<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PROGROUP, 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):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[Logo]
PROGROUP, INC.
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
June 10, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of ProGroup, Inc. to be held at 10:00 a.m., Monday, July 15, 1996,
at the offices of the Company, 6201 Mountain View Road, Ooltewah, Tennessee
37363. At the meeting, you will be asked to elect nine directors to serve on
the Board of Directors for the ensuing year, to approve an amendment to the
Company's Charter to formally change the corporate name of the Company from
ProGroup, Inc. to The Arnold Palmer Golf Company, to ratify the appointment of
Arthur Andersen LLP as independent public accountants for the upcoming fiscal
year and to transact such other business as may properly come before the
meeting or any adjournment thereof.
Your vote is very important, regardless of the number of
shares you own. Whether or not you plan to attend the meeting in person, we
urge you to sign, date and mail the enclosed proxy card promptly in the
accompanying postage prepaid envelope. If you attend the meeting, you may vote
your shares in person, even though you have previously signed and returned your
proxy.
Sincerely,
John T. Lupton
Chairman and Chief Executive Officer
<PAGE> 3
PROGROUP, INC.
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 15, 1996
____________________
To the Shareholders of ProGroup, Inc.:
The Annual Meeting of Shareholders of ProGroup, Inc. (the
"Company") will be held at 10:00 a.m., Monday, July 15, 1996, at the offices of
the Company at 6201 Mountain View Road, Ooltewah, Tennessee 37363, for the
following purposes:
1. To elect nine Directors for the ensuing year;
2. To approve an amendment to the Company's Charter to
formally change the corporate name of the Company
from ProGroup, Inc. to The Arnold Palmer Golf
Company;
3. To ratify the appointment of Arthur Andersen LLP as
independent public accountants for the upcoming
fiscal year; and
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The close of business on May 24, 1996 has been fixed as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting and any adjournment thereof.
A copy of the ProGroup, Inc. Annual Report for the 1996 fiscal
year is being mailed to shareholders with this Notice and Proxy Statement.
Whether or not you plan to attend the meeting, please mark,
date and sign the accompanying proxy and promptly return it in the enclosed
envelope. If you attend the meeting, you may vote your shares in person, even
though you have previously signed and returned your proxy.
By Order of the Board of Directors
George H. Nichols
President and Chief Operating Officer
June 10, 1996
Ooltewah, Tennessee
<PAGE> 4
PROGROUP, INC.
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
PROXY STATEMENT
__________
This proxy statement is being mailed to shareholders of
ProGroup, Inc., a Tennessee corporation (the "Company"), on or about June 10,
1996 in connection with the solicitation of proxies by the Board of Directors
of the Company for use at the Annual Meeting of Shareholders (the "Annual
Meeting") of the Company to be held at 10:00 a.m. on Monday, July 15, 1996, at
the offices of the Company at 6201 Mountain View Road, Ooltewah, Tennessee
37363.
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies and
will reimburse brokers, custodians, nominees and fiduciaries for their
reasonable expenses in sending solicitation material to the beneficial owners
of the Company's shares. In addition to soliciting proxies through the mail,
proxies may also be solicited by officers and employees of the Company by
telephone or otherwise.
Granting a proxy does not preclude the right of the person
giving the proxy to vote in person, and a person may revoke his or her proxy at
any time before it has been exercised, by giving written notice to the Company,
by delivering a later dated proxy or by voting in person at the Annual Meeting.
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of common stock, $.50 par value (the "Common
Stock") which are entitled to vote is necessary to constitute a quorum at the
Annual Meeting. If a quorum is not present or represented at the Annual
Meeting, the shareholders entitled to vote, whether present in person or
represented by proxy, have the power to adjourn the Annual Meeting from time to
time, without notice other than announcement at the Annual Meeting, until a
quorum is present or represented. At any such adjourned Annual Meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the Annual Meeting as originally noticed.
On all matters submitted to a vote of the shareholders at the
Annual Meeting or any adjournment(s) thereof, each shareholder will be entitled
to one vote for each share of Common Stock owned of record at the close of
business on May 24, 1996.
<PAGE> 5
Proxies in the accompanying form that are properly executed
and returned will be voted at the Annual Meeting and any adjournment(s) thereof
in accordance with the directions on such proxies. If no directions are
specified, such proxies will be voted according to the recommendations of the
Board of Directors as stated on the proxy.
