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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
October 21, 1996 (October 11, 1996)
Sport Supply Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-10704 75-2241783
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
1901 Diplomat Drive, Farmers Branch, Texas 75234
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 484-9484
Not Applicable
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(Former name or former address, if changed since last report)
Page 1 of 6 pages.
Index to Exhibits is located on page 2.
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Item 5. Other Events
Set forth below is a brief description of a proposal recently received
by Sport Supply Group, Inc. ("SSG"). Any description or disclosure made in
this Form 8-K with respect to such proposal is qualified in its entirety by
reference to such proposal. The proposal is attached hereto as an Exhibit and
is incorporated herein by reference.
On October 11, 1996, Emerson Radio Corp. ("Emerson") delivered a
written proposal to the Board of Directors of SSG, in which Emerson seeks to
acquire a controlling interest in SSG. Under the terms of the proposal,
Emerson would purchase from SSG an additional 1,333,333 shares of the common
stock, $.01 par value per share (the "Common Stock") of SSG at a purchase price
of $6.00 per share (for an aggregate consideration of approximately $8 million)
and would purchase, for an aggregate consideration of $800, 5-year warrants to
acquire an additional 1,333,333 shares at an exercise price of $6.50 per share,
subject to adjustment. Based upon the number of shares outstanding on the date
hereof and assuming the proposal is accepted, upon acquisition of such shares
(but prior to the exercise of any of such warrants) Emerson would own
approximately 25% of the outstanding shares of Common Stock. Emerson would
own approximately 35% of the outstanding shares of Common Stock upon exercise of
all the warrants. Emerson also requested registration rights on the resale of
the shares of Common Stock proposed to be acquired, as well as on the exercise
and resale of the shares of Common Stock proposed to be acquired under the
warrants. In addition, Emerson proposed to arrange for foreign trade credit
financing of $2 million for the benefit of SSG to supplement existing credit
facilities.
As part of Emerson's proposal, SSG would cause a majority of the
members of its Board of Directors to consist of Emerson's designees. Emerson's
proposal contemplates that Michael J. Blumenfeld, SSG's Chairman of the Board
and Chief Executive Officer, would resign and be retained by SSG as a
consultant, on terms to be negotiated. Emerson would cause SSG to comply with
its current contractual obligations to Mr. Blumenfeld upon the change in
control. All other members of senior management would be retained.
The proposal contemplates a $1 million termination fee if a transaction
with Emerson is not consummated for any reason except for the willful failure
to close by Emerson and is subject to various conditions including the
negotiation and execution of definitive documentation. SSG's Board is
reviewing Emerson's proposal.
(a) Exhibits
Exhibits Index:
DESCRIPTION OF EXHIBIT PAGE
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5(a) Letter to Sport Supply Group, Inc. 4
from Emerson Radio Corp.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sport Supply Group, Inc.
Date: October 21, 1996 By: /s/ Michael J. Blumenfeld
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Michael J. Blumenfeld
Chairman of the Board and
Chief Executive Officer
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EXHIBIT 5(A)
October 11, 1996
Via Telecopy
Sports Supply Group, Inc.
1901 Diplomat Drive
Dallas, Texas 75234
Attn.: Board of Directors
Re: Emerson Radio Corp. Acquisition Proposal
Gentlemen:
Emerson Radio Corp. ("Emerson") has engaged in a due diligence review and
analysis of Sport Supply Group, Inc. ("SSG") over the past few weeks, with a
view towards determining Emerson's interests with regard to its future
relationship with, and its current investment in, SSG. Emerson appreciates the
cooperation and assistance of SSG in its review of SSG to date, enabling
Emerson to conduct its review in an expeditious and non-intrusive manner. The
following proposal is based on the review of the documents made available to
Emerson by SSG and meetings with SSG personnel to date. Subject to the
foregoing, Emerson's proposal is being made on the following terms and subject
to the following conditions:
a) Emerson, or a direct or indirect subsidiary of Emerson (the
"Purchaser"), will purchase directly from SSG 1,333,333 shares of
newly-issued common stock (the "Stock") of SSG at a purchase price of
$6.00 per share, for an aggregate consideration of approximately $8
million.
b) The Purchaser will purchase from SSG, for $800, warrants (the
"Warrants") to purchase an aggregate of 1,333,333 shares of Stock at
an exercise price of $6.50 per share, subject to customary
anti-dilution adjustments. The Warrants shall have a term of
five-years and have such other terms as shall be acceptable to
Emerson.
