<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional materials
/ / Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RIDDELL SPORTS INC.
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
RIDDELL SPORTS INC.
900 THIRD AVENUE, 27TH FLOOR
NEW YORK, NEW YORK 10022
DEAR FELLOW STOCKHOLDER:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Stockholders of Riddell Sports Inc. (the 'Company') to be held
on Tuesday, June 24, 1997, at 1:00 o'clock p.m. (Eastern Daylight Time) at the
Mahogany Room at the Harvard Club, 27 West 44th Street, New York, New York
10036.
For the reasons set forth in the accompanying proxy statement, your Board
of Directors unanimously recommends that you vote for:
1. Management's nominees for directors;
2. adopting the Company's 1997 Stock Option Plan;
3. amending the Company's 1991 Stock Option Plan to eliminate fixed
grants of options to certain members of the Board of Directors;
4. appointing Grant Thornton as the Company's independent auditors;
and
5. such other business as may properly come before the meeting.
In order to ensure that your shares are represented at the meeting, I urge
you to promptly date, sign and mail the enclosed proxy using the enclosed
addressed envelope, which needs no postage if mailed in the United States. You
may withdraw or revoke your proxy at any time prior to the Annual Meeting.
Very truly yours,
ROBERT E. NEDERLANDER
Chairman of the Board
Dated: June 2, 1997
<PAGE>
RIDDELL SPORTS INC.
900 THIRD AVENUE/27TH FLOOR
NEW YORK, NEW YORK 10022
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1997
------------------------
DEAR FELLOW STOCKHOLDER OF
RIDDELL SPORTS INC:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Riddell
Sports Inc. (the 'Company') will be held on Tuesday, June 24, 1997, at 1:00
o'clock p.m. (Eastern Daylight Time) at the Mahogany Room at the Harvard Club,
27 West 44th Street, New York, New York 10036, for the purpose of considering
and voting upon the following proposals:
1. The election of directors;
2. Adopting the Company's 1997 Stock Option Plan;
3. Amending the Company's 1991 Stock Option Plan to eliminate fixed
grants of options to certain members of the Board of Directors;
4. To ratify the appointment of Grant Thornton as the Company's
independent auditors for the calendar year ending December 31,
1997; and
5. Such other business as may properly come before the meeting.
The close of business on May 1, 1997 has been fixed as the record date for
determining the stockholders entitled to notice of and to vote at the meeting
and any adjournment or postponement thereof, and only stockholders of record on
such date are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
ROBERT E. NEDERLANDER
Chairman of the Board
Dated: June 2, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO
POSTAGE IF MAILED WITHIN THE UNITED STATES. THE PROXY MAY BE REVOKED IN WRITING
PRIOR TO THE MEETING, OR IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND
VOTE YOUR SHARES IN PERSON.
<PAGE>
RIDDELL SPORTS INC.
------------------------
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This proxy statement is solicited on behalf of the Board of Directors of
Riddell Sports Inc. (the 'Company') for use at the Annual Meeting of
Stockholders of the Company to be held on Tuesday, June 24, 1997, at 1:00
o'clock p.m. (Eastern Daylight Time) at the Mahogany Room at the Harvard Club,
27 West 44th Street, New York, New York 10036, and at any adjournment or
postponement thereof (the 'Annual Meeting'). The purposes for which the Annual
Meeting is to be held are set forth in the Notice of Meeting on the preceding
page. This proxy statement and the proxies solicited hereby are first being sent
or delivered to stockholders on or about June 2, 1997.
REVOCABILITY AND VOTING OF PROXIES
The proxy may be revoked by the stockholder at any time prior to its use by
the Company by voting in person at the Annual Meeting, by executing a later
proxy, or by submitting a written notice of revocation to the Secretary of the
Company at the Company's office or at the Annual Meeting. If the proxy is signed
properly by the stockholder and is not revoked, it will be voted at the meeting.
If a stockholder specifies how the proxy is to be voted, the proxy will be voted
in accordance with such specification. Otherwise, the proxy will be voted in the
manner specified on the proxy.
In the event of a broker non-vote with respect to any issue coming before
the Annual Meeting arising from the absence of authorization by the beneficial
owner to vote as to that issue, the proxy will be counted as present for
purposes of determining the existence of a quorum, but will not be deemed as
present and entitled to vote as to that issue for purposes of determining the
total number of shares of which a plurality or majority (depending upon the
issue) is required for adoption. Abstentions, being shares present, entitled to
vote and affirmatively not voted are counted for determining a quorum and have
the same effect as a 'no' vote.
RECORD DATE AND SHARE OWNERSHIP
At the close of business on May 1, 1997, 8,067,985 shares of the Company's
common stock, $.01 par value ('Common Stock'), were outstanding and eligible to
vote at the Annual Meeting. Each stockholder of record is entitled to one vote
for each share held on all matters to come before the meeting. Only stockholders
of record at the close of business on May 1, 1997 are entitled to notice of and
to vote at the meeting.
EXPANSION OF BOARD OF DIRECTORS IN CONNECTION WITH THE COMPANY'S
PROPOSED ACQUISITION OF VARSITY SPIRIT CORPORATION
As previously announced, the Company and a wholly-owned subsidiary of the
Company have entered into a merger agreement dated as of May 5, 1997 (the
'Merger Agreement') with Varsity Spirit Corporation ('Varsity') pursuant to
which the Company's subsidiary has made a tender offer (the 'Offer') to acquire
all outstanding shares of Varsity's common stock (the 'Varsity Stock') at $18.90
per share. The Offer is subject to, among other things, receipt of tender of at
least a majority of the outstanding Varsity Stock on a fully diluted basis. The
Board of Directors of Varsity has recommended that Varsity stockholders tender
their shares in the Offer. Pursuant to the Merger Agreement, as soon as
practicable after the completion of the Offer and certain other conditions are
satisfied, the Company's subsidiary will merge with and into Varsity with
Varsity surviving as a wholly-owned subsidiary of the Company (the 'Merger').
The Company's tender offer will expire June 9, 1997 unless extended.
Mr. Jeffrey Webb is currently the Chairman of the Board, President and
Chief Executive Offer of Varsity. Pursuant to the Merger Agreement, the Company
agreed that if the Merger is consummated it will take all actions necessary to
appoint Mr. Jeffrey Webb as a director and Vice Chairman of the Board of the
Company and to
<PAGE>
appoint Mr. Webb's designee a member of the Company's Board. Accordingly, the
Company's Board of Directors resolved to increase the Board of Directors from
six to eight members in the event the Merger is consummated and will appoint Mr.
Webb (and his designee if selected) at the effective time of the Merger (the
'Effective Time'). The election of Mr. Webb to the Board of Directors of the
Company is not a condition to the consummation of the Offer. However, the Merger
Agreement requires the Company to appoint Mr. Webb as a director of the Company
at the Effective Time.
Mr. Webb has not yet designated an individual to serve as a member of the
Company's Board.
Also in connection with the Merger Agreement, the Company entered into an
employment agreement with Mr. Webb effective upon Varsity's becoming a
subsidiary of the Company upon consummation of the Merger. The employment
agreement provides, among other things, that Mr. Webb will be appointed Vice
Chairman of the Company and the President and Chief Operating Officer of Varsity
Spirit Corporation and will receive the grants of certain options to acquire
397,760 shares of the Company's Common Stock under its employee stock option
plan. See 'Employment Agreements and Change of Control Arrangements.'
Pursuant to a shareholders agreement entered into in connection with the
Merger Agreement and dated as of May 5, 1997 among certain shareholders of
Varsity (including Mr. Webb) and the Company, such shareholders have agreed to
tender all shares of Varsity Stock owned by them (representing approximately 38%
of the currently outstanding Varsity Shares) at the purchase price per share set
forth in the Offer and in accordance with the terms of the Offer.
In addition, pursuant to separate but substantially identical stock
purchase agreements dated as of May 5, 1997, Mr. Jeffrey Webb and certain other
key employees of Varsity have agreed to apply the net after tax proceeds of the
sale to the Company of such persons' Varsity Stock (approximately $4,400,000) in
the Offer to purchase the number of shares of the Company's Common Stock
determined by an agreed upon formula. Approximately 1,200,000 shares would be
purchased by these individuals, representing approximately 13% of the Company's
then outstanding shares after giving effect to such purchases. The number of
shares are estimated based on a 20 day average market price of the Company's
Common Stock through May 5, 1997. The actual number of shares to be issued will
be based on calculations set forth in the stock purchase agreements and could
range from approximately 986,000 shares to approximately 1,585,000 shares. The
Company has granted each such purchaser certain incidental registration rights
with respect to his or her shares.
If the proposed Merger with Varsity is consummated, Mr. Webb will
beneficially own approximately 1,300,000 shares (10%) of the Company's Common
Stock determined on a fully diluted basis (including all options and warrants to
be outstanding if the Merger is consummated). Mr. Webb has agreed upon
consummation of the Merger to become a party to the Shareholders Agreement dated
August 9, 1995 more fully described under 'Security Ownership of Certain
Beneficial Owners and Management' among certain officers and/or directors of the
Company (or entities owned by some of them) including Messrs. Nederlander,
Toboroff, Mauer, McConnaughy and Cougill with respect to all shares of the
Company's Common Stock acquired by him in connection with the employment
agreement and the stock purchase agreement he entered into in connection with
the Merger.
Also in connection with the Merger Agreement, the Company amended the terms
of its 4.10% Convertible Subordinated Note due 2004 in the original principal
amount of $7,500,000 with Silver Oak Capital L.L.C. to, among other things,
reduce the Conversion Price per share from $6.00 to $5.3763 in the event the
Merger is consummated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 17, 1997
pertaining to ownership of the Company's Common Stock by persons known to the
Company to own 5% or more of the Company's Common Stock and Common Stock owned
beneficially by each director and named executive officer of the Company and by
directors and named executive officers of the Company as a group.
Mr. Robert Nederlander, the Company's Chairman, is the general partner of
M.L.C. Partners Limited Partnership ('MLC') which beneficially owns
approximately 10% of the Company's outstanding Common Stock. Entities owned by
Mr. John McConnaughy Jr., a member of the Company's Board of Directors, and
2
<PAGE>
Mr. Nederlander are limited partners of MLC. The shares of the Company's Common
Stock owned by MLC (as well as certain other shares of the Company's Common
Stock beneficially owned by Messrs. Nederlander and McConnaughy) are subject to
a Voting Trust dated May 29, 1991 (the 'Voting Trust') with respect to which Mr.
Nederlander is the Voting Trustee. Pursuant to the Voting Trust, Mr. Nederlander
has the sole voting power and the discretion to vote the shares as he determines
with respect to all matters subject to stockholder vote. Messrs. Cougill, Mauer,
McConnaughy, Nederlander and Toboroff (directors and/or officers of the Company)
and certain entities they control entered into a Shareholders Agreement dated
August 9, 1995 (the 'Shareholders Agreement') pursuant to which, generally, they
agreed to vote an aggregate of approximately 2,300,000 shares (29%) of the
Company's outstanding Common Stock in the same manner that Mr. Nederlander votes
as Voting Trustee. The Voting Trust expires May 28, 2001, and the Shareholders
Agreement terminates upon the earliest of the death of Mr. Nederlander, May 28,
2001 or the date of the transfer of shares subject to the Shareholders Agreement
(other than to certain parties) as to the shares transferred.
Pursuant to the Merger, Mr. Jeffrey Webb has agreed to become a party to
the Shareholders Agreement if the Merger is consummated. The parties to the
Shareholders Agreement have agreed to amend such Agreement so that for the
three-year period commencing at the effective time of the Merger and terminating
on the third anniversary of such date or upon earlier termination of Jeffrey
Webb's employment, the parties thereto will vote their shares (i) in favor of
the election of Jeffrey Webb and a designee of Mr. Webb to the Parent Board of
Directors, and (ii) in favor of Parent's 1997 Stock Option Plan.