Management knows of no other matters or business to be
presented for consideration at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournment(s) thereof,
it is the intention of the persons named in the enclosed proxy to vote such
proxy in accordance with their best judgment on any such matters. The persons
named in the enclosed proxy may also, if they deem it advisable, vote such
proxy to adjourn the Annual Meeting from time to time.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On May 24, 1996, the record date for determining shareholders
entitled to notice of, and to vote at, the Annual Meeting, the Company had
issued and outstanding and entitled to vote 2,826,805 shares of Common Stock.
The Company has no shares of Preferred Stock issued and outstanding. The
following table sets forth information regarding beneficial ownership of the
Company's Common Stock as of May 24, 1996, except as otherwise noted, with
respect to (i) each person known by the Company to own beneficially more than
five percent of the outstanding Common Stock, (ii) each director and nominee,
(iii) the Chief Executive Officer, the former Chief Executive Officer of the
Company and the four other most highly compensated executive officers who
earned in excess of $100,000 during the 1996 fiscal year, and (iv) all
directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership(1) Class(2)
------------------------ ----------------------- ---------
<S> <C> <C>
Directors and Nominees
----------------------
Arthur P. Becker(3) 235,013 7.9
Robert H. Caldwell 12,500 *
David S. Gonzenbach 315 *
James L. E. Hill 3,000 *
Richard J. Horton 500(4) *
John T. Lupton(5) 1,399,939 38.2
Russell B. Newton, III 115,000(6) 4.1
George H. Nichols 200 *
Arnold D. Palmer(7) 344,445(8) 11.8
</TABLE>
-2-
<PAGE> 6
<TABLE>
<CAPTION>
Executive Officers
------------------
<S> <C> <C>
Frederick J. Frazier, III 10,000 *
Raymond W. Pilgram 0 *
W. Ryland Dooley, III (9) 0 *
5% or More Shareholders
-----------------------
C. C. Wang(10) 418,500(11) 13.5
Richard E. Wenz(12) 240,392 8.0
All Executive Officers and 2,150,774 55.0
Directors as a group (15
persons)
</TABLE>
- ---------------
*Less than 1.0% of the Common Stock.
(1) Includes the following number of shares subject to purchase
pursuant to options that are exercisable within 60 days of March 2, 1996 under
the Company's Amended and Restated Employee Incentive Stock Option Plan or the
1992 Stock Option Plan: Mr. Becker - 135,013 shares; Mr. Frazier - 10,000
shares; Mr. Wenz - 165,392 shares; and all executive officers and directors as
a group - 155,013 shares. Also includes the following numbers of shares
subject to purchase pursuant to the exercise of warrants that are exercisable
within 60 days of March 2, 1996: Mr. Lupton - 840,000 shares; Mr. Palmer -
90,000 shares; and all executive officers and directors as a group - 930,000
shares.
(2) For the purpose of computing the percentage of outstanding
shares owned by each beneficial owner, the shares issuable pursuant to
presently exercisable stock options or warrants held by such beneficial owner
are deemed to be outstanding. Such options are not deemed to be outstanding
for the purpose of computing the percentage owned by any other person.
(3) The address of this beneficial owner is 345 Park Avenue South,
New York, New York 10010.
(4) Includes 500 shares held in a trust for the benefit of Mr.
Horton's child, as to which shares Mr. Horton disclaims beneficial ownership.
(5) The address for this beneficial owner is 702 Tallan Building,
Two Union Square, Chattanooga, Tennessee 37402.
(6) Includes 100,000 shares owned by Russell B. Newton, Jr.
Irrevocable Trust, as to which shares Mr. Newton, III has investment authority
as president of Timucuan Asset Management. Mr. Newton, III disclaims
beneficial ownership of these shares.
-3-
<PAGE> 7
(7) The address of this beneficial owner is P.O. Box 52,
Youngstown, Pennsylvania 15696.
(8) Includes 90,000 warrants exercisable within 60 days of March
2, 1996 held by Arnold Palmer Enterprises, Inc., a company in which Mr. Palmer
is the majority shareholder.
(9) Mr. Dooley resigned as Chief Operating Officer of the Company
on June 5, 1995.
