<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional materials
/ / Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RIDDELL SPORTS INC.
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction.
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
RIDDELL SPORTS INC.
50 EAST 42ND STREET, SUITE 1808
NEW YORK, NEW YORK 10017
DEAR FELLOW STOCKHOLDER:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Stockholders of Riddell Sports Inc. (the "Company") to be held
on Thursday, May 20, 1999, at 11:00 a.m. (Eastern Daylight Time) at the 13th
Floor Board Room at The American Stock Exchange, 86 Trinity Place, New York, New
York 10006.
For the reasons set forth in the accompanying proxy statement, your Board
of Directors unanimously recommends that you vote for:
1. Management's nominees for directors;
2. Appointing Grant Thornton LLP as the Company's independent
auditors; and
3. Such other business as may properly come before the meeting.
In order to ensure that your shares are represented at the meeting, I urge
you to promptly date, sign and mail the enclosed proxy using the enclosed
addressed envelope, which needs no postage if mailed in the United States. You
may withdraw or revoke your proxy at any time prior to the Annual Meeting.
Very truly yours,
/s/ Robert E. Nederlander
--------------------------------
ROBERT E. NEDERLANDER
Chairman of the Board
Dated: April 19, 1999
<PAGE>
RIDDELL SPORTS INC.
50 EAST 42ND STREET, SUITE 1808
NEW YORK, NEW YORK 10017
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
------------------------------------
DEAR FELLOW STOCKHOLDER OF
RIDDELL SPORTS INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Riddell
Sports Inc. (the "Company") will be held on Thursday, May 20, 1999, at
11:00 a.m. (Eastern Daylight Time) at the 13th Floor Board Room at The American
Stock Exchange, 86 Trinity Place, New York, New York 10006, for the purpose of
considering and voting upon the following proposals:
1. The election of directors;
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for the calendar year ending December 31, 1999; and
3. Such other business as may properly come before the meeting.
The close of business on April 12, 1999 has been fixed as the record date
for determining the stockholders entitled to notice of and to vote at the
meeting and any adjournment or postponement thereof, and only stockholders of
record on such date are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
/s/ Robert E. Nederlander
-----------------------------------
ROBERT E. NEDERLANDER
Chairman of the Board
Dated: April 19, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO
POSTAGE IF MAILED WITHIN THE UNITED STATES. THE PROXY MAY BE REVOKED IN WRITING
PRIOR TO THE MEETING, OR IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND
VOTE YOUR SHARES IN PERSON.
<PAGE>
[This page intentionally left blank]
<PAGE>
RIDDELL SPORTS INC.
------------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This proxy statement is solicited on behalf of the Board of Directors of
Riddell Sports Inc. (the "Company") for use at the Annual Meeting of
Stockholders of the Company to be held on Thursday, May 20, 1999, at 11:00 a.m.
(Eastern Daylight Time) at the 13th Floor Board Room at The American Stock
Exchange, 86 Trinity Place, New York, New York 10006, and at any adjournment or
postponement thereof (the "Annual Meeting"). The purposes for which the Annual
Meeting is to be held are set forth in the Notice of Meeting on the preceding
page. This proxy statement and the proxies solicited hereby are first being sent
or delivered to stockholders on or about April 20, 1999.
REVOCABILITY AND VOTING OF PROXIES
The proxy may be revoked by the stockholder at any time prior to its use by
the Company by voting in person at the Annual Meeting, by executing a later
proxy, or by submitting a written notice of revocation to the Secretary of the
Company at the Company's office or at the Annual Meeting. If the proxy is signed
properly by the stockholder and is not revoked, it will be voted at the meeting.
If a stockholder specifies how the proxy is to be voted, the proxy will be voted
in accordance with such specification. Otherwise, the proxy will be voted in the
manner specified on the proxy.
Each of the two proposals for which proxies are being solicited are
considered "discretionary" proposals, which means that brokers who hold Company
shares in "street name" for customers are authorized to vote on such proposals
on behalf of their customers unless expressly advised to the contrary. In the
event of a broker non-vote with respect to any issue coming before the Annual
Meeting arising from the absence of required authorization by the beneficial
owner to vote as to that issue, the proxy will be counted as present for
purposes of determining the existence of a quorum to conduct the meeting, but
will not be deemed as present and entitled to vote as to that issue for purposes
of determining the total number of shares of which a plurality or majority
(depending upon the issue) is required for adoption. Abstentions, being shares
present, entitled to vote and affirmatively not voted are counted for
determining a quorum and have the same effect as a "no" vote.
RECORD DATE AND SHARE OWNERSHIP
At the close of business on April 12, 1999, 9,258,957 shares of the
Company's common stock, $.01 par value ("Common Stock"), were outstanding and
eligible to vote at the Annual Meeting. Each stockholder of record is entitled
to one vote for each share held on all matters to come before the meeting. Only
stockholders of record at the close of business on April 12, 1999 are entitled
to notice of and to vote at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 12, 1999
pertaining to ownership of the Company's Common Stock by persons known to the
Company to own 5% or more of the Company's Common Stock and Common Stock owned
beneficially by each director and named executive officer of the Company and by
directors and named executive officers of the Company as a group.
<PAGE>
The information contained herein has been obtained from the Company's
records, or from information furnished directly by the individual or entity to
the Company or in Form 13D filings or Form 4 or Form 5 filings.
<TABLE>
<CAPTION>
SHARES OWNED PERCENT/SHARES
BENEFICIALLY OUTSTANDING
------------ --------------
<S> <C> <C>
Robert E. Nederlander .................. 5,251,831(1) 51.8%
810 Seventh Avenue
New York, NY 10019
David M. Mauer ......................... 445,645(2) 4.6%
c/o Riddell Sports Inc.
50 East 42nd Street, Suite 1808
New York, NY 10017
Jeffrey G. Webb ........................ 1,188,954(3) 12.4%
c/o Varsity Spirit Corporation
2525 Horizon Lake Drive
Memphis, TN 38133
Leonard Toboroff ....................... 1,311,085(4) 14.1%
c/o Riddell Sports Inc.
50 East 42nd Street, Suite 1808
New York, NY 10017
Don R. Kornstein ....................... 42,500(5) *
c/o Riddell Sports Inc.
50 East 42nd Street, Suite 1808
New York, NY 10017
John McConnaughy, Jr. .................. 1,046,437(6) 11.2%
c/o JEMC Corp.
1011 High Ridge Road
Stamford, CT 06905
Glenn E. "Bo" Schembechler ............. 45,000(5) *
c/o Riddell Sports Inc.
50 East 42nd Street, Suite 1808
New York, NY 10017
David Groelinger ....................... 57,250(7) *
c/o Riddell Sports Inc.
50 East 42nd Street, Suite 1808
New York, NY 10017
Thomas L. Clark ........................ 5,000(5) *
c/o Riddell Sports Inc.
3670 N. Milwaukee
Chicago, IL 60641
All officers and directors as a group (9 5,401,581 52.5%
individuals)..........................
