<PAGE>
As filed with the Securities and Exchange Commission on February 13, 1998
Registration Number 333-43247
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT No. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RIDDELL SPORTS INC.
(Exact name of registrant as specified in charter)
Delaware 22-2890400
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
900 Third Avenue, New York, NY 10022
(212) 826-4300
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
(State or other jurisdiction of incorporation or organization)
Lisa J. Marroni, Esq.
General Counsel and Vice President
Riddell Sports Inc.
900 Third Avenue, 27th Floor
New York, New York 10022
(212) 826-4300
(name and address, including zip code and telephone number,
including area code of agent for service)
Copies to:
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Sheldon S. Adler, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue, New York, New York 10022
(212) 735-3000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and thereafter
from time to time as determined by the Selling Stockholders.
If the only securities being registered on this form are being offered pursuant
to dividend reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]___________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ]_____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Maximum Maximum
Amount Aggregate Aggregate Amount of
Title of Each Class of to be Price Per Offering Registration
Securities to be Registered Registered Security Price Fee
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<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 1,395,011 Shares (1) $4.25 (2) $5,928,796.75 (2) $1,749.00 (2)
Common Stock,
$.01 par value 224,042 Shares (3) $4.95 (4) $1,109,007.90 (4) $327.16 (4)
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</TABLE>
(1) These 1,395,011 shares were previously registered and the filing fee of
$1,749.00 was previously paid.
(2) Based upon the average of the high and low sale price reported on the
NASDAQ-NMS as of December 19, 1997.
(3) These additional 224,042 shares are being registered on behalf of certain
other selling stockholders who have exercised registration rights since
the date of filing the original registration statement. The filing fee
is being paid herewith.
(4) Based on the average high and low sales price reported on the NASDAQ-NMS
as of February 10, 1998.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
<PAGE>
1,619,053 Shares
RIDDELL SPORTS INC.
Common Stock
This Prospectus relates to 1,395,011 shares of common stock ("Common
Stock") of Riddell Sports Inc. (the "Company") to be offered from time to time
by Angelo, Gordon & Co., L.P. and Silver Oak Capital, L.L.C. and 224,042 shares
of Common Stock to be offered from time to time by Gregory C. Webb, W. Kline
Boyd, Elizabeth Metcalfe Boyd and J. Kristin Shepherd (the "Selling
Stockholders"). Upon conversion of $1,000,000 principal amount of the Company's
4.1% Convertible Subordinated Note due November 1, 2004 (the "Convertible
Note"), Angelo, Gordon & Co., L.L.P. will acquire 186,001 shares of Common
Stock. Upon conversion of $6,500,000 principal amount of the Convertible Note,
Silver Oak Capital L.L.C. will acquire 1,209,010 shares of Common Stock.
The Company will receive no proceeds from the sale of shares offered
hereby. The Selling Stockholders are free to offer shares of Common Stock
pursuant to this Prospectus at such prices as they shall determine. To the
extent required, the terms of sale of Common Stock offered hereby in respect of
which this Prospectus is delivered will be set forth in an accompanying
Prospectus Supplement. See "Principal Stockholders and Selling Stockholders" and
"Plan of Distribution." The Common Stock is quoted on the National Association
of Securities Dealers Automated Quotation National Market System (the
"NASDAQ-NMS") under the symbol "RIDL." On February 12, 1998, the last sale of
price of the Common Stock, as reported by NASDAQ-NMS, was $4 15/16 per share.
-----------
See "Risk Factors" beginning on page 7 of this Prospectus for a
discussion of certain factors which should be considered by prospective
purchasers of the shares of Common Stock offered hereby.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is February 13, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Public Reference Room 1024 of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at 500
West Madison Avenue, Suite 1400, Chicago, Illinois 60661-2511; and New York
Regional Office, Seven World Trade Center Suite 1300, New York, New York 10048.
Copies of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. Such reports, proxy and information statements and other
information may be found on the SEC's site address, http://www.sec.gov. Reports,
proxy statements and other information concerning the Company can also be
inspected and copied at the offices of the National Association of Securities
Dealers, National Market System, 1735 K Street NW, Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement filed by
the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus omits certain of the information
contained in the registration statement, and reference is hereby made to the
registration statement and to the exhibits relating thereto for further
information with respect to the Company and the securities offered hereby. Any
statement contained or incorporated by reference herein concerning the
provisions of any document is not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
registration statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, including all amendments filed for the purpose
of updating or completing such reports, which have been filed by the Company
with the Commission pursuant to the Exchange Act, are hereby incorporated by
reference in this Prospectus:
(A) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 as amended by Form 10K-A dated April
25, 1997and the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997.
(B) The Company's Form 8-K dated May 9, 1997. The Company's Form
8-K dated June 6, 1997. The Company's Form 8-K dated June 19,
1997. The Company's Form 8-K dated December 23,1997. The
Company's Form 8-K dated February 11, 1998.
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<PAGE>
(C) The description of the Common Stock set forth in the Company's
Amended and Restated Articles of Incorporation and First
Amended and Restated By Laws (incorporated by reference to the
Company's Form 10-Q dated November 11, 1996 and the Company's
Form 10-K for the year ended December 31, 1995, respectively).
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents.
Any statement contained herein or in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified,
replaced, or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person, including any beneficial
owner, to whom this Prospectus is delivered, on written or oral request of such
person, a copy of any or all of the foregoing documents incorporated herein by
reference (other than exhibits to such documents unless such exhibits are
incorporated by reference therein). Requests should be directed to the attention
by mail to Lisa Marroni, Esq., General Counsel, Riddell Sports Inc., 900 Third
Avenue, 27th Floor, New York, New York 10022, or by telephone at (212) 826-4300.
THE OFFERING
Securities offered............................ 1,619,053 shares of Common
Stock by the Selling
Stockholders
Common Stock outstanding immediately
prior to the offering(1) ...................... 9,109,654 shares
Common Stock outstanding immediately
after the offering(1)(2)....................... 10,504,665 shares
Use of Proceeds................................ The Company will receive no
proceeds from the sale of
shares being offered
hereby.
NASDAQ-NMS symbol.............................. RIDL
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(1) Excludes 2,154,475 shares issuable upon exercise of options granted
pursuant to the Company's 1991 Stock Option Plan and 1997 Stock Option Plan as
of February 10, 1998. Also excludes 172,152 shares issuable upon exercise of a
warrant which the Company issued to NBD Bank and 150,000 shares issuable upon
exercise of a warrant granted to M.L.C. Partners Limited Partnership.
(2) Assumes conversion of the Convertible Note, which is currently
outstanding into 1,395,011
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<PAGE>
shares of Common Stock.
THE COMPANY
GENERAL
The Company is the world's leading manufacturer and reconditioner of
football protective equipment and is the nation's leading supplier of products
and services to the school spirit industry. The Company is a holding company
that conducts its business through two principal operating divisions: the
Riddell Group Division ("Riddell") and the Varsity Group Division ("Varsity").
The Company believes that the Riddell brand is one of the best known and
recognizable in all of sports. Management estimates that Riddell football
equipment is worn by more than 80% of all professional National Football League
("NFL") players, and by more than 50% of all high school and collegiate players.
In addition to the sale of new protective athletic equipment, Riddell is the
only national reconditioner of athletic equipment. Additionally, Riddell markets
both full-size and miniature collectible helmets and other collectible products,
and licenses its Riddell(R) and MacGregor(R) trademarks for use on athletic
footwear and apparel. Varsity designs and markets innovative cheerleader, dance
team and booster club uniforms and accessories for sale to the school spirit
industry. Varsity is also a leading operator of high school and college
cheerleader and dance team camps. Varsity promotes its products and services, as
well as the school spirit industry, by organizing and producing various
nationally televised cheerleading and dance team championships and other special
events. The Company believes that it has one of the largest nationwide direct
sales forces that focuses on the extracurricular activities segment of the
educational institutional market (the "Institutional market").
