RIDDELL SPORTS INC, 8-K/A, 1998-02-20

RIDDELL SPORTS INC
8-K/A, 1998-02-20
SPORTING & ATHLETIC GOODS, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 2059

FORM 8-K
CURRENT REPORT
Amendment No. 1
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 23, 1997

RIDDELL SPORTS INC.
- -----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

Delaware 0-19298 22-2890400
- -------- ------- ----------
(State or Other Jurisdiction (Commission IRS Employer
of Incorporation) File Number) Identification No.)

900 Third Avenue, 27th Floor, New York, New York 10022
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(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (212) 826 4300
--------------

N/A
- ------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)

<PAGE>

Item 5. OTHER EVENTS

Exhibit 99.1 to this Form 8-K, as initially filed with the Securities
and Exchange Commission on December 23, 1997, inadvertently omitted the section
entitled, "BUSINESS." Exhibit 99.1, as filed herewith, has been corrected and
contains such section.

Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

20.1 Press Release dated October 30, 1997 of Riddell Sports Inc.
announcing third quarter 1997 results.(1)

99.1 The following sections contained in the Registration Statement on
Form S-4 of Riddell Sports Inc. filed with the Securities and
Exchange Commission on July 17, 1997: "Special Cautionary Notice
Regarding Forward Looking Statements," "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
"Business," "Management," "Principal Stockholders" and "Certain
Transactions."(2)

---------
(1) Previously filed
(2) Filed herewith, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

RIDDELL SPORTS INC.

DATED: February 20, 1998 By:/s/ LISA MARRONI
----------------
Lisa Marroni
Vice President

<PAGE>

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. Such
forward-looking statements are principally contained in the sections 'Prospectus
Summary,' 'Summary Unaudited Pro Forma Financial Data,' 'The Acquisition,'
'Unaudited Pro Forma Condensed Consolidated Financial Data' and 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
include, without limitation, the Company's expectation and estimates as to the
Company's business operations following the Acquisition, including the
integration of Varsity's business with Riddell's and the achievement of certain
synergies related thereto, the introduction of new products, future financial
performance, including growth in net sales and earnings, cash flows from
operations, capital expenditures, the ability to refinance indebtedness, and the
sale of assets. In addition, in those and other portions of this Prospectus, the
words 'anticipates,' 'believes,' 'estimates,' 'expects,' 'plans,' 'intends' and
similar expressions, as they relate to the Company and its subsidiaries or the
Company's, Riddell's or Varsity's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
Prospectus. In addition to factors that may be described in this Prospectus, the
following factors, among others, could cause the actual results to differ
materially from those expressed in any forward-looking statements made by
Riddell or Varsity: (i) the outcome of certain litigation pending against the
Company; (ii) difficulties or delays in developing and introducing anticipated
new products or failure of customers to accept new product offerings; (iii) the
continuing popularity of athletic and school spirit programs in the youth,
junior high, high school and college markets; (iv) changes in consumer
preferences and the ability of the Company to adequately anticipate such
changes; (v) the highly seasonal nature of the Company's operations; (vi)
effects of and changes in general economic and business conditions; (vii)
actions by competitors, including new product offerings and marketing and
promotional successes; (viii) the ability of Varsity to secure desirable camp
locations and camper accommodations at competitive prices and to secure
desirable locations for its special events programs; (ix) claims which might be
made against the Company, including product liability claims; (x) the ability of
the Company to combine the Riddell and Varsity businesses and to realize the
expected benefits from the Acquisition; (xi) the ability of the respective sales
forces of Riddell and Varsity to cross-market each others' products; (xii) the
loss of any significant suppliers or sponsors or foreign sourcing; (xiii)
changes in business strategy or new product lines; and (xiv) performance by
licensees. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated or
expected. The Company does not intend to update these forward-looking
statements.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The following should be read in conjunction with 'Unaudited Pro Forma
Condensed Combined Financial Data' and the Consolidated Financial Statements of
each of Riddell and Varsity and the related notes thereto included elsewhere in
this Prospectus. Following the Acquisition, the Company conducts its business
through two distinct operating divisions: the Riddell Group Division, consisting
of Riddell and its subsidiaries (other than Varsity and its subsidiaries), and
the Varsity Group Division, consisting of Varsity and its subsidiaries. Each of
the divisions continues to maintain its own sales, marketing, financial,
accounting and operating personnel. As a result, the Company does not anticipate
significant cost savings as a result of the Acquisition, other than the
elimination of certain costs incurred by Varsity to comply with its public
reporting obligations, the elimination of certain travel agent commissions paid
by Riddell to third parties for services to be provided by a subsidiary of
Varsity following the Acquisition and the reduction of certain freight costs
incurred by Varsity which would not have been incurred under programs
administered by Riddell.

The Company incurred certain non-recurring costs and expenses relating to
the Transactions which will be charged to earnings during the period in which
the Transactions occurred. These costs and expenses include, but are not limited
to, payments by Varsity to terminate outstanding employee stock options
estimated at $4.9 million, payments on change in control provisions contained in
certain Varsity employees' contracts estimated at $0.3 million and costs of
bridge loan commitments of $3.0 million.

SEASONALITY

The Company's businesses are highly seasonal. Riddell's operations in
recent years have been most profitable in the first through third quarters of
each calendar year, with offsetting losses occurring in the fourth quarter.
Varsity's net income has historically been generated in the second and third
quarters of the calendar year while its first and fourth quarters have resulted
in net losses. See 'Business--The Company--Seasonality and Backlog' for further
discussion of the causes of these seasonal patterns. These seasonal patterns
have been heightened by a decrease in Riddell's sales of sports collectible
products sold to retailers during the first quarter of 1997 which resulted in a
near break even loss for Riddell in the period. Riddell believes that the
decline was due to a change in the seasonal pattern in the sale of these
products due to differences in the timing of the product introductions and
deliveries which had shifted sales of these products into the first quarter
during the previous two years. See '--Riddell--Results of Operations--Three
Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996.'

The following table sets forth certain unaudited operating results of
Riddell and Varsity on a pro forma basis for each of the four consecutive
quarters in the period ending December 31, 1996, after giving effect to the
Transactions as if they had occurred on January 1, 1996. This information should

be read in conjunction with 'Unaudited Pro Forma Condensed Combined Financial
Data' and the Consolidated Financial Statements and the related notes thereto of
Riddell and Varsity included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Total revenues............... $26,260 $51,265 $57,779 $25,527
Operating income (loss)...... (880) 7,173 8,178 (1,499)
Net income (loss) from
continuing operations...... (2,486) 2,464 2,803 (3,736)
</TABLE>

Riddell sells a portion of its competitive football products and
reconditioning services on dated payment terms with payments from customers
(primarily high schools and colleges in these cases) generally due the following
July to October period. 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 as the dated receivables become due. In order to finance the resulting
large

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receivable levels, Riddell has maintained a revolving line of credit. The
outstanding balance on the revolving line of credit generally follows the
seasonal receivable cycle described above, increasing as the level of
receivables increase until the fall of each year when collections of the dated
receivables are used to reduce the outstanding balance on the line.

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 business season. Varsity has typically incurred
seasonal borrowings during this period which it has historically eliminated
during the third quarter as it receives prepayments on camp tuition and fees.

After the Acquisition, the Company will use the New Credit Facility to
finance these seasonal working capital needs.

RIDDELL

RESULTS OF OPERATIONS

The following table sets forth statement of operations data of Riddell as a
percentage of total net revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH
DECEMBER 31, 31,
----------------------- --------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues:
Net sales.................................... 93.1% 94.9% 96.6% 95.9% 96.9%
Royalty income............................... 6.9 5.1 3.4 4.1 3.1
----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of sales.................................. 53.8 53.4 53.6 51.5 54.3
----- ----- ----- ----- -----
Gross profit................................... 46.2 46.6 46.4 48.5 45.7
Selling, general and administrative expenses... 38.1 34.8 35.0 35.2 38.8
Product liability expenses..................... 5.3 4.0 3.4 3.3 3.4
Product liability litigation loss.............. 8.3 -- -- -- --
Other charges.................................. 2.1 -- -- -- --
----- ----- ----- ----- -----
Income (loss) from operations.................. (7.6) 7.9 7.8 10.0 3.5
Interest expense............................... 3.6 4.2 3.8 3.2 3.6
Income taxes (credits)......................... (2.3) 0.1 0.2 0.3 --
----- ----- ----- ----- -----
Income (loss) before extraordinary item and
cumulative effect of changes in accounting
principles................................... (8.9)% 3.5% 3.9% 6.5% (0.1)%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

Overview. Operations for the first quarter of 1997 resulted in a net loss
of $17,119, or $0.00 per share, compared to first quarter 1996 net income of
approximately $1.3 million or $0.15 per share. Total revenues for the three
months ended March 31, 1997 decreased by 6% to approximately $18.6 million from
approximately $19.8 million for the three months ended March 31, 1996.

Riddell realized gains in the sale of athletic products and services sold
directly to its Institutional customers of approximately 15% as further
discussed below. However, these gains were offset primarily by a decline in
sales of sports collectible products sold to retailers. In summary, the overall
decrease in profitability for the quarter was a result of the quarter's decline
in sales while related selling and marketing expenses continued at comparatively
fixed levels coupled with an increase in certain other expenses.

The effect of these factors are further described in the following

discussion of operating results by line item together with other matters having
a significant effect on Riddell's results of operations.

<PAGE>

Revenues. Net sales of Riddell's sports products and services segment
(which comprises all revenues other than trademark licensing royalties)
decreased by 5% to approximately $18.0 million for the three months ended March
31, 1997 from approximately $19.0 million during the comparable period of 1996.
Within this segment Riddell achieved gains in sales of competitive products and
services sold directly to schools and other Institutional customers. This gain
was offset by a decline in sales of sports collectible products sold to
retailers. Riddell also experienced a decrease in sales of other product lines
including competitive youth football products sold through recreational dealers
and products sold internationally.

Sales of competitive athletic products and services sold to schools and
other Institutions increased approximately $1.9 million or 15% in comparison to
the first quarter of 1996. Sales of reconditioning services, which increased 7%
over the first quarter of 1996, accounted for approximately $0.5 million of this
gain. This improvement reflects increased unit volume as well as moderate price
increases. Riddell benefitted from a volume increase in its core football helmet
and shoulder pad products. This has occurred as Riddell gains additional
experience marketing these items direct to Institutional customers (a change
adopted at the end of 1994 as discussed elsewhere in this Prospectus) and
continues to place emphasis on expanding sales of these products. Riddell
benefitted from initial sales of its newly introduced line of athletic practice
clothing and experienced strong growth in its line of baseball products
introduced last year. Sales of baseball products to Institutions have increased
as Riddell gains experience in selling the products and the products themselves
gain acceptance in the field.

Sales of sports collectible products sold to retailers for the first
quarter of 1997 decreased by approximately 42% or approximately $1.9 million, in
comparison to the first quarter of 1996. Riddell believes that the decline is
principally due to the trade adjusting its inventory intake based on Riddell's
improved order fulfillment record and to the timing of product introductions. In
the prior period, customers stockpiled inventory because of product shortages in
the preceding Christmas selling season. This led retailers to take inventory
early to ensure availability for later in the year. During 1996, Riddell
demonstrated sufficient order fulfillment capability which allows retailers to
postpone orders and to match inventory receipt more closely with consumer
demand.

In the first quarter of 1996, Riddell also benefitted from sales of sports
collectible products which were in their introductory phase, such as Riddell's
miniature hockey goalie mask. In contrast, Riddell had no new products shipping
in volume during the first quarter of 1997. While Riddell has several new
collectible products slated for 1997 introduction, these will not be available
for shipment in volume until the second and third quarter of the year. These new
products include a line of miniature baseball helmets bearing major league
baseball logos, and a line of miniature collectibles based on the Star Wars

Trilogy(Registered) which is the first line of retail collectible products sold
by Riddell that is not associated with sports.

Royalty income from trademark licensing decreased by approximately $0.2
million or 30%, to approximately $0.6 million for the three months ended March
31, 1997 from approximately $0.9 million during the comparable period of 1996.
This decrease was primarily attributable to a decline in royalties from the
licensing of the MacGregor trademark which decreased by 26%, or approximately
$0.2 million. MacGregor licensing income decreased principally due to a decline
in royalties from Kmart. Additionally, as discussed elsewhere in this
Prospectus, licenses which had accounted for approximately $80,000 of royalties
in the first quarter of 1996 expired at the end of 1996. Royalties from the
licensing of the Riddell trademark decreased 53%, or approximately $40,000. The
decrease results from a decline in royalties realized from Riddell's licensee
for the Riddell trademark on athletic footwear. The Riddell footwear licensee
remains in bankruptcy proceedings as discussed elsewhere in this Prospectus. The
licensee must continue to comply with the terms of the license, including
payment of royalties. On June 20, 1997, the Company entered into the Settlement
Agreement, the finalization of which is conditioned upon, among other things,
obtaining the approval of three bankruptcy courts. The Settlement Agreement
requires the Company, among other things, to assign to the Levitt Trustees (or
any successor trustee or other person approved by the New Jersey Bankruptcy
Court) and to Brooks up to $3.0 million of royalties from the 'Riddell' footwear
license, to the extent such royalties are paid under this or any footwear
license replacing the current footwear license. See 'Business--The
Company--Legal Proceedings--Memorandum of Understanding and Settlement
Agreement.'

Gross Profit. Gross profit decreased by 12%, to approximately $8.5 million
for the three months ended March 31, 1997 from approximately $9.6 million during
the comparable period in 1996. The decline includes a

<PAGE>

decrease in gross profits from sports products and services as well as the
decline in royalty income from trademark licensing discussed above. While
trademark licensing does have certain costs included in selling, general, and
administrative expenses, there are no related costs which are deducted in
arriving at gross profit. Accordingly, each increase or decrease in royalty
income results in an equal change in gross profit.

Gross profit attributable to the sports products and services segment
decreased by 10%, to approximately $7.9 million for the three months ended March
31, 1997 from approximately $8.8 million during the comparable period in 1996.
Gross profit margin rates for the segment decreased to 43.9% of sales for the
three months ended March 31, 1997 compared to 46.4% of sales for the three
months ended March 31, 1996. The decrease in gross profits and gross margin
rates is principally due to the overall decline in sales discussed above, which
impacted gross margin rates through decreased efficiencies arising from lower
utilization of fixed cost operations. Margins were also negatively impacted by
increased reconditioning costs.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to approximately $7.2 million for the three
months ended March 31, 1997 from approximately $7.0 million for the three months
ended March 31, 1996. The increase is principally due to an increase in
litigation related legal expenses of approximately $0.4 million. Additionally,
overall selling and marketing expenses remained relatively constant despite the
decrease in sales discussed above due to the fixed nature of a large portion of
these costs. An increase in promotional and other variable selling expenses
incurred to generate the increase in sales of competitive athletic products
offset any reduction in variable expenses related to the decrease in sales of
sports collectible products. Legal expenses are anticipated to remain at high
levels through the remainder of the year.

Interest Expense. Interest expense increased 6%, or $38,753, to
approximately $0.7 million for the first quarter of 1997. This increase reflects
an increase in average debt levels offset in part by a decline in average
interest rates. Debt increased due to increases in working capital and overall
decreases in non-interest bearing liabilities. Average interest rates declined
principally due to the November 1996 sale of $7.5 million of 4.1% Convertible
Subordinated Notes. As discussed elsewhere in this Prospectus, the proceeds of
the sale of these notes were used, in part, to repay indebtedness which carried
a higher interest rate.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

Overview. Operations for the year ended December 31, 1996, resulted in a
20% increase in net income before an extraordinary item to approximately $2.8
million, or $0.34 per share, in comparison to 1995 earnings of approximately
$2.4 million or $0.29 per share. Tax expense for both 1996 and 1995 was reduced
by the benefit of net operating loss carryforwards recognized during the years.
The recognition of these tax benefits had the effect of decreasing tax expense
approximately $1.2 million, or $0.14 per share, in 1996 and approximately $0.9
million, or $0.11 per share, in 1995. Riddell anticipates that any remaining
unrecognized net operating loss benefit for financial reporting purposes would
be phased out upon the generation of approximately $2.0 million in future income
before tax.

An extraordinary item in 1995 consisted of a $1.9 million charge to
establish a provision for costs related to certain fraudulent transfer
litigation. At the time the provision was established, a settlement had been
agreed to between the parties. However, as described in 'Business--The
Company--Legal Proceedings,' the proposed settlement never materialized and the
litigation remains ongoing.

In 1996, Riddell benefitted from increased sales volume over most of its
product lines which, combined with a favorable sales mix, improved Riddell's
gross margins from sales of sports products and services. These gains were
offset by a decrease in royalties from trademark licensing. The impact of the
volume and margin gains were also offset in part by increased selling costs
resulting from increased promotional expenses and higher commissions.

These factors are further described in the following discussion of
operating results by line item, together with other matters having a significant
effect on Riddell's results of operations.

Net Sales. Net sales of Riddell's sports products and services segment
(which includes the manufacture, sale and reconditioning of football helmets,
other athletic products and sports collectible products) increased 10% to
approximately $69.9 million in 1996 from approximately $63.6 million in 1995.
Riddell experienced sales gains in most of its product lines, including overall
increases in sales of athletic products, sports collectible products and
reconditioning services.

<PAGE>

Sales of competitive athletic products increased 8% to approximately $27.3
million in 1996 from approximately $25.3 million in 1995. Sales of these
products, principally football helmets and shoulder pads sold to schools and
other Institutions, reflects increased volume and selected price increases to
offset rising costs. Unit volume increases have occurred as Riddell has gained
experience in direct distribution of Institutional products, a change that has
been implemented over the past two years. Riddell is also benefitting from other
actions taken in recent periods to increase Institutional sales. These actions
include increases in the number of salesmen calling on schools, more intensive
sales training, incremental field sales managers, new sales incentive programs,
and the introduction of additional athletic products. Riddell also benefitted
from an increase in the volume of competitive youth products which continue to
be sold by independent dealers and distributors to youth recreational groups
such as Pop Warner rather than to elementary schools. Riddell experienced an
anticipated decline in sales of these products in 1995 as many dealers stopped
purchasing Riddell youth products when they were no longer offered Riddell's
Institutional product lines. Sales of youth products have increased as Riddell
has expanded its distribution through new dealers and distributors.

