-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CTQmPjUR9lrqrpIt0hpVmJHFW4V5PiA3+/+79w9nqmaQHUSISNAYa3q5sqg9JwtB BQsePnCYHc0LsMo9/jFHFA== 0001038838-98-000245.txt : 19981014 0001038838-98-000245.hdr.sgml : 19981014 ACCESSION NUMBER: 0001038838-98-000245 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19981007 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPORTSMANS WHOLESALE CO CENTRAL INDEX KEY: 0001071157 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 840108762 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-65573 FILM NUMBER: 98724011 BUSINESS ADDRESS: STREET 1: 55 WEST 200 NORTH CITY: PROVO STATE: UT ZIP: 84601 BUSINESS PHONE: 8013771758 MAIL ADDRESS: STREET 1: 55 WEST 200 NORTH CITY: PROVO STATE: UT ZIP: 84601 SB-2 1 As filed with the Securities and Exchange Commission on October 1, 1998 REGISTRATION NO. 333- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SPORTSMAN'S WHOLESALE COMPANY (Name of Registrant as Specified in its Charter) Nevada 5490 84-1408762 (State or Other Jurisdiction (Primary Standard (I.R.S. Employer Incorporation or Organization) Classification Code) Tax Identification No.) 55 West 200 North, #3 Provo, Utah 84601 (801) 377-1758 (Address and Telephone Number of Registrant's Principal Place of Business) Fred L. Hall President, Sportsman's Wholesale Company 55 West 200 North Provo, Utah 84601 (801) 377-1758 (Name, Address and Telephone Number of Agent for Service) Copies to: A. Robert Thorup, Esq., RAY QUINNEY & NEBEKER 7th Floor, 79 South Main Street Salt Lake City, Utah 84111 (801) 323-3359 Approximate Date of Proposed Sale to the Public: As soon as practicable from time to time after this registration statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) 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 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 any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
CALCULATION OF REGISTRATION FEE - --------------------------------- -------------------- --------------------- --------------------- ------------------ Title of Each Class of Number of Shares Proposed Maximum Proposed Maximum Amount of Securities to Be Registered to be Registered offering Price Per Aggregate Offering Registration Fee Unit - --------------------------------- -------------------- --------------------- --------------------- ------------------ Common Stock 100,000 $1.50 $150,000.00 $44.25 - --------------------------------- -------------------- --------------------- --------------------- ------------------
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 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine. P R O S P E C T U S 100,000 Shares Sportsman's Wholesale Company Common Stock Sportsman's Wholesale Company (the "Company") is offering 100,000 shares of its $.0001 par value common stock, (the "Common Stock" or the "Shares") to the public at a price of $1.50 per Share, on an "all or nothing" basis. Prior to this offering, there has been no public market for the Shares of Common Stock, and there can be no assurance that a market will develop upon completion of this offering or, if a market should develop, that it will continue. The initial public offering price has been arbitrarily determined by the Company and bears no necessary relationship to assets, shareholders equity or any other recognized criteria of value. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. INVESTORS SHOULD EXPECT IMMEDIATE SUBSTANTIAL DILUTION. (SEE "THE COMPANY - DILUTION") EVEN IF THE COMPANY SUCCEEDS IN RAISING THE MAXIMUM AMOUNT IN THE OFFERING, THE AMOUNT OF CAPITAL AVAILABLE TO THE COMPANY WILL BE EXTREMELY LIMITED AND MAY NOT BE SUFFICIENT TO ENABLE THE COMPANY TO FULLY COMMENCE ITS PROPOSED BUSINESS OPERATIONS WITHOUT ADDITIONAL FUND RAISING. (SEE "RISK FACTORS," PAGE 5) THE SECURITIES OFFERED HEREIN SHOULD NOT BE PURCHASED BY ANY INVESTOR WHO CANNOT AFFORD TO SUSTAIN THE TOTAL LOSS OF THEIR INVESTMENT. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY NOR HAS THE COMMISSION OR ANY AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Price to Underwriting Discounts and Proceeds to Public(1)(3) Commissions(1)(3) Company(2)(3) ------------ ----------------- ------------- Per Share $ 1.50 $.00 $ 1.50 Total $150,000.00 $.00 $150,000.00 - -------------- (1) The offering will be managed by the Company and the Shares will be offered and sold by officers of the Company, without any discounts or other commissions. See "Plan of Distribution." (2) Proceeds to the Company are shown before deducting offering expenses payable by the Company estimated at $25,000, including legal and accounting fees and printing costs. (3) The offering is being conducted by the Company on an "all or nothing" basis. If the entire 100,000 shares are not sold, no shares will be sold and all proceeds received from investors will be returned without interest or deduction of any kind. The date of this Prospectus is October __, 1998 2 If the Company is unable to sell the full 100,000 shares offered hereby, any and all of the funds received by the Company will be returned to the investors. Investor funds will be deposited no later than noon of the next business day after receipt into an escrow account at First Security Bank, N.A. maintained by A. Robert Thorup, Esq. of the Ray Quinney & Nebeker law firm, 79 South Main Street, Salt Lake City, Utah 84111, pending receipt of subscriptions totaling the full $150,000 offering. If subscriptions for the full 100,000 shares have not been received within 120 days from the date of this Prospectus, the Offering will terminate (unless extended by the Company by public notice for up to 30 additional days) and all proceeds will be promptly refunded to subscribers without interest or deduction. Subscribers will have no right to return or use of their funds during the offering period, which may last up to 150 days. The Shares are being offered by the Company subject to prior sale, receipt and acceptance by the Company, approval of certain matters by counsel, and certain other conditions. The Company reserves the right to withdraw or cancel this offering and may reject any order, in whole or in part. AVAILABLE INFORMATION The Company has filed with the United States Securities and Exchange Commission (the "Commission") a Registration Statement on Form SB-2, under the Securities Act of 1933, as amended (the "Securities Act), with respect to the securities offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus does not contain all of the information contained in the Registration Statement. For further information regarding both the Company and the securities offered hereby, reference is made to the Registration Statement, including all exhibits and schedules thereto, which may be inspected without charge at the public reference facilities of the Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may be obtained from the Washington, D.C. office upon request and payment of the prescribed fee. The Company is an electronic filer. The Commission maintains a Web site that contains a copy of this Prospectus and the related Registration Statement, reports, proxy and information statements and other information regarding issuers that file reports with the Commission. The Commission's Web site address is (http:/www.sec.gov). The Company intends to furnish its stockholders with annual reports containing consolidated financial statements audited and reported upon by its independent accounting firm and such other periodic reports as the Company may determine to be appropriate or as may be required by law. As of the date of this Prospectus, the Company became subject to the informational requirements of the Exchange Act and, in accordance therewith, will file reports and other information with the Commission. The Company will not file a Form 8-A or other Registration Statement under the Securities Exchange Act in the near future, and will only be subject to Section 15(d) of the Exchange Act following the effective date of the Registration Statement. Therefore the Commission's proxy rules, short-swing profits regulations, beneficial ownership reporting regulations and the bulk of the tender offer regulations will not be applicable to the Company. 3 Reports and other information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act will be available for inspection and copying at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,and at the following regional offices of the Commission: New York Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048; Chicago Regional Office,500 West Madison Street, Chicago, Illinois 60661. Copies of such material may be obtained from the public reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Copies of the Company's Annual, Quarterly and other Reports which will be filed by the Company with the Commission commencing with the Quarterly Report for the first quarter ended after the date of this Prospectus (due 45 days after the end of such quarter). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES AGENCY, AND NO SUCH AGENCY HAS PASSED UPON THE TERMS OF THIS OFFERING OR APPROVED THE MERITS THEREOF. INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING IN EVALUATING THE MERITS AND RISKS OF THE OFFERING AND MAKING AN INVESTMENT DECISION. THIS PROSPECTUS SHOULD BE READ IN ITS ENTIRETY BY ANY PROSPECTIVE INVESTOR PRIOR TO HIS OR HER INVESTMENT. [This Space Left Blank Intentionally] 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety, and particularly the information set forth in "RISK FACTORS." The Company Sportsman's Wholesale Company (the "Company") was organized as a Nevada corporation in 1996 to engage in the wholesale sporting goods business. To date, the Company has not commenced operations nor has it received any revenues from its intended operations, nor has the Company otherwise engaged in any other business. In April, 1998, the Company acquired all of the outstanding stock of Cap's Sporting Goods Wholesale, Inc., a Utah corporation ("Cap's") organized for the same purpose as the Company. To date, Cap's has also not engaged in any serious business operations nor earned any meaningful revenues. The Company intends to develop and operate its wholesale sporting goods business through Cap's. (The Company and Cap's, as a consolidated operating group, are referred to as "the Company" except where the context dictates otherwise.) The Offering 100,000 shares of the Company's Common Stock, $.0001 par value ("Common Stock") are being offered at $1.50 per share on an "all or nothing" basis. All of the shares offered hereby must be subscribed during the Offering period or all Investor funds will be refunded and the Offering will be terminated (See "Terms of the Offering" and "Description of Securities". Plan of Distribution This Offering will be managed by the Company and the shares offered will be sold by officers of the Company, without any discounts or other commissions. Subscription funds from investors will be placed in escrow pending completion or termination of the offering. The offering will terminate 120 days from the date hereof (or 150 days, if extended by the Company in writing for an additional 30 days), and funds held in escrow will be promptly returned to subscribers, unless the entire 100,000 shares ($150,000) is subscribed on or before that date. See "Terms of the Offering." 5 Escrow Agent A. Robert Thorup, Esq. of the Ray Quinney & Nebeker law firm in Salt Lake City, Utah will serve as escrow agent for receipt of the proceeds from this offering and will maintain those funds in a separate account at First Security Bank, N.A. in Salt Lake City, Utah. Use of Proceeds Management intends to use the net proceeds from this offering primarily for the purposes of acquiring supplies and equipment, marketing and advertising the Company's products and services, covering the initial operating expenses and providing the Company with a modest level of working capital. Transfer Agent Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Salt Lake City, Utah 84117, Telephone (801) 272-9294 is transfer agent for the Company's Common Stock. Securities Outstanding The Company presently has 1,503,500 shares of Common Stock issued and outstanding at the date of this Prospectus. Upon the successful completion of this Offering, 1,603,500 shares will be issued and outstanding. The Company is also authorized to issue up to 5,000,000 shares of preferred stock, the rights and preferences of which may be designated in series by the Board of Directors. To the extent of such authorization, such designations may be made without shareholder approval. The Board of Directors has not designated any series or issued any shares of preferred stock. The designation and issuance of series of preferred stock in the future would create additional securities which would have dividend and liquidation preferences over the Common Stock offered hereby. Risk Factors The Company is a start up company with no operating history. Consequently, an investment in the Company is highly speculative. Investors will suffer substantial dilution in the book value per share of the Common Stock compared to the purchase price. In seeking to implement its proposed business, the Company could incur substantial losses during the development stage, and require additional funding for which it has no commitments. Management of the Company will serve on a part-time basis and will have other interests which may conflict with the interests of the Company. Until such time, if ever, that the Company generates sufficient revenue to pay management salaries, 6 members of management will not be employed full time and will only devote a minimal amount of time to the affairs of the Company. No person should invest in the Company who cannot afford to risk loss of the entire investment. See "Risk Factors." Summary Selected Financial Data The Company is a development stage company and has no revenues or earnings from operations. As of June 30, 1998, total assets were $5,048 compared with total liabilities of $10,443. Shareholder equity was a negative ($5,395) at the same date, with a per share book value of a negative ($0.01). RISK FACTORS An investment in the shares offered hereby involves a high degree of risk. Prospective investors should carefully consider the following risk factors, in addition to the other information set forth elsewhere in this Prospectus, including the Consolidated Financial Statements and the Notes thereto, prior to making an investment in the Company. Risks Inherent in a New Start Up Company 1. No Operating History/Doubts as to Going Concern. The Company will not commence business operations until after the proceeds of this Offering are available. The Company has no operating history. Businesses which are starting up or which are in their initial stages of development present substantial business and financial risks and may suffer significant losses in the development of their business from which they can not recover. The Company will face all of the challenges of a new business enterprise, including but not limited to, locating suitable office space, engaging the services of qualified support personnel and consultants, establishing budgets, implementing appropriate financial controls and internal operating policies and procedures. However, the Company does not have significant cash and has not had significant operations since the inception of its development stage. As noted in the Independent Auditors' opinion, there is substantial doubt about the Company's ability to continue as a going concern without the realization of additional adequate financing. 2. Limited Capital/Need for Additional Capital. The Company presently has no significant operating capital and is totally dependent upon receipt of the proceeds of the Offering to commence its wholesale sporting goods business. The level of marketing activities. inventory and staff will depend on both the amount taken in through this Offering and the ongoing revenues of the Company's business. Upon completion of the Offering, even if the entire Offering amount is raised, the amount of capital available to the Company will be extremely limited, and may not be sufficient to enable the Company to fully commence its proposed business operations without additional fund raising. The Company has no commitments for additional cash funding beyond the proceeds expected to be received from this Offering. 7 3. Dependence on the Efforts of Management. The success of the Company will depend in large measure on the efforts and assistance of its management. The officers and directors have experience in financial analysis and economics which will be important to the Company's success. As compared to many other public companies, however, the Company lacks a depth of managerial and technical personnel. Accordingly, there is a greater likelihood that the loss of the services of current management would impair the ability of the Company to effectively carry out its operations. The Company has no plans to obtain Key Man insurance for any of its officers or directors. 4. Conflicts of Interest. All of the officers and directors will maintain part to full time employment outside the Company and may not be able to devote sufficient attention to the Company to ensure its success until earnings justify additional time be devoted to the Company. Such outside employment may also create conflicts of interest. There is no assurance such conflicts could be resolved favorably for the Company. Nevada corporate law requires all officers and directors of the Company to act according to their fiduciary duties to the stockholders. It is contemplated that the Company may enter into non-arms length transactions with members of the Company's management, and the management of other potential subcontractors, including but not limited to, the leasing or use of facilities and the possible purchase of various assets. Management intends that such transactions be entered into on a fair and reasonable basis to the Company; however, due to the non-arms length nature of such transactions there is no assurance of this. Nevada law requires all officers and directors of the Company to act according to their fiduciary duties to the shareholders. 5. Payment of Dividends. The Company has not paid dividends on its Common Stock and does not anticipate paying dividends on its Common Stock in the foreseeable future. There is no assurance that the Company's operations will generate net profits from which to pay cash dividends. Investors who anticipate the need of immediate income from an investment should not purchase the shares being offered hereby. 6. Limited Liability of Officers and Directors. The Nevada Revised Statutes provides that the Company shall provide indemnification of officers and directors and certain employees under certain circumstances and payment of expenses outlined in the statute. The Bylaws of the Company provide that the officers and directors of the Company shall be indemnified to the fullest extent allowable under the statute. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company 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 offered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, 8 submit to a court of appropriate jurisdiction the question of 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. Risks Related to the Nature of the Proposed Business 7. Uncertain Market Acceptance. The Company's proposed business is based on the Company's belief that the increasing interest in shooting sports in the western United States will support a wholesale sporting goods operation like that contemplated by the Company. The Company also sees the advent of Internet advertising and infomercial advertising as media that will benefit the marketing of the Company's inventories and services. There is no assurance of market acceptance of the Company and its product offerings, and the Company's business will be subject to all the risks associated with introducing a new competitor into an established market. The Company has undertaken no independent third party market study to determine the feasibility of its business plan. 8. Competition. The Company will operate in a highly competitive environment. Competition will come from a variety of larger, national and regional sporting goods wholesalers, as well as large sporting goods retail chains and other mass market stores (like Wal-Mart) with significant buying power that approximates the pricing of a traditional wholesaler. Most of the Company's competitors are larger and have significantly greater financial resources, operating experience, management experience, and other capabilities than the Company. 