c) SSG will grant the Purchaser demand and "piggyback" registration
rights on the resale of the shares of Stock currently owned and to be
acquired as contemplated hereby, and to be acquired on the exercise of
the Warrants and the resale of such shares of Stock upon such
exercise. Such registration rights shall be on such terms as shall be
negotiated between Emerson and SSG.
d) The Purchaser will enter into a purchase agreement (the "Purchase
Agreement") with SSG providing for the purchase of the Stock and the
Warrants as described above, and on such other terms and conditions as
shall be agreed upon between Emerson and SSG, and shall provide,
without limitation, for the following:
i) Emerson will provide approximately $2 million of
available trade finance credit to SSG for the
purchase of goods sourced in the Far East through a
foreign subsidiary of Emerson, on terms and
conditions acceptable to Emerson and SSG;
ii) SSG shall cause designees of Emerson to be
appointed to its Board of Directors so as to cause
such designees to constitute a majority of SSG's
Board;
iii) Emerson will cause SSG to retain all current
members of management, except Michael Blumenfeld, in
accordance with their current employment
arrangements. SSG shall not alter
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the title, duties, compensation, or employment
arrangements of any of such management members
without the prior written consent of Emerson;
iv) Michael Blumenfeld will resign as an employee,
officer, and director of SSG and each of its
subsidiaries. Emerson will cause SSG to honor its
contractual commitments to Mr. Blumenfeld;
v) SSG may proceed with its attempts to sell its golf
business as previously disclosed to Emerson;
provided, however, that SSG shall obtain the prior
written consent of Emerson if such sale would be at a
price less than the book value of such business as
reflected in SSG's financial statements contained in
its most recently filed Form 10-Q;
vi) a termination fee shall be payable to Emerson by
SSG equal to $1 million if a transaction with Emerson
is not consummated for any reason except for the
willful failure to close by Emerson;
vii) Emerson shall be entitled to conduct site assessments
and reviews and environmental and other due
diligence as shall be deemed necessary or desirable
by Emerson;
viii)mutually satisfactory definitive documentation shall
have been negotiated, prepared, executed, and
exchanged.
e) Emerson will cause SSG to enter into a consulting or similar agreement
with Michael Blumenfeld, which will be negotiated concurrently with
the Purchase Agreement. Such consulting or similar arrangement will
be on terms acceptable to Emerson and Mr. Blumenfeld, and will
contain, without limitation, Mr. Blumenfeld's agreement not to compete
with SSG, and will be on such terms and conditions as shall be
acceptable to Emerson, SSG, and Mr. Blumenfeld.
f) The current defaults by SSG with its primary lender and the amounts of
future credit availability shall be resolved to Emerson's
satisfaction, either by agreement with SSG's current primary lender or
by arrangements with a substitute primary lender, all of which shall
be acceptable to Emerson.
g) SSG shall consult with Emerson on SSG's accounting practices and shall
provide for such adjustments(to be effective for the fiscal year ended
October 1996), reports, and practices as shall reasonably be requested
by Emerson.
The foregoing represents Emerson's proposal with respect to its
contemplated acquisition of securities of SSG. A draft of the Purchase
Agreement should be supplied to SSG by Monday, October 14, 1996. If this
proposal is acceptable, Emerson representatives would be prepared to meet with
SSG representatives in Dallas on Tuesday and Wednesday of next week to finalize
the Purchase Agreement. The ultimate rights and obligations of the parties
shall only be as set forth in and subject to execution of such definitive
documents.
Emerson understands the importance of effectuating the acquisition as
expeditiously as possible due to the current default of SSG under its lending
arrangements. Thus, Emerson and SSG shall each use their respective best
efforts to close the transactions contemplated hereby on or about November 1,
1996, but in any event by the close of business on November 15, 1996.
Emerson also anticipates that SSG will permit additional access to its
senior and middle management personnel, and reasonable access to other
personnel of SSG and its subsidiaries and affiliates. Further, Emerson shall
be permitted to inspect and monitor the books and records of SSG and its
subsidiaries until the closing date of the Purchase Agreement.
Any release to the public of information with respect to the matters set
forth herein or contemplated hereby or the definitive documents will be made as
necessary or desirable in a form and manner based on the mutual cooperation of
Emerson and SSG; provided, that nothing contained herein shall restrict any
party from releasing information which,
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upon advice of counsel, may be required by applicable laws regulations. An
amendment to Emerson's Schedule 13D will immediately be required due to the
delivery of this proposal.
Emerson looks forward to proceeding immediately with all necessary steps to
expeditiously consummate these transactions.
Very truly yours,
/s/ Eugene I. Davis
Eugene I. Davis
President
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