Riddell believes that it will be able to further increase sales of athletic
products sold to Institutions as it continues to gain experience in direct sales
of its traditional product lines as well as newer lines of products such as
baseball equipment. Riddell also anticipates it can expand sales in this area
through the introduction of additional products such as its new line of athletic
practice clothing introduced late in 1996 for the 1997 season. However, there
can be no assurance that such sales increases will materialize.

Sales of reconditioning services increased 3% to approximately $21.7
million in 1996 from approximately $21.0 million in 1995. This improvement was
principally due to moderate price increases.

Sales of sports collectible products increased approximately 20% to
approximately $20.8 million in 1996 from approximately $17.3 million in 1995.
This improvement was due to increased volume in sales of Riddell's line of
miniature helmets, including miniature hockey goalie masks, which Riddell
started shipping in late 1995. Sales of consumer products have been the
strongest area of growth for Riddell in recent periods. Riddell is continuing to
place a high level of marketing emphasis on the retail collectible business and
has recently introduced two new product lines which will begin shipping in 1997.
These include miniature baseball helmets and miniature collectibles based on the
Star Wars Trilogy, Riddell's first line of retail collectible products not

associated with sports.

Royalty Income. Royalty income decreased 27% to approximately $2.5 million
in 1996 from approximately $3.4 million in 1995. MacGregor licensing royalties
decreased 20% in 1996 to approximately $2.1 million from approximately $2.7
million in 1995 due a to decline in royalties from Kmart and the inclusion in
1995 of certain non-recurring royalties. Royalties from other MacGregor
licensees remained stable at minimum contractual levels. Royalty income for 1996
included approximately $0.3 million in royalties from licenses which expired at
the end of 1996. The larger of these two licenses was with Thom McAn which had
licensed the MacGregor trademark for athletic shoes but has withdrawn from the
athletic shoe market in recent years. See '--MacGregor Trademark' and
'Business--Riddell--Trademarks, Service Marks and License Agreements.'

Royalties from the licensing of the Riddell trademark decreased 52% to
approximately $0.4 million in 1996 from approximately $0.8 million in 1995. The
decline was principally due to two previously announced events which took place
near the end of 1995. First, Riddell terminated a license for certain athletic
equipment due to the licensee's failure to pay royalties. Secondly, Riddell
revised the terms of a license for Riddell branded leisure apparel in
conjunction with the related licensee's restructuring of its product lines. The
revised leisure apparel license called for a lower level of minimum royalties
than those paid in 1995. Riddell also saw a decrease in royalties received from
its Riddell athletic footwear licensee as the licensee offset certain amounts
against royalties due Riddell in 1996. While the Riddell footwear licensee has
resumed payment of royalties to Riddell, the licensee remains in bankruptcy
proceedings. Although this licensee must continue to comply with the terms of
the license, including payment of royalties, in view of the contested bankruptcy
of the licensee, there can be no assurance that royalties will be received in
the long term from this licensee. See '--MacGregor Trademark' and
'Business--Riddell--Trademarks, Service Marks and License Agreements.'

Gross Profit. Gross profit attributable to the sports products and
services segment increased 12% to approximately $31.1 million in 1996 from
approximately $27.8 million in 1995. Gross profit margin rates for the

<PAGE>

segment increased to 44.5% of sales in 1996 from 43.7% of sales for 1995. The
increase in gross profit is principally due to sales increases discussed above.
Other factors contributing to the improvement in gross margins were changes to
the sales mix, efficiencies due to higher volumes and selective price increases
taken to offset rising costs.

While trademark licensing does have certain costs including selling,
general and administrative expenses, there are no costs which are deducted in
arriving at gross profit. Accordingly, each incremental dollar of royalty income
results in a dollar increase in gross profit.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 9% to approximately $25.4 million in 1996 from
approximately $23.3 million in 1995. These increases are attributable to higher

levels of selling, marketing and promotional expenses relating to Riddell's
sales of competitive athletic products sold to schools and other Institutions.
These selling expense increases were incurred in taking certain actions to
increase sales of competitive athletic products as discussed above. These
increases in selling expenses were offset in part by a modest decline in
administrative expenses with the end result that overall selling, general and
administrative expenses remained relatively stable as a percentage of revenues,
increasing to 35.0% of revenues in 1996 from 34.8% of revenues in 1995. In 1996,
Riddell charged $0.5 million of legal expenses relating to the Mac I fraudulent
transfer action against a reserve established for the matter in 1995. See
'Business--The Company--Legal Proceedings.' Had this reserve not existed, these
amounts would have been charged against selling, general and administrative
expenses in 1996.

Product Liability Expenses. Product liability expenses showed a moderate
decrease in 1996. See 'Business--The Company--Product Liability Proceedings and
Insurance.'

Interest Expense. Interest expense was relatively stable at approximately
$2.8 million between the two years with an overall decrease of approximately 1%.
An overall decrease in average interest rates was offset, in part, by increases
in average indebtedness relating to increased levels of overall business volume.
A substantial portion of Riddell's borrowings are based on its bank's prime
rate, which averaged 8.27% in 1996, a 6% decrease from an average rate of 8.83%
in 1995. Average interest rates also decreased as a result of Riddell's issuance
of a $7.5 million, 4.1% convertible subordinated note in November 1996. The
majority of the proceeds of this note were used to repay indebtedness which
carried higher interest rates.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

Overview. Operations for the year ended December 31, 1995, resulted in a
significant improvement over 1994 operating results. Earnings before an
extraordinary item, for the year were approximately $2.4 million, or $0.29 per
share. This compares to a loss of approximately $4.9 million, or $0.62 per
share, for fiscal 1994. The 1994 operations generated net losses due, in large
part, to approximately $6.5 million of pre-tax charges including: (1) a $4.6
million charge for a product liability verdict (subsequently settled) and (2)
approximately $1.9 million of non-recurring costs relating to Riddell's
transition to direct sales of athletic equipment used by schools and other
Institutions, including a special transitional sales return program for
discontinued dealers. The 1995 income reflects lower than normal tax expense due
to the benefit of a net operating loss carry forward which was recognized during
the year. The recognition of this tax benefit had the effect of decreasing tax
expense approximately $0.9 million, or $0.11 per share, for 1995.

An extraordinary item in 1995 consisted of a $1.9 million charge to
establish a provision for costs related to certain fraudulent transfer
litigation. This provision had been recorded in light of a settlement which had
been proposed at the time, but which subsequently failed to materialize. See
'Business--The Company--Legal Proceedings.'

Excluding the effect of the approximately $6.5 million in pre-tax charges
for 1994 discussed above, operating income before interest and taxes for 1995

increased approximately 130% to approximately $5.3 million in 1995 from
approximately $2.3 million in 1994.

Operations for the 1995 and 1994 periods must be viewed in the context of
changes that were occurring at the time in Riddell's method of distributing
competitive athletic equipment used by schools and other Institutions and by
Riddell's increased emphasis on the marketing of sports collectible products. In
October 1994 Riddell announced a significant change in its method of
distributing Institutional products. Sales of these products,

<PAGE>

principally football helmets, shoulder pads and related accessories, had
historically been made to independent team sports dealers for resale to schools
and other Institutions. At the end of 1994 Riddell started marketing these
products to schools and other Institutions on a factory direct basis. While the
unit volume of certain products declined in 1995, as was anticipated given the
magnitude of this difficult change, overall margins on competitive products
increased.

Riddell benefitted from substantial increases in sales of collectible
sports products which continue to be the strongest area of growth for Riddell.
Profits from these sales were the leading contributor to the increase in
operating profitability. Riddell also benefitted from certain managed expense
reductions.

The effects of these factors are described in the following discussion of
operating results by line item, together with other matters having a significant
effect on Riddell's results of operations.

Net Sales. Net sales of Riddell's sports products and services segment
increased 23% to approximately $63.6 million in 1995 from approximately $51.6
million in 1994. Sales of competitive athletic products were stable in
comparison to 1994 levels with an increase of less than 1% after adjusting to
eliminate the effect of a special transitional return program for discontinued
dealers, which had decreased 1994 sales by $1.4 million. As a result of the
change to direct sales, the selling prices of these products increased due to
Riddell's ability to capture a portion of the former dealers' markup to
Institutional customers. The increases were offset by a decline in the unit
volume of these competitive athletic products. Riddell anticipated the potential
of a decline in new equipment volume due to the complexity of converting its
Institutional sales organization to a factory direct basis.

Sales of sports collectible products nearly doubled in 1995 increasing
approximately 94% from approximately $8.9 million in 1994 to approximately $17.3
million in 1995. Sales of these consumer products, which had also increased more
than 80% between 1993 and 1994, have been the strongest area of growth for
Riddell in recent periods due to an overall increase in marketing focus,
including the introduction of a new line of miniature football helmets in 1994.

Sales of reconditioning services increased 12% to approximately $21.0
million in 1995 from approximately $18.8 million in 1994. The year-to-date

increase in reconditioning sales was principally due to increased volume from
Riddell's acquisition of Raleigh Athletic Equipment Corporation in January 1995.

Royalty Income. Royalty income decreased 11% to approximately $3.4 million
in 1995 from approximately $3.8 million in 1994. MacGregor licensing royalties
increased 4% to approximately $2.7 million in 1995 from approximately $2.6
million in 1994 due to increased royalties from Kmart and certain non-recurring
royalties. Royalties from other MacGregor licensees remained stable at minimum
contractual levels (licensees generally pay Riddell the higher of royalties
based on a percentage of their related business volume or an annual minimum
guaranteed royalty).

The increase in MacGregor royalties was offset by a decline in royalties
from the licensing of the Riddell trademark. Riddell royalties decreased 40% to
approximately $0.8 million in 1995 from approximately $1.3 million in 1994. In
addition to current royalties, Riddell licensing income for 1994 had included
approximately $0.5 million received from its Riddell athletic footwear licensee
at the time certain litigation between the licensee and Riddell was settled.
Royalties from the Riddell athletic footwear licensee were approximately $0.3
million for 1995.

Gross Profit. Gross profit attributable to the sports products and
services segment increased 28% to approximately $27.8 million in 1995 from
approximately $21.8 million in 1994. Gross profit margin rates for the segment
increased to 43.7% of sales in 1995 from 42.2% of sales for 1994. The increase
in gross margin rates reflects a number of factors. First, Riddell experienced
increased margins on competitive protective athletic products sold to schools
and other Institutions due to Riddell's ability to capture a portion of the
former dealers' markup to Institutional customers as a result of the change to
direct sales. However, this increase was offset somewhat by the effect of the
unit volume decreases of these products discussed above. These volume decreases
resulted in higher unit costs since fixed manufacturing and distribution
overhead costs do not vary with lower volume. Margin rates were also favorably
impacted by increases in sales of sports collectible products, as the increases
were in product lines which carry margins higher than the average for other
products.

<PAGE>

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 11% to approximately $23.3 million in 1995
from approximately $21.1 million in 1994. These increases are attributable to
increased selling and marketing expenses relating to both Riddell's change to
Institutional sales for competitive products sold to schools and other
Institutions and Riddell's increased efforts in the marketing and sales of
sports collectible products. These increases also include related costs
associated with operations acquired during the past year. The increased selling

and marketing expenses were offset by managed reductions in administrative
expenses of approximately $0.5 million. As a result of these reductions and
sales volume increases, overall selling, general and administrative expenses
decreased as a percentage of revenues from 38.1% of revenues in 1994 to 34.8% of
revenues in 1995, despite the increased marketing efforts. Legal expenses
relating to non-operating litigation matters remained relatively constant in
relation to 1994 levels.

Product Liability Expenses. Product liability expenses decreased 65% to
approximately $2.7 million in 1995 from approximately $7.5 million in 1994, as
1994 expense included the effects of a $1.5 million adjustment to product
liability reserves taken in the fourth quarter, and the effects of a $4.6
million charge (reported as a separate item in Riddell's Consolidated Statement
of Operations for the year ended December 31, 1994). Product liability expense
for 1995 was impacted by the cost of an insurance program implemented at the end
of 1994, which exceeded that expense in the prior year by approximately $1.0
million. See 'Business--The Company--Product Liability Proceedings and
Insurance.'

Interest Expense. Interest expense increased 40% in 1995 to approximately
$2.8 million from approximately $2.0 million in 1994. The increase was due to an
increases in average interest rates and average indebtedness during the year. A
substantial portion of Riddell's borrowings are based on its bank's prime rate.
The average prime rate for 1995 was 8.83%, a 24% increase over the average prime
rate of 7.14% in 1994. The prime rate was 8.5% at December 31, 1995. Average
indebtedness increased due to increased working capital demands.

MACGREGOR TRADEMARK

Riddell acquired certain rights to the MacGregor trademark and related
license agreements as part of an acquisition in 1988 at an allocated cost of
approximately $20.1 million. Riddell is amortizing the trademark rights over a
period of forty years, and the license agreements over their terms. The
unamortized cost of these assets included in intangible assets at December 31,
1996 was approximately $14.4 million. See Note 4 to the Consolidated Financial
Statements of Riddell included elsewhere in this Prospectus. Riddell considers
licensing revenues derived from the MacGregor trademark rights to be a material
part of its business. A material decline in the royalties from the MacGregor
trademark rights could have a material adverse effect on Riddell's results of
operations. Furthermore, 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 Riddell's financial position and results
of operations. As disclosed in 'Business--Riddell--Trademarks, Service Marks and
License Agreements,' Riddell and Meldisco recently reached an agreement in
principal, subject to negotiation and execution of final documentation, that
Meldisco will continue to sell athletic footwear bearing the MacGregor trademark
at Kmart stores pursuant to a license expected to be effective when the Kmart
license expires in 1998. Kmart has an exclusive license to use the MacGregor
trademark on certain athletic apparel (e.g., jogging suits and sweat separates),
athletic bags and knapsacks and a non-exclusive license on other products such
as athletic socks. Riddell plans to establish a new license for the apparel
category effective when the Kmart license expires in 1998. While Riddell
believes it will be successful in renewing or replacing the license 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.

<PAGE>

VARSITY

GENERAL

Over the past three years, Varsity's revenues and net income have grown
substantially. Revenues have grown from approximately $62.6 million in the
twelve-month period ended December 31, 1994 to approximately $88.4 million in
the twelve months ended December 31, 1996, and net income has grown from
approximately $3.8 million in the twelve months ended December 31, 1994 to
approximately $5.2 million in the twelve months ended December 31, 1996. This
growth is due to Varsity's strategy of expanding its school spirit product lines
and sales force, increasing enrollment in its cheerleader and dance team camp
sessions increasing participation in special events such as parades and bowl
games and visibly promoting its business, as well as the school spirit industry,
primarily through nationally televised cheerleading and dance team
championships. In addition, in December 1994, Varsity acquired the group tour
business of Intropa International/USA, Inc., with whom Varsity had worked in the
past in promoting its international and domestic travel events, further
contributing to revenue growth from Varsity's special events. In May 1996,
through its subsidiary, Varsity USA, Inc. ('USA'), Varsity purchased the camp
business of United Special Events, Inc., a California-based company with a
strong position in the western region of the United States, which complemented
Varsity's existing camp operations. Varsity plans to increase its revenues and
market penetration in the future by continuing to implement its growth strategy
(primarily focusing on the youth, junior high, high school, and junior college
markets) and by utilizing its reputation for quality, design, and on-time
delivery of its cheerleading and dance uniforms and for professional instruction
and supervision at its cheerleader and dance team camps and special events.
Varsity is also analyzing new growth opportunities in the school spirit and
cheerleading industries.

Effective April 1994, Varsity changed its fiscal year end from March 31 to
December 31. Therefore, the fiscal period ended December 31, 1994 consists of a
nine-month period as compared to the twelve-month period ended December 31,
1995. Accordingly, a discussion of significant changes between the twelve-month
periods ended December 31, 1995 and 1994, has also been included herein. Each of
these discussions should be read with the discussion set forth above under
'--Seasonality.'

RESULTS OF OPERATIONS

The following table sets forth statement of income data of Varsity as a
percentage of total net revenues for the periods indicated:

THREE MOS.
NINE MOS. TWELVE MOS. YEAR ENDED ENDED
ENDED ENDED DEC. DECEMBER 31, MARCH 31,
DEC. 31, 31, -------------- --------------
1994 1994 1995 1996 1996 1997
--------- ----------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Uniforms and accessories..................... 60.2% 60.1% 58.3% 55.9% 35.5% 33.7%
Camps and events............................. 39.8 39.9 41.7 44.1 64.5 66.3
----- ----- ----- ----- ----- -----
Total........................................ 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- -----
Cost of revenues:
Uniforms and accessories..................... 31.3 31.7 31.0 30.3 25.2 23.9
Camps and events............................. 28.2 28.3 30.6 30.3 48.2 45.5
----- ----- ----- ----- ----- -----
Gross profit................................... 40.5 40.0 38.4 39.4 26.6 30.6
Selling, general and administrative expenses... 27.1 30.2 30.0 29.8 66.2 65.4
----- ----- ----- ----- ----- -----
Operating income (loss)........................ 13.4 9.8 8.4 9.6 (39.6) (34.8)
Other income (expense)......................... 0.3 0.3 0.2 0.1 0.7 0.7
----- ----- ----- ----- ----- -----
Income (loss) before taxes on income........... 13.7 10.1 8.6 9.7 (39.0) (34.1)
Taxes (benefit) on income...................... 5.4 4.0 3.1 3.9 (15.5) (13.5)
----- ----- ----- ----- ----- -----
Net income (loss).............................. 8.3% 6.1% 5.5% 5.8% (23.5)% (20.5)%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>

<PAGE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

Revenues. Total revenues increased 30.0% to approximately $8.3 million in
the three months ended March 31, 1997 from approximately $6.4 million in the
three months ended March 31, 1996.

Revenues from the sale of uniforms and accessories increased by 23.6% to
approximately $2.8 million in the three months ended March 31, 1997 from
approximately $2.3 million in the three months ended March 31, 1996. This
increase was primarily attributable to a strong increase in campwear and
accessories sales at Varsity's annual championship events for college
cheerleading and dance, high school cheerleading, high school dance and All
Stars (as hereinafter defined).

Camp and event revenues increased by 33.5%, to approximately $5.5 million
in the three months ended March 31, 1997, from approximately $4.1 million in the
three months ended March 31, 1996. This increase was primarily attributable to
approximately $1.0 million of additional championships and special events
revenues associated with the USA camp business acquired in May 1996, combined

with a current period increase in the number of participants at each of the
college cheerleading and dance, high school dance and the All Star
championships.

