SCHEDULE 14A
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MERIDIAN SPORTS INCORPORATED
- - - -------------------------------------------------------------------------------
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- - - -------------------------------------------------------------------------------
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<PAGE>
[MERIDIAN LETTERHEAD]
May 9, 1996
To Our Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders of Meridian Sports Incorporated to be held at the Mellon Bank
Building, 8 Loockerman Square, Dover, Delaware, on Friday, June 7, 1996 at
11:00 a.m. local time.
The business of the meeting will be to elect directors and to ratify
the selection of independent auditors for 1996. Information on each of these
matters can be found in the accompanying Proxy Statement.
While stockholders may exercise their right to vote their shares in
person, we recognize that many stockholders may not be able to attend the
Annual Meeting. Accordingly, we have enclosed a proxy which will enable you to
vote your shares on the issues to be considered at the Annual Meeting even if
you are unable to attend. If you desire to vote in accordance with
management's recommendations, you need only sign, date and return the proxy in
the enclosed postage-paid envelope to record your vote. Otherwise, please mark
the proxy to indicate your vote; date and sign the proxy; and return it in the
enclosed postage-paid envelope as soon as conveniently possible.
Sincerely,
/s/ George Napier
<PAGE>
MERIDIAN SPORTS INCORPORATED
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
Meridian Sports Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders of
Meridian Sports Incorporated, a Delaware corporation (the "Company"), will be
held on the 7th day of June 1996 at 11:00 a.m., local time, at the Mellon Bank
Building, 8 Loockerman Square, Dover, Delaware, for the following purposes:
1. To reelect all of the members of the Company's Board of
Directors to serve until the Company's next Annual Meeting and
until such directors' successors are duly elected and shall
have qualified.
2. To ratify the selection of Ernst & Young LLP as the Company's
indepen- dent auditors for 1996.
3. To transact all such other business as may properly come before
the Annual Meeting or at any adjournments or postponements
thereof.
A Proxy Statement describing the matters to be considered at the
Annual Meeting is attached to this notice. Only stockholders of record at the
close of business on May 7, 1996 (the "Record Date") are entitled to notice
of, and to vote at, the Annual Meeting and at any adjournments thereof. A list
of stockholders entitled to vote at the Annual Meeting will be located at the
offices of the CSC Networks at 32 Loockerman Square, Suite 203, Dover,
Delaware, at least ten days prior to the Annual Meeting and will also be
available for inspection at the Annual Meeting.
To ensure that your vote will be counted, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed prepaid
envelope, whether or not you plan to attend the Annual Meeting. Since proxies
may be revoked at any time, any stockholder attending the Annual Meeting may
vote in person even if that stockholder has returned a proxy.
By Order of the Board of Directors
Meridian Sports Incorporated
MAY 9, 1996
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
THIS WILL ENSURE THAT YOUR SHARES ARE VOTED
IN ACCORDANCE WITH YOUR WISHES.
<PAGE>
MERIDIAN SPORTS INCORPORATED
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 1996
------------------------------------
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors (the "Board of Directors") of Meridian
Sports Incorporated, a Delaware corporation (the "Company"), of proxies to be
voted at the 1996 Annual Meeting of Stockholders to be held on the 7th day of
June 1996 at 11:00 a.m., local time, at the Mellon Bank Building, 8 Loockerman
Square, Dover, Delaware, and at any adjournments or postponements thereof (the
"Annual Meeting"). This Proxy Statement and the enclosed proxy are first being
sent to stockholders on or about May 9, 1996.
At the Annual Meeting, the Company's stockholders will be asked (1)
to reelect the following persons as Directors of the Company until the
Company's next annual meeting and until such Directors' successors are duly
elected and shall have qualified: Ronald O. Perelman, George Napier, J. Eric
Hanson, Jerry W. Levin, John P. Murray, Jr., Martin D. Payson and Bruce
Slovin; (2) to ratify the selection of Ernst & Young LLP as the Company's
independent auditors for 1996; and (3) to transact such other business as may
properly come before the Annual Meeting or at any adjournments or
postponements thereof.
The principal executive offices of the Company are located at 625
Madison Avenue, New York, New York 10022 and the telephone number is
212-527-4413.
SOLICITATION AND VOTING OF PROXIES; REVOCATION
All proxies duly executed and received by the Company will be voted
on all matters presented at the Annual Meeting in accordance with the
instructions given therein by the person executing such proxy or, in the
absence of such instructions, will be voted FOR the election to the Board of
Directors of the seven nominees for Director identified in this Proxy
Statement and the ratification of Ernst & Young LLP as the Company's auditors.
The submission of a signed proxy will not affect a stockholders right to
attend or vote in person at the Annual Meeting of stockholders. Any
stockholder may revoke his proxy at any time before it is voted by written
notice to such effect received by the Company at 625 Madison Avenue, New York,
New York 10022, Attention: Secretary, by delivery of a subsequently dated
proxy or by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy).
The accompanying form of proxy is being solicited on behalf of the
Board of Directors. The solicitation of proxies may be made by mail and may
also be made by personal
<PAGE>
interview, telephone and facsimile transmission, and by directors, officers
and regular employees of the Company without special compensation therefor.
The Company will bear the costs incurred in connection with the solicitation
of proxies and expects to reimburse banks, brokers and other persons for their
reasonable out-of-pocket expenses in handling proxy materials for beneficial
owners.
