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SECURITIES AND EXCHANGE COMMISSION

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 ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o
 
Preliminary Proxy Statement

o
 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý
 
Definitive Proxy Statement

o
 
Definitive Additional Materials

o
 
Soliciting Material Pursuant to §240.14a-12

Varsity Brands, Inc.
(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):

o
 
No fee required

ý
 
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
    (1)   Title of each class of securities to which transaction applies:
        Common Stock, par value $.01 per share
    (2)   Aggregate number of securities to which transaction applies:
        10,977,997 shares and 1,666,925 options

 
 
(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):    $6.57
For purposes of calculating the filing fee only, the transaction valuation was based upon the sum of:
(i) The product of 9,592,250 issued and outstanding shares of Varsity's common stock at a price of $6.57 per share.
(ii) The product of 1,385,747 shares of Varsity's stock obtained by the conversion by Silver Oak Capital, L.L.C., an affiliate of Angelo, Gordon & Co., L.P. of the $6,125,000 principal amount of Varsity's 4.10% Convertible Subordinated Note due November 1, 2007, at a price of $6.57 per share.
(iii) A cash out or exchange of 1,666,925 shares of Varsity's stock covered by options to purchase Varsity's common stock, at an aggregate cost of $3,700,573.50
        
    (4)   Proposed maximum aggregate value of transaction:
        $75,826,013.79
    (5)   Total fee paid:
        $15,165.20

VARSITY BRANDS, INC. LOGO

6745 Lenox Center Court, Suite 300
Memphis, Tennessee 38115

Dear Fellow Stockholder:

        On behalf of the Board of Directors, I cordially invite you to attend a special meeting of stockholders of Varsity Brands, Inc. On April 21, 2003, we entered into a merger agreement with VBR Holding Corporation and its wholly owned subsidiary, VB Merger Corporation, each of which is an affiliate of Leonard Green & Partners, L.P. Pursuant to the merger, Varsity will become a wholly owned subsidiary of VBR Holding Corporation. The special meeting will be held on September 15, 2003 at 9:00 AM local time, at the Marriott New York East Side Hotel, 525 Lexington Avenue, New York, New York to consider a proposal to adopt the merger agreement so that the merger can occur. Notice of the special meeting is enclosed.

        In the merger, you will be entitled to receive $6.57 in cash for each share of Varsity common stock that you own. This represents a 39.8% premium over the closing price per share of $4.70 on April 21, 2003, the last trading day prior to the public announcement of the merger agreement and a 43.8% premium over the average closing price of Varsity's common stock for the 20 trading days prior to the public announcement of the signing of the merger agreement. On August 11, 2003, the closing share price of our common stock was $6.49.

        The receipt of cash in exchange for your shares of common stock in the merger will constitute a taxable transaction for U.S. federal income tax purposes.

        This proxy statement gives you detailed information about the special meeting, the merger agreement and the merger and includes the merger agreement as Annex A. We encourage you to read the proxy statement and the merger agreement carefully.

        Our board of directors, has determined that the merger agreement and the merger are fair to and in the best interests of Varsity and its stockholders and by unanimous vote of all directors voting on the matter, recommends that you vote "FOR" adoption of the merger agreement. When you consider the recommendation of the board of directors to adopt the merger agreement, you should be aware that some of our board members and executive officers have interests in the merger that may be different than the interests of Varsity's stockholders generally.

        Your vote is important.    The proposed merger cannot occur unless, among other things, the merger agreement is adopted by the affirmative vote of the holders of a majority of outstanding shares of Varsity common stock. As of the record date for the special meeting, nine of our current and former directors and officers who have entered into voting agreements with VBR Holding Corporation owned or controlled a total of 4,519,920 shares, which is approximately 47% of all outstanding shares entitled to vote on the merger. As a result, we will need affirmative votes from holders of approximately an additional 276,205 common shares (which is approximately 3% of Varsity's total common stock) to complete the merger. It is very important that your shares be represented at the special meeting. Whether or not you plan to attend the special meeting, please complete, sign and date the enclosed proxy card and promptly return it in the enclosed envelope, which needs no postage if mailed within the United States. You may also submit a proxy by telephone or Internet. Failure to submit a properly

executed proxy either by mail, telephone, or Internet or to vote at the special meeting will have the same effect as a vote against the merger agreement.

        This transaction has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the fairness or merits of this transaction or upon the accuracy or adequacy of the information contained in this document. Any representation to the contrary is a criminal offense.

This proxy statement is dated August 12, 2003, and is first being mailed to
Varsity stockholders on or about August 13, 2003.


VARSITY BRANDS, INC. LOGO

6745 Lenox Center Court, Suite 300
Memphis, Tennessee 38115

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Date: September 15, 2003
Time: 9:00 a.m., local time
Place: Marriott New York East Side Hotel, 525 Lexington Avenue, New York, New York

        To Our Stockholders:

         We are pleased to notify you of, and invite you to attend, a special meeting of stockholders. At the meeting, you will be asked:


        Only stockholders of record at the close of business on August 4, 2003 may vote at the special meeting.

        We urge you to read the accompanying proxy statement carefully as it sets forth details of the proposed merger and other important information related to the merger.

        Under Delaware law, if the merger is completed, holders of Varsity's common stock who do not vote in favor of the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery, but only if they submit a written demand for such an appraisal prior to the vote on the merger agreement and they comply with the other Delaware law procedures explained in the accompanying proxy statement.

        Your vote is important.    Whether or not you plan to attend the special meeting, please complete, sign and date the accompanying proxy card and return it in the enclosed envelope, which needs no postage if mailed within the United States. You may also submit a proxy by telephone or Internet by following the instructions on the enclosed proxy card. If you attend the special meeting, you may revoke your proxy and vote in person, if you wish to do so.

Memphis, Tennessee 38115
Dated August 12, 2003


Table of Contents

 
   PAGE

Summary Term Sheet
 
1
 
The Proposed Transaction
 
1
 
What You Will Be Entitled to Receive in the Merger
 
1
 
Background of the Merger
 
1
 
Interests of Our Directors and Executive Officers in the Merger
 
1
 
Recommendation of Our Board Of Directors; Fairness of the Merger
 
2
 
The Position of Green Equity Investors, GEI Capital, VBR Holding Corportion and VB Merger Corporation as to the Fairness of the Merger
 
3
 
The Position of the Management Investors as to the Fairnaess of the Merger
 
3
 
Opinion of Rothschild Inc.
 
3
 
Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders
 
3
 
Appraisal Rights
 
3
 
The Special Meeting
 
4
 
The Merger Agreement
 
6
 
Information about the Participants
 
8

Selected Consolidated Financial Data of Varsity Brands, Inc.
 
10
 
Consolidated Ratios of Earnings to Fixed Charges
 
11
 
Seasonality
 
11

Trading Market and Price
 
13

Dividends
 
13

Special Note Regarding Forward-Looking Statements
 
14

Special Factors
 
16
 
Background of the Merger
 
16
 
Recommendation of Our Board of Directors; Fairness of the Merger
 
24
 
Opinion of Rothschild Inc.
 
28
 
Our Projections
 
34
 
The Position of Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation as to the Fairness of the Merger
 
36
 
The Position of the Management Investors as to the Fairness of the Merger
 
38
 
Purpose and Reasons for the Merger; Structure of the Merger
 
40
 
Effects of the Merger; Plans or Proposals After the Merger
 
41
 
Risk that the Merger Will Not Be Completed
 
46
     

i

 
Interests of Our Directors and Executive Officers in the Merger
 
46
 
Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders
 
53
 
Litigation
 
54

The Special Meeting
 
56
 
Date, Time and Place of the Special Meeting
 
56
 
Proposal to be Considered at the Special Meeting
 
56
 
Record Date
 
56
 
Voting Rights; Vote Required for Adoption
 
56
 
Voting and Revocation of Proxies
 
57
 
Solicitation of Proxies
 
57

The Merger
 
58
 
Effective Time of Merger
 
58
 
Payment of Merger Consideration and Surrender of Stock Certificates
 
58
 
Accounting Treatment
 
59
 
Fees and Expenses of The Merger
 
59
 
Financing of The Merger
 
60
 
Appraisal Rights
 
62
 
The Merger Agreement
 
66

Other Matters
 
80
 
Information about Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation
 
80
 
Security Ownership of Certain Beneficial Owners and Management
 
81
 
Certain Transactions with Directors, Executive Officers and Affiliates
 
84
 
Other Matters for Action at The Special Meeting
 
85
 
Proposals By Holders of Shares of Common Stock
 
85
 
Experts
 
86

Where You Can Find More Information
 
87
Annex A   —   Agreement and Plan of Merger   A-1
Annex B   —   Opinion of Rothschild Inc.   B-1
Annex C   —   Section 262 of the General Corporation Law of the State of Delaware   C-1
Annex D   —   Form of Voting Agreement   D-1

ii


Summary Term Sheet

        This summary term sheet highlights selected information contained elsewhere in this proxy statement and may not contain all of the information that is important to you. You should carefully read this entire proxy statement and the other documents to which we have referred you for a more complete understanding of the matters being considered at the special meeting. In addition, we incorporate by reference important business and financial information about us into this proxy statement. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section entitled "Where You Can Find More Information."

The Proposed Transaction

        In the merger, VB Merger Corporation will merge into Varsity with Varsity continuing as the surviving corporation. As a result of the merger, we will cease to be an independent, publicly traded company and will become a wholly owned subsidiary of VBR Holding Corporation, an affiliate of Green Equity Investors IV, L.P., a private investment fund affiliated with Leonard Green & Partners, L.P. We refer to Green Equity Investors IV, L.P. as "Green Equity Investors" and to Leonard Green & Partners, L.P. as "Leonard Green & Partners" in this proxy statement.

What You Will Be Entitled to Receive in the Merger (see page 58)

        If we complete the merger, VBR Holding Corporation will be the sole stockholder of Varsity, and holders of Varsity's common stock will be entitled to receive $6.57 in cash, without interest, less required withholding taxes, for each share of common stock that they own.

Background of the Merger (see page 16)

        In November, 2002, our board of directors formed a special committee to explore our strategic and other alternatives for enhancing shareholder value. Chaired by Don R. Kornstein, the exploratory committee was comprised entirely of directors with no interest in a possible sale of the Company different than those of the unaffiliated stockholders generally and recommended that Varsity explore its strategic alternatives to enhance stockholder value, including a potential sale transaction.

        At the direction of the board of directors, Mr. Kornstein negotiated the terms of the merger with the assistance of outside financial and legal advisors. The merger agreement has been approved by the unanimous vote of all directors voting on the matter, a majority of whom have no interest in the completion of the merger different from the interests of our unaffiliated stockholders generally. Jeff Webb, our chief executive officer and president, was the only director who abstained from voting on the merger agreement due to a potential conflict of interest. In consideration for his service as lead negotiator, we have agreed to pay Mr. Kornstein a fee of $150,000, payable upon the earlier of termination of the merger agreement or completion of the merger.

Interests of Our Directors and Executive Officers in the Merger (see page 46)

        When considering the recommendation of our board of directors with respect to the merger, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, your interests as a Varsity stockholder, which may create potential conflicts of interest. These interests include:

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Recommendation of Our Board of Directors; Fairness of the Merger (see page 24)

        Our board of directors, by a unanimous vote of all directors voting on the matter, has determined that the merger is fair and in the best interests of Varsity's unaffiliated stockholders and recommends that you vote "FOR" the approval and adoption of the merger agreement.

        Our board of directors considered several factors in making this determination. Due to the variety of factors considered, the board of directors did not assign relative weights to these factors or determine that any factor was of particular importance. The board reached its conclusion based upon the totality of the information presented and considered during its evaluation of the merger.

2


The Position of Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation as to the Fairness of the Merger (see page 36)

        Green Equity Investors, its general partner, GEI Capital IV, LLC, VBR Holding Corporation and VB Merger Corporation did not participate in the deliberations of the Varsity board of directors regarding, or receive advice from Varsity's legal or financial advisors as to, the fairness of the merger to Varsity's unaffiliated stockholders. However, based upon their own knowledge and analysis of available information regarding Varsity, as well as discussions with members of Varsity's senior management regarding the factors considered by, and findings of, the Varsity board of directors discussed under "Special Factors—Recommendation of Our Board of Directors; Fairness of the Merger," they believe that the merger is fair to Varsity's unaffiliated stockholders. None of them makes any recommendation, however, as to how stockholders of Varsity should vote their shares.

The Position of the Management Investors as to the Fairness of the Merger (see page 38)

        Jeff Webb and John Nichols each believe that the merger is fair to Varsity's unaffiliated stockholders. Their belief is based upon their knowledge and analysis of Varsity, as well as the factors considered by, and findings of, the Varsity board of directors discussed under "Special Factors—Recommendation of Our Board of Directors; Fairness of the Merger." Neither of them makes any recommendation, however, as to how stockholders of Varsity should vote their shares.

Opinion of Rothschild Inc. (see page 28)

        In connection with the merger, our board of directors received an opinion from Rothschild Inc., our financial advisor, as to the fairness, from a financial point of view and as of the date of the opinion, of the $6.57 per share in cash to be received by the holders of our common stock in the merger (other than VBR Holding Corporation, VB Merger Corporation, the members of management acquiring shares or options to acquire shares of VBR Holding Corporation, and their respective affiliates). The full text of Rothschild's written opinion dated April 21, 2003 is attached to this proxy statement as Annex B. We encourage you to read the opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Rothschild. Rothschild's opinion was provided to our board of directors in connection with its evaluation of the merger, does not address any related transaction and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any other matters relating to the merger or any related transactions.

Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders (see page 53)

        The receipt of $6.57 in cash for each share of our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. For U.S. federal income tax purposes, each of our U.S. stockholders who receives this consideration generally will recognize taxable gain or loss as a result of the merger measured by the difference, if any, between $6.57 per share and the adjusted tax basis in that share owned by the stockholder.

Appraisal Rights (see page 62)

        Stockholders who do not wish to accept the $6.57 per share cash consideration payable pursuant to the merger may seek, under Delaware law, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more or less than, or the same as, the merger consideration of $6.57 per share. This "right of appraisal" is subject to a number of restrictions and technical requirements. Generally, in order to exercise appraisal rights, among other things:

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        Merely voting against the merger agreement will not preserve your right of appraisal under Delaware law. Also, since a signed proxy card not marked "against" or "abstain" will be voted for the adoption of the merger agreement, the submission of a signed proxy card not marked "against" or "abstain" will result in the loss of appraisal rights. If you hold shares in the name of a broker or other nominee, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal.

        Annex C to this proxy statement sets forth the Delaware statute relating to your right of appraisal.

        Under the merger agreement, VBR Holdings Corporation and VB Merger Corporation will not have to complete the merger if holders of more than 15% of our outstanding common stock seek to exercise their "right of appraisal."

The Special Meeting (see page 56)

        Our special meeting will be held at the Marriott New York East Side Hotel, 525 Lexington Avenue, New York, New York on September 15, 2003 at 9:00 A.M. local time. At the special meeting, you will be asked to vote on the adoption of the merger agreement. A copy of the merger agreement is attached as Annex A to this proxy statement.

        You may vote at the special meeting if you owned shares of our common stock at the close of business on August 4, 2003. On that date, there were 9,592,250 shares of our common stock, par value $.01 per share, outstanding.

4


5

The Merger Agreement (see page 66)

        We will complete the merger only if a number of conditions are satisfied or waived, including, but not limited to, the following:

        We hope to complete the merger shortly following receipt of the required stockholder vote to adopt the merger agreement. Some of these conditions are beyond our control, and we cannot assure you that any of these conditions, including the conditions within our control, will be met or waived.

6


        We and VBR Holding Corporation may mutually agree to terminate the merger agreement at any time prior to the completion of the merger, whether before or after stockholder approval has been obtained.

        In addition, we or VBR Holding Corporation may terminate the merger agreement by written notice to the other if:

        VBR Holding Corporation may terminate the merger agreement without our consent if:

Our Ability to Accept a Superior Proposal (see page 72)

        We may also terminate the merger agreement without the consent of VB Merger Corporation and VBR Holding Corporation before obtaining stockholder approval for the merger if our board of directors authorizes us to accept an unsolicited superior acquisition proposal from a third party. This right, however, is subject to the following requirements:

7

        The merger agreement provides that upon termination in specified circumstances, we must pay a termination fee of $3.5 million to VBR Holding Corporation and reimburse VBR Holding Corporation for fees and expenses up to $1.75 million. Under some circumstances, VBR Holding Corporation must reimburse us for fees and expenses up to $1.75 million.

Information About the Participants (see page 80)

        We are a Delaware corporation. We are the leading provider of goods and services to the school spirit industry. We design, market and manufacture cheerleading and dance team uniforms and accessories, and dance and recital apparel for the studio dance market; operate cheerleading and dance team instructional camps throughout the United States; and produce nationally televised cheerleading and dance team championships and other special events, including studio dance competitions and conventions. We market our proprietary products and services to schools, recreational organizations, coaches and participants in the extra-curricular market using our own nationwide sales force, as well as websites that are targeted to specific audiences and specific activities. Our principal address is 6745 Lenox Center Court, Suite 300, Memphis, Tennessee 38115, and our telephone number is (901) 387-4300.

        VB Merger Corporation, a newly formed Delaware corporation, was formed solely for the purpose of completing the merger. VB Merger Corporation is wholly owned by VBR Holding Corporation and has not engaged in any business except in anticipation of the merger. VB Merger Corporation's principal address is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025 and its telephone number is (310) 954-0444.

        VBR Holding Corporation, a Delaware corporation, was recently formed by Green Equity Investors for the sole purpose of acquiring majority ownership of Varsity. VBR Holding Corporation has not engaged in any business except in anticipation of the merger. Some of our directors and executive officers (as well as the purchasers of senior subordinated notes expected to be issued by the surviving corporation in connection with the merger) will acquire shares, or options to acquire shares, of VBR Holding Corporation prior to completion of the merger. VBR Holding Corporation's principal address is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025, and its telephone number is (310) 954-0444.

        Green Equity Investors, a Delaware limited partnership, is a private investment fund formed by Leonard Green & Partners, a Delaware limited partnership. Leonard Green & Partners, is a Los Angeles-based private equity firm specializing in organizing, structuring and sponsoring management

8

buy-outs, going-private transactions and recapitalizations of established public and private companies. The principal address of Green Equity Investors and Leonard Green & Partners is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025, and their telephone number is (310) 954-0444.

        GEI Capital IV, LLC, a Delaware limited liability company, is the sole general partner of Green Equity Investors. The principal business of GEI Capital is being the sole general partner of Green Equity Investors. The managers and members of GEI Capital IV, LLC are individual partners in Leonard Green & Partners. We refer to GEI Capital IV, LLC as "GEI Capital" in this proxy statement. The principal address of GEI Capital is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025, and its telephone number is (310) 954-0444.

        Jeff Webb, John Nichols, J. Kristyn Shepherd and Gregory Webb who will continue to be employed by Varsity following the merger, will acquire shares, and options to acquire shares, in VBR Holding Corporation, which will be the sole owner of Varsity following the merger. We sometimes refer to Jeff Webb and John Nichols as the "management investors" and to Jeff Webb, John Nichols, J. Kristyn Shepherd and Gregory Webb as the "participating investors" in this proxy statement. The principal address of each of the management investors is c/o Varsity, 6745 Lenox Center Court, Suite 300, Memphis, Tennessee 38115 and their telephone number is (901) 387-4300.

9


Selected Consolidated Financial Data of Varsity Brands, Inc.

        Set forth below is selected historical consolidated financial information of Varsity and its subsidiaries. The historical financial information was derived from the historical financial statements and related notes of Varsity. Interim unaudited data for the three months ended March 31, 2003 and 2002 reflect, in the opinion of Varsity's management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of that data. Results for the three months ended March 31, 2003 do not necessarily indicate results that may be obtained for any other interim period or for the year as a whole.

 
   AS OF OR FOR THE THREE
MONTHS ENDED MARCH 31,
   AS OF OR FOR THE YEAR ENDED DECEMBER 31,
  
 
   2003
   2002
   2002
   2001
   2000
   1999
   1998
  
 
   (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

  
STATEMENT OF OPERATIONS DATA                                            
Net revenues   $ 23,688   $ 18,693   $ 156,404   $ 147,549   $ 136,035   $ 120,285   $ 112,195  
Cost of revenues     14,493     12,129     91,916     86,968     81,347     71,657     67,924  
   
 
 
 
 
 
 
 
Gross profit     9,195     6,564     64,488     60,581     54,688     48,628     44,271  
Selling, general and administrative expenses     11,631     10,715     47,396     46,594     42,146     39,831     38,552  
Income (loss) from operations     (2,436 )   (4,151 )   17,092     13,987     12,542     8,797     5,719  
 
Interest Expense
 
 
1,949
 
 
2,180
 
 
8,183
 
 
11,096
 
 
13,143
 
 
12,505
 
 
11,889
 
  Interest Income     (37 )   (54 )   (143 )   (750 )   (4 )   (158 )   (103 )
Net Interest expense     1,912     2,126     8,040     10,346     13,139     12,347     11,786  
   
 
 
 
 
 
 
 
Income (loss) from continuing operations before income taxes, discontinued operations and extraordinary item (gain on retirement of bonds)     (4,348 )   (6,277 )   9,052     3,641     (597 )   (3,550 )   (6,067 )
Income taxes (benefit)     (1,700 )   (410 )   (735 )   3,010     —     905     —  
   
 
 
 
 
 
 
 
Income (loss) from continuing operations before discontinued operations and extraordinary item   $ (2,648 ) $ (5,867 ) $ 9,787   $ 631   $ (597 ) $ (4,455 ) $ (6,067 )
   
 
 
 
 
 
 
 
Earnings (loss) from continuing operations per share before discontinued operations and extraordinary item:                                            
  Basic   $ (.28 ) $ (.62 ) $ 1.03   $ .07   $ (.06 ) $ (.48 ) $ (.66 )
  Diluted   $ (.28 ) $ (.62 ) $ .91   $ .07   $ (.06 ) $ (.48 ) $ (.66 )
Book Value per Share                                            
  Shareholders Equity     25,139     11,510     27,787     17,377     25,872     24,865     25,451  
  Outstanding Shares     9,592     9,452     9,592     9,452     9,452     9,263     9,259  
Book value per Share   $ 2.62   $ 1.22   $ 2.90   $ 1.84   $ 2.74   $ 2.68   $ 2.75  
Net Income per Share                                            
  Basic   $ (0.28 ) $ (0.62 ) $ 1.05   $ (0.90 ) $ 0.06   $ (0.06 ) $ (0.78 )
  Diluted   $ (0.28 ) $ (0.62 ) $ 0.92   $ (0.90 ) $ 0.06   $ (0.06 ) $ (0.78 )
Cash dividends per share(1)     —     —     —     —     —     —     —  
 
   MARCH 31,
   DECEMBER 31,
 
   2003
   2002
   2002
   2001
   2000
   1999
   1998
 
   (IN THOUSANDS)
BALANCE SHEET DATA (exclusive of assets held for
disposal)(2)		                                          

Working capital
 
$
21,285
 
$
18,215
 
$
24,074
 
$
23,640
 
$
12,065
 
$
10,084
 
$
6,238
Total assets     114,601     110,981     119,558     118,631     106,185     109,433     108,586
Long-term debt, less current portion     69,785     80,410     69,785     80,410     138,919     136,097     126,900
Stockholders' equity     25,139     11,510     27,787     17,377     25,872     24,865     25,451
 
   AS OF OR FOR THE THREE MONTHS ENDED MARCH 31,
   AS OF OR FOR THE YEAR ENDED DECEMBER 31,
  
 
   2003
   2002
   2002
   2001
   2000
   1999
   1998
  
 
   (IN THOUSANDS)

  
STATEMENTS OF CASH FLOWS DATA                                            

Cash flows from continuing operations(3)
 
$
(7,080
)
$
(6,826
)
$
14,315
 
$
4,239
 
$
4,221
 
$
(5,690
)
$
(2,847
)
Cash flows from investing activities(3)     (758 )   (182 )   (812 )   65,219     (2,638 )   (1,384 )   (647 )
Cash flows from financing activities(3)     —     (3 )   (9,028 )   (48,082 )   3,099     8,644     4,538  
Other Data unaudited):                                            
EBITDA from continuing operations(4)   $ (1,961 ) $ (3,683 ) $ 19,012   $ 18,034   $ 16,248   $ 12,378   $ 9,271  
(1)
Varsity's line of credit facility and Senior Note Agreement restrict Varsity's ability to pay dividends.

10

(2)
See Note 10 to the consolidated financial statements relating to contingent liabilities in Varsity's Annual Report on Form 10-K for the year ended December 31, 2002, incorporated in this proxy statement by reference. See "Where You Can Find More Information" for information about obtaining a copy of this Annual Report.

(3)
For more detail regarding cash flow from these activities see the Consolidated Statements of Cash Flow on Page F-6 in Varsity's Annual Report on Form 10-K for the year ended December 31, 2002, incorporated in this proxy statement by reference.

(4)
EBITDA from continuing operations is the sum of Varsity's earnings or loss before discontinued operations, extraordinary item–gain on retirement of bonds (and the cumulative effect of changes in accounting principles (as applicable)), interest, income taxes, depreciation and amortization expense. EBITDA is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of Varsity's operating performance or as a measure of Varsity's liquidity. The measure of EBITDA presented above may not be comparable to similarly titled measures reported by other companies because EBITDA is not a standardized measure of profitability or cash flow as defined by generally accepted accounting principals.

 
   AS OF OR FOR THE
THREE MONTHS
ENDED
MARCH 31,
   AS OF OR FOR THE YEAR ENDED
DECEMBER 31,
  
 
   2003
   2002
   2002
   2001
   2000
   1999
   1998
  
 
   (IN THOUSANDS)

  
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA FROM CONTINUING OPERATIONS                                            

Net income (loss)
 
$
(2,648
)
$
(5,867
)
$
9,927
 
$
(8,495
)
$
561
 
$
(599
)
$
(7,139
)
Adjustments:                                            
Extraordinary item (gain on retirement of bonds)     —     —     (140 )   (4,047 )   —     —     —  
Loss on disposal of businesses     —     —     —     9,326     —     —     —  
(Income) loss from operations of discontinued businesses     —     —     —     3,847     (1,158 )   (3,856 )   1,072  
Income taxes (benefit)     (1,700 )   (410 )   (735 )   3,010     —     905     —  
  Interest Expense     1,949     2,180     8,183     11,096     13,143     12,505     11,889  
  Interest Income     (37 )   (54 )   (143 )   (750 )   (4 )   (158 )   (103 )
Net interest expense     1,912     2,126     8,040     10,346     13,139     12,347     11,786  
Depreciation and amortization, other than debt issue costs     475     468     1,920     4,047     3,706     3,581     3,552  
   
 
 
 
 
 
 
 
EBITDA   $ (1,961 ) $ (3,683 ) $ 19,012   $ 18,034   $ 16,248   $ 12,378   $ 9,271  
   
 
 
 
 
 
 
 

Consolidated Ratios of Earnings to Fixed Charges

        Set forth below is the ratio of earnings to fixed charges for each of the last five fiscal years.

 
   AS OF OR FOR THE YEAR ENDED DECEMBER 31,
 
   2002
   2001
   2000
   1999
   1998
RATIO OF EARNINGS TO FIXED CHARGES:   2.11 to 1   1.33 to 1   0.96 to 1   0.71 to 1   0.49 to 1

        The ratio of earnings to fixed charges for the years ended December 31, 2000, 1999 and 1998 indicate a less than one-to-one coverage. The dollar amount of the deficiency for each of these fiscal years is set forth below:

December 31, 2000   $ 597,000
December 31, 1999   $ 3,550,000
December 31, 1998   $ 6,067,000

Seasonality

        Our operations are highly seasonal. In recent years, our operations have been most profitable in the second and third quarters, with the third quarter typically the strongest, while losses have typically been incurred in the first and fourth quarters.

        The following table sets forth selected unaudited operating results of continuing Varsity operations for each of the four quarters in 2002 and 2001, excluding the operating results of the two business units

11

discontinued in 2001, the Riddell Group and Umbro divisions, and the extraordinary gain on bond redemption. You should read this information together with the consolidated financial statements filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002, the notes related to those financial statements and the other financial data included elsewhere in this report. For information on how to obtain a copy of our Annual Report, please see "Where You Can Find More Information".

 
   First Quarter
   Second Quarter
   Third Quarter
   Fourth Quarter
 
   (In thousands)
Year ended December 31, 2003:                        
Revenues   $ 23,688     —     —     —
  Percent of total annual revenues     N/A     —     —     —
Income (loss) from continuing operations   $ (2,648)     —     —     —
Year ended December 31, 2002:                        
Revenues   $ 18,693   $ 57,370   $ 61,196   $ 19,145
  Percent of total annual revenues     11.9%     36.7%     39.1%     12.3%
Income (loss) from continuing operations   $ (5,867)   $ 8,608   $ 9,988   $ (2,942)

Year ended December 31, 2001:
 
 
 
 
 
 
 
 
 
 
 
 
Revenues   $ 16,659   $ 54,011   $ 60,126   $ 16,753
  Percent of total annual revenues     11.3%     36.6%     40.7%     11.4%
Income (loss) from continuing operations   $ (4,312)   $ 4,862   $ 5,853   $ (5,772)

        This seasonal pattern is influenced by the following factors:

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Trading Market And Price

        Our common stock is traded on the American Stock Exchange under the symbol "VBR." We have set forth below our quarterly per share data:

 
   CLOSING
SALES PRICE
 
   HIGH
   LOW
 
   (PER SHARE)
2003            
Third Quarter (through August 11, 2003)   $ 6.60   $ 6.40
Second Quarter   $ 6.47   $ 4.50
First Quarter   $ 4.69   $ 4.00
2002            
Fourth Quarter   $ 4.75   $ 3.70
Third Quarter     4.75     3.85
Second Quarter     4.49     2.00
First Quarter     2.45     1.85
2001            
Fourth Quarter   $ 2.20   $ 1.40
Third Quarter     2.24     1.56
Second Quarter     2.69     1.25
First Quarter     3.25     2.25

        On April 21, 2003, the last full trading day prior to the announcement of the signing of the merger agreement, the last reported sales price per share of Varsity common stock was $4.70. On August 11, 2003, the most recent practicable trading day prior to the date of this proxy statement, the last reported sales price per share was $6.49. Stockholders should obtain current market price quotations for Varsity common stock in connection with voting their shares.


Dividends

        We have never declared or paid any dividends with respect to our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent upon our results of operations, financial condition, capital expenditures, working capital requirements, any contractual restrictions and other factors our board of directors deems relevant. We do not anticipate that any cash dividends will be paid on the common stock in the foreseeable future if, for any reason, the merger is not completed.

        We agreed in the merger agreement not to, and to cause our subsidiaries not to, declare or pay any dividend until the closing of the merger without the prior written consent of VB Merger Corporation, except for dividends paid in the ordinary course by one of our subsidiaries.

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Special Note Regarding Forward-Looking Statements

        The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. These statements may be made directly in this proxy statement, and they may also be made a part of this proxy statement by reference to other documents filed by Varsity with the Securities and Exchange Commission, which is known as "incorporation by reference."

        Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "objective," "goal" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, or the merger, identify forward-looking statements. Our forward-looking statements are based on management's current views about future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following risks related to our business, among others, could cause or contribute to actual results differing materially from those described in the forward-looking statements:

        Our debt instruments contain numerous restrictive covenants that limit the discretion of our management on various business matters. Our debt instruments also contain a number of financial covenants that require us to meet financial ratios and tests. A failure to comply with the obligations contained in these instruments, if not cured or waived, could permit acceleration of the related indebtedness and acceleration of indebtedness under other instruments that contain cross-acceleration or cross-default provisions. If we were obligated to repay all or a significant portion of our indebtedness, there can be no assurance that we would have sufficient cash to do so or that we could successfully refinance such indebtedness.