Gross Profit. Gross profit increased by 49.9% to approximately $2.6
million in the three months ended March 31, 1997 from approximately $1.7 million
in the three months ended March 31, 1996.

Gross profit from the sale of uniforms and accessories as a percentage of
such sales increased to 29.1% in the three months ended March 31, 1997 from
28.9% in the three months ended March 31, 1996. This increase is primarily due
to the increase in campwear and accessories sales at Varsity's national
championships, which have slightly higher margins than the Varsity's other
purchased product lines.

Gross profit margins associated with camps and special events as a
percentage of such sales increased to 31.4% in the three months ended March 31,
1997 from 25.2% for the three month period ended March 31, 1996. The gross
profit margins were positively impacted by the higher gross profit margins
realized by the championships and special events associated with the recently
acquired USA camp business, as compared to Varsity's other such events. Further,
economies of scale were realized by spreading Varsity's related fixed costs over
a larger revenue base.

Selling, General, and Administrative Expenses. Selling, general and
administrative expenses in the three months ended March 31, 1997 were
approximately $5.5 million as compared to approximately $4.3 million in the
three months ended March 31, 1996. Selling, general and administrative expenses
as a percentage of sales decreased to 65.4% for the three months ended March 31,
1997 from 66.2% in the three months ended March 31, 1996, primarily due to the
economies of scale realized by spreading all of Varsity's administrative costs
over a greater revenue base. The increase of approximately $1.2 million in
selling, general and administrative expenses was primarily due to increases of
approximately $0.7 million in payroll and personnel costs, including
approximately $63,000 in additional selling commissions and related expenses,
and approximately $0.2 million attributable to USA personnel. There were also
increases of approximately $0.3 million of operating costs (excluding payroll)
incurred by USA, and approximately $65,000 associated with equipment repairs.
Additional depreciation expense of approximately $76,000, primarily relating to
recent acquisitions of computer equipment and software, also contributed to the
increase.

Net Loss. The net loss increased 13.7% to approximately $1.7 million for
the three months ended March 31, 1997 as compared to approximately $1.5 million
in the same period last year. The increase in the loss is primarily attributable
to an increase of approximately $1.2 million in operating costs, partially
offset by an increase of approximately $0.9 million in gross profit. The net
loss per share for the period was $0.36 as compared to $0.32 for the same period
last year.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

Revenues. Total revenues increased 17.1% to approximately $88.4 million in
the year ended December 31, 1996 from approximately $75.5 million in the year

ended December 31, 1995.

Revenues from the sale of uniforms and accessories increased 12.3% to
approximately $49.5 million in the year ended December 31, 1996 from
approximately $44.0 million in the year ended December 31, 1995. The

<PAGE>

increase was primarily attributable to a strong increase in shoe and accessory
sales combined with an 8.5% sales growth in other product lines. Other factors
contributing to the sales increase include a combination of expansion within
existing product lines and the introduction of new designs, and, to a much
lesser extent, a small price increase on certain items. In addition, Varsity
increased its inventory levels in an effort to service greater anticipated
demand. The increased availability of inventory further contributed to the sales
volume increases by improving on-time delivery.

Camp and event revenues increased approximately $7.5 million, or 23.9%, to
approximately $39.0 million in the year ended December 31, 1996 from
approximately $31.5 million in the year ended December 31, 1995. This increase
was primarily attributable to approximately $4.2 million of 1996 revenues
associated with the USA camp business acquired in May 1996, combined with higher
incremental revenues derived from a 21.4% increase in camp participants (or 7.1%
exclusive of USA participants), and a 3.7% increase in the average gross tuition
per camp participant during the 1996 summer season.

The revenue increase was also attributable to an increase in the number of
participants in the 1996 National High School Dance and Cheerleading
Championships as compared to the same events held in 1995 and to two new Company
sponsored championships, the All Star Championship in March 1996 and the
National Jumprope Championship in June 1996.

Gross Profit. Gross profit increased 20.1% to approximately $34.8 million
in the year ended December 31, 1996 from approximately $29.0 million in the year
ended December 31, 1995. Gross profit as a percentage of total revenues
increased to 39.4% in the year ended December 31, 1996 from 38.4% in the year
ended December 31, 1995.

Gross profit from sales of uniforms and accessories as a percentage of such
sales decreased to 45.7% in the year ended December 31, 1996 from 46.9% in the
year ended December 31, 1995. A significant portion of the overall sales
increase related to the purchased product lines, such as shoes and accessories,
which have lower margins than custom manufactured goods, such as uniforms.
Specifically, 46.4% of the revenues from merchandise was attributable to the
sale of uniforms and 53.6% to the sale of accessories in the year ended December
31, 1996, compared with 47.7% of such revenue attributable to uniforms, and
52.3% to accessories in the year ended December 31, 1995. Varsity expects this
shift in mix to continue for the foreseeable future.

Gross profit margins associated with camps and special events increased to
31.3% in the year ended December 31, 1996 from 26.5% in the year ended December
31, 1995. This increase was primarily due to more efficient staffing at summer

camps, resulting in savings in instructor payroll, travel and training costs.
The increase is also attributable to economies of scale realized from spreading
certain administrative costs over a larger number of camp participants and to
decreased travel costs associated with Varsity's group tour business. The gross
profit margins were negatively impacted in 1996 by the lower gross profit
margins realized by the camp business acquired in May 1996 by USA, as compared
to Varsity's other camp business.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 16.4% to approximately $26.4 million in 1996
from approximately $22.7 million in 1995. Selling, general and administrative
expenses as a percentage of sales decreased to 29.8% for the year ended December
31, 1996 from 30.0% for the year ended December 31, 1995, primarily due to the
economies of scale realized by spreading all of Varsity's fixed administrative
costs over a greater revenue base. The increase of $3.7 million in selling,
general and administrative was partially due to increases of approximately $2.8
million in payroll and personnel costs, including approximately $0.7 million in
additional selling commission and related expenses, approximately $0.3 million
in additional consulting fees, partially associated with the additional
championships and approximately $0.5 million attributable to USA personnel.
There were also increases of approximately $0.4 million of operating costs
(excluding payroll) incurred by USA, approximately $0.1 million of additional
costs associated with the publication and distribution of annual catalogs and
brochures, and approximately $0.3 million in additional telephone expenses.
Additional depreciation expense of approximately $0.3 million, primarily related
to recent acquisitions of computer equipment and software, contributed to the
increase.

Income Taxes. As a result of the above, income before income taxes
increased 32.4% to approximately $8.6 million for the year ended December 31,
1996 from approximately $6.5 million for the year ended December 31, 1995. The
effective income tax rate was 39.6% for the year ended December 31, 1996
compared

<PAGE>

with 36.0% for the year ended December 31, 1995. The increase in the effective
tax rate primarily results from the favorable settlement of a tax matter in the
year ended December 31, 1995.

Net Income. Net income increased 25.0% to approximately $5.2 million in
the year ended December 31, 1996 from approximately $4.2 million in the year
ended December 31, 1995 and net income per share increased by 23.6% to $1.10 per
share in the year ended December 31, 1996 from $0.89 per share in the year ended
December 31, 1995. The weighted average common shares and equivalent shares
increased to 4,734,000 in the year ended December 31, 1996 from 4,679,000 in the
year ended December 31, 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 1994

Revenues. Total revenues increased 26.7% to approximately $75.5 million in
the year ended December 31, 1995 from approximately $59.6 million in the nine

months ended December 31, 1994 ('short period').

Revenues from the sale of uniforms and accessories increased 22.8% to
approximately $44.0 million in 1995 from approximately $35.9 million in the
short period. The increase in uniform and accessory revenues was due to a
combination of new designs and expansion within existing product lines,
increased unit sales, and, to a much lesser extent, a small price increase on
certain items. Varsity also continued its early order sales incentive program
(first implemented in March 1994 and made available to all customers who
submitted orders prior to April 15), resulting in an increased response over the
prior year. In addition, Varsity increased its inventory levels in an effort to
service greater anticipated demand. The increased availability of inventory
further contributed to the sales volume increase by improving on-time delivery.

Camp and event revenues increased 32.6% to approximately $31.4 million in
1995 from approximately $23.7 million in the short period. This increase was due
to (1) incremental revenues of approximately $3.8 million recognized from the
group travel business of Intropa, which was acquired by Varsity in December,
1994, and (2) higher revenues derived from a combination of a 13.9% increase in
camp participants, to approximately 156,000 in the 1995 summer season from
approximately 137,000 in the 1994 summer season and an increase of 1.8% in gross
tuition per camp participant during the 1995 summer season. In addition,
calendar 1995 included revenues from the National Dance Team Championship held
in February, which were not included in the short period. These increases were
partially offset by decreases in participation in certain of Varsity-sponsored
holiday parade and bowl game performances in the last quarter of 1995, as
compared to record participation that it experienced at certain of these events
in the prior period.

Gross Profit. Gross profit increased 20.3% to approximately $29.0 million
in 1995 from approximately $24.1 million in the short period. Gross profit as a
percentage of total revenues decreased to 38.4% in calendar 1995 from 40.5% in
the short period.

Gross profit from sales of uniforms and accessories as a percentage of such
sales decreased to 46.9% in 1995 from 48.0% in the short period. The percentage
decrease was partially attributable to increases in overhead, including
additional facilities and warehouse space required to service increased sales
volumes. A portion of the remaining decrease was attributable to a shift in the
mix of products sold between uniforms, which have higher margins, and
accessories, which have lower margins. Specifically, 47.7% of the revenues from
merchandise were attributable to the sale of uniforms and 52.3% to the sale of
accessories in 1995, compared to 49.1% of such revenue attributable to uniforms
and 50.9% to accessories in the short period. Varsity expects this shift in mix
to continue in the future.

Gross profit margins associated with camps and special events decreased to
26.5% in 1995 from 29.1% in the short period. This percentage decrease was
partially attributable to greater than anticipated increases in instructor
payroll, travel, and training costs, which resulted from the 1995
regionalization of certain administrative functions in the summer camp program.
In addition, the gross margin generated by Intropa has historically been and is
expected to continue to be lower than the margin generated by Varsity in its
camps and other special events. Finally, Varsity incurred additional student

housing costs resulting from camp closings due to Hurricane Erin in the
Southeast and intense summer heat in the Midwest and Northeast. In certain
instances, Varsity was also required to pay guaranteed student housing costs
resulting from last-minute cancellations of camp reservations in excess of
cancellation fees received from the camp participants. These decreases were

<PAGE>

partially offset by improved margins earned on certain of the company-sponsored
1995 holiday parade and bowl game performances.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses in 1995 increased 40.7% to approximately $22.7 million,
or 30.0% of revenues in 1995, from approximately $16.1 million, or 27.1% of
revenues in the short period. This increase as a percentage of revenues
primarily reflects that the short period figures do not include the months of
January, February, and March, during which revenues are generally nominal and
during which considerable fixed selling, general, and administrative expenses
are incurred. The increase of approximately $6.6 million in selling, general,
and administrative expenses was partially due to an increase of approximately
$2.4 million in payroll and personnel costs, including approximately $1.3
million in increased selling commissions, sales representative training, and
other expenses which are impacted by increased sales volume, as well as
approximately $0.5 million in payroll costs attributable to Intropa personnel.
Varsity's results also include increases of approximately $0.7 million
attributable to additional fixed costs (including rent, depreciation, and
insurance) relating to the expansion of office and storage space, approximately
$0.3 million associated with the publication and distribution of annual catalogs
and brochures, and approximately $0.5 million of operating costs (excluding
payroll) incurred by Intropa. Postage/express mail and travel increased
approximately $0.4 million and approximately $0.3 million, respectively,
relating to an increased revenue and customer base.

Income Taxes. As a result of the above, income before income taxes
decreased 20.0% to approximately $6.5 million in 1995 from approximately $8.1
million in the short period. The effective income tax rate was 36.0% in 1995
compared to 39.6% in the short period. The decrease in the effective tax rate
primarily results from the favorable conclusion of an income tax examination and
a corresponding reversal reduction in the related tax accrual liability
recognized in the short period.

Net Income. Net income decreased 15.3% to approximately $4.2 million from
approximately $4.9 million in the short period and net income per share
decreased 16.8% to $.89 per share in 1995 from $1.07 per share in the short
period. The weighted average common shares and equivalent shares outstanding
increased to 4,679,000 in 1995 from 4,587,000 in the short period.

TWELVE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1994 (UNAUDITED)

Revenues. Total revenues increased 20.6% to approximately $75.5 million in
the year ended December 31, 1995 from approximately $62.6 million in the year

ended December 31, 1994.

Revenues from the sale of uniforms and accessories increased 17.0% to
approximately $44.0 million in 1995 from approximately $37.6 million in 1994.
The increase in uniform and accessory revenues was due to a combination of new
designs and expansion within existing product lines, increased unit sales, and,
to a much lesser extent, a small price increase on certain items. Varsity also
continued its early order sales incentive program (first implemented in March,
1994 and made available to all customers who submitted orders prior to April
15), resulting in an increased response over the prior year. In addition,
Varsity has increased its inventory levels in an effort to service greater
anticipated demand. The increased availability of inventory has further
contributed to the sales volume increase by improving on-time delivery.

Camp and event revenues increased 26.0% to approximately $31.4 million in
1995 from approximately $25.0 million in 1994. The increase was due to (i)
incremental revenues of approximately $3.8 million recognized from the group
travel business of Intropa, which was acquired by Varsity in December, 1994, and
(ii) higher incremental revenues derived from a combination of a 13.9% increase
in camp participants, to approximately 156,000 in the 1995 summer season from
approximately 137,000 in the 1994 summer season, and (iii) an increase of 1.8%
in gross tuition per camp participant during the 1995 summer season. These
increases were partially offset by decreases in participation in certain of
Varsity-sponsored holiday parade and bowl game performances in the last quarter
of 1995, as compared to record participation that it had at certain of these
events in the prior year.

<PAGE>

Gross Profit. Gross profit increased 15.8% to approximately $29.0 million
in 1995 from approximately $25.0 million in 1994. Gross profit as a percentage
of total revenues decreased to 38.4% in 1995 from 40.0% in 1994.

Gross profit from sales of uniforms and accessories as a percentage of such
sales decreased to 46.9% in 1995 from 47.2% in 1994. The percentage decrease was
partially attributable to increases in overhead, resulting from additional
facilities and warehouse space required to service increased sales volumes. A
portion of the remaining decrease was attributable to a shift in the mix of
products sold between uniforms, which have higher margins, and accessories,
which have lower margins. Specifically, 47.7% of the revenues from merchandise
were attributable to the sale of uniforms and 52.3% to the sale of accessories
in 1995, compared to 49.1% of such revenue attributable to uniforms and 50.9% to
accessories in 1994. Varsity expects this shift in mix to continue in the
future.

Gross profit margins associated with camps and special events decreased to
26.5% in 1995 from 29.1% in 1994. This percentage decrease was partially
attributable to greater than anticipated increases in instructor payroll,
travel, and training costs, resulting from the 1995 regionalization of certain
administrative functions in the summer camp program. In addition, the gross
margin generated by Intropa has historically been and is expected to continue to
be lower than the margin generated by Varsity in its camps and other special

events. Finally, Varsity incurred additional housing costs resulting from camp
closings due to Hurricane Erin in the Southeast and intense summer heat in the
Midwest and Northeast. In certain instances, Varsity was also required to pay
guaranteed student housing costs resulting from last-minute cancellations of
camp reservations in excess of cancellation fees received from the camp
participants. These decreases were partially offset by improved margins earned
on certain of the 1995 Varsity-sponsored holiday parade and bowl game
performances.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses in 1995 increased 19.9% to approximately $22.7 million,
or 30.0% of revenues, from approximately $18.9 million, or 30.2% of revenues in
1994. The increase of approximately $3.8 million in selling, general, and
administrative expenses was partially due to an increase of approximately $1.7
million in payroll and personnel costs, including approximately $0.9 million in
increased selling commissions, sales representative training, and other related
selling expenses which are impacted by increased sales volume, as well as
approximately $0.5 million in payroll costs attributable to Intropa personnel.
Varsity incurred increases of approximately $0.3 million attributable to
additional fixed costs (including rent, depreciation, and insurance) relating to
the expansion of office and storage space, approximately $0.3 million associated
with the publication and distribution of annual catalogs and brochures, and
approximately $0.5 million of operating costs (excluding payroll) incurred by
Intropa. Postage/express mail and travel increased approximately $0.3 million
and approximately $0.2 million, respectively, relating to an increased revenue
and customer base.

Income Taxes. As a result of the above, income before income taxes
increased 3.2% to approximately $6.5 million in 1995 from approximately $6.3
million in 1994. The effective income tax rate was 36.0% in 1995 compared to
39.4% in 1994. The decrease in the effective tax rate primarily results from the
favorable conclusion of an income tax examination.

Net Income. Net income increased 9.0% to approximately $4.2 million from
approximately $3.8 million in 1994 and net income per share increased by 7.2% to
$.89 per share in 1995 from $.83 per share in 1994. The weighted average common
shares and equivalent shares outstanding increased to 4,679,000 in 1995 from
4,587,000 in 1994.

NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 128, 'Earnings Per Share' ('SFAS 128'), which
simplifies the standards for computing earnings per share ('EPS') previously
found in Accounting Principles Board Opinion No. 15, 'Earnings Per Share' as the
presentation of primary and fully-diluted EPS is replaced with Basic and Diluted
EPS. Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. SFAS 128 is effective for financial

<PAGE>

statements issued for periods ending after December 15, 1997, and applies to
entities with publicly held common stock or potential common stock. The Company
will adopt SFAS 128 in financial statements issued for the year ending December
31, 1997. The effect of adopting this new standard has not been determined.

PRO FORMA LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

The Acquisition will have a significant impact on the Company's financial
condition. At March 31, 1997, Riddell had total consolidated indebtedness of
$35.1 million and Varsity had total consolidated indebtedness of $0.6 million.
On a pro forma basis, after giving effect to the Transactions, the Company's
total consolidated indebtedness would have been $135.2 million at that date.

