FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-19298
RIDDELL SPORTS INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2890400
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
900 Third Avenue, 27th Floor, New York, New York 10022
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (212) 826-4300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
none none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
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.
LIST OF DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the six directors and the executive officers
of the Company is set forth below as of April 25, 1997 and is based upon the
records of the Company and information furnished to it by the directors and
executive officers. See "Security Ownership of Certain Beneficial Owners and
Management" for information pertaining to the Common Stock owned by the
directors.
Positions Has Served as
Name Age with the Company Director since
- ------------------------ ---- --------------------- ---------------
DIRECTORS:
Robert E. Nederlander 64 Chairman of the Board April 1988
David M. Mauer 48 Chief Executive Officer September 1993
(since April, 1993);
President(June 1994
-June 1995)
Leonard Toboroff 64 Vice President April 1988
and Director
Don R. Kornstein 45 Director April, 1995
John McConnaughy, Jr. 67 Director Sept., 1989
Glenn E. "Bo"
Schembechler 67 Director Sept., 1991
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)
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<PAGE> 3
David Groelinger 46 Chief Financial Officer ----
(since March, 1996);
Executive Vice President
(since June, 1996)
Lawrence Simon 41 Senior Vice President ----
and Treasurer (since
March 1996); Vice President,
Chief Financial Officer
& Treasurer (October 1990
-March 1996)
William Sherman 35 Senior Vice President, ----
Institutional Marketing
of Riddell, Inc. (since
December 1995); Vice
President of Riddell,
Inc. (September 1993-
December 1995)
Robert Brasser 39 Senior Vice President, ----
Consumer Products of
Riddell, Inc. (since
December 1995); Vice
President of Riddell,
Inc. (July 1994 -
December 1995)
Set forth below is additional biographical information regarding each director
and executive officer of the Company based on information supplied by them.
Robert E. Nederlander. Mr. Nederlander has been Chairman of the Board of
the Company since April 1988 and was the Company's Chief Executive Officer from
April 1988 through April 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 legitimate 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.; Chairman
of the Board since January 1988 of Mego Financial Corporation. Mr. Nederlander
became a director of Mego Mortgage Corporation in September 1996. Mr.
Nederlander served as Chairman of the Board of Allis-Chalmers Corp. from May
1989 to 1993, when he became Vice Chairman. In 1995, Mr. Nederlander became a
director of HFS Incorporated. In 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.
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.
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. 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.
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<PAGE> 4
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 has been 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.
("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., Pantapec International, Inc., Enviropur Waste Refining and
Technologies, Inc., Wave Systems, Inc., Oxigene, Inc. and Commonwealth Snack
Co. GEO International Inc. filed a petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code in October 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.
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 1996 its Executive Vice
President. Before joining the Company and from 1994 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 the 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.
Lawrence F. Simon. Mr. Simon was Controller of the Company from April
1988 until appointed Treasurer and Chief Financial Officer of the Company in
October 1990. Mr. Simon was Vice President, Chief Financial Officer and
Treasurer from September 1993 through March 1996, when he was appointed Senior
Vice President and Treasurer.
William Sherman. Mr. Sherman joined Riddell, Inc. (one of the Company's
principal operating subsidiaries) in September 1994 as its Vice President-
Institutional Marketing and was elected Senior Vice President in December,
1995. Prior to joining the Company, Mr. Sherman was employed by Wilson
Sporting Goods since 1984. Most recently before joining Riddell, Inc. Mr.
Sherman was Wilson's Vice President of Business Development, responsible for
development for new business categories. Prior to that he was Vice
President/Business Director responsible for research and development,
marketing, purchasing/manufacturing and finance for Wilson's Team Sports
Division. Mr. Sherman also was responsible for license management and
strategic planning for Wilson's licensing program.
Robert Brasser. Mr. Brasser was appointed Senior Vice President, Consumer
Products of Riddell, Inc. (one of the Company's principal operating
subsidiaries) in December 1995 after joining Riddell, Inc. as Vice President
of Retail marketing in July 1994. Prior to joining Riddell, Mr. Brasser served
as Vice President of Sales and Marketing for Matrixx Marketing, Inc. from
September 1991 to June 1994, and from November 1988 to September 1991 was
President of Waveland Associates. Prior to this Mr. Brasser held marketing
positions with Kimberly-Clark and Helene Curtis.
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<PAGE> 5
ITEM 11. 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>
<CAPTIONS>
Long Term
Compensation
Awards
Annual Compensation -------------
---------------------------------------- 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 1994 166,565 -- -- 15,000 --
Officer (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 1995 173,355 -- -- 15,000 11,647
1988) 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) -- 65000 --
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.
The option to acquire 300,000 shares issued in 1993 includes the option to
acquire 100,000 shares so repriced.
(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."
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<PAGE> 6
(6) Required pursuant to the employment agreement between the Company and Mr.
Groelinger. See "Employment Agreements and Change of Control
Arrangements."