The information set forth in the following table has been obtained from the
Company's records, or from information furnished directly by the individual or
entity to the Company or in Schedule 13D filings or Form 4 filings.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP COMMON STOCK
-------------------- ------------
<S> <C> <C>
M.L.C. Partners Limited Partnership .... 830,281(1) 10.2%
c/o Robert Nederlander
810 Seventh Avenue
New York, NY 10019
Robert E. Nederlander .................. 3,630,882(2) 44.2%
810 Seventh Avenue
New York, NY 10019
Leonard Toboroff ....................... 1,383,003(3) 16.9%
Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
John McConnaughy, Jr. .................. 714,308(4) 8.8%
300 Atlantic Street
Stamford, CT 06901
David M. Mauer ......................... 361,525(5) 4.3%
Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
Dan Cougill ............................ 88,927(6) 1.1%
c/o Riddell, Inc.
3670 N. Milwaukee Avenue
Chicago, IL 60641
Glenn E. 'Bo' Schembechler ............. 37,500(7) *
870 Arlington
Ann Arbor, MI 48104
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP COMMON STOCK
-------------------- ------------
<S> <C> <C>
Don R. Kornstein ....................... 35,000(7) *
c/o Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
David Groelinger ....................... 19,750(8) *
c/o Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
All officers and directors
as a group (8 individuals) ........... 4,324,750(9) 48.7%
Angelo, Gordon & Co., L.P. ............. 1,250,000(10) 13.4%(10)
245 Park Avenue
New York, NY 10167
</TABLE>
- ------------------
* Less than 1%
(1) Includes 43,750 shares underlying the Warrant (as defined below under
'Certain Relationships and Related Transactions') which are currently
exercisable. MLC is the direct beneficial owner of all shares, which (other
than shares underlying the Warrant) are subject to the Voting Trust
pursuant to which Robert Nederlander is voting trustee (the 'Voting
Trustee') and has the sole voting power. Mr. Nederlander, as controlling
stockholder of the corporation which is the general partner of MLC, may be
deemed to beneficially own these shares. Mr. McConnaughy is the sole owner
of a corporation that is a limited partner in MLC; a corporation controlled
by Mr. Nederlander is also a limited partner in MLC.
(2) Of the 3,630,822 shares beneficially owned by Mr. Nederlander: (i)
1,684,737 shares are owned by Mr. Nederlander directly or through entities
controlled by him having dispositive power over these shares (146,989 of
these 1,684,737 shares underlie options granted under the Company's 1991
Stock Option Plan or the Warrant and are exercisable within 60 days of May
17, 1997; 830,281 of those 1,684,737 shares are owned by MLC; and 1,026,873
of these 1,684,737 shares are subject to the Voting Trust), and (ii) an
additional 1,946,145 shares are beneficially owned by Mr. Nederlander as
Voting Trustee under the Voting Trust and pursuant to the Shareholders
Agreement. Under Rule 13d-3 of the Securities Exchange Act of 1934, as
amended Mr. Nederlander is deemed to beneficially own the shares of stock
subject to the Voting Trust and the Shareholders Agreement and owned by
MLC.
(3) Of the 1,383,003 shares of Common Stock beneficially owned by Mr. Toboroff:
(i) 1,228,108 shares are subject to the Shareholders Agreement; and (ii)
124,538 shares underlie options granted under the Company's 1991 Stock
Option Plan and the Warrant that are exercisable within 60 days of May 17,
1997.
(4) Of the 714,308 shares of Common Stock beneficially owned by Mr.
McConnaughy: (i) 147,444 are subject to the Voting Trust; (ii) 504,625 are
subject to the Shareholders Agreement and (iii) 62,239 shares underlie
options granted under the Company's 1991 Stock Option Plan and the Warrant
that are exercisable within 60 days of May 17, 1997. Mr. McConnaughy has
sole voting power with respect of 37,500 of the 714,308 shares.
(5) Of the 361,525 shares of Common Stock beneficially owned by Mr. Mauer: (i)
56,266 shares are subject to the Shareholders Agreement; and (ii) 305,259
shares in the aggregate are issuable in connection with options granted
under the Company's 1991 Stock Option Plan and the Warrant that are
exercisable within 60 days of May 17,1997.
(6) Of the 88,927 shares of Common Stock beneficially owned by Mr. Cougill: (i)
9,702 shares are subject to the Shareholders Agreement and (ii) an
additional 79,225 shares in the aggregate are issuable in connection with
options granted under the Company's 1991 Stock Option Plan and the Warrant
that are exercisable within 60 days of May 17, 1997.
(Footnotes continued on next page)
4
<PAGE>
(Footnotes continued from previous page)
(7) Represents shares underlying an option granted under the Company's 1991
Stock Option Plan that are exercisable within 60 days of May 17, 1997.
(8) Includes 16,250 shares underlying that portion of an option to acquire an
aggregate of 65,000 shares that is exercisable within 60 days of May 17,
1997.
(9) Includes the 830,281 shares owned by MLC.
(10) Based on a Schedule 13G filed February 13, 1997, Angelo, Gordon & Co., L.P.
may be deemed to be the beneficial owner of 1,250,000 shares as a result of
voting and dispositive powers it holds with respect to $1,000,000 principal
amount of the Company's 4.10% Convertible Subordinated Note due November 1,
2004 (the 'Note') convertible at $6.00 per share into 166,667 shares of the
Company's Common Stock held for its own account and $6,500,000 principal
amount of Note convertible into 1,083,333 shares of Common Stock which it
holds for the account of private investment funds for which it acts a
general partner and/or investment advisor or investment manager. Pursuant
to an amendment to the Note entered into in May 1997, in the event the
Company issues certain stock options to Mr. Webb and certain other
employees of Varsity in connection with the Merger, the Note will be
convertible at a per share price of $5.3763 into 1,395,000 shares.
ELECTION OF DIRECTORS AND LIST OF EXECUTIVE OFFICERS
In the absence of contrary instructions, the proxy will be voted for the
election of Don R. Kornstein, David M. Mauer, John McConnaughy, Jr., Robert E.
Nederlander, Glenn E. 'Bo' Schembechler and Leonard Toboroff to serve as members
of the Board of Directors until the 1998 Annual Meeting of Stockholders or until
their respective successors shall have been elected and shall have qualified.
As noted above under 'Expansion of Board of Directors in Connection with
the Company's Proposed Acquisition of Varsity Spirit Corporation,' the Company's
Board of Directors has agreed that if the Merger is consummated the Company will
take all actions necessary to appoint Mr. Jeffrey Webb and his designee members
of the Company's Board of Directors. Accordingly, the Board has resolved that if
the Merger is consummated the number of members of the Board of Directors will
be increased to eight from six. Mr. Webb has not yet named an individual to
serve on the Company's Board as his designee, and at the time this Proxy
Statement is being mailed to the stockholders, the Offer is still pending and
the Merger has not yet been consummated. Consequently, Mr. Webb (and his
designee, if selected) will be appointed to the Board at the Effective Time.
Proxies cannot be voted for more than six nominees.
If any nominee is unable or unwilling to serve, which the Board of
Directors does not anticipate, the persons named in the proxy will vote for
another person in accordance with their best judgment. Assuming the presence of
a quorum, directors shall be elected by a plurality of the votes cast at the
Annual Meeting for the election of directors. Directors hold office until the
next Annual Meeting of Stockholders or until their successors are elected and
qualified.
Information with respect to the nominees and the executive officers of the
Company and Mr. Webb is set forth below as of May 17, 1997 and is based upon the
records of the Company and information furnished to it by such individuals. See
'Security Ownership of Certain Beneficial Owners and Management' for information
pertaining to the Common Stock owned by the nominees and Mr. Webb. See
'Expansion of Board of Directors
5
<PAGE>
in Connection with the Company's Proposed Acquisition of Varsity Spirit
Corporation' for information pertaining to Mr. Webb's agreement to purchase
certain shares of Common Stock in connection with the Merger.
<TABLE>
<CAPTION>
POSITIONS HAS SERVED AS
NAME AGE WITH THE COMPANY DIRECTOR SINCE
- ------------------------------ --- ------------------------------ ---------------
<S> <C> <C> <C>
NOMINEES:
Robert E. Nederlander......... 64 Chairman of the Board April, 1988
David M. Mauer................ 48 Chief Executive Officer (since September, 1993
April, 1993); President
(June 1994-June 1995)
Leonard Toboroff.............. 64 Vice President and Director April, 1988
Don R. Kornstein.............. 45 Director April, 1995
John McConnaughy, Jr.......... 68 Director September, 1989
Glenn E. 'Bo' Schembechler.... 68 Director September, 1991
------------------------
Jeffrey Webb.................. 47 -- --
------------------------
OTHER EXECUTIVE OFFICERS:
Dan Cougill................... 44 President and Chief Operating --
Officer of the Company (since
June 1995); President and
Chief Operating Officer of
Riddell, Inc. (since February,
1994)
David Groelinger.............. 46 Executive Vice President --
(since June, 1996); Chief
Financial Officer (since
March, 1996)
</TABLE>
Set forth below is additional biographical information regarding each
nominee and executive officer of the Company and Mr. Webb based on information
supplied by them.
Robert E. Nederlander. Mr. Nederlander has been Chairman of the Board of
the Company since May 1988 and was the Company's Chief Executive Officer from
May 1988 through May 1, 1993. From February until June 1992, Mr. Nederlander was
also the Company's interim President and Chief Operating Officer. Mr.
Nederlander has been President and a Director since November 1981 of the
Nederlander Organization, Inc., owner and operator of one of the world's largest
chains of live theaters. He served as the Managing General Partner of the New
York Yankees from August 1990 until December 1991, and has been a limited
partner since 1973. Mr. Nederlander has been President since October 1985 of the
Nederlander Television and Film Productions, Inc. and Chairman of the Board
since January 1988 of Mego Financial Corporation and Vice Chairman of the Board
since February 1988 to early 1993 of Vacation Spa Resorts, Inc. (an affiliate of
Mego Financial Corporation). Mr. Nederlander became a director of Mego Mortgage
Corporation in September 1996. Mr. Nederlander became Chairman of the Board of
Allis-Chalmers Corp. in May 1989; from 1993 through October 1996 he was Vice
Chairman and, thereafter he remained solely as a director. In 1995, Mr.
Nederlander became a director of HFS Incorporated. In October 1996 Mr.
Nederlander became a director of News Communications, Inc., a publisher of
Community oriented free circulation newspapers. Mr. Nederlander was a senior
partner in the law firm of Nederlander, Dodge and Rollins in Detroit, Michigan,
between 1960 and 1989. Following the Merger, Mr. Nederlander will continue to
serve as the Chairman of the Board of the Company.
6
<PAGE>
David M. Mauer. Mr. Mauer became the Company's Chief Executive Officer on
April 1, 1993, succeeding Mr. Nederlander. Mr. Mauer was President of Mattel
U.S.A. from late 1990 through the beginning of 1993 and was President of Tonka
U.S.A. Toy Group from 1988 until 1990. In 1995, Mr. Mauer was elected a member
of the Board of Directors of The Topps Company, Inc. Mr. Mauer has been a member
of the Board of Directors of the National Center for Missing and Exploited
Children since 1996.