After giving effect to the Offering and anticipated borrowings under the
New Credit Facility, interest payments on the Senior Notes and interest and
principal payments under the New Credit Facility will significantly increase the
interest charges of the Company. The Senior Notes will require semi-annual
interest payments commencing in January 1998. Borrowings under the New Credit
Facility bear interest at a variable rate. The New Credit Facility consists of a
five year revolving credit and working capital facility in a maximum amount not
to exceed $40.0 million through September 30, 1997 and $35.0 million thereafter
with amounts borrowed thereunder to be subject to a borrowing base of inventory
and accounts receivable. See 'The Acquisition' and 'Description of Other
Indebtedness--The New Credit Facility.'

In addition to its debt service obligations, the Company requires liquidity
for working capital and capital expenditures. The Company experiences seasonal
changes in its working capital as discussed under '--Seasonality' above. In
1996, combined capital expenditures were approximately $3.0 million which the
Company believes is representative of amounts to be expected in 1997.

The Company's primary sources of liquidity are cash flows from operations
and borrowings under the New Credit Facility. Immediately after consummation of
the Transactions, approximately $27.3 million will be available to the Company
from borrowings under the New Credit Facility, subject to inventory and accounts
receivable levels on a pro forma basis at March 31, 1997, after giving effect to
the Transactions. The Company anticipates that its working capital requirements,
capital expenditures and debt service requirements for fiscal 1997 will be
satisfied through a combination of cash flow from operations and funds available
under the New Credit Facility.

<PAGE>

BUSINESS

GENERAL

OVERVIEW

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 conducts its business
through two principal operating divisions: the Riddell Group Division and the
Varsity Group Division. 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 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(Registered) and MacGregor(Registered) trademarks for use in
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. After giving effect to the Transactions,
including the Acquisition and the Offering, the Company would have had net
revenues and pro forma EBITDA of approximately $160.8 million and $18.1 million,
respectively, for the year ended December 31, 1996.

EDUCATIONAL ATHLETIC MARKET

The 1997 edition of Patterson's American Education has reported that there
are approximately 14,900 junior high schools, 19,300 high schools (of which the
Company believes over 15,000 have a football program), 1,750 junior colleges and
1,500 colleges located throughout the United States. According to the National
Federation of State High School Associations, there are more than 5,800,000
students participating in organized athletic programs at high schools located in
the United States. The level of participation in high school football has
remained relatively stable over the past 10 years with participants averaging in
excess of 900,000 per year. The Company believes that there are in excess of
1,000,000 participants in the school spirit industry.

THE ACQUISITION

On May 5, 1997, Riddell, Merger Sub and Varsity entered into the Merger
Agreement. Pursuant to the Merger Agreement, on June 19, 1997, Merger Sub
completed its cash tender offer for all outstanding shares of common stock of
Varsity (the 'Varsity Tender Offer'). A total of 4,511,415 Varsity shares, or
approximately 98.5% of Varsity's then outstanding shares, were purchased

pursuant to the Varsity Tender Offer. Pursuant to the terms of the Merger
Agreement, on July 25, 1997, Varsity was merged with Merger Sub and became a
wholly owned subsidiary of the Company. All remaining shares of Varsity common
stock not tendered and purchased in the Varsity Tender Offer were converted into
the right to receive $18.90 per share. Because Merger Sub owned more than 90% of
the outstanding shares, under the TBCA, no vote was required by the shareholders
of Varsity to effect the Merger. Riddell's Former Credit Agreement was
refinanced with the proceeds of the Offering and the New Credit Facility, which
refinancing will occur simultaneously with the Acquisition. The Company used

<PAGE>

the net proceeds from the Offering and the initial borrowings under the New
Credit Facility to finance the Acquisition, to refinance the Former Credit
Agreement, and to pay fees and expenses of the Transactions.

The Company believes that the Acquisition will better position it to pursue
growth opportunities in the Institutional market. The Company regards the
Acquisition as an opportunity to achieve certain strategic objectives, including
providing the Company with the scale necessary to expand the direct marketing of
its products to include the more female dominated segment of the Institutional
market. The Acquisition will allow Riddell to benefit from Varsity's strong and
consistent growth record, providing a foundation for future growth through
product development, product line extensions and complementary acquisitions. The
Acquisition will improve Riddell's ability to serve the Institutional market by:
(i) enhancing the size and scope of the Institutional sales force; (ii)
expanding and enhancing the Company's 'unique' relationships with the
decision-makers for athletic equipment and services; (iii) accelerating new
product development and entry into new markets; (iv) facilitating the
implementation of its Institutional sales force information systems; and (v)
broadening management. Specifically, the Company believes that it will derive
the following benefits from the Acquisition:

o ENHANCING INSTITUTIONAL SALES FORCE. As a result of the Acquisition, the
Company's full-time sales force increased from 114 to 249. The Company
anticipates having separate sales forces for male and female sports and
activities. The combined Institutional sales force of Riddell and Varsity
will command a greater market presence than would either company's sales
force on a stand-alone basis. The Company intends to widen the focus of the
Varsity sales force from the cheerleading coach to coaches of all female
sports and activities. Historically, these coaches have been served
primarily by independent dealers. The Company expects to derive other
benefits from the Riddell and Varsity sales forces working together, such
as (i) leveraging relationships to provide referrals, or cross-leads, in
schools not currently served by both Riddell and Varsity, (ii)
cross-marketing its product lines to provide increased sales (e.g., Riddell
relationships used to sell Varsity camps, clinics, competitions and tours
and Varsity relationships used to sell Riddell's practicewear) and (iii)
improving customer service by increasing the ratio of sales representatives
to schools.

The Company intends to continue to increase the size of its sales
force, due to the competitive advantages of the direct sales strategy. By
increasing the size of its sales force, reducing the size of sales
territories, and increasing the number of products available for sale, the
Company expects that its sales people will be able to spend more time
productively in each school.

o ENHANCING UNIQUE SELLING RELATIONSHIPS. The Company sells product-related
services which strengthen relationships with its customers who make the
equipment purchasing decisions. Riddell, as a factory-direct supplier and
reconditioner, builds strong relationships through quick repair or
replacement on game-day as well as pick-up, cleaning and safety
recertification for football and baseball protective equipment at the end
of the season. No other football helmet manufacturer that services the
Institutional market provides reconditioning services. Varsity develops
strong relationships with its customers for cheerleading and dance uniforms
during the camp experience through its sponsorship of special events,
including popular holiday parades and regional and national championships,
and its group travel tour activities. In addition, Varsity offers special
training sessions and instructional manuals specifically aimed at the
coaches or other persons responsible for supervising the cheerleading and
dance team activities.

o ACCELERATING NEW PRODUCT DEVELOPMENT AND NEW MARKET ENTRY. Management
believes that the Acquisition will position the Company to expand into the
booster/fund raising market, the broader market for sports camps.
Cheerleading and other school activities, such as band, are often
participant-funded activities, not school-funded. Cheerleaders may sponsor
fundraising activities and sell various products to fund their activity.
The Company believes that by combining Varsity's relationship with
cheerleaders and Riddell's product development knowledge, it has the
ability to become a significant participant in the booster/fundraising
market. Many of the Company's existing products (such as mini-football and
baseball batter helmets and silk-screened t-shirts, shorts and sweatshirts)
are particularly well suited for the booster/fund raising market, and
through Riddell's expertise in molded plastic design and manufacturing, the
Company intends to develop new booster products. Management also expects
that the Company's experience in licensing its brands could be extended to
licensing Varsity's brands.

o FACILITATING IMPLEMENTATION OF SALES FORCE INFORMATION SYSTEMS. The
Company plans to expand its automated order entry processing system over
the next few years and to provide laptop computers to each

<PAGE>

sales person for information collection and order processing. While Varsity
has already begun to automate its sales information system, Riddell has not
yet done so. Varsity's sales force uses laptop computers and Varsity has
developed its own proprietary software. Management expects that Varsity's
experience should accelerate and facilitate Riddell's automation of its
order entry processing system. Management expects that the in-field

automation of sales information will enhance its competitive advantage by
providing Company personnel with faster access to information concerning
its customers and speeding the order entry process, thereby enabling sales
personnel to spend more time selling and less time writing sales orders.

o BROADENING MANAGEMENT. The Acquisition combines two strong management
teams with diverse and complementary backgrounds. The Company operates
Riddell and Varsity as two separate divisions under a broadened management
team. Varsity's management team has been together over eight years and has
consistently produced a record of growth and profitability. Riddell's
management has significant experience in the sporting goods industry and in
managing large public corporations. In connection with the Acquisition, the
top four executives of Varsity purchased $4.4 million of newly issued
Riddell common stock.

RIDDELL

GENERAL

Riddell is the world's leading manufacturer of high school, college and
professional football helmets, with market share estimated at over 50%, and
believes it has a leading market share in other protective equipment, such as
shoulder pads. Riddell sells these products primarily to high schools, colleges
and other Institutions. The Company sells in excess of 200,000 football helmets
a year, over 100,000 of which are used by high school, collegiate and
professional players. Riddell also sells shoulder pads, including a line of
premium pads under the Power(Registered) name, as well as a line of accessory
pads which include thigh, hip, rib and knee pads.

Through its subsidiary, All American, Riddell is the world's leading
reconditioner of football helmets, shoulder pads and other related equipment,
and the only football helmet manufacturer that provides reconditioning services
to the Institutional market. Reconditioning typically involves cleaning,
sanitizing, buffing or painting, and recertifying helmets as conforming to
NOCSAE standards. NOCSAE 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 which requires the Riddell name to appear on the front and on the chin
straps of 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
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.

<PAGE>

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 NHL team logos in 1995 and miniature
baseball batter helmets displaying MLB team logos in 1997. Riddell was granted a
license from Lucasfilm, Ltd. to sell half-scale Star Wars 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, of (i) eliminating
Riddell's network of independent team dealers and selling its new athletic
equipment directly to its Institutional customers through its in-house
reconditioning services sales force; (ii) introducing new products to
Institutional customers such as baseball and practicewear; and (iii) focusing on
new retail product development, including miniature collectibles, Riddell's
operating performance has significantly improved. Its net revenues have
increased from $48.8 million in fiscal 1992 to $72.4 million in fiscal 1996 and
EBITDA has increased from a $3.8 million deficit to $7.9 million over that same
period.

Riddell is a holding company that operates through various wholly owned
subsidiaries. Riddell's subsidiaries include Riddell, Inc., which manufactures
or sources new sports products for both Institutional and retail customers, All
American, which maintains an Institutional sales force that sells reconditioning

services and new athletic products directly to schools and other Institutions,
RHC Licensing Corporation ('RHC') and Ridmark Corporation ('Ridmark'), each of
which licenses the Riddell trademark, Equilink Licensing Corp. ('Equilink'),
which licenses the MacGregor trademark and Proacq. Corp. ('Proacq'), which
licenses Riddell's Maxpro(Registered) trademark.

Riddell was organized in April 1988 to acquire substantially all of the
assets and businesses of two subsidiaries of MacGregor Sporting Goods, Inc. The
businesses of the two former second tier subsidiaries consisted of manufacturing
and selling Riddell football helmets and other protective products and the
licensing of the MacGregor trademark. In September 1991, Riddell acquired
certain assets and liabilities of the protective equipment operations (the
'Protective Equipment Division') of BSN Corp., now known as Aurora Electronics
Inc. The Protective Equipment Division consisted of BSN's reconditioner of
protective sports equipment and certain other businesses.

INDUSTRY SEGMENTS

Riddell has historically operated primarily in two segments of the sporting
goods industry: sports products and services (including sales of athletic
products, reconditioning of athletic equipment and sales of sports collectible
products) and trademark licensing.

SPORTS PRODUCTS AND SERVICES

Athletic Products and Reconditioning

Original Line of Athletic Products: Riddell is the world's leading
manufacturer of football helmets, which it sells under the Riddell brand. For
the years ended December 31, 1994, 1995, and 1996 sales of football helmets for
competitive use constituted approximately 25%, 20% and 21% respectively, of
Riddell's consolidated revenues and 9% of the Company's 1996 pro forma
consolidated revenues.

Riddell football helmets are worn by football players throughout the world,
including players on all NFL teams, certain other professional leagues and on
most teams in the NCAA. High school teams, however, have historically been the
largest market segment for Riddell football helmets. Riddell offers several
types of varsity and youth helmets which are different in their configurations
and types of padding and other fitting features. Riddell helmets are known for
their quality and performance and meet the standards of NOCSAE, which sets the
standards for the industry.

Riddell also believes it has a leading market share position in the
shoulder pad market. The Company sells a professional and collegiate line of
shoulder pads under the Power(Registered) name and several other lines of
shoulder pads used mostly by high school and college players. Football shoulder
pad sales for the years ended December 31, 1994, 1995 and 1996 constituted
approximately 11%, 9% and 9% respectively, of Riddell's consolidated revenues
and 4% of the Company's 1996 pro forma consolidated revenues. Riddell also sells
accessory pads, including thigh, hip, rib and knee pads.

<PAGE>

Expanded Line of Athletic Products: Riddell recently began increasing the
categories of athletic products it sells to the Institutional market. In 1996
Riddell introduced a line of baseball and softball athletic products designed
for high school and college players, marketed under the ProEDGE(Trademark)
brand. This new line includes baseballs and softballs, protective baseball
equipment such as chest protectors, leg guards and catchers' masks and certain
other products including bases, bags and field equipment. In late 1995, Riddell
introduced a newly redesigned line of professional and youth batting helmets,
including the first batting helmet designed specifically for women's softball.
The new baseball product line includes professional quality models that are
similar to the best quality products available from Riddell's competitors.
Riddell's helmets meet the standards set by NOCSAE.

Late in 1996 Riddell further expanded its line of Institutional products to
include practicewear such as t-shirts, shorts, fleece warm-ups and other basic
athletic clothing. Practicewear is the first broad line of products sold by
Riddell to the Institutional market that are used by both male and female
athletes. Riddell offers customized silkscreen printing as an option for its
practicewear line. Riddell believes its practicewear is comparable to the
highest quality products available from its competitors.

Reconditioning: Riddell's subsidiary, All American, is the leading
reconditioner of football helmets, shoulder pads and related equipment with over
50% of the reconditioning market. Reconditioning typically involves the
cleaning, sanitizing, buffing or painting, and recertifying of helmets as
conforming to NOCSAE standards. Riddell may also replace face guards, interior
pads and chin straps. Riddell also reconditions shoulder pads, as well as
equipment for other sports, including baseball and lacrosse helmets, catchers'
masks and baseball gloves. Riddell believes that providing reconditioning
services, which are sold by its Institutional sales force to the same athletic
coaches responsible for equipment purchases, strengthens its customer
relationships. Riddell's reconditioning customers are primarily high schools,
colleges and youth recreational groups. Reconditioning constituted 34%, 31% and
30% of Riddell's consolidated revenues in the years ended December 31, 1994,
1995 and 1996, respectively. Riddell is the only national reconditioner of
football helmets, shoulder pads and related equipment. Competition is fragmented
with approximately 30 other smaller companies providing reconditioning services.

Sports Collectible Products

Riddell's sports collectible products are sold to consumers through the
retail market channel. Sales of these products have been the strongest area of
growth for Riddell in recent years, and Riddell intends to continue to focus on
the sale of these and other retail products in the future. For the years ended
December 31, 1994, 1995 and 1996 sales of sports collectible products have
constituted approximately 16%, 26% and 29% of Riddell's consolidated revenues
and 13% of the Company's 1996 pro forma consolidated revenues.

The sports collectible product line consists primarily of authentic and
replica football helmets of professional and college teams. These helmets are
offered in various miniature and full size models bearing the colors and logos
of NFL and other professional or collegiate teams. Riddell's full size authentic

football helmets are the same helmets used by players on these teams.
Nonauthentic helmets are not constructed with the same material as authentic
helmets, and are therefore less expensive. Riddell recently expanded its line of
collectible items to include a new line of smaller, less expensive miniature
football helmets tailored for the mass market, miniature hockey goalie masks
bearing NHL team logos and miniature baseball batters helmets bearing MLB logos,
among other products.

In connection with the sale of Riddell's collectible helmets, NFL
Properties has granted Riddell a license to use the names, symbols, emblems,
designs and colors of the member clubs of the NFL and the 'League Marks' (i.e.,
'National Football League,' 'NFL,' 'NFC,' 'AFC,' 'Super Bowl,' 'Pro Bowl,' the
'NFL Shield' design and other insignia adopted by the NFL) on authentic and
replica football helmets sold for display purposes. The term of the license is
concurrent with the term of the NFL Agreement. See '--Marketing and Promotion.'
The NFL Agreement has a term expiring April 1999 and automatically extending for
unlimited successive five-year periods thereafter unless, in general, Riddell
helmets fail to continue to meet certain quality standards.

In addition, Riddell has license agreements for other collectible products
from organizations such as the NHL, MLB and Lucasfilm, Ltd. which, late in 1996
granted Riddell a license through December 1998 to sell half-scale Star
Wars(Registered) miniature collectibles in the United States. Riddell has
introduced three Star Wars miniature collectible products thus far in 1997, and
has plans to introduce additional products, based upon Darth Vader, C-3PO and
other characters. Riddell has completed the design of, and has commenced
marketing, these products. Riddell began shipping its new Star Wars collectible
products in the second quarter of 1997.

<PAGE>

Riddell's goal is to continue to develop new collectible products for sale
to appropriate retail channels in the United States and certain international
markets, and, when appropriate, to seek licenses allowing Riddell to display
well-known logos on these products. There can be no assurance that Riddell will
successfully develop and market any new products.

Under a stock purchase agreement, dated July 13, 1994, entered into in
connection with the acquisition of the miniature helmet business of SharCo
Corporation (a former wholly owned subsidiary, which has been merged into
Riddell), the Company is required to pay certain former shareholders and
employees of SharCo a percentage of net sales of certain miniature helmets and
other products through September 30, 2001 as well as certain fixed payments. The
fixed payments totalled approximately $926,000 during the period January 5, 1995
through January 5, 1997, with the last fixed payments totalling approximately
$289,000 to be made on January 5, 1998. The Company was required to pay to
certain shareholders and employees a total of 5.0% of net sales of these
products from June 15, 1994 through September 30, 1996 and is required to pay a
total of 6.0% of such net sales from October 1, 1996 through September 30, 2001.

