<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
MERIDIAN SPORTS INCORPORATED
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(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
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:
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(4) Date Filed:
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<PAGE>
[MERIDIAN SPORTS INCORPORATED LOGO]
April 8, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Meridian Sports Incorporated to be held at the Hilton Hotel,
McGhee Tyson Airport (Knoxville Metropolitan Airport), 2001 Alcoa Highway,
Alcoa, Tennessee 37701, on Thursday, May 14, 1998, at 11:00 a.m. local time.
The business of the meeting will be to elect directors, and ratify the
selection of independent auditors for 1998. 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/ J. Eric Hanson
---------------------------
J. Eric Hanson
President and Chief Executive Officer
<PAGE>
MERIDIAN SPORTS INCORPORATED
100 CHEROKEE COVE DRIVE
VONORE, TENNESSEE 37885
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 14th day of May 1998 at 11:00 a.m., local time, at the Hilton
Hotel, McGhee Tyson Airport (Knoxville Metropolitan Airport), 2001 Alcoa
Highway, Alcoa, Tennessee 37701, for the following purposes:
1. To elect the nominees for the Board of Directors of the
Company to serve until the 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
independent auditors for 1998.
3. To transact 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 April 6, 1998 (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 Company at 100 Cherokee Cove Drive, Vonore, Tennessee 37885, 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
APRIL 8, 1998
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 MAY 14, 1998
------------------------------------
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 1998 Annual Meeting of Stockholders to be held on the 14th day of
May 1998 at 11:00 a.m., local time, at the Hilton Hotel, McGhee Tyson Airport
(Knoxville Metropolitan Airport), 2001 Alcoa Highway, Alcoa, Tennessee 37701,
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 April 8, 1998.
At the Annual Meeting, the Company's stockholders will be asked: (1)
to elect the nominees for the Board of 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, 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
1998; 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 100
Cherokee Cove Drive, Vonore, Tennessee 37885 and the telephone number is
423-884-6776.
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 of the nominees for the Board of
Directors of the Company identified in this Proxy Statement and FOR the
ratification of Ernst & Young LLP as the Company's auditors. The submission of
a signed proxy will not affect a stockholder's right to attend, or vote in
person at, the Annual Meeting. Any stockholder may revoke his or her proxy at
any time before it is voted by written notice to such effect received by the
Company at 100 Cherokee Cove Drive, Vonore, Tennessee 37885, 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 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
<PAGE>
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 April 6, 1998 (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. The presence, in person or by properly
executed proxy, of the holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Any stockholder present (including
broker non-votes) at the Annual Meeting but who abstains from voting shall be
counted for purposes of determining whether a quorum exists. With respect to
all matters considered at the Annual Meeting (other than the election of
directors), an abstention (or broker non-vote) has the same effect as a vote
against the proposal. Abstentions from voting on the election of directors
(including broker non-votes) will have no effect on the outcome of the vote.
The affirmative vote of the holders of at least a majority of the
shares of Common Stock outstanding and entitled to vote is required to ratify
the appointment of Ernst & Young LLP. The affirmative vote of the holders of a
plurality of the votes cast is required to elect the nominees for the Board of
Directors of the Company.
Meridian Sports Holdings Inc. ("Meridian Holdings"), which
beneficially owns 5,200,000 shares or 65% of the outstanding Common Stock as of
the Record Date, has informed the Company of its intention to vote its shares
of Common Stock FOR each of the matters to be acted on at the Annual Meeting
(collectively, the "Proposals").
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.
2
<PAGE>
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES LISTED HEREIN FOR DIRECTOR.
DIRECTOR NOMINEES
The name, age (as of April 1, 1998), principal occupation for the last
five years, selected biographical information and period of service as a
Director of the Company of each Director nominee is set forth hereafter.