Angelo, Gordon & Co., L.P. ............. 1,395,000(8) 13.1%
245 Park Avenue/26th Fl.
New York, NY 10167
</TABLE>
(Footnotes continued on next page)
2
<PAGE>
(Footnotes continued from previous page)
- ------------------
<TABLE>
<S> <C>
* Less than 1%
(1) Of the 5,251,831 shares beneficially owned by Mr. Nederlander: (i) 1,259,710 shares are owned by
Mr. Nederlander directly or through entities controlled by him having dispositive power over these shares
(45,000 of these 1,259,710 shares underlie options granted under the Company's 1991 Stock Option Plan that
are exercisable currently or within 60 days of April 12, 1999; 646,037 of such 1,259,710 shares are subject
to a Voting Trust (the "Voting Trust") expiring May 29, 2001 pursuant to which Robert Nederlander is voting
trustee and has sole voting power (except to the limited extent described in Note 6 below) and (ii) an
additional 3,992,121 shares are beneficially owned by Mr. Nederlander as Voting Trustee under the Voting
Trust and pursuant to a shareholders' agreement to which Mr. Nederlander and certain other officers and
directors of the Company and their affiliates are parties (the "Shareholders' Agreement"). Under Rule 13-d of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Mr. Nederlander is deemed to
beneficially own the shares of stock subject to the Voting Trust and the Shareholders' Agreement. The
Shareholders' Agreement terminates upon the earliest May 28, 2001 or the death of Mr. Nederlander, or the
date of the transfer of shares subject to the Shareholders' Agreement (other than to certain parties) as to
the shares transferred.
(2) 445,645 shares of Common Stock beneficially owned by Mr. Mauer are subject to the Shareholders' Agreement and
387,500 of these shares are issuable in connection with options granted under the Company's 1991 Stock Option
Plan and the Warrant that are exercisable currently or within 60 days of April 12, 1999.
(3) The 1,188,954 shares of Common Stock beneficially owned by Mr. Webb are subject to the Shareholders'
Agreement and 364,427 of these shares underlie options granted under the Company's 1997 Stock Option Plan
that are exercisable currently or within 60 days of April 12, 1999.
(4) The 1,311,085 shares of Common Stock beneficially owned by Mr. Toboroff are subject to the Shareholders'
Agreement and 45,000 shares underlie options granted under the Company's 1991 Stock Option Plan that are
exercisable currently or within 60 days of April 12, 1999.
(5) Represents shares underlying options granted under the Company's 1991 Stock Option Plan that are exercisable
currently or within 60 days of April 12, 1999.
(6) Of the 1,046,437 shares of Common Stock beneficially owned by Mr. McConnaughy: (i) 484,530 are subject to the
Voting Trust; (ii) 561,907 are subject to the Shareholders' Agreement and (iii) 45,000 shares underlie
options granted under the Company's 1991 Stock Option Plan that are exercisable currently or within 60 days
of April 12, 1999. Mr. McConnaughy has pledged his interest in 989,155 shares of the Company's Common Stock
to financial institutions to secure loans. The Voting Trust provides that if Mr. McConnaughy defaults on the
loan pursuant to which the pledge was made, the voting restrictions are removed from the pledged shares.
(7) Includes 53,750 shares underlying that portion of an option granted under the Company's 1991 Stock Option
Plan that is exercisable within 60 days of April 12, 1999.
(8) 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 4.10% Convertible Subordinated Note due November 1, 2004 (the
"Notes") 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 Notes convertible into 1,209,000 shares of Common Stock which it
holds for the account of private investment funds for which it acts as a general partner and/or investment
advisor or investment manager.
</TABLE>
3
<PAGE>
ELECTION OF DIRECTORS AND LIST OF EXECUTIVE OFFICERS
In the absence of contrary instructions, the proxy will be voted for the
election of Don R. Kornstein, David M. Mauer, John McConnaughy, Jr., Robert E.
Nederlander, Glenn E. "Bo" Schembechler, Leonard Toboroff, Jeffrey G. Webb and
Arthur N. Seessel, III to serve as members of the Board of Directors until the
next Annual Meeting of Stockholders or until their respective successors shall
have been elected and shall have qualified.
In accordance with the agreements entered into in connection with the
Company's acquisition of Varsity in 1997, the Company's Board of Directors
increased the number of its members from seven to eight and agreed to nominate
Mr. Webb and his designee to serve on the Board until June 19, 2000, the third
anniversary of the date of the Varsity acquisition, or upon the termination of
Mr. Webb's employment with the Company, whichever is sooner. Mr. Webb, who was
elected a member of the Company's Board at last year's Annual Meeting of
Stockholders and is its Vice Chairman, has named Arthur N. Seessel, III to serve
on the Company's Board as his designee.
If any nominee is unable or unwilling to serve, which the Board of
Directors does not anticipate, the persons named in the proxy will vote for
another person in accordance with their best judgment. Assuming the presence of
a quorum, directors shall be elected by a plurality of the votes cast at the
Annual Meeting for the election of directors. Directors hold office until the
next Annual Meeting of Stockholders or until their successors are elected and
qualified.
Information with respect to the nominees and the executive officers of the
Company is set forth below as of April 12, 1999 and is based upon the records of
the Company and information furnished to it by the nominees and executive
officers. See "Security Ownership of Certain Beneficial Owners and Management"
for information pertaining to the Common Stock owned by the nominees.
<TABLE>
<CAPTION>
POSITIONS HAS SERVED AS
NAME AGE WITH THE COMPANY DIRECTOR SINCE
- ------------------------------ --- ------------------------------------- ---------------
<S> <C> <C> <C>
DIRECTORS:
Robert E. Nederlander (1)..... 66 Chairman of the Board April 1988
David M. Mauer (1)............ 50 Director, President and Chief September 1993
Executive Officer
Jeffrey G. Webb (1)........... 48 Vice Chairman of the Board of the June 1997
Company, President and Chief
Executive Officer of the Varsity
Group Division
Leonard Toboroff (1).......... 66 Director and Vice President April 1988
Don R. Kornstein.............. 47 Director April 1995
John McConnaughy, Jr. (1)..... 70 Director September 1989
Glenn E. "Bo" Schembechler.... 69 Director September 1991
Arthur N. Seessel, III........ 60 Director February 1999
OTHER EXECUTIVE OFFICERS:
David Groelinger.............. 48 Executive Vice President and Chief --
Financial Officer
Thomas L. Clark............... 49 Senior Vice President, --
Consumer Products, of Riddell Group
Division
</TABLE>
4
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Messrs. Nederlander, Mauer, Webb, Toboroff and McConnaughy and certain
entities controlled by them, are parties to a Shareholders' Agreement dated
as of August 1995, as amended (the "Shareholders' Agreement"). The
Shareholders' Agreement generally requires the parties thereto to vote the
shares of Company Common Stock owned by them directly and beneficially in
the same manner as does Mr. Nederlander and for the election of Mr. Webb
and his designee as members of the Company's Board of Directors during the
term of Mr. Webb's Employment Agreement. See "Employment Agreements and
Change of Control Arrangements." In addition, the Shareholders' Agreement
generally provides that the voting restrictions are terminated when a
party transfers his shares. The Shareholders' Agreement expires on the
earlier of May 28, 2001 or upon Mr. Nederlander's death.
Set forth below is additional biographical information regarding each
director and executive officer of the Company based on information supplied by
them.
Robert E. Nederlander. Mr. Nederlander has been Chairman of the Board of
the Company since April 1988 and was the Company's Chief Executive Officer from
April 1988 through April 1, 1993. Mr. Nederlander has been President and a
Director since November 1981 of the Nederlander Organization, Inc., owner and
operator of one of the world's largest chains of live theaters. He served as the
Managing General Partner of the New York Yankees from August 1990 until December
1991, and has been a limited partner since 1973. Mr. Nederlander has been
President since October 1985 of the Nederlander Television and Film Productions,
Inc. and Chairman of the Board since January 1988 of Mego Financial Corporation.