RIDDELL
Riddell is the world's leading manufacturer of high school, college and
professional football helmets, with market share estimated at over 50%. Riddell
sells in excess of 200,000 football helmets a year, over 100,000 of which are
used by high school, varsity, collegiate and professional players. Riddell also
sells shoulder pads, including a line of premium pads under the Power(TM) name,
as well as a line of accessory pads which include thigh, hip, rib and knee pads.
Through its subsidiary, All American Sports Corporation ("All American"),
Riddell is the word's leading reconditioner of football helmets, shoulder pads
and other related equipment. Reconditioning typically involves cleaning,
sanitizing, buffing or painting, and recertifying helmets as conforming to the
National Operating Committee on Standards for Athletic Equipment ("NOCSAE")
standards. NOCSAE, a committee comprised of sports equipment manufacturers,
including Riddell, establishes industrywide standards for protective athletic
equipment. Riddell may also replace face guards, interior pads and chin straps.
In addition, Riddell reconditions shoulder pads, as well as equipment for other
sports, including baseball and lacrosse helmets, catchers' masks and baseball
gloves. Riddell believes its customer relationships are strengthened by
providing reconditioning services through its Institutional market sales force
to the same athletic coaches generally responsible for athletic equipment
purchases.
Riddell maintains a promotional rights agreement with the NFL's licensing
division (the "NFL Agreement") which requires the Riddell name to appear on the
front and on the chin straps of
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each Riddell helmet used in NFL play. The NFL Agreement further requires all
teams in the NFL to cover any indicia of brand identification of other
manufacturers which might otherwise appear on helmets, face masks or chin straps
not manufactured by Riddell but used during league play. The recognition
resulting from the frequent appearance of the Riddell name on helmets in
televised football games as well as in photographs in newspapers and magazines
such as Sports Illustrated is viewed by management as important to its overall
sales, marketing and licensing efforts. The NFL Agreement, which originated in
1989, expires in April 1999 and automatically extends for unlimited successive
five-year periods thereafter, provided that the quality of Riddell's helmets and
shoulder pads remains comparable to the best available technology as reasonably
determined by the NFL.
To better capitalize on Riddell's premium brand name, in 1993, David
Mauer, the former President of Mattel U.S.A., became Riddell's Chief Executive
Officer and initiated a strategic repositioning of Riddell's business, including
assembling Riddell's current management team. In October 1994, management
implemented a significant change in its Institutional distribution system by
eliminating the network of independent team dealers which historically sold
Riddell's products to the Institutional market and began selling athletic
equipment directly to its Institutional customers. Riddell implemented its
strategy by utilizing the All American reconditioning sales force that had
previously been selling reconditioning services to its Institutional customers.
Management subsequently increased All American's full-time sales force from 80
in 1994 to 114 in 1996. The change to direct sales has (i) enabled Riddell to
increase its sales and profitability, (ii) facilitated the introduction and
cross-selling of Riddell's non-football-related products such as practicewear
and baseball equipment, (iii) improved control over the sales efforts to
Institutions and (iv) provided better access to detailed sales information for
analysis.
In addition to repositioning its Institutional marketing effort,
management also refocused its retail collectible business. Riddell's retail
collectible business began with miniature and full size collectible football
helmets displaying NFL and college team logos. Management's strategy with
respect to the retail collectible market has been to (i) reduce production
costs, (ii) segregate products by distribution channels and (iii) accelerate new
product development. Riddell introduced several new collectible products,
including miniature hockey goalie masks displaying National Hockey League
("NHL") team logos in 1995 and miniature baseball batter helmets displaying
Major League Baseball ("MLB") team logos in 1997. Riddell was granted a license
from Lucasfilm, Ltd. to sell half-scale Star War miniature collectibles in the
United States, Riddell's first non-sports collectible product. Riddell began
shipping Star Wars collectibles in the second quarter of 1997, and this license
extends through December 1998.
Under management's strategic plan, effective since 1993, Riddell's
operating performance has significantly improved. Its net revenues have
increased from $48.8 million in fiscal 1993 to $72.4 million in fiscal 1996 and
EBITDA has increased from a $3.8 million deficit to $7.9 million over that same
time period.
VARSITY
Varsity is a leading provider of products and services to the school
spirit industry. Varsity designs and markets cheerleader, dance team and booster
club uniforms and accessories and is one of the nation's leading operators of
youth, junior high, high school and college cheerleader and dance team camps,
clinics and competitions. Varsity promotes its products and services, as
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well as the school spirit industry, by organizing and producing various
nationally televised cheerleading and dance team championships and other special
events. Varsity's primary market includes participants at the approximately
37,500 Institutions located throughout the United States.
Varsity's cheerleader and dance team fashion division maintains an
excellent reputation for quality, design and on time delivery of its products.
Such products, which bear the Varsity(TM) label, include custom-made cheerleader
and dance team uniforms and accessories, including sweaters, sweatshirts,
jumpers, vests, skirts, warm-up suits, t-shirts, shorts, pompons, socks, shoes,
pins, jackets and gloves. By relying on independent manufacturers to produce its
uniforms, Varsity is able to minimize its fixed costs and retain the flexibility
necessary to adjust the manufacturing to its highly seasonal production needs.
Varsity provides its manufacturers with patterns, fabrics, yarn and
manufacturing specifications for its products. Varsity also provides some
cutting, knitting and lettering for the manufacturers at its specialized
production facility located at its Memphis headquarters. Varsity considers
itself an innovator in the design of uniforms and campwear garments and
maintains an in-house design staff to maintain its leadership in setting design
trends.
Varsity's camp division commenced operations in 1975 with 20 cheerleading
camps and 4,000 participants. Today, through its Universal Cheerleaders
Association ("UCA") division and United Spirit Association ("USA") subsidiary,
Varsity is a leading operator of cheerleader and dance camps in the U.S. Camp
enrollment has increased every year since Varsity has been in business, has
grown at a compounded annual rate of 14.6% since 1991 (excluding growth from
acquisitions) and totaled 188,000 participants in 1996. Camp sessions, which are
primarily held on college campuses in the summer, were conducted in every state
as well as in Canada and Japan in 1996. Participants in Varsity's 1996 summer
camps included the cheerleading and/or dance team squads of approximately 65% of
the universities comprising the Atlantic Coast, Big East, Big Ten, Big Twelve,
Pacific 10 and Southeastern collegiate athletic conferences. Varsity instructors
are typically college cheerleaders who may have previously attended a Varsity
camp, and management believes that its training of many of the top college
cheerleading squads augments its recruiting of high school and junior high
school camp participants.
Varsity promotes its products and services through active and visible
association with the following championships and television specials: the
National College Cheerleading and Dance Team Championship(R) (nationally
televised for 12 consecutive years), the National High School Cheerleading
Championship(R) (17 consecutive years), the National Dance Team Championship(R)
(10 consecutive years) and the National All Star Cheerleading Championship(R) (2
consecutive years). In addition to promoting cheerleading and dance team
activities, these championships, television specials and other special events
are a revenue source to Varsity primarily during the first and fourth quarters.
In 1996, approximately 25,000 persons, including cheerleaders and their
families, participated in Varsity's special events, such as championships and
holiday parades in the U.S., London and Paris.
In December, 1994, Varsity acquired Intropa International/U.S.A., Inc.
("Intropa"), a Varsity supplier since 1988. Intropa specializes in providing
international and domestic tours for special interest, performing, youth and
educational groups including Varsity's London and Paris trips.
Varsity's strategy has been to increase revenue and market share by (i)
expanding its school spirit product lines, (ii) strengthening its sales force,
(iii) increasing enrollment in its cheerleader
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and dance team camps as a vehicle to increase participation in special events
such as parades and bowl games and cross-sell products, such as uniforms and
(iv) actively promoting its business as well as the school spirit industry,
primarily though its national televised cheerleading and dance team
championships. Since fiscal 1987, Varsity has significantly expanded the variety
and selection of its uniforms and accessories and increased its direct sales
force to approximately 135 full-time professional sales representatives. Varsity
believes it currently has the largest nationwide full-time direct sales force in
the school spirit industry.