9. Reliance on Short Term Terminable Leases for Office Space. The Company is leasing office and limited warehouse space on a month to month basis so as not to incur excessive long term liabilities. It is foreseeable that this lease could be terminated by the lessor as soon as the lessor found someone willing to lease the property on a longer term basis. Should this be the case, the Company will likely incur significant expense in searching for and configuring new office space to meet its needs. Also, the Company could incur significant inconvenience, loss of time and income, disruption of marketing and customer service as well as loss of customer confidence if it is required to change office and/or warehouse space on a frequent basis. Risks Related to the Offering 10. All or Nothing Offering. The shares covered by this Prospectus are offered by the Company on an "all or nothing" basis. There is no underwriter and no firm commitment from anyone to purchase all or any of the Shares offered. No 9 assurance can be given that all of the Shares will be sold. If the Company is unable to sell all of the 100,000 shares offered hereby, all of the Investor funds received by the Company will be returned to the Investors and the Company will have no funds available for operations. 11. Uncertain Public Market for Shares/Shares not Listed on Any Exchange or NASDAQ. At present, the Company's shares are not traded publicly. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. The Company will not list the securities on any exchange or NASDAQ because it will not be able to meet the financial criteria for any such listing. Therefore, any investment in the shares will be very non-liquid. However, the Company does intend to apply for listing on the Over-the-Counter Bulletin Board (OTCBB). A purchaser of shares may, therefore, find it difficult to resell the securities offered herein should he or she desire to do so. Furthermore, the shares are not marginable and it is unlikely that a lending institution would accept the Company's Common Stock as collateral for a loan. 12. Arbitrary Offering Price. The offering price of the shares was arbitrarily determined by the Company. There is no relationship between the offering price of the shares and the Company's assets, earnings, book value, net worth or other economic or recognized criteria or future value of the Company's shares. 13. Volatility of Stock Price. If a public market develops for the Shares, many factors will influence the market prices. The Shares will be subject to significant fluctuation in response to variations in operating results of the Company, investor perceptions of the Company, supply and demand, interest rates, general economic conditions and those specific to the industry, developments with regard to the Company's activities, future financial condition and management. 14. Uncertain Sufficiency of Funds. The Company believes that the net proceeds from the sale of the shares offered hereby (assuming that all shares offered hereby are sold) will provide the Company with sufficient capital to fund the initial marketing and operating costs of the Company. If the offering amount ($150,000) is raised, the Company believes it will have sufficient resources to commence and continue limited operations for twelve months. Many factors may, however, affect the Company's cash needs, including the Company's possible failure to generate revenues from the sale of its products and services. 15. Broad Discretion as to Use of Proceeds. The Company's Management shall have wide discretion as to the exact allocation and priority and timing of the allocation of funds raised from this Offering. The allocation of the Proceeds of the Offering may vary significantly depending upon numerous factors, including the success that the Company has marketing its products and services. Accordingly, management will have broad discretion with respect to the expenditure of the net proceeds of the Offering. Investors purchasing the shares offered hereby will be entrusting their funds to the Company's management, upon whose judgement the Subscribers must depend. See "Use of Proceeds." 16. Continuation of Management Control. The Company's present officers, directors and principal shareholders own a majority of the Company's outstanding Common Stock and they may purchase shares in the Offering. Even if the officers, directors and principal shareholders do not purchase any of the 10 securities offered hereby, such persons will still own a majority of the outstanding voting stock of the Company. Therefore, the Company's present management and principal stockholders will continue to be able to elect all the directors and otherwise absolutely control the Company, and investors in the Offering will have no ability to remove, control or direct such management. See "Principal Stockholders." 17. Applicability of Low Priced Stock Risk Disclosure Requirements. The shares will be considered low priced securities under rules promulgated under the Exchange Act. Under these rules, broker-dealers participating in transactions in low priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer's duties, the customer's rights and remedies, and certain market and other information, and make a suitability determination approving the customer for low priced stock transactions based on the customer's financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer and obtain specific written consent of the customer, and provide monthly account statements to the customer. The likely effect of these restrictions will be a decrease in the willingness of broker-dealers to make a market in the stock of the Company, decreased liquidity of the stock and increased transaction costs for sales and purchases of the stock as compared to other securities. 18. Limited Reporting Requirements. Because the Company is only subject to Section 15(d) of the Securities Exchange Act, it will not be subject to the proxy rules, short-swing profits regulations, beneficial ownership report regulations and the bulk of the tender offer regulations. Therefore, the Company may only be required to file periodic reports for a limited period of time. The Company does intend to provide its shareholders with annual reports containing audited financial statements from independent accountants and other periodic reports as the Company feels necessary. However, in view of the fact that the Company may have limited reporting requirements, the investor will have less information available with which to assess the status of the Company. 19. Benefits to Present Stockholders/Disproportionate Risks. Collectively the existing shareholders own 1,503,500 shares of the Company's presently outstanding Common Stock, for which they paid an aggregate total of $4,125 in cash. If this offering ($150,000) is sold and closed, upon completion of the Offering present stockholders will own approximately 94% of the then outstanding Common Stock, and Investors in the Offering will own the other 6%, for which they will have paid $150,000 cash. Thus, Investors in the Offering will contribute to the capital of the Company a disproportionately greater percentage than the ownership they receive. Present stockholders will benefit from a greater share of the Company if successful, while investors in the Offering risk a greater loss of cash invested if the Company is not successful. See "DILUTION --Comparative Data." 20. Dilution. Investors who purchase shares in this Offering will experience immediate dilution in the book value of the Common Stock which they acquire. The present shareholders of the Company acquired their Common Stock at an aggregate average cost of $0.002 per share, substantially less than the $1.50 per Share to be paid by investors in this Offering. Dilution may also occur if the Company issues additional shares at a price lower than the offering price stated herein. A substantial portion of the 50,000,000 authorized shares of Common Stock of the Company will remain unissued if all shares offered hereby are sold. The Board of Directors has the authority to issue such shares without 11 shareholder approval. Following the Offering, any additional issuances of shares by the Company from its authorized but unissued shares would have the effect of further diluting the book value of shares and the percentage ownership interest of investors in this Offering. 21. Potential Issuance of Additional Common and Preferred Stock. The Company is authorized to issue up to 50,000,000 shares of Common Stock, of which no more than 1,603,500 shares will be issued and outstanding upon completion of the Offering. To the extent of such authorization, the Board of Directors of the Company will have the ability, without seeking shareholder approval, to issue additional shares of Common Stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of additional Common Stock in the future will reduce the proportionate ownership and voting power of the Common Stock offered hereby. The Company is also authorized to issue up to 5,000,000 shares of preferred stock, the rights and preferences of which may be designated in series by the Board of Directors. To the extent of such authorization, such designations may be made without shareholder approval. The Board of Directors has not designated any series or issued any shares of preferred stock. The designation and issuance of series of preferred stock in the future would create additional securities which would have dividend and liquidation preferences over the Common Stock offered hereby. See "Description of Securities." 22. Shares Eligible for Future Sale. Of the 1,503,500 common shares presently outstanding, 500,000 shares were acquired by Fred Hall in a private placement early in 1998. Mr. Hall acquired another 1,000,000 shares when his company, Cap's, was acquired by the Company in April 1998. 3,500 additional common shares were acquired by several other investors in a private offering in late June 1998. All of these shares are "restricted securities" subject to the resale limitations imposed by Rule 144. While these shares are not being offered for sale presently, they may at some time in the future be sold, pursuant to Rule 144, into any public market that may develop for the Company's Common Stock. Future sales by current shareholders could depress the market prices of the Common Stock in any such market. 23. Cumulative Voting and Pre-emptive Rights. There are no pre-emptive rights in connection with the Company's Common Stock. Cumulative voting in the election of directors is not permitted. Accordingly, the holders of a majority of the shares of Common Stock, present in person or by proxy, will be able to elect all of the Company's Board of Directors. Even if all the shares offered in this Offering are sold, the current shareholders will own a majority interest in the Company. Accordingly, the present shareholders will continue to elect all of the Company's directors and generally control the affairs of the Company. See "Description of Securities." 12 USE OF PROCEEDS The following table sets forth management's present estimate of the allocation of net proceeds expected to be received from this Offering. Actual expenditures may vary from these estimates. Pending such uses, the Company will invest the net proceeds in investment-grade, short-term, interest bearing securities. If All Shares Are Sold ------------- Total Proceeds: $ 150,000 Less: Estimated Offering Expenses 25,000 Net Proceeds Available: $ 125,000 Use of Net Proceeds Acquisition of Supplies $ 7,500 and Equipment(1) Marketing (2) 25,000 Operating Expenses 25,000 Working Capital(3) 67,500 Total Use of Net Proceeds $125,000 (1) This is the approximate amount of net proceeds of the Offering which the Company estimates will be used to purchase the equipment and supplies necessary to operate the Company. (2) This represents the amount the Company estimates it will expend producing marketing literature, contacting potential clients, including the placement of advertising materials indirect mail. (3) The Company intends to use a significant portion of the net proceeds to cover operating expenses and provide working capital during the initial development phase of operations. The Company believes this amount is sufficient to provide the operating capital necessary to operate the business for the first six months at the Minimum level and for the first 18 months at the Maximum level. ORGANIZATION WITHIN LAST FIVE YEARS The Company is a start-up company organized in 1996. It has no operating history. As soon as the money from this Offering is made available, the Company expects to make all arrangements necessary so that it can commence operations. DESCRIPTION OF BUSINESS Company History The Company was incorporated under the laws of the state of Nevada on March 13, 1996 for the purpose of becoming a wholesaler of sporting goods, primarily associated with the shooting sports. Because of a lack of funding, the Company has not been able to commence operations. In April 1998, the Company acquired all of the outstanding stock of Cap's Sporting Goods Wholesale, Inc., 13 and acquired access to the cash then held in Cap's. The Company has concluded to begin its wholesale sporting goods business through its new operating subsidiary, Cap's. Since acquiring Cap's and undertaking to begin business operations, the Company has raised a net $2,625 in new equity capital in private offering in late June, 1998. The present Offering will provide further needed start-up and working capital to get the Company started on its business plan. There is no assurance that the Company can successfully commence operations or successfully implement its business plan. The Sporting Goods Industry According to the National Sporting Goods Association (the "NSGA"), total U.S. retail sales of sporting goods (including sporting equipment, athletic footwear and apparel, but excluding recreational transportation products) were approximately $41.6 billion in 1996, an increase from $39.2 billion in 1995. The retail sporting goods industry is comprised of four principal categories of retailers: (i) large format sporting goods stores, which typically range from 30,000 to 80,000 square feet in size and emphasize high sales volumes and a large number of SKUs in a warehouse-style store, (ii) traditional sporting goods stores, which typically range in size from 5,000 to 20,000 square feet and carry a more limited assortment of merchandise and are often viewed by their customers as convenient neighborhood stores, (iii) specialty sporting goods stores, consisting of specialty stores and pro shops, generally specializing in one product category of sporting goods, and (iv) mass merchandisers, including discount retailers, warehouse clubs and department stores, which although generally price competitive, have limited customer service and a more limited selection. Business Strategy The Company is aiming its wholesale supplier concept at the third category, the specialty stores and pro shops, particularly the organized shooting sports and hunting clubs in the Western United States, initially focusing on Utah, Wyoming and Nevada. The Company will likely offer a broad selection of hunting and shooting supplies and accessories, including such top brand names as: Laport, Benelli, Fiochi, Outlaw, Bushnell, Remington and Winchester. Management Issues It is anticipated that the management of the Company will maintain outside employment and devote only part time to the affairs of the Company during the initial phases of the Company's business plan. The President initially will be employed part time for a regular salary of $2,500 per month. Officers and directors will be entitled to reimbursement of any reasonable out of pocket expenses actually incurred on behalf of the Company. Assuming the success of the Company's business plan, Fred Hall will eventually work full time for the Company. The Company intends to hire other full- and part-time employees as needed, but will not do so unless and until the Company's business operations so justify. The exact amount of any compensation to be paid has not been determined but management intends, to the extent possible, to only pay compensation out of revenues and to keep payments to a minimum until operations have fully commenced. 14 Competition The Company intends to supply shooting clubs and hunting clubs with ammunition, clay targets and related accessories and products. These clubs resell such products to their members and guests, much in the way a golf course or tennis court pro shop operates. Shooting and hunting clubs generally purchase relatively small quantities of products because of their size. Thus they are an economic combination of a wholesale purchaser and a retail customer. However the Company believes that the small size of the hunting club and shooting club market has discouraged competitors aiming to service that market, like the Company. In many product areas, large mass merchandisers, like Wal-Mart, Costco, Sam's Club and the like can offer products in bulk and at prices competitive with traditional wholesalers. The study of the hunting and shooting club industry informally conducted by the Company, indicates that not enough purchasing of clay targets and other shooting sports products takes place at mass retailers to allow for supplies and pricing that otherwise comes with such mass retailers. The Company believes that service relationships and wholesale pricing it intends to offer can effectively compete with mass retailers. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview of Business Plan The Company's purpose is to engage in the business of wholesale sporting goods, primarily catering to the private shooting sports clubs by providing high quality and cost-effective supplies of ammunition, clay targets and related products such as shooting clothing. The Company believes that the growth in organized shooting sports, particularly in the form of shooting clubs, hunting clubs, etc. in the Western United States has not been met with the level of organized wholesale marketing of shooting sports products that exists in the Eastern United States, where organized shooting sports clubs is an older industry. The Company's own informal investigation indicates that several manufacturers of shooting sports products and supplies are willing to sell to new entrants into the wholesale market like the Company, although other manufacturers require credit histories and financial support that the Company will be unable to deliver at the beginning of its business operations. Initially the Company has leased a small office with limited warehousing space at a reasonable rate (currently $750 per month) from which to operate its business. The Company plans on using shipment of products to its customers directly from manufacturers, and therefore the Company does not anticipate needing large warehouse space. Inasmuch as there is no assurance that the Offering will be successful or that the Company will receive any net proceeds therefrom, to date, the Company has not entered into any contracts or commitments for leasing of offices, purchasing of equipment, and buying customer databases. Therefore, 15 there is no assurance the Company will be able, with the proceeds of this Offering, to lease adequate office space, acquire sufficient equipment, or purchase sufficient potential client databases to commence operations. Results of Operations The Company has made no sales to date, and has earned no operating revenues since its inception in early 1998. Still in it organizational stage, the Company has used shareholder equity and borrowed funds to provide cash to pay ongoing expenses. This has resulted in an operating loss of ($9,520) as June 30, 1998, which equates to a loss of ($0.01) per share. Financial Condition The Company had cash of $3,510 at June 30, 1998, far less than it requires to pay the expenses of this Offering and other operating costs currently being incurred. The expenditure of borrowed funds on operating costs has resulted in a negative shareholders equity of ($5,395) at June 30, 1998. If the Company is unsuccessful at raising the $150,000 sought from this Offering, it appears to be unable to continue in the development of its business without some other source of equity funding. Without revenues it is unlikely that further debt funding will be possible except from the limited resources of Management. DESCRIPTION OF PROPERTY The Company owns no real property. The Company currently leases a small office at 55 West 200 North in Provo, Utah. The Company will likely use this or a similar size office as its principal executive offices until the Company's business requires more extensive administrative facilities. At all times, the Company intends to locate appropriate office space and negotiate agreements to lease office space as business operations require and will support such action. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS At present, the Company's Common Stock is not traded publicly. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. A purchaser of Shares may, therefore, find it difficult to resell such Shares should he or she desire to do so when eligible for public resales. Furthermore, shares of the Company's Common Stock are not marginable, and it is unlikely that a lending institution would accept the Company's Common Stock as collateral for a loan. Through this Prospectus, the Company proposes to publicly offer 100,000 shares of the Company's Common Stock. To date, no shares of Common Stock are subject to outstanding options, warrants to purchase or securities convertible into Common Stock. No shares of the Company's Common Stock have been sold pursuant to Rule 144 of the Securities Act. The Registrant has agreed to register no shares of Common Stock held by existing security holders for resale. 16 EXECUTIVE COMPENSATION To date, Fred Hall has been paid $1785 per month by Cap's since February 1998. The Company presently has no formal employment agreements. The Company has agreed informally with Fred Hall to pay him $2,500 per month for his services as Chief Executive Officer if this Offering is successful. DETERMINATION OF OFFERING PRICE The offering price of the shares was arbitrarily determined by the Company. There is no relationship between the offering price of the shares and the Company's assets, earnings, book value, net worth or other economic or recognized criteria or future value of the Company's shares. DILUTION As of the date of this Prospectus, the Company has 1,503,500 shares of Common Stock issued and outstanding and a book value of a negative ($5,395) or a negative ($0.01) per share. This Offering will bring the outstanding shares of Common Stock to 1,603,500. The net proceeds to the Company from this Offering, after deducting the estimated offering costs of $25,000, will be $125,000. Adding the net offering proceeds to the current book value of the Company results in an anticipated book value after this Offering of $119,605. Dividing the total book value of the Company by the number of shares outstanding after the Offering discloses a per share book value of approximately $0.07. Therefore, the Investors who purchase in this Offering will suffer an immediate dilution in the book value of their shares of approximately $1.43 or approximately 95%, and the present shareholders will receive an immediate book value increase of $0.08 per share. "Dilution" means the difference between the price of the Shares purchased by Investors in this Offering from the book value per share after giving effect to the offering. "Book value" is obtained by subtracting the total liabilities from the total assets and offering expenses). Book value per share is determined by dividing the number of shares outstanding into the book value of shares immediately after the Offering. Comparative Data The following table illustrates the pro forma proportionate ownership in the Company, upon completion of this Offering, of present stockholders and of investors in the Offering, compared to the relative amounts paid and contributed [This Space Left Blank Intentionally] 17 to the capital of the Company by present stockholders and by investors in this Offering, assuming no changes in net tangible book value other than those resulting from the Offering. Shares Percent Cash Owned Paid Price/share Present Shareholders 1,503,500 0.029% $0.002 New Investors 100,000 99.97% $1.500 TERMS OF THE OFFERING The Offering will not be sold through selling agents. The officers and directors of the Company will sell the shares offered hereunder on a "best efforts" basis. If the total 100,000 shares of Common Stock are not sold within the 150 days possible under this Offering, all Investor funds will be refunded to the subscribing Investors without interest or deduction of any kind. Pending the closing of the Offering, all Investor funds will be held in escrow by A. Robert Thorup of Ray Quinney & Nebeker, 79 South Main Street, Salt Lake City, Utah 84111. The Company will only accept cash which must be accompanied by a completed subscription agreement in the form attached to this Prospectus as Appendix A. LEGAL PROCEEDINGS To the knowledge of the officers and directors of the Company, neither the Company nor any of its officers or directors is a party to any material legal proceeding or litigation and such persons know of no material legal proceeding or litigation contemplated or threatened. There are no judgments against the Company or its officers or directors. None of the officers or directors has been convicted of a felony or misdemeanor relating to securities or performance in corporate office. [This Space Left Blank Intentionally] 18 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following table sets forth the directors, executive officers promoters and control persons of the Company, their ages, and all offices and positions held within the Company. Directors are elected for a period of one year and thereafter serve until their successor is duly elected by the stockholders and qualified. Officers and other employees serve at the will of the Board of Directors. Name of Officer or Director Age Term Served Positions with the as Officer/Director Company Fred L. Hall 32 3/96 - present President, Secretary, Treasurer and Director; President, Secretary and Director of Cap's SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table provides information known to the Company concerning those persons who, as of the date of this Prospectus, were the beneficial owners of 5% or more of the Company's Common Stock, which is the only type of security the Company currently has issued and outstanding. Name and Address Amount & Nature of % of After Offering Beneficial Ownership(1) Class - ----------------- ----------------------- ----- -------------- Fred L. Hall 1,500,000 common shares 99.7% 93.5% All officers and directors as a group (1 person) 1,500,000 common shares 99.7% 93.5% (1) The term "beneficial owner" refers to both the power of investment (the right to buy and sell) and rights of ownership (right to receive distributions from the Company and proceeds from the sales of shares). Inasmuch as these rights may be held or shared by more than one person, each person who has a beneficial ownership interest in shares is deemed to be the beneficial owners of the same shares because there is shared power of investment or shared rights of ownership. DESCRIPTION OF THE SECURITIES OFFERED The following summary describes the material provisions of the Company's Articles of Incorporation and Bylaws relating to the securities being offered hereby, copies of which documents will be furnished to an investor upon written request therefor. Pursuant to Article XI of the Company's Articles of Incorporation, no director or officer shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer. Notwithstanding the foregoing 19 sentence, a director or officer shall be liable to the extent provided by applicable law, (I) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) for the payment of dividends in violation of NRS 78.300. The foregoing limitations do not affect the standards to which directors must conform in discharging their duties to stockholders or modify the availability of equitable relief for breach of duty. Further, the foregoing limitations do not affect the availability of relief under causes of action based on Federal law, including the Federal securities laws. The shares being registered pursuant to the registration statement of which this prospectus is a part are shares of Common Stock, all of the same class, and entitled to the same rights and privileges as all other shares of Common Stock. Description of Common Stock. The Company's authorized capital stock consists of 50,000,000 shares of Common Stock with a $.0001 par value. As of the date of this Registration Statement, the Company has outstanding 1,503,500 shares of its Common Stock, all of which have been validly issued, fully paid and nonassessable. Holders of the Company's Common Stock are entitled to receive dividends when declared by the Board of Directors out of funds legally available therefore. Any such dividends may be paid in cash, property or shares of the Company's Common Stock. The Company has not paid any dividends since its inception. All dividends will be subject to the discretion of the Company's Board of Directors, and will depend upon, among other things, the operating and financial conditions of the Company, its capital requirements and general business conditions. Therefore, there can be no assurance that any dividends on the Company's Common Stock will be paid in the future. All shares of the Company's Common Stock have equal voting rights and, when validly issued and outstanding, will have one vote per share on all matters to be voted upon by the shareholders. Cumulative voting in the election of directors is not allowed, and a quorum for shareholder meetings shall result from a majority of the issued and outstanding shares present in person or by proxy. Accordingly, the holders of a majority of the shares of Common Stock present, in person or by proxy at any legally convened shareholders' meeting at which the Board of Directors is to be elected, will be able to elect all directors and the minority shareholders will not be able to elect a representative to the Board of Directors. Shares of the Company's Common Stock have no pre-emptive or conversion rights, no redemption or sinking fund provisions, and are not liable for further call or assessment. Each share of the Company's Common Stock is entitled to share pro rata any assets available for distribution to holders of its equity securities upon liquidation of the Company. During the pendency of the offering, subscribers will have no rights as stockholders of the Company until the offering has been completed and the Shares have been issued to them. 20 Description of Preferred Stock. The Company is also presently authorized to issue 5,000,000 shares of $.0001 par value Preferred Stock. Under the Company's Articles of Incorporation, as amended, the Board of Directors has the power, without further action by the holders of the Common Stock, to designate the relative rights and preferences of the preferred stock, and issue the Preferred Stock in one or more series as designated by the Board of Directors. The designation of rights and preferences could include preferences as to liquidation, redemption and conversion rights, voting rights, dividends or other preferences, any of which may be dilutive of the interest of the holders of the Common Stock or the Preferred Stock of any other series. The issuance of Preferred Stock may have the effect of delaying or preventing a change in control of the Company without further shareholder action and may adversely effect the rights and powers, including voting rights, of the holders of Common Stock. In certain circumstances, the issuance of Preferred Stock could depress the market price of the Common Stock. The Board of Directors effects a designation of each series of Preferred Stock by filing with the Nevada Secretary of State a Certificate of Designation defining the rights and preferences of each such series. Documents so filed are matters of public record and may be examined in accordance with procedures of the Nevada Secretary of State, or copies thereof may be obtained from the Company. Transfer Agent. Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Salt Lake City, Utah 84117, Telephone (801) 272-9294 is the transfer agent and registrar for the Company's outstanding securities. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The statements that follow, to the extent such statements refer to matters of tax law, are solely the opinions of Company management. Management has not sought or obtained any formal legal opinion as to such matters, and no conclusion of counsel is binding on the Internal Revenue Service or the courts in any event. There can be no assurance that the Internal Revenue Service or the courts will not reach different conclusions regarding the transactions contemplated hereby. This discussion does not address certain Federal income tax consequences that are the result of special rules, such as those that apply to life insurance companies, tax exempt entities, foreign corporations, and non-resident alien individuals. In addition, the discussion does not address alternative minimum tax considerations and is limited to investors who will hold Common Stock as" capital assets" (generally, property held for investment) within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This discussion also assumes that the Common Stock will be traded on an established securities market. This discussion is based on relevant provisions of the Code, the Treasury Regulations promulgated thereunder (the "Regulation"), revenue rulings published in the Internal Revenue Bulletin and 21 judicial decisions in effect at the date of this Prospectus. There can be no assurance that future changes in applicable law or administrative and judicial interpretations thereof will not adversely affect the tax consequences discussed herein. The tax treatment to a holder of Common Stock may vary depending on such holder's particular situation. Potential investors should consult their own tax advisors as to the tax treatment that may be anticipated to result from the ownership or disposition of common stock in their particular circumstances, including the application of foreign, state or local tax laws or estate and gift tax considerations. State and Local Income Taxes. A holder of Common Stock may be liable for state and local income taxes with respect to dividends paid or gain from the sale, exchange or redemption of Common Stock. Many states and localities do not allow corporations a deduction analogous to the Federal dividends received deduction. Prospective investors are advised to consult their own tax advisors as to the state, local and other tax consequences of acquiring, holding and disposing of Common Stock. INTEREST OF NAMED EXPERTS AND COUNSEL None of the experts named herein was or is a promoter, underwriter, voting trustee, director, officer or employee of the Company. Further, none of the experts was hired on a contingent basis and none of the experts named herein will receive a direct or indirect interest in the Company. Legal Matters Certain legal matters will be passed upon for the Company by Ray Quinney & Nebeker, of Salt Lake City, Utah. Attorneys at Ray Quinney & Nebeker hold no shares in the Company and have no rights to acquire any such shares. Accounting Matters The financial statements included in this Prospectus and elsewhere in the Registration Statement have been audited by Tanner & Co., Certified Independent Public Accountants, located in Salt Lake City, Utah, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. [This Space Left Blank Intentionally] 22 DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons for the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that any claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer 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. FINANCIAL STATEMENTS The audited financial statements of the Company appearing in the Registration Statement have been examined by Tanner + Co., Certified Public Accountants, as indicated in its report contained herein. The financial statements are included in the Registration Statement in reliance upon the report of that firm as an expert in auditing and accounting. [This Space Left Blank Intentionally] 23 SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) - -------------------------------------------------------------------------------- Index to Consolidated Financial Statements - -------------------------------------------------------------------------------- Page Report of Tanner + Co. F-2 Consolidated balance sheet F-3 Consolidated statement of operations F-4 Consolidated statement of stockholders' deficit F-5 Consolidated statement of cash flows F-6 Notes to consolidated financial statements F-7 F-1 SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Sportsman's Wholesale Company We have audited the accompanying consolidated balance sheet of Sportsman's Wholesale Company and Subsidiary (a development stage company), as of June 30, 1998 and the related consolidated statements of operations, stockholders' deficit and cash flows for the period February 5, 1998 (date of inception) to June 30, 1998. 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 financial position of Sportsman's Wholesale Company, as of June 30, 1998 and the results of their operations and their cash flows for the period February 5, 1998 (date of inception) to June 30, 1998, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, there is substantial doubt about the ability of the Company to continue as a going concern. Management's plans in regard to that matter are also described in note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. August 14, 1998 F-2
SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Consolidated Balance Sheet June 30, 1998 - ------------------------------------------------------------------------------------------------------------------- Assets Current assets: Cash $ 3,510 Related party receivable 127 ------------------ Total current assets 3,637 Vehicle, net of accumulated depreciation of $89 1,411 ------------------ $ 5,048 ------------------ Liabilities and Stockholders' Deficit Current liabilities: Accrued expenses $ 943 Related party notes payable 9,500 ------------------ Total current liabilities 10,443 ------------------ Commitments - Stockholders' deficit: Preferred stock, $.0001 par value, 5,000,000 shares authorized, no shares issued or outstanding - Common stock, $.0001 par value, 50,000,000 shares authorized, 1,503,500 shares issued and outstanding 150 Additional paid-in capital 3,975 Accumulated deficit (9,520) ------------------ Total stockholders' deficit (5,395) ------------------ $ 5,048 ------------------
See accompanying notes to consolidated financial statements. F-3
SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Consolidated Statement of Operations Period February 5, 1998 (Date of Inception) to June 30, 1998 Revenue $ - General and administrative expenses 9,175 Interest expense 345 ------------------ Loss before income taxes (9,520) Income tax benefit - ------------------ Net loss $ (9,520) ------------------ Loss per share $ (.01) ------------------ Weighted average number of shares outstanding 921,000 ------------------
See accompanying notes to consolidated financial statements. F-4
SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Consolidated Statement of Stockholders' Deficit February 5, 1998 (Date of Inception) to June 30, 1998 Additional Preferred Stock Common Stock Paid-In Accumulated ------------------------------------------------------- Shares Amount Shares Amount Capital Deficit ------------------------------------------------------------------------------------- Balance at February 5, 1998 - $ - - $ $ - $ - Issuance of common stock for cash - - 503,500 50 3,075 - Issuance of common stock in exchange for subsidiary - - 1,000,000 100 900 - Net loss - - - - - (9,520) ------------------------------------------------------------------------------------- Balance at June 30, 1998 - $ - 1,503,500$ 150 $ 3,975 $ (9,520) -------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-5
SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Consolidated Statement of Cash Flows Period February 5, 1998 (Date of Inception) to June 30, 1998 Cash flows from operating activities: Net loss $ (9,520) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 89 Increase in accrued expenses 943 ------------------ Net cash used in operating activities (8,488) ------------------ Cash flows from investing activities: Purchase of vehicle (1,500) Increase in related party receivable (127) ------------------ Net cash used in investing activities (1,627) ------------------ Cash flows from financing activities: Proceeds from related notes payable 9,500 Issuance of common stock 4,125 ------------------ Net cash provided by financing activities 13,625 ------------------ Net increase in cash 3,510 Cash, beginning of period - ------------------ Cash, end of period $ 3,510 ------------------
See accompanying notes to consolidated financial statements. F-6 SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Notes to Financial Statements June 30, 1998 1. Summary of Significant Accounting Policies Organization and Principles of Consolidation Sportsman's Wholesale Company (Sportsmans) was Incorporated under the laws of the state of Nevada in March of 1996. Cap's Sporting Goods Wholesale, Inc. (Caps) was incorporated under the laws of the state of Utah in February 1998. From March 1996 until February 5, 1998 (date of inception) Sportsmans was an inactive company. On February 5, 1998, Sportsmans became a development stage enterprise as defined in Statement of Financial Accounting Standards No. 7, "Auditing and Reporting by Development Stage Enterprises." On April 30, 1998, Sportsmans and Caps entered into an agreement and plan of share exchange, whereby the sole shareholder of Caps would exchange all of the issued and outstanding common stock held in Caps, for common stock of Sportsmans. At the time of the exchange both Sportsmans and Caps were owned by the same individual. The exchange resulted in 1,000,000 shares of Caps common stock being exchanged for 1,000,000 shares of Sportsmans common stock. The consolidated financial statements consists of Sportsmans and its wholly owned subsidiary Caps (the Company), from February 5, 1998 (date of inception) to June 30, 1998, as any transactions from February 5, 1998 to April 30, 1998 for the companies were immaterial. All significant intercompany balances and transactions have been eliminated. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 1998, the Company had a deficit in working capital of $6,806, and an accumulated deficit of $9,520 and incurred a loss of $9,520 for the period February 5, 1998 (date of inception) to June 30, 1998. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. F-7 SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Notes to Financial Statements Continued 1. Summary of Significant Accounting Policies Continued Going Concern - Continued The Company's ability to continue as a going concern is subject to the attainment of profitable operations or obtaining necessary funding from outside sources. Management is in the process of pursuing business opportunities to provide sufficient cash flows to meet the Company's obligations. It is not know whether management will be successful in these endeavors. Concentration of Credit Risk The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Cash and Cash Equivalents For purposes of the statement of cash flows, cash includes all cash and investments with original maturities to the Company of three months or less. Vehicle The Company's vehicle is recorded at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life. Expenditures for maintenance and repairs are expensed when incurred and betterments are capitalized. Income Taxes Deferred income taxes are provided in amounts sufficient to give effect to temporary differences between financial and tax reporting. Loss Per Common and Common Equivalent Share The computation of basic loss per common share is computed using the weighted average number of common shares outstanding during the year. The computation of diluted loss per common share is based on the weighted average number of shares outstanding during the year plus common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the year. Common stock equivalents are not included in the diluted loss per share calculation when their effect is antidilutive. F-8 SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Notes to Financial Statements Continued 1. Summary of Significant Accounting Policies Continued Use of Estimates in Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. 2. Income Taxes The benefit for income taxes is different than amounts which would be provided by applying the statutory federal income tax rate to loss before benefit for income taxes for the following reasons: Federal income tax benefit at statutory rate $ 1,000 Change in valuation allowance (1,000) ----------------- $ - ----------------- Deferred tax assets (liabilities) are comprised of the following: Net operating loss carryforwards $ 1,000 Valuation allowance (1,000) ----------------- $ - ----------------- At June 30, 1998, the Company has a net operating loss carryforward available to offset future taxable income of approximately $9,000, which will begin to expire in 2018. The utilization of the net operating loss carryforward is dependent upon the tax laws in effect at the time the net operating loss carryforwards can be utilized. The Tax Reform Act of 1986 significantly limits the annual amount that can be utilized for certain of these carryforward as a result of the change in ownership. F-9 SPORTSMAN'S WHOLESALE COMPANY (A Development Stage Company) Notes to Financial Statements Continued 3. Related Party Transactions The related party receivable consists of an unsecured note from an officer/shareholder. The note is due on demand and bears interest at 12%. The related party notes payable consists of notes payable to an entity owned by the spouse of an officer/shareholder. The notes are due on demand and bear interest at 12%. At June 30, 1998, the Company had accrued interest payable and recognized interest expense of $345 related to these notes. 4. Supplemental Cash Flow Disclosure There were no amounts paid for interest or income taxes for the period February 5, 1998 (date of capital contribution) to June 30, 1998. 5. Common Stock Offering The Company is attempting to offer 100,000 shares of common stock for $1.50 per share in a public offering. F-10 No dealer, salesman or other person is authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer made hereby. 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 covered hereby in any jurisdiction or to any person 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, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof. TABLE OF CONTENTS Page AVAILABLE INFORMATION..........................................................3 PROSPECTUS SUMMARY.............................................................5 RISK FACTORS...................................................................7 USE OF PROCEEDS...............................................................13 ORGANIZATION WITHIN LAST FIVE YEARS...........................................13 DESCRIPTION OF BUSINESS.......................................................13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION...........................15 DESCRIPTION OF PROPERTY.......................................................16 MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS............................................16 EXECUTIVE COMPENSATION........................................................17 DETERMINATION OF OFFERING PRICE...............................................17 DILUTION......................................................................17 TERMS OF THE OFFERING.........................................................18 LEGAL PROCEEDINGS.............................................................18 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS........................................................18 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................................19 DESCRIPTION OF THE SECURITIES OFFERED.........................................19 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.....................................21 INTEREST OF NAMED EXPERTS AND COUNSEL.........................................22 DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.............................22 FINANCIAL STATEMENTS..........................................................23 Sportsman's Wholesale Company 100,000 Shares of Common Stock PROSPECTUS October __, 1998 24 PART II - INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. Indemnification of Directors and Officers The statutes, charter provisions, bylaws, contracts or other arrangements under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against any liability which they may incur in such capacity are as follows: (a) Section 78.751 of the Nevada Business Corporation Act provides that each corporation shall have the following powers: 1. A corporation 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, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation 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 by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation; and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. A corporation 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 or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction, determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding refereed to in subsections 1 and 2, above, or in 25 defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. 4. Any indemnification under subsections 1 and 2, above, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel, in a written opinion; or (d) If a quorum consisting of directors two were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. 5. The certificate or articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. 6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders of disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2, above, or for the advancement of expenses made pursuant to this subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action; (b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. 7. The registrant's Articles of Incorporation limit liability of its Officers and Directors to the full extent permitted by the Nevada Business Corporation Act. 26 ITEM 25. Other Expenses of Issuance and Distribution* The following table sets forth the estimated costs and expenses to be paid by the Company in connection with the Offering described in the Registration Statement. Amount SEC registration fee $ 44.25 Blue sky fees and expenses $ 3,000.00 Printing and shipping expenses $ 2,500.00 Legal fees and expenses $ 15,000.00 Accounting fees and expenses $ 5,000.00 Transfer, Escrow and Miscellaneous expenses $ 1,000.00 Total $ 26,544.25 * All expenses except SEC registration fee are estimated. ITEM 26. Recent Sales of Unregistered Securities On June 30, 1998, the Company sold 3,500 shares of unregistered Common Stock to investors at the offering price of $0.75 per share. This offering was conducted in reliance on Section 4(2) of the Securities Act and state corollary exemptions. On May 25, 1998, 1,000,000 shares of unregistered Company Common Stock were issued to Fred Hall in exchange for 1,000,000 shares of Cap's common stock, in a one share per one share exchange pursuant to the Agreement and Plan of Reorganization. These shares were issued in reliance on the exemption found in Section 4(2) of the Securities Act and corollary state exemptions. On February 5, 1998, 500,000 shares of unregistered Company common stock were issued to Fred Hall for cash at $0.001 per share. This transaction took place in reliance on Section 4(2) of the Securities Act and corollary state law exemptions. [This Space Left Blank Intentionally] 27 ITEM 27. Exhibits Index SEC Reference Exhibit No. Document 3.1 Articles of Incorporation 3.2 By-Laws 4.1 Agreement and Plan of Reorganization with Cap's 5 Opinion on Legality 10.1 Escrow Agreement 21 Subsidiaries of the small business issuer 24.1 Consent of Tanner + Co. 24.2 Consent of Counsel to Issuer (included in Exhibit 5) 27 Financial Data Schedule 99.1 Subscription Agreement ITEM 28. Undertakings Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred to that section. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to its Articles of Incorporation or provisions of the Nevada Revised Statutes, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by 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 counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question, whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The Registrant hereby undertakes to: 28 (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in 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 end 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 a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it has met all of the requirements of filing on Form SB-2 and has authorized this Registration Statement to be signed on its behalf by the undersigned, in Salt Lake City, Utah, on September , 1998. Sportsman's Wholesale Company By: /s/ Fred L. Hall -------------------------------------- Fred L. Hall, Chief Executive Officer, Sole Director and President Pursuant to the requirements of the Securities Act of 1933, this amendment to Registration Statement has been signed by the following persons in the capacities and on the date indicated. Signatures Title Date /s/ Fred L. Hall President, Sole Director and September , 1998 - ---------------- Chief Executive Officer Fred L. Hall (Principal Executive and Financial/Accounting Officer) 29
EX-3.(I) 2 ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION OF SPORTSMAN'S WHOLESALE COMPANY. WE, THE UNDERSIGNED natural persons of the age of eighteen (18) years or more, acting as incorporators of a corporation under the Nevada Business Corporation Act, adopt the following Articles of Incorporation. ARTICLE I NAME The name of the corporation is: Sportsman's Wholesale Company. ARTICLE II DURATION The duration of the corporation is perpetual. ARTICLE III PURPOSES The purpose or purposes for which this corporation is engaged are: (a) To pursue the business of wholesaling sporting goods and other outdoor related sporting equipment. Also, to acquire, develop, explore, and otherwise deal in and with all kinds of real and personal property and all related activities, and for any and all other lawful purposes. (b) To acquire by purchase, exchange, gift, bequest, subscription, or otherwise; and to hold, own mortgage, pledge, hypothecate, sell, assign, transfer, exchange, or otherwise dispose of or deal in or with its own corporate securities or stock or other securities including, without limitations, any shares of stocks, bonds, debentures, notes, mortgages, or other obligations, and any certificates, receipts or other instruments representing rights or interests therein on any property or assets created or issued by any person, firm, associate, corporation, or instrumentalities thereof, to make payment therefor in any lawful manner or to issue in exchange therefor in any lawful manner or to issue in exchange therefor its unreserved earned surplus for the purchase of its own shares, and to exercise as owner or holder of any securities, any and all rights, powers, and privileges in respect thereof. (c) To do each and everything necessary, suitable, or proper for the accomplishment of any of the purposes or the attainment of any one or more of the subjects herein enumerated, or which may, at any time, appear conducive to or expedient for the protection or benefit of this corporation, and to do said acts as fully and to the same extent as natural persons might, or could do in any part of the world as principals, agents, partners, trustees, or otherwise, either alone or in conjunction with any other person, association, or corporation. (d) The foregoing clauses shall be construed both as purposes and powers and shall not be held to limit or restrict in any manner the general powers of the corporation, and the enjoyment and exercise thereof, as conferred by the laws of the State of Nevada: and it is the intention that the purposes and powers specified in each of the paragraphs of this Article III shall be regarded as independent purposes and powers. ARTICLES IV STOCK (a) Common Stock. The aggregate number of shares of Common Stock which the Corporation shall have authority to issue is 50,000,000 shares at a par value of $.001 per share. All stock when issued shall be fully paid and non-assessable, shall be of the same class and have the same rights and preferences. No holder of shares of Common Stock of the Corporation shall be entitled, as such, to any pre-emptive or preferential rights to subscribe to any unissued stock or any other securities which the Corporation may now or thereafter be authorized to issue. Each share of Common Stock shall be entitled to one vote at a stockholders meetings, either in person or by proxy. Cumulative voting in elections of directors and all other matters brought before stockholders meeting, whether they be annual or special, shall not be permitted. (b) Preferred Stock. The aggregate number of shares of Preferred Stock which the Corporation shall have authority to issue is 5,000,000 shares, par value $.001, which may be issued in series, with such designations, preferences, stated values, rights, qualifications or limitations as determined solely by the Board of Directors of the Corporation. ARTICLE V AMENDMENT These Articles of Incorporation may be amended by the affirmative Vote of "a majority" of the shares entitled to vote on each such amendment. 2 ARTICLE VI AMENDMENT The authorized and treasury stock of this corporation may be issued at such time, upon such terms and conditions and for such consideration as the Board of Directors shall determine. Shareholders shall not have pre-emptive rights to acquire unissued shares of the stock of this corporation. ARTICLE VII INITIAL OFFICE AND AGENT The registered office of the Corporation in the State of Nevada is 3230 E. Flamingo Road, suite 156, Las Vegas, NV 89121. The registered agent in charge thereof at such address is Gateway Enterprises, Inc.. (See attachment) ARTICLE VIII DIRECTORS The directors are hereby given the authority to do any act on behalf of the corporation by law and in each instance where the Business corporation act provides that the directors may act in certain instances where the Articles of Incorporation authorize such action by the directors, the directors are hereby given authority to act in such instances without specifically numerating such potential action or instance herein. The directors are specifically given the authority to mortgage or pledge any or all assets of the business with shock holder's approval. The number of directors constituting the initial Board of Directors of this corporation is one (1). The names and addresses of persons who are to serve as Directors until the first annual meeting of stockholders or until their successors are elected and qualify are: NAME ADDRESS David N. Nemelka 899 South Artistic Circle Springville, UT 84663 ARTICLE IX INCORPORATORS The name and address of each incorporator is: NAME ADDRESS David N. Nemelka 899 South Artistic Circle Springville, UT 84663 3 ARTICLE X COMMON DIRECTORS- TRANSACTIONS BETWEEN CORPORATIONS No contract or other transaction between this corporation and any one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors or officers are financially interested, shall be either void or voidable because of such relationship or interest, or because such director or directors are present at the meeting of the Board of Directors, or a committee thereof, which authorizes, approves , or ratifies such contract or transaction, or because his or their votes are counted for such purpose if: (a) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves, or ratifies the contract or transaction by vote or consent sufficient of the purpose without counting the votes or consents of such interested director; or (b) the fact of such relationship or interest is disclosed or known to the stockholders entitled to vote and they authorize, approve, or ratify such contract or transaction by vote or written consent, or (c) the contract or transaction is fair and reasonable to the corporation. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or committee there of which authorizes, approves or ratifies such contract or transaction. ARTICLE XI LIABILITY OF DIRECTORS AND OFFICERS No director or officer shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer. Notwithstanding the foregoing sentence, a director or officer shall be liable to the extent provided by applicable law, (`I) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) for the payment of dividends in violation of NRS 78.300. The provisions hereof shall not apply to or have any effect on the liability or alleged liability of any officer or director of the Corporation for or with respect to any acts or omissions of such person occurring prior to such amendment. Under penalties of perjury, I declare that these Articles of Incorporation have been examined by me and are, to the best of my knowledge and belief, true, correct and complete. Dated this 7th day of March, 1996. /s/ David N. Nemelka ---------------------- David N. Nemelka 4 STATE OF UTAH ) ) ss. COUNTY OF ) On the 7th day of MARCH, 1996, personally appeared before me, David N. Nemelka, who being by me first duly sworn, declared that he was the person who signed the foregoing document as incorporator and that the statements therein contained are true. IN WITNESS THEREOF, I have hereunto set my hand and seal this 7th day of March, /s/ Brenda M. Hall ----------------------- NOTARY PUBLIC Residing at 1415 W. Spring Creek Place Springville, UT 84663 My commission expires: 5/5/97 EX-3.(II) 3 BYLAWS BY-LAWS of SPORTSMAN'S WHOLESALE COMPANY A NEVADA CORPORATION ARTICLE I OFFICES Section I. The principal office of the Corporation shall be at 899 South Artistic Circle located in Springville, Utah 84663. The Corporation may have such other offices, either within or without the State of Utah as the Board of Directors may designate or as the business of the Corporation may require from time to time. The registered office of the Corporation required by the Nevada Business Corporation Act to be maintained in the State of Nevada may be, but need not be, identical with the principal offices in the State of Nevada, and the address of the registered office may be changed, from time to time, by the Board of Directors. ARTICLE II STOCKHOLDERS Section 1. ANNUAL MEETING. The annual meeting of stockholders shall be held at the principal office of the Corporation, at 899 South Artistic Circle located in Springville, Utah 84663 or at such other places on the third Friday of April, or at such other times as the Board of Directors may, from time to time, determine. If the day so designated falls upon a legal holiday then the meeting shall be held upon the first business day thereafter. The Secretary shall serve personally or by mail a written notice thereof, not less than ten (10) nor more than fifty (50) days previous to such meeting, addressed to each stockholder at his address as it appears on the stock book; but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above required may be dispensed with. Section 2. SPECIAL MEETINGS. Special meetings of stockholders other than those regulated by statute, may be called at any time by a majority of the Directors. Notice of such meeting stating the place, day and hour and the purpose for which it is called shall be served personally or by mail, not less than ten (10) days before the date set for such meeting. If mailed, it shall be directed to a stockholder at his address as it appears on the stock book; but at any meeting at which all stockholders shall be present, or of which stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. The Board of Directors shall also, in like manner, call a special meeting of stockholders whenever so requested in writing by stockholders representing not less than ten percent (10%) of the capital stock of the Corporation entitled to vote at the meeting. The President may in his discretion call a special meeting of stockholders upon ten (10) days notice. No business other than that specified in the call for the meeting shall be transacted at any special meeting of the stockholders, except upon the unanimous consent of all the stockholders entitled to notice thereof. 1 Section 3. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to receive notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend; or in order to make a determination of stockholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, fifty (50) days. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for a least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than fifty (50) days, and in case of a meeting of stockholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. If the stock transfer books are not closed, and no record date is fixed for the determination of stockholders entitled to receive notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination as to stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof. Section 4. VOTING. At all meetings of the stockholders of record having the right to vote, subject to the provisions of Section 3, each stockholder of the Corporation is entitled to one (1) vote for each share of stock having voting power standing in the name of such stockholder on the books of the Corporation. Votes may be cast in person or by written authorized proxy. Section 5. PROXY. Each proxy must be executed in writing by the stockholder of the Corporation or his duly authorized attorney. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless it shall have specified therein its duration. Every proxy shall be revocable at the discretion of the person executing it or of his personal representatives or assigns. Section 6. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be noted by him either in person or by proxy without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate Order of the Court by which such receiver was appointed. 2 A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledge, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Section 7. ELECTION OF DIRECTORS. At each election for Directors every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are Directors to be elected and for whose election he has a right to vote. There shall be no cumulative voting. Section 8. QUORUM. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the stockholders. If a quorum shall not be present or represented, the stockholders entitled to vote thereat, present in person or by proxy, shall have the power to adjourn the meeting, from time to time, until a quorum shall be present or represented. At such rescheduled meeting at which a quorum shall be present or represented any business or any specified item of business may be transacted which might have been transacted at the meeting as originally notified. The number of votes or consents of the holders of stock having voting power which shall be necessary for the transaction of any business or any specified item of business at any meeting of stockholders, or the giving of any consent, shall be a majority of the outstanding shares of the Corporation entitled to vote. Section 9. INFORMAL ACTION BY STOCKHOLDERS. Any action required or permitted to be taken by the stockholders of the Corporation may be effected by any consent in writing by such holders, signed by holders of not less than that number of shares of Common Stock required to approve such action. ARTICLE III DIRECTORS Section 1. NUMBER. The affairs and business of this Corporation shall be managed by a Board of Directors. The present Board of Directors shall consist of one (1) member. Thereafter the number of Directors may be increased to not more than nine (9) by resolution of the Board of Directors. Directors need not be residents of the State of Utah and need not be stockholders of the Corporation. Section 2. ELECTION. The Directors shall be elected at each annual meeting of the stockholders, but if any such annual meeting is not held, or the Directors are not elected thereat, the Directors may be elected at any special meeting of the stockholders held for that purpose. 3 Section 3. TERM OF OFFICE. The term of office of each of the Directors shall be one (1) year, which shall continue until his successor has been elected and qualified. Section 4. DUTIES. The Board of Directors shall have the control and general management of the affairs and business of the Corporation. Such Directors shall in all cases act as a Board, regularly convened, and may adopt such rules and regulations for the conduct of meetings and the management of the Corporation, as may be deemed proper, so long as it is not inconsistent with these By-Laws and the laws of the State of Nevada. Section 5. DIRECTORS' MEETINGS. Regular meetings of the Board of Directors shall be held immediately following the annual meeting of the stockholders, and at such other time and places as the Board of Directors may determine. Special meetings of the Board of Directors may be called by the President or the Secretary upon the written request of one (1) Director. Section 6. NOTICE OF MEETINGS. Notice of meetings other than the regular annual meeting shall be given by service upon each Director in person, or by mailing to him at his last known address, at least three (3) days before the date therein designated for such meeting, of a written notice thereof specifying the time and place of such meeting, and the business to be brought before the meeting, and no business other than that specified in such notice shall be transacted at any special meeting. At any Directors' meeting at which a quorum of the Board of Directors shall be present (although held without notice), any and all business may be transacted which might have been transacted if the meeting had been duly called if a quorum of the Directors waive or are willing to waive the notice requirements of such meeting. Any Directors may waive notice of any meeting under the provisions of Article XII. The attendance of a Director at a meeting shall constitute a waiver of notice of such meeting except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully convened or called. Section 7. VOTING. At all meetings of the Board of Directors, each Director is to have one (1) vote. The act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. Section 9. REMOVAL OF DIRECTORS. Any Director may be removed from office, with or without cause, at any time, by a vote of the stockholders holding a majority of the stock, at any special meeting called for that purpose. 4 Section 10. QUORUM. The number of Directors who shall be present at any meeting of the Board of Directors in order to constitute a quorum for the transaction of any business or any specified item of business shall be a majority. The number of votes of Directors that shall be necessary for the transaction of any business of any specified item of business at any meeting of the Board of Directors shall be a majority. If a quorum shall not be present at any meeting of the Board of Directors, those present may adjourn the meeting, from time to time, until a quorum shall be present. Section 11. COMPENSATION. By resolution of the Board of Directors, the Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors or each may be paid a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefore. Section 12. PRESUMPTION OF ASSENT. A Director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent is entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. ARTICLE IV OFFICERS Section 1. NUMBER. The officers of the Corporation shall be: President, Vice-President, Secretary, and Treasurer, and such assistant Secretaries as the President shall determine. Any officer may hold more than one (1) office. Section 2. ELECTION. All officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately following the meeting of stockholders, and shall hold office for the term of one (1) year or until their successors are duly elected. Officers need not be members of the Board of Directors. The Board may appoint such other officers, agents and employees as it shall deem necessary who shall have such authority and shall perform such duties as, from time to time, shall be prescribed by the Board. Section 3. DUTIES OF OFFICERS. The duties and powers of the officers of the Corporation shall be as follows: 5 PRESIDENT The President shall preside at all meetings of the stockholders. He shall present at each annual meeting of the stockholders and Directors a report of the condition of the business of the Corporation. He shall cause to be called regular and special meetings of these stockholders and Directors in accordance with these By-Laws. He shall appoint and remove, employ and discharge, and fix the compensation of all agents, employees, and clerks of the Corporation other than the duly appointed officers, subject to the approval of the Board of Directors. He shall sign and make all contracts and agreements in the name of the Corporation, subject to the approval of the Board of Directors. He shall see that the books, reports, statements and certificates required by the statutes are properly kept, made and filed according to law. He shall sign all certificates of stock, notes, drafts, or bills of exchange, warrants or other orders for the payment of money duly drawn by the Treasurer; and he shall enforce these By-Laws and perform all the duties incident to the position and office, and which are required by law. VICE-PRESIDENT During the absence or inability of the President to render and perform his duties or exercise his powers, as set forth in these By-Laws or in the statutes under which the Corporation is organized, the same shall be performed and exercised by the Vice-President; and when so acting, he shall have all the powers and be subject to all the responsibilities hereby given to or imposed upon such President. SECRETARY The Secretary shall keep the minutes of the meetings of the Board of Directors and of the stockholders in appropriate books. He shall give and serve all notices of the Corporation. He shall be custodian of the records and of the corporate seal and affix the latter when required. He shall keep the stock and transfer books in the manner prescribed by law, so as to show at all times the amount of capital stock issued and outstanding; the manner and the time compensation for the same was paid; the names of the owners thereof, alphabetically arranged; the number of shares owned by each; the time at which each person became such owner; and the amount paid thereon; and keep such stock and transfer books open daily during the business hours of the office of the Corporation, subject to the inspection of any stockholder of the Corporation, and permit such stockholder to make extracts from said books to the extent prescribed by law. He shall sign all certificates of stock. He shall present to the Board of Directors at their meetings all communications addressed to him officially by the President or any officer or stockholder of the Corporation; and he shall attend to all correspondence and perform all the duties incident to the office of Secretary. TREASURER The Treasurer shall have the care and custody of and be responsible for all the funds and securities of the Corporation, and deposit all such funds in the name of the Corporation in such bank or banks, trust company or trust companies 6 or safe deposit vaults as the Board of Directors may designate. He shall exhibit at all reasonable times his books and accounts to any Director or stockholder of the Corporation upon application at the office of the Corporation during business hours. He shall render a statement of the conditions of the finances of the Corporation at each regular meeting of the Board of Directors, and at such other times as shall be required of him, and a full financial report at the annual meeting of the stockholders. He shall keep, at the office of the Corporation, correct books of account of all its business and transactions and such other books of account as the Board of Directors may require. He shall do and perform all duties appertaining to the office of Treasurer. The Treasurer shall, if required by the Board of Directors, give to the Corporation such security for the faithful discharge of his duties as the Board may direct. Section 4. BOND. The Treasurer shall, if required by the Board of Directors, give to the Corporation such security for the faithful discharge of his duties as the Board may direct. Section 5. VACANCIES, HOW FILLED. All vacancies in any office shall be filled by the Board of Directors without undue delay, either at its regular meeting or at a meeting specifically called for that purpose. In the case of the absence of any officer of the Corporation or for any reason that the Board of Directors may deem sufficient, the Board may, except as specifically otherwise provided in these By-Laws, delegate the power or duties of such officers to any other officer or Director for the time being; provided, a majority of the entire Board concur therein. Section 6. COMPENSATION OF OFFICERS The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 7. REMOVAL OF OFFICERS. The Board of Directors may remove any officer, by a majority vote, at any time with or without cause. ARTICLE V CERTIFICATES OF STOCK Section 1. DESCRIPTION OF STOCK CERTIFICATES. The certificates of stock shall be numbered and registered in the order in which they are issued. They shall be bound in a book and shall be issued in consecutive order therefrom, and in the margin thereof shall be entered the name of the person owning the shares therein represented, with the number of shares and the date thereof. Such certificates shall exhibit the holder's name and number of shares. They shall be signed by the President or Vice President, and countersigned by the Secretary or Treasurer and sealed with the Seal of the Corporation. Section 2. TRANSFER OF STOCK. The stock of the Corporation shall be assignable and transferable on the books of the Corporation only by the person in whose name it appears on said books, his legal representatives or by his duly authorized agent. In case of transfer by attorney, the power of attorney, duly executed and acknowledged, shall be deposited with the Secretary. In all cases of transfer the former certificate must be surrendered up and canceled before a new certificate may be issued. No transfer shall be made upon the books of the Corporation within ten (10) days next preceding the annual meeting of the stockholders. 