Mr. Nederlander was a director of Mego Mortgage Corporation from September 1996
until June 1998. 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, which recently merged into Cendant Corporation
where he continued on as a director. In October 1996 Mr. Nederlander became a
director of News Communications, Inc., a publisher of community-oriented free
circulation newspapers. Mr. Nederlander was a senior partner in the law firm of
Nederlander, Dodge and Rollins in Detroit, Michigan, between 1960 and 1989.
David M. Mauer. Mr. Mauer became the Company's Chief Executive Officer on
April 1, 1993, succeeding Mr. Nederlander. Mr. Mauer was President of Mattel
U.S.A. from late 1990 through the beginning of 1993 and was President of Tonka
U.S.A. Toy Group from 1988 until 1990. In 1995, Mr. Mauer was elected a member
of the Board of Directors of The Topps Company, Inc. Mr. Mauer is also a
director of the National Center for Missing and Exploited Children.
Jeffrey G. Webb. Mr. Webb has been the Vice Chairman of the Board of the
Company and the President and Chief Executive Officer of the Varsity Group
Division since Varsity was acquired by the Company in June 1997. Prior to the
Varsity acquisition, Mr. Webb was Chairman of the Board, President and Chief
Executive Officer of Varsity Spirit Corporation since its formation in 1974.
Leonard Toboroff. Mr. Toboroff has been Vice President of the Company
since April 1988. Since May 1989, Mr. Toboroff has been a Vice President and
Vice Chairman of the Board of Allis-Chalmers Corp. Mr. Toboroff has been a
practicing attorney since 1961 and from January 1, 1988 to December 31, 1990,
was counsel to Summit Solomon & Feldesman in New York City, which was counsel to
the Company from April 1988 through February 1993. He has been a Director since
August 1987 and was Chairman and Chief Executive Officer from December 1987 to
May 1988 of Ameriscribe Corp. Mr. Toboroff was Chairman and Chief Executive
Officer from May 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, and a director of Hi Rise Recycling since March
1999.
Don R. Kornstein. Mr. Kornstein has been a member of the Board of
Directors, Chief Executive Officer and President of Jackpot Enterprises, Inc.
since September 1994. Prior to this Mr. Kornstein was a Senior Managing Director
at Bear, Stearns & Co. Inc. for 17 years through September 1994.
5
<PAGE>
John McConnaughy, Jr. Mr. McConnaughy has been Chairman and Chief
Executive Officer of JEMC Corp. since 1988. From 1969 to 1986, Mr. McConnaughy
served as Chairman and Chief Executive Officer of Peabody International Corp.
("Peabody"). From 1981 to 1992, he served as Chairman and Chief Executive
Officer of GEO International Corp. when it was spun off from Peabody in 1981.
Mr. McConnaughy is a Director of DeVlieg Bullard Inc., Mego Financial
Corporation, Transact International, Inc., Levcor International, Inc., Wave
Systems, Inc. and Adrien Arpel, Inc.
Glenn E. "Bo" Schembechler. Mr. Schembechler was President of the Detroit
Tigers from January 1990 through August 1992 and a member of the Tigers Board of
Directors from 1989 through 1990. He is also a Director of Midland Company. From
1968 through 1989, Mr. Schembechler was head football coach of the University of
Michigan and served as its Athletic Director in 1988 and 1989.
Arthur N. Seessel, III. Mr. Seessel was the Chief Executive Officer of
Seessel Holdings Inc., a supermarket chain located in Memphis, Tennessee, until
the Company was sold in 1996. Mr. Seessel currently serves as a consultant to
Albertson's Inc. and is a member of the Board of Directors of Red River
Bankshares and Auto Radio Inc.
David Groelinger. In March of 1996, Mr. David Groelinger was appointed the
Company's Chief Financial Officer, and in June 1996 its Executive Vice
President. 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
twelve years at Chiquita Brands International, Inc. In 1990, he was promoted to
Vice President reporting to the Chiquita's President and Chief Operating
Officer. Regency Holdings (Cayman) Inc. filed a petition to reorganize under
Chapter 11 of the United States Bankruptcy Code in November 1995.
Thomas L. Clark. From December 1991 through January 1998, Mr. Clark was a
Vice President and General Manager of Brown Shoe, Inc., heading Dr. Scholl's
footwear division. In February 1998, Mr. Clark became Senior Vice President,
Consumer Products, of the Riddell Group Division of the Company.
* * *
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE NOMINEES FOR DIRECTORS.
* * *
STRUCTURE AND COMPENSATION OF BOARD OF DIRECTORS
DIRECTORS' FEES AND BOARD MEETING ATTENDANCE
Directors who are not officers of the Company received a fee in 1998 of
$17,583 per annum. In 1998, directors who were members of the Audit and
Compensation Committees of the Board (Messrs. McConnaughy, Kornstein and
Schembechler) were also each paid an aggregate additional amount of $5,000 per
annum for their Committee memberships.
During 1998, Messrs. Nederlander, Toboroff, McConnaughy, Kornstein and
Schembechler were each granted an option to purchase 7,500 shares of the
Company's Common Stock at an exercise price of $5.375 per share. In February
1999, Mr. Seessel was granted an option to purchase 15,000 shares of the
Company's Common Stock at an exercise price of $6.50 per share. All of these
grants were pursuant to provisions of the 1991 and 1997 Stock Option Plans which
provide for fixed automatic grants of options to eligible directors as described
below under "General Description of 1997 Stock Option Plan." See "Summary
Compensation Table" and "Options Granted in 1998" for a discussion of
compensation paid to Mr. Mauer, a director and the Company's Chief Executive
Officer, and Mr. Webb, the Company's Vice Chairman and the President and Chief
Executive Officer of its Varsity Group Division.
6
<PAGE>
The Company has agreed to indemnify each director and officer against
certain claims and expenses for which the director might be held liable in
connection with service on the Board. In addition, the Company maintains an
insurance policy insuring its directors and officers against such liabilities.
During calendar year ended December 31, 1998, there were four meetings of
the Board of Directors. Three meetings were attended by all members and one
meeting was attended by six of seven members.
COMMITTEE STRUCTURE AND MEETINGS
The Board of Directors maintains an Executive Committee consisting of
Mr. Nederlander, the Committee's Chairman, Mr. Mauer, Mr. Toboroff and
Mr. Webb. Under the Company's Bylaws the Executive Committee has the power of
the full Board. The Executive Committee had two meetings in 1998, which were
attended by all members other than Mr. Webb who attended one meeting.
The Board of Directors also maintains a Compensation Committee comprised in
1998 of Messrs. McConnaughy, Schembechler and Mr. Kornstein. Mr. Kornstein was
Chairman of the Committee in 1998. None of these individuals has ever been an
officer of the Company. The Compensation Committee reviews and establishes the
cash and non cash compensation of key employees and recommends grants of options
under the Company's 1991 Stock Option Plan and 1997 Stock Option Plan. It
considers recommendations of management and, when it deems appropriate, the
advice of outside experts in connection with these determinations. The
Compensation Committee had three meetings, which were attended by all members
except for Mr. Schembecher who attended two meetings and acted by unanimous
written consent in lieu of a meeting two times in 1998.
