnished to me by the Company or its representatives. The Company has delivered
to me copies of its 1999 Annual Report, that certain Company Proxy Statement
dated December 17, 1999, that certain Form SB-2 Registration Statement filed
with the Securities and Exchange Commission on January 14, 2000, and that
certain Form 10-QSB filed with the Securities and Exchange Commission on
February 14, 2000.
(f) I have had the opportunity to discuss with my professional, legal,
tax and financial advisors the suitability of an investment in the Company for
my particular tax and financial situation and all information that I have
provided to the Company concerning myself and my financial position is correct
and complete as of the
<PAGE> 35
date set forth below, and if there should be any material change in such
information prior to my admission as a noteholder of the Company, I will
immediately provide such information to the Company.
(g) The residence set forth above is my true and correct residence, and
I have no present intention of becoming a resident or domiciliary of any other
state or jurisdiction.
(h) In making the decision to purchase the Note, I have relied solely
upon independent investigations made by me or on my behalf.
(i) I am acquiring the Note for my own personal account, for investment
purposes only, and am not purchasing with a view to, or for, the resale,
distribution, subdivision or fractionalization thereof.
(j) I am neither a member of, nor am I affiliated with or employed by a
member of, the National Association of Securities Dealers, Inc., nor am I
employed by or affiliated with a broker-dealer registered with the Securities
and Exchange Commission nor with any similar agency of any state. (Please advise
the Company in writing of any exceptions to this statement.)
(k) I am an accredited purchaser: Yes No
---------- ----------
If your answer to this representation was yes, please check
one or more of the following, if applicable:
(1) I am an institutional investor within the meaning
of Rule 501(a)(1) or Regulation D.
-------
(2) I am a private business development company for
purposes of Section 202(a)(22) of the Investment Advisors Act
of 1940.
-------
(3) I am a non-profit organization within Section
501(c)(3) of the Internal Revenue Code.
------
(4) I am an Employee Benefit Plan subject to ERISA
and have a plan fiduciary which is a bank, insurance company
or registered investment advisor or I have total assets of at
least $5,000,000.
--------
(5) I am an executive officer, director or principal
stockholder of the Company.
-------
(6) I am an individual whose present net worth (or
whose joint net worth with my spouse) excess $1,000,000.
------
(7) I am an individual who had income in excess of
$200,000 in each of the last two years or joint income with my
spouse in excess of $300,000 in each of those years, and
reasonably expect to have income in excess of those levels in
the current year.
------
<PAGE> 36
(8) I am an entity all of whose equity owners are
accredited investors under paragraphs 1, 2, 3, 4, 6 or 7
above.
-------
The foregoing representations, warranties, agreements, undertakings and
acknowledgments are made by me with the intent that they be relied upon in
determining my suitability as a purchaser of the Note. In addition, I agree to
notify the Company immediately of any change in any representation, warranty or
other information. If more than one person is signing this agreement, each
representation, warranty and undertaking herein shall be a joint and several
representation, warranty and undertaking of each such person. If the Purchaser
is a partnership, corporation, trust or other entity, the Purchaser further
represents and warrants that the entity was not specifically formed to acquire
the Note. If the Purchaser is a partnership, the Purchaser further represents
that the funds to make this investment were not derived from additional capital
contributions of the partners of such partnership.
8. Indemnity by Purchaser. The Purchaser understands and acknowledges
that the Company is relying upon the representations, warranties and agreements
made by the Purchaser to and with the Company herein and, thus, hereby agrees to
indemnify the Company, its officers and directors, agents, attorneys and
employees, and agrees to hold each of them harmless from and against any and all
loss, damage, liability or expense, including reasonable attorneys' fees, that
it or any of them may suffer, sustain or incur by reason of or in connection
with any misrepresentation or breach of warranty or agreement made by the
Purchaser under this Agreement, or in connection with the sale or distribution
by the Purchaser of the securities he is purchasing in this Offering in
violation of the Securities Acts or any other applicable law.
9. Miscellaneous Provisions.
(a) Further Assurances. At any time and from time to time after the
date of this Agreement, each party shall execute such additional instruments and
take such other and further actions as may be reasonably requested by any other
party to confirm or perfect title to any property transferred hereunder or
otherwise to carry out the intent and purpose of this agreement.
(b) WAIVER. Any failure on the part of any party hereunder to comply
with any of their obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed; however, waiver on one
occasion does not operate to effectuate a waiver on any other occasion.
(c) HEADINGS. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas.
(e) NO ORAL MODIFICATION. This agreement may be amended solely in
writing, and only after the mutual agreement of the parties affected thereby.
<PAGE> 37
(f) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties, covenants and agreements contained herein shall
survive the date and execution of this Agreement.
---------------------------------------------------
Name of Subscriber (please print)
Date:
----------------------------------------------
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Signature of Subscriber or Trustee or Custodian,
as applicable
Address:
--------------------------------------
--------------------------------------
--------------------------------------
Social Security No.:
-------------------------------
If this is a joint subscription, please complete the following:
---------------------------------------------------
Name of Subscriber (please print)
Date:
----------------------------------------------
---------------------------------------------------
Signature of Subscriber
Address:
--------------------------------------
--------------------------------------
--------------------------------------
Social Security No.:
-------------------------------
CHECK ONE: (Tenants in Common)
------
(Joint Tenants with Right of Survivorship)
------
<PAGE> 38
**************************************************
This subscription is accepted on this _______ day of ____________________, 2000.
COLLEGIATE PACIFIC, INC.
By:
--------------------------------
Authorized Representative
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
CONSENT FOR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in Form SB-2, Registration Statement under the Securities
Act of 1933, of Collegiate Pacific, Inc. and Subsidiaries of our report dated
August 25, 1998, on the financial statements of Collegiate Pacific, Inc. and
Subsidiaries as of June 30, 1998 accompanying the financial statements contained
in Form SB-2, and to the use of our name and the statements with respect to us
as appearing under the heading "Experts" in Form SB-2.
SUTTON FROST LLP
Arlington, Texas
April 7, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Form SB-2, Registration Statement under the Securities
Act of 1933, of Collegiate Pacific, Inc. of our report dated August 25, 1999,
(except for Note 10, as to when the date is January 14, 2000) on the
consolidated financial statements of Collegiate Pacific, Inc. and Subsidiaries
as of June 30, 1999 and for the year then ended, and to the use of our name, as
it appears under the heading "Experts."
GRANT THORNTON LLP
Dallas, Texas
April 6, 2000