(10) The address for this beneficial owner is 600 Third Avenue, New
York, New York 10016.
(11) Includes 118,500 shares and 280,000 warrants exercisable
within 60 days of March 2, 1996, held by the Wang Group, Inc., an investment
company wholly-owned by Mr. Wang, and 20,000 shares held by U.S. Summit
Corporation, an investment company controlled by Mr. Wang. This information is
based soley upon a Schedule 13D filed by Mr. Wang on July 29, 1994, and an
Amendment No. 1 to Schedule 13D filed on November 14, 1994, and an Amendment
No. 2 to Schedule 13D on December 29, 1994.
(12) The address for this beneficial owner is 1293 Old Mill Lane,
Elk Grove Village, Illinois 60007.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members.
Mr. John P. Murray, Jr., formerly a director of the Company, resigned from the
Board of Directors on October 13, 1995. Messrs. Horton and Nichols were each
elected to the Board of Directors since the date of the 1995 Annual Meeting of
Shareholders. All directors hold their positions until the next annual meeting
of shareholders or until their successors are elected and duly qualified.
Executive officers of the Company are appointed annually by the Board of
Directors and serve at the Board's discretion.
If any nominee for election as director is unable to serve,
which the Board of Directors does not anticipate, the persons named in the
proxy may vote for another person in accordance with their judgment. All of
the nominees have previously served as directors of the Company.
The names and ages of the nominees, their principal
occupations or employment during the past five years and other data regarding
them, based upon information received from them, are as follows:
-4-
<PAGE> 8
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTORSHIPS
Name Age Principal Occupation
---- --- --------------------
<S> <C> <C>
Arthur P. Becker 45 From 1993 to present, Chairman and Chief Executive
Officer of BNOX, Inc., a sports accessory company, and
from 1988 to 1993, Associate Director of Bear Stearns &
Co., Inc., an investment bank, and a private investor;
Chairman of the Board of the Company from February, 1992
to March, 1995, Chief Executive Officer of the Company
from September, 1994 to March, 1995 and a Director of the
Company since February, 1992.
Robert H. Caldwell 71 Self-employed investment counselor; Member of the Board
of Trustees of the University of Chattanooga Foundation
since 1970; Member, National Executive Committee of the
Alexis de Tocqueville Society of the United Way since
1986; Director of Siskin Hospital for Rehabilitation;
Director of the Company since 1964.
David S. Gonzenbach 42 From 1988 to present, executive officer, and from 1994 to
present, Chief Financial Executive of The Lupton Company,
a private investment company; a Director of the Company
since January, 1995.
James L. E. Hill 60 From March, 1995 to present, President and Chief
Executive Officer of The Lupton Company, a private
investment company; from 1993 to 1995, President, and
from 1992 to 1993, Executive Vice President of the
Tennessee Aquarium, a non-profit charitable and
educational organization; from 1991 to 1992, an executive
officer with Dixie Yarns, Inc.; a Director of the Company
since March, 1995.
</TABLE>
-5-
<PAGE> 9
<TABLE>
<CAPTION>
Name Age Principal Occupation
---- --- --------------------
<S> <C> <C>
Richard J. Horton 46 From 1973 to present, Executive Director and Chief
Executive Officer of the Tennessee Section of the
Professional Golf Association of America and the
Tennessee Golf Association; from 1990 to present,
President and Chief Executive Officer of the Tennessee
Golf Foundation; a Director of the Company since
February, 1996.
John T. Lupton 69 Private investor; from 1977 to 1986, Chairman of JTL
Corp., a soft-drink bottling company; a Director of the
Company since January, 1995, and Chairman and Chief
Executive Officer since March, 1995.
Russell B. Newton, III 42 From 1982 to present, Chairman and, since 1985, President
of Gulf Utility Company; President of RBN Company, a
consulting service company; from 1990 to present,
President of Timucuan Asset Management, a registered
investment adviser; Director of the Company since
February, 1992.
George H. Nichols 56 From 1991 to 1995, Chairman, President and Chief
Executive Officer of Square Two Golf, Inc.; President and
Chief Operating Officer of the Company since January,
1996; Director of the Company since February, 1996.
Arnold D. Palmer 66 Professional golfer; President of Arnold Palmer
Enterprises, Inc.; Director of the Company from 1972 to
1990 and since February, 1992.