The Board of Directors has established an Audit Committee which in 1998
consisted of Messrs. McConnaughy, Schembechler and Mr. Kornstein. Mr. Kornstein
was Chairman of the Committee in 1998. No member of the Audit Committee has ever
been an officer of the Company. The Audit Committee reviews the Company's
internal controls and the objectivity of its financial reporting and the scope
and results of the auditing engagement. It meets with appropriate Company
financial personnel and independent public accountants in connection with these
reviews. The auditors have access to such Committee at any time. The Audit
Committee had two meetings in 1998, which were attended by all members other
than Mr. Schmebechler who attended one meeting.
The Company does not have a standing nominating committee.
The members of each Committee are appointed by the Board of Directors for a
term beginning after the first regular meeting of the Board following the Annual
Meeting and until their respective successors are elected and qualified. Each
Committee elects its own Chairman.
SECTION 16(A) DISCLOSURE
The Company believes, based solely on its review of the copies of the Forms
3, 4 and 5 required to be filed with the Company pursuant to Section 16(a) of
the Exchange Act by its officers, directors and beneficial owners of more than
10% of the Company's Common Stock ("insiders"), that during the fiscal year
ended December 31, 1998, all filing requirements applicable to its insiders were
complied with.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
GENERAL
After consultation with supervising management, the Compensation Committee
of the Board of Directors determined the cash compensation of, and recommended
for full Board approval grants of incentive stock options to, senior executive
officers for 1998. Messrs. Nederlander, Mauer, Toboroff and Webb are senior
executive officers and members of the Board of Directors of the Company and do
not vote on matters concerning their own compensation.
7
<PAGE>
COMPENSATION PHILOSOPHY
The executive compensation philosophy of the Board of Directors and its
Compensation Committee (which is intended to apply to all Company management,
including its Chief Executive Officer) is to provide competitive levels of
compensation, provide incentives to management, reward above average corporate
performance, and assist the Company in attracting and retaining qualified
management. Management compensation is intended to be set at levels that the
Board of Directors believes is consistent with others in the Company's industry
and at a level that will aid in attracting and retaining qualified management.
The Board of Directors endorses the position that equity ownership by management
is beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value.
The components of executive officer compensation are designed to meet the
Company's compensation policies. Presently, the program contains two elements:
1) base salary (plus benefits customarily paid to employees, such as insurance)
and 2) incentive compensation, consisting of cash (bonus) and non-cash (stock
options and stock grants) incentive compensation.
The Company from time to time has consulted with executive compensation
experts to assist it in evaluating and establishing appropriate cash and noncash
compensation for key employees and directors, and may do so in the future.
CHIEF EXECUTIVE COMPENSATION
In 1993, in order to induce Mr. Mauer, the Company's Chief Executive
Officer, to join the Company and become a member of its Board of Directors, the
Company entered into an employment agreement with Mr. Mauer containing a
compensation package including salary, stock options and an annual bonus
described in "Employment and Consulting Agreements." Mr. Mauer's initial
compensation was determined after the Board reviewed compensation paid to
similarly qualified Chief Executive Officers in the competitive marketplace.
In determining Mr. Mauer's salary and stock option award for 1998, the
Compensation Committee reviewed the Company's performance under Mr. Mauer's
leadership. Based on the recognition that Mr. Mauer had demonstrated superior
leadership in spearheading a number of important new operating and strategic
initiatives and successfully integrating Varsity's and Riddell's management
teams, the Committee granted Mr. Mauer stock options. At Mr. Mauer's request,
the Committee postponed action on Mr. Mauer's salary for one year. See "Summary
Compensation Table."
COMPENSATION OF OTHER EXECUTIVE OFFICERS
Base salaries for new executive officers are determined initially by
evaluating the responsibilities of the position and the experience,
qualifications and talents of the individual relevant to his or her position and
by reference to the competitive marketplace for management talent, including a
comparison of base salaries for comparable positions at comparable public
companies. Salary adjustments are, generally, discretionary and determined by
evaluating management's recommendations, the competitive marketplace, the
performance of the Company, the performance and overall contribution of the
executive and any increased responsibilities assumed by the executive.
In order to induce qualified individuals to join the Company and continue
their employment, the Company has granted certain senior executive officers
guaranteed signing bonuses in fixed amounts as well as bonuses for the first
year of employment.
In determining the size of an executive's annual bonus, if any, the
Committee compares performance of the division in which the executive works to
the Company's business plan for that division in that year, the contribution of
the individual to the performance of that division, and the individual's
performance against agreed-upon goals developed by the employee with senior
management. For 1997, in recognition of extra services required to complete the
Varsity acquisition and facilitate the integration of the two companies, the
Compensation Committee selectively awarded bonuses to members of senior
management based upon their contribution to identifying Varsity as an
acquisition candidate, negotiating the acquisition and determining and
implementing the initial post-acquisition strategic redirection of the combined
companies.
8
<PAGE>
After reviewing recommendations of supervising management, in 1998 the
Compensation Committee recommended grants of stock options to certain employees
and executive officers. In keeping with the philosophy of the Board of
Directors, options generally vest over a period of years. It is the philosophy
of the Board of Directors that stock options should be awarded primarily to key
employees of the Company and its subsidiaries and members of its Board of
Directors to promote the long-term interest in the welfare of the Company and
assist in the retention of such employees, and that stock options should be
awarded on an intermittent basis in furtherance of this philosophy.
In accordance with rules of the Securities and Exchange Commission (the
"Commission"), the Executive Compensation Philosophy of the Board is not
intended to be "filed" or "soliciting material" or subject to Regulations 14A or
14C or Section 18 of the Exchange Act, or incorporated by reference into any
other filing by the Company with the Commission.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
DON R. KORNSTEIN
JOHN MCCONNAUGHY, JR.
GLENN E. SCHEMBECHLER
9
<PAGE>
EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE
The table below sets forth the cash compensation paid to or accrued for the
Company's Chief Executive Officer and its five other most highly paid executive
officers in 1998 for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1998, 1997 and 1996.
<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(3)
- -------------------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Nederlander .......... 1998 $196,160 $ 50,000 -- 7,500 --
Chairman of the Board 1997 189,511 -- -- 7,500 --
1996 180,656 -- 7,500 --
David M. Mauer ................. 1998 $575,000 -- -- 40,000 $ 1,000
Chief Executive Officer 1997 550,000 $ 60,000 -- 50,000 4,750
1996 500,000 -- 50,000 4,620
Jeffrey G. Webb ................ 1998 $375,000 $207,090(5) -- 35,000 --
President and Chief Executive 1997 200,914(4) 133,380(5) -- 397,760(4) --
Officer of The Varsity Group
Division since the Varsity
Acquisition date of June 19,
1997
David Groelinger ............... 1998 $220,385 $ 50,000 -- 15,000 $ 1,000
Chief Financial Officer and 1997 195,977 25,000 -- 20,000 4,302
Executive Vice President since 1996 143,308 -- 65,000 --
March 7, 1996
Thomas L. Clark ................ 1998 $132,693 $ 88,000 $ 164,467 20,000 --
Senior Vice President,
Consumer Products, of Riddell
Group Division since
February 8, 1998
Dan Cougill .................... 1998 $252,275 -- -- 45,000 $ 479,750
President and Chief Operating 1997 259,231 -- -- 20,000 4,750
Officer of Riddell Group 1996 230,000 -- -- 15,000 4,750
Division until November 27,
1998
</TABLE>
- ------------------
(1) Includes relocation related expenses of $164,467 for Mr. Clark. Other
perquisites and other personal benefits paid for the named executive
officers are omitted from the table as permitted by the rules of the
Commission because they 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.