RONALD O. PERELMAN (55) has been Chairman of the Board of Directors and
a Director of the Company since 1994 and has been Chairman of the Board of
Directors and Chief Executive Officer of Mafco Holdings Inc. ("Holdings") and
MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), diversified holding
companies, and various affiliates since 1980. Mr. Perelman is also Chairman of
the Executive Committee of the Board of Directors of Consolidated Cigar
Holdings Inc. ("Cigar Holdings"), M & F Worldwide Corp. ("M & F Worldwide") and
Revlon, Inc. ("Revlon"). Mr. Perelman is also a Director of the following
corporations which file reports pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"): California Federal Bank, a Federal Savings Bank
("CalFed"), Cigar Holdings, First Nationwide Holdings Inc. ("First Nationwide
Holdings"), First Nationwide (Parent) Holdings Inc. ("First Nationwide
Parent"), M & F Worldwide, Revlon, REV Holdings Inc. ("REV Holdings") and
Revlon Consumer Products Corporation ("Revlon Products"). (On December 27,
1996, Marvel Entertainment Group, Inc. ("Marvel"), Marvel Holdings, Marvel
(Parent) Holdings Inc. of which Mr. Perelman was then a director and Marvel III
Holdings Inc. of which Mr. Perelman is a director and several subsidiaries of
Marvel filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code.)
J. ERIC HANSON (51) has been President and Chief Executive Officer of
the Company since 1997 and has been a Director since 1994. Mr. Hanson has been
Executive Vice President of M & F Worldwide since 1997 and has been Senior Vice
President of Holdings and MacAndrews Holdings, diversified holding companies,
and various affiliates since 1994 and Vice President of Holdings from 1993 to
1994. Mr. Hanson is also a Director of M & F Worldwide which files reports
pursuant to the Exchange Act.
JERRY W. LEVIN (53) has been a Director of the Company since its
formation in 1994. Mr. Levin was Chairman of the Board and Chief Executive
Officer of The Coleman Company, Inc. from February 1997 through March 1998 and
has been Chairman of the Board of Revlon and of Revlon Products, cosmetics,
skin care, fragrance, personal care and professional products
3
<PAGE>
companies, since November 1995. Mr. Levin was Chief Executive Officer of Revlon
and Revlon Products from 1992 to 1997. Mr. Levin has been Executive Vice
President of MacAndrews Holdings since March 1989. Prior to joining MacAndrews
Holdings, 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 Cosmetic Center, Inc. ("Cosmetic
Center"), Revlon, Revlon Products, First Bank System, Inc. and Ecolab, Inc.
JOHN P. MURRAY, JR. (70) 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 (62) 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
President and General Counsel of Warner Communications Inc. Mr. Payson also is
a Director of Delta Financial Corporation, Panavision Inc. and Unapix
Entertainment, Inc., which file reports pursuant to the Exchange Act.
BRUCE SLOVIN (62) has been a Director of the Company since 1994 and
the President of Holdings and MacAndrews Holdings, diversified holding
companies, and various affiliates since 1982. Mr. Slovin is a Director of the
following corporations which file reports pursuant to the Exchange Act: Cantel
Industries, Inc., M & F Worldwide, Continental Health Affiliates, Inc.
and Infu-Tech, 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 and Slovin. The
Executive Committee may exercise all of the powers and authority of the Board
of Directors, 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 Compensation
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
Compensation Committee may consider and recommend awards of options to purchase
shares of Common Stock pursuant to the Company's Stock Option Plan.
4
<PAGE>
During 1997, the Board of Directors held three meetings and the Audit
Committee held four meetings. During 1997, the Executive Committee acted five
times by unanimous written consent and held one meeting. The Compensation
Committee acted once by unanimous written consent.
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.
EXECUTIVE OFFICERS
The following table sets forth as of the date hereof the executive
officers of the Company and executives of its operating subsidiary, MasterCraft
Boat Company ("MasterCraft").
NAME POSITION
- - ---- --------
Ronald O. Perelman Chairman of the Board
J. Eric Hanson President and Chief Executive Officer
Irwin Engelman Executive Vice President and Chief Financial Officer
Gary Lownsdale President, Master Craft Boat Company
James Valkenaar Vice President and Chief Accounting Officer
Thomas E. Kohut Vice President and Controller
For biographical information about Messrs. Perelman and Hanson, see
"Director Nominees."
IRWIN ENGELMAN (63) has been Executive Vice President and Chief
Financial Officer since 1996. Mr. Engelman has been Executive Vice President,
Chief Financial Officer of Holdings and MacAndrews Holdings, diversified
holding companies, and various affiliates since 1992. Mr. Engelman was
Executive Vice President and Chief Financial Officer of GAF Corporation, a
specialty chemical and building materials company, from 1990 to 1992. Mr.
Engelman is also a Director of CalFed and Revlon Products. (On December 27,
1996, Marvel Holdings and Marvel (Parent) Holdings Inc. of which Mr. Engelman
was an executive officer and Marvel III Holdings Inc., of which Mr. Engelman is
an executive officer, filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code.)