TRADEMARK LICENSING

Riddell licenses its Riddell and MacGregor trademarks in various
categories, primarily including athletic products, clothing and footwear. For
the years ended 1994, 1995 and 1996, Riddell's revenues from licenses of its
trademarks constituted approximately 7%, 5% and 3% of consolidated revenues,
respectively and 2% of the Company's 1996 pro forma consolidated revenues. See
'--Trademarks, Service Marks and License Agreements' for a discussion of
Riddell's principal license agreements and its licensing program.

MARKETING AND PROMOTION

General

Since April 1989, Riddell has been a party to the NFL Agreement. The NFL
Agreement requires the Riddell name to appear on the front immediately above the
center front forehead and on the chin straps of each Riddell helmet used in NFL
play and, 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 used during league play.

The NFL Agreement has a term expiring 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. Riddell agrees to
supply specified quantities of Riddell helmets, shoulder pads and related
equipment, either at no cost or at reduced cost to each NFL team with a
requisite percentage of its roster using the Riddell helmet. For the 1996/97
professional football season, Riddell believes that more than 80% of NFL players
used Riddell helmets. Riddell also has supply agreements with certain other
professional leagues.

Riddell utilizes a variety of promotional techniques to build brand
awareness. The NFL Agreement provides Riddell with a unique marketing and
promotional tool. 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. Riddell
believes that this arrangement increases sales of products by Riddell and its
Riddell brand licensees through enhanced visibility of the Riddell name and
improves licensing opportunities.

Sports Products and Services

Athletic Products and Reconditioning: Riddell's athletic products and
equipment reconditioning services are sold directly to schools and other
Institutions through a direct sales force of approximately 114 salespeople.
Prior to October 1994, sales of protective athletic equipment to Institutional
customers had historically been made through independent team sports dealers who
in turn sold to schools and other Institutions. Riddell now markets products to
these Institutional customers on a factory-direct basis utilizing the sales
force of All American, which previously sold only Riddell's reconditioning
services.

Riddell's youth football products are marketed to youth recreational
groups, such as Pop Warner, rather than to elementary schools. Accordingly,
Riddell's youth football products are sold through retail stores, independent
team sports dealers and other distributors.

<PAGE>

To further reinforce and support Riddell's brand recognition, Riddell
conducts a variety of marketing and promotional events in support of its line of
athletic products. Riddell participates in coaches' clinics and equipment shows
throughout the year. At these events, Riddell's entire athletic products line is
displayed and promoted along with Riddell's reconditioning services.

Sports Collectible Products: Riddell's replica and collectible products are
sold primarily to retail and specialty sporting goods stores through
approximately 40 independent sales representatives who are paid commissions.
Riddell has in recent years hired additional retail staff to develop and market
retail products. Riddell strategically targets channels of trade that it
determines to be most appropriate for the type and price of each retail product.
Riddell believes sales of retail products will increase along with new product
introductions and heightened marketing, but cannot assure it will attain any
such increase.

In support of its sports collectible products, Riddell has initiated
various advertising and public relations efforts. Riddell is a sponsor of the
'NFL Experience,' an event conducted each year during the week of the Super Bowl
at which the public can experience various aspects of playing football and the
businesses which supply football products. This event reaches a significant
number of consumers. The retail collectible line has appeared on QVC and the
Home Shopping Network, generating national awareness. Riddell advertises in
publications targeted toward the sports collectible industry as well as other
licensed products retailers. Riddell also provides incentives to retail outlets
to advertise and display Riddell products during promotional periods, and
participates in various national sporting goods shows, where it promotes these
products.

Licensing

Through its licensing subsidiaries, Riddell has granted certain third
parties the right to use the Riddell and MacGregor trademarks in connection with
the sale of athletic shoes, clothing and other products. Riddell is seeking to
further capitalize upon television and media exposure of the Riddell name on
helmets worn during NFL games. In 1996, Riddell hired an independent licensing
agent to help expand its licensing program for both the Riddell and MacGregor
marks and to administer Riddell's trademark programs. Also, Riddell is actively
considering proposals for new license agreements for certain categories of the
MacGregor and Riddell trademarks. There can be no assurance that any new
licenses will be entered into or, if executed, that any such agreements will be
successful.

PRODUCTION

Sports Products and Services

Protective Helmets: Riddell engineers, manufactures and packages all of its
protective football and baseball helmets at its plant in Chicago, Illinois.
Helmet shells are manufactured entirely by Riddell using a custom grade of
plastic resin and precision injection molding techniques.

Shoulder Pads: Production of Power shoulder pads has recently been shifted
to a single source in Canada. Riddell has a facility in Pennsylvania which
customizes shoulder pads upon request. All of Riddell's other shoulder pads are
imported as finished products from sources in the Far East.

Other Athletic Products: Riddell purchases its baseball products from
suppliers in the Far East. Riddell sources its practicewear from four domestic
suppliers. Riddell believes alternative sources for these products are readily
available. Riddell's Elk Grove, Illinois facility has a screen printing
operation which can customize the practicewear with almost any logo, team name
or other design that the customer requests.

Reconditioning: Riddell's reconditioning services include the sanitizing,
buffing or painting, replacing certain parts and recertifying of athletic
equipment as conforming to NOCSAE standards. These services are performed at
Riddell's reconditioning facilities strategically located throughout the United
States and Canada. In late 1994, in response to Riddell's move to direct sales,
Riddell's primary competitor in new football equipment, Schutt Sports Group
('Schutt'), manufacturer of the AIR helmet, canceled Riddell's reconditioning
subsidiary's designation as an authorized reconditioner of AIR helmets and
refused to sell parts for their helmets to this entity. This move has had no
measurable impact on Riddell's ability to recondition AIR helmets and no
significant volume has been lost in 1996. Riddell will source parts from outside
suppliers and will recertify all AIR helmets to NOCSAE standards as it had
before. It is possible that Schutt's action could have some limited impact on
Riddell's reconditioning volume in future years. See 'Risk Factors--Competition
and Market Share Data.' As a policy, Riddell does not recondition helmets over
10 years old.

<PAGE>

Collectible Products: Riddell engineers, manufactures and packages its full
size collectible helmets at its plant in Chicago, Illinois in a process similar
to that used for protective helmets. Riddell purchases its miniature helmets and
other collectible products from two sources in China. Riddell believes that
alternative sources for these products are readily available. See, however,
'Risk Factors--Dependence on Third-Party Foreign Manufacturing.'

Quality Testing

All protective products manufactured by Riddell are subjected to at least
four separate quality control procedures. Quality control inspections for
helmets are conducted when the product is molded, when liners are inserted, when
face guards are attached and when the product is finished. Samples of all models
produced are tested in accordance with NOCSAE standards. Riddell continually

monitors its sourced products to check that they meet the Company's quality
standards.

Warranty

All varsity protective football helmet shells are covered by a five year
warranty. Youth football helmet shells are covered by a three year warranty.
Helmet liners, protective padding and shoulder pads are covered by a one year
warranty. The rate of product returns for warranty claims has averaged
approximately 0.2% annually over the last 3 years.

Research and engineering studies conducted by Riddell and its suppliers
indicate that certain physical properties of the plastics used in football
helmets deteriorate over time. While Riddell recommends that football helmets
not be used for more than five years, its policy is to refuse to recondition
helmets that are more than ten years old.

RAW MATERIALS

Principal raw materials purchased by Riddell for use in its products
include various custom and standard grades of plastic and foam, metal fasteners,
paints and cardboard. Similar materials are used in most purchased components
and finished products along with steel wire used in purchased face guard
components. Riddell has not experienced and does not expect in the near future
to experience shortages in raw materials.

PRODUCT DESIGN AND ENGINEERING

The activities of Riddell's engineering staff relate principally to the
design, development and improvement of its helmets and padding and to the
testing of raw materials which are used in, or could be used to improve, Riddell
products and, to a lesser extent, to the development of new products. Riddell
has seven employees devoted principally to design, development and quality.
Riddell has several patents and patents pending that are applicable to its
protective padding products. See '--Patents and Trade Secrets.' Riddell has
retained a design company to assist it in developing new retail collectible
products on terms that Riddell believes are customary in the industry, and from
time to time works with other design companies.

COMPETITION

Sports Products and Services

Athletic Products: Riddell's principal competitor in the football helmet
market is Schutt, manufacturer of the AIR helmet. Riddell competes principally
with Bike Athletic Co., Inc., Douglas, Inc., Gear 2000, Inc. and Rawlings
Sporting Goods Company, Inc. ('Rawlings') in the football shoulder pad business.
Riddell competes with Diamond Sports Co., Rawlings, Wilson Sporting Goods
Company and other companies for baseball and softball products. Riddell competes
with Champion Products, Inc., Russell Athletic, Inc., and other companies for
practicewear. Some of Riddell's competitors in the athletic products business
are substantially larger and have greater financial and other resources than
Riddell.

Riddell believes it competes in the football market on the basis of
quality, price, reliability, service, comfort and ease of maintenance. With
respect to football and other athletic products, Riddell believes that its
direct sales force provides a competitive advantage in terms of its ability to
provide superior products and customer services and a significant price
advantage due to the elimination of independent dealers. Riddell believes it has
the only national direct sales force for Institutional athletic products and
services which management believes gives Riddell a competitive advantage and
would be difficult to duplicate.

<PAGE>

Reconditioning: The protective equipment reconditioning industry is highly
fragmented. Management believes that Riddell serves approximately 50% of the
reconditioning market and that it has approximately 30 regional competitors.
Riddell is the only national supplier of reconditioning services. Reconditioners
compete on the basis of quality, pricing, reputation, convenience and customer
loyalty.

Retail Collectible Products: Riddell believes that its sales of sports
collectible products compete with a large number and wide array of manufacturers
and sellers of sports and other collectible and memorabilia products, some of
which have greater resources than Riddell. Among its competitors in this large
marketplace are sellers of products such as autographed photographs and uniforms
and other memorabilia and manufacturers of clothing, such as caps and jackets.

Licensing

Competition in the licensing of sports equipment, apparel and footwear is
very substantial. The Riddell and MacGregor brands compete with numerous
companies having significant brand recognition, many of which have greater
financial, distribution, marketing and other resources than Riddell. Competing
brands include Adidas(Registered), Champion(Registered), Converse(Registered),
Nike(Registered), Rawlings(Registered), Reebok(Registered), Russell(Registered)
and Wilson(Registered). Brand recognition and reputation for quality are
important competitive factors in Riddell's licensing business.

PATENTS AND TRADE SECRETS

Certain of Riddell's football helmet liner systems are protected by patents
and trade secrets, including a patent on its inflatable liner expiring 2010.
Other patents on these liners expire 1998 and 2008. Riddell also has patents
expiring in 2006, 2007 and 2008 on various components of its shoulder pads which
increase the impact area of contact and permit better absorption of the related
shock. While management believes certain of these patents are material to the
success of Riddell's products, based on currently competing technology, it also
believes that experience, reputation, brand recognition and its distribution
network are more significant to its business.

TRADEMARKS, SERVICE MARKS AND LICENSE AGREEMENTS

General

Riddell considers the MacGregor, Riddell, ProEdge and Power trademarks to
be material to its business. All of Riddell's football helmets are marketed
under the Riddell name. Riddell's football shoulder pads are sold under the
Riddell and Power trademarks. Riddell markets footballs and certain baseball
equipment, other than helmets, under the ProEdge trademark. Riddell's
reconditioning services are conducted under the name Riddell/All American.

Riddell licenses the Riddell trademark for certain types of athletic
clothing and for athletic footwear. It licenses the MacGregor trademark
primarily for sales of athletic footwear and certain clothing.

Riddell Trademark and Licensing

Riddell owns all domestic rights to the Riddell trademark. The Riddell
trademark is registered in the United States Patent and Trademark Office and
with the trademark registration offices in certain foreign countries, and
registration is being sought in other major foreign markets. Trademark
registrations generally have terms of 10 years, renewable for successive ten
year periods.

In 1992, Riddell granted a license to Signal Apparel Company ('Signal') to
use the Riddell trademark on certain athletic apparel. In May 1996, in
connection with Signal's restructuring of certain of its product lines, Riddell
replaced the original license with a short term license agreement granting
Signal the rights to use the Riddell trademark on certain types of athletic
clothing which also bear the mark of the NFL Properties, Inc. or one of its
member teams. The license is renewable at the option of Riddell and requires a
lower minimum royalty than the original license entered into in 1992.

<PAGE>

Late in 1995, Riddell's licensee for the Riddell trademark on footwear
filed for protection under Chapter 11 of the U.S. Bankruptcy Code in Delaware.
Under the terms of a settlement agreement (the 'Settlement Agreement'), settling
an action commenced against the Company in March 1995 by the trustee for
MacGregor Sporting Goods, Inc. ('Mac I'), which filed for bankruptcy protection
in March 1989, and the trustee for MGS Acquisition, Inc., the Company has waived
its objections to the reorganization of, and has entered into a new licensing
agreement with, its existing 'Riddell' footwear licensee on substantially the
same terms as the previous license. In addition, the Settlement Agreement
requires the Company, among other things, to assign to the Levitt Trustee (as
defined herein) (or any successor trustee or other person approved by the New
Jersey Bankruptcy Court) and to Brooks (as defined herein) up to $3.0 million of
royalties, to the extent such royalties are paid under any 'Riddell' footwear
license. See '--The Company--Legal Proceedings--Terms of the Settlement
Agreement.'

MacGregor Trademark and Licensing

Riddell owns 50% of the stock of MacMark Corporation which owns the
MacGregor trademark for sports apparel, footwear and equipment. The MacGregor
trademark is registered in the United States Patent and Trademark Office, and
registration is being sought in major foreign markets. The remaining 50% of the
stock of MacMark is owned by Hutch Sports USA, Inc. ('Hutch'), a subsidiary of
RDM Sports Group, Inc.

Riddell has a perpetual, exclusive, royalty-free license from MacMark to
use (and to sublicense others to use) the MacGregor trademark in connection with
the manufacture and sale of certain products. The MacMark license allows Riddell
to use (and sublicense others to use) the MacGregor trademark for all products
other than products which MacMark has licensed to Hutch and SSG, as discussed
below.

Hutch has, subject to certain conditions, a perpetual, exclusive and
royalty-free license from MacMark to use (and, with the consent of MacMark and
Riddell, to sublicense others to use) the MacGregor trademark principally for
sports equipment products used in certain major classes of sports, such as
baseball, soccer and basketball, for sale to retail stores only. MacMark has
also granted to Sports Supply Group, Inc. ('SSG') a license to use the MacGregor
trademark for sales of the same classes of goods as it licenses to Hutch, but
restricts SSG to selling these goods only to the Institutional team sports
market.

MacMark and its licensees (including Riddell) are bound by a settlement
agreement entered into in 1981 with a company that owns trademark rights in the
similar trademark, McGregor. Under this agreement, the parties have agreed on
certain restrictions in the use of their respective trademarks. Additionally,
under a separate agreement, Riddell is precluded from using the MacGregor
trademark in connection with the sale of products used in the sport of golf.
Accordingly, Riddell's use of the MacGregor trademark generally is limited to
sporting goods, certain apparel and athletic footwear, but specifically
excluding any of these products that MacMark has licensed to Hutch and products
used in connection with the sport of golf.

Riddell has in turn entered into sublicense agreements for the MacGregor
trademark with Kmart for products including shoes, athletic socks and athletic
apparel. Meldisco, now a division of Footstar, Inc., has historically sold
MacGregor footwear under the Kmart license in Kmart stores. Riddell and Meldisco
recently reached an agreement in principal, subject to negotiation and execution
of final documentation, that Meldisco will continue to sell athletic footwear
bearing the MacGregor trademark at Kmart stores pursuant to a license expected
to be effective when the Kmart license expires in 1998. Kmart has an exclusive
license to use the MacGregor trademark on certain athletic apparel (e.g.,
jogging suits and sweat separates), athletic bags and knapsacks and a
non-exclusive license on other products such as athletic socks. Riddell plans to
establish a new license for the apparel category effective when the Kmart
license expires in 1998. Riddell believes there are long term benefits to
broadening the distribution of MacGregor apparel. However, there can be no
assurance that Riddell will be successful in its efforts to establish a new
apparel license. Royalties from sales of athletic clothing bearing the MacGregor
trademark at Kmart stores constituted 1% of Riddell's total revenues and 29% of
Riddell's total licensing revenues in 1996. No decision has been made with
respect to licensing the use of the MacGregor trademark after June 1998 on

socks, athletic bags or knapsacks currently marketed by Kmart.

Riddell is exploring additional opportunities for licensing the MacGregor
trademark, and in this connection has retained an independent Licensing Agent.
See '--Marketing and Promotion--Licensing.'

<PAGE>

VARSITY

GENERAL

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 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 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(Trademark) label, include custom-made
cheerleader, dance team and booster club uniforms and accessories, including
sweaters, sweatshirts, jumpers, vests, skirts, warm-up suits, t-shirts, shorts,
pompons, socks, shoes, pins, jackets and gloves. Exclusive contracts are
maintained with several independent manufacturers who provide knitting, sewing,
finishing and shipping for all orders. 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 monitors its contractors closely for quality control
and financial performance. 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 UCA division and 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 totalled 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(Trademark) (nationally
televised for 12 consecutive years), the National High School Cheerleading
Championship(Trademark) (17 consecutive years), the National Dance Team
Championship(Trademark) (10 consecutive years) and the National All Star
Cheerleading Championship(Trademark) (2 consecutive years). In addition to
promoting cheerleading and dance team activities, these championships,
television specials and events are a revenue source to Varsity during its off-
season. 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, 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. Management expects to expand Intropa's travel offerings through
referrals from its Institutional sales force.

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 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 through its nationally
televised cheerleading and dance team championships. Since fiscal 1987, Varsity
has significantly

<PAGE>

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 22.3% from
approximately $41.6 million in the year 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.

MARKET AND SCHOOL SPIRIT INDUSTRY

The market for school spirit products and services has evolved and grown
with the development of high school and college athletic programs. The 1997
edition of Patterson's American Education has reported that there are

approximately 14,900 junior high schools, 19,300 high schools, 1,750 junior
colleges and 1,500 colleges located throughout the United States. According to
the National Federation of State High School Associations, there are more than
5,800,000 students participating in organized athletic programs at high schools
located in the United States and, according to the National Collegiate Athletic
Association, there are approximately 260,000 students participating in organized
athletic programs at NCAA universities and colleges. Since commencing operations
in 1974, Varsity has focused primarily on the school spirit market segment
consisting of cheerleader and dance team camps and cheerleader uniforms and
accessories and special events.