(2) These options were issued under the Company's 1991 Stock Option Plan or 1997
Stock Option Plan. Options granted to Mr. Cougill were forfeited upon his
separation from the Company.
(3) Represents the Company's contribution to its 401K Plan on behalf of the
employee, and in the case of Mr. Cougill, also includes $478,750 of
separation payments paid or accrued in 1998.
(Footnotes continued on next page)
10
<PAGE>
(Footnotes continued from previous page)
(4) Pursuant to an employment agreement between the Company and Mr. Webb
effective in June 1997 which provides for an annual base salary of $375,000
and certain stock options to be granted in 1997. See "Employment Agreements
and Change of Control Arrangements."
(5) Includes unrestricted stock awards of the Company's Common Stock valued at
$153,400 for 1998 and $98,800 for 1997 based on quoted market values on the
date the awards were granted. The 1998 award of 41,600 was valued at
approximately $3.69 per share and the 1997 award of 20,800 shares was valued
at $4.75 per share.
STOCK OPTIONS GRANTED IN 1998
The following table sets forth information concerning individual grants of
stock options made during 1998 to each named executive officer listed below
pursuant to the Company's 1991 Stock Option Plan or 1997 Stock Option Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED EXERCISE TERM(5)
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION -----------------------
NAME GRANTED IN FISCAL YEAR SHARE DATE 5%
- -------------------------------- ---------- --------------- --------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Robert Nederlander(1)........... 7,500 2% $5.38 6/24/2008 $ 25,352
David M. Mauer(2)............... 40,000 9% $5.38 6/24/2008 135,212
Jeffrey Webb(2)................. 35,000 8% $5.38 6/24/2008 118,311
David Groelinger(2)............. 15,000 3% $5.38 6/24/2008 50,705
Thomas L. Clark(3).............. 20,000 4% $4.88 2/9/2008 61,317
Dan Cougill(4).................. 45,000 10% $5.38 6/24/2008 (4)
<CAPTION>
NAME 10%
- -------------------------------- -----------------------
<S> <C>
Robert Nederlander(1)........... $ 64,248
David M. Mauer(2)............... 342,655
Jeffrey Webb(2)................. 299,823
David Groelinger(2)............. 128,495
Thomas L. Clark(3).............. 155,390
Dan Cougill(4).................. (4)
</TABLE>
- ------------------
(1) This option was granted pursuant to provisions of the 1991 Stock Options
Plan which provides for annual fixed automatic grants of options to certain
eligible directors. The option is fully exercisable commencing June 24, 1999
through June 24, 2008. In the event Mr. Nederlander's Board membership
terminates, generally, other than for cause, the option becomes fully
exercisable for 90 days. The option terminates if Mr. Nederlander's Board
membership terminates for cause.
(2) This option 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 the
employee's employment is terminated by the Company, generally, other than
for cause, this stock option becomes fully exercisable for one year. The
option fully vests immediately upon a change in control.
(3) This option 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 the
employee's employment is terminated by the Company, generally, other than
for cause, the stock option remains exercisable for 90 days to the extent of
any underlying shares which were vested on the termination date.
(4) Options granted to Mr. Cougill were forfeited upon his separation from the
Company.
(5) Based upon the per share market price on the date of grant and an annual
appreciation of such market price at the rate stated in the table through
the expiration date of such options. Gains, if any, are dependent upon the
actual performance of the Common Stock, as well as the continued employment
of the executive officers through the vesting period. The potential
realizable values indicated have not taken into account amounts required to
be paid as income tax under the Internal Revenue Code and any applicable
state laws.
11
<PAGE>
STOCK OPTIONS HELD AT END OF 1998
The following table indicates the total number of exercisable and
unexercisable stock options held by each named executive officer listed below on
December 31, 1998. No options to purchase the Company's Common Stock were
exercised by any of these individuals during 1998. On December 31, 1998, the
last sale price of the Common Stock on the American Stock Exchange was $5.625
per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert Nederlander........................... 45,000 7,500 $ 107,325 $ 1,875
David M. Mauer............................... 387,500 102,500 $ 741,188 $45,063
Jeffrey G. Webb.............................. 364,427 68,333 $ 638,079 $15,583
David Groelinger............................. 37,500 62,500 $ 33,425 $39,025
Thomas L. Clark.............................. -- 20,000 -- $15,000
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
In June 1992, the Company entered into an employment agreement with each of
Messrs. Nederlander and Toboroff. Each agreement continues until terminated by
the Company, with termination effective three years after the Company delivers
notice of termination or, if earlier, until the death or disability of the
employee. The agreements are immediately terminable by the Company for Cause (as
defined therein). Bonuses are discretionary with the Board. Each agreement
provides a base salary of $162,500 which may be increased in the discretion of
the Board, provided that in any event each year the salaries are increased at
least by the percentage increase in the Consumer Price Index. Each agreement
provides that in the event the Company terminates the employee's employment,
generally, other than for Cause, the employee will receive his full salary
through the end of the term of his agreement and annual bonuses for the
remainder of the term equal to the average of the annual bonuses awarded to the
employee prior to termination. Each agreement acknowledges that the employee
will devote time and provide services to entities other than the Company.
In April 1993, the Company entered into an employment agreement with
Mr. Mauer. The agreement, as amended in 1994, provides an annual base salary in
such amount in excess of $400,000 as the Board of Directors may determine from
time to time. The agreement provides for the years subsequent to 1993, that the
Board of Directors and Mr. Mauer establish target bonuses based upon measures to
be agreed upon before the beginning of each calendar year, and that Mr. Mauer's
bonus will be a percentage, not to exceed 100%, of his base salary based upon
the percent of the targets achieved. The agreement continues until terminated by
the Company, with termination effective three years after the Company delivers
notice of termination or, if earlier, until Mr. Mauer's death or disability. The
agreement is immediately terminable for Cause (as defined therein). Mr. Mauer
was granted an option for ten years to acquire 300,000 shares of the Company's
Common Stock pursuant to the Agreement at an average price of $3.63 per share.
In the event Mr. Mauer's employment is terminated, generally, other than for
Cause, Mr. Mauer will receive his salary for a period of three years plus a pro
rata portion of the bonus earned through the date of termination, and his
options become fully exercisable for one year.
In addition, in connection with the acquisition of Varsity, the Company
entered into an employment agreement with Mr. Webb effective June 1997. Under
the provisions of such agreement Mr. Webb serves as Vice Chairman of the Board
of Directors of the Company as well as President and Chief Executive Officer of
the Varsity Group Division. Mr. Webb is entitled to a base salary of no less
than $375,000 per year and is 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 received options to purchase 50,000 shares of Common Stock of the
Company with a per share exercise price of $5.44 and "special options" to
purchase an additional 347,760 shares at a per share exercise price of $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
12
<PAGE>
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 Shareholders' Agreement to which Messrs. Mauer, Nederlander, Toboroff and
McConnaughy are parties.