7 Section 3. LOST CERTIFICATES. If a stockholder shall claim to have lost or destroyed a certificate or certificates of stock issued by the Corporation, the Board of Directors may, at its discretion, direct a new certificate or certificates to be issued, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed, and upon the deposit of a bond or other indemnity in such form and with such sureties if any that the Board may require. ARTICLE VI SEAL Section 1. SEAL. The seal of the Corporation shall be as follows: NO SEAL IN USE AT THIS TIME ARTICLE VII DIVIDENDS Section 1. WHEN DECLARED. The Board of Directors shall by vote declare dividends from the surplus profits of the Corporation whenever, in their opinion, the condition of the Corporation's affairs will render it expedient for such dividends to be declared. Section 2. RESERVE. The Board of Directors may set aside, out of the net profits of the Corporation available for dividends, such sum or sums (before payment of any dividends) as the Board, in their absolute discretion, think proper as a reserve fund, to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and they may abolish or modify any such reserve in the manner in which it was created. ARTICLE VIII INDEMNIFICATION Section 1. Any person made a party to or involved in any civil, criminal or administrative action, suit or proceeding by reason of the fact that he or his testator or intestate is or was a Director, officer, or employee of the Corporation, or of any corporation which he, the testator, or intestate served as such at the request of the Corporation, shall be indemnified by the Corporation against expenses reasonably incurred by him or imposed on him in connection with or resulting from the defense of such action, suit, or proceeding and in connection with or resulting from any appeal thereon, except with respect to matters as to which it is adjudged in such action, suit or proceeding that such officer, Director, or employee was liable to the Corporation, or to such other corporation, for negligence or misconduct in the performance of his duty. As used herein the term "expense" shall include all obligations incurred by such person for the payment of money, including without limitation attorney's fees, judgments, awards, fines, penalties, and amounts paid in satisfaction of judgment or in settlement of any such action, suit, or proceedings, except amounts paid to the Corporation or such other corporation by him. A judgment of conviction whether based on plea of guilty or nolo contendere or its equivalent, or after trial, shall not of itself be deemed an adjudication that such Director, officer or employee is liable to the Corporation, or such other corporation, for negligence or misconduct in the performance of his 8 duties. Determination of the rights of such indemnification and the amount thereof may be made at the option of the person to be indemnified pursuant to procedure set forth, from time to time, in the By-Laws, or by any of the following procedures: (a) order of the Court or administrative body or agency having jurisdiction of the action, suit, or proceeding; (b) resolution adopted by a majority of the quorum of the Board of Directors of the Corporation without counting in such majority any Directors who have incurred expenses in connection with such action, suit or proceeding; (c) if there is no quorum of Directors who have not incurred expense in connection with such action, suit, or proceeding, then by resolution adopted by a majority of the committee of stockholders and Directors who have not incurred such expenses appointed by the Board of Directors; (d) resolution adopted by a majority of the quorum of the Directors entitled to vote at any meeting; or (e) Order of any Court having jurisdiction over the Corporation. Any such determination that a payment by way of indemnity should be made will be binding upon the Corporation. Such right of indemnification shall not be exclusive of any other right which such Directors, officers, and employees of the Corporation and the other persons above mentioned may have or hereafter acquire, and without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any By-Law, Agreement, vote of stockholders, provision of law, or otherwise in addition to their rights under this Article. The provision of this Article shall apply to any member of any committee appointed by the Board of Directors as fully as though each person and been a Director, officer or employee of the Corporation. ARTICLE IX AMENDMENTS Section 1. HOW AMENDED. These By-Laws may be altered, amended, repealed or added to by the vote of the Board of Directors of the Corporation at any regular meeting of said Board, or at a special meeting of Directors called for that purpose provided a quorum of the Directors as provided by law and by the Articles of Incorporation, are present at such regular meeting or special meeting. These By-Laws and any amendments thereto and new By-Laws added by the Directors may be amended, altered or replaced by the stockholders at any annual or special meeting of the stockholders. ARTICLE X FISCAL YEAR Section 1. FISCAL YEAR. The fiscal year shall end on the 31st day of DECEMBER. 9 ARTICLE XI WAIVER OF NOTICE Section 1. Whenever any notice is required to be given to any shareholders or directors of the Corporation under the provisions of these By-Laws, under the Articles of Incorporation or under the provisions of the Utah Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ADOPTED this 8th day of March, 1996. SPORTSMAN'S WHOLESALE COMPANY A Nevada Corporation, /s/ Fred L. Hall ----------------------- Fred L. Hall President CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: 1. That I am the duly elected and acting Secretary\Treasurer of SPORTSMAN'S WHOLESALE COMPANY, A Nevada Corporation: and 2. That the foregoing By-Laws, comprising Nine (9) pages, constitute the By-Laws of said Corporation as duly adopted at a meeting of the Board of Directors thereof duly held on the 8th day of March, 1996. /s/ Fred L. Hall ------------------------------------ Fred L. Hall, Secretary\Treasurer (SEAL) 10 EX-4.1 4 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF SHARE EXCHANGE This Agreement and Plan of Share Exchange (the "Agreement"), dated as of the 30th day of April, 1998, by and between Sportsman's Wholesale Company, a Nevada corporation ("SPORTSMAN") AND Cap's Sporting Goods Wholesale, Inc., a Utah corporation ("CAP'S") and the shareholders of CAP'S ("Shareholders"), who execute this Agreement and the Investment Letter as set forth in Exhibit A of this Agreement, with reference to the following: A. SPORTSMAN is a privately held corporation organized under the laws of Nevada on March 6, 1996. SPORTSMAN has authorized capital stock of 55,000,000 shares, $.0001 par value, 50,000,000 Common Stock and 5,000,000 Preferred Stock. There are 500,000 common shares outstanding. B. CAP'S is a privately held corporation organized under the laws of the State of Utah, on February 3, 1998. CAP'S has authorized capital stock of 55,000,000 shares, including 50,000,000 shares of common stock, $0.001 par value and 5,000,000 shares of preferred stock. There are 1,000,000 common shares outstanding. C. The respective Boards of Directors of SPORTSMAN and CAP'S have deemed it advisable and in the best interest of SPORTSMAN and CAP'S that CAP'S be acquired by SPORTSMAN, pursuant to the terms and conditions set forth in this Agreement. D. SPORTSMAN and CAP'S propose to enter into this Agreement which provides among other things that all of the outstanding shares of CAP'S be acquired by SPORTSMAN, in exchange for shares of SPORTSMAN and such items as are more fully described in the Agreement. E. The parties desire the transaction to qualify as a tax-free organization under Section 368 (a)(1)(B) of the Internal Revenue Code of 1986, as amended. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1 THE ACQUISITION 1.1 At the Closing, a total of 1,000,000 common shares, which represents all of the outstanding shares of CAP'S, shall be acquired by SPORTSMAN in exchange for 1,000,000 shares of Sportsman common stock which shall be issued to the CAP'S shareholders as set forth on the signature page of this Agreement. 1 1.2 At the Closing, the CAP'S shareholder will deliver certificates for the outstanding shares of CAP'S, duly endorsed so as to make SPORTSMAN the sole holder thereof, free and clear of all claims and encumbrances and SPORTSMAN shall deliver a transmittal letter directed to the transfer agent of SPORTSMAN directing the issuance of shares to the shareholder of CAP'S set forth on the signature page of this Agreement. 1.3 Following the Share Exchange, there will be a total of 1,500,000 shares of common stock, $.001 par value issued and outstanding in SPORTSMAN. ARTICLE 2 THE CLOSING 2.1 The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place in the offices of Ray, Quinney & Nebeker, 79 South Main Street, Salt Lake City, UT 84145-0385 at 10:00 am, on May 22, 1998, or at such other place or date and time as may be agreed to in writing by the parties hereto. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SPORTSMAN'S WHOLESALE COMPANY SPORTSMAN and its officers and directors hereby represent and warrant to CAP'S as follows: 3.1 SPORTSMAN shall deliver to CAP'S, on or within a reasonable time after Closing, each of the following: (a) Financial Statements. Financial statements of SPORTSMAN, including, but not limited to, balance sheet and income statement as of December 31, 1997. (Schedule A) (b) Leases and Contracts. A complete and accurate list describing all material terms of each lease (whether of real or personal property) and each contract, promissory note, mortgage, license, franchise, or other written agreement to which SPORTSMAN is a party which involves or can reasonably be expected to involve aggregate future payments or receipts by SPORTSMAN (whether by the terms of such lease, contract, promissory note, license, franchise or other written agreement or as a result of a guarantee of the payment of or indemnity against the failure to pay same) of $1,000.00 or more annually during the twelve (12) months period ended December 31, 1997, or any consecutive 12-month period thereafter, except any of said instruments which terminate or are cancelable without penalty during such 12-month period. (Schedule B) 2 (c) Loan Agreements. Complete and accurate copies of all loan agreements and other documents with respect to obligations of SPORTSMAN for the repayment of borrowed money. (Schedule C) (d) Articles and Bylaws. Complete and accurate copies of the Articles of Incorporation and Bylaws of SPORTSMAN together with all amendments thereto to the date hereof. (Schedule D) (e) Shareholders. A complete list of all persons or entities holding capital stock of SPORTSMAN or any rights to subscribe for, acquire, or receive shares of the capital stock of SPORTSMAN (whether warrants, calls, options, or conversion rights), including copies of all stock option plans whether qualified or nonqualified, and other similar agreements. (Schedule E) (f) Officers and Directors. A complete and current list of all officers and Directors of SPORTSMAN. (Schedule F) (g) Salary Schedule. A complete and accurate list (in all material respects) of the names and the current salary rate for each present employee of SPORTSMAN who received $1,000.00 or more in aggregate compensation from SPORTSMAN whether in salary, bonus of otherwise, during the year 1997, or who is presently scheduled to received from SPORTSMAN salary in excess of $1,000.00 during the year ending December 31, 1998, including in each case the amount of compensation received or scheduled to be received, and a schedule of the hourly rates of all other employees listed according to departments (Schedule G) (h) Litigation. A complete and accurate list (in all material respects) of all material civil, criminal administrative, arbitration or other such proceedings or investigations (including without limitations unfair labor practice matters, labor organization activities, environmental matters and civil rights violations) pending or, to the knowledge of SPORTSMAN threatened, which may materially and adversely affect SPORTSMAN. (Schedule H) (i) Tax Returns. Accurate copies of all federal and state tax returns for SPORTSMAN for the last fiscal year. (Schedule I) (j) Jurisdictions Where Qualified. A list of all jurisdictions wherein SPORTSMAN is qualified to do business and is in good standing. (Schedule J) 3 (k) Employee and Consultant Contracts. A complete and accurate list of all employee and consultant contracts which SPORTSMAN may have. (Schedule K) 3.2 Organization, Standing and Power. SPORTSMAN is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada with all requisite corporate power to own or lease its properties and carry on its businesses as is now being conducted. 3.3 Qualification. SPORTSMAN is duly qualified and is licensed as a foreign corporation authorized to do business in each jurisdiction wherein it conducts its business operations. Such jurisdictions, which are the only jurisdictions in which SPORTSMAN is duly qualified and licensed as a foreign corporation, are shown in Schedule J. 3.4 Capitalization of SPORTSMAN. The authorized capital stock of SPORTSMAN consists of 50,000,000 shares of Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001 par value, of which the only shares issued and outstanding are 1,500,000 shares of common stock issued to the shareholders listed on Schedule E, which shares were duly authorized, validly issued and fully paid and nonassessable. There are no preemptive rights with respect to the SPORTSMAN stock. 3.5 Authority. The execution delivery of this Agreement and consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action, including but not limited to duly and validly authorized action and approval by the Board of Directors, on the part of SPORTSMAN. This Agreement constitutes the valid and binding obligation of SPORTSMAN enforceable against it in accordance with its terms, subject to the principles of equity applicable to the availability of the remedy of specific performance. This Agreement has been duly executed by SPORTSMAN and the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement shall not result in any breach of any terms or provisions of SPORTSMAN Articles of Incorporation or Bylaws or of any other agreement, court order or instrument to which SPORTSMAN is a party or is bound. 3.6 Absence of Undisclosed Liabilities. SPORTSMAN has no material liabilities of any nature, whether fixed, absolute, contingent or accrued, which were not reflected on the financial statements set forth in Schedule A nor otherwise disclosed in this Agreement or any of the Schedules or Exhibits attached hereto. 3.7 Absence of Changes. Since December 31, 1997, there has not been any material adverse change in the condition (financial or otherwise), assets, liabilities, earnings or business of SPORTSMAN, except for changes resulting from completion of transactions described in Section 5.1. 4 3.8 Tax Matters. All taxes and other assessments and levies which SPORTSMAN is required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper government authorities or are held by SPORTSMAN in separate bank accounts for such payment or are represented by depository receipts, and all such withholdings and collections and all other payments due in connection therewith (including, without limitation, employment taxes, both the employee's and employer's share) have been paid over to the government or placed in a separate and segregated bank account for such purpose. There are no known deficiencies in income taxes for any periods and further, the representations and warranties as to absence of undisclosed liabilities contained in Section 3.6 includes any and all tax liabilities of whatsoever kind or nature (including, without limitation, all federal, state, local and foreign income, profit, franchise, sales, use and property taxes) due or to become due, incurred in respect of or measured by SPORTSMAN income or business prior to the Closing Date. 3.9 Options, Warrants, Etc. There are no outstanding options, warrants, calls, commitments or agreements of any character to which SPORTSMAN or its shareholders are a party or by which SPORTSMAN or its shareholders are bound calling for the issuance of shares of capital stock of SPORTSMAN or securities representing the right to purchase or receive any such capital stock of SPORTSMAN. 3.10 Title to Assets. Except for liens set forth in Schedule C, SPORTSMAN is the sole unconditional owner of, with good and marketable title to, all assets listed int he schedules as owned by it and all other property and assets are free and clear of any mortgages, lines, pledges, charges or encumbrances of nay nature whatsoever. 3.11 Agreements in Force and Effect. All material contracts, agreements, plans, promissory notes, mortgages, leases, policies, licenses, franchises or similar instruments to which SPORTSMAN is a party are valid and in full force and effect on the date hereof and SPORTSMAN has not breached any material provision of, and is not in default in any material respect under the terms of any such contract, agreement, plan, promissory note, mortgage, lease, policy, license, franchise or similar instrument which breach or default would have a material adverse effect upon the business, operations or financial condition of SPORTSMAN. 3.12 Legal Proceedings, Etc. There are no civil, criminal, administrative, arbitration or other such proceedings or investigations pending or, to the knowledge of either SPORTSMAN or the shareholders thereof threatened, in which, individually or in the aggregate, an adverse determination would materially and adversely affect the assets, properties, business or income of SPORTSMAN. SPORTSMAN has substantially complied with, and is not in default in any material respect under, any laws, ordinances, requirements, regulations or orders applicable to its businesses. 5 3.13 Governmental Regulation. To the knowledge of SPORTSMAN, the company is not in violation of or in default with respect to any applicable law or any applicable rule, regulation, order, writ or decree of any court or any governmental commission, board, bureau, agency or instrumentality, or delinquent with respect to any report required to be filed with any governmental commission, board, bureau, agency or instrumentality which violation or default could have a material adverse effect upon the business, operations or financial condition of SPORTSMAN. 3.14 Accuracy of Information. No representation or warranty by SPORTSMAN contained int his Agreement and no statement contained in any certificate or other instrument delivered or to be delivered to CAP'S pursuant hereto or in connection with the transaction contemplated hereby (including without limitation all Schedules and Exhibits hereto) contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary in order to make the statement contained herein or therein not misleading. 3.15 Subsidiaries. SPORTSMAN does not currently have any subsidiaries or own capital stock representing ten percent (10%) or more of the issued and outstanding stock of any other corporation. 3.16 Consents. No consent or approval of, or registration, qualification or filing with any governmental authority or other person is required to be obtained or accomplished by SPORTSMAN or any shareholder thereof in connection with the consummation of the transactions contemplated hereby. 3.17 Improper Payments. Neither SPORTSMAN, nor any person acting on behalf of SPORTSMAN has made any payment or otherwise transmitted anything of value, directly or indirectly, to (a) any official or any government or agency or political subdivision there of for the purpose of influencing any decision affecting the business of SPORTSMAN, (b) any customer, supplier or competitor of SPORTSMAN or employee of such customer, supplier or competitor, for the purpose of obtaining, retailing or directing business for SPORTSMAN, or (c) any political party or any candidate for elective political office nor has any fund or other asset of SPORTSMAN been maintained that was not fully and accurately recorded on the books or account of SPORTSMAN. 3.18 Copies of Documents. SPORTSMAN has made available for inspection and copying to CAP'S and its duly authorized representatives, and will continue to do so at all times, true and correct copies of all documents which it has filed with any governmental agencies which are material to the terms and conditions contained in this Agreement. 