Leonard Toboroff. Mr. Toboroff has been Vice President of the Company
since April 1988. Since May 1989, Mr. Toboroff has been a Vice President and
Vice Chairman of the Board of Allis-Chalmers Corp. Mr. Toboroff has been a
practicing attorney since 1961 and from January 1, 1988 to December 31, 1990,
was counsel to Summit Solomon & Feldesman in New York City, which was counsel to
the Company from April 1988 through February 1993. He has been a Director since
August 1987 and was Chairman and Chief Executive Officer from December 1987 to
May 1988 of Ameriscribe Corp. Mr. Toboroff was Chairman and Chief Executive
Officer from May-July 1982, and then was Vice Chairman from July 1982 through
September 1988 of American Bakeries Company. Mr. Toboroff has been a director of
Banner Aerospace, Inc., a supplier of aircraft parts since September 1992. He
has been a director of Engex, Inc. and director of Saratoga Springs Beverage Co.
since 1993. In 1995, Mr. Toboroff became a director of Xplor Corporation.
Don R. Kornstein. Mr. Kornstein has been a member of the Board of
Directors, Chief Executive Officer and President of Jackpot Enterprises, Inc.
since September 1994. Prior to this he was a Senior Managing Director at Bear,
Stearns & Co. Inc. for 17 years through September 1994.
John McConnaughy, Jr. Mr. McConnaughy is Chairman and Chief Executive
Officer of JEMC Corp. since 1988. From 1969 to 1986, Mr. McConnaughy served as
Chairman and Chief Executive Officer of Peabody International Corp. since 1988
('Peabody'). From 1981 to 1992, he served as Chairman and Chief Executive
Officer of GEO International Corp. when it was spun off from Peabody in 1981.
Mr. McConnaughy is a Director of DeVlieg Bullard Inc., Mego Corp., Transact
International, Inc., Levcor International, Inc. and Wave Systems. Geo
International filed a petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in 1993.
Glenn E. 'Bo' Schembechler. Mr. Schembechler was President of the Detroit
Tigers from January 1990 through August 1992 and a member of the Tigers Board of
Directors from 1989 through 1990. He is also a Director of Midland Company. From
1968 through 1989, Mr. Schembechler was head football coach of the University of
Michigan and served as its Athletic Director in 1988 and 1989.
Jeffrey Webb. Mr. Webb has been the Chairman of the Board, President and
Chief Executive Officer of Varsity Spirit Corporation since its formation in
1983. Following the Merger, Mr. Webb will serve as the Vice Chairman of the
Board of the Company and the President and Chief Operating Officer of Varsity
Spirit Corporation and the Company's Varsity Group Division.
Dan Cougill. Mr. Cougill was appointed President and Chief Operating
Officer of the Company in June, 1995 and of its subsidiary, Riddell, Inc., in
February 1, 1994. Prior to his appointment, Mr. Cougill was employed in various
capacities by Wilson Sporting Goods since 1977 and was a Vice President of
Wilson Sporting Goods and the General Manager of its Team Sports Division prior
to joining the Company.
David Groelinger. In March of 1996, Mr. David Groelinger was appointed the
Company's Chief Financial Officer and in June of 1996 its Executive Vice
President. From 1994 to 1995, he was a member of the Board of Directors,
Executive Vice President and Chief Financial Officer of Regency Holdings
(Cayman) Inc., which owned and operated a major international cruise line. Prior
to this Mr. Groelinger served in various senior financial capacities during
twelve years at Chiquita Brands International, Inc. In 1990, he was promoted to
Vice President reporting to Chiquita's President and Chief Operating Officer.
Regency Holdings (Cayman) Inc. filed a petition to reorganize under Chapter 11
of the United States Bankruptcy Code in November 1995.
7
<PAGE>
* * *
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE 'FOR' THE NOMINEES FOR DIRECTORS.
* * *
STRUCTURE AND COMPENSATION OF BOARD OF DIRECTORS
DIRECTORS' FEES AND BOARD MEETING ATTENDANCE
Directors who are not officers of the Company received a fee in 1996 of
$15,000 per annum. In 1996, directors who were members of the Audit and
Compensation Committees of the Board (Messrs. McConnaughy, Kornstein and
Schembechler) were also each paid an aggregate additional amount of $5,000 per
annum for their Committee memberships. Mr. McConnaughy waived his directors'
fees in 1996.
During 1996, directors other than Mr. Mauer were each granted an option to
purchase 7,500 shares of the Company's Common Stock at an exercise price of
$4.75 per share. Mr. Mauer, the Company's Chief Executive Officer, was granted
an option in 1996 to acquire 50,000 shares of Common Stock at an exercise price
of $4.50 per share. See 'Options Granted in 1996'.
The Company has agreed to indemnify each director and officer against
certain claims and expenses for which the director might be held liable in
connection with services on the Board. In addition, the Company maintains an
insurance policy insuring its directors and officers against such liabilities.
During calendar year ended December 31, 1996, there were 6 meetings of the
Board of Directors, and all members attended each meeting. There was one meeting
of each of the Audit, Compensation and Executive Committee, attended by all
members in each case. Additionally, there was Action by Unanimous Written
Consent of the Compensation Committee one time in 1996.
COMMITTEE STRUCTURE AND MEETINGS
The Board of Directors maintains an Executive Committee consisting of Mr.
Nederlander, the Committee's Chairman, Mr. Mauer and Mr. Toboroff. Under the
Company's Bylaws the Executive Committee has the power of the full Board. The
Executive Committee met one time in 1996.
The Board of Directors also maintains a Compensation Committee comprised in
1996 of Messrs. McConnaughy, Schembechler and Mr. Kornstein. Mr. Kornstein was
Chairman of the Committee in 1996. None of these individuals has ever been an
officer of the Company. The Compensation Committee reviews and establishes the
cash and non cash compensation of key employees and recommends grants of options
under the Company's 1991 Stock Option Plan. It considers recommendations of
management and, when it deems appropriate, the advice of outside experts in
connection with these determinations. The Compensation Committee had one
meeting, and acted by unanimous written consent in lieu of a meeting one time,
in 1996.
The Board of Directors has established an Audit Committee which in 1996 was
comprised of Messrs. McConnaughy, Schembechler and Mr. Kornstein. Mr. Kornstein
was Chairman of the Committee in 1996. No member of the Audit Committee has ever
been an officer of the Company. The Audit Committee reviews the Company's
internal controls and the objectivity of its financial reporting and the scope
and results of the auditing engagement. It meets with appropriate Company
financial personnel and independent public accountants in connection with these
reviews. The auditors have access to such Committee at any time. The Audit
Committee met one time in 1996.
The Company does not have a standing nominating committee.
The members of each Committee are appointed by the Board of Directors for a
term beginning after the first regular meeting of the Board following the Annual
Meeting and until their respective successors are elected and qualified. Each
Committee elects its own Chairman.
8
<PAGE>
SECTION 16(a) DISCLOSURE
The Company believes, based solely on its review of the copies of the Forms
3, 4 and 5 required to be filed with the Company pursuant to Section 16(a) of
the Exchange Act by its Officers, Directors and Beneficial Owners of over 10% of
the Company's Common Stock ('insiders'), that during the fiscal year ended
December 31, 1996, all filing requirements applicable to its insiders were
complied with.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
GENERAL
After consultation with supervising management, the Compensation Committee
of the Board of Directors determined the cash compensation of, and recommended
for full Board approval grants of incentive stock options to, senior executive
officers for 1996. Messrs. Nederlander, Mauer and Toboroff are senior executive
officers and members of the Board of Directors of the Company and do not vote on
matters concerning their own compensation.
COMPENSATION PHILOSOPHY
The executive compensation philosophy of the Board of Directors and its
Compensation Committee (which is intended to apply to all Company management,
including its Chief Executive Officer) is to provide competitive levels of
compensation, provide incentives to management, reward above average corporate
performance, and assist the Company in attracting and retaining qualified
management. Management compensation is intended to be set at levels that the
Board of Directors believes is consistent with others in the Company's industry
and at a level that will aid in attracting and retaining qualified management.
The Board of Directors endorses the position that equity ownership by management
is beneficial in aligning management's and shareholders' interests in the
enhancement of shareholder value.
The components of executive officer compensation are designed to meet the
Company's compensation policies. Presently, the program is comprised of two
elements: 1) base salary (plus benefits customarily paid to employees, such as
insurance) and 2) incentive compensation, consisting of cash (bonus) and
non-cash (stock options) incentive compensation.
The Company from time to time consults with executive compensation experts
to assist it in evaluating and establishing appropriate cash and noncash
compensation for key employees and directors.
CHIEF EXECUTIVE COMPENSATION
In order to induce Mr. Mauer, the Company's Chief Executive Officer, to
join the Company and become a member of its Board of Directors, in 1993 the
Company entered into an employment agreement with him containing a compensation
package including salary, stock options and an annual bonus described in
'Employment and Consulting Agreements.' Mr. Mauer's initial compensation was
determined after the Board reviewed compensation paid to similarly qualified
Chief Executive Officers in the competitive marketplace.
In determining Mr. Mauer's salary and stock option awards for 1996, the
Compensation Committee reviewed the Company's performance in 1996 and the
continuing improvement in its performance under Mr. Mauer's leadership. Based on
its review, the Committee determined to grant Mr. Mauer stock options and to set
Mr. Mauer's salary for 1996 at a rate that it believed was commensurate with his
performance and the Board's perception of compensation paid to individuals with
similar qualifications in similar positions in the marketplace. As discussed
further in the next section, the Compensation Committee determined not to award
members of senior management, including Mr. Mauer, cash bonuses with respect to
calendar year 1996 because, while the Company made significant operating
improvements in 1996, it did not meet its aggressive internal goals.
9
<PAGE>
COMPENSATION OF OTHER EXECUTIVE OFFICERS
Base salaries for new executive officers are determined initially by
evaluating the responsibilities of the position and the experience,
qualifications and talents of the individual relevant to his or her position,
and by reference to the competitive marketplace for management talent, including
a comparison of base salaries for comparable positions at comparable public
companies. Salary adjustments are, generally, discretionary and determined by
evaluating management's recommendations, the competitive marketplace, the
performance of the Company, the performance and overall contribution of the
executive, and any increased responsibilities assumed by the executive.
In order to induce qualified individuals to join the Company and continue
their employment, the Company has granted certain senior executive officers
guaranteed signing bonuses in fixed amounts as well as bonuses for the first
year of employment. In determining the size of an executive's bonus, if any, the
Committee compares performance of the division in which the executive works to
the Company's business plan for that division in that year, the contribution of
the individual to the performance of that division, and the individual's
performance against agreed-upon goals developed by the employee with senior
management. The Compensation Committee determined that with respect to 1996 the
Company set aggressive growth objectives upon which bonuses were to be
determined, and while the Company made significant improvements in 1996, it did
not reach its internal objectives and, upon recommendation of senior management,
no cash bonuses were awarded to senior management in 1996 (other than a bonus
required to be paid to Mr. Groelinger pursuant to the terms of his employment
agreement).
After reviewing recommendations of supervising management, in 1996 the
Compensation Committee recommended for full Board approval grants of stock
options to certain employees and executive officers. In keeping with the
philosophy of the Board of Directors, options granted to executive officers
generally vest over a period of years. It is the philosophy of the Board of
Directors that stock options should be awarded primarily to key employees of the
Company and its subsidiaries and members of its Board of Directors to promote
the long-term interest in the welfare of the Company and assist in the retention
of such employees, and that stock options should be awarded on an intermittent
basis in furtherance of this philosophy.
In accordance with rules of the Securities and Exchange Commission (the
'Commission'), the Executive Compensation Philosophy of the Board is not
intended to be 'filed' or 'soliciting material' or subject to Regulations 14A or
14C or Section 18 of the Exchange Act, or incorporated by reference into any
other filing by the Company with the Commission.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
DON R. KORNSTEIN
JOHN MCCONNAUGHY, JR.