The Company entered into an employment agreement with Mr. Groelinger
effective March 1996 in connection with his joining the Company as Chief
Financial Officer. The agreement provides for an annual base salary of $180,000
and a guaranteed minimum bonus for 1996 of $25,000. Thereafter, bonuses will be
a percentage of his salary, with a target of 40%. Pursuant to the Agreement,
Mr. Groelinger was granted a ten-year option to purchase 65,000 shares of the
Company's Common Stock at an exercise price of $4.63 per share. The agreement is
immediately terminable for Cause (as defined therein) and expires, unless
renewed, in March 2001. 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.
The stock options granted to Messrs. Mauer, Webb and Groelinger in
connection with their employment become immediately exercisable in the event a
change of control of the Company occurs.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
Mr. McConnaughy is a member of the Company's Board of Directors and its
Compensation and Audit Committees and a member of a group of stockholders who
may be deemed to beneficially own and exercise control over approximately 52% of
the Company's outstanding Common Stock as of April 12, 1999. See "Security
Ownership of Certain Beneficial Owners and Management."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1994 the Company granted a Warrant (the "Warrant") to a limited
partnership owned in part by Messrs. Nederlander, Toboroff and McConnaughy to
purchase 150,000 shares of its Common Stock in consideration for the extension
of a note in the amount of $2,000,000 issued by the partnership in favor of the
Company. In August 1995 certain of the original partners withdrew from the
partnership, and Messrs. Cougill, Mauer, McConnaughy, Nederlander and Toboroff
or entities controlled by them acquired their interests in the Warrant.
In 1998, based on a resolution of the Compensation Committee with
Mr. McConnaughy abstaining, the Company allowed the holders of the Warrant to
effect a cashless exercise of the Warrant, in effect accepting shares issuable
upon exercise as payment for the exercise based on per share value one-eighth of
a point higher than the quoted market value. As a result, 42,362 shares of
Common Stock were issued in exchange for the 150,000 share Warrant based on an
exercise price of $2.96 per share and an exchange price of $4.125 per share. The
exchange price of $4.125 per share was set on a date when the quoted market
price of a share of Common Stock was $4.00.
13
<PAGE>
COMPARATIVE PERFORMANCE BY THE COMPANY
The following graph shows a comparison of cumulative total returns for the
Company, the American Stock Exchange Market Value Index, the NASDAQ Market Value
Index and an index of peer companies selected by the Company for the five-year
period from January 1, 1994 to December 31, 1998. In accordance with the rules
of the Commission, the Company's Comparative Performance Information is not
intended to be "filed" or "soliciting material" or subject to Regulations 14A or
14C or Section 18 of the Exchange Act, or incorporated by reference into any
other filing by the Company with the Commission.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG RIDDELL SPORTS INC.,
AMERICAN STOCK EXCHANGE MARKET VALUE INDEX,
NASDAQ MARKET VALUE INDEX AND SIC CODE INDEX
[GRAPH]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Riddell Sports Inc. 100.00 88.89 138.89 205.56 222.22 250.00
Nasdaq Market Value Index 100.00 104.99 136.18 169.23 207.00 291.96
American Stock Exchange Market Value Index 100.00 88.33 113.86 120.15 144.57 142.61
SIC Code Index 100.00 103.69 93.33 91.35 89.46 38.96
</TABLE>
The graph compares the performance of the Company, the American Stock
Exchange Market Value Index, the NASDAQ Market Value Index and an index of
companies in the sporting and athletics goods industry having the same SIC Code
as the Company (SIC Code 3949-Sporting and Athletic Goods), with the investment
weighted on market capitalization at the beginning of each period for which a
return is indicated. The total returns presented assume the reinvestment of
dividends, although dividends have not been declared on the Company's Common
Stock. All indexes were obtained through Media General Financial Services, and
are the same indices used by the Company in its Proxy Statement dated May 2,
1998, except for the American Stock Exchange Market Value Index which has not
previously been presented in a Proxy Statement of the Company. The Company's
Common Stock commenced trading on the American Stock Exchange in November 1998,
prior to which it was quoted on the NASDAQ National Market System.
14
<PAGE>
THE RIDDELL SPORTS INC. 1991 STOCK OPTION PLAN
AND 1997 STOCK OPTION PLAN
INTRODUCTION
The Company maintains two stock option plans: the 1991 Riddell Sports Inc.
Stock Option Plan (the "1991 Plan") and the 1997 Riddell Sports Inc. Stock
Option Plan (the "1997 Plan") pursuant to which there are 483,150 shares of
Common Stock available for grant of options as of April 12, 1999. The Company
has granted an aggregate of 2,432,350 shares of its Common Stock under options
and stock grants made in accordance with the 1991 Plan and 1997 Plan as of April
12, 1999 (net of past grants canceled or expired).
GENERAL DESCRIPTION OF 1991 STOCK OPTION PLAN
The Company's Board of Directors adopted the 1991 Stock Option Plan, which
was approved by the Company's stockholders, to attract and retain qualified
management. Options to acquire an aggregate of 1,415,500 shares of Common Stock
were originally reserved for issuance under the 1991 Plan.
Under the 1991 Plan, options may be granted from time to time to key
employees, including officers, directors, advisors and independent consultants
to the Company or to any of its subsidiaries. The 1991 Plan is administered by
the Board of Directors, which may empower a committee of directors to administer
the 1991 Plan. If such committee is appointed, it may exercise all of the powers
of the Board in relation to the 1991 Plan. The Board is generally empowered to
interpret the 1991 Plan, to prescribe rules and regulations relating thereto, to
determine the terms of the option agreements, to amend them with the consent of
the optionee, to determine the employees to whom options are to be granted, and
to determine the number of shares subject to each option and the exercise price
thereof. Options granted under the 1991 Plan may be designated as incentive
stock options ("ISOs") or nonqualified stock options ("NQSOs"). The per share
exercise price for ISOs granted to directors, officers and employees may not be
less than 100% of the fair market value of a share of Common Stock on the date
the option is granted (110% of such fair market value if the optionee owns more
than 10% of the Common Stock of the Company), and for NQSOs, not less than 85%
of fair market value on the date the NQSO is granted. Upon exercise of an
option, the optionee may pay the purchase price with previously acquired
securities of the Company, or at the discretion of the Board, the Company may
loan some or all of the purchase price to the optionee.
In the discretion of the Board, NQSOs may be exercisable immediately and
need not terminate upon termination of the optionee's relationship with the
Company, and the Board may amend the terms and provisions (other than the option
price) of any NQSOs. Options could be exercisable for a term which may not be
less than one year or greater than ten years from the date of grant. ISOs are
not transferable other than by will or by the laws of descent and distribution.
NQSOs may be transferred to the optionee's spouse or lineal descendants, subject
to certain restrictions. In the event of a change in control or certain other
basic changes in the Company, in the Board's discretion, each option may become
fully and immediately exercisable. Options may be exercised during the holder's
lifetime only by the holder, his or her guardian or legal representative. The
Board may decrease the exercise price of outstanding options to the fair market
value of the Common Stock on the date the Board resolves to decrease such price.
Options granted pursuant to the 1991 Plan may be designated as ISOs, with
the attendant tax benefits provided under Sections 421of the Internal Revenue
Code of 1986, as amended. Accordingly, the 1991 Plan provides that the aggregate
fair market value (determined at the time an ISO is granted) of the Common Stock
subject to ISOs becoming exercisable for the first time by an employee during
any calendar year (under all stock option plans of the Company and its
subsidiaries) may not exceed $100,000.