Varsity believes the school spirit industry, and, in particular, the market
for cheerleader and dance team camps, clinics, uniforms and accessories, is
expanding. This expansion is primarily attributable to the following factors:

o Multiple Squads. Many high schools and junior high schools have
formed multiple cheerleader squads, which follows a trend set by
many colleges and universities. Separate squads are often organized
for each major sports program, such as football and basketball. In
addition, some schools have formed separate squads for other men's
sports and for women's sports.

o Younger Participants. Participation in cheerleading is increasing
among younger students, and formal squads are being organized at
junior high school and even elementary school levels.

o New Market. New non-school related teams are being formed. These
teams (typically called 'All Stars') are organized by private gyms
and function strictly to compete and to perform at local special
events.

o Dance and Pompon Teams. In addition to traditional cheerleader
squads, dance and pompon squads are becoming increasingly popular.

o Focus on Fashion and Competitions. A trend has developed among
cheerleaders and dance teams to purchase and wear different uniforms
for various athletic events and to participate in cheerleading and
dance team competition.

o Increase in Students. According to the U.S. National Center for
Education Statistics, the number of students attending high school
in the United States is increasing and is expected to increase over
the next five years.

o Increased Exposure. Increased national media exposure, including
television broadcasts of sporting events and cheerleading and dance
team competitions, has heightened the interest in and awareness of
cheerleader and dance team activities.

<PAGE>

VARSITY CHEERLEADER UNIFORMS AND ACCESSORIES

Through its subsidiary, Varsity Spirit Fashions & Supplies, Inc. ('Varsity
Fashions'), Varsity designs and markets cheerleader, dance team and booster club
uniforms and accessories, including sweaters, sweatshirts, jumpers, vests,
skirts, warm-up suits, t-shirts, shorts, pompons, socks, jackets, pins and
gloves. Varsity believes it is the industry leader in cheerleader and dance team
uniform fashion and that it has an excellent reputation for quality, design and
on-time delivery of its products. 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 Fashions employs
two full-time fashion designers, both of whom are former college cheerleaders
and one of whom was trained at the Fashion Institute of Technology in New York
City. Varsity Fashions also utilizes specialized computer software to create its
new fashion designs and patterns.

Cheerleading and dance team uniforms designed and marketed by Varsity
Fashions are made to order. During 1996, Varsity Fashions contracted for its
production requirements with seven independent garment manufacturers utilizing
ten manufacturing facilities. Varsity Fashions has exclusive contracts with
these manufacturers, under which the manufacturers provide knitting, cutting,
sewing, finishing and shipping for all orders. Varsity Fashions provides these
manufacturers with patterns, fabrics, yarn and manufacturing specifications and
quality control supervision. Varsity Fashions also provides some cutting,
knitting and lettering for the manufacturers at its specialized production
facility located at Varsity's Memphis headquarters. The use of independent
manufacturing facilities to fulfill the Varsity's production needs affords
Varsity flexibility to adjust its production output to meet its highly seasonal
selling cycle. The use of independent manufacturers also reduces Varsity's fixed
costs, which Varsity believes is beneficial in a highly seasonal business.
Varsity believes that the loss or termination of its relationship with any
single independent manufacturer would not have a material adverse effect on
Varsity.

Varsity Fashions purchases from various suppliers many of the cheerleading
accessories that it markets, including shoes, pompons and campwear. Varsity
Fashions purchases products from Nike, Capezio and Converse, among others.
Varsity Fashions has expanded the variety and number of accessories it markets,
which has contributed to the increase in merchandise sales revenue experienced
by Varsity Fashions in the past five fiscal years. Varsity believes that the
loss or termination of its relationship with any single supplier would not have
a material adverse effect on Varsity.

Varsity markets its uniforms, accessories and other merchandise through
sales representatives and, to a lesser extent, through its direct mail catalog
and telemarketing programs. As of March 31, 1997 Varsity had approximately 135
full-time sales representatives operating in a total of 50 states. Varsity
representatives are employed directly by Varsity or are representatives of one
marketing firm with which Varsity has contracted for marketing services. These
sales representatives, who typically cover one or more major metropolitan areas
on an exclusive basis, call on substantially all of the junior high, high school
and college accounts within their respective territories. The sales
representatives are typically compensated on a percentage of sales basis.
Varsity closely and continuously monitors the performance of its sales
representatives and periodically meets with the representatives to discuss and

review sales goals.

VARSITY CHEERLEADER AND DANCE TEAM CAMPS

Varsity operates cheerleader and dance team camps in the United States.
During the 1996 summer camp season, approximately 188,000 participants
(consisting of students and their coaches) attended UCA and USA camps, including
over 6,300 participants representing colleges and junior colleges. During the
summer of 1996, cheerleading and/or dance team squads from approximately 65% of
the universities comprising the Atlantic Coast, Big East, Big Ten, Big Twelve,
Pacific 10 and Southeastern collegiate athletic conferences attended Varsity
camps. On May 15, 1996, Varsity acquired the camp business of United Spirit
Association from United Special Events, Inc. This business consists of
instructional spirit camps and clinics primarily in the western United States.

Varsity camp sessions for high school and junior high school students are
held primarily in June and July, while camp sessions for college cheerleaders
and dance team participants are held primarily in August. Mascot training
clinics are also provided at certain of Varsity's cheerleader and dance team
camps.

<PAGE>

The following map depicts Varsity camp locations throughout the continental
U.S. during 1996.

[Map of camp locations in continental U.S.]

A significant majority of Varsity cheerleader and dance team camps are
conducted on college or junior college campuses. The camps generally are
conducted over a four day period and are attended by resident and commuting
students. Varsity generally markets the camp, establishes registration fees,
registers students, collects the registration fees, provides instruction and
performs all related administrative services. Varsity contracts with the
colleges and universities for provision of housing, food and conference
facilities. During the summer of 1996, resident fees for high school cheerleader
and dance team camps sponsored by Varsity ranged from $70 to $236, with commuter
fees ranging from $40 to $139. In addition to registration fees, Varsity also
generates revenues at cheerleading and dance team camps through the sale of
t-shirts, shorts, caps, patches and various other accessories.

The staff of a Varsity summer camp includes instructors, administrators and
trainers. On average, one instructor is provided for every 23 students, which
Varsity believes is the most favorable instructor to student ratio among the
major operators of cheerleader and dance team camps. Camp administration staff,
including administrators and trainers, are provided at the ratio of
approximately one to 75 students. Varsity's instructors, all of whom are
required to complete an intensive training session prior to each summer season,
typically are college or former high school cheerleaders who also have attended
Varsity camps in the past.

Varsity also operates two cheerleading practice facilities located in

Dallas, Texas and Decatur, Georgia. These gyms are year round facilities at
which cheerleaders and other spirit group participants can enroll in
instructional and recreational programs offered by Varsity.

<PAGE>

SPECIAL EVENTS

Varsity promotes its products and services, as well as the school spirit
industry, through active and visible association with the following
championships and television specials:

o National High School Cheerleading Championship(Trademark)

o National Dance Team Championship(Trademark)

o National College Cheerleading and Dance Team Championship(Trademark)

o National All Star Cheerleading Championship(Trademark)

These championships and specials have been regularly televised on the ESPN
television networks in recent years and have been sponsored by various companies
and products, including Nike, Unilever, Capezio, the Walt Disney World Resort,
Johnson & Johnson, Pepsi Cola and Wal-Mart.

Varsity also conducts and promotes special cheerleading events, such as
parades and half-time shows at college football bowl games. 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. For example, in 1990 Varsity began its
annual involvement with the Lord Mayor of Westminster's New Year's Day Parade
held in London, England, and registered over 1,490 participants for this parade
in 1997. Varsity also registered over 380 participants for the 1997 parade held
in Paris, France, over 710 participants for the 1996 Thanksgiving Day Parade
held in Walt Disney World(Registered) Resort, Florida, over 1,050 participants
for the 1996 Macy's Thanksgiving Day Parade held in New York, over 740
participants for the half-time show at the 1997 Outback Bowl Game held in Tampa,
Florida and over 540 participants for the Christmas Parade held in Hollywood,
California.

These championships, television specials and events are a revenue source to
Varsity during its off-season and promote consumer awareness of
Varsity(Trademark) and Universal Cheerleaders Association(Trademark) products
and services, as well as cheerleader and dance team activities in general.

MARKETING PROGRAMS

Varsity believes that the marketing talents of its personnel are
fundamental to its past and future growth. Varsity's marketing programs include
certain activities described below.

Varsity markets its uniforms and accessories under the Varsity trademark.

The distinctive Varsity logo patch appears on the front of all uniforms
manufactured by or for Varsity. Varsity annually mails to schools and school
spirit advisors and coaches over 150,000 Varsity catalogs containing color
photographs and descriptions of Varsity's uniforms and accessories. Varsity
supplements its direct and catalog sales efforts with a telemarketing sales
force of 12 full and part-time employees operating from its Memphis
headquarters.

Varsity annually publishes several newsletters which are directed toward
cheerleaders and school spirit advisors. Varsity also annually distributes, in
certain targeted areas, a professionally produced video tape containing
highlights of Varsity's cheerleader and dance team camps and special events.
Varsity distributes each year by direct mail over 178,000 four-color promotional
brochures describing Varsity's cheerleader and dance team camps to schools,
school principals, head cheerleaders, coaches, dance team captains and school
spirit advisors.

Varsity has developed various cross-marketing programs to promote both its
cheerleader and dance team camps and its uniforms and accessories. Specifically,
Varsity's sales force of approximately 135 full-time representatives also
promote Varsity's cheerleader and dance team camps. Similarly, the more than
1,525 instructors at Varsity's cheerleader and dance team camps promote sales of
Varsity's merchandise.

OTHER OPERATIONS

Varsity, through a wholly owned subsidiary, Varsity/Intropa Tours, Inc.
('Varsity/Intropa'), operates a tour company that specializes in organizing
tours primarily for cheerleaders, bands, choirs and orchestra, dance and theater
groups and other school affiliated or performing groups. Most tours are planned
around a performance event. Therefore, the revenues from this business are
seasonal. Prices are negotiated on a tour-by-tour basis and

<PAGE>

fluctuate based on factors such as the availability of discounts on air fares
and the exchange rates, in the case of international tours. The tours are
marketed to targeted existing groups via direct mailings, conventions, trade
magazines, advertisements, and, more importantly, repeat business and referrals.
Last year, Intropa handled the travel and concert arrangements for over 5,000
persons, excluding cheerleaders, who toured the continental United States,
Hawaii, Canada, Europe and Israel.

TRAINING

Varsity emphasizes the training of its Varsity instructors and believes it
has the premier instructor training program in its industry. Prior to the
commencement of the camps, the instructors participate in an intensive six-day
training session where they are taught new cheerleading and dance material, as
well as up-to-date teaching and safety techniques. Varsity hires its instructors
by utilizing applications given to talented camp participants, supervisor
evaluations and numerous nationwide tryouts. As a result of this process,

Varsity believes it hires the most qualified and talented instructors available.

Varsity believe it is the industry leader in the promotion of safety among
cheerleaders and dance team participants and coaches. Varsity was a founding
member of and is an active participant in the American Association of
Cheerleading Coaches and Advisors ('AACCA'), an industry trade group whose
mission is to improve the quality of cheerleading and to maintain established
safety standards. In 1990, AACCA published comprehensive certification and
safety guidelines for cheerleading coaches, which guidelines were edited by Dr.
Gerald George, a nationally recognized expert on sports safety and training. An
updated version of that manual is scheduled to be released during 1997. Varsity
follows the AACCA safety guidelines in the training of its professional
instructional staff and in the conduct of its cheerleader and dance team camps
and competitions.

COMPETITION

Varsity is one of two major companies that designs and markets cheerleader,
dance team and booster club uniforms and accessories on a national basis. In
addition to Varsity and its major national competitor, NSG, there are other
smaller national and regional competitors serving the uniform and accessories
market in the United States. Varsity believes that the principal factors
governing the selection of cheerleader and dance team uniforms and accessories
are the quality, variety, design, delivery, service and, to a lesser extent,
price of the merchandise.

Varsity is also one of two companies that annually operate a significant
number of cheerleader and dance team camps in the United States (the other being
NSG). There are also many other companies and schools that operate camps and
clinics on a regional basis. Varsity believes the principal factors governing
the selection of a cheerleader or dance team camp or clinic are the reputation
of the camp operator for providing quality instruction and supervision,
accessibility of camp locations, timing of the camps and the tuition charged for
camp participation.

TRADEMARKS AND SERVICE MARKS

Varsity has registered various trademarks with the U.S. Patent and
Trademark Office, including the following: the Universal Cheerleaders
Association logo, the Varsity logo, the United Spirit Association logo, the
National High School Cheerleading Championship logo, the Universal Dance
Association logo, Universal Dance Camps, Varsity Spirit Fashions and The
National Dance Team Championship. Varsity believes that these trademarks have
significant value and are important to its marketing efforts.

THE COMPANY

SEASONALITY AND BACKLOG

Riddell has historically experienced and expects to continue to experience
seasonal fluctuations in its sales and profitability. The move to direct
Institutional sales has shifted peak sales of Riddell's competitive products to
a later point in the year than that experienced prior to going direct.

Orders for competitive 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
competitive football products and performance of reconditioning services reach a
low point during

<PAGE>

the football playing season. These activities contribute most to profitability
in the first through third quarters of each calendar year.

Riddell's sports collectible products are sold to retailers throughout the
year. However, sales are at their peak during the third and fourth quarters as
retailers build inventory in anticipation of both the football and the holiday
shopping seasons. Volume shipment of newly introduced products in the early part
of both 1995 and 1996 moderated this seasonality. However, shipment of new
products planned for 1997 introduction are anticipated to impact later points of
the year with a resulting shift in revenues and profitability towards the second
half of 1997.

Due in large part to the lull in sales of competitive football products and
services during the football season, Riddell has normally experienced operating
losses during the fourth quarter of recent years. While the growth of the
collectible business and other products has softened this seasonality and should
continue to do so, Riddell anticipates that the overall pattern of lower fourth
quarter profitability will continue due to the significance of Riddell's sales
of football products and services.

Backlog for all of Riddell's products and services at April 30, 1997 was
approximately $17.2 million, a 12% decrease from the April 30, 1996 backlog of
approximately $19.5 million. The decrease is principally due to changes in
Riddell's procedures and policies for solicitation and acceptance of certain
classes of orders for sports collectible products. In early 1996 certain
retailers placed large orders for sports collectible products which they later
reduced by a material amount. These orders were for collectible products which,
at the time, had recently been introduced by Riddell and were new to these
retailers.

Varsity's business and the results of its operations are highly seasonal.
Varsity's cheerleader and dance team camps are held exclusively in the summer
months, and sales of uniforms and accessories occur primarily in the six months
prior to the beginning of the school year. A substantial portion of Varsity's
annual revenues and all of Varsity's net income are generated in the second and
third quarters of the calendar year, while the first and fourth quarters have
historically resulted in net losses. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Seasonality.'

GOVERNMENTAL REGULATION

Riddell's products and accessories are subject to the Federal Consumer
Product Safety Act, which empowers the Consumer Product Safety Commission (the
'CPSC') to protect consumers from hazardous sporting goods and other articles.

The CPSC has the authority to exclude from the market certain articles which are
found to be hazardous and can require a manufacturer to repurchase such goods.
The CPSC's determination is subject to court review. Similar laws exist in some
states and cities in the United States, Canada and Europe. Riddell maintains a
quality control program for its protective equipment operations and retail
products that is designed to ensure compliance with applicable laws. To date,
none of these products has been deemed to be hazardous by any governmental
agency.

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 and 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 as
sociations, the Company expects to participate in the formulation of such rules
to the extent permissible.

<PAGE>

At the high school level, some state athletic associations have classified
cheerleading as a sport and in some cases have 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.

Each of Riddell's and Varsity's operations at all of its facilities are
subject to regulation by the Occupational Safety and Health Agency and various
other regulatory agencies.

The Company's operations are also subject to environmental regulations and
controls. While some of the raw materials used by Riddell may be potentially
hazardous, it has not received any material environmental citations or
violations and has not been required to spend significant amounts to comply with

applicable law.

EMPLOYEES

At March 31, 1997, Riddell had 613 employees. The employees are engaged as
follows: 7 in product design, engineering and testing, 112 in manufacturing, 312
in reconditioning, 141 in sales and marketing and 41 in administration.
Approximately 40 of Riddell's employees are represented by the Chicago and
Central States Joint Board, Amalgamated Clothing and Textile Workers Union,
under a collective bargaining agreement which will expire in January 1999.
Approximately 33 of Riddell's employees are represented by the Local #500A
United Food and Commercial Workers Union (AFL-CIO) under a collective bargaining
agreement that expires in January 2000. Riddell believes that relations with its
employees are satisfactory.

At March 31, 1997, Varsity employed 401 full-time employees and 214
part-time employees. In addition, during the summer of 1996, Varsity employed
approximately 1,670 summer camp instructors, trainers and administrators. None
of Varsity's employees is covered by a collective bargaining agreement. Varsity
considers its relationship with its employees to be satisfactory.

PRODUCT LIABILITY PROCEEDINGS AND INSURANCE

As part of its ongoing business, Riddell is routinely a defendant in
various product liability suits relating to personal injuries allegedly related
to the use of Riddell helmets.

Insurance

Riddell maintains product liability insurance under a policy bound in
December 1994. In October 1996 the policy term was extended until December 2001
and certain coverage limits were increased. The policy is an occurrence-based
policy generally covering claims relating to injuries occurring prior to
December 2001 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 basic insurance coverage under the policy ('Basic Coverage') provides
coverage against claims currently pending against Riddell and future claims
relating to any injuries occurring prior to December 13, 2001. There is an
aggregate coverage limit of $7.5 million for the Basic Coverage, and the policy
is also subject to certain annual aggregate sub-limits. The Basic Coverage
covers up to $2.25 million per claim in excess of an uninsured retention
(deductible) of $750,000 per occurrence. Until such time as the premiums for the
entire policy have been paid, the Basic Coverage is also limited to 110% of the
premiums paid or which have been guaranteed by a letter of credit.