6 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CAP'S WHOLESALE SPORTING GOODS, INC. CAP'S and its officers and directors hereby represent and warrant to SPORTSMAN as follows: 4.1 CAP'S shall deliver to SPORTSMAN, on or within a reasonable time after Closing, each of the following: (a) Financial Statements. Financial statements of CAP'S, including, but not limited to, balance sheet and income statement as of December 31, 1997. (Schedule A) (b) Leases and Contracts. A complete and accurate list describing all material terms of each lease (whether of real or personal property) and each contract, promissory note, mortgage, license, franchise, or other written agreement to which CAP'S is a party which involves or can reasonably be expected to involve aggregate future payments or receipts by CAP'S (whether by the terms of such lease, contract, promissory note, license, franchise or other written agreement or as a result of a guarantee of the payment of or indemnity against the failure to pay same) of $1,000.00 or more annually during the twelve (12) months period ended December 31, 1997, or any consecutive 12-month period thereafter, except any of said instruments which terminate or are cancelable without penalty during such 12-month period. (Schedule B) (c) Loan Agreements. Complete and accurate copies of all loan agreements and other documents with respect to obligations of CAP'S for the repayment of borrowed money. (Schedule CC) (d) Articles and Bylaws. Complete and accurate copies of the Articles of Incorporation and Bylaws of CAP'S together with all amendments thereto to the date hereof. (Schedule DD) (e) Shareholders. A complete list of all persons or entities holding capital stock of CAP'S or any rights to subscribe for, acquire, or receive shares of the capital stock of CAP'S (whether warrants, calls, options, or conversion rights), including copies of all stock option plans whether qualified or nonqualified, and other similar agreements. (Schedule EE) (f) Officers and Directors. A complete and current list of all officers and Directors of CAP'S. (Schedule FF) 7 (g) Salary Schedule. A complete and accurate list (in all material respects) of the names and the current salary rate for each present employee of CAP'S who received $1,000.00 or more in aggregate compensation from SPORTSMAN whether in salary, bonus of otherwise, during the year 1997, or who is presently scheduled to received from CAP'S salary in excess of $1,000.00 during the year ending December 31, 1998, including in each case the amount of compensation received or scheduled to be received, and a schedule of the hourly rates of all other employees listed according to departments (Schedule GG) (h) Litigation. A complete and accurate list (in all material respects) of all material civil, criminal administrative, arbitration or other such proceedings or investigations (including without limitations unfair labor practice matters, labor organization activities, environmental matters and civil rights violations) pending or, to the knowledge of CAP'S threatened, which may materially and adversely affect CAP'S. (Schedule HH) (i) Tax Returns. Accurate copies of all federal and state tax returns for CAP'S for the last fiscal year. (Schedule II) (j) Jurisdictions Where Qualified. A list of all jurisdictions wherein CAP'S is qualified to do business and is in good standing. (Schedule JJ) (k) Employee and Consultant Contracts. A complete and accurate list of all employee and consultant contracts which CAP'S may have. (Schedule KK) 4.2 Organization, Standing and Power. CAP'S is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah with all requisite corporate power to own or lease its properties and carry on its businesses as is now being conducted. 4.3 Qualification. CAP'S is duly qualified and is licensed as a foreign corporation authorized to do business in each jurisdiction wherein it conducts its business operations. Such jurisdictions, which are the only jurisdictions in which CAP'S is duly qualified and licensed as a foreign corporation, are shown in (Schedule JJ). 4.4 Capitalization of CAP'S. The authorized capital stock of CAP'S consists of 55,000,000 shares of Capital Stock, 50,000,000 which are Common Stock, par value $0.001 and 5,000,000 of which are preferred stock, of which the only shares issued and outstanding are 1,000,000 shares of Common Stock issued to the shareholder listed on Schedule EE, which shares were duly authorized, validly issued and fully paid and nonassessable. There are no preemptive rights with respect to the CAP'S stock. 8 4.5 Authority. The execution delivery of this Agreement and consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action, including but not limited to duly and validly authorized action and approval by the Board of Directors, on the part of CAP'S. This Agreement constitutes the valid and binding obligation of CAP'S enforceable against it in accordance with its terms, subject to the principles of equity applicable to the availability of the remedy of specific performance. This Agreement has been duly executed by CAP'S and the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement shall not result in any breach of any terms or provisions of CAP'S Articles of Incorporation or Bylaws or of any other agreement, court order or instrument to which CAP'S is a party or is bound. 4.6 Absence of Undisclosed Liabilities. CAP'S has no material liabilities of any nature, whether fixed, absolute, contingent or accrued, which were not reflected on the financial statements set forth in Schedule AA nor otherwise disclosed in this Agreement or any of the Schedules or Exhibits attached hereto. 4.7 Absence of Changes. Since December 31, 1997, there has not been any material adverse change in the condition (financial or otherwise), assets, liabilities, earnings or business of CAP'S, except for changes resulting from completion of transactions described in Section 5.1. 4.8 Tax Matters. All taxes and other assessments and levies which CAP'S is required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper government authorities or are held by CAP'S in separate bank accounts for such payment or are represented by depository receipts, and all such withholdings and collections and all other payments due in connection therewith (including, without limitation, employment taxes, both the employee's and employer's share) have been paid over to the government or placed in a separate and segregated bank account for such purpose. There are no known deficiencies in income taxes for any periods and further, the representations and warranties as to absence of undisclosed liabilities contained in Section 4.6 includes any and all tax liabilities of whatsoever kind or nature (including, without limitation, all federal, state, local and foreign income, profit, franchise, sales, use and property taxes) due or to become due, incurred in respect of or measured by CAP'S income or business prior to the Closing Date. 4.9 Options, Warrants, Etc. There are no outstanding options, warrants, calls, commitments or agreements of any character to which CAP'S or its shareholders are a party or by which CAP'S or its shareholders are bound calling for the issuance of shares of capital stock of CAP'S or securities representing the right to purchase or receive any such capital stock of CAP'S. 9 4.10 Title to Assets. Except for liens set forth in Schedule CC, CAP'S is the sole unconditional owner of, with good and marketable title to, all assets listed int he schedules as owned by it and all other property and assets are free and clear of any mortgages, lines, pledges, charges or encumbrances of nay nature whatsoever. 4.11 Agreements in Force and Effect. All material contracts, agreements, plans, promissory notes, mortgages, leases, policies, licenses, franchises or similar instruments to which CAP'S is a party are valid and in full force and effect on the date hereof and CAP'S has not breached any material provision of, and is not in default in any material respect under the terms of any such contract, agreement, plan, promissory note, mortgage, lease, policy, license, franchise or similar instrument which breach or default would have a material adverse effect upon the business, operations or financial condition of CAP'S. 4.12 Legal Proceedings, Etc. There are no civil, criminal, administrative, arbitration or other such proceedings or investigations pending or, to the knowledge of either CAP'S or the shareholders thereof threatened, in which, individually or in the aggregate, an adverse determination would materially and adversely affect the assets, properties, business or income of CAP'S. CAP'S has substantially complied with, and is not in default in any material respect under, any laws, ordinances, requirements, regulations or orders applicable to its businesses. 4.13 Governmental Regulation. To the knowledge of CAP'S, the company is not in violation of or in default with respect to any applicable law or any applicable rule, regulation, order, writ or decree of any court or any governmental commission, board, bureau, agency or instrumentality, or delinquent with respect to any report required to be filed with any governmental commission, board, bureau, agency or instrumentality which violation or default could have a material adverse effect upon the business, operations or financial condition of CAP'S. 4.14 Accuracy of Information. No representation or warranty by CAP'S contained int his Agreement and no statement contained in any certificate or other instrument delivered or to be delivered to SPORTSMAN pursuant hereto or in connection with the transaction contemplated hereby (including without limitation all Schedules and Exhibits hereto) contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary in order to make the statement contained herein or therein not misleading. 4.15 Subsidiaries. CAP'S does not currently have any subsidiaries or own capital stock representing ten percent (10%) or more of the issued and outstanding stock of any other corporation. 10 4.16 Consents. No consent or approval of, or registration, qualification or filing with any governmental authority or other person is required to be obtained or accomplished by CAP'S or any shareholder thereof in connection with the consummation of the transactions contemplated hereby. 4.17 Improper Payments. Neither CAP'S, nor any person acting on behalf of CAP'S has made any payment or otherwise transmitted anything of value, directly or indirectly, to (a) any official or any government or agency or political subdivision there of for the purpose of influencing any decision affecting the business of CAP'S, (b) any customer, supplier or competitor of CAP'S or employee of such customer, supplier or competitor, for the purpose of obtaining, retailing or directing business for CAP'S, or (c) any political party or any candidate for elective political office nor has any fund or other asset of CAP'S been maintained that was not fully and accurately recorded on the books or account of CAP'S. 4.18 Copies of Documents. CAP'S has made available for inspection and copying to SPORTSMAN and its duly authorized representatives, and will continue to do so at all times, true and correct copies of all documents which it has filed with any governmental agencies which are material to the terms and conditions contained in this Agreement. 4.19 Investment Intent of Shareholders. Each shareholder of CAP'S represents and warrants to SPORTSMAN that the shares of SPORTSMAN being acquired pursuant to this Agreement are being acquired for her own account and for investment and not with a view to the public resale or distribution of such shares and further acknowledges that the shares being issued have not been registered under the Securities Act and are "restricted securities" as that term is defined in rule 144 promulgated under the Securities Act and must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration as available. ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE ACQUISITION 5.1 Conduct and Transactions of SPORTSMAN. During the period from the date hereof to the date of Closing, SPORTSMAN shall: (a) Conduct its operations in the ordinary course of business, including but not limited to, paying all obligations as they mature, complying with any applicable tax laws, filing all tax returns required to be filed and paying all taxes due; (b) Maintain its records and books of account in a manner that fairly and correctly reflect its income, expenses, assets and liabilities. 11 5.2 SPORTSMAN shall not during such period, except in the ordinary course of business, without the prior written consent of CAP'S: (a) Except as otherwise contemplated or required by this Agreement, sell, dispose of or encumber any of its properties or assets; (b) Declare or pay any dividends on shares of its capital stock or make any other distribution of assets to the holders thereof; (c) Issue, reissue or sell or issue options or tights to subscribe to, or enter into any contract or commitment to issue, reissue or sell any shares of its capital stock or acquire or agree to acquire any shares of its capital stock; (d) Except as otherwise contemplated and required by this Agreement, amend its Articles of Incorporation or merge or consolidate with or into any other corporation with or into any other corporation or sell all or substantially all of its assets or change in any manner the rights of its capital stock or other securities; (e) Except as contemplated or required by this Agreement, pay or incur any obligation or liability, direct or contingent more than $1,000; (f) Incur and indebtedness for borrowed money, assume, guarantee, endorse or otherwise become responsible for obligations of any other party, or make loans or advances to any other party; (g) Make any material change in its insurance coverage; (h) Increase in any manner the compensation, direct or indirect, of any of its officers or executive employees, except in accordance with existing employment contracts; (I) Enter into any agreement of make any commitment to any labor union or organization; (j) Make any capital expenditures. 5.3 Conduct and Transactions of CAP'S. During the period from the date hereof to the date of closing, CAP'S shall: (a) Obtain an investment letter from each shareholder of CAP'S in a form substantially like that attache hereto as Exhibit A. (b) Conduct the operations of CAP'S in the ordinary course of business. 12 (c) Issue, reissue or sell, or issue options or rights to subscribe to, or enter into any contract or commitment to issue, reissue or sell, any shares of its capital stock or acquire or agree to acquire any share of its capital stock; (d) Except as otherwise contemplated and required by this Agreement, amend its Articles of Incorporation or merge or consolidate with or into any other corporation or sell all or substantially all of its assets or change in any manner the rights of its capital stock or other securities; (e) Except as otherwise contemplated and required by this Agreement, pay or incur any obligation or liability, direct or contingent; (f) Incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise become responsible for obligations of any other party, or make loans or advances to any other party; (g) Make any material change in its insurance coverage; (I) Enter into any agreement or make any commitment to any labor union or organization; (j) Make any material capital expenditures; (k) Allow any of the foregoing actions to be taken by any subsidiary of CAP'S. ARTICLE 6 RIGHTS OF INSPECTION 6.1 During the period from the date of this Agreement to the date of Closing of the acquisition, SPORTSMAN and CAP'S agree to use their best efforts to give the other party, including its representatives and agents, full access to the premises, books and records of each of the entities, and to furnish the other with such financial and operation data and other information including, but not limited to, copies of all legal documents and instruments referred to on any schedule or exhibit hereto, with respect to the business and properties of SPORTSMAN or CAP'S, as the case may be, as the other shall from time to time request; provided, however, if there are any such investigations: (1) they shall be conducted in such manner as not to unreasonably interfere with the operation of the business of the other parties and (2) such right of inspection shall not affect in any way whatsoever any of the representation or warranties given by the respective parties hereunder. In the event of termination of this Agreement, SPORTSMAN and CAP'S will each return to the other all documents, work papers and other material obtained from the other party in connection with the transactions contemplated hereby, and will take such other steps necessary to protect the confidentiality of such material. 13 ARTICLE 7 CONDITIONS TO CLOSING 7.1 Conditions to Obligations of SPORTSMAN. The obligation of SPORTSMAN to perform this Agreement is subject to the satisfaction of the following conditions on or within a reasonable time after Closing unless waived in writing by CAP'S. 7.2 Representations and Warranties. There shall be no information disclosed in the schedules delivered by SPORTSMAN which in the opinion of CAP'S would materially adversely affect the proposed transaction and intent of the parties as set forth in this Agreement. The representations and warranties of SPORTSMAN set forth in Article 3 hereof shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though made on and as of the Closing, except as otherwise permitted by this Agreement. (a) Performance of Obligations. SPORTSMAN shall have in all material respects performed all agreements required to be performed by it under this Agreement and shall have performed in all material respects any actions contemplated by this Agreement prior to or on the Closing and SPORTSMAN shall have complied in all material respects with the course of conduct required by this Agreement. (b) Corporate Action. Minutes, certified copies of corporate resolutions and/or other documentary evidence satisfactory to counsel for CAP'S that SPORTSMAN submitted this Agreement and any other documents required hereby to such parties for approval as provided by applicable law. (c) Consents. Execution of this Agreement by the shareholders of SPORTSMAN and any consents necessary for or approval is required pursuant thereto shall have been obtained. (d) Financial Statements. CAP'S shall have been furnished with financial statements of SPORTSMAN including, but not limited to, balance sheets and profit and loss statements as of December 31,1997. Such financial statements shall have been prepared in conformity with generally accepted accounting principles on a basis consistent with those of prior periods and fairly present the financial position of SPORTSMAN as of December 31,1997. (e) Statutory Requirements. All statutory requirements for the valid consummation by SPORTSMAN of the transactions contemplated by this Agreement shall have been obtained. (f) Governmental Approval. All authorizations, consents, approvals, permits and orders of all federal and state governmental agencies required to be obtained by SPORTSMAN for consumption of the transactions contemplated by this Agreement shall have been obtained. 14 (g) Changes in Financial Condition of SPORTSMAN. There shall not have occurred any material adverse change in the financial condition or in the operations of the business of SPORTSMAN, except expenditures in furtherance of this Agreement. (h) Absence of Pending Litigation. SPORTSMAN is not engaged in or threatened with any suit, action, or legal administrative or other proceedings or governmental investigations pertaining to this Agreement or the condition of the transactions contemplated hereunder. (I) Authorization for Issuance of Stock. CAP'S shall have received in from and substance satisfactory to counsel for CAP'S a letter instructing and authorizing the Registrar and Transfer Agent for the shares of common stock of SPORTSMAN to issue stock certificates representing ownership of SPORTSMAN common stock to the shareholders of CAP'S in accordance with the terms of this Agreement. 7.3 Conditions and Obligations of CAP'S. The obligation of CAP'S to perform this Agreement is subject to the satisfaction of the following conditions on or before the Closing unless waived in writing by SPORTSMAN. (a) Representations and Warranties. There shall be no information disclosed in the schedules delivered by CAP'S which in the opinion of SPORTSMAN would materially adversely affect the proposed transaction and intent of the parties as set forth in this Agreement. The representations and warranties of CAP'S set forth in Article 4 hereof shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though made on and as of the Closing, except as otherwise permitted by this Agreement. (b) Performance of Obligations. CAP'S shall have in all material respects performed all agreements required to be performed by it under this Agreement and shall have performed in all material respects any actions contemplated by this Agreement prior to or on the Closing and CAP'S shall have complied in all material respects with the course of conduct required by this Agreement. (c) Corporate Action. Minutes, certified copies of corporate resolutions and/or other documentary evidence satisfactory to counsel for SPORTSMAN that CAP'S submitted this Agreement and any other documents required hereby to such parties for approval as provided by applicable law. (d) Consents. Execution of this Agreement by the shareholders of CAP'S and any consents necessary for or approval is required pursuant thereto shall have been obtained. 