Varsity has experienced significant growth over the last five years.
Revenues have increased at a compounded annual growth rate of 22.1% from
approximately $41.6 million in the years ended March 31, 1993 to approximately
$88.4 million in the year ended December 31, 1996 and EBITDA has increased at a
compounded annual growth rate of 22.1% from $4.6 million to $9.8 million over
the same period.
The Company was incorporated in the State of Delaware in April 1988. The
executive offices of the Company are located at 900 Third Avenue, 27th Floor,
New York, New York 10022 and its telephone number is (212) 826-4300.
RISK FACTORS
Prospective Holders of Common Stock should carefully consider the specific
factors set forth below, as well as the other information included in this
Prospectus before deciding to purchase any Common Stock.
Significant Leverage and Indebtedness Service
The Company incurred substantial indebtedness in connection with its
acquisition of Varsity Spirit Corporation (the "Acquisition") in June, 1997. As
of September 30, 1997, the Company had total consolidated indebtedness of
approximately $129.1 million. The Company's earnings on a pro forma basis after
giving effect to the Acquisition and refinancing of the Company's indebtedness
(collectively, the "Transactions") for the year ended December 31, 1996 were
inadequate to cover fixed charges by $1.0 million. Subject to the restrictions
in the Company's debt agreements, including its $35 million Credit Facility with
NationsBank N.A. and NBD Bank (the "Credit Facility") and the indenture (the
"Indenture") governing the Company's $115 million principal amount of 10.5%
Senior Notes due 2007 (the "Senior Notes"), the Company and its subsidiaries may
incur additional indebtedness from time to time to finance capital expenditures
and acquisitions and for other general corporate purposes.
The degree to which the Company is leveraged could have important
consequences to the holders of the Common Stock, including: (i) the possible
limitation in the future of the Company's ability to obtain additional financing
for working capital, capital expenditures, debt service requirements or other
purposes; (ii) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of the principal of and interest on its
indebtedness, thereby reducing funds available for operations; (iii) certain of
the Company's borrowings, primarily the borrowings under the Credit Facility,
will be at variable rates of interest which could cause the Company to be
vulnerable to increases in interest rates; and (iv) the Company may be more
vulnerable to economic downturns and be more limited in its ability to withstand
competitive
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pressures than its competitors that are not as highly leveraged.
The Company's ability to make scheduled payments of the principal of, or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control, as well as the
availability of borrowings under the Credit Facility or successor facilities and
any provisions of law which generally may restrict the Company's subsidiaries
from making distributions to the Company (such as laws restricting dividends to
the extent of adequate capital). However, based upon the current and anticipated
level of operations, the Company believes that its cash flow from operations,
together with amounts available under the Credit Facility, will be adequate to
meet its anticipated cash requirements for the next several years for working
capital, capital expenditures, interest payments and scheduled principal
payments. There can be no assurance, however, that the Company's business will
continue to generate cash flow at or above current levels. If the Company is
unable to generate sufficient cash flow from operations in the future to service
its indebtedness, it may be required to refinance all or a portion of its
existing indebtedness, or to obtain additional financing or to dispose of
material assets or operations. The Credit Facility and the Indenture restrict
the Company's ability to sell assets and the use of proceeds therefrom. There
can be no assurance that any such refinancing or asset sales would be possible
under the Company's debt instruments existing at such time, that the proceeds
which the Company could realize from such refinancing or asset sales would be
sufficient to meet the Company's obligations then due or that any additional
financing could be obtained.
Restrictive Covenants and Asset Encumbrances
The Credit Facility and the Indenture contain numerous restrictive
covenants which limit the discretion of the management of the Company with
respect to certain business matters. These covenants place significant
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to pay dividends
or make other restricted payments, to make investments, loans and guarantees and
to sell or otherwise dispose of a substantial portion of assets to, or merge or
consolidate with, another entity. The Credit Facility also contains a number of
financial covenants that require the Company to meet certain financial ratios
and tests and provide that a Change of Control (as defined in the Credit
Facility) constitutes an event or default. A failure to comply with the
obligations contained in the Credit Facility or the Indenture, if not cured or
waived, could permit acceleration of the related indebtedness and acceleration
of indebtedness under other instruments that contain cross- acceleration or
cross-default provisions. In addition, the obligations of the Company under the
Credit Facility are secured by substantially all of the assets of the Company.
In the case of an event of default under the Credit Facility, the lenders under
the Credit Facility would be entitled to exercise the remedies available to a
secured lender under applicable law. If the Company were obligated to repay all
or a significant portion of its indebtedness, there can be no assurance that the
Company would have sufficient cash to do so or that the Company could
successfully refinance such indebtedness. Other indebtedness of the Company that
may be incurred in the future may contain financial or other covenants more
restrictive than those applicable to the Credit Facility or the Senior Notes.
Seasonality and Quarterly Fluctuations
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The business and results of operations of both Riddell and Varsity are
highly seasonal and both follow a similar annual pattern. With respect to
Riddell, orders for football products and reconditioning services are solicited
over a sales cycle that begins in the fall of each year and continues until the
start of football play at the end of the following summer. Delivery of products
and performance of reconditioning services are solicited over a sales cycle that
begins in the fall of each year and continues until the start of football play
at the end of the following summer. Delivery of products and performance of
reconditioning services reaches a low point during the football playing season.
These activities contribute most to profitability in the first through third
quarters of each calendar year. Riddell sells most of its competitive football
products and reconditioning services on dated payment terms with payments from
customers generally due the following July or August. Accordingly, trade
receivables increase throughout the year as sales are made on these dated
payment terms. The increase in trade receivables continues throughout an annual
cycle until reduced at the end of the cycle, generally in the following July to
October period, as the dated receivables become due. In order to finance the
resulting large receivable levels, Riddell requires a revolving line of credit.
The outstanding balance on the revolving line of credit generally follows the
receivable cycle described above, increasing as the level of receivables
increases until the mid summer of each year when collections of the dated
receivables are used to reduce the outstanding balance on the line.
The Company expects that its new debt structure will impact the
seasonality of its working capital demands as the semi-annual interest payments
on the $115 million of 10.5% Senior Notes come due each January and July.
Varsity's cheerleader and dance team camps are held exclusively in the
summer months. Sales of Varsity's cheerleader, dance team and booster club
uniforms and accessories primarily occur prior to the beginning of the school
year. Accordingly, a substantial portion of Varsity's annual revenues and all of
its net income is generated in the second and third quarters of each calendar
year, respectively, while the first and fourth quarters have historically
resulted in net losses. Varsity's working capital needs have generally followed
a similar pattern reaching their peak at the end of the first calendar quarter
and continuing through the second quarter. This period follows Varsity's
off-season period during which it generates only nominal revenues while
incurring expenditures in preparation for its approaching peak season.
Dependence on Third-Party Foreign Manufacturing
A large portion of Riddell's merchandise is sold through retail channels
and certain protective athletic equipment, such as shoulder pads, are currently
manufactured to its specifications by independent manufacturers located
throughout the world. In particular, all of Riddell's mini-helmet collectibles
are manufactured in China. Riddell has no long term contracts with its
manufacturers and competes with other companies for production capacity.
Riddell's arrangements with its non-U.S. suppliers are subject to the risks
generally associated with doing business abroad, such as changes in import
duties, tariffs, foreign governmental regulations, political unrest, foreign
currency fluctuations, disruptions or delays in shipments, changes in economic
conditions in countries in which Riddell's manufacturing sources are located and
other factors. Additionally, manufacturing in foreign countries adds weather and
time risk largely associated with transoceanic shipping. Riddell cannot predict
the effect that such factors will have on its manufacturers. If any such factors
were to render the conduct of business in a particular country undesirable or
impractical, or if Riddell's current foreign manufacturers were to cease doing
business with Riddell
-10-
<PAGE>
for any reason, Riddell's business and operating results could be severely
impacted. Riddell cannot predict whether additional United States quotas,
duties, taxes or other charges or restrictions will be imposed upon the
importation of its products in the future, or what effect any such actions would
have on its business, financial condition and results of operations.