</TABLE>
DIRECTORS' MEETINGS
The Board of Directors held eight meetings during the fiscal
year ended March 2, 1996. Each director attended in person or by telephone
more than 75% of the total of meetings of the Board during the tenure of such
director.
-6-
<PAGE> 10
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee.
The functions of the Executive Committee are to exercise the powers of the
Board of Directors, to the extent legally permissible, between meetings of the
full Board of Directors. Messrs. Lupton, Hill and Gonzenbach serve as the
members of the Executive Committee. The Executive Committee meets
periodically.
The Executive Committee also serves in the role of an Audit
Committee for the Company. Consequently, the Executive Committee meets with
the independent public accountants of the Company, reviews the audit plan for
the Company, reviews the annual audit of the Company with the accountants,
together with any other reports or recommendations made by the accountants, and
recommends whether the auditors should be continued as auditors for the
Company. The Executive Committee is also to review with the auditors for the
Company the adequacy of the Company's internal controls and to perform such
other duties as shall be delegated to the Committee by the Board of Directors.
In addition, the Executive Committee fulfills the functions of
a Compensation Committee for the Board of Directors. The Executive Committee
thus recommends to the Board of Directors policies and plans concerning the
salaries, bonuses and other compensation of the senior executives of the
Company, including reviewing the salaries of the senior executives;
recommending bonuses, stock options and other forms of additional compensation
for them; establishing and reviewing policies regarding management perquisites
and performing such other duties as shall be delegated to the Committee by the
Board.
DIRECTOR COMPENSATION
Directors who receive no other compensation fro the Company
receive a fee of $1,000 for each board meeting attended in person.
CERTAIN TRANSACTIONS
As of March 1, 1992, the Company entered into a license
agreement (the "License Agreement") with Arnold Palmer Enterprises, Inc.
("Enterprises"), pursuant to which the Company obtained a license to use the
name, likeness and endorsement of Arnold Palmer ("Palmer") in connection with
the advertisement, promotion and sale of golf clubs, bags, balls, gloves and
other products. The License Agreement expands the scope of the Palmer license
previously utilized by the Company. In exchange for the grant of the license,
the Company pays Enterprises as a royalty a specified percentage of net sales
of each different product category. The Company also pays a minimum annual
royalty regardless of the royalty amount
-7-
<PAGE> 11
determined as a percentage of product sales. The License Agreement also sets
forth the manner in which the Company and Enterprises divide sub-licensing
royalties. The Company believes the License Agreement significantly enhances
its advertisement, promotion and sale of golf equipment and apparel. The
License Agreement has been amended to extend its term through March 1, 2007,
clarify certain provisions and grant the Company certain rights with regard to
the use of the name "The Arnold Palmer Golf Company" as more fully set forth
below.
On March 17, 1995, the Company entered a $4,000,000 revolving
credit facility with Mr. Lupton (the "Facility"), secured by a second lien on
all of the Company's assets. The Facility earned interest at a floating rate
equal to the prime rate plus 2%, and matured on December 31, 1995. At Mr.
Lupton's election, the loan was to be repaid in the Company's shares, based on
a conversion price of $7.75 per share, which was the Company's closing price
for its Common Stock on March 15, 1995. For each incremental $100,000 in
principal outstanding under the Facility, Mr. Lupton was to be issued 3,750
shares of the Company's common stock, up to a maximum of 150,000 shares. Under
the terms of this Facility, Mr. Lupton was issued 80,625 shares.
As additional consideration for the Facility, all 390,000
stock purchase warrants granted to Mr. Lupton in January 1995 were deemed
immediately vested. The exercise price of all of these warrants will be
subject to adjustment based on fluctuations in the trading price of the common
stock of the Company. Under the reset provision, the reset price on the
warrants shall be the greater of $5.00 per share or the average trading price
of the Company's common stock for any successive period of four calendar weeks
commencing on March 13, 1995 until the date of exercise. The Company received
an opinion from an investment banking firm that the terms of the transaction
with Mr. Lupton were fair to the shareholders from a financial point of view.