15 (e) Financial Statements. SPORTSMAN shall have been furnished with financial statements of CAP'S including, but not limited to, balance sheets and profit and loss statements as of December 31,1997. Such financial statements shall have been prepared in conformity with generally accepted accounting principles on a basis consistent with those of prior periods and fairly present the financial position of CAP'S as of December 31,1997. (f) Statutory Requirements. All statutory requirements for the valid consummation by CAP'S of the transactions contemplated by this Agreement shall have been obtained. (g) Governmental Approval. All authorizations, consents, approvals, permits and orders of all federal and state governmental agencies required to be obtained by CAP'S for consumption of the transactions contemplated by this Agreement shall have been obtained. (h) Employment Agreements. Existing CAP'S employment agreements will have been delivered to counsel for SPORTSMAN. (I) Changes in Financial Condition of CAP'S. There shall not have occurred any material adverse change in the financial condition or in the operations of the business of CAP'S, except expenditures in furtherance of this Agreement. (j) Absence of Pending Litigation. CAP'S is not engaged in or threatened with any suit, action, or legal administrative or other proceedings or governmental investigations pertaining to this Agreement or the condition of the transactions contemplated hereunder. ARTICLE 8 MATTERS SUBSEQUENT TO CLOSING 8.1 Covenant of Further Assurance. The parties covenant and agree that they shall, from time to time, execute and deliver or cause to be executed and delivered all such further instruments of conveyance, transfer, assignments, receipts and other instruments, and shall take or cause to be taken such further of other actions as the other party or parties to this Agreement may reasonably deem necessary in order to carry out the purposes and intent of the Agreement. ARTICLE 9 NATURE AND SURVIVAL OF REPRESENTATIONS 9.1 All statements contained in any written certificate, schedule, exhibit or other written instrument delivered by SPORTSMAN or CAP'S pursuant hereto, or otherwise adopted by SPORTSMAN, by its written approval or by CAP'S by its written approval or in connection with the transaction contemplated hereby, shall be 16 deemed representations and warranties by SPORTSMAN or CAP'S as the case may be. All representations, warranties and agreements made by either party shall survive for the period of the applicable statute of limitations and until the discovery of any claim, loss, liability or other matter based on fraud, if longer. ARTICLE 10 TERMINATION OF AGREEMENT AND ABANDONMENT OF SHARE EXCHANGE 10.1 Termination. Anything here into the contrary notwithstanding, this Agreement and any agreement executed as required hereunder and the acquisition contemplated hereby may be terminated at any time before the closing date as follows: (a) By mutual written consent of the Boards of Directors of SPORTSMAN and CAP'S. (b) By the Board of Directors of SPORTSMAN if any of the conditions set forth in Section 7.2 shall not have been satisfied. (c) By the Board of Directors of CAP'S if any conditions set forth in Section 7.1 shall not have been satisfied. 10.2 Termination of Obligations and Waiver of Conditions; Payment of Expenses. In the event this Agreement and the Share Exchange are terminated and abandoned pursuant to this Article 10 hereof this Agreement shall become void and of no force and effect and there shall be no liability on the part of any of the parties hereto, or their respective directors, officers, shareholders of controlling persons to each other. Each party hereto will pay all costs and expenses incident to its negotiation and preparation of this agreement and any of the documents evidencing the transactions contemplated hereby, including fees, expenses and disbursements of counsel. ARTICLES 11 EXCHANGE OF SHARES; FRACTIONAL SHARES 11.1 Exchange of Shares. At the Closing, SPORTSMAN shall issue a letter to the transfer agent of SPORTSMAN with a copy of the resolution of the Board of Directors of SPORTSMAN authorizing and directing the issuance of SPORTSMAN shares as set forth on the signature page of this Agreement. 11.2 Restrictions on Shares Issued to CAP'S. Due to the fact that CAP'S will receive shares of SPORTSMAN common stock in connection with the acquisition which have not been registered under the 1933 Act by virtue of the exemption provided in Section 4(2) of such Act, those shares SPORTSMAN contain the following legend: The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares have been acquired for investment and may not be sold or offered for sale in the absence of an effective Registration Statement for the shares under the Securities Act of 1933 or an opinion of counsel to the Corporation that such registration is required. 17 ARTICLE 12 MISCELLANEOUS 12.1 Construction. This Agreement shall be construed and enforced in accordance with the laws of the Sate of Utah excluding the conflicts of laws. 12.2 Notices. All notices necessary or appropriate under this Agreement shall be effective when personally delivered to deposited in the United States mail postage prepaid, certified or registered, return receipt requested, and addressed to the parties' last known address which addresses are currently as follow: If to "Sportsman" If to "Cap's" Sportsman Wholesale Company Cap's Sporting Goods 899 Artistic Circle Wholesale, Inc Springville, UT 84663 157 South 880 East Springville, UT 84663 12.3 Amendment and Waiver. The parties hereby may, by mutual agreement in writing signed by each party, amend this Agreement in any respect. Any term or provision of this agreement may be waived in writing at any time by the party which is entitled to the benefits thereof such waiver fight shall include, bu not be limited to, the right of either party to: (a) Extend time for the performance of any of the obligations of the other; (b) Waive any inaccuracies in representations by the other contained in this Agreement or in any document delivered pursuant hereto; (c) Waiver compliance by the other with any of the covenants contained in this Agreement, and performance of any obligations by the other; and (d) Waive the fulfillment of any condition that is precedent to the performance by the party so waiving of any of its obligations under this Agreement. Any writing on the part of a party relating to such amendment, extension or waiver as provided in this Section 12.03 shall valid if authorized or ratified by the board of directors of such party. 12.4 Remedies Not Exclusive. No remedy conferred by any of the specific provision of this Agreement is intended of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies by SPORTSMAN or CAP'S shall not constitute a waiver of the right to pursue available remedies. 12.5 Counterparts. This agreement may be executed in one or counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 18 12.6 Benefit. This Agreement shall be binding upon, and inure to the benefit of, the respective successors and assigns of SPORTSMAN and CAP'S. 12.7 Entire Agreement. This Agreement and the Schedules and Exhibits attached hereto represent the entire agreement of the undersigned regarding the subject matter hereof, and supersedes all prior written or oral understandings or agreements between the parties. 12.8 Each Party to Bear Its Own Expense. SPORTSMAN and CAP'S shall each bear their own respective expenses incurred in connection with the negotiation, execution, closing, and performance of this Agreement, including counsel fees and accountant fees. 12.9 Captions and Section Headings. Captions and section headings used herein are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. SPORTSMAN'S WHOLESALE COMPANY BY:/s/ Fred Hall ---------------- President CAP'S SPORTING GOODS WHOLESALE, INC. BY: /s/ Fred Hall ---------------- President CAP'S SHAREHOLDERS: /s/ Fred Hall ------------------- Fred Hall 1,000,000 SHARE OF COMMON STOCK 19 EX-5 5 OPINION OF RAY, QUINNEY & NEBEKER TO THE LEGALITY October __,1998 Sportsman's Wholesale Company Attn: Fred L. Hall, President 55 West 200 North, Suite 3 Provo, Utah 84601 Re: Registration and Issuance of Sportsman's Wholesale Company Common Stock To Public Investors Dear Mr. Hall: This Firm has acted as counsel to Sportman's Wholesale Company, a Nevada corporation ("the Company), in connection with its registration of 100,000 shares of its common stock ("the Shares") for sale to the public through the Company's Prospectus included within its Registration Statement on Form SB-2 as filed with the Securities and Exchange Commission on October __, 1998. In connection with this representation, we have examined the originals, or copies identified to our satisfaction, of such minutes, agreements, corporate records and filings and other documents necessary to our opinion contained in this letter. We have also relied as to certain matters of fact upon representations made to us by officers and agents of the Company. Based upon and in reliance on the foregoing, it is our opinion that: 1. the Company has been duly incorporated and is validly existing and in good standing as a corporation under the laws of the State of Nevada; and has full corporate power and authority to own its properties and conduct its business as described in the Prospectus referred to above. 2. When issued and distributed to the purchasers thereof, the Shares will be duly and validly issued and will be fully paid and nonassessable. 3. The shareholders of the Company have no pre-emptive rights to acquire additional shares of the Company's Common Stock or other securities in respect of the Shares. Fred L. Hall October __, 1998 Page 2 We hereby consent to the use of our name in the Prospectus and therein being disclosed as counsel to the Company in this matter. Very truly yours, RAY, QUINNEY & NEBEKER By:/s/ A. R. Thorup ----------------------- A. Robert Thorup, a Shareholder and Director of the Firm EX-10.1 6 ESCROW AGREEMENT THE OFFICERS AND DIRECTORS OF SPORTSMAN'S WHOLESALE COMPANY HEREBY AGREE TO DELIVER, BY NOON OF THE BUSINESS DAY AFTER RECEIPT, and with names and addresses of investors at time deposit is made, funds to be applied to an escrow account up to a maximum amount of $150,000 to be maintained at First Security Bank, N.A. by A. Robert Thorup of the law firm of Ray Quinney & Nebeker, 7th floor, 79 South Main Street, Salt Lake City, Utah 84111, who will act as escrow agent, and who will maintain all papers, money, or property hereinafter described, to be held and disposed of by said escrow agent in accordance with the duties, instructions, and upon the terms and conditions hereinafter set forth to which the undersigned hereby agree: 1. The above named bank (hereinafter called the "Bank") is not a party to, or bound by any agreement which may be evidenced by or arises out of the following instructions. 2. The Escrow Agent and the Bank and its officers, agents, and employees, are not responsible or liable in any manner whatever in this matter or for the sufficiency, correctness, genuineness or validity of any instrument deposited with it hereunder, or with respect to the form or execution of the same, or the identity, authority, or rights of any person executing or depositing the same. 3. The Escrow Agent and the Bank shall not be required to take or be bound by notice of any default by any person, or to take any action with respect to such default involving any expense or liability, unless written notice is given to the Escrow Agent or to an officer of the Bank of such default by the undersigned or any of them, and unless it is indemnified in a manner satisfactory to it against any such expense or liability. 4. The Bank and the Escrow Agent shall be protected in acting upon any notice, request, waiver, consent, receipt or other paper or document believed by the Escrow Agent or the Bank to be genuine and to be signed by the proper party or parties. 5. The Bank and the Escrow Agent shall not be liable for any error in judgment or for any act done or step taken or omitted by it in good faith or for any mistake or fact or law, or for anything which it may do or refrain from doing in connection herewith, except its or his own willful misconduct. 6. The Bank and the Escrow Agent shall not be answerable for the default or misconduct of any agent, attorney, or employee acting on behalf of the Issuer. 7. In the event of any disagreement between the undersigned(s) or any of them, and/or the person or persons named in the foregoing instructions, and/or any other person, resulting in adverse claims and demands being made in connection with or for any papers, money or property involved herein or affected hereby, the Escrow Agent shall be entitled at its option to refuse to comply with any such claim or demand, so long as such disagreement shall continue, and in so refusing the Escrow Agent may make no delivery or other disposition of any money, papers or property involved herein or affected hereby and in so doing the Escrow Agent shall not be or become liable to the undersigned or any of them or to any person named in the foregoing instructions for its failure or refusal to comply with such conflicting or adverse demands; and the Escrow Agent shall be entitled to continue so to refrain and refuse so to act until: a. The rights of the adverse claimants have been finally adjudicated in the court assuming and having jurisdiction of the parties and the money, papers and property involved herein or affected hereby; and/or b. All differences shall have been adjusted by agreement and the Bank shall have been notified thereof in writing signed by all of the interested parties. 8. The papers, documents, money or property subject to this escrow (if other than already named) are as described on attached schedules. 9. The other duties of Escrow Agent under the terms of this agreement are as follows: None 10. The Escrow Agent has not passed in any way upon the merits or qualifications of the security and makes no recommendation with regard to its purchase. The Escrow Agent does not authorize the use of its name by any person for the promotion or sale of the security. 11. Special requirements: 12. Fees for the usual services of the Escrow Agent under terms of this agreement are set forth below. All such fees shall be computed on a fiscal or calendar year period adjusted for any fractional part thereof except that a fee for any period shall not be less than the minimum fee indicated. a. In the event the fees charged and due the Escrow Agent remain unpaid for a period of one year, the Escrow Agent shall have the right, and is hereby authorized in its role and absolute discretion to discontinue the escrow, terminate all duties hereunder, close all accounting or other records, and to destroy all documents, records and files or to retain such items in a dormant account status subject to the escheat laws of the State of Utah. b. All fees charged shall be paid as follows: (1). The initial escrow fee shall be $70.00 (2). The minimum escrow fee shall be $4.00 PER DEPOSIT (3). For fee for any check issued in refunding to subscribers see (13b). c. In addition to the escrow fee paid or agreed upon at the inception of this escrow, the parties agree to pay a reasonable compensation for any extra services rendered or incurred by the Escrow Agent including a reasonable attorney's fee if disputes arise or litigation is threatened or commences which requires the Escrow Agent to refer such dispute to its attorneys. 13. If a minimum of $150,000 is not deposited with the Escrow Agent by the date nine months after the effective date of the Offering or within an additional period of sixty days if extended by the Company. a. Issuer shall request termination of escrow and the Escrow Agent shall refund to investors the full amount of investment. b. Issuer agrees to pay a fee of $4.00 per check for this service if returned to investors or $36.00 for one check made to SPORTSMAN'S WHOLESALE COMPANY. 14. When 100% of $150,000 or more has been deposited with the Escrow Agent, and all escrow requirements have been met, the issuer shall request a release of funds, setting forth how funds are to be released pursuant to the terms of the Offering. 15. After release of escrow, the duties, responsibilities and liability of every kind and character of the Escrow Agent under this escrow agreement shall cease and terminate. Signed: Sportsman's Wholesale Company (Issuer) By: /s/ Fred Hall ---------------- Its President Escrow Agent: /s/ A. R. Thorup - ---------------- EX-21 7 SUBSIDIARIES OF THE SMALL BUSINESS ISSUER Cap's Sporting Goods Wholesale, Inc. (wholly-owned) EX-24.1 8 CONSENT OF TANNER + CO. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in this Registration Statement on Form SB-2 of our report dated August 14, 1998, relating to the financial statements of Sportsman's Wholesale Company, and to the reference to our Firm under the caption "Experts" in the Prospectus. TANNER + CO. Salt Lake City, Utah October 1, 1998 EX-27 9 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JUN-30-1998 3,510 0 127 0 0 3,637 1,500 89 5,048 10,443 0 0 0 150 (5,545) 5,048 0 0 0 9,175 0 0 345 (9,520) 0 (9,520) 0 0 0 (9,520) (.01) (.01)
EX-99.1 10 SUBSCRIPTION AGREEMENT SPORTSMAN'S WHOLESALE COMPANY SUBSCRIPTION AGREEMENT FOR PURCHASERS OF SHARES OF COMMON STOCK CASHIER'S CHECKS MUST BE MADE PAYABLE TO: A. ROBERT THORUP, ESCROW AGENT FOR SPORTSMAN'S WHOLESALE COMPANY FOR IRA OR PENSION INVESTORS: INCLUDE BANK CUSTODIAL DOCUMENTS ALL CHECKS AND DOCUMENTS MUST BE DELIVERED TO: A. ROBERT THORUP, ESCROW AGENT RAY QUINNEY & NEBEKER 7TH FLOOR 79 SOUTH MAIN STREET SALT LAKE CITY, UTAH 84111 1. SHARES PURCHASED: This subscription is for __________ SHARES in the total purchase amount of $______________, to be registered as follows: 2. FORM OF OWNERSHIP: Mark only one box: |_| SINGLE PERSON--one signature required |_| JOINT TENANTS WITH RIGHT OF SURVIVORSHIP--all parties must sign |_| HUSBAND AND WIFE, AS COMMUNITY PROPERTY--two signatures required |_| TENANTS IN COMMON--all parties must sign |_| CORPORATION |_| CUSTODIAN UGTM--custodian signature required |_| MARRIED PERSON/SEPARATE PROPERTY--one signature required |_| TRUST--trustee signature(s) required. ALL SECTIONS MUST BE FILLED IN Print Trustee name(s) (sign in Signature Section) Trust Date | | | | | | | | | Month Day Year For the benefit of: ________________________________ |_| TENANTS BY THE ENTIRETIES--two signatures required |_| PARTNERSHIP |_| CUSTODIAN (for Taxable Person)--custodian signature required 3. INVESTOR INFORMATION: Please print name(s) in which Notes are to be registered. All interest and principal payments and correspondence will go to this address unless another address is listed in Section 4. Name (1st)| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name (2nd)| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Address | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | City | | | | | | | | | | | | | || | | | | | State | | | Zip Code | | | | | | | Daytime Phone Number | | | |-| | | |-| | | | | State of Residence | | | How Long? Since | | | | | Enter the Taxpayer identification number in the appropriate box. Note: If the account is in more than one name, the number should be that of the first person listed. Social Security No. | | | |-| | |-| | | | | and/or Taxpayer Identification No. | | |-| | | | | | | | |-| | |-| | | $| | | | | | | | $| | | | | | | | | | | M | | F Date of Birth Gross Income for Estimated Net Worth Sex Past 12 Months as of This Date If Subscription is a trust, date of trust formation | | |-| | |-| | | 4. OTHER MAILING ADDRESS: If you want shareholder mailings sent to an address other than in Section 3, please fill in below (REQUIRED FOR IRA OR PENSION ACCOUNTS). Account Number | | |-| | | | | | | Name of Custodian | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Address | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | City | | | | | | | | | | | | | || | | | | | State | | | Zip Code | | | | | | | 5. SIGNATURES: The undersigned Investor, hereby certifies that a current copy of the Sportsman's Wholesale Company Prospectus dated October , 1998 has been delivered to, and received by the Investor prior to making any investment decision, and the Investor has had a full opportunity to ask questions of, and receive information responsive to his questions from, Sportsman's Wholesale Company prior to investing in the Shares. NOT TO BE EXECUTED UNTIL RECEIPT OF PROSPECTUS X ________________________________ __/__/__ Authorized Signature of Investor Date X ___________________________________ __/__/__ Signature of Joint Investor (if any) Date
-----END PRIVACY-ENHANCED MESSAGE-----