GLENN E. SCHEMBECHLER
10
<PAGE>
EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE
The table below sets forth the cash compensation paid to or accrued for the
Company's Chief Executive Officer and its four most highly paid executive
officers in 1996 for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION AWARDS ------------
---------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2) COMPENSATION(4)
- ----------------------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
David M. Mauer .................... 1996 $500,000 -- -- 50,000 $ 4,620
Chief Executive Officer 1995 457,500 $170,000 -- 50,000 4,620
(since April 1993) 1994 420,000 120,000 -- 100,000(3) 1,100
Robert E. Nederlander ............. 1996 $180,656 -- -- 7,500 --
Chairman of the Board; (since 1995 173,355 -- -- 15,000 --
1988); Chief Executive Officer 1994 166,565 -- -- 15,000 --
(1988-April 1, 1993); President
and Chief Operating Officer
(February-June 1992)
Leonard Toboroff .................. 1996 $180,656 -- -- 7,500 $13,614
Vice President (since April 1988) 1995 173,355 -- -- 15,000 11,647
1994 166,565 -- -- 15,000 1,422
Dan Cougill ....................... 1996 $230,000 -- -- 15,000 $ 4,750
President and Chief Operating 1995 206,923 $ 60,000 -- 15,000 4,322
Officer (since June 1995); 1994 180,000 110,000 75,000 --
President and Chief Operating
Officer of Riddell, Inc. (since
February 1994)
David Groelinger .................. 1996 $143,308(5) $ 25,000(6) -- 65,000 --
Chief Financial Officer (since
March 1996); Executive Vice
President (since June 1996)
</TABLE>
- ------------------
(1) Perquisites and other personal benefits paid in 1996 for the named executive
officers aggregated less than the lesser of $50,000 and 10% of the total
annual salary and bonus set forth in the columns entitled, 'Salary' and
'Bonus' for each named executive officer and, accordingly, are omitted from
the table as permitted by the rules of the Commission.
(2) These options were issued under the Company's 1991 Stock Option Plan.
(3) In 1994 the Company canceled an option previously granted to Mr. Mauer to
acquire 100,000 shares of Common Stock and in its place issued an option to
acquire an equal number of shares at a lower exercise price per share.
(4) Represents the Company's contribution to its 401K Plan on behalf of the
employee, and in the case of Mr. Toboroff, includes the dollar value of
approximately $9,000 and $7,000 of insurance premiums paid on behalf of Mr.
Toboroff for 1996 and 1995, respectively under an Indeterminate Premium One
Year Term Life Policy pursuant to which he will receive the cash surrender
value.
(5) Based on an annual salary of $180,000 pursuant to an employment agreement
between the Company and Mr. Groelinger. See 'Employment Agreements and
Change of Control Arrangements.'
(6) Paid pursuant to the employment agreement between the Company and Mr.
Groelinger. See 'Employment Agreements and Change of Control Arrangements.'
11
<PAGE>
STOCK OPTIONS GRANTED IN 1996
The following table sets forth information concerning individual grants of
stock options made during 1996 to each executive officer listed below pursuant
to the Company's 1991 Stock Option Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR OPTION
SECURITIES OPTIONS GRANTED TERM (5)
UNDERLYING TO EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ------------------- --------------- --------------- -------------- ---------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
David M. Mauer..... 50,000(1) 21% $ 4.50 7/16/06 $141,501 $358,592
Dan Cougill........ 15,000(2) 6% 4.31 12/17/06 40,682 103,095
David Groelinger... 65,000(3) 27% 4.63 3/7/06 189,061 479,119
Robert
Nederlander...... 7,500(4) 3% 4.75 6/27/06 22,404 56,777
Leonard Toboroff... 7,500(4) 3% 4.75 6/27/06 22,404 56,777
</TABLE>
- ------------------
(1) This option expires July 16, 2006, vests as to 25% of the underlying shares
on each of the first, second, third and fourth anniversaries of the date of
grant. The option is canceled upon a termination of employment for cause. In
the event Mr. Mauer's employment is terminated by the Company, generally,
other than for cause, this stock option becomes fully exercisable for 90
days.
(2) Mr. Cougill's option vests as to 25% of the underlying shares on each of the
first, second, third and fourth anniversaries of the date of grant and
expires December 17, 2006. The option is canceled upon a termination of
employment for cause. In the event Mr. Cougill's employment is terminated by
the Company, generally, other than for cause, the option becomes fully
exercisable for 90 days.
(3) Mr. Groelinger's option vests as to 25% of the underlying shares on each of
the first, second, third and fourth anniversaries of the date of grant and
expires March 7, 2006. The option is canceled upon a termination of
employment for cause. In the event Mr. Groelinger's employment is terminated
by the Company, generally, other than for cause, the option becomes fully
exercisable for 90 days.
(4) Messrs. Nederlander and Toboroff were granted options together with the
other members of the Company's Board of Directors (other than Mr. Mauer) in
1996 under the Company's 1991 Stock Option Plan. The options are fully
exercisable commencing June 27, 1997 through June 27, 2006. Each option is
canceled upon a termination of employment for cause. In the event the
individual's Board membership terminates, generally, other than for cause,
each stock option becomes fully exercisable for 90 days.
(5) Based upon the per share market price on the date of grant and an annual
appreciation of such market price at the rate stated in the table through
the expiration date of such options. Gains, if any, are dependent upon the
actual performance of the Common Stock, as well as the continued employment
of the executive officers through the vesting period. The potential
realizable values indicated have not taken into account amounts required to
be paid as income tax under the Internal Revenue Code and any applicable
state laws.
12
<PAGE>
STOCK OPTIONS HELD AT END OF 1996
The following table indicates the total number of exercisable and
unexercisable stock options held by each executive officer listed below on
December 31, 1996. No options to purchase the Company's Common Stock were
exercised during 1996. On December 31, 1996, the last sales price of the Common
Stock on NASDAQ was $4.63 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996
------------------------------ ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David M. Mauer........... 230,000 170,000 $ 268,950 $98,050
Dan Cougill.............. 78,750 26,250 159,375 18,750
David Groelinger......... -- 65,000 -- --
Robert E. Nederlander.... 71,000 7,500 69,375 --
Leonard Toboroff......... 71,000 7,500 69,375 --
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
In June 1992, the Company entered into an employment agreement with each of
Messrs. Nederlander and Toboroff. Each agreement continues until terminated by
the Company, with termination effective three years after the Company delivers
notice of termination or, if earlier, until the death or disability of the
employee. The agreements are immediately terminable by the Company for Cause (as
defined therein). Bonuses are discretionary with the Board. Each agreement
provides a base salary of $162,500 which may be increased in the discretion of
the Board, provided that in any event each year the salaries are increased at
least by the percentage increase in the Consumer Price Index. The current salary
of Messrs. Nederlander and Toboroff is $184,889. Each agreement provides that in
the event the Company terminates the employee's employment, generally, other
than for Cause, the employee will receive his full salary through the end of the
term of his agreement and annual bonuses for the remainder of the term equal to
the average of the annual bonuses awarded to the employee prior to termination.
Each agreement acknowledges that the employee will devote time and provide
services to entities other than the Company.
In April 1993, the Company entered into an employment agreement with Mr.
Mauer. The agreement, as amended in 1994, provides an annual base salary in such
amount in excess of $400,000 as the Board of Directors may determine from time
to time. The agreement provides for years after 1993 that the Board of Directors
and Mr. Mauer establish target bonuses based upon measures to be agreed upon
before the beginning of each calendar year, and that Mr. Mauer's bonus will be a
percentage, not to exceed 100%, of his base salary based upon the percent of the
targets achieved. The agreement continues until terminated by the Company, with
termination effective three years after the Company delivers notice of
termination or, if earlier, until Mr. Mauer's death or disability. The agreement
is immediately terminable for Cause (as defined). Mr. Mauer was granted an
option for ten years to acquire 300,000 shares of the Company's Common Stock
pursuant to the Agreement at an average price of $3.63 per share. In the event
Mr. Mauer's employment is terminated, generally, other than for Cause, Mr. Mauer
will receive his salary for a period of three years plus a pro rata portion of
the bonus earned through the date of termination, and his options become fully
exercisable for one year.
The Company entered into an employment agreement with Mr. Cougill as of
February 1, 1994, providing for a $50,000 signing bonus, an annual salary of
$200,000 per annum and minimum bonus of $50,000 for 1994. Pursuant to his
employment agreement, Mr. Cougill was granted an Option for five years to
purchase 75,000 shares of the Company's Common Stock at $2.56 per share. In the
event Mr. Cougill's employment is terminated by the Company, generally, other
than for Cause (as defined therein), the stock options become fully exercisable
for one year. The employment agreement also provides that in the event the
Company terminates Mr. Cougill's employment, generally, other than for Cause,
Mr. Cougill will receive his full salary for a period of one year plus the pro
rata portion of his bonus earned through the date of termination by the Company,
and his options become exercisable in full for one year. The Agreement is
immediately terminable for Cause and expires, unless renewed, in May 1998.
13
<PAGE>
The Company entered into a two year employment agreement with Mr.
Groelinger effective March 1996 in connection with his joining the Company as
Chief Financial Officer. The agreement provides for an annual base salary of
$180,000 and a guaranteed minimum bonus for 1996 of $25,000. After 1996, bonuses
will be a percentage of his salary, with a target of 40%. Pursuant to his
employment agreement, Mr. Groelinger was granted a ten year option to purchase
65,000 shares of the Company's Common Stock at an exercise price of $4.63 per
share. The agreement is immediately terminable for Cause (as defined). The
agreement provides generally that if Mr. Groelinger's employment is terminated
other than for Cause, he will be paid no less than one year's salary (two years'
salary in the event termination arises in connection with a Change of Control
(as defined) plus a pro rata portion of his bonus through the date of
termination, and his stock options become immediately exercisable for one year
to the extent then vested.
In connection with the Merger, the Company entered into an employment
agreement with Jeffrey G. Webb on May 5, 1997 which becomes effective if the
Merger is consummated. Under the terms of such agreement, which has a three-year
term, Mr. Webb will serve as Vice Chairman of the Company, as well as President
and Chief Operating Officer of Varsity. Mr. Webb will be entitled to a base
salary of no less than $375,000 per year and will be eligible to participate in
those bonus arrangements which are made available to other senior officers of
the Company at a target level of 40% of his base salary. Upon termination of Mr.
Webb's employment (i) by the Company without Cause (as defined in the employment
agreement), (ii) by Mr. Webb with Good Reason (as defined therein, including a
material adverse alteration in his status or responsibility and relocation more
than 50 miles from Memphis, Tennessee), or (iii) following a Change in Control
(as defined in the employment agreement), Mr. Webb will receive continued
payments of base salary for the longer of the remainder of the term and one year
(two years in case of termination following a Change in Control) (any such
applicable period, the 'Continuation Period'), as well as certain other
benefits. Mr. Webb is subject to a noncompetition covenant for a period of two
years following the termination of his employment for any reason (or for the
Continuation Period, if longer).
Pursuant to his employment agreement, Mr. Webb will also receive two
tranches of options to purchase an aggregate of 397,760 shares of the Company's
Common Stock more fully described below. First, on the later of the effective
time of the Merger and the date of the Company's 1997 Annual Shareholders'
Meeting (the applicable date, the 'Grant Date'), Mr. Webb will receive options
to purchase 50,000 shares of the Company's Common Stock. Such grant may, at the
Company's option, be pursuant to the Company's 1997 Stock Option Plan (the '1997
Plan'). The exercise price of the options shall be equal to the average closing
price of a share of the Company's Common Stock over the ten (10) consecutive
trading days ending on the date immediately prior to the Grant Date. The option
shall become exercisable as to 1/3 of the shares originally covered by such
option upon the first anniversary of the Grant Date and as to an additional 1/3
of the shares originally covered by such option on each of the second and third
anniversaries of the Grant Date. The options shall, in general, expire on the
earlier of the tenth anniversary of the Grant Date or (subject to extension
under certain circumstances) the thirtieth (30) day following the date Mr.