REPORTING SECURITIES TRANSACTIONS
Under the federal securities laws, the Company's directors,
officers and persons holding more than 10% of the Company's Common Stock are
required to report, within specified monthly and annual due dates, their
initial ownership of Common Stock and all subsequent acquisitions, dispositions
or other transfers of beneficial interest therein, if and to the extent
reportable events occur which require reporting by such due dates. The Company
is required to describe in this proxy statement whether, to its knowledge, any
person required to file such a report may have failed to do so in a timely
manner. In this regard, all of the Company's directors and officers are
believed to have satisfied such filing requirements in full, except that Mr.
Nichols inadvertantly failed to file in a timely fashion a Form 3 upon his
appointment as President and Chief Executive Officer of
-8-
<PAGE> 12
the Company, which omission was corrected in a filing on March 5, 1996, and
Messrs. Frazier and Kirby inadvertantly failed to file a timely Form 3 upon
their respective appointments as executive officers of the Company, which
omission was corrected in filings on May 24, 1996.
-9-
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth information concerning
compensation paid or accrued for the past three fiscal years to the Chief
Executive Officer, the former Chief Executive Officer of the Company and the
four other most highly compensated executive officers who earned in excess of
$100,000 during the 1996 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensa-
Annual Compensation tion
------------------- -------
Other
Annual All Other
Name and Fiscal Compensa- Options/ Compensa-
Principal Position Year Salary Bonus(1) tion SARS(#) tion
------------------ ------ ------ -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
John T. Lupton 1996 $ 0 $ 0 $0 - $ 3,000(2)
Chairman and Chief
Executive Officer
George H. Nichols 1996 29,168 0 0 200,000 29,168(3)
President and Chief Operating
Officer
Frederick J. Frazier, III 1996 100,888 0 0 15,000 0
Vice President - Sales 1995 97,194 0 0 - 0
1994 53,250 0 0 15,000(4) 0
Raymond W. Pilgram 1996 130,000 25,000 0 - 0
Vice President - Operations 1995 47,308 0 0 - 0
Arthur P. Becker (5) 1996 0 0 0 - 3,000(6)
Former Chairman and Chief 1995 0 0 0 - 47,917(7)
Executive Officer
W. Ryland Dooley(8) 1996 99,997 100,000 0 - 0
Former Chief Operating 1995 86,410 0 0 - 0
Officer
</TABLE>
- ---------------------
(1) Bonuses are accrued at the end of the fiscal year based on
predetermined Company performance objectives and paid, after recommendation by
the Compensation Committee and approval by the Board of Directors, in the
following fiscal year.
(2) Represents directors fees paid to the named individual.
(3) Represents payments by the Company to Mr. Nichols under a
consulting arrangement prior to his official employment with the Company on
January 1, 1996.
(4) 10,000 of the options granted to Mr. Frazier in July, 1993
were cancelled in March, 1995.
-10-
<PAGE> 14
(5) Mr. Becker resigned as Chairman and Chief Executive Officer of
the Company on March 9, 1995. Mr. Becker remains a Director of the Company.
(6) Represents directors fees paid to the named individual.
(7) Represents payments to Mr. Becker under the terms of an
agreement under which the Company agreed to pay an annual retainer of $50,000
in monthly installments for so long as Mr. Becker served as Chairman of the
Board of Directors.
(8) Mr. Dooley resigned as Chief Operating Officer of the Company
on June 5, 1995.
STOCK OPTIONS
The following table contains information concerning the grant
of stock options under the Company's Amended and Restated ProGroup Employee
Incentive Stock Option Plan to the Chief Executive Officer, the former Chief
Executive Officer of the Company and the four other most highly compensated
executive officers of the Company during the fiscal year ended March 2, 1996:
OPTIONS/GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term
----------------- ----------------------------
% of total
Options
Granted to
Employees Exercise or
in Fiscal Base
Options --------- Price Expiration
Name Granted(#) Year ($/sh) Date 5%($) 10%($)
---- ---------- ---- ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
John T. Lupton - - - - - -
George H. Nichols 200,000 84.7 3.75 1/1/2006 413,500 2,518,460
Frederick J. 15,000 6.4 7.625 3/1/2005 81,245 182,280
Frazier
Raymond W. Pilgram - - - - - -
Arthur P. Becker - - - - - -
W. Ryland Dooley, III - - - - - -
</TABLE>
-11-
<PAGE> 15
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the
named executives concerning the exercise of options during the last fiscal year
and unexercised options held as of March 2, 1996:
AGGREGATED EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION> Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at FY-
Shares FY-End(#) End($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
---- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
John T. Lupton 0 0 0 0
George H. Nichols 0 0 0/200,000 0/300,000
Frederick J. 0 0 5,000/0 0
Frazier 5,000/10,000
Raymond W. Pilgram 0 0 0 0
Arthur P. Becker 0 0 0 0
W. Ryland Dooley 0 0 0 0
</TABLE>
RETIREMENT PLAN
Prior to December 31, 1993, substantially all full-time
salaried employees of the Company who had completed one credited year of
service were eligible to receive benefits under the Company's Salaried
Retirement Plan (the "Plan"). A participant receives a full year of credited
service for each plan year in which 1,000 or more hours of service are earned.