GARY LOWNSDALE (51) has been President of Master Craft Boat Company
since 1997. From 1996 to 1997 Mr. Lownsdale was Vice President - Operations of
Master Craft Boat Company. From 1994 to 1996 he was Vice President - Chief
Operating Officer of Trans2 Corporation, a manufacturer of alternative fuel
vehicles, from 1993 to 1994, he was Director of Molded Composites Commercial
Business at APX International, an automotive engineering and
5
<PAGE>
composites manufacturer and from 1990 to 1993 was Industry Director of
Worldwide Automotive Business for Hercules, a chemical and aerospace
manufacturer.
JAMES VALKENAAR (40) has been Vice President and Chief Accounting
Officer of the Company since February 1998 and Vice President - Finance of
Master Craft Boat Company since 1996. Prior to joining Master Craft, Mr.
Valkenaar was Director of Finance and Assistant Treasurer of Berkline
Corporation.
THOMAS E. KOHUT (35) has been Vice President and Controller since
1993. From 1987 to 1993 he served in various positions at Holdings and
MacAndrews Holdings, diversified holding companies, including Assistant Vice
President and Assistant Controller from 1991 to 1993.
6
<PAGE>
EXECUTIVE COMPENSATION
The compensation paid by the Company for services during each of the
years ended December 31, 1995, 1996 and 1997 to its Chief Executive Officer and
each of the Company's four most highly compensated executive officers was as of
follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------------------------------------
Number of
Other Securities All
Annual Underlying Other
Name and Compensa- Options/SARs Compen-
Principal Position Year Salary ($)(a) Bonus ($)(b) tion ($)(c) (#) sation ($)(d)
- - ------------------ ---- ------------- ------------ ----------- --- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Eric Hanson(e) 1997 75,000 0 0 85,000 0
President and Chief Executive
Officer
Gary Lownsdale 1997 146,765 10,000 8,400 20,000 16,319
President, Master Craft 1996 99,417 0 4,725 0 12,090
James Valkenaar 1997 91,732 7,500 6,300 10,000 2,068
Vice President and Chief 1996 90,000 0 6,300 0 8,656
Accounting Officer 1995
Thomas E. Kohut 1997 134,000 10,000 12,972 10,000 5,128
Vice President and 1996 125,000 10,000 12,710 0 4,124
Controller 1995 125,000 0 12,785 0 6,145
James W. Hoag (e) 1997 50,000 0 0 0 125,000
1996 242,306 50,000 4,646 50,000 10,070
</TABLE>
- - ----------------------
(a) Includes salary paid or accrued during year indicated.
(b) Includes bonus accrued during the applicable year.
(c) Includes automobile allowances.
(d) The amounts reported include payments for life insurance premiums ($70
for Mr. Hoag in 1996; $628, $1,624 and $1,645 for Mr. Kohut in 1997,
1996 and 1995, respectively; $395 and $63 for Mr. Lownsdale in 1997
and 1996, respectively; $130 and $130 for Mr. Valkenaar in 1997 and
1996, respectively); matching contributions under the Company's 401(k)
plan ($4,500, $2,500 and $4,500 for Mr. Kohut in 1997, 1996 and 1995,
respectively); membership and dues, professional fees and relocation
assistance payments ($10,000 for Mr. Hoag in 1996; $12,027 for Mr.
Lownsdale in 1996 and $8,526 for Mr. Valkenaar in 1996; and consulting
fees ($125,000 for Mr. Hoag in 1997)).
(e) Mr. Hanson was elected President and Chief Executive Officer in 1997.
Mr. Hoag served as President and Chief Executive Officer until
February 28, 1997 and was a consultant to the Company for the
remainder of 1997.
7
<PAGE>
STOCK OPTION TRANSACTIONS IN 1997
During 1997, the following grants were made under the Company's Stock
Option Plan to the Named Executive Officer.
OPTIONS/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL YEAR (PER SHARE) DATE PRESENT VALUE(2)
---- ---------- ----------- ----------- ---- ----------------
<S> <C> <C> <C> <C> <C>
J. Eric Hanson................... 85,000 68% $0.75 2007 $56,979
Gary Lownsdale................... 20,000 16% $0.75 2007 13,407
James Valkenaar.................. 10,000 8% $0.75 2007 6,703
Thomas E. Kohut.................. 10,000 8% $0.75 2007 6,703
</TABLE>
- - ----------------------
(1) The options vest one third each year beginning on the first anniversary of
the date of grant and become 100% vested on the third anniversary of the
date of grant.