Product Liability Claims; Uncertainty of Insurance Coverage; and Personal Injury
Claims
Given the nature of the products manufactured by Riddell, particularly its
line of football helmets, Riddell has in the past and will continue in the
future to be subject to product liability claims. Currently certain subsidiaries
are defendants in various product liability suits relating to personal injuries
allegedly related to the use of Riddell helmets or helmets reconditioned by the
Company. The ultimate outcome of these claims, or potential future claims, and
their effect on the Company's business, financial condition and results of
operations cannot presently be determined. Riddell estimates that the uninsured
portion of future costs and expenses related to these claims, and incurred but
not reported claims, would amount to at least $3.6 million at September 30, 1997
and, accordingly, a reserve in this amount is included in the Consolidated
Balance Sheet of Riddell as of September 30, 1997 as part of accrued liabilities
and other liabilities. These reserves are based on estimates of losses and
defense costs anticipated to result from such claims based on available
information, including an analysis of historical data such as the rate of
occurrence and the settlement amounts of past cases. However, due to the
uncertainty involved with estimates, actual results have at times varied
substantially from earlier estimates and could do so in the future. Accordingly,
there can be no assurance that the ultimate costs of such claims will fall
within the established reserves.
The Company maintains product liability insurance under an insurance
program initiated in December 1994. In January 1998, the Company and its insurer
restructured this insurance program replacing the existing policy with a new
policy extending coverage through January 2005, three years beyond the previous
policy term, and providing reduced annual fixed cost with no material change in
the scope of coverage. The policy is an occurrence-based policy providing
coverage against claims currently pending against the Company and future claims
relating to injuries occurring prior to January 2005 even if such claims are
filed after the end of the policy period. The insurance program provides certain
basic and excess coverage on product liability claims. The policy provides
combined aggregate coverage of over $40,000,000 subject to the limitations
described below.
The basic insurance coverage under the policy ("Basic Coverage") provides
coverage of up to $2,250,000 per claim in excess of an uninsured retention
(deductible) of $750,000 per occurrence. The Basic Coverage is subject to an
aggregate program limit and certain annual aggregate sub limits. The aggregate
program limit, which is currently $4.3 million, increases by 120% of future
premiums paid until a maximum aggregate limit of $7.7 million is reached.
The insurance program also provides for additional coverage ("Excess
Coverage") of up to $20,000,000 per occurrence, in excess of the first
$3,000,000 of each claim. The Basic Coverage, to the extent available, covers
the initial $3,000,000 layer. Claims covered by the Excess Coverage are subject
to one of two separate $20,000,000 aggregate policy limits, depending on the
date of the related injury. The first $20,000,000 aggregate limit applies to
claims for injuries occurring prior to January 31, 1998. Claims occurring after
January 1998 are covered by the second separate $20,000,000 aggregate limit.
The Company's product liability insurance carrier is a division of American
International Group, Inc. which has been rated A++XV by A.M. Best Property and
Casualty Insurance Ratings Company. There is no certainty that coverage will
remain available to the Company after 2005, that the Company's insurer will
remain viable, or that the insured amounts will be sufficient to cover all
future claims in excess of the Company's uninsured retention. Furthermore,
future rate increases might make such insurance uneconomical for the Company to
maintain after 2005.
Cheerleading is a vigorous athletic activity involving jumps, tumbling,
partner stunts and pyramids, with which there are associated risks of personal
injury. Varsity actively promotes safety among cheerleaders, dance team
participants and coaches and was a founding member of and
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<PAGE>
is an active participant in the American Association of Cheerleading Coaches and
Advisors, an industry trade group whose mission is to improve the quality of
cheerleading and to maintain established safety standards. During the past 17
years, Varsity has been subject to four personal injury claims arising from its
cheerleader and dance team camps, and is presently subject to two such claims.
Varsity believes it is adequately insured against such risks. There can be no
assurance, however, that one or more meritorious claims against Varsity for
serious personal injury would not have an adverse effect upon the Company's
business, financial condition and results of operations.
Risk of Loss of Material License and Other Contractual Relationships
Riddell is currently a party to several license agreements as a licensor
and has retained an independent licensing agent to help expand its licensing
program. Approximately 2% of the Company's consolidated revenues and
approximately 14% of the Company's EBITDA for the year ended December 31, 1996
on a pro forma basis after giving effect to the Transactions would have resulted
from its licensing activities. Royalties paid to the Company by Kmart for the
use of the MacGregor trademark constituted approximately 70% of licensing
revenues for 1996 and constituted approximately 82% of the Company's licensing
revenues from the MacGregor trademark rights for 1996. Of such royalties paid to
the Company by Kmart, 36% were derived with respect to athletic footwear and 41%
with respect to apparel. An agreement in principal has been reached with
Meldisco, a division of Footstar, Inc. pursuant to which Meldisco will continue
to sell athletic footwear bearing the MacGregor trademark in Kmart stores under
the Kmart license. Kmart has an exclusive license to use the MacGregor trademark
on certain athletic apparel (e.g., socks, jogging suits and sweat separates).
The Company anticipates establishing a new license for the apparel category
after the Kmart license expires in June 1998, but no assurance can be given that
such renewal will occur. A material decline in the royalties from the MacGregor
trademark rights could have a material adverse effect on the Company's results
of operations. The unamortized cost of the related MacGregor trademark rights
and license agreements included in intangible assets at December 31, 1996 was
approximately $14.4 million. If there were a material decline in the revenues
from the MacGregor trademark, then the carrying amount of the MacGregor
trademark rights could be deemed to have been impaired. A write-down for such
impairment could have a material adverse effect on the Company's business,
financial condition and results of operations. While the Company believes
Riddell will be successful in replacing all or some of the categories of
products currently licensed to Kmart in a manner which will continue to generate
revenues sufficient to support the carrying value of the trademark rights, there
can be no assurance that it will be successful in doing so. While Riddell
believes its relationships with its other licensees and licensors are good,
there can be no assurance that such license agreements will be renewed upon
expiration or that the Company will be successful in entering into new license
agreements in the future.
In addition to the foregoing licensing agreements, the Company has formed
several strategic alliances to promote its business. Since April 1989 Riddell
has had an exclusive promotional rights agreement with the NFL pursuant to which
the Riddell brand is the only name that can be displayed on helmets used in NFL
play. Riddell's agreement with the NFL expires in April 1999 and automatically
extends for unlimited successive five-year periods thereafter, provided that the
quality of Riddell's helmets and shoulder pads remain comparable to the best
available technology as reasonably determined by the NFL.
-12-
<PAGE>
Since 1989, Varsity has organized and produced various national
cheerleading and dance team championships for exclusive broadcast on the ESPN,
Inc. ("ESPN") cable channel. Varsity's current agreement with ESPN expires after
the 1998 season. In 1996, Varsity entered into several agreements with Walt
Disney Attractions, Inc. ("Walt Disney Attractions") pursuant to which its
national cheerleading and dance team championships through 1999 will be held at
Walt Disney World(R) Resort in Florida. While the Company believes that it will
be successful in renewing or replacing the agreements with the NFL, ESPN and
Walt Disney Attractions in a manner which will continue to promote the Company's
products and services, there can be no assurance that it will be successful in
doing so or that it will be able to do so on economically favorable terms.
Although the Company believes that the failure to renew any one of the
agreements with the NFL, ESPN and Walt Disney Attractions would not have a
material effect on the Company, there can be no assurance that the loss of all
or any combination of such agreements would not have a material adverse effect
on the Company's business, financial condition and results of operations.
Initiation of Direct Sales Of Youth Helmets
For strategic reasons, at the time the Company decided to eliminate the
dealer network for products sold to the institutional market, the Company
decided to continue selling competitive youth equipment through independent
dealers and distributors. The Company experienced an anticipated decline in the
sale of youth products as a result of this decision as many dealers stopped
purchasing Riddell youth products when they were no longer offered the Company's
institutional product lines. In early 1998 the Company decided to commence
selling competitive youth football products directly to coaches and youth
groups, and will continue to offer youth products to dealers. This strategy
could lead to lower youth sales through dealers which may or may not be offset
by direct sales.
