The Deal

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At one point, though, late in Thursday's conversations, Scott finally asked the question Russell had dreaded for months. "I notice that your numbers dropped eight years ago. Can you explain why that happened?"

"My guess," Russell says, "was that Scott had already talked to our investment banker about it but wanted to see how I'd handle the question." The truth is the dip was tied to a painful incident that Russell still had difficulty discussing with anyone. But he knew he couldn't risk losing the deal by being anything less than completely honest.

"There were two reasons," he explained, although he immediately wished he had just mentioned one. The first problem, Russell told Scott, was that the company had grown too fast, with sales overshooting its collections ability, and cash flow unable to support the new growth.

"What was the second problem?" Scott asked.

In his glass-enclosed, circular conference room, Russell finally made his confession. "There was a guy who had worked with us for years, whom I would have trusted with anything. He and a new employee went to a bank meeting, back in the days when we did have a credit line, and gave our bankers some financial reports that I hadn't examined as closely as I should have."

As a result, it looked to NASC's bankers as though the company had lost $250,000 during the preceding year, instead of the $40,000 it had projected. "I didn't believe it was true," Russell explained, "but I was so completely taken by surprise that it took me eight weeks to figure out what had happened and prove that I was right."

NASC lost its credit line immediately because of that bankers' meeting, the two employees soon left the company, and Russell almost lost NASC while he struggled to find the cash to pay down its outstanding balance. "I'm still embarrassed by the story," he confessed to Scott.

But the investor was satisfied by his openness. "Every company we've ever dealt with has had something they'd rather not talk about. What matters is what you learned from this," said Scott, "which was putting better systems, with checks and balances, in place." By the time Scott left for the airport, Vogelgesang and Russell were convinced that an offer was imminent.

Finalizing the Deal

It was. The following day, Sirrom faxed a final set of financing terms to Russell, which looked pretty similar to the terms it had originally proposed in May.

"The reality is," Scott says, "there's not too much competition on private placements until you get to about $5 million in size. I don't have to negotiate too aggressively on a deal like this because I've either got to believe that I've got a pretty good chance of earning a 20% to 30% rate of return on my money, once we factor in the interest and equity potential, or I'll go on to the next deal."

Russell agreed with the terms. Then he experienced the closing to end all closings. "If you've ever closed on a house, multiply that awful experience by 10," he says. "I had more faxes and more papers to sign than Jack Nicklaus has golf clubs." One conference call between Sirrom's office and NASC's lawyer, accountant, executive team, and marketing employees lasted more than an hour and a half. "It was kind of like, do you have the fingernail clippings of your grandmother from when she was 90 years old?" Russell muses.

There were endless paperwork issues to resolve. "Sirrom wanted us to set up formal management contracts, which we'd never had before," explains Russell. Those were complicated by the equity stakes he planned to turn over to each member of his management team once the closing took place. "We also had to formally set up a holding company, with subsidiaries for each of our new and existing sports divisions," he says. Some holdups in the NFL negotiations slowed things down, but Sirrom eventually agreed to close while that contract was still unresolved. The closing finally took place on Wednesday, June 26, just about two years after Garofolo's fateful plane ride from Los Angeles. But surprisingly enough, it was almost anticlimactic, since it took place by fax.

"There was one final crisis, because we expected Sirrom's money to be wired to us by 2, but we didn't get it," Russell recalls. "At 2:30 they called us to say, 'We're done. You'll get the money.' But it still didn't come in. Our bank was getting ready to close at 5," the CEO says, a smile finally breaking out on his face. "They called us at 4:55 to tell us it had arrived."

That night, Russell and his wife took their kids out to dinner to celebrate. He sent flowers to the team at Brown, Gibbons and planned an end-of-the-week champagne celebration for his employees and some of the company's local business supporters.

And, as always, he waxed philosophical about the fund-raising process that had finally come to an end. "We don't hear enough about day-to-day heroes. There are a lot of people who worked very hard to help our company find an operational way to make our dream happen. They earned fees, true, but they also accomplished a tremendous amount." He pauses, leaving little doubt about how he inspires all those campers, then adds simply, "I'm filled with a tremendous sense of pride in our team."

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