RECORD DATE; OUTSTANDING SHARES; VOTING AT THE ANNUAL MEETING
Only holders of record of the Company's common stock, par value $0.01
(the "Common Stock"), at the close of business on May 7, 1996 (the "Record
Date") will be entitled to notice of and to vote at the Annual Meeting. On
that date, there were issued and outstanding 8,000,000 shares of Common Stock,
each of which is entitled to one vote. Of that total, 5,200,000 shares (or
65%) were owned by Meridian Sports Holdings Incorporated ("Meridian
Holdings"), an indirect wholly owned subsidiary of MacAndrews & Forbes
Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned through
Mafco Holdings Inc. ("Mafco" and together with MacAndrews Holdings,
"MacAndrews & Forbes") by Ronald O. Perelman, Chairman of the Board of
Directors of the Company. Meridian Holdings has informed the Company that it
will vote FOR the election of the nominees to the Board of Directors
identified herein and vote FOR the ratification of the selection of Ernst &
Young LLP as the Company's independent auditors for 1996. Accordingly, the
affirmative vote of Meridian Holdings is sufficient, without the concurring
vote of any other stockholder of the Company, to approve and adopt each of the
proposals to be considered at the Annual Meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
All of the Company's Directors will be elected at the Annual Meeting
to serve until the next succeeding Annual Meeting of stockholders and until
their successors are duly elected and shall have qualified. All of the
nominees listed herein are currently members of the Board of Directors and,
except as herein stated, the proxies solicited hereby will be voted FOR the
election of the nominees listed herein. All nominees, if elected, are expected
to serve until the next succeeding Annual Meeting. Directors of the Company
will be elected by a plurality vote of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting. Under
applicable Delaware law, in tabulating the vote, abstentions from voting on
the election of Directors (including broker non-votes) will be disregarded and
have no effect on the outcome of the vote.
The Board of Directors has been informed that all persons listed
below are willing to serve as Directors, but if any of them should decline or
be unable to act as a Director, the individuals named in the proxies will vote
for the election of such other person or persons as they, in their discretion,
may choose. The Board of Directors has no reason to believe that any such
nominees will be unable or unwilling to serve.
2
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES LISTED HEREIN FOR DIRECTOR.
NOMINEES FOR ELECTION AS DIRECTORS
The name, age (as of April 1, 1996), principal occupation for the
last five years, selected biographical information and period of service as a
Director of the Company of each Director are set forth hereafter.
RONALD O. PERELMAN (53) has been Chairman of the Board of Directors
and a Director of the Company since its formation in 1994 and has been
Chairman of the Board of Directors and Chief Executive Officer of MacAndrews &
Forbes, a diversified holding company, for more than the past five years. Mr.
Perelman also is Chairman of the Board of Directors of Andrews Group
Incorporated, Consolidated Cigar Corporation, Mafco Consolidated Group Inc.,
Mafco Worldwide Corporation, Marvel Entertainment Group, Inc., New World
Communications Group Incorporated, Power Control Technologies Inc. and Toy
Biz, Inc.; and Mr. Perelman is the Chairman of the Executive Committee of the
Boards of Revlon, Inc. and Revlon Consumer Products Corporation. Mr. Perelman
is also a Director of the following corporations which file reports pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act"): Andrews Group
Incorporated, The Coleman Company, Inc., Coleman Holdings Inc., Coleman
Worldwide Corporation, Consolidated Cigar Corporation, First Nationwide Bank,
A Federal Savings Bank, First Nationwide Holdings Inc., Mafco Consolidated
Group Inc., Mafco Worldwide Corporation, Marvel Entertainment Group, Inc.,
Marvel Holdings Inc., Marvel (Parent) Holdings Inc., Marvel III Holdings Inc.,
New World Communications Group Incorporated, NWCG Holdings Corporation, New
World Television Incorporated, Power Control Technologies Inc., Revlon, Inc.,
Revlon Consumer Products Corporation, Revlon Worldwide Corporation and Toy
Biz, Inc.
GEORGE NAPIER (43) has been President, Chief Executive Officer and a
Director of the Company since its formation in 1994 and its predecessor
company since May 1992. Prior to joining the Company, he held various
positions at Wilson Sporting Goods Company, a sporting goods company, for nine
years, including Chief Operating Officer of Wilson Sporting Goods Company,
President of Wilson USA, and President of Wilson International.
Mr. Napier is a Director of Stroheim & Romann, Inc.
J. ERIC HANSON (49) has been a Director of the Company since its
formation in 1994 and has been Senior Vice President of MacAndrews & Forbes, a
diversified holding company, since 1994 and was Vice President of MacAndrews &
Forbes from 1993 to 1994. He was President of Edina Group Inc., a private
investment firm, from 1992 to 1993 and prior to 1992 he served in various
positions, culminating in his appointment as Chief Execu-
3
<PAGE>
tive Officer of Ground Round Restaurants Inc. Mr. Hanson is also a Director of
Power Control Technologies Inc., which files reports pursuant to the Exchange
Act.
JERRY W. LEVIN (51) has been a Director of the Company since its
formation in 1994 and has been Chairman of the Boards of Revlon, Inc. and of
Revlon Consumer Products Corporation, cosmetics, skin care, fragrance,
personal care and professional products companies, since November 1995, and
Chief Executive Officer and a Director of Revlon, Inc. and of Revlon Consumer
Products Corporation since their respective formations in 1992. Mr. Levin has
been Executive Vice President of MacAndrews & Forbes since March 1989. Prior
to joining MacAndrews & Forbes, for 15 years he held various senior executive
positions with The Pillsbury Company. Mr. Levin is a Director of the following
corporations which file reports pursuant to the Exchange Act: The Coleman
Company, Coleman Holdings Inc., Coleman Worldwide Corporation, Revlon, Inc.,
Revlon Consumer Products Corporation, Revlon Worldwide Corporation, Apogee
Enterprises Inc., First Bank System, Inc. and Ecolab, Inc.