Competition and Market Share Data
In its Institutional athletic products business, Riddell competes with
several larger national companies, such as Rawlings Sporting Goods Company,
Inc., Diamond Sports Co., Wilson Sporting Goods Company, and in its practicewear
business, with national companies such as Champion Products, Inc. and Russell
Athletic, Inc. While none of such national competitors manufactures football
helmets, some of Riddell's competitors offer a broad line of sports equipment
and are significantly larger and have substantially greater financial and other
resources at their disposal than Riddell. Riddell also competes with numerous
smaller manufacturers and suppliers of sporting goods, services and
collectibles. In particular, the protective equipment reconditioning and the
sports collectibles industries are highly fragmented. In late 1994, in response
to Riddell's move to direct sales, Schutt Sports Group, Riddell's primary
competitor in new football equipment, canceled the designation of All American
Sports Corporation's (Riddell's reconditioning subsidiary) as an authorized
reconditioner of AIR(TM) helmets and refused to sell parts for their helmets to
All American. This move has had no measurable impact on Riddell's ability to
recondition AIR helmets and no significant effect on total reconditioning volume
in 1995 or 1996. Although Riddell will continue to source parts from outside
suppliers that meet or exceed AHI's standards and to recertify all AIR helmets
to NOCSAE standards as it had before, AHI's actions could have some limited
impact on the reconditioning volume of All American in future years.
Varsity is one of two major national companies that designs and markets
cheerleader, dance team and booster club uniforms and accessories and is one of
two major national operators of camps. While Varsity's only national competitor
is National Spirit Group Limited ("NSG"), it also competes with other smaller
national and regional competitors that serve the uniform and accessories market
or that operate cheerleader and dance team camps and clinics. Competitive
pressure could have a material adverse effect on the Company's business,
financial condition and results of operations.
The market share and other market data contained in this Prospectus are
based on independent industry publications and the good faith belief of the
Company's management. However, market share data cannot always be verified with
complete certainty due to the unavailability of raw data in certain
circumstances and the voluntary nature of the data gathering process, and
estimates may be incorrect, possibly to a material degree. In particular, the
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<PAGE>
Company is not aware of the availability of reliable statistics with respect to
the actual size of the high school football helmet market. Management's
estimates with respect to this market are based only on the limited data in the
public domain and the Company's participation in the football helmet industry
which contains only one major competitor, a private company that does not reveal
distribution information with respect to the high school market. Accordingly, no
assurance can be given as to the accuracy of management's estimates.
Management's estimates with respect to the collegiate market are based on the
Company's market share data with respect to NCAA teams. Prospective holders of
Common Stock should not place undue emphasis on the market share data contained
in this Prospectus, as there can be no assurance that such data are accurate in
all material respects.
Regulation
At present, no national governing body regulates cheerleading and dance
team activities at the collegiate level. Although voluntary guidelines relating
to safety and sportsmanship have been issued by the NCAA and some of the
athletic conferences, to date cheerleading and dance teams generally are free
from rules and restrictions similar to those imposed on other competitive
athletics at the college level. However, if rules limiting off-season training
are applied to cheerleading and/or dance teams (similar to rules imposed by the
NCAA on other sports), it is likely that Varsity would be unable to offer a
significant number of its camps either because participants would be prohibited
from participating during the summer or because suitable sites would not be
available. Although the Company is not aware of any school officially adopting
these activities as a competitive sport, recognition of cheerleading and/or
dance teams as "sports" would increase the possibility that these activities may
become regulated. If Varsity were restricted from providing its training
programs to colleges and high schools, or if cheerleaders and dance teams were
restricted from training during the off-season, such regulations would likely
have a material adverse effect on Varsity's business, financial condition and
results of operations. However, the Company currently does not believe that any
regulation of collegiate cheerleading or dance teams as a "sport" is forthcoming
in the foreseeable future, and in the event any rules are proposed to be adopted
by athletic associations, the Company expects to participate in the formulation
of such rules to the extent permissible.
At the high school level, some state athletic associations have classified
cheerleading as a sport and have in some cases imposed certain restrictions on
off-season practices and out-of-state travel to competitions. However, in all
cases to date, Varsity has been able to work with these state athletic
associations to designate acceptable times for the cheerleaders within these
states to attend camps. Varsity has also signed agreements with several state
associations to assist with sponsoring and execution of official competitions
with these states. To date, state regulations have not had a material effect on
Varsity's ability to conduct its normal business activities within those states.
Dependence on Key Personnel
The Company's executive officers and certain other key employees of
Riddell and Varsity have been primarily responsible for the development and
expansion of their respective businesses, and the loss of the services of one or
more of these individuals could have an adverse effect on the Company. The
Acquisition combined two separate management teams under the ownership of one
company. The Company's future success will be dependent in part
-14-
<PAGE>
upon its continued ability to recruit, motivate and retain qualified personnel,
as well as the successful integration of the two management teams. There can be
no assurance that the Company will be successful in this regard. The Company has
employment and non-competition agreements with certain key personnel.
Risks Relating to Benefits of the Acquisition
Management expects certain economic benefits to result from the
Acquisition, including the introduction of new products and cross marketing of
products. There can be no assurance that following the Acquisition the Company
will be able to successfully introduce new products or programs or will achieve
the economic benefits that management expects. Realization of such economic
benefits from the Acquisition could also be affected by a number of factors
beyond the Company's control, such as general economic conditions, increased
operating costs, the response of the Company's customers or competitors,
difficulties in launching new products or entering new markets and regulatory
developments.
Shares Eligible For Future Sale
Immediately prior to the Offering, the Company had 9,109,654 shares
outstanding and has reserved for issuance 2,154,475 shares issuable pursuant to
employee stock options granted under the Company'S 1991 Stock Option Plan and
1997 Stock Option Plan, 172,152 shares underlying warrants granted to NBD Bank,
150,000 shares issuable upon exercise of a warrant granted to a principal
stockholder and 1,395,011 shares issuable upon conversion of the Convertible
Note.
As of February 10, 1998, approximately 5,380,937 shares (52.8%) of the
Company's Common Stock is deemed beneficially owned by certain officers and
directors of the Company (determined in accordance with Rule 13d-13(d)(i) of the
Exchange Act) and, according to Rule 144(a)(3) of the Securities Act, are
"restricted securities" which can be sold only pursuant to an effective
registration statement or exemption from registration.
The effect, if any, that future market sales of shares of Common Stock or
the availability of shares for sale will have on the market price prevailing
from time to time cannot be predicted. Nevertheless, sales of substantial
additional amounts of Common Stock in the public market, or the perception that
such sales could occur, could adversely affect the prevailing market price for
the Common Stock.
USE OF PROCEEDS
The Company will receive no proceeds from any sale of the shares being
offered hereby. The Company will bear all expenses of the offering, which are
expected to be approximately $50,000.
-15-
<PAGE>
SELLING STOCKHOLDERS
Upon conversion of their interests in the Convertible Note, Angelo, Gordon
& Co. and Silver Oak Capital L.L.C. (the "Noteholders") will acquire 1,395,011
of the shares of Common Stock offered hereby. The Noteholders purchased the
Convertible Note directly from the Company on October 30, 1996. The
Convertible Note is convertible at any time prior to November 1, 2004 at a
conversion price of $5.3763 per share, subject to adjustments. The Company
granted the Noteholders certain rights to register the Common Stock into which
the Convertible Note is convertible. The Registration Statement, of which this
Prospectus forms a part, was filed pursuant to such registration rights.