Each Company director other than any director who is also a Chief Executive
Officer, President, Executive Vice President or Senior Vice President of the
Company or any of its subsidiaries will receive an option to acquire 7,500
shares of Common Stock each year. In addition, each such individual (other than
current directors) will receive an option to acquire 15,000 shares of Common
Stock upon becoming a member of the Board of Directors and, after the first
anniversary of his joining the Board, the annual grant of an option to acquire
7,500 shares concurrently with the grants to the other directors. All such
directors' options will become exercisable in full on the first anniversary of
the date of grant will have an exercise price equal to the fair market value of
the
15
<PAGE>
Common Stock on the date of grant, which will be the closing price of the Common
Stock on the date of each Annual Meeting of Stockholders. In order for the
compensation in respect of options granted in the future under the 1991 Plan to
be deductible to the Company as "performance-based compensation" (within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), the 1991 Plan limits the number of shares of Common Stock with respect
to which options may be granted to any individual in any year to no more than
150,000.
The Board may modify, suspend or terminate the 1991 Plan, provided however,
that certain material modifications affecting the 1991 Plan must be approved by
the stockholders, and any change in the 1991 Plan that may adversely affect an
optionee's rights under an option previously granted under the 1991 Plan
requires the consent of the optionee.
GENERAL DESCRIPTION OF 1997 STOCK OPTION PLAN
Under the 1997 Plan a maximum of 1,500,000 shares of Common Stock has been
reserved for issuance, subject to equitable adjustment upon the occurrence of
any stock dividend, stock split, recapitalization, combination or exchange of
shares.
Unless otherwise determined by the Board of Directors of the Company, the
1997 Plan shall be administered by a committee appointed by the Board
("Compensation Committee"), which shall consist of two or more members of the
Board who are "outside directors" within the meaning of section 162(m) of the
Code. The Compensation Committee may, in its discretion, delegate to a
subcommittee its duties, including the grant of stock options or other
stock-based awards. The full Board shall also have the authority, in its
discretion, to grant stock options or other stock-based awards under the Plan
and to administer the Plan. For all purposes under the Plan, any entity which
performs the duties described, shall be referred to as the "Committee." The
Committee shall have full authority, subject to the provisions of the 1997 Plan,
among other things, to determine the persons to whom options or other
stock-based awards will be granted, to determine the exercise price of the stock
options and to prescribe, amend and rescind rules and regulations relating to
the 1997 Plan.
Grants of stock options or other stock-based awards may be made under the
1997 Plan to selected employees, directors (including directors who are not
employees) and consultants of the Company and its present or future affiliates,
in the discretion of the Committee. Stock options may be either ISOs or NQSOs.
The exercise price of an NQSO may be above, at or below the fair market value
per share of Common Stock on the date of grant; the exercise price of an ISO may
not be less than the fair market value per share of Common Stock on the date of
grant.
The 1997 Plan also provides for automatic grants of stock options (with an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant) to each member of the Board of Directors of the Company who is
not a Chief Executive Officer, President, Senior Vice President or Executive
Vice President of the Company or its subsidiaries ("Eligible Directors"). Except
as otherwise determined by the Committee, options to purchase 15,000 shares of
Common Stock will be automatically granted to Eligible Directors upon
commencement of their service on the Board of Directors, except with respect to
Eligible Directors serving on the date of the 1997 annual stockholders meeting.
Thereafter (and in each case except as otherwise determined by the Committee),
Eligible Directors are granted an option to purchase 7,500 shares of Common
Stock on the date of each subsequent annual meeting of stockholders (unless such
Eligible Director has received an initial option grant less than one year prior
to the date of such meeting).
In view of the fact that each of the 1991 Plan and 1997 Plan provides
certain directors with fixed automatic grants of options to acquire shares of
Company Common Stock, the Board of Directors has resolved that the total number
of shares underlying options required to be granted to each eligible director
shall not be duplicated.
Options automatically granted to Eligible Directors become exercisable as
to all shares on the first anniversary of the date of grant or on the retirement
of the Eligible Director from the Board of Directors, whichever is first.
Options automatically granted to Eligible Directors expire on the earliest of
(i) the tenth anniversary of the date of grant, (ii) the second anniversary of
the termination of the Eligible Directors' service on the Board of Directors for
reasons other than cause, or (iii) thirty days after the termination of the
Eligible Directors' service on the Board of Directors for Cause (as defined in
the 1997 Plan).
16
<PAGE>
No person may be granted stock options under the 1997 Plan representing an
aggregate of more than 900,000 shares of Common Stock during 1997 and
representing an aggregate of more than 500,000 shares of Common Stock during any
subsequent calendar year. Stock options shall be exercisable at the times and
upon the conditions that the Committee may determine, as reflected in the
applicable agreement. The exercise period shall be determined by the Committee;
provided, however, that in the case of an ISO, such exercise period shall not
exceed ten (10) years from the date of grant of such ISO.
Except to the extent the Committee provides otherwise, in the event that
the employment of a grantee shall terminate (other than by reason of death or
disability), all stock options that are not exercisable at the time of such
termination shall terminate and all stock options that are exercisable at the
time of such termination may be exercised for a period of three months
immediately following such termination (but in no case after the stock options
expire in accordance with their terms). Except to the extent the Committee
provides otherwise, in the event that the employment of a optionee shall
terminate by reason of death or disability, all stock options that are not
exercisable at the time of such termination shall terminate and all stock
options that are exercisable at the time of such termination may be exercised
for a period of one year immediately following such termination (but in no event
after the stock options expire in accordance with their terms). In the event of
a change in control or certain other basic changes in the Company, in the
Board's discretion, each option may become fully and immediately exercisable.
The Committee may also grant other stock-based awards under the 1997 Plan.
Such stock-based awards may also be granted pursuant to any long-term incentive
bonus plan the Company may adopt in the future and will be subject to such terms
and conditions as the Committee may determine.
Except to the extent the Committee provides otherwise, stock options
granted under the 1997 Plan shall not be transferable otherwise than by will or
by the laws of descent and distribution. The 1997 Plan may, at any time and from
time to time, be altered, amended, suspended, or terminated by the Board of
Directors, in whole or in part; provided that, unless otherwise determined by
the Board, an amendment that requires stockholder approval in order for the 1997
Plan to continue to comply with Section 162(m) of the Code or any other law,
regulation or stock exchange requirement shall not be effective unless approved
by the requisite vote of stockholders. In addition, no amendment may be made
which adversely affects any of the rights of a optionee under any award
theretofore granted, without such grantee's written consent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER EACH OF THE
1991 PLAN AND 1997 PLAN
The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to grants of stock options under each of the 1991 Plan and 1997 Plan. This
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign income and other tax consequences.
An optionee will not recognize any taxable income upon the grant of a NQSO
and the Company will not be entitled to a tax deduction with respect to the
grant of a NQSO Upon exercise, the excess of the fair market value of a share of
Common Stock on the exercise date over the option exercise price will be taxable
as ordinary income to the optionee and will be subject to applicable withholding
taxes. The Company generally will be entitled to a tax deduction at such time in
the amount of such ordinary income.
In the event of a sale of a share of Common Stock received upon the
exercise of a NQSO any appreciation or depreciation after the exercise date
generally will be taxed as capital gain or loss and will be long-term capital
gain or loss if the holding period for such Common Stock is more than one year.