JOHN P. MURRAY, JR. (67) has been a Director of the Company since
November 1994 and was Chairman of the Board and Chief Executive Officer of
Wilson Sporting Goods Company, a sporting goods company, from 1985 until 1989
when he retired. Mr. Murray is the founder and a Director of the Murray
Foundation for Eye Research.
MARTIN D. PAYSON (60) has been a Director of the Company since
November 1994. He was Vice Chairman and a Director of Time Warner Inc., an
entertainment company, from 1990 through 1992 when he retired. Prior to 1990,
Mr. Payson was a member of the office of the President and General Counsel of
Warner Communications Inc. Mr. Payson also is a Director of Renaissance
Communications Corporation, which files reports pursuant to the Exchange Act,
and Ithaca Holdings, Inc.
BRUCE SLOVIN (59) has been a Director of the Company since its
formation in 1994 and has been President of MacAndrews & Forbes, a diversified
holding company, and various of its affiliates for more than the past five
years. Mr. Slovin is a Director of the following corporations which file
reports pursuant to the Exchange Act: Andrews Group Incorporated, The Coleman
Company, Inc., Coleman Holdings Inc., Coleman Worldwide Corporation,
Continental Health Affiliates, Inc., Infutech, Inc., Cantel Industries, Inc.
and Power Control Technologies Inc.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Executive Committee, an Audit Committee
and a Management Compensation and Stock Option Committee.
The Executive Committee consists of Messrs. Perelman, Napier and
Slovin. The Executive Committee may exercise all of the powers and authority
of the Board of Directors,
4
<PAGE>
except as otherwise provided under the Delaware General Corporation Law. The
Audit Committee, consisting of Messrs. Murray and Payson, makes
recommendations to the Board of Directors regarding the engagement of the
Company's independent auditors, reviews the plan, scope and results of the
audit, reviews with the auditors and management the Company's policies and
procedures with respect to internal accounting and financial controls and
reviews changes in accounting policy and the scope of the non-audit services
which may be performed by the Company's independent auditors. The Management
Compensation and Stock Option Committee, consisting of Messrs. Levin and
Slovin, makes recommendations to the Board of Directors regarding
compensation, benefits and incentive arrangements for officers and other key
managerial employees of the Company. The Management Compensation and Stock
Option Committee may consider and recommend awards of options to purchase
shares of Common Stock pursuant to the Company's 1994 Stock Option Plan.
The Company was formed in 1994 in connection with the initial public
offering. During 1995, the Board of Directors acted once by unanimous written
consent and held seven meetings; to date, in 1996, the Board of Directors has
held two meetings. During 1995, the Executive Committee acted eight times by
unanimous written consent in 1995, and, to date, in 1996 has acted once by
unanimous written consent. The Management Compensation and Stock Option
Committee acted once by unanimous written consent in 1995. The Audit Committee
was first formed in 1995 and held two meetings in 1995, and, to date, in 1996
has held one meeting.
COMPENSATION OF DIRECTORS
Directors who are not currently receiving compensation as officers or
employees of the Company or any of its affiliates are paid an annual $25,000
retainer fee, payable in monthly installments, plus reasonable out-of-pocket
expenses and a fee of $1,000 for each meeting of the Board of Directors or any
committee thereof they attend.
5
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth as of the date hereof the executive
officers of the Company.
NAME POSITION
- - - ---- --------
Ronald O. Perelman Chairman of the Board and Director
George Napier President, Chief Executive Officer and Director
Mark L. Wilson Executive Vice President, Chief Financial Officer and
Treasurer
Thomas E. Kohut Vice President and Controller
F. Douglas Fonte President, Boston Whaler, Inc.
James W. Hoag President, MasterCraft Boat Company
Gary J. Keller President, Soniform, Inc.
Barry T. Tait President, O'Brien International, Inc.
For biographical information about Messrs. Perelman and Napier, see
"Nominees for Election as Directors."
Mr. Wilson (39) has been Executive Vice President, Chief Financial
Officer and Treasurer since September 1992. From 1987 to 1992, he was Vice
President and Controller of MacAndrews & Forbes, a diversified holding
company. Mr. Wilson has served in various positions at MacAndrews & Forbes,
including Assistant Treasurer, since 1984.
Mr. Kohut (33) has been Vice President and Controller since September
1993. Since 1987 he has served in various positions at MacAndrews & Forbes, a
diversified holding company, including Assistant Vice President and Assistant
Controller from 1991 to 1993.
Mr. Fonte (56) has been President of Boston Whaler, Inc. ("Boston
Whaler") since February 1994. From September 1991 to January 1994, he was
President of Sports Tactics International, Inc., a sports consulting company,
and prior thereto for ten years he was an executive with GenCorp, Inc., a
developer and manufacturer of propulsion and related de- fense products and
services, including serving as President of the Penn Racquet Sports Company
for seven years.
Mr. Hoag (57) has been President of MasterCraft Boat Company ("Master
Craft") since February 1996. Prior to joining MasterCraft, Mr. Hoag had been
retired since 1994. From 1976 to 1994, he served in various capacities at the
US Marine Division of Brunswick Corporation (Bayliner), including President
from 1989.
6
<PAGE>
Mr. Keller (44) has been President of Soniform, Inc. ("Soniform")
since 1989. Since 1982, he has served in various positions at Soniform,
including Vice President.
Mr. Tait (51) has been President of O'Brien International, Inc.
("O'Brien") since early 1996. Prior to joining O'Brien, Mr. Tait served as
President and Chief Executive Officer of ICEX, Inc., a developer and
manufacturer of hockey stick products, from 1993 to 1995. From 1989 to 1993,
he was President, Canada and Latin America of Wilson Sporting Goods Company, a
sporting goods company.