        Our business and results of operations are highly seasonal and follow a similar annual pattern. Accordingly, a substantial portion of our annual revenues and all of our net income is generated in the second and third quarters of each calendar year, while the first and fourth quarters have historically resulted in net losses. Our working capital needs have generally followed a similar pattern reaching their peak at the end of the first calendar quarter and continuing through the second quarter. For a more detailed explanation of the seasonality of our earnings, see "Selected Consolidated Financial Data of Varsity Brands—Seasonality."

        Cheerleading is a vigorous athletic activity involving jumps, tumbling, partner stunts and pyramids, with which there are associated risks of personal injury.

        From time to time, we are subject to personal injury claims arising from our cheerleader and dance team camps, none of which has been or is material to our operations. We believe we are adequately insured against such risks. We cannot assure you however, that one or more meritorious claims against us for serious personal injury would not have an adverse effect upon our business, financial condition and results of operations.


        We organize and produce various national cheerleading and dance team championships for exclusive broadcast on the ESPN, Inc. cable channel. Our current agreement with ESPN expires in October of 2003. We have entered into several agreements with Walt Disney Attractions, Inc. pursuant to which our national cheerleading and dance team championships through 2004 will be held at the Walt Disney World Resort in Florida. While we believe that we will be successful in renewing or replacing the agreements with ESPN and Walt Disney Attractions in a manner which will continue to

14

promote our products and services, we cannot assure you that we will be successful in doing so or that we will be able to do so on economically favorable terms.

        We are one of two major national companies that design and market cheerleader, dance team and booster club uniforms and accessories and are one of two major national operators of camps. While our only national competitor is National Spirit Group Limited, we also compete with other smaller national and regional competitors that serve the uniform and accessories market or that operate cheerleader and dance team camps and clinics.

        At present, no national governing body regulates cheerleading and dance team activities at the collegiate level. However, if rules limiting off-season training are applied to cheerleading and/or dance teams (similar to rules imposed by the NCAA on other sports) we might not be able to offer a significant number of our camps either because participants might be prohibited from participating during the summer or because suitable sites might not be available. However, we currently do not believe that any regulation of collegiate cheerleading dance teams as a "sport" is forthcoming in the foreseeable future, and in the event any rules are proposed to be adopted by athletic associations, we expect to participate in the formulation of such rules to the extent permissible.

        At the high school level, some state athletic associations have classified cheerleading as a sport and have in some cases imposed restrictions on off-season practices and out-of-state travel to competitions. However, in all cases to date, we have been able to work with these state athletic associations to designate acceptable times for the cheerleaders within these states to attend our camps.

        Our executive officers and other key employees of Varsity have been primarily responsible for the development and expansion of our business, and the loss of the services of one or more of these individuals could have a material adverse effect on the Company.

        We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this proxy statement or the date of the document incorporated by reference in this proxy statement. Except as required by law, we are under no obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

        For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the quarterly reports on Form 10-Q and the annual reports on Form 10-K that Varsity has filed with the Securities and Exchange Commission as described under "Where You Can Find More Information."

        All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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Special Factors

Background of the Merger

        Our management and board of directors have been of the view for a number of years that our common stock has been undervalued due to a number of factors, including the relatively small size of our company and the niche industry in which we operate. As a consequence, in addition to focusing on implementing operating efficiencies, we attempted to implement various business initiatives to improve our prospects, such as: expanding into the dance studio market, which for the first time since we undertook this initiative in 1997 was profitable for the 2002 fiscal year; developing an internet marketing strategy, which has augmented and enhanced our ability to communicate with our core constituency of junior and senior high school cheerleaders; and acquiring the UMBRO license for soccer sportswear, which was not successful and which we discontinued approximately three years after commencing this initiative at the end of 1998. Although we had sporadically over the past few years been approached regarding potential change in control transactions and had considered potential investment, acquisition and other opportunities, none of those approaches or other potential investment, acquisition and other opportunities ever advanced beyond a preliminary stage.

        In October 2002, a private equity firm that had, in the past, made preliminary inquiries regarding a possible transaction with us, contacted our executive management and indicated that it was interested in acquiring us. On November 5, 2002, with the authorization of our board of directors, Jeff Webb, our president and chief executive officer, Robert Nederlander, our chairman of the board, Leonard Toboroff, a director and our vice president, and John Nichols, our chief financial officer, met with representatives of this private equity firm in New York City. At that meeting, the private equity firm provided us with an indication of interest to acquire all of our outstanding common stock.

        The private equity firm advised us at the end of the meeting that if it were to proceed, it would require that we enter into a 60-day exclusivity agreement, during which time the private equity firm would have the exclusive right to conduct due diligence to enable it to decide whether to make a formal proposal to acquire us and to negotiate a definitive acquisition agreement. During this 60-day exclusivity period, we would have been prohibited from engaging in discussions with any other potential acquiror.

        Upon the conclusion of the meeting, John Nichols advised our outside counsel, Zukerman Gore & Brandeis, LLP, of the substance of the meeting. On November 6, 2002, the private equity firm's outside counsel contacted our counsel and reiterated its client's request that we enter into an exclusivity agreement.

        Following consultation with Jeff Webb, John Nichols and Messrs. Nederlander and Toboroff, as well as outside counsel, our board of directors determined that maintaining flexibility would provide us with the best opportunity to maximize stockholder value, and that it was not in the best interests of our stockholders for us to enter into an exclusivity agreement with the private equity firm at this time and foreclose other possible opportunities. Our counsel advised the private equity firm's outside counsel of our decision on November 8, 2002.

        As a consequence of our receipt of this indication of interest, on November 12, 2002, the executive committee of our board of directors, comprised of Messrs. Nederlander, Webb and Toboroff, convened telephonically to discuss the advisability of establishing a new committee of the board to explore whether opportunities existed to enhance stockholder value and, based upon the results of such exploration, to recommend to the full board whether it would be in the stockholders' best interests to pursue any such opportunities at this time. The other members of our board of directors then joined the telephonic meeting.

        The full board considered the concept of establishing an exploratory committee to examine whether there may be opportunities to enhance stockholder value by engaging in a transaction with a strategic or financial purchaser, rather than remaining an independent public company, particularly in light of the board's perception that the public markets had undervalued, and would continue to

16


undervalue, the Company, notwithstanding that Varsity had experienced some success with certain of its business initiatives. The board noted that our seven person board included Jeff Webb, our founder, whose continued employment through the completion of any transaction and thereafter was likely to be a requirement of any non-strategic investor that might seek to acquire us. The board made this determination based upon its belief that Jeff Webb's extensive knowledge of, and experience in, the school spirit industry would be an important factor to financial purchasers, which generally do not operate the companies they acquire, but rely on key management to remain with the acquired company and operate the business upon the completion of the acquisition. In addition, the board also noted that two of our other executive officers, Messrs. Nederlander and Toboroff, have employment contracts that would entitle them to change in control payments under specified circumstances. Accordingly, the board unanimously determined that the exploratory committee should be comprised of the remaining four members of our board, all of whom had no interest in a possible sale of the Company different than those of our unaffiliated stockholders generally.

        Consequently, during this telephonic meeting, the board unanimously decided to establish the exploratory committee, comprised of Don R. Kornstein (chairman), Arthur N. Seessel, III, Glenn E. "Bo" Schembechler and John McConnaughy, Jr. The board granted the exploratory committee the authority to take those actions that it determined in its judgment to be advisable in connection with exploring strategic alternatives. The exploratory committee was authorized to retain separate legal counsel of its choice. Other than forming the exploratory committee to analyze whether there may exist opportunities to enhance stockholder value, no formal board decisions were made at this time.

        The exploratory committee then held its initial telephonic meeting in order to establish the time and date for a subsequent meeting at which they would discuss the selection of legal counsel.

        The exploratory committee met again on November 14, 2002. After considering various law firms, the exploratory committee unanimously voted to retain Schulte Roth & Zabel LLP as its legal advisor. Schulte Roth & Zabel LLP had not previously provided any legal services to us or our affiliates, other than limited advice provided a number of years ago to one of our former executive officers. At subsequent meetings of the exploratory committee on November 21 and December 4, 2002, representatives of Schulte Roth & Zabel reviewed with the exploratory committee its role and duties under applicable law. In late November, the executive committee advised each member of the exploratory committee that he would receive $20,000 as compensation for his services, payable by the end of 2002, and that Mr. Kornstein would receive an additional $10,000 as chairman of the exploratory committee. In addition, after confirming with the remaining members of the board its authority to retain a financial advisor, the exploratory committee interviewed four investment banking firms, and determined that it would retain Rothschild Inc. Rothschild had not previously provided any services to us or our affiliates.

        The exploratory committee commenced a process, with the assistance of its professional advisors, to identify strategic and financial candidates that might be interested in acquiring us, and prepared summary descriptive materials for distribution to interested candidates.

        During the first week of December 2002, the exploratory committee authorized Rothschild to make initial contact with 18 potential candidates on our behalf. The candidates, which included 12 private equity funds and six strategic candidates, were selected based on various criteria, including such candidates' prior interest in pursuing a transaction with Varsity, past or current businesses in, or investments in companies with businesses in, Varsity's business sectors, the size of the investment funds and the funds' past equity investments in the case of private equity funds and the potential for cost savings and other strategies in the case of strategic candidates. Eleven of these potential candidates expressed interest in receiving summary descriptive materials concerning us. After entering into a confidentiality agreement with us, each of these candidates was given these materials, which included financial projections for the five-year period ended December 31, 2007.

17


        During the week of January 6, 2003, seven of the potential candidates, all of which were private equity firms, submitted written preliminary indications of interest to acquire us. As a result, including the preliminary proposal that we received in November 2002, we then had a total of eight preliminary indications of interest to acquire the Company.

        At a telephonic meeting on January 12, 2003, the exploratory committee reviewed with its legal and financial advisors all of the indications of interest that it had received. In connection with this review, the exploratory committee determined that the preliminary indications of interest contained different financial assumptions, regarding, among other things, the amount of our net debt. When adjusted to reflect consistent assumptions, seven of the eight preliminary indications of interest were within a range the exploratory committee believed justified continued participation in a process, and one was materially below this range.

        At a meeting of the full board of directors on January 13, 2003, the exploratory committee described the preliminary results of its process. The exploratory committee informed the board that while none of the potential strategic candidates expressed any interest in pursing a potential transaction with us, eight private equity firms expressed interest in acquiring us and submitted preliminary indications of interest. The exploratory committee further advised the board that seven of the eight private equity firms had proposed a purchase price within a range that justified continued participation in the process when compared on a like basis, and that the purchase price proposed by the eighth private equity firm was $0.75 less than the next lowest proposed purchase price, and thus materially below the range of the per share indications of interest submitted by the other seven potential purchasers. Since, among other things, the price range of seven of the preliminary indications of interest represented a substantial premium not only to the current trading range of our common stock, but also to the trading range of our common stock during the past few years, the exploratory committee advised the full board that our stockholders' interest would be best served by continuing the process.

        Based upon the recommendation of the exploratory committee, the board engaged in a full discussion of the matter. Our counsel, Zukerman Gore & Brandeis, in attendance at the board meeting by invitation, reviewed with the full board its fiduciary duties under applicable law, including in the event the board were to decide to sell the Company. After further discussion, the board unanimously authorized the continued exploration of a possible transaction to enhance stockholder value.

        The board then noted that all of the indications of interest received by us were from private equity firms rather than strategic candidates. The board also noted that private equity firms typically rely on the existing management team to continue to operate the business through and after the completion of any transaction. As a consequence, the board recognized that it would likely be important for our core management team (other than Messrs. Nederlander and Toboroff, who have historically focused on providing guidance to us with respect to strategic matters and not day-to-day operations) to continue to operate our business, at least through the completion of any transaction, in order to ensure the consummation of any transaction we might determine to pursue.

        In connection with all but one of the proposals submitted by the private equity firms, these firms made it clear that they specifically contemplated that Jeff Webb, our founder and chief executive officer, would be the key member of the management team following the transaction (the final private equity firm also subsequently confirmed to the Company's representatives that Jeff Webb's continued involvement with the Company following the closing of the transaction was essential). The board noted that Jeff Webb's employment contract had expired in May 2000. The board also noted that while Jeff Webb and the Company had from time to time sought to enter into a new employment agreement, they had not yet done so. It was further noted that Jeff Webb had received salary and bonus of $605,000 in 2002. Given the management structure contemplated by seven of the eight private equity firms, the board concluded that it would likely be essential for us to ensure that Jeff Webb continue in his current management capacity at least through the completion of any transaction. The board therefore noted, although it did not conclusively determine at this time, that a transaction and stay

18


bonus pool with respect to Jeff Webb and the other members of the Company's core management team would likely be needed to ensure the successful completion of the sale process, should it be determined to pursue this course of action.

        The board determined that the appropriate course of action, based upon the recommendation of the exploratory committee, was the continued exploration of a possible acquisition transaction by one of the private equity firms that had submitted an indication of interest. Further, since the board was comprised of a majority of directors who had no interest in a possible sale of the Company different than those of our public stockholders generally, the board also determined that the exploratory committee could at this time be dissolved, and that the determination of which acquisition proposal, if any, to proceed with would be made by the entire board. In connection with this determination, the full board unanimously designated Mr. Kornstein to act as the lead director on behalf of the entire board to work closely with our legal and financial advisors in exploring a sale, and if terms could be reached with a potential purchaser, negotiating a definitive agreement. In addition, the board determined that, given Jeff Webb's likely required participation in the Company after completion of any transaction by a private equity firm, he would remain apprised of all material developments, although he would not take an active role in the process going forward.

        Thereafter, Mr. Kornstein instructed Rothschild to advise seven of the eight private equity firms which had submitted proposals that they would be invited to participate in a second round of indications of interest. Mr. Kornstein instructed Rothschild that the eighth private equity firm, which had submitted the lowest proposed purchase price, was to be advised that it was no longer part of the process. Each of the seven private equity firms was also advised that we would adjust its proposal in determining the final per share merger consideration in order to reflect transaction expenses we expected to incur, including the bonus pool referred to above, professional fees and insurance costs. These expenses, however, were not yet fully quantified at this time.

        All of the private equity firms were also advised that they would be afforded the opportunity to meet with management, and were invited to attend our sales meetings in Phoenix, Arizona during the last week in January, as well as to visit the National High School Cheerleading Championship that we were holding in Orlando, Florida on February 8 and 9. Each of these private equity firms was also offered the opportunity to visit a data room to review business and financial information about us.

        All seven of the private equity firms were advised that the second round of written indications of interest would be due on February 26, 2003. During the period from January 28 through February 25, our executive management team made presentations to those private equity firms which requested a presentation. During this period, Leonard Green & Partners reviewed with certain of the management investors the capital structure contemplated in connection with its proposal and advised them that, in connection with such proposal, it contemplated that management would be offered an opportunity to acquire up to 15% of the common stock of VBR Holding Corporation for $1.5 million.

        All seven private equity firms submitted bids on February 26, 2003. Following receipt of the bids, Mr. Kornstein met with four other members of the board, Jeff Webb, Robert Nederlander, Leonard Toboroff and Jack McConnaughy, as well as with John Nichols and our legal and financial advisors. At that meeting the group reviewed the seven second round written indications of interest, all of which were delivered to the remaining two board members by the next morning. The price range of these indications of interest varied from highest to lowest by $1.55 per share. All of the private equity firms required, as a condition to effecting a transaction with us, that they be able to negotiate employment agreements and investment agreements with management, which would provide for management to make an equity investment in any ongoing entity, if the bidders were permitted to proceed. However, the details of any such arrangements had not been determined at that time. Significantly, each of the indications of interest, other than the one made by Leonard Green & Partners, was expressly subject to and conditioned upon the potential purchaser obtaining financing. In its proposal, however, Leonard Green & Partners expressly stated that it would provide a back-up financing commitment for the full amount necessary to complete the acquisition, and that it anticipated that a definitive purchase

19


agreement would not contain any financing condition. The board considered this aspect of the Leonard Green & Partners proposal quite significant, because it increased the likelihood of closing a transaction at a time when the current economic climate and volatile geopolitical environment made financing uncertain.

        After Mr. Kornstein conferred with the two board members who were not present at the February 26 meeting, the board determined to provide four of the potential purchasers with the opportunity to have further meetings with management to facilitate their submitting their final and best proposal. In order to make sure that all of the private equity firms were still interested in continuing in the bidding process, the board instructed Rothschild to approach the seven private equity firms in order to ascertain from them whether they reasonably believed, at this juncture, that they would be able to negotiate satisfactory employment agreements and investment agreements with management. The board was informed by Rothschild that at that time the remaining potential purchasers had indicated that they believed that they could come to such agreements with management on mutually agreeable terms if they were given the opportunity to do so. Since this would not be an issue going forward in the process, the board selected these four potential purchasers based upon price to stockholders and relative certainty of closure.

        All four of the remaining potential purchasers subsequently met with Jeff Webb and John Nichols to engage in further due diligence discussions, and thereafter submitted their proposals. Before these bids were submitted, the board directed Rothschild to inform each of these bidders that we expected to incur various expenses in connection with the transaction, including the potential management bonus pool, and other costs related to items such as insurance, and fees of legal and financial advisors and although some of these expenses were known at this time, the total amount of these expenses was not yet determined. As a result, each of these bidders was further advised that we would uniformly adjust any bids received to account for these expenses once they were determined so as to arrive at the final, per share merger consideration. The Board also instructed Rothschild to inform each of the bidders of the factors which the Board considered important in its consideration of their proposals, specifically, price and certainty of closure. Mr. Kornstein instructed Rothschild to call each of the four potential purchasers to confirm that their proposals were their final and best proposals for consideration by the board of directors.

        A meeting of the board of directors was held on March 5, 2003 in New York City, at which all but one of our board members were in attendance (one of our independent directors was unable to attend due to a medical emergency). Also attending the meeting in person were John Nichols and our legal and financial advisors. Rothschild reviewed for the board the process to date, including the potential purchasers from which bids were received, the information that had been provided to these purchasers and the opportunities made available to these purchasers to receive additional information concerning Varsity, including data room visits and management presentations. Also reviewed with the board were the proposed terms, including proposed purchase prices, exclusivity requirements, management equity participation proposals, financing conditions and status of proposed financings, of each of the four final proposals submitted as well as the three other proposals previously considered by the board. The proposed purchase prices received ranged from $5.53 to $7.08 after adjustment for the call premium in connection with the redemption of Varsity's outstanding 10.5% senior notes and reflected proposed exclusivity periods ranging from zero to 90 days. Three of the potential purchasers proposed co-investment in the company by participating members of Varsity's management at a per share price to be discussed with Varsity's management, one of the potential purchasers proposed a $2.0 million investment by Varsity's management post-closing, Leonard Green & Partners proposed an investment of $1.5 million by Varsity's management for 15% of Varsity common stock and an additional option plan for 3% of Varsity common stock, and the remaining two potential purchasers indicated that terms relating to management participation, if any, would be discussed with Varsity's management. All of the potential purchasers, other than Leonard Green & Partners, required a financing condition, five of which indicated possible financing for the transaction by financial institutions subject to such

20


institutions' internal credit approval, due diligence and other customary conditions. The board also reviewed the material non-financial terms of these proposals. Zukerman Gore & Brandeis then reviewed with the board its fiduciary duties under applicable law.

        The board noted that two of the four private equity firms did not raise their bids and that the other two did raise their bids, including Leonard Green & Partners by $0.35. The two proposals which contained the highest per share consideration were from The Riverside Company, the private equity firm with which we met in November 2002, and Leonard Green & Partners. Furthermore, each of these two highest bidders expressly stated that it would not participate in the process any further and would withdraw its proposal unless it was afforded the exclusive right to negotiate with us. Significantly, however, the bid submitted by Leonard Green & Partners reiterated that it would not be subject to financing, while the proposal from the other private equity firm continued to be conditioned upon obtaining financing.

        The board discussed that simply comparing the nominal per share merger consideration of the two high bids did not take into account the back-up financing commitment offered by Leonard Green & Partners, and, as a result, the increased certainty of closing a transaction, which the board believed was an important factor. The board believed that failure to complete a transaction due to the buyer's inability to secure the financing could place us at a competitive disadvantage. This would be exacerbated by the fact that we were heading into the height of our selling season for uniform sales and camp enrollment. Specifically, the board believed that a failed transaction could destabilize us by creating uncertainty and upsetting the morale of our sales force and other employees, who we rely upon to effectively market and sell our products and services. The board was also concerned that our competitors would seek to use any failed transaction to their advantage, depicting us as vulnerable and unstable to our significant vendors, key customers, relationship partners and employees. Further, given that our business is primarily a cash-flow business not requiring or involving significant "hard" assets, the board believed that obtaining the necessary debt financing without the benefit of substantial "hard" assets to secure the financing could be even more difficult than might otherwise be the case in the difficult and uncertain financing environment. Although the board noted that The Riverside Company, which submitted the highest nominal per share price, had orally advised our representatives that it believed that it could obtain the necessary financing to consummate the transaction, the board also took note of the fact that the size of The Riverside Company's fund was substantially smaller than that of any of the other seven private equity firms which had submitted bids and that it had not, as far as the board was aware, ever independently committed the equity capital necessary to close a transaction as large as ours. The Riverside Company had advised us that it had received proposals and letters of interest (but not commitment letters) from Antares Leveraged Capital, Banc One Mezzanine, MassMutual, GE Capital Merchant Banking Group, Madison Capital, Merrill Lynch Capital and National City Bank with respect to the debt financing that The Riverside Company required to effect the proposed transaction. However, The Riverside Company did not independently have the committed capital to finance its proposed transaction. Conversely, Leonard Green & Partners could finance the entire purchase without the need for any outside financing.

        The board then turned to the management bonus pool issue. As the board had anticipated, each of the four proposals was conditioned on the continued involvement of Jeff Webb and John Nichols and the Company's core management team. During the time since January 13, 2003 when the board first discussed the possibility that a management bonus pool may be advisable to ensure the successful completion of any transaction we may wish to pursue with a financial buyer, Mr. Kornstein had discussed with the board members, other than Jeff Webb, the appropriate magnitude of any management bonus pool. Of particular concern was the amount of any bonus for Jeff Webb. Based on the directors' knowledge and transaction experience, they recognized that change of control payments for similarly situated chief executive officers of up to three times annual compensation were not uncommon. In Jeff Webb's case, that would amount to approximately $1.8 million. The board was also cognizant of the fact that in connection with the Company's last change in control transaction in 1997,

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John Nichols received a $250,000 transaction bonus. In addition, based on his current contract with the Company, John Nichols is entitled to receive an aggregate of approximately $560,000 upon the closing of a change in control transaction if he chooses not to continue with the Company thereafter. Further, the board also wanted to provide bonuses to other employees of the Company to assure that they remain with the Company following any transaction for a period of time sufficient to assure an orderly transition. After further considering all of the individuals (which was anticipated to be in excess of 26 individuals) who would participate in the transaction and stay bonus pools, the board, while not deciding the matter, was of the view that given the approximate size of the transaction, the Company's contractual obligations and the efforts required of the Company's management team and various personnel in order to effectively consummate a transaction and effect an orderly transition, a total bonus pool of up to approximately $2.3 million should be factored into all proposals.

        After a thorough discussion, the board decided to table any decision until 11:00 a.m. Eastern Standard Time on Friday, March 7, 2003, providing the members of the board additional time to consider all four proposals.

        On Friday, March 7, at 11:00 a.m., the full board reconvened via telephonic conference call. John Nichols and our legal and financial advisors were also present. At this meeting, Zukerman Gore & Brandeis summarized the applicable fiduciary duties of the board. The board then engaged in a discussion of the four proposals, including a review of the factors and issues discussed at the March 5 meeting with particular emphasis on the price and certainty of closure, particularly in light of the current financing, economic and geopolitical environment, which appeared to be worsening as war with Iraq appeared imminent. Although the exact amounts were not known at this time, making uniform adjustments to compare the bids on a like basis for the potential amount of the bonus pool, insurance costs, fees of our legal and financial advisors, and other costs, the highest bid would have equated to $6.80 per share and the bid by Leonard Green & Partners, which was the second highest, would have equated to $6.57 per share. In considering Leonard Green & Partners, the board not only took note of its back-up financing commitment, which the board concluded greatly enhanced the certainty of closing a transaction, but also noted the fact that Leonard Green & Partners exhibited the best understanding of the financial aspects of our business. As a consequence, the board had greater confidence that it could reach an agreement with Leonard Green & Partners at its proposed purchase price. Thereafter, taking into account all of the considerations discussed at the March 5 and the March 7 meetings, upon the unanimous vote of all of the directors voting on the matter, with Jeff Webb abstaining, the board determined to enter into a short-term exclusivity agreement with Leonard Green & Partners. No other board decision was made at this time.

        On March 11, 2003, we entered into a 30-day exclusivity agreement with Leonard Green & Partners. Upon the execution of the exclusivity agreement, we delivered an initial draft of the merger agreement to Leonard Green & Partners and its counsel, Latham & Watkins LLP. On March 13, 2003, Leonard Green & Partners sent a team of business and legal professionals to our corporate headquarters to commence extensive financial, business and legal due diligence.

        Over the course of the next 30 days there were numerous meetings and conference calls between our respective counsel, and numerous drafts of the merger agreement were circulated. During this process, Mr. Kornstein, our lead director, working with our counsel, negotiated a number of issues with Leonard Green & Partners. These issues included the nature and scope of our representations and warranties, the definition of "material adverse effect" as it applied to our business between the signing of the merger agreement and the consummation of the merger, the permissible business activities we could engage in between the signing of the merger agreement and the consummation of the merger, the manner in which our outstanding 10.5% senior notes due 2007 would be repaid, the closing condition that holders of no more than an agreed upon percentage of our outstanding shares would exercise appraisal rights under Delaware law, and the termination fee and other fees and costs payable in the event of the termination of the merger agreement. During this time, Mr. Kornstein regularly

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updated each of the members of the board other than Jeff Webb as to the progress of the ongoing negotiations.

        During this 30-day period, Jeff Webb and John Nichols negotiated the terms of their respective employment agreements and other arrangements with Leonard Green & Partners, all of which were subject to the closing of the transaction. During this 30-day period, Leonard Green & Partners also negotiated the terms of the voting agreements to be entered into with some of our stockholders.

        On April 10, 2003, as the parties had been engaged in active, ongoing negotiations which appeared to be progressing towards a definitive agreement, we extended the exclusivity agreement with Leonard Green & Partners until April 18, 2003. Thereafter, on April 17, we agreed to a further extension to April 23 in order to provide the parties with sufficient time to resolve the few remaining issues and finalize the merger agreement and related documents. Each member of the board was provided with copies of the draft merger agreement on April 12, and again on April 19, this second time with substantially all of the related schedules and exhibits.

        On April 21, 2003 at 5:00 p.m., our board of directors met via conference telephone to consider the definitive merger agreement with VBR Holding Corporation and VB Merger Corporation, the entities formed to effect the transaction. John Nichols and our legal and financial advisors also attended the meeting. The definitive merger agreement under consideration was essentially identical to the draft delivered to the board members on April 19, except for conforming changes, the correction of typographical errors and a change requested by us to the provision in the merger agreement governing the number of days allowed to cure breaches of representations, warranties and covenants by either party. At this meeting, Rothschild summarized the third party solicitation process that had been conducted, and the economic terms of the Leonard Green & Partners proposal. Rothschild then reviewed with the board its financial analysis of the merger consideration and delivered to the board an oral opinion (confirmed by delivery of a written opinion dated April 21, 2003) to the effect that, as of the date of the opinion and based on and subject to the matters described in its opinion, the merger consideration was fair, from a financial point of view, to the holders of our common stock (other than VBR Holding Corporation, VB Merger Corporation, the members of management acquiring shares or options to acquire shares of VBR Holding Corporation, and their respective affiliates).

        Zukerman Gore & Brandeis reviewed with the board of directors its fiduciary duties under applicable law, including those duties in connection with a sale of the Company. Our counsel then reviewed with the board the various issues that had been the subject of extensive negotiations in connection with the merger agreement, including, but not limited to: conditions under which we could provide non-public information to, and engage in discussions with, a third party bidder; the circumstances under which we would be able to terminate the merger agreement in order to enter into an alternative transaction, including the determination of what would constitute a superior proposal; the amount of the termination fee that we would be required to pay in that circumstance; our obligation to provide VBR Holding Corporation and VB Merger Corporation with the opportunity to negotiate changes to the merger agreement in the event we received an alternative, superior proposal; the nature and scope of the representations and warranties to be provided by us; the requirement that Jeff Webb and John Nichols both be employed by the surviving corporation upon the consummation of the merger; the definition of "material adverse effect" as it applied to our business between the signing of the merger agreement and the consummation of the merger and the relationship between such definition and the "bring down" of our representations and warranties; the manner in which our outstanding 10.5% senior notes due 2007 would be repaid; the requirement that no more than 15% of the Company's stockholders effectively exercise appraisal rights under Delaware law; and other closing conditions required to be satisfied by the parties in order to effect the merger.

        The board then engaged in a discussion regarding the proposed merger, during which the board compared the prospects of remaining a public company to the prospects of engaging in the transaction under consideration. The board noted our inability to attract research analyst coverage despite our efforts to attract coverage, as well as the poor performance of equity securities in the last few years in

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general. The board also discussed our poor stock performance over the same period, as well as not seeing any factors that could reasonably be expected to occur in the foreseeable future that would change this situation. Accordingly, in light of these facts, and all of the other considerations that had been taken into account by the board throughout the process, the board determined that the merger under consideration was the best alternative to maximize stockholder value. The board, by the affirmative vote of six of its directors, with Jeff Webb abstaining, then approved the merger agreement and determined that it is fair, advisable to, and in the best interest of, our stockholders, and authorized management to execute the merger agreement and recommended adoption of the merger agreement by our stockholders.

        In connection with its approval of the merger agreement, the board also determined to grant transaction and stay bonuses to 29 members of management in the aggregate amount of approximately $2.3 million. The board did not compare our particular grants to any other transaction, and granted these bonuses in recognition of the value various members of management provided us and to assure that these individuals, including Jeff Webb and John Nichols, would continue with us through the closing of the transaction. In determining to grant these bonuses, the board considered the fact that failure to retain management would jeopardize the closing of the merger. Of those transaction and stay bonuses, $1.585 million is to be paid to Jeff Webb and $300,000 is to be paid to John Nichols upon the closing of the merger. The balance of this bonus pool, approximately $415,000, is to be paid to other members of management on the 91st day following the closing of the transaction, assuming they remain employed by us until such time. Jeff Webb's transaction and stay bonus is approximately what, in the board's view, Jeff Webb would reasonably have been expected to receive under an executive employment agreement that contained a change in control provision consistent with what executives in similar positions to Jeff Webb often receive. John Nichols has an executive employment agreement with the Company, which provides that on a change of control John Nichols is entitled to terminate his employment agreement and receive a payment equal to two times the sum of his base salary of $210,000 per annum plus the prior year's bonus of $70,000, for an aggregate payment of $560,000. If we complete the merger, John Nichols' new employment agreement will take effect and he will not be entitled to these payments.

        The board of directors also determined to pre-pay to 29 members of management, other than Jeff Webb and John Nichols, half year operational bonuses of approximately $400,000 in the aggregate on the closing of the merger. The board further agreed to pay David Groelinger, a former executive who served as a consultant to us during the negotiation process, attending negotiating sessions and working with our counsel, $40,000 upon the closing of the transaction for various services rendered. Finally, the board determined that Mr. Kornstein should receive a payment of $150,000 in recognition of his substantial contribution of time and effort in his capacity as our lead director working with our legal and financial advisors with respect to exploring a change in control transaction and the negotiation of the definitive merger agreement on behalf of the board of directors. Payment to Mr. Kornstein is to be made upon the earlier of the closing of the merger or termination of the merger agreement.

        The merger agreement was then signed on April 21, 2003 and publicly announced before the opening of trading of our common stock the following morning on April 22, 2003.