Webb's employment is terminated for any reason.
Secondly, Mr. Webb's employment agreement provides he will receive, within
thirty days immediately following the effective time of the Merger, 'special
options' to purchase an additional 347,760 shares of Parent Common Stock. Such
grant may, at the Company's election be pursuant to the 1997 Plan. The per share
exercise price of the special option shall be equal to the lower of (i) the
average closing price of a share of the Company's Common Stock over the ten
consecutive trading days ending on the date immediately prior to the effective
time of the Merger and (ii) $3.80. The special option shall be fully vested as
of the date of grant and shall expire on the tenth anniversary of the date of
grant.
If shareholders of the Company fail to approve the 1997 Plan, Mr. Webb and
the Company have agreed to discuss alternative mechanisms to provide Mr. Webb
with the economic equivalent of the option provisions discussed above.
The stock options granted to Messrs. Mauer, Webb, Cougill and Groelinger in
connection with their employment agreements become immediately exercisable in
the event of a change of control (as defined in their respective employment
agreements).
14
<PAGE>
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
In 1995, the Company entered into an agreement with Mr. McConnaughy
pursuant to which he agreed to provide certain investment banking services
through June 1996 for an aggregate fee of $75,000. Mr. McConnaughy is a member
of the Company's Board of Directors and its Compensation and Audit Committees
and a member of a group of stockholders who may be deemed to beneficially own
and exercise control over the Company's outstanding Common Stock and management
as of April 15, 1997. See 'Security Ownership of Certain Beneficial Owners and
Management'. Mr. McConnaughy waived his directors' fees for 1996 and did not
vote with respect to the Board of Directors' resolution to enter into the
agreement for his investment banking services.
In 1996, the Company presented 'Bo Schembechler Football Clinics'
throughout the United States. Mr. Schembechler, the former head football coach
at the University of Michigan from 1968 through 1989, assisted in designing and
operating the clinics. Mr. Schembechler was also the lead speaker on football
coaching and safety to over 1,000 high school coaches and athletic directors at
these clinics. Mr. Schembechler received a fee of $20,000 for his services in
1996 in addition to his directors' fees. The Company discontinued these clinics
in 1996. Mr. Schembechler is a member of the Compensation Committee and Audit
Committee of the Company's Board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OBLIGATIONS TO CERTAIN SHAREHOLDERS
In September 1988, the Company issued a Note to MLC in the original
principal amount of $2,000,000 (the 'MLC Note') in connection with a
recapitalization. In the recapitalization, the Company issued Common Stock in
exchange for Class A Common Stock of the Company owned by MLC (which had a
preferential right to receive $4,000,000 before any dividends or distributions
were to be made to any other stockholders), Class B Common Stock owned by
MacGregor Sporting Goods, Inc. ('Mac I') (from certain subsidiaries of which the
Company acquired its initial businesses in April 1988 for certain cash
consideration, Class B Common Stock, long term notes and assumed liabilities)
and Class B Common Stock owned by Mr. Frederick Brooks (the Company's President
and Chief Operating Officer until February 1992). Originally due in 1993, the
MLC Note was extended until January 1998, subject to mandatory prepayments
relating to cash flow measurement and changes in capitalization. The outstanding
balance of the MLC Note ($870,834) was repaid in November 1996 in accordance
with its terms from a portion of the net proceeds of the Company's sale to
Silver Oak Capital L.L.C. of its 4.10% Convertible Subordinated Note due
November 1, 2004. The MLC Note bore interest at 10% per annum, was secured by a
lien on substantially all of the assets of the Company and was subordinated to
the Company's indebtedness to NBD Bank.
In 1994 the Company granted MLC a Warrant (the 'Warrant') to purchase
150,000 shares of its Common Stock at $2.44 per share in consideration for the
extension of the MLC Note. In August 1995 certain of the original partners
withdrew from MLC, and in connection with the restructuring of MLC, Messrs.
Cougill, Mauer, McConnaughy, Nederlander and Toboroff or entities controlled by
them acquired interests in the Warrant.
In May 1991, Messrs. Nederlander, Toboroff, Epstein, McConnaughy and Brooks
(the 'Investors') acquired from a party not affiliated with the Company a
promissory note (the 'Investors Note') with an aggregate principal amount of
$439,000. The Investors Note was originally issued in April 1988 to Mac I in
connection with the acquisition described above. The unaffiliated seller had
acquired substantially all of the assets of Mac I's successor, MacGregor Sports
Inc., in a sale authorized during the successor's bankruptcy proceedings. The
Investors Note is due in April 1998 and bears simple interest at the rate of 8%
per annum (which interest accrues and is not paid until the principal is due)
and is unsecured. In August 1995, Mr. Epstein transferred his interest in the
Investors Note to Messrs. McConnaughy, Nederlander and Toboroff in connection
with the MLC restructuring noted above.
15
<PAGE>
COMPARATIVE PERFORMANCE BY THE COMPANY
The following graph shows a comparison of cumulative total returns for the
Company, the NASDAQ Market Index and an index of peer companies selected by the
Company for the five year period from January 1, 1992 to December 31, 1996. In
accordance with the rules of the Commission, the Company's Comparative
Performance Information is not intended to be 'filed' or 'soliciting material'
or subject to Regulations 14A or 14C or Section 18 of the Exchange Act, or
incorporated by reference into any other filing by the Company with the
Commission.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG RIDDELL SPORTS INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[GRAPH]
RIDDELL SPORTS INC. SIC CODE INDEX NASDAQ MARKET INDEX
Jan. 1, 1992 100 100 100
Dec. 31, 1992 53.03 91.28 100.98
Dec. 31, 1993 27.27 136.05 121.13
Dec. 31, 1994 24.24 141.07 127.17
Dec. 31, 1995 37.88 126.98 164.96
Dec. 31, 1996 56.06 124.29 204.98
Assumes $100 invested on January 1, 1992.
The graph compares the performance of the Company, the NASDAQ Market Index
and an index of companies in the sporting and athletic goods industry having the
same SIC Code as the Company (SIC Code 3949-Sporting and Athletic Goods), with
the investment weighted on market capitalization at the beginning of each period
for which a return is indicated. The total returns presented assume the
reinvestment of dividends, although dividends have not been declared on the
Company's Common Stock. The line of business index (SIC Code 3949), obtained
through Media General Financial Services, is the same index as the index used by
the Company in its Proxy Statement dated May 20, 1996.
16
<PAGE>
PROPOSAL TO AMEND 1991 STOCK OPTION PLAN
AND PROPOSAL TO ADOPT 1997 STOCK OPTION PLAN
INTRODUCTION
The Company's Board of Directors adopted the 1991 Stock Option Plan (the
'1991 Plan'), which was approved by the Company's stockholders, to attract and
retain qualified management. Options to acquire an aggregate of 1,415,500 shares
of Common Stock were originally reserved for issuance under the 1991 Plan, and
options to acquire 1,186,050 shares have been granted as of May 17, 1997 (net of
past grants cancelled or expired). As previously discussed, the Company has
entered into the Merger Agreement and other documents in connection with the
proposed acquisition of Varsity, pursuant to which the Company has agreed to
grant stock options to acquire 950,000 shares of the Company's Common Stock
options to Varsity employees, including options for Mr. Webb to acquire 397,760
such shares. Furthermore, particularly if the Merger is consummated, the Board
believes that the 229,450 shares remaining (net of grants cancelled or expired)
available for grant under the 1991 Plan are not sufficient to reward, attract
and retain qualified management. Consequently, the Board of Directors has
approved the 1997 Stock Option Plan (the '1997 Plan'), hereby submitted for
stockholder approval.
The proposed 1997 Plan, described more fully below, will increase the
number of shares of Common Stock available for grant of options by 1,500,000
(from 1,415,500 to 2,915,500). Whether or not the stockholders approve the 1997
Plan or the Merger is consummated, the 1991 Plan will remain in full force and
effect.
As discussed more fully below, to provide flexibility to the Board to award
stock options to the highest levels of senior management who may also be members
of the Company's Board of Directors, the Board has approved, and is submitted
hereby for stockholder approval, an amendment to the 1991 Plan providing that
the fixed and automatic grants of options will be made to each member of the
Board of Directors of the Company who is not a Chief Executive Officer,
President, Executive Vice President or Senior Vice President of the Company or
any of its subsidiaries.
The following discussion is qualified by the terms of the proposed
amendments to the 1991 Plan and the proposed 1997 Plan, which are attached
hereto as Exhibits A and B, respectively.
GENERAL DESCRIPTION OF 1991 STOCK OPTION PLAN
Under the 1991 Plan, options may be granted from time to time to key
employees, including officers, directors, advisors and independent consultants
to the Company or to any of its subsidiaries. The 1991 Plan is administered by
the Board of Directors, which may empower a committee of directors to administer
the 1991 Plan. If such committee is appointed, it may exercise all of the powers
of the Board in relation to the 1991 Plan. The Board is generally empowered to
interpret the 1991 Plan, to prescribe rules and regulations relating thereto, to
determine the terms of the option agreements, to amend them with the consent of
the optionee, to determine the employees to whom options are to be granted, and
to determine the number of shares subject to each option and the exercise price
thereof. Options granted under the 1991 Plan may be designated as incentive
stock options ('ISOs') or nonqualified stock options ('NQSOs'). The per share
exercise price for ISOs granted to directors, officers and employees may not be
less than 100% of the fair market value of a share of Common Stock on the date
the option is granted (110% of such fair market value if the optionee owns more
than 10% of the Common Stock of the Company), and for NQSOs, not less than 85%
of fair market value on the date the NQSO is granted. Upon exercise of an
option, the optionee may pay the purchase price with previously acquired
securities of the Company, or at the discretion of the Board, the Company may
loan some or all of the purchase price to the optionee.
In the discretion of the Board, NQSOs may be exercisable immediately and
need not terminate upon termination of the optionee's relationship with the
Company, and the Board may amend the terms and provisions (other than the option
price) of any NQSOs. Options could be exercisable for a term which may not be
less than one year or greater than ten years from the date of grant. ISOs are
not transferable other than by will or by the laws of descent and distribution.
NQSOs may be transferred to the optionee's spouse or lineal descendants, subject
to certain restrictions. In the event of a change in control or certain other
basic changes in the Company, in the Board's discretion, each option may become
fully and immediately exercisable. Options may be exercised during the holder's
lifetime only by the holder, his or her guardian or legal representative. The
Board may
17
<PAGE>
decrease the exercise price of outstanding options to the fair market value of
the Common Stock on the date the Board resolves to decrease such price.
Options granted pursuant to the 1991 Plan may be designated as ISOs, with
the attendant tax benefits provided under Sections 421 of the Internal Revenue
Code of 1986, as amended. Accordingly, the 1991 Plan provides that the aggregate
fair market value (determined at the time an ISO is granted) of the Common Stock
subject to ISOs becoming exercisable for the first time by an employee during
any calendar year (under all stock option plans of the Company and its
subsidiaries) may not exceed $100,000.