EXECUTIVE COMPENSATION
The compensation paid by the Company for services during the years
ended December 31, 1994 and December 31, 1995 to its Chief Executive Officer
and each of the Company's four most highly compensated executive officers was
as follows:
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG
TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------------------------------------
Other
Annual Options/ All Other
Name and Principal Compensa- SARs Compensa-
Position Year Salary($)(a) Bonus($)(b) tion($)(c) (#) tion($)(d)
-------- ---- ------------ ----------- ---------- --- ----------
<S> <C> <C> <C> <C> <C> <C>
George Napier - 1995 $ 440,000 $ 0 $19,108 0 $38,143
President and Chief 1994 370,000 278,735 25,313 59,250 12,745
Executive Officer
Mark L. Wilson - 1995 325,000 0 24,929 0 12,043
Executive Vice 1994 280,000 167,195 14,638 38,000 11,064
President and Chief
Financial Officer
F. Douglas Fonte - 1995 195,000 0 11,400 0 9,947
President, Boston 1994 156,000(e) 155,867 12,317 17,000 53,168
Whaler
James M. Weber - 1995 174,500 0 10,008 0 4,881
President, O'Brien(f) 1994 162,000 113,562 7,492 10,000 4,836
Russell Kelley - 1995 161,827 149,000 3,300 0 66,055
President, Skeeter
Products, Inc.(g)
</TABLE>
(a) Includes salary paid or accrued during years indicated.
(b) Includes bonus accrued during the applicable year. Mr. Kelley's amount
includes a $50,000 signing bonus paid during 1995.
(c) Includes automobile allowances and, for Mr. Fonte, $3,000 and $4,800 of
imputed interest in 1995 and 1994, respectively, on a $75,000
non-interest bearing loan from the Company, assuming an 8% and 7%,
respectively, average interest rate. Such loan was made to Mr. Fonte in
connection with his relocation and was repaid in July 1995.
(d) The amount reported for 1995 includes payments made for life insurance
premiums ($2,693 for Mr. Napier; $2,123 for Mr. Wilson); matching
contributions by the Company under the Company's 401(k) plan ($4,500 for
Mr. Napier; $4,500 for Mr. Wilson; $7,392 for Mr. Fonte; $3,083 for Mr.
Weber); memberships and dues, professional fees and relocation assistance
payments ($30,950 for Mr. Napier; $5,420 for Mr. Wilson; $2,555 for Mr.
Fonte; $1,798 for Mr. Weber; and $66,055 for Mr. Kelley).
(e) Mr. Fonte commenced employment with the Company in February 1994.
(f) As of January 1996, Mr. Weber ceased to be an executive officer of the
Company.
(g) Mr. Kelley commenced employment with the Company in January 1995 and, as
of January 1996, in connection with the Company's sale (the "Skeeter
Sale") of Skeeter Products Inc. ("Skeeter"), Mr. Kelley ceased to be an
executive officer of the Company.
8
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1995
AND YEAR END 1995 OPTION/SAR VALUES
The following chart shows, for 1995, the number of stock options
exercised and the 1995 year-end value of the options held by the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Year End(#) Year End ($)(b)
Acquired on Value Exercisable/ Exercisable/
Name(a) Exercise(#) Realized($) Unexercisable Unexercisable
- - - ------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
George Napier 0 $0 14,813/ $0
44,437 0
Mark L. Wilson 0 0 9,500/ 0
28,500 0
F. Douglas Fonte 0 0 4,250/ 0
12,750 0
James M. Weber 0 0 2,500/ 0
7,500 0
</TABLE>
(a) Mr. Kelly did not hold any stock options as of the end of the 1995 fiscal
year.
(b) Calculated using actual December 29, 1995 closing price per common share
on the Nasdaq National Market of $5 1/8.
9
<PAGE>
MANAGEMENT COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Management Compensation and Stock Option Committee of the Board
of Directors (the "Committee") is comprised of Messrs. Levin and Slovin,
neither of whom is an officer of the Company. The Committee's duties include
determination of the Company's compensation and benefit policies and practices
for executive officers and key managerial employees. In accordance with rules
established by the Securities and Exchange Commission (the "SEC"), the Company
is required to provide certain data and information in regard to the
compensation provided to the Company's Chief Executive Officer and the four
other most highly compensated executive officers. The Committee has prepared
the following report for inclusion in this Proxy Statement.
Compensation Policies
The Company's current compensation arrangements for senior executives
are designed to incentivize and reward management for creating enterprise
value. To encourage the achievement of short to middle term objectives, the
compensation program for officers emphasizes a base salary with an annual
bonus opportunity dependent on achieving aggressive operating performance
levels in its subsidiaries and for the Company. For the year ended December
31, 1995, the subsidiaries, as well as the Company, each had "minimum",
"target", and "stretch" operating income goals. Consistent with the philosophy
of creating enterprise value and setting aggressive operating performance
levels for each of the subsidiaries, as well as the Company, the "target"
operating income goals were significantly higher than prior year actual
performance. No bonuses were paid under the Executive Bonus Plan in 1995,
other than to executives of Skeeter, which achieved its performance targets.
In connection with the initial public offering, the Company also
adopted the 1994 Stock Option Plan to encourage management to participate in
the equity of the business and provide rewards for the success of the business
in building stockholder value over the long term. Options granted under the
1994 Stock Option Plan vest in equal installments over four years to ensure
that management balances its short term and long term objectives. The use of
stock options also provides a long term incentive for executives and key
management officers to remain in the Company's employ.