Recommendation of Our Board of Directors; Fairness of the Merger

        Our board of directors consists of a majority of directors who have no direct or indirect interest in the merger that is different from the interests of Varsity stockholders generally. At a special meeting of the board of directors held on January 13, 2003, the board of directors, by unanimous vote of all directors voting on the matter:

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        At a special meeting of the board of directors held on April 21, 2003, the board of directors, by unanimous vote of all directors voting on the matter:

        Jeff Webb was the only director who abstained from these votes due to a potential conflict of interest. See the section entitled "—Background of the Merger" for additional information on the board of director's recommendations.

        In making the determinations and recommendation set forth above, the members of the board of directors considered the following material positive factors:

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        Our board of directors also considered potentially negative factors in its deliberations concerning the merger, including:

        Our board of directors concluded, however, that these negative factors could be managed or mitigated by Varsity or were unlikely to have a material impact on the merger, and that, overall, the

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potentially negative factors associated with the merger were outweighed by the potential benefits of the merger. For example, the board of directors believed that the merger could be completed on the proposed terms.

        Our board of directors was fully aware of and considered the possible conflicts of interest of the management investors. See the sections entitled "—Background of the Merger," and "—Interests of Our Directors and Executive Officers in the Merger" for a description of these possible conflicts of interest. Our board of directors considered in this regard that the exploratory committee recommended that we explore strategic alternatives to enhance stockholder value, including a potential sale transaction, with an understanding that these potential conflicts of interests were likely to occur and that the composition of the board of directors, consisting of a majority of members with no interest in the completion of a sale transaction that is different from the interests of our unaffiliated stockholders generally, permitted it to represent effectively the interests of those unaffiliated stockholders.

        While our board of directors did not independently consider the going concern value of Varsity, it considered and adopted the discounted cash flow analysis performed by Rothschild. With respect to liquidation value, the board of directors considered that, as a member of the school spirit industry, with significant value in its employees and goodwill, liquidation value would likely be significantly lower than the valuation of Varsity as a going concern and, as such, would not provide a useful comparison for assessing the fairness of the $6.57 per share consideration. In addition, the board of directors considered that book value ($3.11 per share as of June 30, 2003), which is based on the historical cost value of Varsity's assets (but does not take into account any shares of common stock issuable upon the exercise of options of the conversion of Varsity's convertible debt), also would not provide a fair value for the business as compared to current period measurements of Varsity's operational performance, such as EBITDA and earnings per share. Since none of Green Equity Investors, GEI Capital, VBR Holding Corporation, VB Merger Corporation, Jeff Webb or John Nichols had purchased shares of our common stock in the last two years, the board was not able to compare the merger consideration with a related range of purchase prices.

        The above discussion of the material factors considered by our board of directors is not intended to be exhaustive, but does set forth the principal factors considered by the board of directors. The board collectively reached its conclusion to approve the merger agreement and the merger in light of the various factors described above and other factors that each member of the board of directors (other than Jeff Webb, who abstained from the vote) believed were appropriate. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, our board of directors found it impracticable, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered or determine that any factor was of particular importance in reaching its determination that the merger agreement and the transactions contemplated thereby are fair to, and in the best interests of, our unaffiliated stockholders. Rather, our board of directors viewed its recommendations as being based upon its judgment, in light of the totality of the information presented and considered, of the overall effect of the merger on our unaffiliated stockholders compared to any alternative transaction or remaining an independent company. In considering the factors discussed above, individual directors may have given different weights to different factors. Our board of directors did not analyze the fairness of the $6.57 per share consideration in isolation from the other considerations referred to above. Our board of directors did not attempt to distinguish between factors that support a determination that the merger is "fair" and factors that support a determination that the merger is in the "best interests" of our unaffiliated stockholders.

        The board of directors believes that the merger is advisable and is fair to, and in the best interests of Varsity's unaffiliated stockholders. By a unanimous vote of all directors voting on the matter, the board of directors recommends that you vote "FOR" the approval and adoption of the merger agreement.

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Our Position as to the Procedural Fairness of the Merger

        Our board of directors also determined that the merger is procedurally fair, because, among other things:

        In light of the foregoing factors, our board of directors determined that the merger is procedurally fair despite the fact that the terms of the merger agreement do not require the approval of at least a majority of our unaffiliated stockholders and that the board of directors did not retain an unaffiliated representative to act solely on behalf of our unaffiliated stockholders for purposes of negotiating the terms of the merger agreement.

        The members of the board of directors evaluated the merger in light of their knowledge of the business, financial condition and prospects of Varsity, and with the assistance of legal and financial advisors. In view of the variety of factors that the board of directors considered in connection with their evaluation of the merger, the board of directors did not quantify, rank or otherwise assign relative weights to any of the foregoing factors.

Opinion of Rothschild Inc.

        Varsity retained, on behalf of the exploratory committee, Rothschild to act as exclusive financial advisor in connection with the proposed merger. The exploratory committee selected Rothschild based on its reputation and experience. As part of its investment banking business, Rothschild regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, restructurings, private placements and other purposes.

        In connection with this engagement, the board of directors requested that Rothschild evaluate the fairness, from a financial point of view, of the merger consideration to be received by the holders of our common stock (other than VBR Holding Corporation, VB Merger Corporation, the members of management acquiring shares or options to acquire shares of VBR Holding Corporation, and their respective affiliates). On April 21, 2003, at a meeting of the board of directors held to evaluate the

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proposed merger, Rothschild delivered to the board of directors an oral opinion, which opinion was confirmed by delivery of a written opinion dated the same date, to the effect that, as of that date and based on and subject to the matters described in its opinion, the merger consideration was fair, from a financial point of view, to the holders of Varsity common stock (other than VBR Holding Corporation, VB Merger Corporation, the members of management acquiring shares or options to acquire shares of VBR Holding Corporation, and their respective affiliates).

        The type and amount of consideration payable in the merger was determined through negotiation between Varsity and Leonard Green & Partners and the decision to approve the merger and related transactions was solely that of Varsity and its board of directors. Except as otherwise described below, no other instructions or limitations were imposed by the board of directors on Rothschild with respect to the investigations made or procedures followed by Rothschild in rendering its opinion.

        The full text of Rothschild's written opinion dated April 21, 2003, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. We encourage you to read this opinion in its entirety. Rothschild's opinion was provided for the information of the board of directors in connection with its evaluation of the merger, is limited to the fairness, from a financial point of view, of the merger consideration and does not address any other aspect of the merger or any related transaction, including arrangements with Varsity's management. Rothschild's opinion is not intended to and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger or any related transactions. Rothschild's opinion does not address the relative merits of the merger and alternative business strategies that might exist for Varsity, nor does it address any other transaction which Varsity has considered or may consider or the decision of Varsity or the board of directors to proceed with the merger and related transactions.

        In arriving at its opinion, Rothschild:

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        In rendering its opinion, Rothschild did not assume any obligation independently to verify any information utilized, reviewed or considered by Rothschild in formulating its opinion and relied on such information being accurate and complete in all material respects. With respect to financial forecasts and other information and operating data for Varsity and related sensitivities regarding the future financial performance of Varsity provided to or otherwise discussed with Rothschild by Varsity's management, Rothschild was advised, and assumed, that these forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of Varsity's management as to the future financial performance of Varsity and the potential impact on these forecasts of sensitivities which may affect the financial performance of Varsity. Rothschild also assumed, at Varsity's direction, that there had not occurred any material change in the assets, financial condition, results of operations, business or prospects of Varsity since the dates on which the most recent financial statements or other financial and business information relating to Varsity were made available to Rothschild. Rothschild further assumed, with Varsity's consent, that the merger and related transactions would be consummated in all material respects in accordance with the terms and conditions described in the merger agreement and related documents without any waiver or modification and that all governmental, regulatory and other consents and approvals necessary for the consummation of the merger and related transactions would be obtained without any adverse effect on Varsity or the merger. Rothschild did not assume responsibility for making any independent evaluation, appraisal or physical inspection of any of the assets or liabilities, contingent or otherwise, of Varsity. Rothschild's opinion was necessarily based on information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Rothschild as of the date of its opinion. Accordingly, although subsequent developments may affect Rothschild's opinion, Rothschild has not assumed any obligation to update, revise or reaffirm its opinion.

        In preparing its opinion, Rothschild performed a variety of financial and comparative analyses, including those described below. The summary of these analyses is not a comprehensive description of all analyses and factors considered by Rothschild. The preparation of a fairness opinion is a complex analytical process that involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to summary description. Rothschild believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

        Rothschild employed several analytical methodologies and no one method of analysis should be regarded as critical to the overall conclusion reached by Rothschild. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. The conclusion reached by Rothschild is based on all analyses and factors taken as a whole and also on application of Rothschild's experience and judgment, which conclusion may involve significant elements of subjective judgment and qualitative analysis. Rothschild therefore gives no opinion as to the value or merit standing alone of any one or more parts of the analyses it performed. In its analyses, Rothschild considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Varsity. No company, transaction or business used in those analyses as a comparison is identical to Varsity or the proposed merger, and an evaluation of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed.

        The estimates contained in Rothschild's analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition,

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analyses relating to the value of businesses or securities do not necessarily purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, Rothschild's analyses and estimates are inherently subject to substantial uncertainty.

        Rothschild's opinion and analyses were only one of many factors considered by the board of directors in its evaluation of the merger and should not be viewed as determinative of the views of Varsity's board of directors or management with respect to the proposed merger or the merger consideration.

        A copy of Rothschild's written presentation to the board of directors has been filed as an exhibit to the Rule 13e-3 Transaction Statement on Schedule 13E-3 filed by Varsity with the Securities and Exchange Commission and also will be available for inspection and copying at Varsity's principal executive offices during regular business hours by any interested stockholder of Varsity or any representative of such stockholder who has been so designated in writing and also may be inspected and copied at the office of, and obtained by mail from, the Securities and Exchange Commission.

        The following is a summary of the material financial analyses, each of which is a standard valuation methodology customarily undertaken in transactions of this type, performed by Rothschild in connection with the rendering of its opinion dated April 21, 2003 to the board of directors. The financial analyses summarized below include information presented in tabular format. In order to fully understand Rothschild's financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Rothschild's financial analyses.

        Rothschild performed a market price analysis in order to compare historical trading prices of Varsity common stock with the merger consideration provided for in the merger agreement. In this analysis, Rothschild reviewed historical trading prices for Varsity common stock from April 17, 2002 through April 17, 2003 (the last trading day prior to Varsity's board of directors' meeting held to evaluate the proposed merger). This analysis reflected the following low and high trading prices for Varsity common stock during such period, as compared to the per share merger consideration:


Low and High Trading
Prices of Varsity Common Stock
from April 17, 2002 to April 17, 2003
 
Per Share
Merger Consideration
$2.40 -$5.00   $6.57

        Rothschild performed a selected public companies analysis in order to derive an implied per share equity reference range for Varsity from the market value and trading multiples of other publicly traded companies and then compared this implied per share equity reference range with the merger consideration provided for in the merger agreement. Given the mix of Varsity's business operations and the limited number of publicly traded companies with business operations directly comparable to those of Varsity, Rothschild analyzed the market values and trading multiples of Varsity and selected publicly traded companies with lines of business, or operating and financial characteristics, generally similar to those of Varsity. Using publicly available information, Rothschild analyzed the market values and trading multiples of Varsity and the following six publicly traded companies in the sports apparel and athletic footwear businesses, referred to below as the "Apparel/Footwear Companies," and the following

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two publicly traded companies in the teen/sporting goods retail businesses, referred to below as the "Teen/Sporting Goods Retail Companies:"


Apparel/Footwear Companies
 
Teen/Sporting Goods Retail Companies

•    Ashworth, Inc.
 
•    Alloy, Inc.
•    NIKE, Inc.   •    Foot Locker, Inc.
•    Reebok International Ltd.    
•    Russell Corporation    
•    Vans, Inc.    
•    V.F. Corporation    

        All multiples were based on closing stock prices on April 17, 2003. Estimated financial data for the selected companies were based on publicly available research analysts' estimates and estimated financial data for Varsity were based on internal estimates of Varsity's management. Rothschild reviewed enterprise values of the selected companies as multiples of, among other things, calendar year 2002 and estimated calendar year 2003 revenue, earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA, and earnings before interest and taxes, commonly referred to as EBIT. Rothschild calculated enterprise values as equity value, plus total debt and minority interest, less cash. Rothschild also reviewed equity values of the selected companies as a multiple of, among other things, calendar year 2002 and estimated calendar year 2003 net income. After taking into account, among other things, the selected companies' market capitalization, brand recognition attributable to its name and products, and lines of businesses in which it operated, Rothschild then applied ranges of selected multiples derived from the selected companies of calendar year 2002 EBITDA and calendar year 2003 estimated EBITDA of 4.5x to 7.0x and 4.0x to 6.0x, respectively, calendar year 2002 EBIT and calendar year 2003 estimated EBIT of 6.5x to 9.5x and 5.5x to 7.5x, respectively, and calendar year 2002 net income and calendar year 2003 estimated net income of 10.5x to 14.5x and 9.0x to 12.5x, respectively, to corresponding financial data of Varsity. Based on the average of the low and the average of the high implied equity reference ranges derived from these multiples, this analysis indicated the following approximate implied per share equity reference range for Varsity, as compared to the per share merger consideration:


Implied Per Share Equity
Reference Range for Varsity
 
Per Share Merger Consideration
$4.15 - $7.25   $6.57

        Rothschild performed a selected precedent transactions analysis in order to derive an implied per share equity reference range for Varsity from transaction value multiples in merger and acquisition transactions involving other publicly traded companies and then compared this implied per share equity reference range with the merger consideration provided for in the merger agreement. Given the mix of Varsity's business operations and the limited number of precedent transactions involving companies in the school spirit industry, using publicly available information Rothschild analyzed the transaction value multiples paid or proposed to be paid in the following five selected transactions involving companies with business operations which generally reflected similar characteristics to those of Varsity's business operations:

Acquiror
   Target

•    Gart Sports Company
 
•    The Sports Authority, Inc.
•    K2 Inc.   •    Rawlings Sporting Goods Company, Inc.
•    Gart Sports Company   •    Oshman's Sporting Goods, Inc.
•    Investcorp   •    Jostens, Inc.
•    The Warnaco Group, Inc.   •    Authentic Fitness Corporation

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        Rothschild compared transaction values in the selected transactions as multiples of latest 12 months revenue, EBITDA and EBIT. Rothschild then applied ranges of selected multiples (other than a high outlier) derived from the selected transactions of latest 12 months EBITDA and EBIT of 5.0x to 8.0x and 8.0x to 12.0x, respectively, to Varsity's calendar year 2002 EBITDA and EBIT. Based on the average of the low and the average of the high implied equity reference ranges derived from these multiples, this analysis indicated the following approximate implied per share equity reference range for Varsity, as compared to the per share merger consideration:


Implied Per Share Equity
Reference Range for Varsity
 
Per Share Merger Consideration

$5.25 - $10.00
 
$6.57

        Rothschild performed a discounted cash flow analysis of Varsity in order to derive an implied per share equity reference range for Varsity if it were to remain an independent public company and then compared this implied per share equity reference range with the merger consideration provided for in the merger agreement. In this analysis, Rothschild calculated the estimated present value of the stand-alone, unlevered, after-tax free cash flows that Varsity could generate over fiscal years 2003 through 2007 utilizing financial forecasts provided to Rothschild by Varsity's management. For purposes of this analysis, Rothschild utilized an average compounded annual revenue growth rate for Varsity's uniforms and accessories and camps and events divisions during the five-year period analyzed of 7.4% based on internal estimates of Varsity's management. These forecasts also were sensitized, based on discussions with Varsity's management, by applying compounded annual revenue growth rates for Varsity's uniforms and accessories and camps and events divisions over such five-year period of 4.5% to 6.5% to reflect the potential for lower revenue growth in Varsity's business divisions as a result of various economic, market and other conditions existing at the time Rothschild rendered its opinion, which Varsity's management indicated may affect the future financial performance of Varsity notwithstanding management's expectations as to Varsity's financial results for the first quarter of 2003. These conditions included, among other things, a continuing downturn in the U.S. economy and increased uncertainty in economic and market conditions given the then imminent war with Iraq. Rothschild then calculated a range of estimated terminal values for Varsity by applying to Varsity's calendar year 2007 estimated EBITDA terminal EBITDA multiples ranging from 4.5x to 5.5x. In selecting this terminal EBITDA multiples range, Rothschild considered the trading multiples of the Apparel/Footwear Companies and Teen/Sporting Goods Retail Companies referred to above under "Selected Public Companies Analysis" (other than Nike, Inc. given its larger market capitalization relative to the other selected companies). The present value of the cash flows and terminal values were calculated using discount rates ranging from 11.0% to 13.0%, based generally on the weighted average cost of capital for the Apparel/Footwear Companies and Teen/Sporting Goods Retail Companies referred to above under "Selected Public Companies Analysis" (other than Vans, Inc. given its higher cost of capital relative to the other selected companies). Utilizing the midpoint of the terminal EBITDA multiple and discount rate ranges, this analysis indicated the following approximate implied per share equity reference range for Varsity (the low end of which was derived from internal estimates of Varsity's management assuming a compounded annual revenue growth rate of 4.5% and the high end of which was derived from internal estimates of Varsity's management assuming an average compounded annual revenue growth rate of 7.4%), as compared to the per share merger consideration:


Implied Per Share Equity
Reference Range for Varsity
 
Per Share Merger Consideration

$4.75 - $8.85
 
$6.57

33

        Rothschild performed a selected premiums paid analysis in order to derive an implied per share equity reference range for Varsity from premiums implied in selected public merger and acquisition transactions and then compared this implied per share equity reference range with the merger consideration provided for in the merger agreement. In this analysis, Rothschild reviewed the premiums paid in 107 selected public transactions and 45 selected public cash transactions completed between January 1, 2000 and April 17, 2003 with transaction values between $100 million and $200 million, excluding transactions involving technology and telecom companies and financial institutions. Rothschild reviewed the purchase prices paid in the selected transactions relative to the target company's average closing stock prices one week and four weeks prior to public announcement of the transaction. Rothschild then applied the premiums implied by the purchase prices paid in the selected transactions over these specified periods to the closing prices of Varsity common stock one week and four weeks prior to April 17, 2003 in order to derive an implied equity reference range for Varsity. This analysis indicated the following approximate implied per share equity reference range for Varsity, as compared to the per share merger consideration:


Implied Per Share Equity
Reference Range for Varsity
 
Per Share Merger Consideration

$5.80 - $6.60
 
$6.57

        In rendering its opinion, Rothschild also reviewed and considered other factors, including the historical trading prices for Varsity common stock from June 1, 2001 (the month in which Varsity completed the sale of its Riddell Group Division) through April 17, 2003 and the premiums implied in the merger based on the merger consideration, the closing price of Varsity common stock on April 17, 2003 and the average closing prices of Varsity common stock over the three-month, six-month and one-year periods prior to April 17, 2003.

        Under the terms of its engagement, Varsity has agreed to pay Rothschild for its financial advisory services a transaction fee based on a percentage of the total consideration, including outstanding indebtedness assumed, payable in the merger. The aggregate fee payable to Rothschild currently is estimated to be approximately $1.4 million, $700,000 of which is contingent upon completion of the merger. Varsity also has agreed to reimburse Rothschild for reasonable expenses incurred by Rothschild in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Rothschild and related persons against liabilities, including liabilities under the federal securities laws, arising out of its engagement. The terms of Rothschild's fee arrangements were negotiated at arm's length between the exploratory committee and Rothschild, and the board of directors was aware of such fee arrangements. In the ordinary course of business, Rothschild and its affiliates may actively trade or hold the securities of Varsity and affiliates of Green Equity Investors for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in those securities.

Our Projections

        We do not as a matter of policy make public forecasts or projections of future performance or earnings. However, in connection with exploring our strategic alternatives to enhance stockholder value, we prepared projections of our anticipated future operating performance for the five fiscal years ended December 31, 2003 through December 31, 2007. These projections were provided to Rothschild, and each of the eleven potential purchasers who entered into confidentiality agreements with us, as described in "—Background of the Merger." The projections were not prepared with a view towards public disclosure or compliance with published guidelines of the SEC, the guidelines established by the

34


American Institute of Certified Public Accountants for Prospective Financial Information or generally accepted accounting principles. Our certified public accountants have not examined or compiled any of the projections or expressed any conclusion or provided any form of assurance with respect to the projections and, accordingly, assume no responsibility for them. They are included below to give our stockholders access to information that was not publicly available and that we provided to Leonard Green & Partners.

        The projections are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those statements and should be read with caution. They are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and recent developments. While presented with numerical specificity, the projections were not prepared by us in the ordinary course and are based upon a variety of estimates and hypothetical assumptions made by our management with respect to, among other things, industry performance, general economic, market, interest rate and financial conditions, operating and other revenues and expenses, capital expenditures and working capital and other matters. None of the assumptions may be realized, and they are inherently subject to significant business, economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond our control. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove accurate, and actual results may materially differ. In addition, the projections do not take into account any of the transactions contemplated by the merger agreement, including the merger and related financing, which may also cause actual results to materially differ.

        For these reasons, as well as the bases and assumptions on which the projections were compiled, the inclusion of the projections in this proxy statement should not be regarded as an indication that the projections will be an accurate prediction of future events, and they should not be relied on as such. No one has made, or makes, any representation to any stockholder regarding the information contained in the projections and, except as required by applicable securities laws, we do not intend to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrences of future events even in the event that any or all of the assumptions are shown to be in error.


Varsity Spirit Corporation
Financial Projections Summary
2003 - 2007

 
   2003
   2004
   2005
   2006
   2007
 
   ($ in thousands)
Rounded
Total Revenues   170,549   183,789   199,032   216,761   234,048
Gross Profit   71,058   77,109   84,266   92,678   100,216
EBITDA   22,446   25,766   29,438   34,056   37,612
Pre-Tax Income   12,998   16,078   19,750   24,368   31,174
Net Income   9,629   9,807   12,048   14,864   19,016

        The projections that we provided Leonard Green & Partners set forth above are based on, among other things, the assumption that we will become a private company during 2003 and remain private through 2007. Consequently, these projections do not take into account certain public company expenses including, but not limited to, legal, accounting and audit fees and assume we will achieve savings as a result of the retirement of our public notes. The EBITDA, pre-tax income and net income projections, which our management provided to Rothschild in connection with its opinion, assumed that we would continue as a public company. Therefore, those projections reflect lower estimates with respect to EBITDA, pre-tax income and net income. In addition to the above total revenues and gross profit

35


projections, set forth below are the EBITDA, pre-tax income and net income projections our management provided to Rothschild:

 
   2003
   2004
   2005
   2006
   2007
 
   ($ in thousands)
 
   Rounded
EBITDA   21,610   24,376   27,968   32,500   35,966
Pre-Tax Income   11,546   14,647   18,239   22,771   29,487
Net Income   7,043   8,934   11,126   13,890   17,987

The Position of Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation as to the Fairness of the Merger

        Under a potential interpretation of the rules governing "going private" transactions, Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation may be deemed affiliates of Varsity and required to express their beliefs as to the fairness of the merger to our unaffiliated stockholders. Each of Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation believes that the merger is fair to Varsity's unaffiliated stockholders on the basis of the factors described below.

        Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not participate in the deliberations of the Varsity board of directors regarding, or receive advice from Varsity's legal or financial advisors as to, the fairness of the merger to Varsity's unaffiliated stockholders. However, based upon their own knowledge and analysis of available information regarding Varsity, as well as discussions with members of Varsity's senior management regarding the factors considered by, and findings of, the Varsity board of directors discussed in this proxy statement in the section entitled "—Recommendation of Our Board of Directors; Fairness of the Merger," they believe that the merger is substantively fair to Varsity's unaffiliated stockholders. In particular, they considered the following:

36

        Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation believe that the merger is procedurally fair to the unaffiliated stockholders of Varsity is based upon the following factors:

        Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation believe that the merger is procedurally fair despite the fact that the terms of the merger agreement do not require the approval of at least a majority of the unaffiliated Varsity stockholders and that the board of directors did not retain an unaffiliated representative to act solely on behalf of the unaffiliated Varsity stockholders for purposes of negotiating the terms of the merger agreement.

        Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not consider net book value in determining the fairness of the merger to the unaffiliated stockholders because they believe that net book value, which is an accounting concept, does not reflect, or have any meaningful impact on, the market trading prices for the Varsity common stock. They note, however, that the merger consideration of $6.57 per share of Varsity common stock is higher than the book value of the Varsity common stock. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not consider liquidation value in determining the fairness of the merger to the unaffiliated stockholders because Varsity will continue to operate its businesses following completion of the merger. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not establish a pre-merger going concern value for the Varsity common stock as a public company to determine the fairness of the merger consideration to Varsity's unaffiliated stockholders. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation do not believe there is a single method of determining going concern value. In this regard, however, they noted that Varsity's board of directors' exploration of a possible sale of Varsity contemplated the sale of Varsity as a going concern. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not consider the going concern value of Varsity in determining the fairness of the merger because, following the merger, Varsity will have a significantly different capital structure, which will result in different opportunities and risks for the business as a highly-leveraged private company.

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        Since none of Green Equity Investors, GEI Capital, VBR Holding Corporation, VB Merger Corporation, Jeff Webb or John Nichols has purchased shares of Varsity common stock in the last two years, Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not have any purchase prices for shares of Varsity common stock with which to compare the merger consideration. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation did not rely on any report, opinion or appraisal from an outside party in determining the fairness of the merger to Varsity's unaffiliated stockholders.

        Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation believe that these factors provide a reasonable basis for their belief that the merger is fair to Varsity's unaffiliated stockholders. This belief should not, however, be construed as a recommendation to any Varsity stockholder to adopt the merger agreement. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation do not make any recommendation as to how stockholders of Varsity should vote their shares. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation have not undertaken any formal evaluation of the fairness of the merger to Varsity's unaffiliated stockholders, nor have they assigned specific relative weights to the factors considered by them.

The Position of the Management Investors as to the Fairness of the Merger

        Each of the management investors has considered the factors considered by, and findings of the board of directors, with respect to the fairness of the merger to the unaffiliated stockholders of Varsity and believes that the merger is substantively fair to Varsity's unaffiliated stockholders on the basis of the factors described below.

38

The management investors believe that the merger is procedurally fair to the unaffiliated stockholders of Varsity based upon the following factors:

        The management investors determined that the merger is procedurally fair despite the fact that the terms of the merger agreement do not require the approval of at least a majority of the unaffiliated Varsity stockholders and that the board of directors did not retain an unaffiliated representative to act solely on behalf of the unaffiliated Varsity stockholders for purposes of negotiating the terms of the merger agreement.

        While the management investors did not independently consider the going concern value of Varsity, they considered and adopted the discounted cash flow analysis performed by Rothschild. With respect to liquidation value, the management investors considered that, as a member of the school spirit industry, with significant value in its employees and goodwill, liquidation value would likely be significantly lower than the valuation of Varsity as a going concern and, as such, would not provide a useful comparison for assessing the fairness of the $6.57 per share consideration. In addition, the management investors considered that book value ($3.11 per share as of June 30, 2003), which is based on the historical cost value of Varsity's assets (but does not take into account any shares of common stock issuable upon the exercise of options at the conversion of Varsity's convertible debt), also would not provide a fair value for the business as compared to current period measurements of Varsity's operational performance, such as EBITDA and earnings per share. Since none of Green Equity Investors, GEI Capital, VBR Holding Corporation, VB Merger Corporation, Jeff Webb or John

39


Nichols had purchased shares of Varsity's common stock in the last two years, the management investors were not able to compare the merger consideration with a related range of purchase prices.

        The management investors believe that these factors provide a reasonable basis for their belief that the merger is fair to Varsity's unaffiliated stockholders. This belief should not, however, be construed as a recommendation to any Varsity stockholder to adopt the merger agreement. The management investors do not make any recommendation as to how stockholders of Varsity should vote their shares. The management investors have not undertaken any formal evaluation of the fairness of the merger to Varsity's unaffiliated stockholders, nor have they assigned specific relative weights to the factors considered by them. The management investors, other than Jeff Webb, in his capacity as a director of Varsity, have not received any report, opinion or appraisal from an outside party that is materially related to the merger.

Purpose and Reasons for the Merger; Structure of the Merger

        Our purpose for engaging in the merger is to enable our unaffiliated stockholders to receive $6.57 in cash per share, representing a substantial premium to the market price of our common stock prior to announcement of the merger agreement. As discussed above under "—Recommendation of Our Board of Directors; Fairness of the Merger," our board of directors concluded that the opportunity to achieve $6.57 per share in the merger at this time was a superior alternative to remaining a publicly traded company. We also believe that our common stock has been undervalued in the public market, despite the efforts of the board to implement various business initiatives over the years to improve our prospects. As a result of the relatively small size of our Company and the niche industry in which we operate, we believe that we have not been able to realize fully the benefits of public company status. At the same time, our public company status imposes a number of limitations on us and our management in conducting our operations. Accordingly, another of the purposes of the merger is to create greater operating flexibility, allowing management to concentrate on long-term growth. Similarly, management will no longer be required to continue to devote the significant time required to comply with our public reporting obligations. Furthermore, as a private company, we will not continue to incur significant audit, legal and other costs and fees associated with remaining a public company. We intend to use in our operations those funds that would otherwise be expended in complying with requirements applicable to public companies. We also determined to undertake the merger at this time based on the conclusions of the exploratory committee and the reasons of the board of directors described in detail above under "—Background of the Merger" and "—Recommendation of Our Board of Directors; Fairness of the Merger."

        The purpose of Green Equity Investors, GEI Capital and their affiliates VBR Holding Corporation and VB Merger Corporation for engaging in the merger are to enable Green Equity Investors to make an investment in, and to obtain a controlling interest in, Varsity, and to enable existing Varsity stockholders (other than the management investors) to realize a premium on their shares of Varsity common stock. Because Green Equity Investors contemplated that existing management, including the management investors, would continue to operate Varsity's business following completion of the merger, it was important to Green Equity Investors that the management investors have an ownership interest in VBR Holding Corporation following completion of the merger. The parties structured the transaction with the intent that the management investors should generally have a tax-free exchange of a portion of their Varsity common stock and options for stock and options in VBR Holding Corporation. VBR Holding Corporation and VB Merger Corporation were formed for the purpose of

40

engaging in the merger and the other transactions contemplated by the merger agreement. VBR Holding Corporation and VB Merger Corporation elected to proceed with the merger and the other transactions contemplated by the merger agreement for the same purposes that motivated Green Equity Investors. Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation undertook the transaction at this time because of the solicitation process initiated by Varsity described under "Special Factors—Background of the Merger."

        The management investors' purpose for engaging in the merger is to retain an investment in Varsity as a private company. The management investors believe that as a private company Varsity will have greater operating flexibility to focus on enhancing value by emphasizing growth and operating cash flow without the constraint of the public market's emphasis on quarterly earnings. While the management investors believe that there will be significant opportunities associated with their continued ownership, there are also substantial risks that these opportunities may not be realized. These risks include, among others, risks associated with holding equity of a privately held company as opposed to public companies. These risks include:

        Because Green Equity Investors contemplated that existing management, including the management investors, would continue to operate Varsity's business following completion of the merger, it was important to Green Equity Investors that the management investors have an ownership interest in VBR Holding Corporation following completion of the merger. The parties structured the transaction with the intent that the management investors should generally have a tax-free exchange of a portion of their Varsity common stock and options for stock and options in VBR Holding Corporation.

        The transaction was structured as a merger because, in the opinion of each of Varsity, Green Equity Investors, GEI Capital, VBR Holding Corporation, VB Merger Corporation and the management investors, it was the most efficient structure to accomplish the transaction. In addition, the parties structured the transaction with the intent that the management investors should generally have a tax-free exchange of a portion of their Varsity common stock and options for stock and options in VBR Holding Corporation.