The insurance program also provides for additional coverage ('Excess
Coverage') of up to $20.0 million per occurrence, in excess of the first $3.0
million of each claim. The Basic Coverage, to the extent available, covers the
initial $3.0 million layer. The Excess Coverage applies to 10 of the 11 claims
pending against Riddell at December 31, 1996 and will apply to any future claims
which relate to injuries occurring prior to December 13, 2001. Claims covered by
the Excess Coverage are subject to one of two separate $20.0 million aggregate

policy limits, depending on the date of the related injury and the date the
claim is filed against Riddell. The first $20.0 million aggregate limit applies
to claims filed before October 4, 1996 for injuries occurring after January 1,
1985 and prior to December 13, 1994 together with any future claims for injuries
occurring before October 4, 1996. The second separate $20.0 million aggregate
limit applies to claims filed before October 4, 1996 for injuries occurring
after December 13, 1994 together with any future claims for injuries occurring
after

<PAGE>

October 4, 1996 and before December 13, 2001. The Excess Coverage is also
limited to certain ratios of paid premiums until such time as the premiums due
under the policy for the entire policy period have been paid. However, this
latter limitation can be eliminated at any time by prepaying the future premiums
due during the remainder of the policy, or by guaranteeing the future premiums
with a letter of credit.

The amount of insurance available under the Excess Coverage discussed above
includes an expansion of coverage obtained in October 1996. Prior to October
1996, the per case limits and two separate aggregate limits under the Excess
Coverage were each $10.0 million as opposed to the $20.0 million amounts
discussed above. The maximum possible payout under the entire policy, combining
the aggregate limit for the Basic Coverage and the two separate aggregate limits
under the Excess Coverage, is currently $47.5 million whereas prior to the
policy expansion this amount would have been $27.5 million. The annual cost of
this product liability insurance coverage for 1995 and 1996 exceeded the cost of
insurance incurred in years prior to 1995 by approximately $1.0 million. The
increase in cost for this expansion of coverage was offset by the benefit of
spreading Basic Coverage policy premiums over two additional years, on a
prospective basis, with the extension of the original policy period from five to
seven years. This has resulted in a net decrease in the annual cost of the
policy for the remaining five years of the policy period. Riddell believes that
the new additional product liability coverage provides a substantial increase in
coverage against future claims.

At the time the new policy was bound there were several preexisting claims
pending against Riddell. The policy provides only limited coverage for these
preexisting claims (only one of which was still pending at April 30, 1997).
Accordingly, in 1994 Riddell entered into an effort to settle several claims
that it believed, considering the substantially reduced level of available
insurance, represented the greatest potential risk to Riddell. Riddell was
successful in carrying out this settlement effort, and in early 1995 settled
certain claims for an aggregate amount of $2.1 million. However, because of the
risks associated with these claims, and given the reduced level of available
insurance, the amount of these settlements was substantially above historical
levels for settlements of similar claims. Accordingly, these settlements,
together with revaluations of reserves for remaining claims, resulted in an
increase in product liability expense for the year ended December 31, 1994 of
approximately $1.5 million.

Riddell'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 Riddell after 2001, that Riddell's insurer will remain
viable, or that the insured amounts will be sufficient to cover all future
claims in excess of Riddell's uninsured retention. Furthermore, future rate
increases might make such insurance uneconomical for Riddell to maintain after
2001.

Each of Riddell and Varsity carries general liability insurance with
coverage limits which the Company believes will be adequate for its business.

Product Liability Proceedings

A subsidiary of Riddell has historically been a defendant in product
liability suits relating to personal injuries allegedly related to the use of
Riddell football helmets. These claims, and related issues, have had a material
impact on Riddell's operating results and financial position. As of June 6,
1997, seven such cases were pending against Riddell. Riddell has established
reserves for pending product liability claims and determines its reserves based
on estimates of losses and defense and settlement costs which it anticipates
would result from such claims based on information available at the time the
financial statements are issued. Due to the uncertainty involved with estimates,
as demonstrated by the events discussed below, 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 these claims
or potential future claims will fall within the established reserves. See Note 8
to the Consolidated Financial Statements of Riddell included elsewhere in this
Prospectus.

In 1994, a jury returned a verdict against Riddell for damages amounting to
approximately $8.0 million in one of these suits. Although Riddell believes that
it was not responsible in the case, and had been in the process of appealing the
verdict, Riddell settled with the plaintiff in late 1995 for an amount that was
less than what was previously awarded. Riddell had taken a charge of $4.6
million before taxes in 1994 to establish a reserve for the full uninsured
portion of the initial award, as well as current and future premiums then due
under a $5.0 million product liability insurance policy (which had a term
running through June 1997) which would be exhausted by payment of the verdict.
As the amount of the settlement was less than the initial award, the settlement
had no

<PAGE>

effect on 1995 income. In 1995, the excess of the reserve over amounts due under
the settlement was added to general reserves established for other product
liability claims as described in Note 8 to the Consolidated Financial Statements
of Riddell. The Consolidated Balance Sheets reflect certain liabilities relating
to this, and other product liability matters, as well as receivables for insured
portions of certain losses, as further described in Note 8 to the Consolidated
Financial Statements of Riddell included elsewhere in this Prospectus. The
settlement does not affect coverage available under Riddell's current product
liability insurance policy.

In September 1991, Riddell acquired the assets of subsidiaries of BSN Corp.
(known now as Aurora Electronics, Inc. ('Aurora')), and Aurora has indemnified
Riddell for any losses it may incur in connection with any product liability
claims asserted prior to September 23, 1994. Upon completing the 1991
acquisition, Riddell immediately discontinued the Maxpro football helmet
business formerly conducted by Aurora. As of April 30, 1997, there were no
product liability claims with respect to Aurora products pending against
Riddell. Some states impose liability for product liability claims on successors
that continue the business of manufacturing or distributing the same products.
The laws of successor liability, which vary from state to state, may result in
Riddell being found liable on some or all of any future claims.

Properties

Riddell has 14 locations, 10 of which are used in its reconditioning
operations. Riddell owns its principal football helmet manufacturing facility
located in Chicago, Illinois. In 1995 Riddell closed a facility that
manufactured certain sports collectible products. In February 1994, Riddell sold
its foam product manufacturing plant in Wauseon, Ohio. Varsity leases its
facilities throughout the U.S. The Company believes its properties, machinery
and equipment are adequate for its current requirements.

Set forth below is certain information regarding the Company's principal
properties:

<TABLE>
<CAPTION>
LEASE
SQUARE EXPIRATION
LOCATION PRINCIPAL USE FOOTAGE DATE
- ---------------------------- ------------------------- ------- --------------
<S> <C> <C> <C>
New York, New York Corporate headquarters 3,800 September 1999
Chicago, Illinois Headquarters of Riddell, 95,000 Owned
Inc. and helmet
manufacturing
Elk Grove Village, Illinois Warehouse and 83,000 March 2000
distribution center
Elyria, Ohio Headquarters for All 39,000 May 2000
American Sports Corp.
reconditioning operations
and customer service
San Antonio, Texas(1) Reconditioning 27,000 October 1998
Stroudsburg, Pennsylvania Reconditioning and 44,000 October 1998
shoulder pad customizing
Belton, Missouri Reconditioning 6,600 January 1999
Buffalo, New York(2) Warehouse 6,400 Month-to-month
Burgettestown, Pennsylvania Reconditioning 17,000 September 2013
Franklin Park, Illinois Reconditioning 16,000 June 2000
Fort Valley, Georgia(2) Reconditioning 15,000 October 1997
Ft. Erie, Ontario, Canada(2) Reconditioning 5,000 September 1997
New Rochelle, New York Reconditioning 23,000 January 2000
Union City, California(3) Reconditioning 23,000 September 1997

Memphis, Tennessee(4) Office/Warehouse/Production 63,700 October 1997
Memphis, Tennessee Warehouse 21,500 October 1997
Sunnyvale, California Office/Warehouse 10,030 November 2000
Decatur, Georgia Sport Gym 12,000 July 1998
Carrollton, Texas Sport Gym 11,050 January 2000
Bellaire, Texas Office 2,984 November 1997
</TABLE>

- ------------------
(1) Lease is subject to renewal by Riddell for three years.

(2) Riddell is currently negotiating a renewal lease for this property.

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

(3) Riddell has entered into a lease for an alternate facility.

(4) This facility is subject to renewal at tenant's option. Varsity is currently
evaluating whether to renew this lease or find alternate facilities.

LEGAL PROCEEDINGS

Riddell and its subsidiaries from time to time become involved in various
claims and lawsuits incidental to their businesses including without limitation,
employment related and product liability litigation. See '--Product Liability
Proceedings and Insurance.' Varsity is not a party to any litigation that is
expected to have a material adverse effect on its business.

Mac I Fraudulent Transfer Action and State Law Debtor and Creditor Claim

On August 5, 1997, the Company settled an action commenced against it in
March 1995 by the trustee for MacGregor Sporting Goods, Inc. ('Mac I') and the
trustee for MGS Acquisition, Inc. (Bruce Levitt, Bankruptcy Trustee for
MacGregor Sporting Goods, Inc., now known as M. Holdings, Inc., Paul Swanson,
Bankruptcy Trustee for MGS Acquisition, Inc., v. Riddell Sports Inc. et al., No.
95-2261 (RG) (Bankr. D.N.J.) (the 'Levitt Action')). The settlement agreement
(the 'Settlement Agreement') was approved by order of the New Jersey Bankruptcy
Court (the 'Mac Order'), which also dismissed the action with prejudice. The
action sought monetary damages and/or the rescission of Riddell's acquisitions
(the 'MacGregor Acquisitions') in 1988 and 1989 of substantially all the assets
and businesses of two former, second-tier subsidiaries of Mac I, including,
among other things, the football protective division, the MacGregor licensing
business and the nonfootball uses of the Riddell trademark for, among other
claims, alleged failure to pay fair consideration at a time when Mac I was
insolvent or as a result of which Mac I became insolvent or undercapitalized.

The complaint sought monetary damages in an unspecified amount plus
interest and/or rescission in connection with the MacGregor Acquisitions. In
addition to seeking monetary damages and/or rescission from Riddell, the
complaint sought to void the liens of NBD Bank in the property at issue. The
complaint also sought damages against Frederic H. Brooks ('Brooks'), a former
President of Riddell, for breaches of fiduciary duties to Mac I for failing to
obtain fair consideration in connection with these transactions.

The terms of the Settlement Agreement are described below under, '--Terms
of the Settlement Agreement.'

The Settlement Agreement also settles, and the Mac Order dismisses with
prejudice, the claims made against Riddell in a state law debtor and creditor
action initiated against Riddell by Innovative Promotions, Inc. and certain
other purported unsecured creditors of Mac I based on substantially the same
claims as were made in the Trustees' (as defined herein) actions in the New
Jersey Bankruptcy Court. This action was removed to the New Jersey Bankruptcy
Court (Innovative Promotions, Inc. et al. v. Riddell Sports Inc. et al. (in re
MacGregor Sporting Goods, Inc.), Adv. Proc. No. 94-2656(RG) (the 'Innovative
Action'). The plaintiffs in the Innovative Action sought rescission of, and/or
monetary damages in excess of $22 million exclusive of interest relating to the
MacGregor Acquisitions for alleged failure to pay fair consideration at a time
when Mac I was insolvent, or as a result of which Mac I became insolvent or
undercapitalized. Plaintiffs also sought judgments voiding the liens of NBD Bank
with respect to the assets. In June 1995, the trustee in the Levitt action (the
'Levitt Trustee,' and together with the trustees in the Mac I and MGS
Aquisition, Inc. bankruptcy proceedings, the 'Trustees') intervened as
plaintiffs in the Innovative Action purportedly to preserve their rights in the
event they lost the Levitt Action.

The Settlement Agreement also settles, and the Mac Order dismisses with
prejudice, certain claims brought against Riddell by Brooks in the Levitt
Action. See '--Terms of the Settlement Agreement.'

Employee Litigation

From time to time Riddell is party to employee litigation claims including,
without limitation, workers compensation and wrongful termination claims. In
June 1995, a subsidiary of the Company was served with a complaint entitled,
Beverly A. Eichler v. Riddell, Inc. (D. Ct, N.D. III., E. Div.), No. 95-C-3782.
The complaint, brought by a former employee of one of Riddell's subsidiaries who
was terminated in December 1993, alleged sex and age discrimination and sought
past and future wages and punitive damages in an undisclosed amount. In early

1997, a jury awarded Ms. Eichler damages in the amount of $59,000 and the court
assessed front-pay

<PAGE>

damages of $420,000. Plaintiff filed a motion for her attorneys' fees and
expenses in the amount of $386,000. In July 1997, the Company settled this
action for less than the total of (i) damages previously awarded and assessed
and (ii) plaintiff's attorneys' fees and expenses.

The Settlement Agreement also settles counterclaims and other claims
against Riddell, two of its officers and directors and Riddell's footwear
licensee arising out of an action captioned Riddell Sports Inc. v. Frederic H.
Brooks (D.C., SDNY), 92 Civ. 7851 (JGK) (the 'Brooks Action'). Brooks generally
alleged that Riddell breached its indemnification obligations to him as a former
officer and director of Riddell and sought damages in excess of $3.9 million,
plus future attorneys' fees and interest. Brooks also sought compensatory and
punitive damages combined of at least $15 million for alleged tortious
interference with prospective advantage, prima facie tort and other claims
against Riddell, two of its officers and directors and an entity controlled by
them. Riddell had agreed to indemnify its footwear licensee and certain of its
affiliates in connection with Brooks' claims against them.

Terms of the Settlement Agreement

On June 20, 1997, the Company entered into the Settlement Agreement for the
proposed settlement of, among others, the Levitt Action, the Innovative Action
as well as the counterclaims asserted against Riddell and its affiliates and two
directors in the Brooks action.

On July 24, 1997, the New Jersey Bankruptcy Court approved the Settlement
Agreement. Generally, the Settlement Agreement releases Riddell and its
affiliates from all claims in these actions and requires Riddell to pay an
aggregate of $2.3 million of which Riddell previously reserved $1.4 million and
of which Riddell previously escrowed and expensed approximately $0.7 million.
Pursuant to the Settlement Agreement, the Company will assign to the Levitt
Trustees (or any successor trustee or other person approved by the New Jersey
Bankruptcy Court) and to Brooks royalties, to the extent paid, of up to $3.0
million, on a present value basis, generally over ten years from its present or
any future 'Riddell' footwear licensee. The Settlement Agreement provides that,
subject to certain conditions, Riddell will enter into a new license agreement
with its current footwear licensee on substantially the same terms as its
existing license. See '--Riddell--Trademarks, Service Marks and License
Agreements.'

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the names, ages and positions of each of the
individuals that serve as directors and executive officers of the Company. All
directors will hold office until the next annual meeting of stockholders of the
Company and until their successors are duly elected and qualified, and all
executive officers will hold office at the pleasure of the Board of Directors.

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- -------------------------- --- -----------------------------------------------
<S> <C> <C>
Robert E. Nederlander 64 Chairman of the Board
David M. Mauer 48 Director, President and Chief Executive Officer
Jeffrey G. Webb* 47 Vice Chairman of the Board of the Company and
President and Chief Operating Officer of the
Varsity Group Division
Leonard Toboroff 65 Director and Vice President
Don R. Kornstein 45 Director
John McConnaughy, Jr. 68 Director
Glenn E. 'Bo' Schembechler 68 Director
Dan Cougill 44 President and Chief Operating Officer of the
Riddell Group Division
David Groelinger 47 Executive Vice President and Chief Financial
Officer
</TABLE>

- ------------------

* Pursuant to the Merger Agreement, Mr. Webb has the right to designate an
additional director to serve on the Board.

Robert E. Nederlander has been Chairman of the Board of the Company since
the Acquisition. Prior thereto, Mr. Nerderlander served as Chairman of the Board
of Riddell from May 1988 until the Acquisition and was Riddell's Chief Executive
Officer from May 1988 through May 1, 1993. From February until June 1992, Mr.
Nederlander was also Riddell's interim President and Chief Operating Officer.
Mr. Nederlander has been President and Director since November 1981 of the
Nederlander Organization, Inc., owner and operator of one of the world's largest
chains of live theaters. He served as the Managing General Partner of the New
York Yankees from August 1990 until December 1991, and has been a limited
partner since 1973. Mr. Nederlander has been President since October 1985 of the
Nederlander Television and Film Productions, Inc., Chairman of the Board since
January 1988 of Mego Financial Corporation and Vice President of the Board since

February 1988 to early 1993 of Vacation Spa Reports, Inc. (an affiliate of Mego
Financial Corporation). Mr. Nederlander became a director of Mego Mortgage
Corporation in September 1996. Mr. Nederlander became Chairman of the Board of
Allis-Chalmers Corp. in May 1989; from 1993 through October 1996, he was Vice
Chairman and, thereafter, he remained solely a director. In 1995, Mr.
Nederlander became a director of HFS Incorporated. In October 1996, Mr.
Nederlander became a director of New 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 has been President, Chief Executive Officer and a Director
of the Company since the Acquisition. Prior thereto, Mr. Mauer served as
Riddell's Chief Executive Officer from April 1993 until the Acquisition, when he
succeeded Mr. Nederlander. Mr. Mauer was a member of the Board of Directors of
Riddell from September 1993 until the Acquisition. 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.

Jeffrey G. Webb has been the Chairman of the Board, President and Chief
Executive Officer of Varsity since its formation in 1974. Mr. Webb has been the
Vice Chairman of the Board of the Company and the President and Chief Operating
Officer of the Varsity Group Division since the Merger.

<PAGE>

Leonard Toboroff has been Vice President and a Director of the Company
since the Acquisition. Prior thereto, Mr. Toboroff served as a member of the
Board of Directors and a Vice President of Riddell from April 1988 until the
Acquisition. 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 Riddell
from April 1988 though 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 from May through
July 1982, and then was Vice Chairman from July 1982 through September 1988 of
American Bakeries Company. Mr. Toboroff has been a director of Banner Aerospace,
Inc., a supplier of aircraft parts since September 1992. He has been a director
of Engex, Inc. and director of Saratoga Springs Beverage Co. since 1993. In
1995, Mr. Toboroff became a director of Xplor Corporation.