The Committee believes that the Company's senior management have, as
a group, faced several difficult challenges during 1995 and achieved mixed
results relative to agreed targets. The restructuring of the Company's WetJet
business and the related overhaul of the MasterCraft/WetJet management team
was the most notable challenge. In addition, Boston Whaler, O'Brien, Skeeter
and Soniform faced manufacturing efficiency issues and, in the case of Boston
Whaler and Soniform, revenue challenges. Notwithstanding the hard work and
dedication demonstrated by the Company's senior management in meeting these
10
<PAGE>
challenges, with the exception of Skeeter, all of the Company's subsidiaries
fell short of their 1995 minimum operating income goals.
Compensation of Chief Executive Officer
The employment agreement with the Company's President and Chief
Executive Officer was entered into in July 1994 prior to the initial public
offering. The Company's recent history of net losses required new direction,
leadership and commitment to restructuring, consolidating and expanding the
business. The compensation for the Chief Executive Officer was established,
consistent with these needs and the Company's emphasis on rewarding the
achievement of aggressive performance levels which are established consistent
with industry market conditions and growth objectives of the Company. In 1995,
the Company fell short of its 1995 minimum operating income goal. Accordingly,
the Chief Executive Officer did not receive a bonus.
LIMIT ON DEDUCTIBILITY OF COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") limits the tax
deductibility of compensation paid to the chief executive officer and each of
the four highest paid employees of public companies to $1 million for fiscal
years beginning on or after January 1, 1994. Certain types of compensation,
however, including qualifying performance-based compensation and compensation
arrangements entered into prior to February 17, 1993 are excluded from the
limitation. The Company's general policy is to preserve the tax deductibility
of compensation paid to its executive officers. OBRA recognizes stock option
plans as performance-based if such plans meet certain requirements. The
Company's 1994 Stock Option Plan and Executive Bonus Plan are structured to
meet the requirements of OBRA. In future years, the Management Compensation
and Stock Option Committee will consider taking such steps as it deems
necessary to qualify compensation so as not to be subject to the limit on
deductibility.
The Management Compensation and
Stock Option Committee
Jerry W. Levin
Bruce Slovin
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Compensation and Stock Option Committee consists of
Messrs. Levin and Slovin.
EMPLOYMENT ARRANGEMENTS
The Company has an employment agreement with Mr. Napier which
provides for his employment as President and Chief Executive Officer of the
Company through December 31, 1997 at an annual salary of $440,000, subject to
discretionary increases. At any time on or after December 31, 1996, the
Company may give written notice of non-renewal of the employment term. In the
event the Company gives such notice, the term will be extended until 18 months
after the last day of the month in which such notice is given. From and after
January 1, 1998, unless the Company gives written notice of non-renewal, the
employment term is automatically extended day-by-day. Mr. Napier is also
eligible to participate in the Company's Executive Bonus Plan and 1994 Stock
Option Plan. If Mr. Napier's employment is terminated other than for "cause",
he is entitled to receive for the greater of the balance of the employment
term or 18 months, continued payment of base salary, continued provision of
benefits, the pro rata portion of the annual bonus, if any, for the year in
which he is terminated and accelerated vesting of his stock options.
The Company has an employment agreement with Mr. Wilson which
provides for Mr. Wilson to be employed through December 31, 1997 at a base
salary of $325,000, subject to discretionary increases. At any time after
December 31, 1996, the Company may give written notice of non-renewal of the
employment term. In the event the Company gives such notice, the term will be
extended 18 months after the last day of the month in which such notice is
given. From and after January 1, 1998, unless the Company gives written notice
of non-renewal, the employment term is automatically extended day-by-day. Mr.
Wilson is also eligible to participate in the Company's Executive Bonus Plan
and 1994 Stock Option Plan. If Mr. Wilson's employment is terminated other
than for "cause", he is entitled to receive for the greater of the balance of
the employment term or 18 months, continued payment of base salary, continued
provision of benefits, the pro rata portion of the annual bonus, if any, for
the year in which he is terminated and accelerated vesting of his stock
options.
The Company has an employment agreement with Mr. Fonte which provides
for Mr. Fonte to be employed through December 31, 1996 at a base salary of
$195,000, subject to discretionary increases. Mr. Fonte is also eligible to
participate in the Company's Executive Bonus Plan and 1994 Stock Option Plan.
The employment agreement will be automatically renewed for an additional year
each December 31 unless 60 days notice of non-renewal is delivered by either
party. If Mr. Fonte's employment is terminated for other than "cause," he is
entitled to receive for the greater of the balance of the employment term or
12 months,
12
<PAGE>
continued payment of base salary and continued provision of benefits. In
addition, the Company has entered into a retention agreement with Mr. Fonte
providing that, in case of a change in control of Boston Whaler, Mr. Fonte
will receive a retention payment of $120,000 if he remains employed with
Boston Whaler or its successor on a date six months immediately following the
change in control (or is terminated without cause prior to such date). Any
payments under the retention agreement will be in addition to any payments
that Mr. Fonte may receive upon termination of employment under his employment
agreement. In connection with the proposed sale of the assets of Boston Whaler
to Brunswick Corporation, which will constitute a change in control for
purposes of the retention agreement, Brunswick Corporation has agreed to
assume the Company's obligations under each of Mr. Fonte's employment
agreement and retention agreement; however the Company will remain obligated
to pay one-half of any amounts paid pursuant to the retention agreement.
O'Brien had an employment agreement with Mr. Weber which provided for
Mr. Weber to be employed, at a base salary of $175,000, subject to
discretionary increases. Mr. Weber was also eligible to participate in the
Company's Executive Bonus Plan and 1994 Stock Option Plan. Mr. Weber resigned
from the Company in January 1996.