Assuming the stockholders approve the amendment to the 1991 Plan described
below, each Company director other than any director who is also a Chief
Executive Officer, President, Executive Vice President or Senior Vice President
of the Company or any of its subsidiaries will receive an option to acquire
7,500 shares of Common Stock each year. In addition, each such individual (other
than current directors) will receive an option to acquire 15,000 shares of
Common Stock upon becoming a member of the Board of Directors and, after the
first anniversary of his joining the Board, the annual grant of an option to
acquire 7,500 shares concurrently with the grants to the other directors. All
such directors' options will become exercisable in full on the first anniversary
of the date of grant. In order for the compensation in respect of options
granted in the future under the 1991 Plan to be deductible to the Company as
'performance based compensation' (within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the 'Code'), the 1991 Plan limits the
number of shares of Common Stock with respect to which options may be granted to
any individual in any year to no more than 150,000.
The Board may modify, suspend or terminate the 1991 Plan, provided however,
that certain material modifications affecting the 1991 Plan must be approved by
the stockholders, and any change in the 1991 Plan that may adversely affect an
optionee's rights under an option previously granted under the 1991 Plan
requires the consent of the optionee.
PROPOSED ELIMINATION OF FIXED GRANTS TO CERTAIN DIRECTORS UNDER 1991 PLAN
The 1991 Plan provides that each director other than any director who is
also the Chief Executive Officer will receive an annual grant of an option to
purchase 7,500 shares of Common Stock and that each such individual who joins
the Board of Directors (excluding current directors) will receive an initial
grant of an option to acquire 15,000 shares of Common Stock, and after the first
anniversary of his joining the Board will receive the annual grant of an option
to acquire 7,500 shares concurrently with the grants to other directors. All
such options will have an exercise price equal to the fair market value of the
Common Stock on the date of grant, which will be the closing price of the Common
Stock on the date of each Annual Meeting of Stockholders.
As previously discussed, in connection with the merger, it is contemplated
that certain individuals, including Mr. Webb, will become members of the
Company's Board of Directors. The Board has approved an amendment to the 1991
Plan providing that these fixed and automatic grants of options, will be made to
each member of the Board of Directors of the Company who is not a Chief
Executive Officer, President, Senior Vice President or Executive Vice President
of the Company or any of its subsidiaries. The Board of Directors believes it is
in the best interests of the Company to increase its flexibility with respect to
grants of options to the most senior members of management, especially in view
of the Company's proposed acquisition of Varsity Spirit. The Board is submitting
for stockholder approval, and recommending, that the stockholders approve the
proposed amendment to eliminate the fixed grants of options to directors who are
not also the Chief Executive Officer, president, Executive Vice President of
Senior Vice President of the Company or any of its subsidiaries.
REQUIRED VOTE FOR APPROVAL OF AMENDMENTS TO 1991 PLAN
The 1991 Plan requires approval of a majority of stockholders present at a
meeting of stockholders by proxy or in person in order to implement certain
material modifications to the 1991 Plan. Thus, assuming a quorum is present, the
affirmative vote of a majority of the shares of the Common Stock present at the
Annual Meeting of Stockholders entitled to vote is required to approve the
above-described amendment to the 1991 Plan.
* * *
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING
'FOR' THE APPROVAL OF THE AMENDMENT TO THE 1991 STOCK OPTION PLAN.
* * *
18
<PAGE>
GENERAL DESCRIPTION OF PROPOSED 1997 STOCK OPTION PLAN
The Company, subject to the approval of its stockholders, has adopted the
Riddell Sports Inc. 1997 Stock Option Plan (the '1997 Plan'). A maximum of
1,500,000 shares of Common Stock has been reserved for issuance under the 1997
Plan, subject to equitable adjustment upon the occurrence of any stock dividend,
stock split, recapitalization, combination or exchange of shares.
Unless otherwise determined by the Board of Directors of the Company, the
1997 Plan shall be administered by a committee appointed by the Board
('Compensation Committee'), which shall consist of two or more members of the
Board who are 'outside directors' within the meaning of section 162(m) of the
Code. The Compensation Committee may, in its discretion, delegate to a
subcommittee its duties hereunder, including the grant of stock options or other
stock-based awards. The full Board shall also have the authority, in its
discretion, to grant stock options or other stock-based awards under the Plan
and to administer the Plan. For all purposes under the Plan, any entity which
performs the duties described herein, shall be referred to as the 'Committee.'
The Committee shall have full authority, subject to the provisions of the 1997
Plan, among other things, to determine the persons to whom options or other
stock-based awards will be granted, to determine the exercise price of the stock
options and to prescribe, amend and rescind rules and regulations relating to
the 1997 Plan.
Grants of a stock options or other stock-based awards may be made under the
1997 Plan to selected employees, directors (including directors who are not
employees) and consultants of the Company and its present or future affiliates,
in the discretion of the Committee. Stock options may be either 'incentive stock
options,' as such term is defined in Section 422 of the Code, or nonqualified
stock options. The exercise price of a nonqualified stock option may be above,
at or below the fair market value per share of Common Stock on the date of
grant; the exercise price of an incentive stock option may not be less than the
fair market value per share of Common Stock on the date of grant.
The 1997 Plan also provides for automatic grants of stock options (with an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant) to each member of the Board of Directors of the Company who is
not a Chief Executive Officer, President, Senior Vice President or Executive
Vice President of the Company or its subsidiaries ('Eligible Directors'). Except
as otherwise determined by the Committee, options to purchase 15,000 shares of
Common Stock will be automatically granted to Eligible Directors upon
commencement of their service on the Board of Directors, except with respect to
Eligible Directors serving on the date of the 1997 annual stockholders meeting.
Thereafter (and in each case except as otherwise determined by the Committee),
Eligible Directors are granted an option to purchase 7,500 shares of Common
Stock on the date of each subsequent annual meeting of shareholders (unless such
Eligible Director has received an initial option grant less than one year prior
to the date of such meeting).
In view of the fact that each of the 1991 Plan and 1997 Plan provides
certain directors with fixed automatic grants of options to acquire shares of
Company Common Stock, the Board of Directors has resolved that the total number
of shares underlying options required to be granted to each eligible director
shall not be duplicated.
Options automatically granted to Eligible Directors become exercisable as
to all shares on the first anniversary of the date of grant, or on the
retirement of the Eligible Director from the Board of Directors, whichever is
first. Options automatically granted to Eligible Directors expire on the
earliest of (i) the tenth anniversary of the date of grant, (ii) the second
anniversary of the termination of the Eligible Directors' service on the Board
of Directors for reasons other than cause, or (iii) thirty days after the
termination of the Eligible Directors' service on the Board of Directors for
Cause (as defined in the 1997 Plan).
No person may be granted stock options under the 1997 Plan representing an
aggregate of more than 900,000 shares of Common Stock during 1997 and
representing an aggregate of more than 500,000 shares of Common Stock during any
subsequent calendar year. Stock options shall be exercisable at the times and
upon the conditions that the Committee may determine, as reflected in the
applicable agreement. The exercise period shall be determined by the Committee;
provided, however, that in the case of an incentive stock option, such exercise
period shall not exceed ten (10) years from the date of grant of such incentive
stock option.
Except to the extent the Committee provides otherwise, in the event that
the employment of a grantee shall terminate (other than by reason of death or
disability), all stock options that are not exercisable at the time of such
termination shall terminate and all stock options that are exercisable at the
time of such termination may be exercised for a period of three months
immediately following such termination (but in no case after the stock options
expire in accordance with their terms). Except to the extent the Committee
provides otherwise, in the
19
<PAGE>
event that the employment of a grantee shall terminate by reason of death or
disability, all stock options that are not exercisable at the time of such
termination shall terminate and all stock options that are exercisable at the
time of such termination may be exercised for a period of one year immediately
following such termination (but in no case after the stock options expire in
accordance with their terms).
The Committee may also grant other stock-based awards under the 1997 Plan.
Such stock-based awards may be granted pursuant to the Company's Key Executive
Long-Term Incentive Bonus Plan or any successor thereto and will be subject to
such terms and conditions as the Committee may determine.
Except to the extent the Committee provides otherwise, stock options
granted under the 1997 Plan shall not be transferable otherwise than by will or
by the laws of descent and distribution. The 1997 Plan may, at any time and from
time to time, be altered, amended, suspended, or terminated by the Board of
Directors, in whole or in part; provided that, unless otherwise determined by
the Board, an amendment that requires stockholder approval in order for the Plan
to continue to comply with Section 162(m) of the Code or any other law,
regulation or stock exchange requirement shall not be effective unless approved
by the requisite vote of stockholders. In addition, no amendment may be made
which adversely affects any of the rights of a grantee under any award
theretofore granted, without such grantee's written consent.
REQUIRED VOTE FOR APPROVAL OF 1997 PLAN
Approval for the adoption of the 1997 Plan requires approval of a majority
of stockholders present at a meeting of stockholders by proxy or in person.
Thus, assuming a quorum is present, the affirmative vote of a majority of the
shares of the Common Stock present at the Annual Meeting entitled to vote is
required to approve the above-described 1997 Plan.
* * *
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING
'FOR' THE APPROVAL OF THE 1997 STOCK OPTION PLAN
* * *
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER
EACH OF THE 1991 PLAN AND 1997 PLAN
The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to grants of stock options under the each of the 1991 Plan and 1997 Plan. This
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign income and other tax consequences.
An optionee will not recognize any taxable income upon the grant of a
nonqualified stock option and the Company will not be entitled to a tax
deduction with respect to the grant of a nonqualified stock option. Upon
exercise, the excess of the fair market value of a share of Common Stock on the
exercise date over the option exercise price will be taxable as ordinary income
to the optionee and will be subject to applicable withholding taxes. The Company
will generally be entitled to a tax deduction at such time in the amount of such
ordinary income.
In the event of a sale of a share of Common Stock received upon the
exercise of a nonqualified stock option, any appreciation or depreciation after
the exercise date generally will be taxed as capital gain or loss and will be
long-term capital gain or loss if the holding period for such Common Stock is
more than one year.
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an incentive stock option and the Company will not be
entitled to a tax deduction with respect to such grant or exercise. Exercise of
an incentive stock option may, however, give rise to taxable compensation income
subject to applicable withholding taxes, and a tax deduction to the Company, if
the incentive stock option is not exercised on a timely basis (generally, while
the optionee is employed by the Company or within 90 days after termination of
employment) or if the optionee subsequently engages in a 'disqualifying
disposition,' as described below. The amount by which the fair market value of
the Common Stock on the exercise date of an incentive stock option exceeds the
exercise price generally will increase the optionee's 'alternative minimum
taxable income.'
A sale or exchange by an optionee of shares acquired upon the exercise of
an incentive stock option more than one year after the transfer of the shares to
such optionee and more than two years after the date of grant will
20
<PAGE>
result in any difference between the net sale proceeds and the exercise price
being treated as long-term capital gain (or loss) to the optionee. If such sale
or exchange takes place within two years after the date of grant of the
incentive stock option or within one year from the date of transfer of the
incentive stock option shares to the optionee, such sale or exchange will
generally constitute a 'disqualifying disposition' of such shares that will have
the following results: any excess of (i) the lesser of (a) the fair market value
of the shares at the time of exercise and (b) the amount realized on such
disqualifying disposition of the shares over (ii) the option exercise price of
such shares, will be ordinary income to the optionee, subject to applicable
withholding taxes, and the Company will be entitled to a tax deduction in the
amount of such income. Any further gain or loss after the date of exercise
generally will qualify as capital gain or loss and will not result in any
deduction by the Company.