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an incentive stock option and the Company will not be
entitled to a tax deduction with respect to such grant or exercise. Exercise of
an ISO may, however, give rise to taxable compensation income subject to
applicable withholding taxes, and a tax deduction to the Company, if the ISO is
not exercised on a timely basis (generally, while the optionee is employed by
the Company or within 90 days after termination of employment) or if the
optionee subsequently engages in a "disqualifying disposition," as described
below. The amount by which the fair market
17
<PAGE>
value of the Common Stock on the exercise date of an incentive stock option
exceeds the exercise price generally will increase the optionee's "alternative
minimum taxable income."
A sale or exchange by an optionee of shares acquired upon the exercise of
an ISO more than one year after the transfer of the shares to such optionee and
more than two years after the date of grant will result in any difference
between the net sale proceeds and the exercise price being treated as long-term
capital gain (or loss) to the optionee. If such sale or exchange takes place
within two years after the date of grant of the ISO or within one year from the
date of transfer of the ISO shares to the optionee, such sale or exchange will
generally constitute a "disqualifying disposition" of such shares that will have
the following results: any excess of (i) the lesser of (a) the fair market value
of the shares at the time of exercise and (b) the amount realized on such
disqualifying disposition of the shares over (ii) the option exercise price of
such shares, will be ordinary income to the optionee, subject to applicable
withholding taxes, and the Company will be entitled to a tax deduction in the
amount of such income. Any further gain or loss after the date of exercise
generally will qualify as capital gain or loss and will not result in any
deduction by the Company.
If an optionee uses previously acquired shares of Common Stock to pay the
exercise price of an option, the optionee would not ordinarily recognize any
taxable income to the extent that the number of new shares of Common Stock
received upon exercise of the option does not exceed the number of previously
acquired shares so used. If nonrecognition treatment applies to the payment for
option shares with previously acquired shares, the tax basis of the option
shares received without recognition of taxable income is the same as the basis
of the shares surrendered as payment. In the case of an ISO, if a greater number
of shares of Common Stock is received upon exercise than the number of shares
surrendered in payment of the option price, such excess shares will have a zero
basis in the hands of the holder. Where a NQSO is being exercised, the option
holder will be required to include in gross income (and the Company will be
entitled to deduct) an amount equal to the fair market value of the additional
shares on the date the option is exercised less any cash paid for the shares.
Moreover, if the stock previously acquired by exercise of an ISO is transferred
in connection with the exercise of another option whether or not an incentive
stock option, and if, at the time of such transfer, the stock so transferred has
not been held for the holding period required in order to receive favorable
treatment under the rules governing ISO, then such transfer will be treated as a
disqualifying disposition of the shares so transferred.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP have been the principal accountants of the Company
during the calendar year ended December 31, 1998 and have been selected as the
Company's principal accountants for the current calendar year, subject to
ratification by the stockholders. A representative of Grant Thornton LLP will be
present at the Annual Meeting, with an opportunity to make a statement if he
desires to do so, and will be available to respond to appropriate questions.
If, prior to the next Annual Meeting of Stockholders, such firm shall
decline to act or otherwise become incapable of acting, or if its engagement
shall be otherwise discontinued by the Board of Directors, the Board of
Directors will appoint other independent auditors whose appointment for any
period subsequent to the next Annual Meeting will be subject to stockholder
approval at such meeting.
Assuming the presence of a quorum, the affirmative vote of a majority of
the shares of Common Stock present at the Annual Meeting of Stockholders and
entitled to vote on this item is required to ratify the selection of the
Company's independent auditors.
* * *
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS
* * *
18
<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS
The Company currently anticipates holding next year's Annual Meeting of
Stockholders on or about June 1, 2000. Accordingly, any stockholder desiring to
submit a proposal for action at the next Annual Meeting of Stockholders which
the stockholder desires to be presented in the Company's Proxy Statement with
respect to such meeting should submit such proposal to David Groelinger, Chief
Financial Officer, 50 East 42nd Street, Suite 1808, New York, NY 10017, no later
than January 15, 2000.
OTHER MATTERS
Other than as set forth in this proxy statement, within a reasonable time
before the commencement of this solicitation, the Board of Directors did not
know of any other business constituting a proper subject for action by the
stockholders to be presented at the Annual Meeting. However, if any such matter
should properly come before the meeting, the persons named in the enclosed proxy
intend to vote such proxy in accordance with their best judgment.
The proxies named in the enclosed form of proxy and their substitutes, if
any, will vote the shares represented by the enclosed form of proxy, if the
proxy appears to be valid on its face and, where a choice is specified on the
form of proxy, the shares will be voted in accordance with each specification so
made.
A list of stockholders of record of the Company as of April 12, will be
available for inspection by stockholders during normal business hours from May
19, 1999 to May 20, 1999 at the offices of the Company, 42 East 50th Street,
Suite 1808 New York, New York 10017.
In addition to soliciting proxies by mail, the Company may make requests
for proxies by telephone, telegraph or messenger or by personal solicitation by
officers, directors, or employees of the Company, or by anyone or more of the
foregoing means. The Company will also reimburse brokerage firms and other
nominees for their actual out-of-pocket expenses in forwarding proxy material to
beneficial owners of the Company's shares. All expenses in connection with such
solicitation are to be paid by the Company.
By Order of the Board of Directors
/s/ Robert E. Nederlander
----------------------------------
ROBERT E. NEDERLANDER
Chairman of the Board
Dated: April 19, 1999
19
<PAGE>
PROXY - RIDDELL SPORTS INC.
Annual Meeting of Stockholders - May 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND UNLESS OTHERWISE
PROPERLY MARKED AND EXECUTED BY THE UNDERSIGNED STOCKHOLDER THIS WILL BE VOTED
FOR ALL PROPOSALS AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints each of Robert E. Nederlander and David M.
Mauer, each with full power to act without the other, and with full power of
substitution as the undersigned or any attorneys and proxies of the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of Riddell Sports Inc., to be held at the 13th Floor Board Room at
The American Stock Exchange, 86 Trinity Place, New York, New York on Thursday,
May 20, 1999 at 11:00 a.m., local time, or at any adjournment or postponement
thereof, upon such business as may properly come before the meeting, including
the items set forth below.
<PAGE>
Please Detach and Mail in the Envelope Provided
/X/ Please mark your votes as in this example.
1. ELECTION OF DIRECTORS.
NOMINEES:
FOR WITHHOLD AUTHORITY DON R. KORNSTEIN,
all nominees to vote for all nominees DAVID M. MAUER,
at right listed at right JOHN MCCONNAUGHY, JR.,
(except as ROBERT E. NEDERLANDER,
marked to GLENN E. ('BO') SCHEMBECHLER,
the contrary LEONARD TOBOROFF,
below) JEFFREY G. WEBB
/ / / / and ARTHUR N. Seessel, III
INSTRUCTION: To withhold authority to vote for any
nominee, write that nominee's name in the space below.
- -------------------------------------------------------
2. To ratify the appointment of Grant Thornton LLP as certified independent
public accountants for the 1999 calendar year.
FOR / / AGAINST / / ABSTAIN / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE DATED: , 1999
--------------------------------------- --------------
SIGNATURE IF HELD JOINTLY DATED: , 1999
---------------------- --------------
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