Effects of the Merger; Plans or Proposals After the Merger

        After the effective time of the merger, holders of Varsity common stock will cease to have ownership interests in Varsity or rights as stockholders and will therefore not have the opportunity to share in any of Varsity's future earnings and growth and similarly, will not bear the risk of any losses generated by Varsity's operations and any decrease in its value after the merger. As a result of the merger, VBR Holding Corporation will own all of the surviving corporation's outstanding common stock and will be the sole beneficiary of Varsity's future earnings and growth, if any. Similarly, VBR Holding Corporation will also bear the risk of any losses generated by the surviving corporation's

41


operations and any decrease in value after the merger. All of the securities of VBR Holding Corporation will be owned by Green Equity Investors, the management investors and the purchasers of senior subordinated notes expected to be issued by the surviving corporation as described under "The Merger—Financing of the Merger" below.

        Following the merger, our common stock will no longer be traded on the American Stock Exchange. In addition, the registration of our common stock under the Securities Exchange Act of 1934 will be terminated under section 12(g)(4) of the Exchange Act. Due to this termination, certain provisions of Section 16(b) of the Exchange Act, and requirements that we furnish a proxy or information statement in connection with stockholders' meetings will no longer apply to Varsity. After the effective time of the merger, there will be no publicly traded Varsity common stock outstanding and Varsity will no longer be required to file periodic reports under Section 15(d) of the Exchange Act with the Securities and Exchange Commission.

        From and after the effective time of the merger, all of Varsity's current officers, other than Mr. Nederlander and Mr. Toboroff, will remain the officers of the surviving corporation, and the directors of VBR Holding Corporation will be the directors of the surviving corporation, until, in each case, their successors are duly elected or appointed and qualified. From and after the effective time, Varsity's certificate of incorporation will be as set forth in Exhibit F to the merger agreement, and Varsity's by-laws will be the by-laws of the surviving corporation, each until amended afterwards.

        Green Equity Investors, VBR Holding Corporation, VB Merger Corporation and the management investors expect that following completion of the merger, Varsity's operations will be conducted substantially as they are currently being conducted. Green Equity Investors, VBR Holding Corporation, VB Merger Corporation and the management investors have informed Varsity that they have no current plans or proposals or negotiations which relate to or would result in an extraordinary corporate transaction involving Varsity's corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations, or sale or transfer of a material amount of assets except as described in this proxy statement. Nevertheless, Green Equity Investors, VBR Holding Corporation and the management investors may initiate from time to time reviews of Varsity and its assets, corporate structure, capitalization, operations, properties, management and personnel to determine what changes, if any, would be desirable following the merger. They expressly reserve the right to make any changes that they deem necessary or appropriate in light of their review or in light of future developments. Green Equity Investors is continuously engaged in the process of identifying, receiving and reviewing potential investment opportunities in companies for itself and on behalf of companies in which it has an ownership interest. In that regard, Green Equity Investors and VBR Holding Corporation have preliminarily explored and discussed with the management investors and, subsequent to the signing of the merger agreement, with third parties, potential investment, acquisition and other opportunities involving companies in the same and related lines of business as Varsity, including without limitation school spirit apparel and athletic camps, athletic apparel, athletic equipment and other products and services relating to the school spirit and sports industries and the markets served by those industries, and expect to do so in the future. However, Green Equity Investors, VBR Holding Corporation and the management investors are not presently engaged in any such exploration or discussion.

        Among the benefits of the merger to us is the elimination of the expenses related to our being a publicly-traded company and filing periodic reports under the Exchange Act. A benefit to Green Equity Investors, VBR Holding Corporation, VB Merger Corporation and the management investors is that our future earnings and growth will be solely for their benefit and not for the benefit of our current unaffiliated stockholders. In addition, the parties structured the transaction with the intent that the management investors should generally have a tax-free exchange of a portion of their Varsity common stock and options for stock and options in VBR Holding Corporation. Additionally, as of December 31,

42


2002 Varsity had net operating loss carry forwards of approximately $4.6 million. As a result of the merger, VBR Holding Corporation and VB Merger Corporation will be the beneficiaries of these net operating loss carry forwards. The detriments to us and Green Equity Investors, VBR Holding Corporation, VB Merger Corporation and the management investors are the lack of liquidity for our common stock following the merger; the payment of approximately $165 million to fund the merger and the payment of approximately $19 million in estimated fees and expenses. The anticipated tax consequences of the transaction to the management investors is discussed under "Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders." There will not be any tax consequences to Varsity as a result of the merger.

        The benefit to our unaffiliated stockholders is the right to receive $6.57 per share for their shares of our common stock. The detriments are that such stockholders will cease to participate in our future earnings and growth, if any, and that the receipt of the payment for their shares will be a taxable transaction for federal income tax purposes. See "Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders."

        The following table sets forth a pro forma analysis of the number of shares and book value per share of each person participating in the going private transaction as compared to the unaffiliated stockholders.

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VARSITY BRANDS, INC.
EFFECTS OF GOING PRIVATE TRANSACTION
(IN THOUSANDS, EXCEPT FOR PER SHARE,
NET BOOK VALUE AND NET EARNINGS DATA)
AS OF AND FOR THE PERIOD ENDED MARCH 31, 2003

 
   Old
Common
Stock
   Adjustment
   New
Common
Stock
GEI Capital IV            
Green Equity Investors IV            
VBR Holding Corp            
VB Merger Corp            
  Shares of Common Stock   0   1,379,573   1,379,573
  Net Book Value — Dollar   0   22,741,696   22,741,696
  Net Book Value — Percentage   0.00%   90.46%   90.46%
  Net Earnings — Dollar   0   (2,395,482)   (2,395,482)
  Net Earnings — Percentage   0.00%   90.46%   90.46%
Jeffrey G. Webb            
  Shares of Common Stock   866,127   (751,972)   114,155
  Net Book Value — Dollar   2,269,912   (388,114)   1,881,798
  Net Book Value — Percentage   9.03%   (1.54%)   7.49%
  Net Earnings — Dollar   (239,100)   40,882   (198,218)
  Net Earnings — Percentage   9.03%   (1.54%)   7.49%
John M. Nichols*            
  Shares of Common Stock   0   8,441   8,441
  Net Book Value — Dollar   0   139,146   139,146
  Net Book Value — Percentage   0.00%   0.55%   0.55%
  Net Earnings — Dollar   0   (14,657)   (14,657)
  Net Earnings — Percentage   0.00%   0.55%   0.55%
   
 
 
Total Affiliated Security Holders            
  Shares of Common Stock   866,127   636,042   1,502,169
  Net Book Value — Dollar   2,269,912   22,492,728   24,762,640
  Net Book Value — Percentage   9.03%   89.47%   98.50%
  Net Earnings — Dollar   (239,100)   (2,369,257)   (2,608,356)
  Net Earnings — Percentage   9.03%   89.47%   98.50%
Unaffiliated Security Holders            
  Shares of Common Stock   8,726,123   (8,703,292)   22,831
  Net Book Value — Dollar   22,869,088   (22,492,728)   376,360
  Net Book Value — Percentage   90.97%   (89.47%)   1.50%
  Net Earnings — Dollar   (2,408,900)   2,369,257   (39,644)
  Net Earnings — Percentage   90.97%   (89.47%)   1.50%
*
The figures for John Nichols do not reflect any of the options of VBR Holding Corporation that he will acquire pursuant to his Contribution and Option Exchange Agreement with VBR Holding Corporation.

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VARSITY BRANDS, INC.
EFFECTS OF GOING PRIVATE TRANSACTION
(IN THOUSANDS, EXCEPT FOR PER SHARE,
NET BOOK VALUE AND NET EARNINGS DATA)
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2002

 
   Old
Common
Stock
   Adjustment
   New
Common
Stock
GEI Capital IV            
Green Equity Investors IV            
VBR Holding Corp            
VB Merger Corp            
  Shares of Common Stock   0   1,379,573   1,379,573
  Net Book Value — Dollar   0   25,137,177   25,137,177
  Net Book Value — Percentage   0.00%   90.46%   90.46%
  Net Earnings — Dollar   0   8,980,342   8,980,342
  Net Earnings — Percentage   0.00%   90.46%   90.46%

Jeffrey G. Webb
 
 
 
 
 
 
  Shares of Common Stock   866,127   (751,972)   114,155
  Net Book Value — Dollar   2,509,012   (428,996)   2,080,016
  Net Book Value — Percentage   9.03%   (1.54%)   7.49%
  Net Earnings — Dollar   896,353   (153,260)   743,093
  Net Earnings — Percentage   9.03%   (1.54%)   7.49%

John M. Nichols*
 
 
 
 
 
 
  Shares of Common Stock   0   8,441   8,441
  Net Book Value — Dollar   0   153,803   153,803
  Net Book Value — Percentage   0.00%   0.55%   0.55%
  Net Earnings — Dollar   0   54,947   54,947
  Net Earnings — Percentage   0.00%   0.55%   0.55%
   
 
 

Total Affiliated Security Holders
 
 
 
 
 
 
  Shares of Common Stock   866,127   636,042   1,502,169
  Net Book Value — Dollar   2,509,012   24,861,985   27,370,997
  Net Book Value — Percentage   9.03%   89.47%   98.50%
  Net Earnings — Dollar   896,353   8,882,028   9,778,381
  Net Earnings — Percentage   9.03%   89.47%   98.50%

Unaffiliated Security Holders
 
 
 
 
 
 
  Shares of Common Stock   8,726,123   (8,703,292)   22,831
  Net Book Value — Dollar   25,277,988   (24,861,985)   416,003
  Net Book Value — Percentage   90.97%   (89.47%)   1.50%
  Net Earnings — Dollar   9,030,647   (8,882,028)   148,619
  Net Earnings — Percentage   90.97%   (89.47%)   1.50%
*
The figures for John Nichols do not reflect any of the options of VBR Holding Corporation that he will acquire pursuant to his Contribution and Option Exchange Agreement with VBR Holding Corporation.

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Risk that the Merger Will Not Be Completed

        Completion of the merger is subject to various conditions, including, but not limited to, the following:

        As a result of the conditions to the completion of the merger, even if the requisite stockholder approval is obtained, there can be no assurance that the merger will be completed. In particular, as described under "Special Factors—Litigation," our directors and we are defendants in a lawsuit seeking to enjoin the merger. Our directors and we believe the allegations contained in the complaint are without merit and intend to contest the action vigorously. However, we cannot assure you as to the outcome of this litigation or, if the action is still pending at the time the merger would otherwise be consummated, whether VBR Holding Corporation and VB Merger Corporation would elect to complete the merger.

        We expect that if the merger agreement is not approved and adopted by stockholders, or if the merger is not completed for any other reason, our current management, under the direction of our board of directors, will continue to manage Varsity as an on-going business. We are not currently considering any other transaction as an alternative to the merger.

Interests of Our Directors and Executive Officers in the Merger

        In considering the recommendation of the board of directors, you should be aware that some members of our board of directors and some of our executive officers and employees have interests that are different from, or in addition to, your interests as a Varsity stockholder generally and that may create potential conflicts of interest. Our board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement. These interests are described below.

        Jeff Webb, a Varsity director and our chief executive officer and president, John Nichols, our chief financial officer and senior vice president, J. Kristyn Shepherd, our Senior Vice President, Special Events and Gregory Webb, our Senior Vice President, Camps and Events, have entered into agreements to exchange a combination of cash, Varsity shares and Varsity stock options for shares and options to acquire shares of VBR Holding Corporation, which will own Varsity following the merger.

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        Jeff Webb has entered into a contribution and subscription agreement with VBR Holding Corporation. Under this agreement, Jeff Webb has agreed to contribute 114,155 shares of Varsity common stock to VBR Holding Corporation prior to the merger in exchange for 114,155 shares of VBR Holding Corporation common stock. Jeff Webb's shares will represent approximately 7.5% of VBR Holding Corporation's common stock (calculated prior to dilution for new options to be granted under an employee option program and equity to be issued to the purchasers of the senior subordinated notes described under "The Merger—Financing of the Merger" below). The remainder of Jeff Webb's shares will be converted into the right to receive $6.57 per share in the merger.

        John Nichols has entered into a contribution and exchange agreement with VBR Holding Corporation. Under this agreement, John Nichols has agreed to contribute $55,457 to VBR Holding Corporation prior to the merger in exchange for 8,441 shares of VBR Holding Corporation common stock. In addition, John Nichols will exchange all of his 68,500 Varsity stock options, with an average exercise price of $4.99 per share, for 22,001 options to acquire shares of VBR Holding Corporation common stock with an average exercise price of $1.6425 per share. As a result, he will own, or have the right to acquire, approximately 2.0% of VBR Holding Corporation's common stock (calculated prior to dilution for new options to be granted under an employee option program and equity to be issued to the purchasers of the senior subordinated notes described under "The Merger—Financing of the Merger" below).

        J. Kristyn Shepherd, Varsity's Senior Vice President, Special Events, has entered into a contribution and subscription agreement with VBR Holding Corporation. Under this agreement, she has agreed to contribute 15,221 shares of Varsity common stock to VBR Holding Corporation prior to the merger in exchange for 15,221 shares of VBR Holding Corporation common stock. Her shares will represent approximately 1% of VBR Holding Corporation's common stock (calculated prior to dilution for new options to be granted under the employee option program described below and equity to be issued to the purchasers of the senior subordinated notes described under "The Merger—Financing of the Merger" below).

        Gregory Webb, Varsity's Senior Vice President, Camps and Events, has entered into a contribution and subscription agreement with VBR Holding Corporation. Under this agreement, he has agreed to contribute 7,610 shares of Varsity common stock to VBR Holding Corporation prior to the merger in exchange for 7,610 share of VBR Holding Corporation common stock. His shares will represent approximately 0.5% of VBR Holding Corporation's common stock (calculated prior to dilution for new options to be granted under the employee option program described below and equity to be issued to the purchasers of the senior subordinated notes described under "The Merger—Financing of the Merger" below).

        The opportunity to obtain an equity interest in VBR Holding Corporation in connection with the merger may have presented the management investors with actual and potential conflicts of interest in connection with the merger. As a result of these arrangements, these individuals will own or have the right to acquire up to 11% of the common equity interests in VBR Holding Corporation following the merger (calculated prior to dilution for (i) new options to be granted under the employee option program described below and (ii) equity to be issued to the purchasers of the senior subordinated notes described under "The Merger—Financing of the Merger" below). None of Varsity's other existing stockholders will have an ownership interest in VBR Holding Corporation. In addition, VBR Holding Corporation currently intends to adopt a stock option plan for our key employees after completion of the merger.

Employment with Surviving Corporation

        The officers of Varsity, other than Robert E. Nederlander and Leonard Toboroff will continue in their current positions with the surviving corporation. Varsity has amended its employment agreement

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with Mr. Toboroff to provide that he will continue as a non-executive employee of Varsity for 18 months following the consummation of the merger at the rate of $90,000 per annum, plus health and other benefits for 36 months following the merger. Jeff Webb and John Nichols have each entered into an employment agreement that will become effective upon the completion of the merger.

        Jeff Webb has entered into an employment agreement with VB Merger Corporation that will become effective upon the completion of the merger (at which point VB Merger Corporation will cease to exist and the employment agreement will be assumed by the surviving corporation). Jeff Webb's employment agreement provides that he will serve as chairman of the board, chief executive officer and president of the surviving corporation. In addition, the agreement provides that Leonard Green & Partners or an affiliate will cause Jeff Webb to be appointed or elected as a member of the surviving corporation's board of directors. The agreement will expire on the fifth anniversary of the date of the completion of the merger; provided that beginning on the second anniversary of such date the employment agreement will automatically be extended each day by one additional day (so that the remaining term will always be three years) unless the employment agreement is terminated as described below.

        Jeff Webb's employment agreement provides for the following base salary and bonus:

        Jeff Webb's employment may be terminated by the surviving corporation with or without "cause" (as defined in his employment agreement), by him with or without "good reason" (as defined in his employment agreement), due to his death or disability, or due to a "change in control" (as defined in his employment agreement). If his employment is terminated in connection with a change in control, by the surviving corporation without cause, by Jeff Webb for good reason, or by him without good reason during the thirty-day period beginning on the six-month anniversary of any change in control, then he will generally be eligible to continue to receive coverage under the surviving corporation's applicable welfare benefit plans and fringe benefit programs until the later of the fifth anniversary of the effective date of the employment agreement or the third anniversary of the date of termination. Any payment or benefit he receives in connection with any change in control will, if necessary, be reduced to the maximum amount, which would not result in any "excess parachute payment" (within the meaning of Section 280G of the Internal Revenue Code).

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        Jeff Webb's employment agreement includes the following restrictive covenants:

        John Nichols has entered into a new employment agreement with VB Merger Corporation that will become effective upon the completion of the merger (at which point, VB Merger Corporation will cease to exist and the employment agreement will be assumed by the surviving corporation). This new employment agreement will, subject to the completion of the merger, supersede John Nichols' existing employment agreement. If the merger is not consummated, John Nichols' existing employment agreement will remain in effect. John Nichols' new employment agreement provides that he will serve as senior vice president and chief financial officer of the surviving corporation. The agreement will expire on the second anniversary of the date that it becomes effective; provided that it will automatically extend for successive two-year periods unless either party gives the other advanced notice of non-extension or the agreement is otherwise terminated as described below.

        John Nichols' new employment agreement provides for the following base salary and bonus:

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        John Nichols' employment may be terminated by the surviving corporation with or without "cause" (as defined in his new employment agreement), by John Nichols with or without "good reason" (as defined in his new employment agreement), or due to his death or disability. If John Nichols' employment is terminated by the surviving corporation without cause, by John Nichols for good reason, or if the surviving corporation fails to renew the term of the new employment agreement, then:

        John Nichols' new employment agreement includes the following restrictive covenants:

        Our board of directors has approved cash transaction and retention bonuses for Jeff Webb and John Nichols in the amount of $1,585,000 and $300,000 respectively, payable upon completion of the merger. These amounts will be reduced, if necessary, to the maximum amount, which would not result in any "excess parachute payment" (within the meaning of Section 280G of the Internal Revenue Code) being paid. Our board of directors has also approved retention bonuses in an aggregate amount of approximately $415,000 to be paid to 27 other key employees on the 91st day following the completion of the merger, provided that the employee is still employed by us at that date. The board of directors determined to grant these bonuses for the reasons described under "—Background of the Merger" above.

        In addition, historically, our performance based bonus pool (excluding Jeff Webb and John Nichols) has typically been approximately $750,000 in the aggregate with respect to a full year of Company operations. As a consequence, the surviving corporation has agreed to pay 29 key employees, (other than Jeff Webb and John Nichols) their approximate pro rata share of the normal, year-end operational bonuses, or an aggregate amount of approximately $400,000. Payment of these bonuses is subject to and conditional upon the completion of the merger.

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        In addition, David Groelinger, a former executive of Varsity, acted as a consultant to Varsity during the negotiation of the merger. In consideration for the substantial time and effort devoted by Mr. Groelinger in connection with the negotiation of the merger, the board of directors, by unanimous vote of all directors voting on the matter, determined to pay Mr. Groelinger a fee of $40,000 for his services, conditioned and payable upon completion of the merger.

        In connection with the merger, Mr. Kornstein, Mr. Seessel, Mr. Schembechler, and Mr. McConnaughy served as members of the exploratory committee, which explored whether other opportunities existed to maximize stockholder value. On December 9, 2002 we paid each of these individuals a fee of $20,000 for serving as a member of the exploratory committee. In addition, we paid Mr. Kornstein an additional $10,000 for serving as chairman of the exploratory committee. The fees were paid in recognition of the substantial amount of time and effort that the members of the exploratory committee devoted to the exploration of our strategic alternatives including a potential sale transaction.

        Mr. Kornstein, an independent director, performed valuable services, and expended substantial time and effort as the lead director delegated by the board to negotiate the merger agreement and work with Varsity's financial and legal advisors. As such, the board recognized that Mr. Kornstein expended far more time and effort, and took on substantially greater responsibilities than any other member of the board. As a consequence, Varsity will pay Mr. Kornstein a fee of $150,000 upon the earlier of the closing of the merger or the termination of the merger agreement. This fee is not contingent on completion of the merger.

        We have executive employment agreements with Mr. Nederlander and Mr. Toboroff. Each employment agreement originally provided that in the event of a constructive termination, which would effectively occur upon the change in control resulting from the closing of the merger, the executive is entitled to receive a cash payment of $671,500. In connection with the negotiation of the merger agreement, Mr. Nederlander agreed to amend his employment agreement to reduce the amount he is entitled to receive upon the completion of the merger to $670,000. Mr. Toboroff has similarly agreed to reduce the amount he is entitled to receive under his employment agreement to $536,500.

        In connection with the merger, we will cash out all options on common stock at a price equal to the excess, or spread, of the $6.57 per share merger consideration over the per share exercise price of each option. As of the record date, our executive officers, three of whom are directors, hold options to purchase a total of approximately 1,235,950 shares and the aggregate spread for these options is approximately $2,889,813. In connection with this provision of the merger agreement, some of our directors, executive officers and employees have signed written consents agreeing to the cash-out of their options and to accept the merger consideration that is due and payable under the merger agreement, upon the completion of the merger. In the event that the merger is not completed, these consents will be null and void.

        The merger agreement provides that the surviving corporation will indemnify and hold harmless each present and former director and officer of Varsity for acts and omissions occurring prior to the

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effective time of the merger. The merger agreement further provides that for a period of six years after the effective time of the merger, the surviving corporation will maintain officers' and directors' liability insurance covering the persons who, on the date of the merger agreement, were covered by Varsity's officers' and directors' liability insurance policies with respect to acts and omissions occurring prior to the effective time of the merger, subject to some limitations. However, if the annual premium for the policy exceeds 200% of the last annual premium paid by us prior to April 21, 2003, then the surviving corporation is required only to get as much comparable insurance as possible for an annual premium equal to 200% of the last annual premium paid by us prior to that date. Alternatively, with the consent of VB Merger Corporation we may purchase "tail" insurance, at a cost no greater than $415,000, that provides the coverage described above. The persons benefiting from these provisions include all of varsity's current directors and executive officers. (See "The Merger—The Merger Agreement—Covenants of VBR Holding Corporation and VB Merger Corporation—Director and Officer Liability.")

        In connection with the merger agreement, the following current and former directors and executive officers have entered into separate voting agreements dated April 21, 2003, with VBR Holding Corporation: Mr. Nederlander, Jeff Webb, Mr. Toboroff, Mr. McConnaughy, John Nichols, Gregory Webb, Mr. Groelinger, Kline Boyd, and Kristyn Shepherd. These individuals, who were identified by VBR Holding Corporation, have agreed, pursuant to the voting agreements, among other things, to do the following:


        The voting agreements will terminate upon the earliest of (a) consummation of the merger, (b) termination of the merger agreement or (c) written notice of VBR Holding Corporation, to the

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individual, of the termination of such individual's voting agreement. VBR Holding Corporation may terminate, or waive the provisions of, any person's voting agreement without seeking the consent of any other person who has entered into a voting agreement. Any such termination or waiver would have no impact on the obligations of any other person who has entered into a voting agreement with VBR Holding Corporation. Furthermore, no person who has entered into a voting agreement with VBR Holding Corporation has the ability to enforce the obligations of any other person's voting agreement, nor does any such person have any responsibility for a breach or failure to perform by any other person who has entered into a voting agreement with VBR Holding Corporation. For a more complete description of the voting agreements, you should refer to the form of voting agreement attached as Annex D to this proxy statement.

        Immediately before completion of the merger, Green Equity Investors, VBR Holding Corporation and the management investors will enter into a stockholders agreement. The stockholders agreement will restrict the ability of the management investors to freely transfer their securities in VBR Holding Corporation and will give Green Equity Investors and VBR Holding Corporation a right of first refusal if a management investor seeks to make specified transfers of his or her securities to a third party. If the management investor ceases employment with Varsity, Green Equity Investors and VBR Holding Corporation will be able to purchase an agreed portion of their securities at specified prices. Additionally, Green Equity Investors will have drag-along rights, meaning that, under some circumstances, if Green Equity Investors desires to sell a portion of its securities to a third party, the management investors will be required to sell a portion of their shares to the third party. Also, the management investors will have tag-along rights to participate if Green Equity Investors sells its shares to a third party, which means that the management investors are allowed to include a portion of their shares in the sale to the third party. The stockholders agreement will also provide Green Equity Investors and the management investors with demand and piggyback registration rights in some circumstances.

        Initially, Jeff Webb and a nominee of Jeff Webb will be nominated to the board of directors of VBR Holding Corporation.

Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders

        The following is a summary of United States federal income tax consequences of the merger to stockholders whose shares of Varsity common stock are converted into the right to receive cash in the merger and the United States federal income tax consequences to management investors whose shares of Varsity common stock are exchanged for shares of VBR Holding Corporation. The discussion does not purport to consider all aspects of United States federal income taxation that might be relevant to Varsity's stockholders. The discussion is based on current law, which is subject to change possibly with retroactive effect. The discussion applies only to stockholders who hold shares of Varsity's common stock as capital assets, and may not apply to shares of common stock received in connection with the exercise of employee stock options or otherwise as compensation, or to some types of stockholders (such as insurance companies, tax-exempt organizations, financial institutions and broker-dealers) who may be subject to special rules.

        This discussion does not discuss the tax consequences to any Varsity stockholder who, for United States federal income tax purposes, is a non-resident alien individual, foreign corporation, foreign partnership or foreign estate or trust, and does not address any aspect of state, local or foreign tax laws. Furthermore, this summary does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction.

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        In addition, if a stockholder is an entity treated as a partnership for United States federal income tax purposes, the tax treatment of each partner of such partnership will depend upon the status of the partner and upon the activities of the partnership. A stockholder that is a partnership, and partners in such partnerships, should consult their own tax advisors regarding the tax consequences of the merger.

        The receipt of cash for shares of Varsity's common stock in the merger will be a taxable transaction for United States federal income tax purposes. In general, a stockholder who surrenders shares of Varsity's common stock for cash in the merger will recognize capital gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's adjusted tax basis in the shares of Varsity common stock surrendered. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered for cash pursuant to the merger. Such gain or loss will be long-term capital gain or loss provided that a stockholder's holding period for such shares is more than 12 months at the time of the consummation of the merger. There are limitations on the deductibility of capital losses.

        No gain or loss generally will be recognized by the management investors who exchange shares of Varsity common stock for shares of VBR Holding Corporation common stock. The aggregate adjusted basis of the VBR Holding Corporation common stock received by a management investor in exchange for his or her common stock will generally be equal to the aggregate adjusted basis of the Varsity common stock exchanged therefor. The holding period of the VBR Holding Corporation stock received in exchange for Varsity common stock generally will include the holding period of the Varsity common stock exchanged therefor.

        Under the U.S. federal backup withholding tax rules, unless an exemption applies, the exchange agent will be required to withhold, and will withhold, 30% of all cash payments to which a holder of shares is entitled pursuant to the merger agreement, unless the stockholder provides a tax identification number (social security number, in the case of an individual, or employer identification number, in the case of other stockholders), certifies that such number is correct, certifies as to no loss of exemption from backup withholding, and otherwise complies with such backup withholding tax rules. Each of Varsity's stockholders should complete and sign the Substitute Form W-9 included as part of the letter of transmittal to be returned to the exchange agent, in order to provide the information and certification necessary to avoid backup withholding tax, unless an exemption applies and is established in a manner satisfactory to the exchange agent.

        The description of the U.S. federal income tax consequences of the merger set forth above is not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder's tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger, including the application of state, local and foreign tax laws.

Litigation

        As of the date of this proxy statement, we are aware of one lawsuit that has been filed relating to the merger. Our directors and we are defendants in this lawsuit, filed by one of our unaffiliated stockholders seeking to represent a putative class of all of our public stockholders. The lawsuit (Case

54


No. CH-03-0948) was filed on May 15, 2003 in the Chancery Court of Tennessee, and was served on us after the close of business on May 21, 2003.

        The lawsuit alleges that the defendants breached their fiduciary and other duties owed to our stockholders, in that the $6.57 per share merger consideration to be paid to our stockholders is unfair, was derived through an unfair process, and does not represent the value of our future prospects. The complaint also alleges that the defendants engaged in self-dealing without regard to conflicts of interest. The complaint seeks, among other things: injunctive relief prohibiting us from consummating the merger; and costs and disbursements related to the action, including reasonable attorneys' and experts' fees.

        Our directors and we believe that the allegations contained in the complaint are without merit and intend to contest the action vigorously. On June 16, 2003, we filed a motion to dismiss this lawsuit on the grounds that the lawsuit should proceed, if at all, in Delaware, our state of incorporation. On July 9, 2003, the plaintiff filed his opposition to our motion to dismiss. Argument on our motion to dismiss is currently scheduled to be heard by the Court on September 11, 2003.

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The Special Meeting

        This proxy statement is furnished in connection with the solicitation of proxies by Varsity's board of directors in connection with a special meeting of Varsity's stockholders.

Date, Time and Place of the Special Meeting

        The special meeting is scheduled to be held on September 15, 2003 at 9 a.m., local time at the Marriott New York East Side Hotel, 525 Lexington Avenue, New York, New York.

Proposal to be Considered at the Special Meeting

        At the special meeting, you will be asked to consider and vote upon a proposal to adopt an Agreement and Plan of Merger, dated as of April 21, 2003, among Varsity, VBR Holding Corporation and VB Merger Corporation.

Record Date

        The board of directors has fixed the close of business on August 4, 2003 as the record date for the special meeting and only holders of common stock on the record date are entitled to notice of and to vote at the special meeting. On that date, there were approximately 690 holders of record of common stock, and 9,592,250 shares of common stock outstanding.

Voting Rights; Vote Required for Adoption

        Each share of common stock entitles its holder to one vote on all matters properly coming before the special meeting. A majority of the total number of all outstanding shares of common stock entitled to vote, represented in person or by proxy, will constitute a quorum at the special meeting.

        If you hold your shares in an account with a bank or broker, you must instruct the broker or bank on how to vote your shares. If an executed proxy card returned by a broker or bank holding shares indicates that the broker or bank does not have discretionary authority to vote on the adoption of the merger agreement, the shares will be considered present at the meeting for purposes of determining the presence of a quorum, but will not be voted on the proposal to adopt the merger agreement. This is called a broker non-vote. Your broker or bank will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your broker or bank.

        Under Delaware law, the merger agreement must be adopted by the affirmative vote of the holders of a majority of the shares of common stock outstanding and entitled to vote at the special meeting. Abstentions and broker non-votes will have the same effect as a vote against the proposal to adopt the merger agreement.

        Nine of our current and former directors and executive officers have entered into voting agreements with VBR Holding Corporation obligating them to vote their shares in favor of the merger. As of the record date, these nine individuals possessed or controlled 4,519,920 shares, representing approximately 47% of Varsity's outstanding shares of common stock. This means that holders of approximately an additional 3% of all shares entitled to vote at the meeting would need to vote for adoption of the merger agreement in order for it to be adopted. In addition, as of the record date, the remaining three directors who have not entered into voting agreements with VBR Holding Corporation held 37,437 shares representing approximately 0.4% of Varsity's outstanding shares of common stock. These directors have expressed their present intent to vote their shares in favor of the approval and adoption of the merger agreement. Varsity's transfer agent, American Stock Transfer & Trust Company, will tabulate the votes.

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Voting and Revocation of Proxies

        Stockholders of record may submit proxies by mail, by Internet, or by telephone. Stockholders who wish to submit a proxy by mail should mark, date and sign the proxy card and promptly return it in the envelope furnished. Stockholders who wish to submit a proxy by Internet may do so by going to the website, www.voteproxy.com. Stockholders who wish to submit a proxy by telephone may do so by calling 1-800-PROXIES. Telephone and Internet proxy submission procedures are designed to verify stockholders through use of a control number that is provided on each proxy card. If voting via telephone, use the telephone keypad to submit any required information and your vote, after the appropriate voice prompts. If voting via Internet, please follow the on-screen instructions and use your keyboard and mouse to submit any required information and your vote. Stockholders who hold shares beneficially through a nominee (such as a bank or broker) may be able to submit a proxy by telephone or the Internet if the nominee offers those services.

        Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special meeting. Where the proxy indicates a specification, it will be voted in accordance with the specification. Where no specification is indicated, the proxy will be voted "FOR" the proposal to adopt the merger agreement and in the discretion of the persons named in the proxy with respect to any other business that may properly come before the meeting or any adjournment of the meeting. However, the proxies do not grant authority to vote on any proposal to adjourn or postpone the special meeting for the purpose of soliciting further proxies in favor of adoption of the merger agreement. Varsity's board of directors is not currently aware of any business to be brought before the special meeting other than that described in this proxy statement.

        Until your proxy is exercised at the special meeting, you can revoke your proxy and change your vote in any of the following ways:


Solicitation of Proxies

        We will bear the expenses in connection with the solicitation of proxies. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of common stock held of record by such persons, and Varsity may reimburse them for their reasonable transaction and clerical expenses. Solicitation of proxies will be made principally by mail. Proxies may also be solicited in person, or by telephone, facsimile, telegram or other means of communication, by Varsity's officers and regular employees. These people will receive no additional compensation for these services, but will be reimbursed for any transaction expenses incurred by them in connection with these services.

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The Merger

        This section of the proxy statement describes material aspects of the proposed merger, including the merger agreement. While we believe that the description covers the material terms of the merger, this summary may not contain all of the information that is important to you. You should carefully read this entire proxy statement and the other documents we refer you to for a more complete understanding of the merger. In addition, we incorporate important business and financial information into this proxy statement by reference. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section entitled "Where You Can Find More Information" that begins on page 87 of this proxy statement.

Effective Time of Merger

        If the merger agreement is adopted by the requisite vote of stockholders and the other conditions to the merger are satisfied, or waived to the extent permitted, the merger will be consummated and become effective at the time a certificate of merger is filed with the Secretary of State of the State of Delaware or any later time as we, VBR Holding Corporation and VB Merger Corporation agree upon and specify in the certificate of merger. In the event that stockholders adopt the merger agreement, the parties hope to complete the merger shortly thereafter.

        We or VBR Holding Corporation may terminate the merger agreement prior to the effective time of the merger in some circumstances, whether before or after the adoption of the merger agreement by stockholders. Additional details on termination of the merger agreement are described in "—The Merger Agreement—Termination of the Merger Agreement" below.

Payment of Merger Consideration and Surrender of Stock Certificates

        If we complete the merger, our common stockholders will be entitled to receive $6.57 in cash for each share of common stock that they own. VBR Holding Corporation will designate an exchange agent reasonably acceptable to our board of directors to make the cash payments contemplated by the merger agreement. At or prior to the effective time of the merger, VBR Holding Corporation will deposit or will cause VB Merger Corporation to deposit in trust with the exchange agent funds in an aggregate amount equal to the merger consideration for all stockholders. The exchange agent will deliver to you your merger consideration according to the procedure summarized below.

        At the effective time of the merger, we will close our stock ledger. After that time, if you present common stock certificates to the surviving corporation, the surviving corporation will cancel them in exchange for cash as described in this section.

        As soon as practicable after the effective time of the merger, the surviving corporation will send you, or cause to be sent to you, a letter of transmittal and instructions advising you how to surrender your certificates in exchange for the merger consideration.

        The exchange agent will promptly pay you your merger consideration, together with any dividends to which you are entitled, after you have (i) surrendered your certificates to the exchange agent and (ii) provided to the exchange agent any other items specified by the letter of transmittal.

        Interest will not be paid or accrue in respect of cash payments of merger consideration. The surviving corporation will reduce the amount of any merger consideration paid to you by any applicable withholding taxes.

        If the exchange agent is to pay some or all of your merger consideration to a person other than you, you must have your certificates properly endorsed or otherwise in proper form for transfer, and you must pay any transfer or other taxes payable by reason of the transfer or establish to the surviving corporation's satisfaction that the taxes have been paid or are not required to be paid.

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        You should not forward your stock certificates to the exchange agent without a letter of transmittal, and you should not return your stock certificates with the enclosed proxy.

        The transmittal instructions will tell you what to do if you have lost your certificate, or if it has been stolen or destroyed. You will have to provide an affidavit to that fact and, if required by the exchange agent, VBR Holding Corporation or the surviving corporation, post a bond in an amount that the exchange agent, VBR Holding Corporation or the surviving corporation, as the case may be, reasonably directs as indemnity against any claim that may be made against those parties in respect of the certificate.

        After the merger, subject to the exceptions in the next sentence, you will cease to have any rights as a Varsity stockholder. The exceptions include the right to receive dividends or other distributions with respect to your shares with a record date before the effective time of the merger, the right to surrender your certificate in exchange for payment of the merger consideration or, if you exercise your appraisal rights, the right to perfect your right to receive payment for your shares pursuant to Delaware law.

        One year after the merger occurs, the exchange agent will return to the surviving corporation all funds in its possession that constitute any portion of the merger consideration, and the exchange agent's duties will terminate. After that time, stockholders may surrender their certificates to the surviving corporation and, subject to applicable abandoned property laws, escheat and similar laws, will be entitled to receive the merger consideration without interest. None of Varsity, the exchange agent or VBR Holding Corporation will be liable to stockholders for any merger consideration delivered to a public official pursuant to applicable abandoned property laws, escheat and similar laws.

Accounting Treatment

        For U.S. accounting and financial reporting purposes, the merger is intended to be treated as a purchase of Varsity by VBR Holding Corporation under generally accepted accounting principles. Under the purchase method of accounting, the assets and liabilities of the corporation not surviving a merger are, as of the effective date of the merger, recorded at their respective fair values and added to those of the surviving corporation. Financial statements of the surviving corporation issued after consummation of the merger reflect such values and are not restated retroactively to reflect the historical financial position or results of operations of the corporation not surviving.

Fees and Expenses of The Merger

        We estimate that if we complete the merger, expenses incurred in connection with the merger will be approximately as follows:

 
   ($ in thousands)
Financing Fees and Expenses   $ 5,926
Closing Fees to Leonard Green & Partners     2,445
Legal Expenses     1,800
Accounting Expenses     750
Financial Advisory Fee     1,453
Severance, Retention and Transaction Bonus Payments     3,700
Printing, Proxy Solicitation and Mailing Costs     200
Exploratory Committee Fees     90
Filing Fees     15
Miscellaneous     2,576
   
Total   $ 18,955
   

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        Whether or not the merger is completed and except as otherwise provided in the merger agreement, all fees and expenses in connection with the merger will be paid by the party incurring those fees and expenses.

Financing of The Merger

        The obligation of VBR Holding Corporation and VB Merger Corporation to complete the merger is not subject to a financing condition. VBR Holding Corporation estimates that approximately $165 million will be required to complete the merger and pay related fees and expenses. VBR Holding Corporation expects this amount to be funded through a combination of equity contributions by Green Equity Investors and the management stockholders, new credit facilities with a syndicate of banks, and a private offering of Varsity senior subordinated notes. Leonard Green & Partners has received commitments from financial institutions in an amount that, when combined with the equity contributions, will be sufficient to fund these amounts.

        The estimated sources and uses of funds in connection with the merger and related transactions (assuming conversion of Varsity's subordinated notes into common stock prior to closing) are as follows (assuming the merger is completed on June 30, 2003):


Sources and Uses of Funds
$ in millions
(all figures are approximate)

Sources
    
   Uses
    
Varsity Cash   $ 8.5   Merger Consideration   $ 75.8
Senior Credit Facilities     62.7   Repay Existing Debt      
Senior Subordinated Notes     45.0   (including accrued interest)     69.4
Equity Contributions     48.0   Fees and Expenses     19.0
   
     
Total   $ 164.2   Total   $ 164.2
   
     

        In connection with the merger, Green Equity Investors intends to contribute approximately $46.5 million in cash to VBR Holding Corporation in exchange for a combination of common and preferred equity. In addition, Jeff Webb, John Nichols, J. Kristyn Shepherd and Gregory Webb intend to contribute a combination of cash, Varsity common stock and options to acquire Varsity Common Stock to VBR Holding Corporation with an approximate value of $1,100,000 (assuming a value of $6.57 per share of Varsity common stock) in exchange for common stock, or options to acquire common stock, representing or having the right to acquire 11% of VBR Holding Corporation's common equity. In addition, VBR Holding Corporation intends to adopt a stock option plan for Varsity's employees after the merger.

        Wells Fargo Bank, N.A. has entered into a letter agreement with Leonard Green & Partners and committed to make loans to us and to act as exclusive advisor and arranger under credit facilities consisting of a $25 million senior revolving credit facility, a $22.5 million Tranche A senior term loan facility and a $22.5 million Tranche B senior term loan facility, upon the terms and conditions in the letter agreement.

        The revolving credit facility and the Tranche A facility will initially bear interest, at Varsity's option, of either the base rate, as defined below, plus 2.75% per annum or LIBOR, as defined below, plus 4.00% per annum. The Tranche B facility will initially bear interest, at Varsity's option, of either

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the base rate plus 3.25% per annum or LIBOR plus 4.50% per annum. The terms "base rate" and "LIBOR" will have meanings customary and appropriate for financings of this type.

        The revolving credit facility and the Tranche A facility will mature on the fifth anniversary of the closing date of the merger. The Tranche B facility will mature on the sixth anniversary of the closing date of the merger. Both the Tranche A facility and the Tranche B facility will amortize in scheduled quarterly installments. The revolving credit facility, the Tranche A facility and the Tranche B facility will be subject to mandatory prepayments under agreed circumstances. Amounts repaid on the revolving credit facility prior to maturity may be reborrowed. Amounts repaid on the Tranche A facility and the Tranche B facility may not be reborrowed.

        The revolving credit facility will be used to finance the working capital and general corporate needs of Varsity and its subsidiaries. The Tranche A facility, the Tranche B facility and, subject to some restrictions, a portion of the revolving credit facility will be used for the following purposes:

        Funding of these credit facilities will be subject to the following material conditions:

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        We do not currently have any plan or arrangement to refinance or repay these credit facilities prior to their maturity dates.

        Northwestern Mutual Life Insurance Company and BancAmerica Capital Investors I, L.P. have entered into a letter agreement with Leonard Green & Partners and have jointly committed to purchase $45.0 million of Varsity's senior subordinated notes in an offering exempt from registration under the Securities Act of 1933, as amended, subject to terms and significant conditions described below and as set forth in the letter agreement. The senior subordinated notes will mature ten years from the date of the closing of the merger. Interest on the senior subordinated notes will accrue at a rate of 13.75% per annum and will be payable semi-annually in cash. Varsity may redeem the senior subordinated notes at our option at any time after three years from the completion of the merger, in whole or in part, based on an agreed upon schedule of prices. At any time before the third anniversary of the completion of the merger, all, but not less than all, of the senior subordinated notes may be prepaid from the proceeds of a sale of Varsity or an initial public offering of common stock at a price of 110% of the principal amount of the senior subordinated notes repaid, plus accrued interest.

        The sale of the senior subordinated notes will be subject to the following material conditions:

        In connection with the issuance of the senior subordinated notes, VBR Holding Corporation will issue to Northwestern Mutual and BancAmerica equity of VBR Holding Corporation representing 4.1% of each class of its common and preferred equity on a fully-diluted basis (including dilution for management stock options). The equity will have customary tag-along, drag-along, demand registration, pre-emptive and piggy-back rights.

        We do not currently have any plan or arrangement to refinance or repay the senior notes prior to maturity.

Appraisal Rights

        Under Section 262 of the General Corporation Law of the State of Delaware, if you do not wish to accept the merger consideration of $6.57 in cash per share you may elect to have the fair value of your shares judicially determined and paid in cash, together with a fair rate of interest, if any. The valuation will exclude any element of value arising from the accomplishment or expectation of the merger. You may only exercise your appraisal rights if you comply with the provisions of Section 262.

        The following discussion is not a complete statement of the law pertaining to appraisal rights under the General Corporation Law of the State of Delaware, and is qualified in its entirety by the full text of Section 262. We have attached Section 262 in its entirety as Annex C to this proxy statement. All references in Section 262 and in this summary to a "stockholder" are to the record holder of the shares of common stock as to which appraisal rights are asserted. If you have a beneficial interest in shares of common stock held of record in the name of another person, such as a broker or nominee, you must act promptly to cause the record holder to follow properly the steps summarized below in a timely manner to perfect appraisal rights.

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        Under Section 262, where a proposed merger is to be submitted for approval at a meeting of stockholders, as in the case of the special meeting, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that these appraisal rights are available and include in such notice a copy of Section 262. If you wish to exercise such appraisal rights or you wish to preserve the right to do so you should review carefully the following discussion and Annex C to this proxy statement. Failure to comply with the procedures specified in Section 262 timely and properly will result in the loss of your appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of the common stock, we believe that if you consider exercising such rights you should seek the advice of counsel.

        This proxy statement will constitute notice to the holders of common stock and the applicable statutory provisions of the General Corporation Law of the State of Delaware are attached to this proxy statement as Annex C.

        If you wish to exercise the right to demand appraisal under Section 262 of the General Corporation Law of the State of Delaware, you must satisfy each of the following conditions:


        Voting against, abstaining from voting on or failing to vote on the proposal to adopt the merger agreement will not constitute a written demand for appraisal within the meaning of Section 262. Your written demand for appraisal must be in addition to and separate from any proxy you deliver or vote you cast in person.

        Only a holder of record of shares of common stock is entitled to assert appraisal rights for those shares registered in that holder's name. A demand for appraisal should:


        If a person owns the shares of record in a fiduciary capacity, such as a trustee, guardian or custodian, the demand should be executed in that capacity. If more than one person (as in a joint tenancy or tenancy in common) own the shares of record, the demand should be executed by or on behalf of all owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a stockholder; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as

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agent for such owner or owners. A record holder such as a broker who holds shares as nominee for several beneficial owners may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising these rights with respect to the shares held for one or more other beneficial owners. In this case, the written demand should set forth the number of shares as to which appraisal is sought, and where no number of shares is expressly mentioned the demand will be presumed to cover all shares held in the name of the record owner. If you hold your shares in a bank or brokerage account or other nominee form and you wish to exercise appraisal rights you are urged to consult with your bank or broker to determine appropriate procedures for the making of a demand for appraisal by such nominee.

        If you elect to exercise appraisal rights pursuant to Section 262 you should mail or deliver a written demand to: Varsity Brands, Inc., 6745 Lenox Center Court, Suite 300, Memphis, Tennessee 38115, Attention: John M. Nichols.

        Within ten days after the effectiveness of the merger, the surviving corporation in the merger must send a notice as to the effectiveness of the merger to each of our former stockholders who has made a written demand for appraisal in accordance with Section 262 and who has not voted to adopt the merger agreement. Within 120 days after the effectiveness of the merger, but not after that date, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the value of the shares of common stock held by all stockholders demanding appraisal of their shares. We are under no obligation to, and have no present intent to, file a petition for appraisal, and if you seek to exercise appraisal rights you should not assume that the surviving corporation will file a petition or that the surviving corporation will initiate any negotiations with respect to the fair value of the shares. Accordingly, if you desire to have your shares appraised you should initiate any petitions necessary for the perfection of your appraisal rights within the time periods and in the manner prescribed in Section 262. Since we have no obligation to file a petition, your failure to do so within the period specified could nullify your previous written demand for appraisal.

        Under the merger agreement, we have agreed to give VB Merger Corporation prompt notice of any demands for appraisal we receive. VB Merger Corporation has the right to participate in and approve all negotiations and proceedings with respect to demands for appraisal under the General Corporation Law of the State of Delaware. We will not, except with the prior written consent of VB Merger Corporation, make any payment with respect to any demands for appraisal, or offer to settle, or settle, any demands.

        Within 120 days after the effectiveness of the merger, if you have complied with the provisions of Section 262 you will be entitled to receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares not voted in favor of the merger agreement and with respect to which we have received demands for appraisal and the aggregate number of holders of those shares. The surviving corporation must mail this statement to you no later than 10 days after receipt of a request or 10 days after expiration of the period for delivery of demands for appraisals under Section 262.

        If you timely file a petition for appraisal with the Delaware Court of Chancery you must serve a copy upon the surviving corporation. The surviving corporation must then within 20 days file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares and who have not reached agreements with us as to the value of their shares. After notice to stockholders as may be ordered by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine which stockholders are entitled to appraisal rights. The Delaware Court of Chancery may require stockholders who have demanded an appraisal of the fair value of their shares and who hold stock represented by certificates to submit their certificates to the Register in Chancery

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for notation on the certificates of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the requirement, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

        After determining what stockholders are entitled to an appraisal, the Delaware Court of Chancery will appraise the "fair value" of their shares. This value will exclude any element of value arising from the accomplishment or expectation of the merger, but will include a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. The costs of the action may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable. However, costs do not include attorneys' or expert witness fees. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding be charged pro rata against the value of all of the shares entitled to appraisal. These expenses may include, without limitation, reasonable attorneys' fees and the fees and expenses of experts. If you consider seeking appraisal you should be aware that the fair value of their shares as determined under Section 262 could be more than, the same as or less than the merger consideration you would be entitled to receive pursuant to the merger agreement. You should also be aware that investment banking opinions as to fairness from a financial point of view are not necessarily opinions as to fair value under Section 262.

        In determining fair value and, if applicable, a fair rate of interest, the Delaware Court of Chancery is to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that "proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court" should be considered, and that "fair price obviously requires consideration of all relevant factors involving the value of a company."

        Section 262 provides that fair value is to be "exclusive of any element of value arising from the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a "narrow exclusion [that] does not encompass known elements of value," but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 to mean that "elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered."

        If you have duly demanded an appraisal in compliance with Section 262 you will not, after the effectiveness of the merger, be entitled to vote the shares subject to that demand for any purpose or be entitled to the payment of dividends or other distributions on those shares. However, you will be entitled to dividends or other distributions payable to holders of record of shares as of a record date prior to the effectiveness of the merger.

        You may withdraw your demand for appraisal and accept the merger consideration by delivering to the surviving corporation a written withdrawal of your demand for appraisal. Any attempt to withdraw made more than 60 days after the effectiveness of the merger will require written approval of the surviving corporation and no appraisal proceeding before the Delaware Court of Chancery as to any stockholder shall be dismissed without the approval of the Delaware Court of Chancery, and this approval may be conditioned upon any terms the Delaware Court of Chancery deems just.

        If the surviving corporation does not approve your request to withdraw a demand for appraisal when the approval is required or if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, you would be entitled to receive only the appraised value determined in any such appraisal proceeding. This value could be higher or lower than, or the same as, the value of the merger consideration.

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        Failure to comply strictly with all of the procedures set forth in Section 262 of the General Corporation Law of the State of Delaware will result in the loss of your statutory appraisal rights. Consequently, if you wish to exercise your appraisal rights you are urged to consult legal counsel before attempting to exercise those rights.

        Under the merger agreement, one of the conditions to VBR Holdings Corporation's and VB Merger Corporation's obligation to complete the merger is that holders of no more than 15% of our outstanding stock shall have validly demanded judicial appraisal of their shares. In the event that holders of over 15% of our outstanding shares do seek the "right of appraisal," VBR Holdings Corporation and VB Merger Corporation will not have to complete the merger.

The Merger Agreement

        This section of the proxy statement describes the material terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is incorporated into this proxy statement by reference and attached as Annex A to this proxy statement. We urge you to read the full text of the merger agreement.

        The merger will be completed when a certificate of merger is filed with the Secretary of State of the State of Delaware. The parties may agree to a later time for completion of the merger and specify that time in the certificate of merger. The certificate of merger will be filed as soon as practicable after the satisfaction or waiver of the closing conditions in the merger agreement, which are described below.

        The parties expect to complete the merger as quickly as possible after we receive stockholder approval of the merger. We hope to complete the merger shortly following receipt of the required stockholder approval to adopt the merger agreement.

        Each party's obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

        The obligations of VBR Holding Corporation and VB Merger Corporation to complete the merger are subject to the satisfaction or waiver of the following additional conditions:

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        Our obligation to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

        As a result of the conditions to the completion of the merger, even if the requisite stockholder approval is obtained, there can be no assurance that the merger will be completed. See "Special Factors—Risk that the Merger Will Not Be Completed."

        The merger agreement provides that a "material adverse effect" on Varsity means any change, effect, event, occurrence, state of facts or development that has had a material adverse effect on:

        However, no change, effect, event, occurrence, state of facts or development of the following types will be considered a material adverse effect:

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        The merger agreement provides that a "material adverse effect" with respect to VBR Holding Corporation and VB Merger Corporation means any change or effect that would prevent or materially impair their ability to complete the merger and the other transactions contemplated by the merger agreement in a timely manner.

        Our board of directors has agreed to recommend that our stockholders approve the merger agreement at the special meeting. The board of directors may change its recommendation to stockholders regarding the merger if:

        Under the merger agreement we have agreed that neither we nor our representatives will:

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        The merger agreement permits us to comply with our obligations under the federal securities laws to take and disclose to our stockholders a position with respect to an acquisition proposal. In addition, if we receive a written acquisition proposal before obtaining stockholder approval for the merger, we may furnish nonpublic information to, and engage in negotiations with, the third party making the acquisition proposal if:


        We have agreed to keep VBR Holding Corporation and VB Merger Corporation informed of the identity of any person making an acquisition proposal, and the terms and conditions of the proposal, and the status of any material discussions.

        For purposes of the merger agreement, the term "acquisition proposal" means, any offer or proposal for, or indication of interest in:

        We and VBR Holding Corporation may mutually agree to terminate the merger agreement at any time prior to completion of the merger, whether before or after the approval and adoption of the merger agreement.

        In addition, we or VBR Holding Corporation may terminate the merger agreement:

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        VBR Holding Corporation may terminate the merger agreement if:

        We may terminate the merger agreement if:

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        We may terminate the merger agreement without the consent of VBR Holding Corporation and VB Merger Corporation before obtaining stockholder approval and adoption of the merger agreement if the following conditions are met:

Termination Fees and Expenses

        We must pay VBR Holding Corporation a termination fee of $3.5 million if:

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        In addition, we must pay VBR Holding Corporation up to $1.75 million of its reasonable out of pocket fees and expenses if we do not complete the merger because:

        However, we will not have to pay a termination fee or reimburse VBR Holding Corporation's expenses if VBR Holding Corporation refuses to complete the merger because:

        VBR Holding Corporation has agreed to pay our reasonable documented out of pocket expenses and fees (including reasonable attorneys fees) up to $1.75 million if the merger agreement is

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terminated as a result of the failure of any of our conditions to the consummation of the merger described in "—Conditions to Varsity's Obligations" above.

        Under the merger agreement, we have agreed that, with limited exceptions, we and each of our subsidiaries will conduct our respective businesses only in the ordinary and usual course consistent with past practice, and we will use reasonable best efforts, to:

        We also agreed that, until the completion of the merger, unless expressly permitted by the merger agreement or unless VB Merger Corporation gives its consent, we and our subsidiaries will conduct our businesses in compliance with specific restrictions relating to the following:

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        We have agreed under the merger agreement to commence a tender offer for all of the $66.035 million aggregate principal amount of our 101/2% senior notes due 2007. VBR Holding Corporation will determine the consideration to be paid to each noteholder, which will not be less than the amount required to redeem the senior notes under the senior notes indenture. As part of the notes tender offer, we will solicit the consent of the holders of the senior notes to amend, eliminate or waive certain sections of the indenture (selected by VBR Holding Corporation and reasonably acceptable to us). Our obligation to pay for the senior notes tendered in the notes tender offer is subject to the following material conditions:

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        We agree in the merger agreement to pay for all senior notes validly tendered and not withdrawn promptly after expiration of the notes tender offer, subject to the terms and conditions listed above. We will not waive any of the conditions to the notes tender offer without the consent of VBR Holding Corporation, which it will not unreasonably withhold.

        When we have received consents from noteholders holding at least a majority of the aggregate principal amount of the senior notes outstanding, we will execute a supplemental indenture in order to give effect to the amendments of the indenture described above. The proposed amendments will not become operative until the conditions to the notes tender offer have been satisfied or waived by us and we accept all senior notes (and related consents) validly tendered for purchase and payment.

        The merger agreement contains representations and warranties made by each of VBR Holding Corporation and VB Merger Corporation and us regarding aspects of their and our respective businesses, financial condition and structure, as well as other facts pertinent to the merger. These representations and warranties relate to the following subject matters with respect to each party:

In addition, we made additional representations and warranties regarding:

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        The merger agreement also contains representations and warranties made by VB Merger Corporation relating to its actions relating to the employment agreements with Jeff Webb and John Nichols, and by VBR Holding Corporation relating to the availability of the funds necessary to complete its obligations under the merger agreement.

        The representations and warranties contained in the merger agreement expire upon completion of the merger.

        VBR Holding Corporation and VB Merger Corporation have certain obligations and responsibilities under the merger agreement.

        VB Merger Corporation agreed that the surviving corporation will honor all of our obligations to indemnify our present and former officers and directors for acts or omissions that occurred at or prior to completion of the merger. This obligation will continue for six (6) years after the completion of the merger, except to the extent such obligation expires earlier by its terms.

        VB Merger Corporation has also agreed to maintain our current officers' and directors' liability insurance with a reputable financial institution for six years after completion of the merger in respect of acts or omissions that occurred prior to completion of the merger. The terms and amounts of the coverage must be as favorable as those in the policy in effect on the date of the merger agreement. However, if the annual premium for the policy exceeds 200% of the last annual premium paid by us prior to April 21, 2003, then the surviving corporation is required only to obtain the level of comparable insurance available for an annual premium equal to 200% of the last annual premium paid by us prior to that date. Alternatively, with the consent of VBR Holding Corporation we may purchase "tail" insurance, at a cost no greater than $415,000, that provides the coverage described above.

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        VBR Holding Corporation or VB Merger Corporation agree to provide the funds to us to allow us to complete the notes tender offer at the effective time of the merger, provided that the conditions to the merger and the notes tender offer have been satisfied or waived.

        We also have other obligations and responsibilities under the merger agreement. We must:

        Varsity, VB Merger Corporation and VBR Holding Corporation agreed to coordinate and cooperate with one another and use commercially reasonable best efforts to comply with, and refrain from actions that would impede compliance with, applicable laws, regulations and any other requirements of any other governmental entity. Each of the parties also agreed to, among other things, do the following:

        Each of the parties to the merger agreement agreed to use its reasonable best efforts to take any actions required under state or federal securities laws in connection with the transactions contemplated by the merger agreement. We are required to promptly prepare this proxy statement and the Schedule 13E-3 in connection with the merger and each party has agreed to provide the other with relevant information to be included in the proxy statement and the Schedule 13E-3.

        Under the terms of the merger agreement, the parties have agreed to consult with and obtain the consent of each other before issuing any press release or making any public statement with respect to the merger.

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        Under the terms of the merger agreement, the parties also agreed as follows:

        Each of the parties are required to promptly use their respective best efforts to take all actions required to complete the transactions contemplated by the merger agreement.

        The parties acknowledge that the confidentiality agreement (described in the second bullet point in "—Access to Information; Notification of Certain Matters" above), will continue in full force and effect until the earlier of the completion of the merger or the expiration of the confidentiality agreement.

        The parties may amend the merger agreement or waive compliance of any provisions of the merger agreement at any time before the completion of the merger. At any time before the completion of the merger, each of the parties to the merger agreement may extend the other's time for the performance of any of the obligations or other acts under the merger agreement, waive any inaccuracies in the other's representations and warranties contained in the merger agreement or in any document required to be delivered under the merger agreement.

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Other Matters

Information about Green Equity Investors, GEI Capital, VBR Holding Corporation and
VB Merger Corporation

        Under a potential interpretation of the rules governing "going private" transactions, Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation may be deemed affiliates of Varsity. Therefore, each of them has been included as a filing person on the Schedule 13E-3 filed in connection with the merger. Information with respect to Green Equity Investors, GEI Capital, VBR Holding Corporation and VB Merger Corporation as well as their controlling persons, directors and executive officers, is set forth below.

        VB Merger Corporation, a newly formed Delaware corporation, was formed solely for the purpose of completing the merger. VB Merger Corporation is wholly owned by VBR Holding Corporation and has not engaged in any business except in anticipation of the merger.

        VBR Holding Corporation, a Delaware corporation, was recently formed by Green Equity Investors for the sole purpose of acquiring majority ownership of Varsity. VBR Holding Corporation has not engaged in any business except in anticipation of the merger.

        Green Equity Investors, a Delaware limited partnership, is a private investment fund that was formed in 2002 by Leonard Green & Partners, a Delaware limited partnership. Leonard Green & Partners is a private equity firm specializing in organizing, structuring and sponsoring going private transactions and recapitalizations of established public and private companies. Green Equity Investors was formed to invest in various financially attractive companies. Green Equity Investors is continuously engaged in the process of identifying, receiving and reviewing potential investment opportunities in companies for itself and on behalf of companies in which it has an ownership interest.

        GEI Capital, a Delaware limited liability company, is and its principal business is being, the sole general partner of Green Equity Investors. The managers of GEI Capital are Jonathan D. Sokoloff, John G. Danhakl, and Peter J. Nolan. Jonathan A. Seiffer, John M. Baumer, and James D. Halper are members of GEI Capital.

        Jonathan D. Sokoloff has been a partner of Leonard Green & Partners since 1990. Mr. Sokoloff is a manager of GEI Capital. Mr. Sokoloff has served as a director and the president of both VB Merger Corporation and VBR Holding Corporation since their formation in April 2003.

        John G. Danhakl has been a partner of Leonard Green & Partners since 1995. Mr. Danhakl is a manager of GEI Capital.

        Peter J. Nolan has been a partner of Leonard Green & Partners since 1997. Mr. Nolan is a manager of GEI Capital.

        Jonathan A. Seiffer has been a partner of Leonard Green & Partners since January 1999. Prior to becoming a partner, Mr. Seiffer had been a vice president at Leonard Green & Partners since 1997 and an associate at Leonard Green & Partners since 1994. Mr. Seiffer is a member of GEI Capital. Mr. Seiffer has served as a director and the vice president, secretary and treasurer of both VB Merger Corporation and VBR Holding Corporation since their formation in April 2003.

        John M. Baumer has been a partner of Leonard Green & Partners since January 2001. Prior to becoming a partner, Mr. Baumer had been a vice president at Leonard Green & Partners since May 1999. Mr. Baumer is a member of GEI Capital. Prior to joining Leonard Green & Partners,

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Mr. Baumer was a vice president in the corporate finance division of Donaldson, Lufkin & Jenrette in Los Angeles since 1999 and an associate at Donaldson, Lufkin & Jenrette since 1995.

        James D. Halper has been a partner of Leonard Green & Partners since April 2003. Mr. Halper is a member of GEI Capital. Prior to joining Leonard Green & Partners, Mr. Halper was the president of TDA Capital Partners (formerly Templeton Direct Advisors, Inc.) since 1996.

        James R. Gillette has been the chief financial officer of Leonard Green & Partners since January 1998.

        During the past five years, none of VB Merger Corporation, VBR Holding Corporation, Green Equity Investors, GEI Capital, Leonard Green & Partners, Jonathan D. Sokoloff, John G. Danhakl, Peter J. Nolan, Jonathan A. Seiffer, John M. Baumer, James D. Halper and James R. Gillette has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). In addition, during the past five years, none of VB Merger Corporation, VBR Holding Corporation, Green Equity Investors, GEI Capital, Leonard Green & Partners and Messrs. Sokoloff, Danhakl, Nolan, Seiffer, Baumer, Halper and Gillette has been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws. Messrs. Sokoloff, Danhakl, Nolan, Seiffer, Baumer, Halper and Gillette are citizens of the United States and are principally employed by Leonard Green & Partners and its affiliates.