(2) The present value of the options are based on the Black-Scholes option
pricing model using the following assumptions: (i) stock price volatility
of 138%, (ii) a risk-free rate of 6.03%, (iii) a dividend yield of 0%,
(iv) an exercise price equal to the fair market value of the Common Stock
on the date of grant, (v) an expected life of 5 years and (vi) no
discounts for forfeiture or nontransferability.
8
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND YEAR END 1997 OPTION/SAR VALUES
The following chart shows, for 1997, the number of stock options
exercised and the 1997 year-end value of the options held by the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares at Year End (#) Year End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#)(a) Realized ($) Unexercisable Unexercisable
- - ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
J. Eric Hanson 0 $0 0/85,000 0
Gary Lownsdale 0 $0 0/20,000 0
James Valkenaar 0 $0 0/10,000 0
Thomas E. Kohut 0 $0 3,750/11,250 0
</TABLE>
- - ---------------
(a) Calculated using actual December 31, 1997 closing price per common
share on the OTC Bulletin Board of $0.75.
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 three
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. For the year ended December 31, 1997, Master Craft had
"minimum", "target", and "stretch" operating income goals. The "target"
operating income goals were established based the business plan at levels
higher than 1996 actual results. Although no bonuses were paid under the
Executive Bonus Plan in 1997, small, discretionary bonuses were paid to Messrs.
Lownsdale, Valkenaar and Kohut based on the substantial improvement in Master
Craft's results.
In connection with the initial public offering, the Company also
adopted the 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 Stock
Option Plan vest in equal installments over three to 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.
Compensation of Chief Executive Officer
Mr. Hanson has an employment agreement with M & F Worldwide, an
affiliate of the Company and serves as President and Chief Executive Officer of
the Company pursuant to an arrangement with M & F Worldwide. The Company agreed
to reimburse M & F Worldwide a portion of the salary payable to Mr. Hanson for
his services to the Company. The amount of such reimbursement is $25,000 per
calendar quarter. The Company believes that such allocation is fair and
reasonable to the Company for the services performed by Mr. Hanson.
The Management Compensation and
Stock Option Committee
Jerry W. Levin
Bruce Slovin
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Compensation and Stock Option Committee consists of
Messrs. Levin and Slovin, neither of whom is an officer or employee of the
Company or any of its subsidiaries.
EMPLOYMENT ARRANGEMENTS
Mr. Hanson has an employment agreement with M & F Worldwide, an
affiliate of the Company. Mr. Hanson serves as President and Chief Executive
Officer of the Company pursuant to an arrangement with M & F Worldwide whereby
the Company reimburses M & F Worldwide $25,000 per calendar quarter, a portion
of the salary payable to Mr. Hanson under the M & F Worldwide agreement. Mr.
Hanson is also eligible to participate in the Company's Stock Option Plan. Mr.
Hanson receives no other benefits from the Company.
The Company has an employment agreement with Mr. Kohut which provides
for Mr. Kohut to be employed at a base salary of $144,000. At any time the
Company may give written notice of non-renewal of the employment term. In such
event, the employment term will be extended 12 months after the last day of the
month in which such notice is given. From and after January 1, 1997, unless the
Company gives notice of non-renewal, the employment term is extended
automatically day-by-day. Mr. Kohut also is eligible to participate in the
Company's Stock Option Plan. If Mr. Kohut's employment is terminated other than
for "cause," he is entitled to receive for 12 months continued payment of base
salary, continued provision for benefits and accelerated vesting of any stock
options.
Mr. Hoag served as President and Chief Executive Officer of the Company
until February 28, 1997 at a base salary of $300,000. Mr. Hoag served as
Chairman of Master Craft and a consultant to the Company through December 31,
1997. As a consultant, Mr. Hoag received $12,500 per month.
COMMON STOCK PERFORMANCE
The Company's Common Stock is traded on the OTC Bulletin Board
("Bulletin Board"). The graph set forth below presents a comparison of
cumulative shareholder return through December 31, 1997 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 competitor, Brunswick Corporation, assuming $100 was
invested on October 12, 1994, the date of the initial public offering.