Gregory Webb, W. Kline Boyd and J. Kristin Shepherd purchased the
164,561 shares of Common Stock offered by them herein with certain proceeds from
the sale of shares of Varsity Spirit Corporation common stock to the Company in
connection with the Acquisition. Each of Messrs. Gregory Webb and Kline Boyd and
Ms. Kristin Shepherd is a Senior Vice President of Varsity Spirit Corporation, a
wholly-owned subsidiary of the Company. The Company granted these individuals
piggyback registration rights at the time of their purchase of the shares
offered for sale in this Prospectus. Elizabeth Metcalfe Boyd acquired the 59,481
shares of Common Stock offered by her herein from W. Kline Boyd, who purchased
them in addition to the shares offered for sale by him in this Prospectus with
certain proceeds from the sale of Varsity Spirit Corporation common stock in
connection with the Acquisition. Such additional shares also were issued with
piggyback registration rights. The Company has registered the shares owned by
Messrs. Webb and Boyd and Mesdms. Boyd and Shepherd as a result of their
exercise of these piggyback registration rights.
The following table sets forth information as of February 10, 1998
regarding the Selling Stockholders and the shares of the Company's Common Stock
that may be offered from time to time pursuant to this Prospectus.
<TABLE>
<CAPTION>
Number
Shares Beneficially of Shares Shares Beneficially
Owned Prior to Being Owned After the
Offering Sold Offering
------------------- --------- -------------------
<S> <C> <C> <C> <C> <C>
Number Percent Number Percent
Angelo Gordon & Co. L.P. 1,395,011(1)(2) 13.3% 1,395,011(1) 0 0
245 Park Avenue
New York, New York
10167
Gregory Webb 146,317(3) 1.6% 98,617 47,700(3) *
c/o Varsity Spirit
Corporation
2525 Horizon Lake Drive
Memphis, TN 38133
Elizabeth Metcalfe Boyd 77,976(4) * 59,481 18,495(4) *
c/o Varsity Spirit
Corporation
2525 Horizon Lake Drive
Memphis, TN 38133
J. Kristin Shepherd 65,599(5) * 44,074 21,525(5) *
c/o Varsity Spirit
Corporation
2525 Horizon Lake Drive
Memphis, TN 38133
W. Kline Boyd 42,590(6) * 21,870 20,720(6) *
c/o Varsity Spirit
Corporation
2525 Horizon Lake Drive
Memphis, TN 38133
</TABLE>
- ---------
* Less than 1%
(1) Assumes conversion of the Convertible Note, which is currently
outstanding, into shares of Common Stock.
(2) Based on a Schedule 13G filed February 13, 1997, Angelo, Gordon & Co.,
L.P. may be deemed to be the beneficial owner of all the shares of Common Stock
owned upon conversion of the Convertible Note by the Noteholders as a result of
voting and dispositive powers it holds with respect to $1,000,000 principal
amount of the Convertible Note held for its own account and $6,500,000 principal
amount of the Convertible Note which it holds for the account of private
investment funds for which it acts as general partner and/or investment advisor
and a private corporation for which it acts as investment manager. Pursuant to
the Convertible Note, as amended, the Conversion Price (as defined in the
Convertible Note) is $5.376 per share of Common Stock, subject to certain
adjustments.
(3) Of the 146,317 shares beneficially owned by Mr. Webb, 45,000 shares
underlie an option granted under the Company's 1997 Stock Option Plan (the
"Plan") which are fully exercisable at $3.80 per share.
(4) Of the 77,976 shares beneficially owned by Ms. Boyd, 18,495 shares
underlie an option granted under the Plan which are fully exercisable at
$3.80 per share.
(5) Of the 65,599 shares beneficially owned by Ms. Shepherd, 20,250 shares
underlie an option granted under the Plan which are fully exercisable at
$3.80 per share.
(6) Of the 42,590 shares beneficially owned by Mr. Boyd, 18,495 shares
underlie an option granted under the Plan which are fully exercisable at
$3.80 per share.
Sales of a substantial number of shares of Common Stock of the Company
beneficially owned by the Selling Stockholders may have an adverse effect on the
market price of the Company's Common Stock. See "Risk Factors - Shares Eligible
for Future Sale."
-16-
<PAGE>
PLAN OF DISTRIBUTION
Any sale of the Common Stock by the Selling Stockholders will
be for their own account. The Company will receive none of the proceeds from the
sale of the Common Stock.
The Common Stock offered hereby by the Selling Stockholders
may be sold from time to time by one or more of the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest. Such sales may be
made in the NASDAQ National Market System, in the over-the-counter market, or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Common Stock
offered hereby by the Selling Stockholders may be sold in one or more of the
following transactions: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the Common Stock offered hereby by the Selling
Stockholders as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by the broker or dealer for its account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Any broker or dealer to be utilized by the Selling Stockholders
will be selected by such Selling Stockholders. Brokers or dealers will receive
commissions or discounts from the Selling Stockholders in amounts to be
negotiated immediately prior to the sales. These brokers or dealers and any
other participating brokers or dealers, as well as certain pledgees, donees,
transferees and other successors in interest, may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act in connection with the
sales. In addition, any securities covered by this Prospectus that qualify for
sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant to
this Prospectus.
Upon the Company being notified by any Selling Stockholder
that any material arrangement has been entered into with a broker-dealer for the
sale of Common Stock offered hereby by such Selling Stockholder through a block
trade, special offering, or secondary distribution or a purchase by a broker or
dealer, a prospectus supplement will be filed, if required, pursuant to Rule
424(c) under the Securities Act, disclosing: (i) the name of each such Selling
Stockholder and of the participating broker-dealer(s), (ii) the number of
shares of Common Stock involved, (iii) the price at which such shares of Common
Stock were sold, (iv) the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated
by reference in this Prospectus and (vi) other facts material to the
transaction.
In addition, to the extent otherwise required, the amount of
the shares of Common Stock offered by the Selling Stockholders to be sold,
purchase prices, public offering prices, the names of any agents, dealers or
underwriters, and any applicable commissions or discounts with respect to a
particular offer will be set forth by the Company in a prospectus supplement
accompanying this Prospectus or, if appropriate, a post-effective amendment to
the Registration Statement.
-17-
<PAGE>
The Selling Stockholders reserve the sole right to accept and,
together with any agent of the Selling Stockholders, to reject in whole or in
part any proposed purchase of the Common Stock offered hereby by the Selling
Stockholders. The Selling Stockholders will pay any sales commissions or other
seller's compensation applicable to such transactions.
The Selling Stockholders and agents who execute orders on its
behalf may be deemed to be underwriters as that term is defined in Section 2(11)
of the Securities Act and a portion of any proceeds of sales and discounts,
commissions or other seller's compensation may be deemed to be underwriting
compensation for purposes of the Securities Act.
Offers and sales of shares of the Common Stock have not been
registered or qualified under the laws of any country, other than the United
States. To comply with certain states' securities laws, if applicable, the
shares of Common Stock offered by the Selling Stockholders will be offered or
sold in such jurisdictions only through registered or licensed brokers or
declares. In addition, in certain states the Selling Stockholders shares may not
be offered or sold unless they have been registered or qualified for sale in
such states or an exemption from registration or qualification is available and
is complied with.
The Selling Stockholders and any other person participating in
a distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, which provisions may limit the timing of
purchases and sales of any of the shares of Common Stock by the Selling
Stockholders or any such other person, and may affect the marketability of the
Common Stock and the brokers' and dealers' ability to engage in market-making
activities with respect to the Common Stock.
The Company has agreed to indemnify the Noteholders and
certain other persons against certain liabilities including liabilities
arising under the Act arising out of any material misstatement or material
omission from the registration statement or prospectus relating hereto.
The Noteholders have certain other registration rights with
respect to the Common Stock under the agreement relating to the purchase of
the Convertible Note by the Noteholders.
LEGAL MATTERS
Certain legal matters with respect to the validity of the
shares of Common Stock being registered will be passed upon for the Company by
Skadden, Arps, Slate, Meagher & Flom, L.L.P., New York, New York.