        The business address for VB Merger Corporation, VBR Holding Corporation, Green Equity Investors, GEI Capital, Leonard Green & Partners, Mr. Sokoloff, Mr. Danhakl, Mr. Nolan, Mr. Seiffer, Mr. Baumer, Mr. Halper and Mr. Gillette is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025 and their telephone number is (310) 954-0444. The business address for the Los Angeles office of Credit Suisse First Boston (formerly Donaldson, Lufkin & Jenrette) is 2121 Avenue of the Stars, Los Angeles, California 90067. The business address for TDA Capital Partners is 15 Valley Drive, Greenwich, CT 06831.

Security Ownership of Certain Beneficial Owners and Management

        The following table sets forth certain information as of August 12, 2003 pertaining to ownership of Varsity's common stock by persons known to Varsity to own 5% or more of Varsity's common stock and common stock owned beneficially by each director and named executive officer of Varsity and by directors and named executive officers of Varsity as a group. The information contained herein has been obtained from Varsity's records, or from information furnished directly by the individual or entity to Varsity or filed by such persons with the SEC. In accordance with SEC rules, the percentages of common stock owned by certain individuals and groups also include all vested options and options which will vest within sixty (60) days, described in the notes below. In addition, the notes describe options to acquire shares of common stock that become exercisable due to approval or consummation of the proposed merger. No options can be voted at the special meeting.

81

 
   Shares Owned
Beneficially
   Percent of
Common Stock
  
Robert E. Nederlander   1,282,212 (1) 13.3 %
  c/o Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

Jeffrey G. Webb
 
1,333,887
(2)
13.3
%
  Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

John M. Nichols
 
66,000
(3)
*
 
  Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

David Groelinger
 
123,500
(4)
1.3
%
  Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

Leonard Toboroff
 
1,333,585
(5)
13.8
%
  c/o Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

Don R. Kornstein
 
74,937
(6)
*
 
  c/o Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

John McConnaughy, Jr.
 
1,068,935
(7)
11.1
%
  c/o Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

Glenn E. "Bo" Schembechler
 
67,500(8
)
*
 
  c/o Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

Arthur N. Seessel, III
 
37,500(9
)
*
 
  c/o Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

W. Kline Boyd
 
145,985(10
)
1.5
%
  Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

Gregory C. Webb
 
163,535(11
)
1.7
%
  Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          
           

82


J. Kristyn Shepherd
 
88,617(12
)
*
 
  Varsity Brands, Inc.          
  6745 Lenox Center Court, Suite 300          
  Memphis, TN 38115          

All officers and directors as a group
 
5,786,193(13
)
53.5
%
  (12 individuals)          

Angelo, Gordon & Co., L.P.
 
1,385,747(14
)
12.6
%
  245 Park Avenue, 26th Fl.          
  New York, NY 10167          

Bedford Oak Partners
 
625,000(15
)
6.5
%
  100 South Bedford Road          
  Mt. Kisco, NY 10549          
*
Less than 1%

(1)
1,282,212 shares are owned by Mr. Nederlander directly or through entities controlled by him having dispositive power over these shares, and 37,500 of these 1,282,212 shares are currently issuable upon the exercise of options granted under Varsity's 1991 Stock Option Plan and 15,000 of these shares are currently issuable upon the exercise of options granted under Varsity's 1997 Stock Option Plan.

(2)
Includes 467,760 shares issuable upon the exercise of options granted under Varsity's 1997 Stock Option Plan, all of which are exercisable currently.

(3)
Includes 7,500 shares underlying options granted under Varsity's 1991 Stock Option Plan and 58,500 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently. John Nichols has also received an additional 2,500 options under Varsity's 1991 Stock Option Plan which vest on October 1, 2004; provided, however that in the event that the merger is consummated before such date, the vesting of such options will be accelerated and they will become exercisable simultaneously with the consummation of the merger.

(4)
Includes 115,000 shares underlying options granted under Varsity's 1991 Stock Option Plan that are exercisable currently.

(5)
Includes 37,500 shares underlying options granted under Varsity's 1991 Stock Option Plan and 15,000 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently.

(6)
Includes 37,500 shares underlying options granted under Varsity's 1991 Stock Option Plan and 15,000 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently.

(7)
Includes 37,500 shares underlying options granted under Varsity's 1991 Stock Option Plan and 15,000 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently. Mr. McConnaughy has pledged his interest in 1,061,435 shares of Varsity's common stock to financial institutions to secure loans.

(8)
Includes 37,500 shares underlying options granted under Varsity's 1991 Stock Option Plan and 15,000 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently.

83

(9)
Includes 22,500 shares underlying options granted under Varsity's 1991 Stock Option Plan and 15,000 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently.

(10)
Includes 112,990 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently. Mr. Boyd has also received an additional 2,000 options under Varsity's 1997 Stock Option Plan, which vest on October 1, 2004; provided, however that in the event that the merger is consummated before such date, the vesting of such options will be accelerated and they will become exercisable simultaneously with the consummation of the merger.

(11)
Includes 98,918 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently. Gregory Webb has also received an additional 1,307 options under Varsity's 1997 Stock Option Plan, which vest on October 1, 2004; provided, however that in the event that the merger is consummated before such date, the vesting of such options will be accelerated and they will become exercisable simultaneously with the consummation of the merger.

(12)
Includes 68,168 shares underlying options granted under Varsity's 1997 Stock Option Plan that are exercisable currently. Ms. Shepherd has also received an additional 1,307 options under Varsity's 1997 Stock Option Plan, which vest on October 1, 2004; provided, however that in the event that the merger is consummated before such date, the vesting of such options will be accelerated and they will become exercisable simultaneously with the consummation of the merger.

(13)
The aggregate number of shares beneficially owned and percent of common stock beneficially owned by all officers and directors as a group does not include an aggregate of 438,089 shares underlying options granted under Varsity's 1991 Stock Option Plan and 1997 Stock Option Plan, including an aggregate of 7,114 shares underlying options granted to officers and directors under Varsity's 1991 Stock Option Plan and 1997 Stock Option Plan which have not yet vested, but whose vesting will be accelerated in the event that the merger is consummated and will become exercisable simultaneously with the consummation of the merger.

(14)
Based on a Schedule 13G filed February 13, 1997, Angelo, Gordon & Co., L.P. may be deemed to be the beneficial owner of 1,385,747 shares as a result of voting and dispositive powers it holds with respect to $6,125,000 principal amount of Varsity's 4.10% Convertible Subordinated Note due November 1, 2007 convertible at $4.42 per share into 1,385,747 shares of common stock which it holds for the account of private investment funds for which it acts a general partner and/or investment advisor or investment manager. An affiliate of Angelo Gordon has entered a conversion agreement with respect to these notes, which is described below.

(15)
Based on amounts reported by the American Stock Exchange as of August 12, 2003.

Certain Transactions with Directors, Executive Officers and Affiliates

Nederlander Sub-Lease

        On February 25, 2000, we entered into a nine (9) year six (6) month sublease with a company owned and controlled by our chairman, Mr. Robert Nederlander, for premises to serve as our corporate offices located in New York City. Pursuant to the sublease, we pay a base rent of approximately $117,000 per annum which will rise to approximately $138,000 per annum during the term of the sublease. We also pay our pro rata share (approximately 33%) of operating expenses during the term of the sublease. Our management believes that the terms of the sublease are at least equivalent to what we could reasonably expect to receive from an unrelated third party. In connection with the sale of our Riddell Group Division, we moved our corporate offices to Memphis, Tennessee, and are currently subleasing the New York premises to a third party. During the year ended December 31, 2002, we paid approximately $14,000 to Mr. Nederlander under this lease agreement. Subsequent to December 31, 2002, the tenant who was sub-subleasing the office space stopped paying rent on a current basis. We

84


currently are collecting rent of $2,500 per month, on a month-to-month basis, plus one-third of the operating expenses with respect to the premises. We are currently attempting to sublease the premises.

Angelo, Gordon & Co., L.P.

        On August 16, 2001 we issued a 4.10% senior convertible subordinated note due November 1, 2007 in the aggregate principle amount of $7,500,000 to Silver Oak Capital, L.L.C., an affiliate of Angelo, Gordon & Co., L.P. As of August 12, 2003, $6,125,000 in principal amount was outstanding on the note, at a conversion price of $4.42 per share. As of May 27, 2003, we entered into a conversion agreement with Silver Oak. The conversion agreement provides that simultaneously with the consummation of the merger, the note will be deemed to be converted and Silver Oak will have the right to receive $6.57 in cash for each of our common shares into which the note would have been convertible, for a total of $9,104,357.79. If the merger is not consummated for any reason, the conversion agreement will be deemed null and void.

        In connection with the merger, VBR Holding Corporation will enter into a management services agreement with Leonard Green & Partners. Under the management services agreement, Leonard Green & Partners will provide investment banking, management, consulting and financial planning services on an ongoing basis. In consideration of these services, VBR Holding Corporation will pay Leonard Green & Partners an annual fee of approximately $744,000. Leonard Green & Partners also will provide financial advisory and investment banking services in connection with major financial transactions that we may undertake from time to time in the future. In consideration of these services, VBR Holding Corporation will pay Leonard Green & Partners fees that are reasonable and customary for services of like kind. In addition, this agreement will provide that, upon the completion of the merger, we will pay Leonard Green & Partners transaction fees in an amount to be determined.

Other Matters for Action at The Special Meeting

        Our board of directors is not aware of any matters to be presented for action at the special meeting other than those described in this proxy statement. If other matters should properly come before the special meeting, it is intended that the holders of proxies solicited by this proxy statement will vote on those matters in their discretion. However, the proxies do not grant authority to vote on any proposal to adjourn or postpone the special meeting for the purpose of soliciting further proxies in favor of the adoption of the merger agreement.

Proposals By Holders of Shares of Common Stock

        Due to the contemplated consummation of the merger, we do not currently expect to hold a 2003 annual meeting of stockholders because, following the merger, we will not be a publicly held company. If the merger is not consummated for any reason, under SEC rules, we must receive proposals of stockholders intended to be presented at and included in the proxy statement for the 2003 annual meeting of stockholders at our principal executive offices no later than April 4, 2003. If the date of the 2003 annual meeting is more than 30 days before or after August 29, 2003, however, the new deadline for receipt of stockholder proposals will be described in a quarterly report of Varsity on Form 10-Q.

        Our by-laws govern the submission of nominations for directors or other business proposals that a stockholder wishes to have considered at a meeting of stockholders, but that are not included in its proxy statement for that meeting. Under our by-laws, a stockholder entitled to vote who has delivered a notice to our Secretary not less than 90 days nor more than 120 days prior to the date of the annual meeting of stockholders may make nominations for directors or other business proposals to be addressed at the 2003 annual meeting, provided, however, that in the event that less than 100 days'

85


notice or prior public disclosure of the date of the meeting is given to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. Any proposal must also comply with the other provisions contained in our by-laws relating to stockholder proposals.

Experts

        Our consolidated financial statements incorporated in this proxy statement by reference to our Annual Report on Form 10-K for the year ended December 31, 2002, have been incorporated in reliance on the report of Grant Thornton LLP, our independent accountants, given on the authority of that firm as experts in accounting and auditing. It is not anticipated that a representative of Grant Thornton will attend the special meeting.

86


Where You Can Find More Information

        Varsity files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file at the Securities and Exchange Commission's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. Varsity's Securities and Exchange Commission filings are also available to the public at the Securities and Exchange Commission's website at http://www.sec.gov. Copies of documents filed by Varsity with the Securities and Exchange Commission are also available at the offices of The American Stock Exchange located at 86 Trinity Place, New York, NY 10006.

        Varsity, Green Equity Investors, GEI Capital, VBR Holding Corporation, VB Merger Corporation and some of the management investors have filed a Rule 13E-3 Transaction Statement on Schedule 13E-3 with the Securities and Exchange Commission with respect to the merger. As permitted by the Securities and Exchange Commission, this proxy statement omits some information contained in the Schedule 13E-3. The Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference as a part of it, is available for inspection or copying as set forth above. Statements contained in this proxy statement or in any document incorporated in this proxy statement by reference regarding the contents of any contract or other document are not necessarily complete and each such statement is qualified in its entirety by reference to such contract or other document filed as an exhibit with the Securities and Exchange Commission.

        The Securities and Exchange Commission allows Varsity to "incorporate by reference," into this proxy statement documents we have filed with the Securities and Exchange Commission. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this proxy statement:

        Varsity Filings (SEC FILE NUMBER 0-19298):

Varsity's proxy statement for its 2002 annual meeting of stockholders   Filed August 2, 2002
Annual Report on Form 10-K   Year ended December 31, 2002
Quarterly Reports on Form 10-Q   Quarter ended March 31, 2003
Current Reports on Form 8-K   Filed April 22, 2003
Amended Annual Report on Form 10-K/A   Filed July 11, 2003

        Varsity incorporates by reference into this proxy statement additional documents that we may file with the Securities and Exchange Commission between the date of this proxy statement and the date of the Varsity stockholders' meeting. Those documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements. Varsity will file amendments to the Schedule 13E-3 with the Securities and Exchange Commission to include as an exhibit to the Schedule 13E-3 any of these additional documents that we may file between the date of this proxy statement and the date of the Varsity stockholders' meeting.

        You may request a copy of the documents incorporated by reference into this proxy statement by writing to, telephoning or e-mailing Varsity.

        Requests for documents should be directed to:

87

        If you would like to request documents from Varsity, please do so at least five (5) business days before the date of the special meeting in order to receive timely delivery of such documents prior to the special meeting.

        This proxy statement does not constitute the solicitation of a proxy in any jurisdiction to or from any person to whom or from whom it is unlawful to make such proxy solicitation in such jurisdiction. You should rely only on the information contained or incorporated by reference in this proxy statement to vote your shares at the special meeting. Varsity has not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated August 12, 2003. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders does not create any implication to the contrary.

88


SPECIAL MEETING OF STOCKHOLDERS OF

VARSITY BRANDS, INC.

SEPTEMBER 15, 2003

PROXY VOTING INSTRUCTIONS

TO VOTE BY MAIL

Please date, sign and mail your proxy card in the envelope provided as soon as possible.


TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)

Please call toll-free 1-800-PROXIES and follow the instructions.
Have your control number and the proxy card available when you call.


TO VOTE BY INTERNET

Please access the web page at "www.voteproxy.com" and follow the on-screen instructions. Have your control number available when you access the web page.

COMPANY NUMBER    
ACCOUNT NUMBER    
YOUR CONTROL NUMBER IS    

*  Please Detach and Mail in the Envelope Provided *


PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF

VARSITY BRANDS, INC.

SPECIAL MEETING—SEPTEMBER 15, 2003

        The undersigned stockholder hereby appoints Robert E. Nederlander and Jeffrey G. Webb, and each of them, each with full power of substitution, the proxies and attorneys-in-fact of the undersigned to attend the Special Meeting of Stockholders of VARSITY BRANDS, INC. (the "Corporation") to be held on September 15, 2003 at 9 a.m., local time, at the Marriott New York East Side Hotel, 525 Lexington Avenue, New York, NY 10017, and any adjournments or postponements thereof, and to vote at said meeting and any adjournments or postponements thereof all shares of stock of the Corporation standing in the name of the undersigned stockholder.

        This proxy is solicited on behalf of the board of directors. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, the proxy will be voted FOR proposal 1 and in the judgment of the persons named herein on any other matter which may properly come before the meeting or any adjournments or postponements of the special meeting. However, this proxy does not grant authority to vote on any proposal to adjourn or postpone the special meeting for the purpose of soliciting further proxies in favor of the adoption of the merger agreement.

(Continued and To Be Dated and Signed On The Other Side)

        ý  Please mark your votes as in this example.

        The board of directors of the Corporation recommends a vote for adoption of the Agreement and Plan of Merger.

1.   Proposal to adopt the Agreement and Plan of Merger, dated as of April 21, 2003, among Varsity Brands, Inc., VBR Holding Corporation and VB Merger Corporation, as the merger agreement may be further amended from time to time.   FOR
o		   AGAINST
o		   ABSTAIN
o

        Please mark, sign, date and return this proxy card promptly, using the enclosed envelope.

SIGNATURE   DATE   SIGNATURE   DATE
             
             
 
 
 
NOTE:
Stockholder(s) should sign above exactly as name(s) appear(s) hereon, but minor discrepancies in such signatures will not invalidate this proxy. If more than one stockholder, all should sign.

Annex A

FINAL
EXECUTION COPY


AGREEMENT AND PLAN OF MERGER

by and among

VARSITY BRANDS, INC.,

and

VBR HOLDING CORPORATION

and

VB MERGER CORPORATION

         Dated as of April 21, 2003

Table of Contents

 
    
   Page
ARTICLE I DEFINITIONS   2
 
1.1.
 
Definitions
 
2

ARTICLE II THE MERGER
 
8
 
2.1.
 
The Merger
 
8
 
2.2.
 
Organizational Documents
 
8
 
2.3.
 
Directors and Officers
 
8

ARTICLE III CONVERSION OF SECURITIES AND RELATED MATTERS
 
9
 
3.1.
 
Capital Stock of Acquiror
 
9
 
3.2.
 
Cancellation of Treasury Stock and Parent-Owned Shares
 
9
 
3.3.
 
Conversion of Company Shares
 
9
 
3.4.
 
Exchange of Certificates
 
9
 
3.5.
 
Company Stock Options
 
11
 
3.6.
 
Dissenting Shares
 
11
 
3.7.
 
Adjustments
 
11

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
12
 
4.1.
 
Corporate Existence and Power
 
12
 
4.2.
 
Corporate Authorization
 
12
 
4.3.
 
Governmental Authorization
 
13
 
4.4.
 
Non-Contravention
 
13
 
4.5.
 
Capitalization
 
14
 
4.6.
 
Subsidiaries
 
14
 
4.7.
 
Company SEC Documents
 
15
 
4.8.
 
Financial Statements; No Material Undisclosed Liabilities
 
15
 
4.9.
 
Absence of Certain Changes
 
16
 
4.10.
 
Litigation
 
18
 
4.11.
 
Taxes
 
18
 
4.12.
 
Employee Benefits
 
19
 
4.13.
 
Compliance with Laws; Licenses, Permits and Registrations
 
21
 
4.14.
 
Finders' Fees; Opinion of Financial Advisor
 
22
 
4.15.
 
Affiliate Transactions
 
22
 
4.16.
 
Intellectual Property
 
22
 
4.17.
 
Material Contracts
 
24
         

A-i

 
4.18.
 
Specified Contracts
 
25
 
4.19.
 
Reserved
 
25
 
4.20.
 
Riddell Sale Agreement
 
25
 
4.21.
 
Real Estate
 
26
 
4.22.
 
Accounts Payable and Inventory
 
26
 
4.23.
 
Accounts Receivable
 
26
 
4.24.
 
Suppliers
 
27
 
4.25.
 
Personnel, etc
 
27
 
4.26.
 
Assets
 
27
 
4.27.
 
Insurance
 
27
 
4.28.
 
Disclaimer of Other Representations and Warranties
 
28

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
 
28
 
5.1.
 
Corporate Existence and Power
 
28
 
5.2.
 
Corporate Authorization
 
28
 
5.3.
 
Governmental Authorization
 
28
 
5.4.
 
Non-Contravention
 
29
 
5.5.
 
Employment Agreements
 
29
 
5.6.
 
Financing
 
29
 
5.7.
 
Disclaimer of Other Representations and Warranties
 
29
 
5.8.
 
Finders' Fees
 
29

ARTICLE VI COVENANTS OF THE COMPANY
 
30
 
6.1.
 
Company Interim Operations
 
30
 
6.2.
 
Acquisition Proposals; Board Recommendation
 
32
 
6.3.
 
Taxes
 
34
 
6.4.
 
The Notes Tender Offer
 
34

ARTICLE VII COVENANTS OF ACQUIROR
 
35
 
7.1.
 
Director and Officer Liability
 
35
 
7.2.
 
Transfer Taxes
 
36
 
7.3.
 
Reserved
 
36
 
7.4.
 
Repayment of Debt
 
36

ARTICLE VIII COVENANTS OF ACQUIROR AND THE COMPANY
 
37
 
8.1.
 
Efforts and Assistance/HSR Act
 
37
 
8.2.
 
Stockholder Meeting/Proxy Statement and Schedule 13E-3
 
38
         

A-ii

 
8.3.
 
Public Announcements
 
39
 
8.4.
 
Access to Information; Notification of Certain Matters
 
39
 
8.5.
 
Further Assurances
 
40
 
8.6.
 
Disposition of Litigation
 
41
 
8.7.
 
Confidentiality Agreement
 
41

ARTICLE IX CONDITIONS TO MERGER
 
41
 
9.1.
 
Conditions to the Obligations of Each Party
 
41
 
9.2.
 
Conditions to the Obligations of the Company
 
41
 
9.3.
 
Conditions to the Obligations of Acquiror
 
42

ARTICLE X TERMINATION
 
44
 
10.1.
 
Termination
 
44
 
10.2.
 
Effect of Termination
 
45
 
10.3.
 
Fees and Expenses
 
46

ARTICLE XI MISCELLANEOUS
 
46
 
11.1.
 
Notices
 
47
 
11.2.
 
Survival
 
47
 
11.3.
 
Amendments; No Waivers
 
47
 
11.4.
 
Successors and Assigns
 
48
 
11.5.
 
Counterparts; Effectiveness; Third Party Beneficiaries
 
48
 
11.6.
 
Governing Law
 
48
 
11.7.
 
Jurisdiction
 
48
 
11.8.
 
Entire Agreement
 
48
 
11.9.
 
Authorship
 
49
 
11.10.
 
Severability
 
49
 
11.11.
 
Waiver of Jury Trial
 
49
 
11.12.
 
Headings; Construction
 
49

Exhibit A—Form of Voting Agreement
 
 

Exhibit B—Form of Contribution Agreement
 
 

Exhibit C—Form of Contribution and Option Exchange Agreement
 
 

Exhibit D—Form of Webb Employment Agreement
 
 

Exhibit E—Form of Nichols Employment Agreement
 
 

Exhibit F—Certificate of Incorporation of the Surviving Corporation
 
 

Exhibit G—FIRPTA Certification Documents
 
 

A-iii

AGREEMENT AND PLAN OF MERGER

        This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of this 21st day of April 2003, by and among Varsity Brands, Inc., a Delaware corporation (the "Company"), VBR Holding Corporation, a Delaware corporation ("Parent"), and VB Merger Corporation, a Delaware corporation ("Acquiror") wholly owned by Parent.

        WHEREAS, it is the intention of the parties that Acquiror shall merge with and into the Company (the "Merger") with the Company being the surviving corporation and a wholly owned subsidiary of Parent;

        WHEREAS, the Board of Directors of the Company, consisting of a majority of directors who have no direct or indirect interest in the transactions contemplated by this Agreement, other than ownership of Company Shares (as defined below) and Company Options (as defined in Section 1.1), has determined, by the unanimous vote of all of the directors voting on the matter, that it is fair to and in the best interests of the Company and the holders of common stock, par value $0.01 per share (the "Company Shares"), to enter into this Agreement and to consummate the Merger upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law (the "DGCL");

        WHEREAS, the Board of Directors of the Company, by resolutions unanimously adopted by all of the directors voting on the matter, has (i) approved and declared advisable this Agreement and the Merger and the other transactions contemplated hereby and by the Voting Agreements (as defined below) upon the terms and subject to the conditions set forth in this Agreement and the Voting Agreements and in accordance with the DGCL and (ii) resolved to recommend that the holders of Company Shares adopt and approve this Agreement;

        WHEREAS, the Board of Directors of Acquiror has unanimously (i) determined that the Merger is fair to and in the best interests of Acquiror and its stockholders, (ii) adopted resolutions approving and declaring advisable this Agreement and the Merger and the other transactions contemplated hereby and by the Voting Agreements upon the terms and subject to the conditions set forth in this Agreement and the Voting Agreements and in accordance with the DGCL and (iii) resolved to recommend that the holders of Acquiror Common Shares (as defined in Section 1.1) adopt and approve this Agreement;

        WHEREAS, Parent, as the sole stockholder of Acquiror has adopted and approved this Agreement and approved the transactions contemplated hereby;

        WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to the willingness of Parent and Acquiror to enter into this Agreement, certain holders of Company Shares (collectively, the "Principal Stockholders") are entering into voting agreements with Parent in the form attached hereto as Exhibit A (the "Voting Agreements"), pursuant to which, among other things, the Principal Stockholders will agree to vote all of their Equity Interests (as defined in Section 1.1) in the Company in favor of adopting and approving this Agreement; and

        WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to the willingness of Parent and Acquiror to enter into this Agreement, Jeffrey Webb is entering into a Contribution and Subscription Agreement with Parent substantially in the form attached hereto as Exhibit B (the "Contribution Agreement"), pursuant to which Mr. Webb will exchange a portion of his Company Shares for shares of capital stock of Parent immediately prior to the Effective Time (as defined below);

        WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to the willingness of Parent and Acquiror to enter into this Agreement, John Nichols is entering into a Contribution and Option Exchange Agreement with Parent substantially in the form attached hereto as Exhibit C (the "Contribution and Option Exchange Agreement"), pursuant to which Mr. Nichols will

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acquire shares of capital stock of Parent for cash and exchange a portion of his Company Options for options to acquire shares of capital stock of Parent, in each case, immediately prior to the Effective Time;

        NOW, THEREFORE, in consideration of the premises and promises contained herein, and intending to be legally bound, the parties hereto agree as set forth below.

ARTICLE I
DEFINITIONS

        1.1.    Definitions.    

        As used herein, the following terms have the meanings set forth below:

        "Acquiror" has the meaning specified in the recitals to this Agreement.

        "Acquiror Common Shares" means the common stock, $0.01 par value per share, of Acquiror.

        "Acquiror Disclosure Schedule" has the meaning specified in the preamble to Article V.

        "Acquiror Material Adverse Effect" means any change or effect that would prevent or materially impair the ability of Parent or Acquiror to consummate the Merger and the other transactions contemplated hereby in a timely manner.

        "Acquisition Proposal" means any offer or proposal (whether or not in writing) (other than an offer or proposal by or on behalf of Parent or its Affiliates) for, or any indication of interest in: (a) a transaction pursuant to which any Person or group of Persons acquires or would acquire Beneficial Ownership of more than twenty percent (20%) of the outstanding voting power of the Company or any Company Subsidiary, whether from the Company or pursuant to a tender offer, exchange offer or otherwise, (b) a merger, consolidation, business combination, reorganization, share exchange, sale of substantially all assets, recapitalization, liquidation, dissolution or similar transaction which would result in a Third Party acquiring twenty percent (20%) or more of the fair market value of the assets of the Company and its Subsidiaries, taken as a whole, (c) any transaction which would result in a Third Party acquiring twenty percent (20%) or more of the fair market value of the assets (including, without limitation, the capital stock of Subsidiaries) of the Company and its Subsidiaries, taken as a whole, immediately prior to such transaction (whether by purchase of assets, acquisition of stock of a Subsidiary or otherwise), or (d) any combination of the foregoing.

        "Affiliate" means, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by, or under common control with, such Person. For purposes of this definition, the term "control" (including the correlative terms "controlling", "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, each Principal Stockholder shall be deemed an Affiliate of the Company.

        "Agreement" has the meaning specified in the preamble to this Agreement.

        "Ancillary Agreements" means the Voting Agreements and the Employment Agreements.

        "Audited Financial Statements" has the meaning specified in Section 4.8(a).

        "Balance Sheet Date" means December 31, 2002.

        "Beneficial Ownership" shall have the meaning provided therefor under Section 13(d) of the Exchange Act and the rules and regulations promulgated under such Section.

        "Business Day" means any day, other than a Saturday, Sunday or one on which banks are authorized by Law to be closed in New York, New York.

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        "Certificate" has the meaning specified in Section 3.3.

        "Certificate of Merger" has the meaning specified in Section 2.1(b).

        "Closing" has the meaning specified in Section 2.1(d).

        "Closing Date" has the meaning specified in Section 2.1(d).

        "Code" means the U.S. Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.

        "Company" has the meaning specified in the preamble to this Agreement.

        "Company Balance Sheet" means the Company's consolidated balance sheet included in the Company's Annual Report on Form 10-K relating to its fiscal year ended on December 31, 2002.

        "Company Contract" means any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, contract, commitment, arrangement, Permit, concession, franchise, limited liability or partnership agreement, or other instrument to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties, assets or business activities may be bound or affected.

        "Company Disclosure Schedule" has the meaning specified in the preamble to Article IV.

        "Company Employee Plans" has the meaning assigned in Section 4.12(a).

        "Company Expense Reimbursement Amount" means all reasonable documented out of pocket fees and expenses (including reasonable attorneys fees and disbursements) actually incurred by the Company and its Subsidiaries on or prior to the termination of this Agreement in connection with the transactions contemplated herein, provided that this amount shall not be greater than $1,750,000.

        "Company Material Adverse Effect" means any change, effect, event, occurrence, state of facts or development which has had a material adverse effect on (a) the business, assets, liabilities, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement or any of the Ancillary Agreements to which it is or will become a party, and the transactions contemplated hereby and thereby in a timely manner; provided, however, that none of the following, in and of itself, shall be deemed to constitute a Company Material Adverse Effect: (a) changes in U.S. financial markets or conditions or global financial markets or conditions, including any fluctuation, in and of itself, in the trading price of the Company Shares (it being understood that any fact or development giving rise to or contributing to the state of such markets or conditions or any such fluctuation in the trading price of the Company Shares may be the cause of a Company Material Adverse Effect); (b) acts of terrorism (it being understood that any such act of terrorism may be the cause of a Company Material Adverse Effect); (c) the announcement of this Agreement or the transactions contemplated hereby; (d) compliance by the Company and its Subsidiaries with the covenants contained in this Agreement; or (e) actions by the Company or any Subsidiary expressly permitted under this Agreement or specifically set forth in Section 6.1 of the Company Disclosure Schedule.

        "Company Options" means any options to purchase Company Shares granted pursuant to the Company Options Plans.

        "Company Option Plans" means the Company's 1991 Stock Option Plan, as amended, and the Company's 1997 Stock Option Plan, as amended.

        "Company Preferred Stock" has the meaning specified in Section 4.5(a).

        "Company Proxy Statement" has the meaning specified in Section 8.2(c).

        "Company Recommendation" has the meaning specified in Section 6.2(d).

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        "Company Returns" has the meaning specified in Section 4.11.

        "Company SEC Documents" means each final registration statement, prospectus, report, schedule or definitive proxy statement required to be filed or otherwise furnished by the Company or any of its Subsidiaries with or to the SEC since January 1, 2000 pursuant to the Securities Act or the Exchange Act, in each case including all exhibits, appendices and attachments thereto, whether filed or otherwise furnished therewith or incorporated by reference therein.

        "Company Securities" has the meaning specified in Section 4.5(b).

        "Company Shares" has the meaning specified in the recitals to this Agreement.

        "Company Stockholders" or "Stockholders" means the holders of Company Shares.

        "Company Stockholder Approval" has the meaning specified in Section 4.2(a).

        "Company Stockholder Meeting" has the meaning specified in Section 8.2(b).

        "Company Subsidiary" means a Subsidiary of the Company.

        "Confidentiality Agreement" has the meaning specified in Section 8.4(a).

        "Contributing Holders" means Jeff Webb, John Nichols and any other holder of Company Shares or Company Options who enters into an agreement with Parent prior to the Effective Time providing for such holder to acquire shares, or options to acquire shares, of Parent immediately prior to the Effective Time.

        "Contribution Agreement" has the meaning specified in the recitals to this Agreement.

        "Contribution and Option Exchange Agreement" has the meaning specified in the recitals to this Agreement.

        "Convertible Debt" has the meaning specified in Section 4.5(a).

        "Current Policies" has the meaning specified in Section 7.1(a).

        "Default" has the meaning specified in Section 4.17(c).

        "DGCL" has the meaning specified in the recitals to this Agreement.

        "Dissenting Shares" has the meaning specified in Section 3.6.