11
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE
OCTOBER 1994 AMONG MERIDIAN SPORTS INCORPORATED,
BRUNSWICK CORPORATION AND THE S & P SMALLCAP 600 INDEX
[The Tabular Information below is a fair and accurate
description of Graphic Material Omitted for the purpose
of Edgar Filing]
<TABLE>
<CAPTION>
October 12, 1994 December 31, 1994 December 31, 1995 December 31, 1996 December 31, 1997
---------------- ----------------- ----------------- ----------------- -----------------
(Dollars)
<S> <C> <C> <C> <C> <C>
Meridian Sports Incorporated 100 86 47 11 7
Brunswick Corporation 100 87 114 116 149
S & P Smallcap 600 100 98 128 155 194
</TABLE>
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<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
------------ ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 8,242 $ 12,363 $ 16,484 $ 20,604 $ 24,725 $ 28,846
100,000 18,242 27,363 36,484 45,604 54,725 63,846
150,000 28,242 42,363 56,484 70,604 84,725 98,846
200,000 38,242 57,363 76,484 95,604 114,725 133,846
250,000+ 48,242 72,363 96,484 120,604 144,725 168,846
</TABLE>
- - -------------------
(a) For 1997, the Benefit Restoration Plan covered annual compensation
greater than $160,000.
(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 in 1997 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, 1997, the executive officers
named in the Summary Compensation Table had included compensation and
credited service as follows: Mr. Lownsdale, $156,765 and 2 years;
Mr. Valkenaar, $99,232 and 2 years; Mr. Kohut, $144,000 and 10 years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 the NASDAQ Stock Market.
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 representations from certain reporting persons that they were
not required to file Forms 3, 4 or 5 for a specified fiscal year, the Company
believes that all its officers, Directors and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during 1997.
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<PAGE>
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, 1998. 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
1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth as of April 1, 1998 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 as a group (including one former executive officer). 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.
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<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Ownership(a) Class
----------------- ------------
<S> <C> <C>
Ronald O. Perelman (b) 5,200,000 64.7%
35 East 62nd Street
New York, NY 10021
Irwin Engelman 5,000 *
J. Eric Hanson 25,000 *
Thomas E. Kohut 5,750 *
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 5,279,750 65.7%
as a group (11 persons)
</TABLE>
- - -------------
* 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 Holdings. The shares owned and shares of intermediate holding
companies may from time to time be pledged to secure obligations of
Holdings or its affiliates.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Holdings owns indirectly 65% of the outstanding Common Stock. Due to
its stock ownership, Holdings is able to control the Company and elect the
entire Board of Directors.
Holdings is wholly owned by Ronald O. Perelman.
CREDIT AGREEMENT. The Company is party to a Credit Agreement, as
amended, (the "Credit Agreement") with an indirect wholly owned subsidiary of
Holdings (the "Lender") entered into in March 1997 which provides for
borrowings on a revolving basis of up to $20,000,000, bears interest at the
prime rate plus 1% and matures December 1, 1999. Loans under the Credit
Agreement are secured by a pledge of stock of the Company's subsidiary, Master
Craft and guaranteed by Master Craft. Borrowings outstanding under the Credit
Agreement are required to be prepaid with the net cash proceeds of the sales of
any subsidiary of the Company. The commitment under the Credit Agreement will
be reduced by any such required prepayments. The Credit Agreement contains
typical events of default including change of control, material adverse change
and non-payment of obligations.
INTERNATIONAL SALES ARRANGEMENTS. In two markets, the Company sold
products to subsidiaries of Coleman, which act as distributors for the Company.
These products are
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<PAGE>
purchased at arms' length prices that reflect competitive export practices. In
1997 such amounts were not material.
TAX INDEMNIFICATION AGREEMENT. Concurrent with the consummation of the
initial public offering, the Company, Holdings 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 Holdings or any
affiliate of Holdings 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 to the Tax Indemnification Agreement,
Holdings 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
Holdings or any Holdings 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 Holdings or any Holdings
affiliate. No indemnification claims were made for the year ended December 31,
1997.
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.
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<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, 1997 and any Quarterly Reports on
Form 10-Q filed thereafter, without charge, upon written request to the
Secretary, Meridian Sports Incorporated, 100 Cherokee Cove Drive, Vonore,
Tennessee 37885. Each such request must set forth a good faith representation
that, as of the Record Date, April 6, 1998, 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 1999 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, 100 Cherokee
Cove Drive, Vonore, Tennessee 37885, not later than November 30, 1998.
17
<PAGE>
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.
April 8, 1998
BY ORDER OF THE BOARD OF DIRECTORS
MERIDIAN SPORTS INCORPORATED
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