Skeeter had an employment agreement with Mr. Kelley which provided
for Mr. Kelley to be employed at a base salary of $165,000, subject to
discretionary increases. Mr. Kelley was also eligible to participate in the
Company's Executive Bonus Plan and 1994 Stock Option Plan. Mr. Kelley ceased
employment with the Company in connection with the sale of Skeeter in January
1996. In addition, the Company entered into a retention agreement with Mr.
Kelley providing that, in case of a change in control of Skeeter, Mr. Kelley
will receive a retention payment of $100,000 if he remains employed with
Skeeter or its successor on a date six months immediately following the change
in control (or is terminated without cause prior to such date). In connection
with the sale of Skeeter to Yamaha Motor Corporation, U.S.A. ("Yamaha") in
January 1996, Yamaha agreed to assume the Company's obligations under each of
Mr. Kelley's retention agreement and employment agreement.
COMMON STOCK PERFORMANCE
The Company's Common Stock is traded on the Nasdaq National Market
("Nasdaq"). The graph set forth below presents a comparison of cumulative
shareholder return through December 31, 1995, assuming reinvestment of
dividends, for the Company's Common Stock since the date of the initial public
offering, as compared to the Standard & Poor's Smallcap 600 index and the
Company's marine competitors, Outboard Marine Corporation and Brunswick
Corporation, assuming $100 was invested on October 12, 1994, the date of the
initial public offering.
13
<PAGE>
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG MERIDIAN SPORTS INCORPORATED, BRUNSWICK CORPORATION,
OUTBOARD MARINE CORPORATION AND THE S & P SMALLCAP 600 INDEX
10/12/94 12/94 12/95
-------- ----- -----
MERIDIAN SPORTS INCORPORATED $100 $86 $47
OUTBOARD MARINE $100 $83 $88
BRUNSWICK CORPORATION $100 $87 $114
S & P SMALLCAP 600 $100 $98 $127
* $100 INVESTED ON 10/12/94 IN STOCK OR
ON 09/30/94 IN INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
14
<PAGE>
RETIREMENT PLANS
DEFINED BENEFITS PLANS. The executive officers named in the Summary
Compensation Table participate in the Meridian Sports Incorporated Retirement
Plan for Salaried Employees (the "Meridian Pension Plan") and Benefit
Restoration Plan (the "Benefit Restoration Plan" and, together with the
Meridian Pension Plan, the "Meridian Pension Plans").
The following table shows estimated annual benefits payable upon
retirement under the Meridian Pension Plan (and, where applicable, the Benefit
Restoration Plan):
<TABLE>
<CAPTION>
Years of Service(b)
------------------------------------------------------------------
REMUNERATION(A) 10 15 20 25 30 35
------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
$ 50,000......... $ 8,555 $12,833 $17,110 $21,388 $ 26,666 $ 29,943
100,000......... 15,555 23,333 31,110 38,888 46,666 54,443
150,000......... 22,555 33,833 45,110 56,388 67,666 78,943
200,000......... 29,555 44,333 59,110 73,888 88,666 103,443
245,000......... 35,855 53,783 71,710 89,638 107,566 120,000
250,000......... 35,855 53,783 71,710 89,638 107,566 120,000
</TABLE>
(a) For 1995, the Benefit Restoration Plan covered annual compensation
greater than $150,000 and less than $245,000.
(b) Years of service for plan benefits is limited to 35. Therefore, no
additional service levels are illustrated. Benefits shown above
reflect the straight life benefit form of payment for employees,
assuming normal retirement at age 65 and reflecting reductions for
Covered Compensation (as defined in the Meridian Pension Plan). The
Meridian Pension Plan provides a benefit of 2% of the highest 60
consecutive months of base compensation less 0.6% of the employee's
Covered Compensation, for each year of service to a maximum of 35
years of service. As of December 31, 1995, the executive officers
named in the Summary Compensation Table had included compensation and
credited service as follows: Mr. Napier, $245,000 and 4 years; Mr.
Wilson, $245,000 and 11 years; Mr. Weber, $150,000 and 7 years; Mr.
Kelley, $150,000 and 1 year.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the SEC and Nasdaq. Officers, Directors and
greater than ten percent owners are required to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it
has received and written representations from certain reporting persons that
they were not required to file Forms 5 for a specified fiscal year, the
Company believes that all its officers, Directors and greater than
15
<PAGE>
ten percent beneficial owners complied with all filing requirements applicable
to them with respect to transactions during 1995.
PROPOSAL 2 - RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee and the Board of Directors have selected, subject
to ratification by the stockholders, Ernst & Young LLP to audit the accounts
of the Company for the fiscal year ending December 31, 1996. The ratification
of the selection of Ernst & Young LLP will require the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock present in
person or represented by proxy at the Annual Meeting and entitled to vote.
Under applicable Delaware law, in tabulating the votes, abstentions from
voting on the ratification of the auditors (including broker non-votes) will
be counted and will have the same effect as a vote against the proposal.
Ernst & Young LLP has audited the consolidated financial statements
of the Company for the past five years. Ernst & Young LLP representatives will
be present at the Annual Meeting and will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF
THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth as of April 1, 1996, the total number
of shares of Common Stock beneficially owned, and the percent so owned, by
each Director of the Company, by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, by the
officers named in the summary compensation table and by all Directors and
officers (including two former executive officers) as a group. The number of
shares owned are those "beneficially owned," as determined under the rules of
the SEC, and such information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which a person has sole or shared voting power or
investment power and any shares of Common Stock which the person has the right
to acquire within 60 days through the exercise of any option, warrant or
right, through conversion of any security, or pursuant to the automatic
termination of power of attorney or revocation of trust, discretionary account
or similar arrangement.