Don R. Kornstein has been a Director of the Company since the Acquisition.
Prior thereto, Mr. Kornstein served as a member of the Board of Directors of
Riddell from April 1995 until the Acquisition. Mr. Kornstein has been a member
of the Board of Directors, Chief Executive Officer and President of Jackpot
Enterprises, Inc. since September 1994. Mr. Kornstein was a Senior Managing
Director at Bear, Stearns & Co. Inc. for 17 years through September 1994.

John McConnaughy, Jr. has been a Director of the Company since the
Acquisition. Prior thereto, Mr. McConnaughy served as a member of the Board of
Directors of Riddell from September 1989 until the Acquisition. 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., after which it
was spun off from Peabody in 1981. Mr. McConnaughy is a Director of DeVlieg
Bullard Inc., Mego Financial Corporation, Transact International, Inc., Levcor
International, Inc., and Wave Systems, Inc. GEO International Inc. filed a
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
October 1993.

Glenn E. 'Bo' Schembechler has been a Director of the Company since the
Acquisition. Prior thereto, Mr. Schembechler served as a member of the Board of
Directors of Riddell from September 1991 until the Acquisition. Mr. Schembechler
was President of the Detroit Tigers from January 1990 through August 1992 and a
member of the Detroit Tigers Board of Directors from 1989 through 1990. He is
also 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 has been President and Chief Operating Officer of the Company's
Riddell Group Division since the Acquisition. Prior thereto, Mr. Cougill was
President and Chief Operating Officer of Riddell from June, 1995 until the
Acquisition and of its subsidiary, Riddell, Inc. from February, 1994 until the
Acquisition. Prior to his appointment, Mr. Cougill was previously employed in
various capacities by Wilson Sporting Goods since 1977 and was Vice President of
Wilson Sporting Goods and the General Manager of its Team Sports Division prior
to joining Riddell.

David Groelinger has been Executive Vice President and Chief Financial
Officer of the Company since the Acquisition. Prior thereto, Mr. Groelinger was
Riddell's Chief Financial Officer from March 1996 and Executive Vice President
from June 1996 until the Acquisition. From 1994 to 1995, he was a member of the
Board of Directors, Executive Vice President and Chief Financial Officer of
Regency Holdings (Cayman) Inc., which owned and operated a major international
cruise line. Prior to 1994, Mr. Groelinger served in various senior financial
capacities during his twelve years at Chiquita Brands International, Inc. In
1990, he was promoted to Vice President reporting to Chiquita's President and
Chief Operating Officer. Regency Holdings (Cayman) Inc. filed a petition to
reorganize under Chapter 11 of the United States Bankruptcy Code in November
1995.

COMPENSATION OF DIRECTORS

Directors who are not officers of Riddell received fees in 1996 of $15,000
per annum. Directors who are members of the Audit and Compensation Committees of
the Board (Messrs. McConnaughy, Kornstein and Schembechler) are also each paid
an aggregate additional amount of $5,000 per annum for their Committee
memberships. In 1996, the Company paid Mr. McConnaughy consulting fees of
$75,000; Mr. McConnaughy

<PAGE>

waived his directors' fees in 1996. In 1996, Mr. Schembechler was paid fees of
$20,000 for services rendered in connection with a series of promotional
football clinics sponsored by the Company in addition to his director's fees.

During 1996, directors other than Mr. Mauer were granted options to
purchase 7,500 shares of the Company's Common Stock at an exercise price of
$4.75 per share. Mr. Mauer was granted an option in 1996 to acquire 50,000
shares of Common Stock at an exercise price of $4.50 per share.

Riddell has agreed to indemnify each director against certain claims and
expenses for which the director might be held liable in connection with services
on the Board. In addition, the Company maintains an insurance policy insuring
its directors and officers against such liabilities.

During the calendar year ended December 31, 1996, there were 6 meetings of
the Board of Directors of Riddell, and all members attended each meeting. There
was one meeting of each of the Audit, Compensation and Executive Committees,
attended by all members in each case. Additionally, there was one Action by
Unanimous Written Consent of the Compensation Committee in 1996.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below sets forth the cash compensation paid to or accrued for
Riddell's Chief Executive Officer and its four most highly paid executive
officers in 1996 for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1996, 1995 and 1994.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------------- 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
1994 420,000 120,000 -- 100,000(3) 1,100

Robert E. Nederlander ......... 1996 $180,656 -- -- 7,500 --
Chairman of the Board 1995 173,355 -- -- 15,000 --
1994 166,565 -- -- 15,000 --

Leonard Toboroff .............. 1996 $180,656 -- -- 7,500 $13,614
Vice President 1995 173,355 -- -- 15,000 11,647
1994 166,565 -- -- 15,000 1,422

Dan Cougill ................... 1996 $230,000 -- -- 15,000 $ 4,750
President and Chief Operating 1995 206,923 $ 60,000 -- 15,000 4,322
Officer 1994 180,000 110,000 -- 75,000 --

David Groelinger .............. 1996 $143,308(5) $ 25,000(6) -- 65,000 --
Chief Financial Officer and
Executive Vice President
</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 Riddell's 1991 Stock Option Plan.

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

(3) In 1994 Riddell canceled an option previously granted to Mr. Mauer to
acquire 100,000 shares of Common Stock and in its place issued an option to
acquire an equal number of shares at a lower exercise price per share.

(4) Represents Riddell'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 Riddell and Mr. Groelinger. See '--Employment Agreements.'

(6) Paid pursuant to the employment agreement between Riddell and Mr.
Groelinger. See '--Employment Agreements.'

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 Riddell's 1991 Stock Option Plan.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE

VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS GRANTED EXERCISE STOCK PRICE
UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION APPRECIATION FOR
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE OPTION TERM(5)
- ------------------------ --------------- --------------- --------- ---------- -------------------
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 Riddell, 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
Riddell, 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 Riddell, 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 Riddell's Board of Directors (other than Mr. Mauer) in 1996
under Riddell'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

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

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.

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 Riddell's Common Stock were exercised
during 1996. On December 31, 1996, the last sales price of the Common Stock on
NASDAQ was $4.63 per share.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David M. Mauer.......... 230,000 170,000 $ 268,950 $98,050
Dan Cougill............. 78,750 26,250 159,375 18,750
David Groelinger........ -- 65,000 -- --
Robert E. Nederlander... 71,000 7,500 69,375 --
Leonard Toboroff........ 71,000 7,500 69,375 --
</TABLE>

EMPLOYMENT AGREEMENTS

In June 1992, Riddell entered into an employment agreement with each of
Messrs. Nederlander and Toboroff. Each agreement continues until terminated by
Riddell, with termination being effective three years after Riddell delivers
notice of termination or, if earlier, upon the death or disability of the
employee. The agreements are immediately terminable by Riddell for Cause (as
defined therein). Bonuses are discretionary with the Board. Each agreement
provides a base salary of $162,500 which may be increased in the discretion of
the Board, provided that, in any event, each year the salaries are increased at
least by the percentage increase in the Consumer Price Index. The current salary
of Messrs. Nederlander and Toboroff is $194,135. 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, Riddell 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 Riddell, with
termination effective three years after Riddell delivers notice of termination
or, if earlier, until Mr. Mauer's death or disability. The agreement is
immediately terminable for Cause (as defined therein). Pursuant to his
employment agreement, Mr. Mauer was granted an option for ten years to acquire
300,000 shares of the Company's Common Stock 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.

Riddell entered into an employment agreement with Mr. Cougill as of
February 1, 1994, providing for a $50,000 signing bonus, an annual salary of
$200,000 per annum and minimum bonus of $50,000 for 1994. Pursuant to his
employment agreement, Mr. Cougill was granted an Option for five years to
purchase 75,000 shares of the Company's Common Stock at $2.56 per share. In the
event Mr. Cougill's employment is terminated

<PAGE>

by the Company, generally, other than for Cause (as defined therein), 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, unless renewed, expires in May 1998.

Riddell entered into a two year employment agreement with Mr. Groelinger
effective March 1996 in connection with his joining Riddell 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 his employment
agreement, Mr. Groelinger was granted a ten year option to purchase 65,000
shares of the Company's Common Stock at an exercise price of $4.63 per share.
The agreement is immediately terminable for Cause (as defined therein). 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 therein)) plus a pro rata portion of his bonus through the date of
termination, and his stock options become immediately exercisable for one year
to the extent then vested.

In addition, in connection with the Transactions, the Company has entered
into an employment agreement with Mr. Webb on May 5, 1997 which will become
effective after the Merger is consummated. Under the terms of such agreement,
which has a three-year term, Mr. Webb will serve as Vice Chairman of the Board
of Directors of the Company, as well as President and Chief Operating Officer of

the Varsity Group Division. Mr. Webb will be entitled to a base salary of no
less than $375,000 per year and will be eligible to participate in those bonus
arrangements which are made available to other senior officers of the Company at
a target level of 40% of his base salary. Pursuant to his employment agreement,
Mr. Webb will receive options to purchase 50,000 shares of common stock of the
Company and 'special options' to purchase an additional 347,760 shares. The per
share exercise price of the 50,000 options shall be equal to the average closing
price of a share of the Company's Common Stock over the ten consecutive trading
days ending on the date immediately prior to the date of grant. The per share
exercise price of the 347,760 special options will be $3.80. Upon termination of
Mr. Webb's employment (i) by the Company without Cause (as defined therein),
(ii) by Mr. Webb with Good Reason (as defined therein, including a material
adverse alteration in his status or responsibilities and relocation more than 50
miles from Memphis, Tennessee), or (iii) following a Change in Control (as
defined therein), Mr. Webb will receive continued payments of base salary for
the longer of the remainder of the term and one year (two years in case of
termination following a Change in Control), as well as certain benefits. Mr.
Webb is subject to a noncompetition covenant generally for a period of two years
following the termination of his employment for any reason. Pursuant to his
employment agreement, Mr. Webb agreed to become a party to the Stockholders
Agreement.

The stock options granted to Messrs. Mauer, Webb, Cougill and Groelinger in
connection with their employment agreements become immediately exercisable in
the event of a change of control (as defined in their respective employment
agreements).

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of July 11, 1997
regarding the ownership of the capital stock of the Company with respect to (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of any class of its voting capital stock, (ii) each of the
Company's directors, (iii) each of the executive officers of the Company and
(iv) all directors and executive officers as a group. Except as otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- -------------------------------------------------- --------- ------
<S> <C> <C>
M.L.C. Partners Limited Partnership(1) ........... 830,281 9.1%
c/o Robert Nederlander
810 Seventh Avenue
New York, NY 10019

Robert E. Nederlander(2) ......................... 5,260,387 51.9%
810 Seventh Avenue
New York, NY 10019

David M. Mauer(3) ................................ 361,525 3.9%
Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022

Jeffrey G. Webb(4) ............................... 1,109,887 11.8%
Varsity Spirit Corporation
2525 Horizon Lake Drive
Memphis, TN 38133

Leonard Toboroff(5) .............................. 1,342,003 14.7%
Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022

Don R. Kornstein(6) .............................. 35,000 *
Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022

John McConnaughy, Jr.(7) ......................... 714,308 7.8%
300 Atlantic Street
Stamford, CT 06901

Glenn E. 'Bo' Schembechler(6) .................... 37,500 *
870 Arlington
Ann Arbor, MI 48104

Dan Cougill(8) ................................... 88,927 1.0%
Riddell, Inc.
3670 N. Milwaukee Avenue
Chicago, IL 60641

David Groelinger(9) .............................. 19,750 *
Riddell Sports Inc.
900 Third Avenue/27th Fl.
New York, NY 10022

All executive officers and directors listed above,
as a group(10).................................. 5,352,637 52.8%

Angelo, Gordon & Co., L.P.(11) ................... 1,395,000 13.4%
245 Park Avenue
New York, NY 10167
</TABLE>

- ------------------
* Less than 1%

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

(1) Includes 43,750 shares underlying a warrant (the 'Warrant') which are
currently exercisable. M.L.C. Partners Limited Partnership ('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 (the 'Voting Trustee') and has
the sole voting power. Mr. Nederlander, as controlling stockholder of the
corporation which is the general partner of MLC, may be deemed to
beneficially own these shares. Mr. McConnaughy is the sole owner of a
corporation that is a limited partner in MLC. A corporation controlled by
Mr. Nederlander is also a limited partner in MLC.

(2) Of the 5,260,387 shares beneficially owned by Mr. Nederlander: (i)
1,643,737 shares are owned by Mr. Nederlander directly or through entities
controlled by him having dispositive power over these shares (105,989 of
these 1,643,737 shares underlie options granted under the Company's 1991
Stock Option Plan or the Warrant which are exercisable within 60 days of
July 11, 1997, 830,281 of such 1,643,737 shares are owned by MLC and
983,123 of such 1,643,737 shares are subject to the Voting Trust) and (ii)
an additional 3,616,650 shares are beneficially owned by Mr. Nederlander as
Voting Trustee under the Voting Trust and pursuant to a shareholders
agreement (the 'Principal Shareholders Agreement') dated as of August 1995,
as amended, pursuant to which, generally, the parties thereto agree to vote
the outstanding shares of the Company's Common Stock owned by them directly
and beneficially in the same manner that Mr. Nederlander votes the shares
of stock in the Voting Trust with respect to which he is Voting Trustee.
Under Rule 13d-3 of the Securities Exchange Act of 1934, as amended, Mr.
Nederlander is deemed to beneficially own the shares of stock subject to
the Voting Trust and the Principal Shareholders Agreement and owned by MLC.

(3) The 361,525 shares of Common Stock beneficially owned by Mr. Mauer are
subject to the Principal Shareholders Agreement and 305,259 of these shares
are issuable in connection with options granted under the Company's 1991
Stock Option Plan and the Warrant that are exercisable within 60 days of
July 11, 1997.

(4) The 1,109,887 shares of Common Stock beneficially owned by Mr. Webb are
subject to the Principal Shareholders Agreement and 347,760 of these shares
underlie an option the Company has agreed to grant upon consummation of the
Merger and which will be fully exercisable on the date of grant.

(5) The 1,342,003 shares of Common Stock beneficially owned by Mr. Toboroff are
subject to the Principal Shareholders Agreement and 91,038 of these shares
underlie options granted under the Company's 1991 Stock Option Plan and the
Warrant that are exercisable within 60 days of July 11, 1997.

(6) Represents shares underlying an option granted under the Company's 1991
Stock Option Plan that are exercisable within 60 days of July 11, 1997.

(7) Of the 714,308 shares of Common Stock beneficially owned by Mr.
McConnaughy: (i) 147,444 are subject to the Voting Trust, (ii) 566,864 are
subject to the Principal Shareholders Agreement and (iii) 62,239 shares
underlie options granted under the Company's 1991 Stock Option Plan and the
Warrant that are exercisable within 60 days of July 11, 1997.

(8) The 88,927 shares of Common Stock beneficially owned by Mr. Cougill are
subject to the Principal Shareholders Agreement and 79,225 of these shares
underlie options granted under the Company's 1991 Stock Option Plan and the
Warrant that are exercisable within 60 days of July 11, 1997.

(9) Includes 16,250 shares underlying that portion of an option to acquire an
aggregate of 65,000 shares that is exercisable within 60 days of July 11,
1997.

(10) Includes the 830,281 shares owned by MLC.

(11) Based on a Schedule 13G filed February 13, 1997, Angelo, Gordon & Co., L.P.
may be deemed to be the beneficial owner of 1,395,000 shares as a result of
voting and dispositive powers it holds with respect to $1,000,000 principal
amount of the Company's 4.1% Convertible Subordinated Note due November 1,
2004 (the 'Convertible Note') convertible at $5.3763 per share into 186,000
shares of the Company's Common Stock held for its own account and
$6,500,000 principal amount of the Convertible Note convertible into
1,209,000 shares of Common Stock which it holds for the account of private
investment funds for which it acts as general partner and/or investment
advisor or investment manager.

<PAGE>

CERTAIN TRANSACTIONS

In September 1988, Riddell issued a subordinated secured term note (the
'Subordinated Note') in the original principal amount of $2.0 million to M.L.C.
Partners Limited Partnership ('MLC') in connection with a recapitalization. In
the recapitalization, Riddell issued Common Stock in exchange for (i) Class A
Common Stock of Riddell owned by MLC (which had a preferential right to receive
$4.0 million before any dividends or distributions were to be made to any other
stockholders), (ii) Class B Common Stock owned by Mac I (from certain
subsidiaries of which Riddell acquired its initial businesses in April 1988 for
certain cash consideration, Class B Common Stock, long term notes and assumed
liabilities) and (iii) Class B Common Stock owned by Mr. Frederic Brooks (the
Company's President and Chief Operating Officer until February 1992). Originally
due in 1993, the Subordinated Note was extended until January 1998, subject to
mandatory prepayments relating to cash flow measurement and changes in
capitalization. The outstanding balance of the Subordinated Note was repaid in
accordance with its terms in November 1996. The Subordinated Note bore interest
at 10% per annum, was secured by a lien on substantially all of the assets of

Riddell and was subordinated to Riddell's indebtedness to NBD Bank.

In 1994, Riddell granted MLC a warrant to purchase 150,000 shares of its
Common Stock in consideration for the extension of the Subordinated Note. In
August 1995, certain of the original partners withdrew from MLC, and in
connection with the restructuring of MLC, Messrs. Cougill, Mauer, McConnaughy,
Nederlander and Toboroff or entities controlled by them acquired interests in
the warrant.

In May 1991, Messrs. Nederlander, Toboroff, Epstein, McConnaughy and Brooks
(the 'Investors') acquired from a party not affiliated with Riddell a promissory
note with an aggregate principal amount of $439,000. The 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. In August 1995, Mr. Epstein transferred his
interest in the note to Messrs. Cougill, Mauer, McConnaughy, Nederlander and
Toboroff in connection with the restructuring of MLC. The note was paid in full
in June 1997 in connection with the refinancing relating to the New Credit
Facility. The note was due in April 1998, bore simple interest at the rate of 8%
per annum and was unsecured.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Certificate of Incorporation of the Company contains provisions
eliminating the personal liability of directors for monetary damages for
breaches of their duty of care, except in certain prescribed circumstances. The
Bylaws of the Company also provides that directors and officers will be
indemnified to the fullest extent authorized by law, as it now exists or may in
the future be amended, against all expenses and liabilities reasonably incurred
in connection with service for or on behalf of the Company. The Bylaws of the
Company provide that the right of directors and officers to indemnification is
not exclusive of any other right now possessed or hereinafter acquired under any
statute, agreement or otherwise.