        "Effective Time" has the meaning specified in Section 2.1(b).

        "Employment Agreements" means, collectively, the employment agreements, each dated the date hereof, by and between the Acquiror and each of: (i) Jeffrey Webb and (ii) John Nichols, each substantially in the form attached hereto as Exhibit D and Exhibit E, respectively.

        "End Date" has the meaning specified in Section 10.1(b)(i).

        "Environmental Laws" has the meaning specified in Section 4.13(d).

        "Equity Interest" means with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person's capital stock or other equity interests (including, without limitation, partnership or membership interests in a partnership or limited liability company or any other interest or participation that confers on a Person the right to receive a share of the profits and losses, or distributions of assets, of the issuing Person) whether outstanding on the date hereof or issued after the date hereof.

        "ERISA" has the meaning specified in Section 4.12(a).

        "ERISA Affiliate" has the meaning specified in Section 4.12(a).

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        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

        "Exchange Agent" has the meaning specified in Section 3.4(a).

        "Exchange Fund" has the meaning specified in Section 3.4(a).

        "GAAP" means United States generally accepted accounting principles, applied on a consistent basis.

        "Governmental Entity" means any supranational, federal, state, local or foreign government, court, administrative agency or commission or other governmental or regulatory authority or instrumentality.

        "HSR Act" has the meaning specified in Section 4.3.

        "Insurance Policies" has the meaning specified in Section 4.27.

        "Intellectual Property" means (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all provisionals, reissuances, continuations, continuations-in-part, divisions, revisions, extensions, and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, brand names, trade names, domain names and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (iii) all copyrightable works, all copyrights, any and all website content, and all applications, registrations, and renewals in connection therewith, (iv) all mask works and all applications, registrations, and renewals in connection therewith, (v) all trade secrets and confidential business information (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, research records, records of inventions, test information, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (vi) all source code and object code versions of computer software (including data and related documentation), (vii) all moral rights, (viii) all other proprietary rights, and (ix) all copies and tangible embodiments thereof (in whatever form or medium), any rights in or licenses of any of the foregoing, and any claims or causes of actions (pending, filed) arising out of or related to any infringement or misappropriation of any of the foregoing.

        "Knowledge" as used in this Agreement, knowledge shall refer to the actual knowledge, after due inquiry, of the members of the Board of Directors of the Company and each of the Persons listed on Annex 1.1.

        "Law" means any supranational, federal, state, local, or foreign law, rule, regulation, judgment, code, ruling, statute, order, decree, injunction, ordinance or other legal requirement (including any arbitral decision or award).

        "Leases" has the meaning specified in Section 4.21.

        "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of an asset; provided, however, that the term "Lien" shall not include (a) liens for utilities and current Taxes not yet due and payable, (b) mechanics', carriers', workers', repairers', materialmen's, warehousemen's and other similar liens arising or incurred in the ordinary course of business relating to claims not yet due or payable or (c) liens for Taxes (not to exceed $25,000 in the aggregate) being contested in good faith.

        "Material Contract" and "Material Contracts" have the meanings specified in Section 4.17(a).

        "Merger" has the meaning specified in the recitals to this Agreement.

        "Merger Consideration" has the meaning specified in Section 3.3.

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        "Minimum Notes Condition" has the meaning specified in Section 6.4(b).

        "Noteholders" has the meaning specified in Section 6.4(c).

        "Notes Consents" has the meaning specified in Section 6.4(b)

        "Notes Offer to Purchase" has the meaning specified in Section 6.4(a).

        "Notes Tender Offer" has the meaning specified in Section 6.4(a).

        "Notes Tender Offer Documents" has the meaning specified in Section 6.4(c).

        "Notice of Superior Proposal" has the meaning specified in Section 6.2(c).

        "Other Shares" has the meaning specified in Section 3.3.

        "Parent" has the meaning specified in the preamble to this Agreement.

        "Parent Common Shares" means the common stock, par value $0.01 per share, of Parent.

        "Parent Expense Reimbursement Amount" means all reasonable, documented, out of pocket expenses and fees (including reasonable attorneys fees) actually incurred by Parent and its Affiliates on or prior to the termination of this Agreement in connection with the transactions contemplated by this Agreement and the Ancillary Agreements; provided that this amount shall not be greater than $1,750,000.

        "Permits" has the meaning specified in Section 4.13.

        "Person" means an individual, corporation, limited liability company, partnership, association, trust or any other entity or organization, including any Governmental Entity.

        "Premises" has the meaning specified in Section 8.4(c).

        "Principal Stockholders" has the meaning specified in the recitals to this Agreement.

        "Proposed Amendments" has the meaning specified in Section 6.4(d).

        "Real Property" has the meaning specified in Section 4.21.

        "Record Holder" has the meaning specified in Section 3.4(b).

        "Replacement Policies" has the meaning specified in Section 7.1(a).

        "Representatives" has the meaning specified in Section 6.2(a).

        "Riddell Sale Agreement" means the Stock Purchase Agreement between Riddell Acquisition Sub, Inc. and Riddell Sports Inc, dated as of April 27, 2001.

        "Schedule 13E-3" has the meaning specified in Section 8.2(c).

        "SEC" means the United States Securities and Exchange Commission.

        "Secretary of State" has the meaning specified in Section 2.1(b).

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

        "Senior Notes" has the meaning assigned to such term in Section 5.6.

        "Senior Notes Indenture" means the indenture relating to the Senior Notes, dated as of June 19, 1997, among the Company, the guarantors party thereto, and Marine Midland Bank, or its successor, as trustee.

        "Specified Contracts" means those contracts set forth on Annex 4.18.

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        "Spread Amount" has the meaning specified in Section 3.5(b).

        "Subsidiary" means, with respect to any Person, any other Person (including joint ventures) of which such Person, directly or indirectly, (a) has the right or ability to elect, designate or appoint a majority of the Board of Directors or other Persons performing similar functions for such Person, whether as a result of the beneficial ownership of Equity Interests, contractual rights or otherwise or (b) beneficially owns a majority of the voting Equity Interests or a majority of the economic interests.

        "Superior Proposal" means any bona fide written Acquisition Proposal (with all of the percentages included in the definition of Acquisition Proposal increased to 100% for purposes of this definition) that a majority of the members of the Company's Board of Directors determine in good faith, after consultation with its outside legal counsel and financial advisors, (a) provides to the Company Stockholders consideration with a value per Company Share that exceeds the value per Company Share of the consideration provided for in this Agreement (after taking into account any revisions made or proposed by Parent or Acquiror); (b) would result in a transaction, if consummated, that would be more favorable to the Company Stockholders (taking into account all facts and circumstances, including all legal, financial, regulatory and other aspects of the proposal and the identity of the offeror) than the transactions contemplated hereby; (c) is reasonably capable of being consummated in a timely manner (taking into account all regulatory and other relevant considerations); (d) is not subject to any financing condition; and (e) is made by a Person or group of Persons who have provided the Company with reasonable evidence that such Person or group has or will have sufficient funds to complete such Acquisition Proposal.

        "Supplemental Indenture" has the meaning specified in Section 6.4(d).

        "Surviving Corporation" has the meaning specified in Section 2.1(a).

        "Takeover Statute" means any restrictive provision or any applicable "fair price," "moratorium," "control share acquisition," "interested stockholder" or other similar anti-takeover statute or regulation, including Sections 48-103-201 through 48-103-209 of the Tennessee Code (as defined below).

        "Taxes" means all United States federal, state, local or foreign income, profits, estimated gross receipts, windfall profits, environmental (including taxes under Section 59A of the Code), severance, property, intangible property, occupation, production, sales, use, license, excise, emergency excise, franchise, escheat, capital gains, capital stock, employment, withholding, social security (or similar), disability, transfer, registration, stamp, payroll, goods and services, value added, alternative or add-on minimum tax, estimated, or any other tax, custom, duty or governmental fee, or other like assessment or charge of any kind whatsoever, together with any interest, penalties, fines, related liabilities or additions to taxes that may become payable in respect therefor imposed by any Governmental Entity, whether disputed or not.

        "Tennessee Code" means the Annotated Code of the State of Tennessee.

        "Termination Fee" means, in respect of any termination of this Agreement, a cash amount equal to $3,500,000.

        "Third Party" means any Person (or group of Persons) other than Parent, Acquiror or any of their Affiliates. For the avoidance of doubt, the Principal Stockholders shall be deemed Third Parties.

        "Third Party Acquisition" means the consummation by a Third Party of any transaction or series of transactions described in clauses (a) through (d) of the definition of "Acquisition Proposal".

        "Voting Agreements" has the meaning specified in the recitals to this Agreement.

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ARTICLE II
THE MERGER

        2.1.    The Merger.    

        2.2.    Organizational Documents.    

        2.3.    Directors and Officers.    

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ARTICLE III
CONVERSION OF SECURITIES AND RELATED MATTERS

        3.1.    Capital Stock of Acquiror.    At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each Acquiror Common Share that is issued and outstanding immediately prior to the Effective Time shall be converted into one newly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

        3.2.    Cancellation of Treasury Stock and Parent-Owned Shares.    At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Company Share, each Company Share held by the Company as treasury stock or owned by Parent, Acquiror or any Company Subsidiary, if any, immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no payment shall be made or consideration delivered in respect therefor.

        3.3.    Conversion of Company Shares.    At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Company Share, each Company Share issued and outstanding immediately prior to the Effective Time other than (i) any Common Shares to be cancelled pursuant to Section 3.2 and (ii) Dissenting Shares, if any, complying with Section 3.6, shall be canceled, retired and shall cease to exist and shall be converted automatically into the right to receive an amount in cash equal to $6.57 (the "Merger Consideration"), payable to the holder thereof upon surrender of the certificate (a "Certificate") which immediately prior to the Effective Time represented any such Company Shares in the manner provided in Section 3.4; and no other consideration shall be delivered or deliverable on or in exchange therefor.

        3.4.    Exchange of Certificates.    

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        3.5.    Company Stock Options.    

        3.6.    Dissenting Shares.    

        3.7.    Adjustments.    If between the date of this Agreement and the Effective Time the number of outstanding Company Shares shall have been changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split-up, combination, exchange of shares or the like other than pursuant to the Merger, the amount of Merger Consideration shall be correspondingly adjusted and, if and as appropriate, all other appropriate corresponding adjustments shall be made.

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        Except as disclosed in the Company disclosure schedule delivered by the Company to the Acquiror prior to the execution of this Agreement (the "Company Disclosure Schedule") with specific reference to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates (it being understood that any information set forth in a particular section of the Company Disclosure Schedule shall be deemed to apply to each other section or subsection thereof or hereof to which its relevance is clearly apparent on its face), the Company represents and warrants to Parent and Acquiror as set forth below:

        4.1.    Corporate Existence and Power.    

        4.2.    Corporate Authorization.    

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        4.3.    Governmental Authorization.    The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby do not and will not require any consent, approval, action, order, authorization, or permit of, or registration or filing with, any Governmental Entity, other than (a) the filing of (i) the Certificate of Merger in accordance with the DGCL and (ii) the appropriate documents with respect to the Company's qualification to do business with the relevant authorities of other states or jurisdictions in which the Company is qualified to do business; (b) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (c) compliance with any applicable requirements of the Exchange Act; (d) such as may be required under any applicable state securities or blue sky Laws; and (e) other consents, approvals, actions, orders, authorizations, registrations, declarations, filings and permits which, if not obtained or made, have not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.

        4.4.    Non-Contravention.    (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby do not and will not (a) contravene, breach or conflict with the Company's Certificate of Incorporation or By-laws, (b) assuming compliance with the matters referred to in Section 4.3, contravene, breach or conflict with or constitute a violation of any provision of any Law binding upon or applicable to the Company or its Subsidiaries or by which any of their respective properties is bound or affected, (c) constitute a default under (or an event that with notice or lapse of time or both could reasonably be expected to become a default) or give rise (with or without notice or lapse of time or both) to a right of termination, amendment, cancellation or acceleration under any Material Contract, or (d) result in the creation or imposition of any material Lien on any asset of the Company or any Company Subsidiary, other than, in the case of clauses (b) and (c) any items that have not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.

        (b)   The execution, delivery and performance by Jeffrey Webb and John Nichols of their respective Employment Agreements does not and will not breach or conflict with or constitute a violation of any contract, agreement, or understanding between each of Jeffrey Webb and John Nichols, on the one hand, and the Company, on the other hand.

        (c)   The execution, delivery and performance by the Principal Stockholders of their respective Voting Agreements does not and will not breach or conflict with or constitute a violation of any contract, agreement, or understanding between each of the Principal Stockholders, on the one hand, and the Company, on the other hand.

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        4.5.    Capitalization.    

        4.6.    Subsidiaries.    

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        4.7.    Company SEC Documents.    

        4.8.    Financial Statements; No Material Undisclosed Liabilities.    

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        4.9.    Absence of Certain Changes.    Since December 31, 2002, except as set forth in Section 4.9 of the Company Disclosure Schedule or otherwise expressly contemplated by this Agreement, the Company and each Company Subsidiary has conducted its business in the ordinary course consistent with past practice. Neither the Company nor any Company Subsidiary has engaged in any transaction or series of transactions material to the Company or any Company Subsidiary other than in the ordinary course of business and consistent with past practices, and there has not been any event, occurrence or development, that individually or in the aggregate, constitutes or would be reasonably expected to have a Company Material Adverse Effect. Without limiting the generality of the foregoing, and except as set forth by the Company on Schedule 4.9, since December 31, 2002, there has not been:

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        4.10.    Litigation.    All of the actions, suits, claims, investigations, arbitrations or proceedings pending, or to the Knowledge of the Company threatened, against the Company or any Company Subsidiary or any of their respective assets or properties before any arbitrator or Governmental Entity are set forth in Section 4.10 of the Company Disclosure Schedule. (a) There is no action, suit, claim, investigation, arbitration or proceeding pending, or to the Knowledge of the Company threatened, against the Company or any Company Subsidiary or any of their respective assets or properties before any arbitrator or Governmental Entity that has had, or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect (it being expressly understood and agreed that the mere filing of litigation or mere existence of litigation by or on behalf of Company Stockholders or any other Person, that challenges or otherwise seeks damages with respect to the transactions contemplated hereby shall not in and of itself be deemed to have such effect) and (b) to the Knowledge of the Company, there is no basis for any such action, suit, claim, investigation, arbitration or proceeding. Neither the Company, nor any Company Subsidiary, any officer, director or employee of the Company or any Company Subsidiary has been permanently or temporarily enjoined by any order, judgment or decree of any court or any other Governmental Entity from engaging in or continuing any conduct or practice in connection with the business or assets of the Company or any Company Subsidiary nor, to the Company's and the Company Subsidiaries' Knowledge, is the Company, any Company Subsidiary or any officer, director or employee of the Company or any Company Subsidiary under investigation by any Governmental Entity related to the conduct of the Company's or any Company Subsidiaries' business. To the Knowledge of the Company, there is not in existence any order, judgment or decree of any court or other tribunal or other agency that is applicable to the Company or any Company Subsidiary enjoining or requiring the Company or any Company Subsidiary to take any action of any kind with respect to its business or assets.

        4.11.    Taxes.    Except as set forth in Section 4.11 of the Company Disclosure Schedule, (a) all Tax returns, statements, reports and forms (collectively, the "Company Returns") required to be filed with any taxing authority by, or with respect to, the Company and each Company Subsidiary has been timely filed in accordance with all applicable Laws; (b) the Company and each Company Subsidiary has timely paid all material Taxes due and payable and the Company Returns are true, correct and complete in all material respects; (c) the Company and each Company Subsidiary has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party; (d) there is no action, suit, proceeding, audit or claim now proposed or pending against the Company or any Company Subsidiary in respect of any Taxes; (e) neither the Company nor any Company Subsidiary is party to, bound by or has any obligation under, any Tax sharing agreement or similar contract or arrangement or any agreement that obligates either of them to make any payment computed by reference to the Taxes, taxable income or taxable losses of any other Person; (f) there are no Liens with respect to Taxes on any of the assets or properties of the Company or any Company Subsidiary; (g) neither the Company nor any Company Subsidiary (1) is, or has been, a member of an affiliated, consolidated, combined or unitary group, other than one of which the Company was the common parent and (2) has any liability for the Taxes of any Person (other than the Company and the Company Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), or as a transferee or successor, by contract or otherwise; (h) no consent under Section 341(f) of the Code has been filed with respect to the Company or any Company Subsidiary; (i) neither the Company nor any Company Subsidiary has ever entered into a closing agreement pursuant to Section 7121 of the Code; (j) neither the Company nor any Company Subsidiary has agreed to make or is required to make any adjustment

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under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (k) no waivers of statutes of limitation with respect to any Company Returns have been given by or requested from the applicable entity; (l) all deficiencies asserted or assessments made as a result of any examinations of the Company or any of the Company Subsidiaries have been fully paid, or are fully reflected as a liability in the Company Balance Sheet, or are being contested and an adequate reserve therefor has been established and is fully reflected in the Company Balance Sheet; (m) none of the Company or any of the Company Subsidiaries has received written notice from any governmental agency in a jurisdiction in which such entity does not file a Tax return stating that such entity is or may be subject to taxation by that jurisdiction; (n) none of the assets of the Company or any Company Subsidiary is property required to be treated as being owned by any other Person pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of the Code; (o) none of the assets of the Company or any Company Subsidiary directly or indirectly secures any debt the interest on which is tax-exempt under Section 103(a) of the Code; (p) none of the assets of the Company or any Company Subsidiary is "tax-exempt use property" within the meaning of Section 168(h) of the Code; and (q) neither the Company nor any predecessors of the Company by merger or consolidation has within the past three years been a party to a transaction intended to qualify under Section 355 of the Code or under so much of Section 356 of the Code as relates to Section 355 of the Code.

        4.12.    Employee Benefits.    

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        4.13.    Compliance with Laws; Licenses, Permits and Registrations.    

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        4.14.    Finders' Fees; Opinion of Financial Advisor.    

        4.15.    Affiliate Transactions.    Except as set forth in Section 4.15 of the Company Disclosure Schedule, and except for employment agreements with officers of the Company set forth on Section 4.17(vi) of the Company Disclosure Schedule, there are no Company Contracts with any (i) present or former officer or director of the Company or any Company Subsidiary or any of their immediate family members (including their spouses), (ii) record or beneficial owner of five percent or more of any voting securities of the Company or (iii) Affiliate of any such officer, director, family member or beneficial owner.

        4.16.    Intellectual Property.    

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        4.17.    Material Contracts.    

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        4.18.    Specified Contracts.    The Company and, to the Knowledge of the Company, the other parties to each Specified Contract have performed in all material respects their respective obligations under the Specified Contracts. Neither the Company nor any of its Subsidiaries has received from any other party to a Specified Contract any notice of the termination of, or intent to terminate or otherwise fail to fully perform, such Specified Contract. The Company has no reason to believe or not believe that, upon the expiration of any Specified Contract in accordance with its terms, such Specified Contract will be renewed on terms and conditions as favorable in all material respects to the Company as the terms and conditions of such Specified Contract as in effect on the date hereof.

        4.19.    Reserved.    

        4.20.    Riddell Sale Agreement.    

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        4.21.    Real Estate.    Except as has not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect: (i) all of the leases, licenses, tenancies, subleases and all other occupancy agreements ("Leases") in which the Company or any Company Subsidiary is a tenant, subtenant, landlord or sublandlord (the leased and subleased space or parcel of real property thereunder being, collectively, the "Real Property"), are in full force and effect, (ii) neither the Company (or the applicable Company Subsidiary), nor to the Knowledge of the Company, any other party to any Lease, is in default under the Leases, and no event has occurred which, with notice or lapse of time, would constitute a Default by the Company (or such Subsidiary) under the Leases and (iii) the Company (or the applicable Company Subsidiary) enjoys peaceful and undisturbed possession under the Leases. The Company does not own, and no Company Subsidiary owns, any real property or any interests (other than the Leases) therein. All of the Leases of the Company and its Subsidiaries are set forth on Section 4.21 of the Company Disclosure Schedule.

        4.22.    Accounts Payable and Inventory.    Since December 31, 2002, the Company has (i) discharged its material accounts payable and other material current liabilities and obligations in accordance with past practice, and (ii) purchased and maintained inventory in an amount which it reasonably believes to be appropriate for normal seasonal requirements of the Company's business and current business conditions consistent with its past practices.

        4.23.    Accounts Receivable.    The accounts and notes receivable reflected on the Company Balance Sheet (except to the extent collected since the Balance Sheet Date), and all accounts or notes receivable since the Balance Sheet Date, represent bona fide claims of the Company and the Company Subsidiaries against customers for sales made, services performed or other charges or valid consideration arising on or before the date hereof and require no additional performance by the Company or any Company Subsidiary to render them valid. Such accounts receivable are valid and enforceable claims, fully collectible in the ordinary course of business (and to the Company's Knowledge without resort to commencement of any action or assignment to a collection agency), consistent with past practice (subject to reserves for bad debts reflected on the Company Balance Sheet in accordance with GAAP and, in the case of accounts receivable arising since the Balance Sheet Date, additions to such reserves reflected on the Company's books and records) and to the Company's Knowledge, subject to no defense, set-off or counterclaim. To the Company's Knowledge, all of the goods delivered and services performed which gave rise to said accounts were delivered or performed in accordance with the applicable orders, contracts or customer requirements. The Company and the

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Company Subsidiaries have no accounts or loans receivable from any Person, firm or corporation that is affiliated with the Company and the Company Subsidiaries or from any director, officer, shareholder or employee of the Company and the Company Subsidiaries, except for advances for business expenses incurred in the ordinary course of business, so long as such advances do not exceed $250,000 in the aggregate, outstanding at any one time.

        4.24.    Suppliers.    Set forth in Section 4.24 of the Company Disclosure Schedule is a list of the ten largest suppliers and the ten largest contract manufacturers of the Company based on the dollar value of materials or products purchased by the Company, in the case of suppliers, and payments made by the Company, in the case of contract manufacturers, for the fiscal year ended December 31, 2002. Since such date, there has not been, nor as a result of the Merger is there anticipated to be, any change in relations with any of the major suppliers and contract manufacturers of the Company and its Subsidiaries that, individually or in the aggregate, has had, or would be reasonably expected to result in, a Company Material Adverse Effect. The existing suppliers and contract manufacturers of the Company and its Subsidiaries are adequate for the operation of the Company's business as operated on the date hereof.

        4.25.    Personnel, etc.    

        4.26.    Assets.    The assets and properties of the Company and the Company Subsidiaries, considered as a whole, constitute all of the material assets and properties which are reasonably required for the business and operations of the Company and its Subsidiaries as presently conducted. The Company and its Subsidiaries have good and marketable title to or a valid leasehold estate in, free and clear of any Liens, all personal properties and assets reflected on the Company Balance Sheet at the Balance Sheet Date (except for properties or assets subsequently sold in the ordinary course of business consistent with past practices).

        4.27.    Insurance.    Each of the Company and its Subsidiaries maintains insurance policies (the "Insurance Policies") against all risks of a character and in such amounts as are usually insured against by similarly situated companies in the same or similar businesses. Section 4.27 of the Company Disclosure Schedules contains a complete and accurate list of all Insurance Policies of the Company and its Subsidiaries. Each Insurance Policy is in full force and effect and is valid, outstanding and enforceable, and all premiums due thereon have been paid in full, in each case without any exception other than those which have not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. None of the Insurance Policies will terminate or lapse (or be affected in any other materially adverse manner) by reason of the transactions contemplated by this Agreement, in each case without any exception other than those which have not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. Each of the Company and its Subsidiaries has complied in all material respects with the provisions of each Insurance Policy under which it is the insured party. No insurer under any Insurance Policy has canceled or generally disclaimed liability under any such policy or, to the Company's Knowledge, indicated any intent to do so or not to renew any such policy, in each case without any exception other than those which have not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. All material claims under

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the Insurance Policies have been filed in a timely fashion. Since the Company's formation, there have been no historical gaps in insurance coverage of the Company and/or its Subsidiaries.

        4.28.    Disclaimer of Other Representations and Warranties.    The Company does not make, and has not made, any representations or warranties in connection with the Merger and the transactions contemplated hereby other than those expressly set forth herein, including those items set forth in the Company Disclosure Schedule or incorporated herein by reference. For the avoidance of doubt, notwithstanding the fact that Parent and Acquiror and their representatives have been afforded the opportunity, prior to the date hereof, to ask questions of, and receive answers from the Company and its management, it is understood that any responses from or other information provided by the Company, or its management, including, but not limited to any data, financial information or any memoranda or other materials of any nature whatsoever or any presentations are not and shall not be deemed to be or to include representations and warranties of the Company except as otherwise set forth herein or in the Company Disclosure Schedule.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR

        Except as disclosed in the disclosure schedule delivered by Parent and the Acquiror to the Company prior to the execution of this Agreement (the "Acquiror Disclosure Schedule") with specific reference to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates (it being understood that any information set forth in a particular Section of the Acquiror Disclosure Schedule shall be deemed to apply to each other Section or subsection thereof or hereof to which its relevance is clearly apparent on its face), Parent and Acquiror jointly and severally represent and warrant to the Company that:

        5.1.    Corporate Existence and Power.    Each of Parent and Acquiror is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware and has all corporate powers and authority required to own, lease and operate its respective properties and carry on its respective business as now conducted and to consummate the Merger and the other transactions contemplated hereby. Each of Parent and Acquiror is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned, leased or operated by it or the nature of its activities makes qualification necessary, except where the failure to be so qualified has not had, and would not be reasonably expected to have, individually or in the aggregate, an Acquiror Material Adverse Effect.

        5.2.    Corporate Authorization.    The execution, delivery and performance by Parent and the Acquiror of this Agreement, the Ancillary Agreements, as applicable, and the consummation by Parent and the Acquiror of the Merger and the other transactions contemplated hereby and thereby, as applicable, are within the corporate powers of Parent and the Acquiror and have been duly and validly authorized by all necessary corporate action, as applicable, and no other corporate proceedings on the part of Parent or the Acquiror are necessary to authorize this Agreement, the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by Parent and the Acquiror, as applicable, and assuming that this Agreement and the Ancillary Agreements constitute the valid and binding obligation of the Company and/or the other parties thereto, this Agreement and the Ancillary Agreements constitute valid and binding obligations of Parent and the Acquiror, as applicable, each enforceable in accordance with their terms.

        5.3.    Governmental Authorization.    The execution, delivery and performance by Parent and the Acquiror of this Agreement and the Ancillary Agreements, as applicable, and the consummation by Parent and the Acquiror of the transactions contemplated hereby and thereby, as applicable, will not require any consent, approval, action, order, authorization, or permit of, or registration or filing with,

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any Governmental Entity, other than (a) the filing of the Certificate of Merger in accordance with the DGCL; (b) compliance with any applicable requirements of the HSR Act; (c) compliance with any applicable requirements of the Exchange Act; (d) such as may be required under any applicable state securities or blue sky Laws; and (e) other consents, approvals, actions, orders, authorizations, registrations, declarations, filings and permits which, if not obtained or made, have not had, and would not be reasonably expected to have, individually or in the aggregate, an Acquiror Material Adverse Effect.

        5.4.    Non-Contravention.    The execution, delivery and performance by Parent and the Acquiror of this Agreement, the Ancillary Agreements and the consummation by Parent and the Acquiror of the Merger and the other transactions contemplated hereby and thereby, as applicable, do not and will not (a) contravene or conflict with Parent's or Acquiror's Certificate of Incorporation or By-laws, (b) assuming compliance with the matters referred to in Section 5.3, contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to Parent or the Acquiror or by which any of their respective properties is bound or affected, (c) constitute a Default under (or an event that with notice or lapse of time or both could reasonably be expected to become a Default) or give rise (with or without notice or lapse of time or both) to a right of termination, amendment, cancellation or acceleration under any agreement, contract, note, bond, mortgage, indenture, lease, franchise, Permit or other similar authorization or joint venture, limited liability or partnership agreement or other instrument binding upon Acquiror, other than, in the case of clauses (b) and (c) any items that have not had, and would not be reasonably expected to have, individually or in the aggregate, an Acquiror Material Adverse Effect.

        5.5.    Employment Agreements.    Parent has caused Acquiror to enter into the Employment Agreements. Neither Parent nor Acquiror will take any action to cause the Employment Agreements not to be in full force and effect on and as of the Effective Time.

        5.6.    Financing.    Parent has sufficient funds available to pay the aggregate Merger Consideration and to provide the Company with sufficient funds to consummate the Notes Tender Offer for the Company's 101/2% Senior Notes due 2007 (the "Senior Notes").

        5.7.    Disclaimer of Other Representations and Warranties.    Parent and the Acquiror do not make, and have not made, any representations or warranties in connection with the Merger and the transactions contemplated hereby other than those expressly set forth herein, including those items set forth in the Acquiror Disclosure Schedule or incorporated herein by reference. For the avoidance of doubt, notwithstanding the fact that the Company and their representatives have been afforded the opportunity, prior to the date hereof, to ask questions of, and receive answers from the Parent and its management, it is understood that any responses from or other information provided by the Parent, or its management, including, but not limited to any data, financial information or any memoranda or other materials of any nature whatsoever or any presentations are not and shall not be deemed to be or to include representations and warranties of the Parent except as set forth herein or in the Acquiror Disclosure Schedule.

        5.8.    Finders' Fees.    Other than Leonard Green & Partners, L.P., all of whose fees and expenses will be borne by the Surviving Corporation at the Closing and whose fees are set forth on Section 5.8 of the Acquiror Disclosure Schedule, there is no investment banker, financial advisor, broker, finder or other intermediary which has been retained by, or is authorized to act on behalf of, the Parent, Acquiror or any Affiliate thereof, which might be entitled to any fee or commission from the Parent, Acquiror, Company, any Company Subsidiary, or of any of their respective Affiliates upon consummation of the Merger or the other transactions contemplated by this Agreement or the Ancillary Agreements.

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ARTICLE VI
COVENANTS OF THE COMPANY

        The Company agrees as set forth below:

        6.1.    Company Interim Operations.    Except as set forth in the Company Disclosure Schedule or as otherwise expressly permitted by any other provision of this Agreement, without the prior consent of Acquiror, from the date hereof until the Effective Time, the Company shall, and shall cause its Subsidiaries to, conduct their respective businesses only in the ordinary and usual course consistent with past practice, and shall use reasonable best efforts, to (i) preserve intact its present business organization, (ii) keep available the services of its present officers, key employees and consultants of the Company and each Company Subsidiary, and (iii) preserve existing relationships with its material customers, suppliers and other Persons with which the Company or any Company Subsidiary has significant business relationships. Without limiting the generality of the foregoing, and as an extension thereof, except as set forth in the Company Disclosure Schedule or as otherwise expressly contemplated by this Agreement, from the date hereof until the Effective Time, without the prior consent of Acquiror, the Company shall not and shall not permit its Subsidiaries, directly or indirectly, to:

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        6.2.    Acquisition Proposals; Board Recommendation.    

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        6.3.    Taxes.    The Company shall, and shall cause the Company Subsidiaries to timely file or cause to be timely filed (in all cases, giving effect to any valid extension granted to the Company by an appropriate Governmental Entity), consistent with past practice, all Company Returns due prior to the Closing Date and shall timely pay, or cause to be timely paid (in all cases, giving effect to any valid extension granted to the Company by an appropriate Governmental Entity) all Taxes due and payable by or with respect to the Company and each Company Subsidiary. Prior to filing any such Company Return with respect to federal income Taxes of the Company or its Subsidiaries, the Company shall provide a copy of such returns to Parent for Parent's review. Except as set forth in Section 6.3 of the Company Disclosure Schedule, all Tax sharing agreements or similar arrangements involving the Company or any Company Subsidiary shall be terminated prior to the Closing Date and, after the Closing Date, no such entity shall be bound thereby or have any liability thereunder.