EXPERTS
The consolidated financial statements of the Company as of
December 31, 1996 and 1995, and for the years ended December 31, 1994, 1995 and
1996 have been incorporated by reference herein in reliance upon the report of
Grant Thornton LLP, independent certified public
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<PAGE>
accountants, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Varsity Spirit
Corporation, a subsidiary of the Company, as of December 31, 1996 and 1995 and
for the years ended December 31, 1996 and 1995 and for the nine month period
ended December 31, 1994 have been incorporated herein by reference in reliance
upon the report of BDO Seidman, LLP, independent certified public accountants,
and upon the authority of said firm as experts in accounting and auditing.
-19-
<PAGE>
====================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such other
information and representations must not be relied upon as having been
authorized by the Company. Except with respect to facts or events arising after
the date hereof which individually or in the aggregate, represent a material
change in the information set forth herein, neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstance, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct as of any
time subsequent to its date. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy such securities in any circumstances
in which such offer or solicitation is unlawful.
----------
TABLE OF CONTENTS
Page
----
Available Information................................ 2
Incorporation of Certain Documents
by Reference....................................... 2
The Offering......................................... 3
The Company.......................................... 4
Risk Factors......................................... 7
Use of Proceeds...................................... 14
Selling Stockholders................................. 15
Plan of Distribution................................. 16
Legal Matters........................................ 17
Experts.............................................. 17
====================
1,619,053 Shares
RIDDELL SPORTS INC.
Common Stock
----------
PROSPECTUS
----------
February 13, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC registration fee................................. $ 2,076.16
Printing and engraving............................... $ 3,000
NASDAQ listing fee................................... $17,500
Accountants' fees and expenses....................... $ 5,000
Legal fees and expenses.............................. $15,000
Blue Sky Fees........................................ $ 5,000
Miscellaneous Fees................................... $ 3,751
----------
Total......................................... $51,327.16
==========
Item 15. Indemnification of Directors and Officers
The Indemnification of officers and directors of the Company is
governed by Section 145 of the Delaware General Corporation Law (the "DGCL") and
the Certificate of Incorporation (the "Certificate") and By-Laws of the Company.
Among other things, the DGCL permits indemnification of a director, officer,
employee or agent in civil, criminal, administrative or investigative actions,
suits or proceedings (other than an action by or in the right of the
corporation) to which such person is a party is threatened to be made a party by
reason of the fact of such relationship with the corporation or the fact that
such person is or was serving in a similar capacity with another entity at the
request of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, if he had no reasonable cause to
believe his conduct was unlawful. No indemnification may be made in any such
suit to any person adjudged to be liable to the corporation unless and only to
the extent that the Delaware Court of Chancery or the court in which the action
was brought determines that, despite the adjudication of liability, such person
is under all circumstances, fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper. Under the DGCL, to the extent that
a director, officer, employee or agent is successful, on the merits or
otherwise, in the defense of any action, suit or proceeding or any claim, issue
or matter therein (whether or not the suit is brought by or in the right of the
corporation), he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him. In all cases in which
indemnification is permitted (unless ordered by a court), it may be made by the
corporation only as authorized in the specific case upon a determination that
the applicable standard has been met by the party to be indemnified. The
determination must be made (a) by a majority vote of a quorum consisting of the
directors who were not parties to the action even though less than a quorum, or
(b) if there are no such directors, or such directors so direct, by independent
legal counsel in a written opinion, or (c) by the stockholders. The statute
authorizes the corporation to pay expenses incurred by an officer or director in
advance of a final disposition of a proceeding upon receipt of an undertaking by
or on behalf of the person to whom the advance will be made, to repay the
advances if it shall ultimately be determined that he was not entitled to
indemnification. The DGCL provides that indemnification and advances of expenses
permitted thereunder are not to be
-21-
<PAGE>
exclusive of any rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise. The DGCL also authorizes the corporation
to purchase and maintain liability insurance on behalf of its directors,
officers, employees and agents regardless of whether the corporation would have
the statutory power to indemnify such person against the liabilities insured.
The Certificate and the By-Laws each provides that the directors,
officers and others shall be indemnified to the fullest extent authorized by the
DGCL, as in effect (or, to the extent indemnification is broadened, as it may be
amended), against any and all judgments, fines and amounts paid in settling or
otherwise disposing of threatened, pending or completed actions, suits or
proceedings, whether civil, criminal, administrative or investigative and
expenses incurred by such person in connection therewith. The By-Laws further
provide that, to the extent permitted by law, expenses so incurred by any such
person in defending a civil or criminal action or proceeding shall, at his
request, be paid by the Company in advance of the final disposition of such
action or proceeding. The Certificate also eliminates the personal liability of
directors to the fullest extent permitted by the DGCL, as amended from time to
time.
The By-Laws provide that the right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition shall not be exclusive of any other right which any person may have
or acquire under any state law, provision of the Certificate or By-Laws or
otherwise.
In addition to the indemnification as described below, the Company
is a party to employment agreements with each of Messrs. Nederlander, Toboroff
and Mauer (executive officers and directors of the Company) and Messrs. Cougill
(an executive officer of Riddell, Inc., a wholly owned subsidiary of the
Company) and Gleisner (President of All American Sports Corporation, a wholly
owned subsidiary of the Company) indemnifying such individual against liability
arising out of his actions or the performance of his duties within the scope of
his employment not taken in bad faith. In addition, the employment agreements
entered into by the Company and Messrs. Nederlander, Toboroff and Mauer provide
that the Company shall assume primary responsibility for legal fees incurred by
such person in any action as to which such person is entitled to have his legal
fees paid for by the Company, and that the Company shall pay such fees directly
to counsel rather than reimburse such officer.
The Company maintains directors and officers liability and company
reimbursement insurance which among other things, (i) provides for payments on
behalf of its officers in their capacity as such and (ii) provides for payment
on behalf of the Company against such loss pursuant to statutory or common law
or pursuant to duly effective Certificate or By-Law provisions.
Item 16 List of Exhibits
The Exhibits to this Registration Statement are listed in the Index
to Exhibits of this Registration Statement, which is incorporated herein by
reference.
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<PAGE>
Item 17 Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
EXHIBIT INDEX
Exhibit
Nos. Description of Exhibit
- ---- ----------------------
4(a) Amended and Restated Articles of Incorporation (1)
4(b) First Amended and Restated By Laws (2)
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<PAGE>
5(a) Opinion of Skadden, Arps, Slate, Meagher & Flom, L.L.P. (3)
23(a) Consent of Grant Thornton, LLP. (3)
23(b) Consent of BDO Seidman, LLP. (3)
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom, L.L.P (included in
Exhibit 5(a))
24. Power of Attorney (4)
- -------------
(1) Incorporated by reference to Registrants's Form 10-Q dated November
11, 1996.
(2) Incorporated by reference to the Company's Form 10-K for the year
ended December 31, 1995.
(3) Filed herewith.
(4) Previously filed.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on form S-3 and has duly caused this Amendment
No. 1 to Registration Statement (File No. 333-43247) to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of New York,
State of New York, on the 13th day of February, 1998.
RIDDELL SPORTS INC.
By:/s/ David M. Mauer
------------------------------
David M. Mauer
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Robert Nederlander* Chairman of the Board February 13,1998
- ---------------------------------------
Robert Nederlander
/s/ David M. Mauer Chief Executive Officer Febraury 13, 1998
- --------------------------------------- and Director (Principal Executive
David M. Mauer Officer)
/s/ Jeffrey Webb* Vice Chairman, President and February 13, 1998
--------------------------------------- Chief Operating Officer, Varsity
Jeffrey Webb Group Division
/s/ Dan Cougill* President and Chief Operating February 13, 1998
- --------------------------------------- Officer, Riddell Group Division
Dan Cougill
</TABLE>
-25-
<PAGE>
<TABLE>
<S> <C> <C>
/s/ David Groelinger* Executive Vice President, February 13, 1998
- -------------------------------------- Chief Financial Officer
David Groelinger (Principal Financial Officer)
/s/ Leonard Toboroff* Vice President and Director
- --------------------------------------
Leonard Toboroff
/s/ Lawrence Simon* Senior Vice President and Treasurer February 13, 1998
- -------------------------------------- (Principal Accounting Officer)
Lawrence Simon
/s/ Don R. Kornstein* Director February 13, 1998
- --------------------------------------
Don R. Kornstein
/s/ John McConnaughy* Director
- --------------------------------------
John McConnaughy
/s/ Glenn "Bo" Schembechler* Director
- --------------------------------------
Glenn "Bo" Schembechler
* By David M. Mauer, Attorney in Fact
-26-
</TABLE>
<PAGE>
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
February 13, 1998
Riddell Sports Inc.