If an optionee uses previously acquired shares of Common Stock to pay the
exercise price of an option, the optionee would not ordinarily recognize any
taxable income to the extent that the number of new shares of Common Stock
received upon exercise of the option does not exceed the number of previously
acquired shares so used. If non-recognition treatment applies to the payment for
option shares with previously acquired shares, the tax basis of the option
shares received without recognition of taxable income is the same as the basis
of the shares surrendered as payment. In the case of an incentive stock option,
if a greater number of shares of Common Stock is received upon exercise than the
number of shares surrendered in payment of the option price, such excess shares
will have a zero basis in the hands of the holder. Where a nonqualified stock
option is being exercised, the option holder will be required to include in
gross income (and the Company will be entitled to deduct) an amount equal to the
fair market value of the additional shares on the date the option is exercised
less any cash paid for the shares. Moreover, if the stock previously acquired by
exercise of an incentive stock option is transferred in connection with the
exercise of another option whether or not an incentive stock option, and if, at
the time of such transfer, the stock so transferred has not been held for the
holding period required in order to receive favorable treatment under the rules
governing incentive stock option, then such transfer will be treated as a
disqualifying disposition of the shares so transferred.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton have been the principal accountants of the Company during
the calendar year ended December 31, 1996 and have been selected as the
Company's principal accountants for the current calendar year, subject to
ratification by the shareholders. A representative of Grant Thornton will be
present at the Annual Meeting, with an opportunity to make a statement if he
desires to do so, and will be available to respond to appropriate questions.
If, prior to the next Annual Meeting, such firm shall decline to act or
otherwise become incapable of acting, or if its engagement shall be otherwise
discontinued by the Board of Directors, the Board of Directors will appoint
other independent auditors whose appointment for any period subsequent to the
next Annual Meeting will be subject to stockholder approval at such meeting.
Assuming the presence of a quorum, the affirmative vote of a majority of
the shares of Common Stock present at the Annual Meeting of and entitled to vote
on this item is required to ratify the selection of the Company's independent
auditors.
* * *
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING
'FOR' THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS
* * *
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the next Annual
Meeting of Stockholders which the stockholder desires to be presented in the
Company's Proxy Statement with respect to such meeting should submit such
proposal to the Company, c/o its General Counsel, Lisa J. Marroni, Esq., Riddell
Sports Inc., 900 Third Avenue, 27th Floor, New York, New York 10022, no later
than February 3, 1998.
21
<PAGE>
OTHER MATTERS
Other than as set forth in this proxy statement, within a reasonable time
before the commencement of this solicitation, the Board of Directors did not
know of any other business constituting a proper subject for action by the
stockholders to be presented at the Annual Meeting. However, if any such matter
should properly come before the meeting, the persons named in the enclosed proxy
intend to vote such proxy in accordance with their best judgment.
The proxies named in the enclosed form of proxy and their substitutes, if
any, will vote the shares represented by the enclosed form of proxy, if the
proxy appears to be valid on its face and, where a choice is specified on the
form of proxy, the shares will be voted in accordance with each specification so
made.
A list of stockholders of record of the Company as of May 1, 1997, will be
available for inspection by stockholders during normal business hours from May
15 through June 13, 1997 at the offices of the Company, 900 Third Avenue, 27th
Floor, New York, New York 10022.
In addition to soliciting proxies by mail, the Company may make requests
for proxies by telephone, telegraph or messenger or by personal solicitation by
officers, directors, or employees of the Company, or by any one or more of the
foregoing means. The Company will also reimburse brokerage firms and other
nominees for their actual out-of-pocket expenses in forwarding proxy material to
beneficial owners of the Company's shares. All expenses in connection with such
solicitation are to be paid by the Company.
By Order of the Board of Directors
ROBERT E. NEDERLANDER
Chairman of the Board
Dated: June 2, 1997
22
<PAGE>
EXHIBIT A
AMENDMENT NO. 4 TO THE RIDDELL SPORTS INC.
1991 STOCK OPTION PLAN
WHEREAS, the Board of Directors (the 'Board') of Riddell Sports Inc. (the
'Company') has heretofore adopted the Riddell Sports Inc. 1991 Stock Option Plan
(the '1991 Plan'); and
WHEREAS, the Board has previously amended the 1991 Plan on August 20, 1992,
September 30, 1993 and June 27, 1996; and
WHEREAS, the Board desires to further amend the 1991 Plan.
NOW, THEREFORE, the 1991 Plan is hereby further amended, subject to the
approval of this Amendment by the stockholders of the Company, as follows:
Section 19(b) is hereby amended to read as follows:
(b) AUTOMATIC GRANTS. (1) Upon becoming a member of the Board of
Directors, each director (other than members of the Board on the date of
the annual stockholders' meeting in 1997 and other than a director who is
also the Chief Executive Officer, President, Executive Vice President or
Senior Vice President of the Company or any of its subsidiaries) shall be
granted automatically without action by the Board, an Option to purchase
15,000 shares of Common Stock.
(2) On the date of the annual stockholder's meeting first occurring
after the first anniversary of a grant to a director pursuant to paragraph
b(1) above, such director shall be granted an Option to acquire 7,500
shares of Common Stock.
<PAGE>
EXHIBIT B
RIDDELL SPORTS INC.
1997 STOCK OPTION PLAN
1. PURPOSE
This Riddell Sports Inc. 1997 Stock Option Plan (the 'Plan') is intended to
encourage stock ownership by employees, directors and consultants of Riddell
Sports Inc. (the 'Company') and Affiliate Corporations (as defined in Section
2(a)), so that they may acquire or increase their proprietary interest in the
Company, and to encourage such employees, directors and consultants to remain in
the employ or service of the Company and to put forth maximum efforts for the
success of the business of the Company. It is further intended that options
granted pursuant to Section 6 of the Plan shall constitute 'incentive stock
options' ('Incentive Stock Options') within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations issued thereunder
(the 'Code'), and options granted pursuant to Section 7 of the Plan shall
constitute 'nonqualified stock options' ('Nonqualified Stock Options').
2. DEFINITIONS
As used in the Plan, the following words and phrases shall have the
meanings indicated:
(a) 'Affiliate Corporation' shall mean any corporation, directly or
indirectly, through one or more intermediaries, controlling, controlled by
or under common control with the Company.
(b) 'Board' shall mean the Board of Directors of the Company.
(c) 'Change in Control' shall be deemed to have occurred if a majority
of the members of the Board are representatives or designees of any
'Person' (as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) other than M.L.C. Partners Limited
Liability Partnership, its former (other than Mr. Epstein) and present
general or limited partners, or any Person affiliated with the foregoing
and their heirs; it being understood that it shall not be deemed to be a
Change in Control of the Company if no Person shall have designated or
nominated a majority of the members of the Board.
(d) 'Disability' shall have the meaning set forth in Section 22(e)(3)
of the Code.
(e) 'Eligible Director' shall mean each director who is not a Chief
Executive Officer, President, Senior Vice President or Executive Vice
President of the Company or any Affiliate Corporation.
(f) 'Fair Market Value' per share as of a particular date shall mean
(i) the closing price per share of Common Stock (as defined in Section 5)
on a national securities exchange or on the NASDAQ stock market for the
last preceding date on which there was a sale of Common Stock on such
exchange, or (ii) if the shares of Common Stock are then traded on any
other over-the-counter market, the average of the closing bid and asked
prices for the shares of Common Stock in such over-the-counter market for
the last preceding date on which there was a sale of Common Stock in such
market or (iii) if the shares of Common Stock are not then listed on a
national securities exchange or traded in an over-the-counter market, such
value as the Committee in its discretion may determine.
(g) 'Option' shall mean an Incentive Stock Option or a Nonqualified
Stock Option granted under the Plan.
(h) 'Parent Corporation' shall mean any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if,
at the time of granting an Option, each of such corporations (other than
the Company) owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(i) 'Subsidiary Corporation' shall mean any corporation (other than
the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting an Option, each of such corporations
(other than the last corporation in an unbroken chain) owns stock
possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
<PAGE>
(j) 'Ten Percent Stockholder' shall mean an Optionee who, at the time
an Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of its Parent or Subsidiary Corporations.
3. ADMINISTRATION
Unless otherwise determined by the Board, the Plan shall be administered by
a committee appointed by the Board ('Compensation Committee'), which shall
consist of two or more members of the Board who are 'outside directors' within
the meaning of section 162(m) of the Code. The Compensation Committee may, in
its discretion, delegate to a subcommittee its duties hereunder, including the
grant of Options and other stockbased awards. The full Board shall also have the
authority, in its discretion, to grant Options and other stockbased awards under
the Plan and to administer the Plan. For all purposes under the Plan, any entity
which performs the duties described herein, shall be referred to as the
'Committee.'
The Committee shall have the authority in its discretion, subject to and
not inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options and other
stockbased awards; to determine which Options shall constitute Incentive Stock
Options and which Options shall constitute Nonqualified Stock Options; to
determine the purchase price of the shares of Common Stock covered by each
Option (the 'Option Price'); to determine the persons to whom, and the time or
times at which, Options and other stockbased awards shall be granted; to
determine the number of shares to be covered by each Option; to interpret the
Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the Option Agreements (which need
not be identical) entered into in connection with Options granted under the
Plan; and to make all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee may delegate to one or more of its
members or to one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan.
No member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option or other
stock-based award granted hereunder.
4. ELIGIBILITY
Options and other stockbased awards may be granted to key employees
(including, without limitation, officers) and directors (whether or not such
directors are employees) of, or consultants to, the Company or its present or
future Affiliate Corporations, except that Incentive Stock Options shall be
granted only to individuals who, on the date of such grant, are employees of the
Company or a Parent Corporation or a Subsidiary Corporation. In determining the
persons to whom Options shall be granted and the number of shares to be covered
by each Option, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan. A person to whom an
Option has been granted hereunder is sometimes referred to herein as an
'Optionee.'
An Optionee shall be eligible to receive more than one grant of an Option
during the term of the Plan, but only on the terms and subject to the
restrictions hereinafter set forth.
5. STOCK
The stock subject to Options hereunder shall be shares of the Company's
common stock, par value $0.01 per share ('Common Stock'). Such shares may, in
whole or in part, be authorized but unissued shares or shares that shall have
been or that may be reacquired by the Company. The aggregate number of shares of
Common Stock with respect to which Options may be granted from time to time
under the Plan shall not exceed 1,500,000. No person may be granted Options
under the Plan during 1997 with respect to more than 900,000 shares of Common
Stock and, during any subsequent calendar year, with respect to more than
500,000 shares of Common Stock.
2
<PAGE>
The limitations established by the preceding two sentences shall be subject to
adjustment as provided in Section 8(h).
6. INCENTIVE STOCK OPTIONS
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
8.
(a) Value of Shares. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Options granted under the Plan and all other option plans of
the Company, any Parent Corporation and any Subsidiary Corporation become
exercisable for the first time by an Optionee during any calendar year shall not
exceed $100,000.
(b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one hundred ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date of grant of such Incentive Stock Option, and (ii) the
exercise period shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.
7. NONQUALIFIED STOCK OPTIONS
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 8.
8. TERMS AND CONDITIONS OF OPTIONS
Each Option granted pursuant to the Plan shall be evidenced by a written
stock option agreement ('Option Agreement') between the Company and the
Optionee, which shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) Option Price. Each Option Agreement shall state the Option Price
per share of Common Stock, which, in the case of Incentive Stock Options,
shall be not less than one hundred percent (100%) of the Fair Market Value
of a share of Common Stock on the date of grant of the Option. The Option
Price shall be subject to adjustment as provided in Section 8(h).
(c) Medium and Time of Payment. The Option Price shall be paid in
full, at the time of exercise, in cash or in shares of Common Stock having
a Fair Market Value equal to the Option Price or in a combination of cash
and such shares, and may be effected in whole or in part with monies
borrowed from the Company pursuant to repayment terms and conditions as
shall be determined from time to time by the Committee, in its discretion,
separately with respect to each exercise of Options and each Optionee;
provided, however, that each such method and time for payment and each such
borrowing and terms and conditions of security, if any, and repayment shall
be permitted by and be in compliance with applicable law. An Optionee may
also elect to pay all or a portion of the aggregate Option Price by having
shares of Common Stock with a Fair Market Value on the date of exercise
equal to the aggregate exercise price withheld by the Company or sold by a
broker-dealer.