16
<PAGE>
Amount and Nature
of Beneficial Percent of
Ownership(a) Class
------------ ----------
Ronald O. Perelman(b) 5,200,000 64.7%
35 East 62nd Street
New York, NY 10021
George Napier 22,913(c) *
Mark L. Wilson 18,700(d) *
F. Douglas Fonte 5,250(e) *
James M. Weber(f) 1,000 *
Russell Kelley(g) 0 *
J. Eric Hanson 5,000 *
Jerry W. Levin 5,000 *
John P. Murray, Jr. 17,000 *
Martin D. Payson 12,000 *
Bruce Slovin 10,000 *
All Directors and executive officers
as a group (15 persons)(h) 5,301,363 66.0%
* Less than 1%
(a) Includes Common Stock and options exercisable within 60 days.
(b) All of such shares of Common Stock are indirectly owned by Mr.
Perelman through MacAndrews & Forbes. Of such shares owned by Mr.
Perelman, 4,520,334 shares are pledged.
(c) Includes 14,813 shares of Common Stock subject to stock options granted
pursuant to the Company's 1994 Stock Option Plan.
(d) Includes 9,500 shares of Common Stock subject to stock options granted
pursuant to the Company's 1994 Stock Option Plan.
(e) Includes 4,250 shares of Common Stock subject to stock options granted
pursuant to the Company's 1994 Stock Option Plan.
(f) As of January 1996, Mr. Weber ceased to be an executive officer of
the Company.
(g) As of January 1996, in connection with the Skeeter Sale, Mr. Kelley
ceased to be an executive officer of the Company.
(h) Includes two former executive officers of the Company, Messrs. Weber
and Kelley.
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MacAndrews & Forbes owns indirectly 65% of the outstanding Common
Stock. Due to its stock ownership, MacAndrews & Forbes is able to control the
Company and elect the entire Board of Directors. MacAndrews & Forbes is wholly
owned by Ronald O. Perelman.
CROSS-INDEMNIFICATION AGREEMENT. The Company and certain affiliates
of MacAndrews & Forbes are parties to a cross-indemnification agreement (the
"Cross-Indemnification Agreement"), pursuant to which the Company indemnifies
such affiliates against all liabilities related to Boston Whaler, except that
such affiliates indemnify the Company against all liabilities related solely
to a former Boston Whaler manufacturing facility, owned through January 19,
1996 by one of such affiliates. The liabilities that the Company indemnifies
such affiliates against include asserted and potential product liability
claims arising out of products manufactured or sold by Boston Whaler. The
liabilities that such affiliates indemnify the Company against include
asserted and potential environmental claims and liabilities related solely to
a former Boston Whaler facility. No indemnification claims were made for the
year ended December 31, 1995.
SERVICES AGREEMENT. Pursuant to a services agreement (the "Services
Agreement"), MacAndrews & Forbes and its subsidiary, New Coleman Holdings
Inc., have provided services through Meridian Holdings through December 31,
1993 to the Company. These services included legal, accounting and tax
services, insurance and employee benefit services. From January 1, 1994
through June 30, 1995, the Company received a significantly reduced level of
services from MacAndrews & Forbes and New Coleman Holdings Inc. through
Meridian Holdings under a new services agreement which provides for charges to
the Company of approximately $0.2 million per annum based on the actual amount
of services provided. Such agreement expired at June 30, 1995. Since July 1,
1995, the Company has continued to receive services from MacAndrews & Forbes
and New Coleman Holdings Inc. through Meridian Holdings at the same cost under
an informal arrangement. The Company believes that the terms of such
arrangement are at least as favorable to the Company as those that it could
negotiate with nonaffiliated parties. For the year ended December 31, 1995,
fees to affiliates incurred by the Company for such services were
approximately $0.2 million. In addition, the Company leases its corporate
headquarters from MacAndrews & Forbes at approximately $0.2 million per annum.
INTERNATIONAL SALES ARRANGEMENTS. In two markets, the Company sells
products to subsidiaries of The Coleman Company, Inc., which act as
distributors for the Company. These products are purchased at arms' length
prices that reflect competitive export practices. In 1995 such amounts were
not material.
TAX INDEMNIFICATION AGREEMENT. Concurrent with the consummation of
the initial public offering, the Company, MacAndrews & Forbes and certain of
its affiliates entered into a tax indemnification agreement (the "Tax
Indemnification Agreement"). Pursuant to the Tax Indemnification Agreement,
all prior tax sharing agreements between any subsidiaries of the Company and
Mafco or any affiliate of Mafco were terminated with respect to all periods
ending after the date of the initial public offering. Such prior tax sharing
agreements continue with respect to periods ending on or before the date of
the initial public offering. In addition, pursuant
18
<PAGE>
to the Tax Indemnification Agreement, Mafco is obligated to indemnify the
Company, on an after-tax basis, against (i) any liability to the Internal
Revenue Service for any consolidated federal income taxes of the Company for
any period (or portion thereof) beginning on or after April 28, 1989 and
ending on or before the date of the initial public offering, (ii) any
liability to a state or local taxing authority for any combined state and
local income taxes of the Company for any period (or portion thereof)
beginning on or after April 28, 1989 and ending on or before the date of the
initial public offering, to the extent such taxes arise in any return in which
the Company or any affiliate thereof files a combined return with Mafco or any
Mafco affiliate, and (iii) any liability to the Internal Revenue Service or a
state or local taxing authority, as the case may be, for any consolidated
federal or combined state or local income taxes incurred by the Company as a
result of the Company or any affiliate thereof being part of any consolidated
or combined tax return with Mafco or any Mafco affiliate. No indemnification
claims were made for the year ended December 31, 1995.