900 Third Avenue
New York, New York 10022
Re: Offering of up to 1,619,053 Shares of Riddell
Sports Inc. Common Stock by Selling Stockholders
pursuant to Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to Riddell Sports Inc., a
Delaware corporation (the "Company"), in connection with the
preparation of a Registration Statement on Form S-3 (File No. 333-
43247) (the "Registration Statement") relating to the registration for
resale by (i) Angelo, Gordon & Co., L.P. ("Angelo, Gordon") and Silver
Oak Capital, L.L.C. ("Silver Oak" and together with Angelo, Gordon, the
"Convertible Noteholders") of up to 1,395,011 shares of common stock,
par value $.01 per share ("Common Stock"), of the Company issuable upon
the conversion of $7,500,000 principal amount of the Company's 4.1%
Convertible Subordinated Note Due November 1, 2004 (the "Convertible
Note"), and (ii) Gregory C. Webb, W. Kline Boyd, Elizabeth Metcalfe
Boyd and J. Kristin Shepherd (collectively, the "Varsity Executives"
and together with the Convertible Noteholders, the "Selling
Stockholders") of up to 224,042 shares of Common Stock of the Company.
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities
Act of 1933, as amended (the "Act").
In connection with this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement filed with the Securities and Exchange
Commission (the "Commission") on December 24, 1997 under the Act, and
Amendment No. 1 thereto to be filed with the Commission on the date
hereof under the Act (such Registration Statement, as so amended, being
hereinafter referred to as the "Registration Statement"); (ii) an
executed copy of the Registration Rights Agreement dated November 8,
1996 (the "Registration Rights Agreement"), by and between the Company
and Silver Oak; (iii) an executed copy of the Note Purchase Agreement
(the "Note Purchase Agreement") dated October 30, 1996 by and between
the Company and Silver Oak; (iv) an executed copy of the Stock Purchase
Agreement by and between Gregory C. Webb and the Company dated as of
May 5, 1997 (the "Webb Agreement"); (v) an executed copy of the Stock
Purchase Agreement by and between W. Kline Boyd and the Company dated
as of May 5, 1997 (the "Boyd Agreement"); (vi) an executed copy of the
Stock Purchase Agreement by and between J. Kristin Shepherd and the
Company dated as of May 5, 1997 (together with the Webb Agreement and
the Boyd Agreement, the "Stock Purchase Agreements"); (vii) the
Certificate of Incorporation of the Company, as amended to date; (viii)
the Bylaws of the Company, as amended to date; (ix) certain resolutions
adopted by the Board of Directors of the Company, relating to, among
<PAGE>
other things, the authorization of the sale of the Convertible Note and
its terms and related matters and the authorization of the Stock
Purchase Agreements and their terms and related matters; (x) the form
of Convertible Note attached as an exhibit to the Note Purchase
Agreement; (xi) a specimen certificate for the Common Stock; (xii) the
Secretary's Certificate, dated June 27, 1997, certifying as to the
number of shares to be issued in accordance with the terms of the Stock
Purchase Agreements; (xiii) the Officer's Certificate, dated February
9, 1998, certifying as to, among other things, the price per share of
Common Stock at which the Company sold the Common Stock pursuant to the
terms of the Stock Purchase Agreements and the transfer of a portion of
the shares of Common Stock originally issued to W. Kline Boyd under the
Boyd Agreement to Elizabeth Metcalfe Boyd; and (xiv) receipts, dated
November 8, 1996, executed by Silver Oak and the Company acknowledging
receipt by the Company of payment in full for the purchase of the
Convertible Note and receipt by Silver Oak of the Convertible Note. We
have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and such
agreements, certificates of public officials, certificates of officers
or other representatives of the Company and others, and such other
documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of documents executed or to be
executed by parties other than the Company, we have assumed that such
parties had or will have the power, corporate or other, to enter into
and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the
validity, binding effect and enforceability thereof. As to any facts
material to the opinion expressed herein which we have not
independently established or verified, we have relied upon statements
and representations of officers and other representatives of the
Company and others.
In rendering the opinion set forth in paragraph 1 below, we
have assumed that the Convertible Note conforms to the specimen thereof
examined by us.
In rendering the opinion set forth in paragraph 2 below, we
have assumed that (a) the Company received the full consideration
required by the Stock Purchase Agreements and stated in the Officer's
Certificate for the issuance of the 224,042 shares of Common Stock to
be sold by the Varsity Executives, (b) Mr. Boyd duly transferred his
ownership of 59,481 shares of the 81,351 shares of Common Stock issued
by the Company pursuant to the Boyd Agreement to Elizabeth Metcalfe
Boyd and such transfer was registered by the transfer agent and
registrar for the Common Stock and (c) each of the stock certificates
evidencing the 224,042 shares of Common Stock to be sold by the Varsity
Executives conforms to the specimen Common Stock certificate examined
by us and has been manually signed by an authorized officer of the
transfer agent and registrar for the Common Stock and registered by
such transfer agent and registrar.
<PAGE>
Members of our firm are admitted to the bar in the State of
New York, and we do not express any opinion as to the laws of any
jurisdiction other than the General Corporation Law of the State of
Delaware.
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, we are of
the opinion that:
1. When (i) the Registration Statement becomes effective,
(ii) the Convertible Note has been duly converted by the Convertible
Noteholders in accordance with the terms of the Convertible Note and
the Note Purchase Agreement and (iii) the shares of Common Stock
issuable upon conversion of the Convertible Note in the form of the
specimen Common Stock certificate examined by us have been manually
signed by an authorized officer of the transfer agent and registrar for
the Common Stock, registered by such transfer agent and registrar and
issued and delivered upon conversion of the Convertible Note in
accordance with the terms thereof and of the Note Purchase Agreement,
the 1,395,011 shares of Common Stock to be sold by the Convertible
Noteholders will be validly issued, fully paid and nonassessable.
2. The 224,042 shares of Common Stock to be sold by the
Varsity Executives have been validly issued and are fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also
consent to the reference to our firm under the caption "Legal Matters"
in the Registration Statement. In giving this consent, we do not
thereby admit that we are included in the category of persons whose
consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
<PAGE>
Exhibit 23(a)
Consent of Grant Thornton LLP
The Board of Directors
Riddell Sports Inc.:
We have issued our report dated March 14, 1997 accompanying the consolidated
financial statements and schedule of Riddell Sports Inc. and subsidiaries
appearing in the 1996 Annual Report of the Company on Form 10-K for the year
ended December 31, 1996 which are incorporated by reference in this Registration
Statement on Form S-3. We consent to the incorporation by reference in the
Registration Statement of the aforementioned reports and to the use of our name
as it appears under the caption, "Experts."
GRANT THORNTON LLP
Chicago, Illinois
February 12, 1998
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<PAGE>
Exhibit 23(b)
Consent of BDO Seidman, LLP
To the Board of Directors
Riddell Sports Inc.
New York, New York
We hereby consent to the incorporation by reference in Prospectus constituting
part of this Registration Statement on Form-3 of our report dated February 12,
1997, related to the consolidated financial statements of Varsity Spirit
Corporation, which report appears in the current Report on Form 8-K of Riddell
Sports Inc. dated June 19, 1997 of Riddell Sports Inc.
We also consent to the reference to us under the caption, "Experts" in the
Registration Statement.
BDO SEIDMAN, LLP
Memphis, Tennessee
February 12, 1998