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>
<CAPTIONS>
Potential Realizable
Value at Assumed
% of Total Annual Rates of Stock
Number of Options Price Appreciation for
Securities Granted to Exercise Option Term (5)
Underlying Employees In 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.
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<PAGE> 7
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>
<CAPTIONS>
Number of Securities Underlying Value of Unexercised
Unexercised Options in-the-Money Options
at December 31, 1996 at 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). 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. 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.
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<PAGE> 8
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 the
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), 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.
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. Thereafter,
bonuses will be a percentage of his salary, with a target of 40%. Pursuant to
the 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.
The stock options granted to Messrs. Mauer, 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).
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 approximately 47% of the Company's outstanding
Common Stock and management as of April 15, 1997. See "Security Ownership of
Certain Beneficial Owners and Management" and "Restructuring of Ownership of
Company's Stock by Principal Stockholders." Mr. McConnaughy 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 began presenting "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. The Company discontinued these clinics in
1996. Mr. Schembechler is a member of the Compensation Committee and Audit
Committee of the Company's Board.
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<PAGE> 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 15, 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.
The information contained herein has been obtained from the Company's
records, or from information furnished directly by the individual or entity to
the Company or in Form 13D filings or Form 4 filings.
Shares Owned Percent/Shares
Beneficially Outstanding
--------------- -----------
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 3,638,382 (2) 44.2%
810 Seventh Avenue
New York, NY 10019
Leonard Toboroff 1,375,503 (3) 16.8%
c/o Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
John McConnaughy, Jr. 706,808 (4) 8.7%
300 Atlantic Street
Stamford, CT 06901
David M. Mauer 349,025 (5) 4.2%
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 30,000 (7) *
870 Arlington
Ann Arbor, MI 48104
Don R. Kornstein 27,500 (7) *
c/o Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
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<PAGE> -10-
David Groelinger 19,750 (8) *
c/o Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022
All officers and directors as 4,274,750 (9) 48.4%
a group (8 individuals)
Angelo, Gordon & Co., L.P. 1,250,000 (10) 12.9%
245 Park Avenue/26th Fl.
New York, NY 10167
____________________
* Less than 1%
(1) Includes 43,750 shares underlying the Warrant (as defined in Item 13
below) which are currently exercisable. MLC is the direct beneficial
owner of all shares, which (other than shares underlying the Warrant) are
subject to a Voting Trust (the "Voting Trust") pursuant to which Robert
Nederlander is 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 3,623,382 shares beneficially owned by Mr. Nederlander: (i)
1,677,237 shares are owned by Mr. Nederlander directly or through entities
controlled by him having dispositive power over these shares (139,489 of
these 1,677,237 shares underlie options granted under the Company's 1991
Stock Option Plan or the Warrant and are currently exercisable; 830,281 of
those 1,677,237 shares are owned by MLC; and 1,026,873 of these 1,677,237
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 a shareholders agreement to which Mr.
Nederlander and certain other officers and directors of the Company are
parties (the"Shareholders Agreement"). Under Rule 13-d of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") 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 1,375,503 shares of Common Stock beneficially owned by Mr.
Toboroff: (I) 1,228,108 shares are subject to the Shareholders Agreement;
(ii) 666,667 shares are pledged to Bestin Worldwide Limited and (iii)
124,538 shares underlie options granted under the Company's 1991 Stock
Option Plan and the Warrant that are currently exercisable.
(4) Of the 706,808 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) 54,739 shares underlie
options granted under the Company's 1991 Stock Option Plan and the Warrant
that are currently exercisable. Mr. McConnaughy has sole voting power
with respect of 30,000 of the 706,808 shares.
(5) Of the 349,025 shares of Common Stock beneficially owned by Mr. Mauer: (i)
56,266 shares are subject to the Shareholders Agreement; and (ii) 292,759
shares in the aggregate underlying options granted under the Company's
1991 Stock Option Plan and the Warrant that are exercisable currently.
(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 underlie options granted under
the Company's 1991 Stock Option Plan and the Warrant that are exercisable
currently.
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<PAGE> -11-
(7) Represents shares underlying an option granted under the Company's 1991
Stock Option Plan that is currently exercisable.
(8) Includes 16,250 shares underlying that portion of an option to acquire an
aggregate of 65,000 shares that is currently exercisable at $4.63 per
share. The option vests 25% per annum commencing March 7, 1997 and is
exercisable through March 7, 2006.
(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 "Notes") convertible into
166,667 shares of the Company's Common Stock held for its own account and
$6,500,000 principal amount of Notes 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.
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ITEM 13. 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). 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 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 in consideration for the extension of the
MLC Note. In August 1995 certain of the original partners withdrew from MLC,
and 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.
The undersigned registrant hereby amends its Form 10-K for the Fiscal Year
Ended December 31, 1996 to include the information contained herein in response
to Part III of Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized on this 25th day of April, 1997.
RIDDELL SPORTS INC.
By: LISA J. MARRONI
------------------------
Lisa J. Marroni
Vice President
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