REGISTRATION RIGHTS AGREEMENTS. In connection with the initial public
offering, the Company and Meridian Holdings entered into a registration rights
agreement (the "Registration Rights Agreement") pursuant to which Meridian
Holdings and certain transferees of Common Stock held by Meridian Holdings
(the "Holders") have the right to require the Company to register all or part
of the Common Stock owned by such Holders under the Securities Act of 1933 (a
"Demand Registration"); provided that the Company may postpone giving effect
to a Demand Registration up to a period of 30 days if the Company believes
such registration might have a material adverse effect on any plan or proposal
by the Company with respect to any financing, acquisition, recapitalization,
reorganization or other material transaction, or the Company is in possession
of material non-public information that, if publicly disclosed, could result
in a material disruption of a major corporate development or transaction then
pending or in progress or in other material adverse consequences to the
Company. In addition, the Holders will have the right to participate in
registrations by the Company of its Common Stock (a "Piggyback Registration").
The Holders will pay all out-of-pocket expenses incurred in connection with a
Piggyback Registration, except for underwriting discounts, commissions and
expenses attributable to the shares of Common Stock sold by such Holders.
SUBORDINATED CREDIT FACILITY. In January 1996, the Company entered
into a Subordinated Credit Facility with an affiliate of Meridian Holdings
(the "Subordinated Facility") to provide for additional liquidity. Initially,
the Subordinated Facility provided for borrowings on a revolving basis of up
to approximately $12.5 million. In connection with the Skeeter Sale on January
31, 1996, the commitment under the Subordinated Facility was reduced to
approximately $6.1 million. The borrowings under the Subordinated Facility
bear interest at the prime rate. At April 30, 1996, there was approximately
$4.9 million outstanding under the Subordinated Facility.
INDEBTEDNESS OF MANAGEMENT. In connection with Mr. Fonte's
relocation, the Company made a $75,000 non-interest bearing loan to Mr. Fonte
in 1994. Such loan was repaid in July 1995.
19
<PAGE>
ADDITIONAL INFORMATION
The Company will make available a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and any Quarterly Reports on
Form 10-Q filed thereafter, without charge, upon written request to the
Secretary, Meridian Sports Incorporated, 625 Madison Avenue, New York, New
York 10022. Each such request must set forth a good faith representation that,
as of the Record Date, May 7, 1996, the person making the request was a
beneficial owner of Common Stock entitled to vote.
In order to ensure timely delivery of such documents prior to the
Annual Meeting, any request should be received by the Company promptly.
STOCKHOLDER PROPOSALS
Under the rules and regulations of the SEC as currently in effect,
any holder of at least $1,000 in market value of Common Stock who has held
such securities for at least one year and who desires to have a proposal
presented in the Company's proxy material for use in connection with the
Annual Meeting of stockholders to be held in 1997 must transmit that proposal
(along with his name, address, the number of shares of Common Stock that he
holds of record or beneficially, the dates upon which the securities were
acquired and documentary support for a claim of beneficial ownership) in
writing as set forth below. Proposals of stockholders intended to be presented
at the next annual meeting must be received by the Secretary, Meridian Sports
Incorporated, 625 Madison Avenue, New York, New York 10022, not later than
November 30, 1996.
OTHER BUSINESS
The Company knows of no other matters which may come before the
annual meeting. However, if any such matters properly come before the meeting,
the individuals named in the proxies will vote on such matters in accordance
with their best judgment.
May 9, 1996
BY ORDER OF THE BOARD OF DIRECTORS
20
<PAGE>
PROXY
MERIDIAN SPORTS INCORPORATED
COMMON STOCK
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting to be held on June 7, 1996
The undersigned appoints Joram C. Salig, Barry F. Schwartz and Thomas E. Kohut,
and each of them, attorneys and proxies, each with power of substitution, to
vote all shares of Common Stock of Meridian Sports Incorporated ("Meridian")
that the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Meridian to be held on Friday, June 7, 1996 at 11:00 A.M, local
time, at the Mellon Bank Building, 8 Loockerman Square, Dover, Delaware, on the
proposals set forth on the reverse side hereof and on such other matters as may
properly come before the meeting and any adjournments or postponements thereof.
The proxy holders will vote the shares represented by this proxy in the manner
indicated on the reverse side hereof. Unless a contrary direction is indicated,
the proxy holders will vote such shares "FOR" the proposals set forth on the
reverse side hereof. If any further matters properly come before the Annual
Meeting, it is the intention of theperson named above to vote such proxies in
accordance with their best judgment.
SEE
REVERSESIDE
[X]
Please mark your
votes as in this
example
The Board of Directors recommends a vote FOR the following proposals.
<TABLE>
<CAPTION>
FOR all WITHHOLD AUTHORITY
Nominees to vote for all
nominees
<S> <C> <C>
1. To reelect Ronald O. Perelman, George Napier, J. Eric Hanson, [ ] [ ]
Bruce Slovin, Jerry W. Levin, John P. Murray, Jr. and Martin D.
Payson as directors of Meridian to serve until Meridian's next
Annual Meeting and until their successors are duly elected and
qualified.
WITHHOLD for the following only: (Write the name of the
nominee(s) in the space below)
</TABLE>
- - - -----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. To ratify the appointment of Ernst & Young LLP as [ ] [ ] [ ]
independent certified public accountants of Meridian for the fiscal
year ending December 31, 1996.
3. To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
</TABLE>
SIGNATURE _____________________________________________ DATE _____________
NOTE: Please sign exactly as name appears hereon. If a joint account, each
joint owner must sign. If signing for a corporation or partnership or
as agent, attorney or fiduciary, indicate the capacity in which you are
signing.