        6.4.    The Notes Tender Offer.    (a) Provided that this Agreement shall not have been terminated in accordance with Section 10.1, the Company will commence a tender offer (the "Notes Tender Offer") for all of the $66,035,000 million aggregate principal amount at maturity of the Senior Notes as promptly as reasonably practicable after the date hereof, but in no event later than the mailing of the Company Proxy Statement. The aggregate consideration payable to each holder of Senior Notes pursuant to the Notes Tender Offer shall be an amount in cash established by Parent; provided that such amount shall not be less than the amount required to redeem the Senior Notes as provided in Section 3.07 of the Senior Notes Indenture, as of the date the Notes Tender Offer is expected to expire in accordance with its terms (as such date may be extended). The Notes Tender Offer shall be made pursuant to an Offer to Purchase and Consent Solicitation Statement prepared by the Company in connection with the Notes Tender Offer in form and substance reasonably satisfactory to Parent (as amended from time to time, the "Notes Offer to Purchase").

        (b)   As part of the Notes Tender Offer, the Company shall solicit the consent of the holders of the Senior Notes, to amend, eliminate or waive certain sections (as selected by Parent and reasonably acceptable to the Company) of the Senior Notes Indenture (the "Notes Consents"). The Company's obligation to accept for payment and pay for the Senior Notes tendered pursuant to the Notes Tender Offer shall be subject to the conditions that (i) the aggregate principal amount of Senior Notes validly tendered and not withdrawn prior to the expiration of the Notes Tender Offer constitutes at least a majority of the aggregate principal amount of Senior Notes outstanding at the expiration of the Notes Tender Offer (the "Minimum Notes Condition"), (ii) the Company receives Notes Consents from Noteholders (as that term is defined below) of at least a majority of the aggregate principal amount of Senior Notes, (iii) the other conditions set forth in Article IX below shall have been satisfied or waived, (iv) the simultaneous occurrence of the Effective Time and (v) such other conditions as are customary for transactions similar to the Notes Tender Offer. Subject to the terms and conditions of

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the Notes Tender Offer (including, without limitation, the Minimum Notes Condition), the Company agrees to accept for payment and to pay for, as promptly as practicable after expiration of the Notes Tender Offer, all Senior Notes validly tendered and not withdrawn. The Company will not waive any of the conditions to the Notes Tender Offer without the consent of Parent, which consent shall not be unreasonably withheld.

        (c)   The Company shall prepare, as promptly as practicable, the Notes Offer to Purchase, together with related letters of transmittal and similar ancillary agreements (such documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Notes Tender Offer Documents"), relating to the Notes Tender Offer and to disseminate to the record holders of the Senior Notes, and to the extent known by the Company, the beneficial owners of the Senior Notes (collectively, the "Noteholders"), the Notes Tender Offer Documents; provided, however, that prior to the dissemination thereof, the Company shall consult with Parent with respect to the Notes Tender Offer Documents and shall afford Parent reasonable opportunity to comment thereon. Parent and the Acquiror shall provide the Company with any information for inclusion in the Notes Tender Offer Documents which may be required under applicable Law and which is reasonably requested by the Company. If at any time prior to the acceptance of Senior Notes pursuant to the Notes Tender Offer any event should occur that is required by applicable Law to be set forth in an amendment of, or a supplement to, the Notes Tender Offer Documents, the Company will prepare and disseminate such amendment or supplement; provided, however, that prior to such dissemination, the Company shall consult with Parent with respect to such amendment or supplement and shall afford Parent reasonable opportunity to comment thereon. The Company will notify Parent at least 48 hours prior to the dissemination of the Notes Tender Offer Documents, or 24 hours prior to the mailing of any amendment or supplement thereto, to the Noteholders.

        (d)   At such time as the Company receives consents from Noteholders holding at least a majority of the aggregate principal amount of Senior Notes, the Company agrees to execute, and to cause all of the guarantors that are a party to the Senior Notes Indenture to execute, and will use reasonable best efforts to cause the trustee under the Senior Notes Indenture to execute, a supplemental indenture (the "Supplemental Indenture") in order to give effect to the amendments of the Indenture contemplated in the Notes Tender Offer Documents; provided, however, that notwithstanding the fact that the Supplemental Indenture will become effective upon such execution, the proposed amendments set forth therein (the "Proposed Amendments") will not become operative unless and until the Minimum Notes Condition is satisfied or waived and all other conditions to the Notes Tender Offer have been satisfied or waived by the Company and the Company accepts all Senior Notes (and related consents) validly tendered for purchase and payment pursuant to the Notes Tender Offer. In such event, the parties hereto agree that the Proposed Amendments will be deemed operative as of immediately prior to such acceptance for payment, and the Company will thereafter be obligated to make all payments for the Senior Notes (and related consents) so tendered.

ARTICLE VII
COVENANTS OF ACQUIROR

        Acquiror agrees as set forth below:

        7.1.    Director and Officer Liability.    (a) The Surviving Corporation shall honor all of the Company's obligations to indemnify and hold harmless the present and former officers and directors of the Company in respect of acts or omissions occurring prior to the Effective Time to the extent provided under the DGCL and the Company's Certificate of Incorporation and By-laws in effect on the date hereof, and such obligations shall survive the Merger and shall continue in full force and effect from the Effective Time until six (6) years after the Effective Time, except to the extent such obligation shall expire or terminate by its terms prior to such time; provided, however, that such indemnification

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shall be subject to any limitation imposed from time to time under applicable Law. For a period of six (6) years after the Effective Time, the Surviving Corporation shall cause to be maintained the current policies of officers' and directors' liability insurance maintained by the Company (the "Current Policies") (provided that the Surviving Corporation may substitute therefore policies with reputable and financially sound carriers of at least the same coverage and amount containing terms and conditions that are no less favorable (the "Replacement Policies")) in respect of acts or omissions occurring prior to the Effective Time covering each such Person currently covered by such Current Policies; provided, however, that in no event shall the Surviving Corporation be required to expend, per annum, in excess of 200% of the annual premium currently paid by the Company for such coverage (or such coverage as is available for 200% of such annual premium); provided, further, that if the annual premium required to provide the foregoing insurance exceeds 200% of the annual premium currently paid by the Company (which the Company represents and warrants is equal to $175,000 per annum), the Company shall provide as much of such insurance as can be purchased for such premium, and, any present or former officer or director, upon reasonable written notice thereof from the Surviving Corporation, who desires to be covered by the Current Policies may so elect and shall be covered by the Current Policies so long as such former offer or director pays the portion of the premium for such Current Policies in excess of the amount which the Surviving Corporation is obligated to pay pursuant to this Section 7.1. Alternatively, with the consent of Parent, which consent shall not be unreasonably withheld, the Company may purchase "tail" insurance coverage, at a cost no greater than that set forth above, that provides coverage identical in all material respects to the coverage described above.

        (b)   This Section 7.1 shall survive the consummation of the Merger and is intended to be for the benefit of, and shall be enforceable by, present or former officers or directors, their heirs and personal representatives and shall be binding on the Surviving Corporation and its successors and assigns and the covenants and agreements contained herein shall not be deemed exclusive of any other rights to which any present or former officer or director is entitled, whether pursuant to Law, contract or otherwise.

        (c)   If the Surviving Corporation or any of it successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each case, to the extent reasonably necessary, proper provision shall be made so that the successors and assigns of the Surviving Corporation shall assume the obligations set forth in this Section 7.1.

        (d)   Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors' and officers' insurance claims under any policy that is or has been in existence with respect to the Company or any of its officers, directors or employees, it being understood and agreed that the indemnification provided for in this Section 7.1 is not prior to or in substitution for any such claims under such policies.

        7.2.    Transfer Taxes.    All state, local or foreign sales, use, real property transfer, stock transfer or similar Taxes (including any interest or penalties with respect thereto) attributable to the Merger shall be timely paid by the Surviving Corporation.

        7.3.    Reserved.    

        7.4.    Repayment of Debt.    Parent or Acquiror shall take any and all necessary action to provide the funds to, or to cause the funds to be provided to, the Company to enable the Company to consummate the Notes Tender Offer at the Effective Time, provided that the conditions to the Merger and the Notes Tender Offer have been satisfied or waived.

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ARTICLE VIII
COVENANTS OF ACQUIROR AND THE COMPANY

        The parties hereto agree as set forth below:

        8.1.    Efforts and Assistance/HSR Act.    

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        8.2.    Stockholder Meeting/Proxy Statement and Schedule 13E-3.    

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        8.3.    Public Announcements.    So long as this Agreement is in effect, the parties shall consult with each other before issuing any press release or making any public statement with respect to this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby and shall not issue any such press release or make any such public statement without the prior consent of the other party, which shall not be unreasonably withheld or delayed, except as may be required by applicable Law or any listing agreement with any national securities exchange.

        8.4.    Access to Information; Notification of Certain Matters.    

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        8.5.    Further Assurances.    Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use their respective best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and otherwise to satisfy or cause to be satisfied all conditions precedent to its obligations under this Agreement. At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company or Acquiror, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Acquiror, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of

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the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

        8.6.    Disposition of Litigation.    The Company will consult with Parent and the Acquiror with respect to any action by any Third Party to restrain or prohibit or otherwise oppose the Merger or the other transactions contemplated by this Agreement or the Voting Agreements and, subject to Section 6.2, will use reasonable best efforts to resist any such effort to restrain or prohibit or otherwise oppose the Merger or the other transactions contemplated by this Agreement or the Voting Agreements. Acquiror may participate in (but not control) the defense of any stockholder litigation against the Company and its directors relating to the transactions contemplated by this Agreement at Acquiror's sole cost and expense (subject to Section 10.2). In addition, subject to Section 6.2, the Company will not voluntarily cooperate with any Third Party which has sought or may hereafter seek to restrain or prohibit or otherwise oppose the Merger or the other transactions contemplated by this Agreement and the Voting Agreements and will cooperate with Acquiror to resist any such effort to restrain or prohibit or otherwise oppose the Merger or the other transactions contemplated by this Agreement and the Voting Agreements.

        8.7.    Confidentiality Agreement.    The parties acknowledge that the Company and Leonard Green & Partners, L.P. entered into the Confidentiality Agreement, which shall be deemed to be incorporated herein as if it were set forth in its entirety, and which Confidentiality Agreement shall continue in full force and effect in accordance with its terms until the earlier of (a) the Effective Time or (b) the expiration of the Confidentiality Agreement according to its terms; provided that, to the extent any provision of this Agreement or the Ancillary Agreements permits Parent or Acquiror to take any action otherwise prohibited under the Confidentiality Agreement, the terms of this Agreement or such Ancillary Agreement shall prevail.

ARTICLE IX
CONDITIONS TO MERGER

        9.1.    Conditions to the Obligations of Each Party.    The obligations of the Company, Parent and Acquiror to consummate the Merger are subject to the satisfaction or waiver of the following conditions:

        9.2.    Conditions to the Obligations of the Company.    The obligations of the Company to consummate the Merger are subject to the satisfaction or waiver of the following further conditions:

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        9.3.    Conditions to the Obligations of Acquiror.    The obligations of Acquiror to consummate the Merger are subject to the satisfaction or waiver of the following further conditions:

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ARTICLE X
TERMINATION

        10.1.    Termination.    This Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by written notice, whether before or after the Company Stockholder Approval shall have been obtained:

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        The party desiring to terminate this Agreement pursuant to Sections 10.1(b) through (f) shall give written notice of such termination to the other party in accordance with Section 11.1 of this Agreement; provided that no such termination by the Company shall be effective unless and until the Company shall have paid any Termination Fee and/or Parent Expense Reimbursement Amount required to be paid by it pursuant to Section 10.2 of this Agreement and provided, further, that no such termination by the Parent or Acquiror shall be effective unless and until the Parent shall have paid any Company Expense Reimbursement Amount required to be paid by it pursuant to Section 10.2(b) of this Agreement.

        10.2.    Effect of Termination.    

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        10.3.    Fees and Expenses.    Except as otherwise specifically provided herein, all fees and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring expenses, whether or not the Merger is consummated.

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ARTICLE XI
MISCELLANEOUS

        11.1.    Notices.    All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given,

        if to Parent or Acquiror, to:

        with a copy to:

        if to the Company, to:

        with a copy to:

or such other address or facsimile number as a party may hereafter specify for the purpose by notice to the other parties hereto. Each notice, request or other communication shall be effective only (a) if given by facsimile, when the facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by overnight courier or personal delivery when delivered at the address specified in this Section.

        11.2.    Survival.    None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 11.2 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time, including, but not limited to, those covenants in Articles 2, 3, 7 and 11 which contemplate performance after the Effective Time.

        11.3.    Amendments; No Waivers.    

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        11.4.    Successors and Assigns.    The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that all or any of the rights or obligations of Acquiror may be assigned to any direct or indirect wholly-owned Subsidiary of Acquiror (which assignment shall not relieve Acquiror of its obligations hereunder); provided, further, that other than with respect to the foregoing proviso, no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto. Any purported assignment in violation hereof shall be null and void.

        11.5.    Counterparts; Effectiveness; Third Party Beneficiaries.    This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Except as set forth in Section 7.1, no provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

        11.6.    Governing Law.    This Agreement shall be construed in accordance with and governed by the internal Laws of the State of Delaware applicable to contracts executed and fully performed within the State of Delaware.

        11.7.    Jurisdiction.    Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in the Court of Chancery of the State of Delaware, County of New Castle or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the United State District Court for the District of Delaware, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as provided in Section 11.1 shall be deemed effective service of process.

        11.8.    Entire Agreement.    This Agreement (together with the exhibits and schedules hereto), the Ancillary Agreements and the Confidentiality Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof.

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        11.9.    Authorship.    The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there shall be no presumption that any ambiguities in this Agreement shall be resolved against any party. Any controversy over construction of this Agreement shall be decided without regard to events of authorship or negotiation.

        11.10.    Severability.    If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

        11.11.    Waiver of Jury Trial.    EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

        11.12.    Headings; Construction.    The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) "it" or "its" or words denoting any gender include all genders, (c) the word "including" shall mean "including without limitation," whether or not expressed, (d) any reference herein to a Section, Article, Paragraph, Clause or Schedule refers to a Section, Article, Paragraph or Clause of or a Schedule to this Agreement, unless otherwise stated, and (e) when calculating the period of time within or following which any act is to be done or steps taken, the date which is the reference day in calculating such period shall be excluded and if the last day of such period is not a Business Day, then the period shall end on the next day which is a Business Day.

* * *

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

    VARSITY BRANDS, INC.

 
 
By:
 
/s/  JOHN M. NICHOLS      
    Name:   John M. Nichols
    Its:   Senior V.P. and CFO

 
 
VB MERGER CORPORATION

 
 
By:
 
/s/  JONATHAN A. SEIFFER      
    Name:   Jonathan A. Seiffer
    Its:   Vice President

 
 
VBR HOLDING CORPORATION

 
 
By:
 
/s/  JONATHAN A. SEIFFER      
    Name:   Jonathan A. Seiffer
    Its:   Vice President

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Annex B


[LETTERHEAD OF ROTHSCHILD INC.]

April 21, 2003

The Board of Directors
Varsity Brands, Inc.
6745 Lenox Center Court, Suite 300
Memphis, Tennessee 38115

Members of the Board of Directors:

        You have requested our opinion ("Opinion") as to the fairness, from a financial point of view, of the Merger Consideration (as defined below) to be received by the holders of the common stock, par value of $0.01 per share, of Varsity Brands, Inc. ("Varsity Brands" and, such common stock, "Varsity Brands Common Stock"), other than VB and the Rollover Holders (as such terms are defined below) and their respective affiliates, pursuant to the terms of the Agreement and Plan of Merger, dated as of April 21, 2003 (the "Merger Agreement"), among VBR Holding Corporation ("Parent") and its wholly owned subsidiary, VB Merger Corporation ("Merger Sub" and, together with Parent, "VB"), each an affiliate of Leonard Green & Partners, L.P. ("Leonard Green"), and Varsity Brands. As more fully described in the Merger Agreement, (i) Merger Sub will be merged with and into Varsity Brands (the "Merger") and (ii) each outstanding share of Varsity Brands Common Stock will be converted into the right to receive $6.57 in cash (the "Merger Consideration"). Representatives of Varsity Brands have advised us that, in connection with the transactions contemplated by the Merger Agreement, certain members of the management of Varsity Brands will enter into certain agreements with Parent pursuant to which such members of management will exchange a portion of their shares of Varsity Brands Common Stock or options to purchase such shares, as the case may be, for shares of the common stock of Parent or options to purchase such shares (such members of management, the "Rollover Holders").

        In arriving at our Opinion, we have, among other things, (i) reviewed the Merger Agreement and certain related documents; (ii) discussed the proposed Merger with the management and Board of Directors of Varsity Brands and Varsity Brands' advisors and other representatives; (iii) reviewed certain publicly available business and financial information relating to Varsity Brands; (iv) reviewed certain audited and unaudited financial statements of Varsity Brands and certain other financial and operating data, including financial forecasts relating to Varsity Brands as well as certain sensitivities regarding the future financial performance of Varsity Brands, provided to or discussed with us by the management of Varsity Brands; (v) held discussions with the management of Varsity Brands regarding the past and current operations and financial condition and prospects of Varsity Brands; (vi) compared the financial performance of Varsity Brands with those of certain publicly traded companies which we deemed to be generally relevant in evaluating Varsity Brands; (vii) reviewed, to the extent publicly available, the financial terms of certain public transactions which we deemed to be generally relevant in evaluating the Merger; (viii) reviewed, to the extent publicly available, information relating to premiums paid in certain public transactions with transaction values which we deemed to be generally relevant in evaluating the Merger; (ix) reviewed the estimated present value of the unlevered, after-tax free cash flows of Varsity Brands for the fiscal years ending December 31, 2003 through December 31, 2007 based on financial forecasts and related sensitivities provided to or discussed with us by the management of Varsity Brands; (x) at the direction of the Board of Directors of Varsity Brands and a special committee thereof, contacted selected third parties to solicit indicative bids for Varsity Brands; and (xi) considered such other factors and information as we deemed appropriate.

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The Board of Directors
Varsity Brands, Inc.
April 21, 2003
Page 2

        In rendering our Opinion, we have not assumed any obligation independently to verify any information utilized, reviewed or considered by us in formulating our Opinion and have relied on such information being accurate and complete in all material respects. With respect to the financial forecasts and other information and operating data for Varsity Brands and related sensitivities regarding the future financial performance of Varsity Brands provided to or discussed with us by the management of Varsity Brands, we have been advised, and have assumed, that such forecasts have been reasonably prepared on bases reflecting the best available estimates and judgments of the management of Varsity Brands as to the future financial performance of Varsity Brands and the potential impact on such forecasts of certain sensitivities which may affect such financial performance. We also have assumed, at your direction, that there has not occurred any material change in the assets, financial condition, results of operations, business or prospects of Varsity Brands since the respective dates on which the most recent financial statements or other financial and business information relating to Varsity Brands were made available to us. We further have assumed, with your consent, that the Merger and related transactions will be consummated in all material respects in accordance with the terms and conditions described in the Merger Agreement and related documents without any waiver or modification thereof and that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger and related transactions will be obtained without any adverse effect on Varsity Brands or the Merger. We have not assumed responsibility for making an independent evaluation, appraisal or physical inspection of any of the assets or liabilities (contingent or otherwise) of Varsity Brands. Our Opinion is based on economic, monetary and market and other conditions as in effect on, and the information made available to us as of, the date hereof. Accordingly, although subsequent developments may affect this Opinion, we have not assumed any obligation to update, revise or reaffirm this Opinion.

        We have acted as financial advisor to Varsity Brands in connection with the Merger and will receive a fee for our services, a significant portion of which is contingent upon consummation of the Merger. We also will receive a fee in connection with this Opinion. In the ordinary course of business, we and our affiliates may trade the securities of Varsity Brands and certain affiliates of Leonard Green for our and/or their own accounts or for the accounts of customers and may, therefore, at any time hold a long or short position in such securities.

        Our Opinion is limited to the fairness, from a financial point of view and as of the date hereof, of the Merger Consideration to be received by the holders of Varsity Brands Common Stock (other than VB, the Rollover Holders and their respective affiliates) pursuant to the Merger Agreement and does not address any other aspect of the Merger or related transactions. Our Opinion does not address the relative merits of the Merger and alternative business strategies that might exist for Varsity Brands, nor does it address any other transaction which Varsity Brands has considered or may consider or the decision of Varsity Brands or the Board of Directors to proceed with the Merger and related transactions.

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The Board of Directors
Varsity Brands, Inc.
April 21, 2003
Page 3

        Based upon and subject to the foregoing and other factors we deem relevant and in reliance thereon, it is our Opinion that, as of the date hereof, the Merger Consideration to be received by the holders of Varsity Brands Common Stock (other than VB, the Rollover Holders and their respective affiliates) pursuant to the Merger Agreement is fair, from a financial point of view, to such holders. This Opinion is for the information of the Board of Directors of Varsity Brands in connection with its evaluation of the Merger, does not address any related transaction and does not constitute a recommendation as to how any stockholder should vote or act with respect to any matters relating to the Merger or any related transactions.

    Very truly yours,

 
 
/s/ ROTHSCHILD INC.

 
 
ROTHSCHILD INC.

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Annex C

General Corporation Law Of The State Of Delaware

Section 262. Appraisal Rights.

        (a)   Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to sec. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.

        (b)   Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to sec. 251 (other than a merger effected pursuant to sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec. 264 of this title:

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        (c)   Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.

        (d)   Appraisal rights shall be perfected as follows:

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        (e)   Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.

        (f)    Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.

        (g)   At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.

        (h)   After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid

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upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.

        (i)    The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation is a corporation of this State or of any state.

        (j)    The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.

        (k)   From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.

        (l)    The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.

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Annex D

VOTING AGREEMENT

        Voting Agreement (this "Agreement"), dated as of April 21, 2003, by and among VBR HOLDING CORPORATION, a Delaware corporation ("Parent"), and the stockholder(s) listed on the signature pages hereto (the "Stockholder").

        WHEREAS, simultaneously with the execution and delivery of this Agreement, Parent, VB Merger Corporation, a Delaware corporation ("Merger Sub"), and Varsity Brands, Inc., a Delaware corporation (the "Company"), are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing, among other things, for the merger of Merger Sub with and into the Company with the Company continuing as the surviving corporation and wholly owned subsidiary of Parent (the "Merger"); and

        WHEREAS, as of the date hereof, the Stockholder is the Beneficial Owner (as defined below) of, and has the sole right to vote and dispose of that number of shares of common stock, par value $0.01 per share (the "Company Shares"), of the Company set forth beside the Stockholder's name on Schedule A hereto; and

        WHEREAS, concurrently with the execution of the Merger Agreement, and as a condition to Merger Sub and Parent entering into the Merger Agreement and incurring the obligations set forth therein, Parent has required that the Stockholder enter into this Agreement;

        NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS

        Capitalized terms used but not defined in this Agreement are used in this Agreement with the meanings given to such terms in the Merger Agreement. In addition, for purposes of this Agreement:

        "Affiliate" means, with respect to any specified Person, any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. For purposes of this Agreement, with respect to the Stockholder, "Affiliate" shall not include the Company and the Persons that directly, or indirectly through one or more intermediaries, are controlled by the Company. For the avoidance of doubt, no officer or director of the Company shall be deemed an Affiliate of another officer or director of the Company by virtue of his or her status as a director or officer of the Company.

        "Alternative Transaction" means (i) any transaction of the type described in clauses (a) through (d) of the definition of Acquisition Proposal contained in the Merger Agreement other than the transactions contemplated by the Merger Agreement and (ii) any other action, agreement or transaction that would result in a breach of any representation, warranty, covenant or other obligation or agreement of the Company contained in the Merger Agreement (or of Stockholder contained in this Agreement) or that might hinder, delay, impede or frustrate the consummation of the transactions contemplated by the Merger Agreement.

        "Beneficially Owned" or "Beneficial Ownership" with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase "within 60 days" in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of

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the same securities, securities Beneficially Owned by a Person shall include securities Beneficially Owned by (i) all Affiliates of such Person, and (ii) all other Persons with whom such Person would constitute a "Group" within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.

        "Beneficial Owner" with respect to any securities means a Person that has Beneficial Ownership of such securities.

        "Person" means an individual, corporation, limited liability company, partnership, association, trust or any other entity or organization, including any Governmental Entity (as defined in the Merger Agreement).

        "Subject Shares" means, with respect the Stockholder, without duplication, (i) Company Shares owned by the Stockholder on the date hereof as described on Schedule A hereto, (ii) any additional Company Shares acquired by the Stockholder or over which it acquires Beneficial Ownership, whether pursuant to existing stock option agreements or otherwise, (iii) any Equity Interests of any Person that the Stockholder is or becomes entitled to receive by reason of being a holder of any of the Subject Shares, and (iv) any Equity Interests or other property into which any of such Subject Shares shall have been or shall be converted or changed, whether by amendment to the certificate of incorporation of the Company, merger, consolidation, reorganization, reclassification, capital change or otherwise.

        "Transfer" means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof, the offer to make such a sale, transfer or other disposition, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, "Transfer" shall have a correlative meaning.

ARTICLE II
COVENANTS OF THE STOCKHOLDER

        Section 2.1    Agreement to Vote.    The Stockholder agrees as follows:


        Section 2.2    Revocation of Proxies; Cooperation.    The Stockholder agrees as follows:

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        Section 2.3    No Solicitation.    Stockholder agrees that:

        Section 2.4    No Transfer of Subject Shares; Publicity.    Stockholder agrees that:

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        2.5    No Appraisal.    Stockholder agrees not to make a written demand for appraisal in respect of the Subject Shares in accordance with Section 262 of the Delaware General Corporation Law in connection with the Merger.

ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
OF THE STOCKHOLDER

        Stockholder represents, warrants and covenants to Merger Sub that:

        Section 3.1    Ownership.    Stockholder is the sole Beneficial Owner and legal owner of the Subject Shares identified on Schedule A hereto and such shares constitute all of the capital stock of the Company Beneficially Owned by Stockholder. Stockholder has good and marketable title to all of such shares, free and clear of all Liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Subject Shares and there are no restrictions on rights of disposition or other Liens pertaining to such Subject Shares, except as described on Schedule A. None of the Subject Shares is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Subject Shares.

        Section 3.2    Authority and Non-Contravention.    

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        Section 3.3    Total Shares.    Except as set forth on Schedule A hereto, Stockholder, except with respect to stock options disclosed pursuant to the Merger Agreement, is not the Beneficial Owner of, and does not have (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, and has no other interest in or voting rights with respect to, any Company Shares or any securities convertible into or exchangeable or exercisable for Company Shares.

        Section 3.4.    Reliance.    Stockholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon Stockholder's execution, delivery and performance of this Agreement.

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT

        Parent represents, warrants and covenants to the Stockholder that, assuming due authorization, execution and delivery of this Agreement by the Stockholder, this Agreement constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Parent has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Parent of this Agreement and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Parent and no other corporate proceedings on the part of Parent are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent.

ARTICLE V
GENERAL PROVISIONS

        Section 5.1    No Ownership Interest.    Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares shall remain and belong to the Stockholder, and Parent shall have no authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of the Company or exercise any power or authority to direct the Stockholder in the voting of any of the Subject Shares, except as otherwise expressly provided herein or in the Merger Agreement.

        Section 5.2    Notices.    All notices, consents, waivers and other communications under this Agreement shall be in writing (including facsimile or similar writing) and shall be given:

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        Section 5.3    Further Actions.    Upon the request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement.

        Section 5.4    Entire Agreement and Modification.    This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitutes (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except in a written document executed by the party against whose interest the modification will operate.

        Section 5.5    Drafting and Representation.    The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there shall be no presumption that any ambiguities in this Agreement shall be resolved against any party. Any controversy over construction of this Agreement shall be decided without regard to events of authorship or negotiation.

        Section 5.6    Severability.    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

        Section 5.7    No Third-Party Rights.    Stockholder may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of Parent. Parent may not assign any of its rights or delegate any of its obligations under this Agreement with respect to Stockholder without the prior written consent of Stockholder; provided, that Parent may assign its rights and delegate its obligations hereunder to any Person wholly-owned, directly or indirectly, by Green Equity Investors III, L.P. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of the Stockholder and the successors and permitted assigns of Parent. Nothing expressed or referred to in this Agreement will be construed to give any Person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section.

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        Section 5.8    Enforcement of Agreement.    Stockholder acknowledges and agrees that Parent could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by Stockholder could not be adequately compensated by monetary damages. Accordingly, Stockholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at Law, and (b) in addition to any other right or remedy to which Parent may be entitled, at Law or in equity, Parent will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

        Section 5.9    Waiver.    The rights and remedies of the parties to this agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

        Section 5.10    Governing Law.    This Agreement will be governed by and construed under the Laws of the State of Delaware applicable to contracts made and to be performed entirely in such State.

        Section 5.11    Consent to Jurisdiction.    Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in the Court of Chancery of the State of Delaware, County of New Castle or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the United States District Court for the District of Delaware, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as provided in Section 5.2 shall be deemed effective service of process. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

        Section 5.12    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same instrument.

        Section 5.13    Termination.    This Agreement shall terminate upon the earliest of (a) the Effective Time (as defined in the Merger Agreement), (b) the termination of the Merger Agreement in

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accordance with Section 10.1 thereof, or (c) written notice by Parent to the Stockholder of the termination of this Agreement (the earliest of the events described in clauses (a), (b) and (c), the "Expiration Date").

        Section 5.14    Expenses.    Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. Nothing in this Agreement shall be deemed to limit the obligations of the Company pursuant to Section 10.2 of the Merger Agreement.

        Section 5.15    Headings; Construction.    The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) "it" or "its" or words denoting any gender include all genders, (c) the word "including" shall mean "including without limitation," whether or not expressed, (d) any reference herein to a Section, Article, Paragraph, Clause or Schedule refers to a Section, Article, Paragraph or Clause of or a Schedule to this Agreement, unless otherwise stated, and (e) when calculating the period of time within or following which any act is to be done or steps taken, the date which is the reference day in calculating such period shall be excluded and if the last day of such period is not a Business Day (as defined in the Merger Agreement), then the period shall end on the next day which is a Business Day.

[Signature Page Follows]

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

    VBR HOLDING CORPORATION

 
 
By:
 
 
 
 
       
        Name:    
           
        Title:    
           

 
 
Stockholder

 
 
By:
 
 
 
 
       

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SCHEDULE A

Name and
Address of Stockholder
   Company Shares
   Other Company Securities

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QuickLinks

VARSITY BRANDS, INC. LOGO 6745 Lenox Center Court, Suite 300 Memphis, Tennessee 38115
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Table of Contents
Summary Term Sheet
Selected Consolidated Financial Data of Varsity Brands, Inc.
Trading Market And Price
Dividends
Special Note Regarding Forward-Looking Statements
Special Factors
Varsity Spirit Corporation Financial Projections Summary 2003 - 2007
VARSITY BRANDS, INC. EFFECTS OF GOING PRIVATE TRANSACTION (IN THOUSANDS, EXCEPT FOR PER SHARE, NET BOOK VALUE AND NET EARNINGS DATA) AS OF AND FOR THE PERIOD ENDED MARCH 31, 2003
VARSITY BRANDS, INC. EFFECTS OF GOING PRIVATE TRANSACTION (IN THOUSANDS, EXCEPT FOR PER SHARE, NET BOOK VALUE AND NET EARNINGS DATA) AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2002
The Special Meeting
The Merger
Sources and Uses of Funds $ in millions (all figures are approximate)
Other Matters
Where You Can Find More Information
SPECIAL MEETING OF STOCKHOLDERS OF VARSITY BRANDS, INC.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
TO VOTE BY INTERNET
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VARSITY BRANDS, INC. SPECIAL MEETING—SEPTEMBER 15, 2003
AGREEMENT AND PLAN OF MERGER by and among VARSITY BRANDS, INC., and VBR HOLDING CORPORATION and VB MERGER CORPORATION
[LETTERHEAD OF ROTHSCHILD INC.]
SCHEDULE A