(d) Term and Exercise of Options. Options shall be exercisable over
the exercise period as and at the times and upon the conditions that the
Committee may determine, as reflected in the Option Agreement; provided,
however, that the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be determined by the Committee; provided, however,
that in the case of an Incentive Stock Option, such exercise period shall
not exceed ten (10) years from the date of grant of such Incentive Stock
Option. The exercise period shall be subject to earlier termination as
provided in Sections 8(e), 8(f) and 8(h)(4). An Option may be exercised, as
to any or all full shares of Common Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Company;
3
<PAGE>
provided, however, that an Option may not be exercised at any time as to
fewer than 100 shares (or such number as to which the Option is then
exercisable if such number of shares is less than 100).
(e) Termination of Employment or Service. Except as provided in this
Section 8(e) and in Section 8(f), an Option may not be exercised unless the
Optionee is then in the employ of, or a director of, or a consultant to (1)
the Company, (2) an Affiliate Corporation or (3) a corporation issuing or
assuming the Option in a transaction to which Section 424(a) of the Code
applies or a Parent Corporation or Subsidiary Corporation of the
corporation described in clauses (1), (2) or (3) above in this Section 8(e)
(any such corporation, an 'Employer') and unless the Optionee has remained
continuously employed or in service with an Employer since the date of
grant of the Option. Unless otherwise determined by the Committee, in the
event that the employment or service of an Optionee shall terminate other
than by reason of death or Disability (and regardless of whether the
Optionee is entitled to any contractual or severance payments with respect
to such termination), then all Options of such Optionee that are not
exercisable as of the date of such termination shall terminate as of the
date of termination and all exercisable Options shall (unless earlier
terminated in accordance with their terms) remain exercisable for a period
of three months immediately following the date of termination and shall
terminate thereafter. Nothing in the Plan or in any Option granted pursuant
hereto shall confer upon an individual any right to continue in the employ
of, or as a director of, or a consultant to an Employer or interfere in any
way with the right of an Employer to terminate such employment or service
at any time.
(f) Death or Disability of Optionee. Unless otherwise determined by
the Committee, if an Optionee shall die while employed by, or a director
of, or a consultant to an Employer, or if the Optionee's employment or
service shall terminate by reason of Disability, then all Options of such
Optionee that are not exercisable as of the date of such death or
termination by reason of Disability shall terminate as of the date of such
death or termination by reason of Disability and all Options that are
exercisable as of such date shall (unless earlier terminated in accordance
with their terms) remain exercisable for a period of one year immediately
following the date of such death or termination by reason of Disability and
shall terminate thereafter.
(g) Nontransferability of Options. Unless otherwise determined by the
Committee, the Options shall not be transferable otherwise than by will or
by the laws of descent and distribution, and Options may be exercised,
during the lifetime of the Optionee, only by the Optionee or by the
guardian or legal representative of the Optionee.
(h) Effect of Certain Changes.
(1) If there is any change in the number of shares of Common Stock
as a result of the declaration of stock dividends, recapitalization
resulting in stock splits or combinations or exchanges of such shares,
the number of shares of Common Stock available for Options, the annual
limitations on grants of Options, the number of shares of Common Stock
covered by outstanding Options, and the Option Price per share of such
Options shall be proportionately adjusted by the Committee to reflect
any increase or decrease in the number of issued shares of Common Stock;
provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.
(2) In the event of a change in the Common Stock of the Company as
presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning of
the Plan.
(3) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Committee, whose determination shall be final, binding and conclusive,
provided that each Incentive Stock Option granted pursuant to the Plan
shall not be adjusted in a manner that causes such option to fail to
continue to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.
(4) In the event of (i) a Change in Control or (ii) the disposition
by the Company of substantially all of the assets or stock of an
Affiliate Corporation of which the Optionee is then an employee, officer
or director or consultant, then the Board may, in its discretion, cause
each Option under the Plan (in
4
<PAGE>
case of an event described in (i)) or each Option granted to an
employee, officer, director or consultant of an Affiliate Corporation
with respect to which an event described in (ii) has occurred, as
applicable, (in each case, an 'Affected Option') to become immediately
and fully exercisable. In addition, in any such event, the Committee may
terminate simultaneously with the happening of such event each Affected
Option, and the Company shall pay the Optionee in lieu thereof an amount
equal to (a) the excess of the Fair Market Value over the Option Price
of one share of Common Stock on the date on which such event occurs,
multiplied by (b) the number of shares of Common Stock subject to the
Option.
(i) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by
the Option until the date of the issuance of a stock certificate to him or
her for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distribution of other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 8(h).
(j) Other Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions, including, without limitation, (i) the
imposition of restrictions upon the exercise of an Option and (ii) in the
case of an Incentive Stock Option, the inclusion of any condition not
inconsistent with such Option's qualifying as an Incentive Stock Option, as
the Committee shall deem advisable.
9. AUTOMATIC DIRECTOR OPTIONS
(a) All Options granted pursuant to this Section 9 ('Formula Director
Options') shall be nonqualified stock options and the Option Price per share of
Formula Director Options shall be the Fair Market Value of a share of Common
Stock on the date of grant.
(b) (1) Except as may be otherwise determined by the Committee, upon
becoming a member of the Board, each Eligible Director (other than members of
the Board on the date of the annual stockholders' meeting in 1997) shall be
granted automatically without action by the Committee, an Option to purchase
15,000 shares of Common Stock.
(2) Except as may be otherwise determined by the Committee, on the date of
the annual stockholders' meeting first occurring after the first anniversary of
a grant to an Eligible Director pursuant to paragraph b(1) above, such Eligible
Director shall be granted an Option to acquire 7,500 shares of Common Stock.
(3) Except as may be otherwise determined by the Committee, on the date of
each annual meeting of stockholders commencing with the annual meeting in 1997,
each Eligible Director, other than a director who has received a grant of
Options pursuant to paragraph b(1) above less than one year prior to such annual
meeting date, will be granted automatically, without action by the Committee, an
Option to purchase 7,500 shares of Common Stock.
(4) Except as may be otherwise determined by the Committee, on the date of
each annual meeting of stockholders commencing with the annual meeting in 1998,
each Eligible Director who has previously received an Option under paragraph
b(2) or b(3) above will be granted automatically, without action by the
Committee, an Option to purchase 7,500 shares of Common Stock.
(c) Subject to Section 8(h) hereof, each Option shall be exercisable as to
all the shares covered by the Formula Director Option on the first anniversary
of the date the Formula Director Option is granted; provided, however, that upon
the Retirement of a director all Formula Director Options held by such director
pursuant to this Section 9 shall become fully vested and exercisable. To the
extent not exercised, installments shall accumulate and be exercisable, in whole
or in part, at any time after becoming exercisable, but no later than the date
the option expires. Sections 8(e) and (f) hereof shall not apply to Formula
Director Options.
(d) Each Formula Director Option shall expire on the first to occur of (i)
the tenth anniversary of the date of grant of the Formula Director Option, (ii)
the second anniversary of the director's termination of service as a member of
the Board other than for Cause or (iii) thirty days following the director's
removal from the Board for Cause.
5
<PAGE>
(e) For purposes of this Section 9, the following terms shall have the
following meanings:
'Cause' shall mean the termination of service as a member of the Board
by a director due to any act of (i) fraud or intentional misrepresentation,
or (ii) embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any affiliate.
'Retirement' shall mean the termination of service as a member of the
Board by a director that occurs (i) after having served as a member of the
Board for at least 10 years and (ii) other than for Cause.
10. OTHER STOCK-BASED AWARDS
The Committee may grant such awards in the form of other stock-based awards
as deemed by the Committee to be consistent with the purposes of the Plan.
Awards granted pursuant to this paragraph may be granted pursuant to the
Company's Key Executive Long-Term Incentive Bonus Plan or any successor thereto.
The Committee shall determine the terms and conditions of such awards at the
date of grant or thereafter.
11. TAXES
The Company or any Affiliate Corporation is authorized to withhold upon
Option exercise, amounts of withholding and other taxes due in connection with
such exercise and to take such other action as the Committee may deem advisable
to enable the Company and Optionees to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Option. The Optionee
may authorize the Company or an Affiliate Corporation to withhold shares of
Common Stock with respect to which the Option is being exercised in satisfaction
of the Optionee's tax obligations.
12. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board.
13. AMENDMENT AND TERMINATION OF THE PLAN
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that, unless otherwise determined by the
Board, an amendment that requires stockholder approval in order for the Plan to
continue to comply with Section 162(m) of the Code or any other law, regulation
or stock exchange requirement shall not be effective unless approved by the
requisite vote of stockholders. Except as provided in Section 8, no suspension,
termination, modification or amendment of the Plan may adversely affect any
Option previously granted, unless the written consent of the Optionee is
obtained.
14. EFFECTIVENESS; APPROVAL OF STOCKHOLDERS
The Plan shall take effect upon its adoption by the Board, but its
effectiveness and the exercise of any Options shall be subject to the approval
of the stockholders of the Company, which approval must occur within twelve (12)
months after the date the Plan is adopted by the Board.
15. EFFECT OF HEADINGS
The section and subsection headings contained herein are for convenience
only and shall not affect the construction of the Plan.
16. COMPLIANCE WITH CERTAIN LAWS
This Plan is intended to comply with the requirements of Section 162(m) of
the Code and shall be interpreted accordingly.
6
<PAGE>
RIDDELL SPORTS INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS--JUNE 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND UNLESS OTHERWISE
PROPERLY MARKED AND EXECUTED BY THE UNDERSIGNED STOCKHOLDER THIS WILL BE VOTED
FOR ALL PROPOSALS AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints each of Robert E. Nederlander and David M.
Mauer, each with full power to act without the other, and with full power of
substitution as the undersigned or any attorneys and proxies of the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of Riddell Sports Inc., to be held at the Harvard Club, 27 West
44th Street, New York, New York on Tuesday, June 24, 1997 at 1:00 p.m., local
time, or at any adjournment or postponement thereof, upon such business as may
properly come before the meeting, including the items set forth below.
1. ELECTION OF DIRECTORS.
<TABLE>
<S> <C> <C>
FOR all nominees below / / WITHHOLD AUTHORITY / /
(except as marked to the contrary below) to vote for all nominees below
</TABLE>
NOMINEES: DON R. KORSTEIN, DAVID M. MAUER, JOHN MCCONNAUGHY, JR., ROBERT E.
NEDERLANDER, GLENN E. ('BO') SCHEMBECHLER AND LEONARD TOBOROFF
INSTRUCTION: To withhold authority to vote for any nominee, write that nominee's
name in the space below.
- --------------------------------------------------------------------------------
2. AMENDING THE COMPANY'S 1991 STOCK OPTION PLAN TO ELIMINATE FIXED GRANTS OF
OPTIONS TO DIRECTORS WHO ARE ALSO SENIOR EXECUTIVE OFFICERS.
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
3. ADOPTING THE COMPANY'S 1997 STOCK OPTION PLAN.
FOR / / AGAINST / / ABSTAIN / /
4. TO RATIFY THE APPOINTMENT OF GRANT THORNTON AS CERTIFIED INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE 1997 CALENDAR YEAR.
FOR / / AGAINST / / ABSTAIN / /
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
DATED:
-------------------------------------------, 1997
-------------------------------------------------
-------------------------------------------------
SIGNATURE
-------------------------------------------------
SIGNATURE IF HELD JOINTLY
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