The normal retirement benefit is 1.5% of final-average earnings multiplied by
years of benefit accrual service minus 1.42857% of Primary Social Security
Benefit multiplied by years of benefit accrual service not in excess of 35.
Final-average earnings is the greater of earnings in the last 12 months of
employment and average earnings during the last 60 months of employment. The
cash and bonus compensation shown in the Summary Compensation Table above are
earnings covered by the Plan. The normal form of retirement benefit is a life
annuity.
During fiscal 1994, the Company curtailed the benefits under
the Plan. Under this curtailment, nonunion employees that are not at least age
50 with at least five years of service will accrue no further benefits under
the Plan. During fiscal 1994, the
-12-
<PAGE> 16
Company established a 401(k) profit-sharing plan covering substantially all
employees at least 21 years of age with six months of service. The 401(k) plan
allows for employees to contribute a portion of their compensation subject to
certain limitations. The Company may make discretionary contributions to the
401(k) plan.
Messrs. Lupton, Nichols, Frazier, Pilgram, Becker and Dooley
are not eligible to receive benefits under the Plan.
The table below shows the estimated annual pension payable
under the Retirement Plan to an employee, including an employee who is a
Director or executive officer, upon retirement in 1994 at age 65 after selected
periods of service.
<TABLE>
<CAPTION>
Years of Service
----------------
Remuneration 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 75,000 13,900 18,600 23,200 27,900 32,600
90,000 17,300 23,100 28,900 34,600 40,400
120,000 24,000 32,100 40,100 48,100 56,200
250,000 50,100 66,800 83,600 100,300 115,600
450,000 115,641* 115,641* 115,641* 115,641* 115,641*
</TABLE>
*Federal law requires that compensation in excess of $150,000 per year be
excluded for purposes of determining pension benefits in qualified retirement
plans, effective January 1, 1994. However, for those employees whose
compensation exceeded $150,000 prior to 1994, additional benefits may be paid
as a result of benefits accrued prior to 1994.
-13-
<PAGE> 17
COMPENSATION REPORT OF THE EXECUTIVE COMMITTEE
OF THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors establishes
the general compensation policies of the Company and the compensation plans and
specific compensation levels for executive officers, and administers the
various stock option, management incentive and retirement plans maintained by
the Company. The Executive Committee is composed of three independent,
non-employee directors who have no interlocking relationships as defined by the
Securities and Exchange Commission.
EMPLOYEE INCENTIVE STOCK OPTION PLAN
The Company maintains an Amended and Restated ProGroup
Employee Incentive Stock Option Plan ("Incentive Option Plan"), pursuant to
which key executive employees are eligible for the grant of incentive options
in Common Stock, as an incentive and reward, such grants being determined by
the Executive Committee. The aggregate number of shares that may be issued
under the Incentive Option Plan is 500,000. As of March 2, 1996, 67,400 shares
remained available for future issuance. The option price per share under the
Incentive Option Plan cannot be less than the fair market value of the Common
Stock at the date of grant and the term of the option cannot exceed 10 years.
EXECUTIVE OFFICER COMPENSATION
The current Chief Executive Officer of the Company is not an
employee of the Company and serves without compensation. The compensation of
the Chief Operating Officer (COO) is heavily influenced by Company performance.
Major elements of the COO's compensation package are directly tied to Company
performance. Incentive awards to the COO are granted on an annual basis to the
extent the Company has achieved certain target levels of earnings before taxes
and return on net assets set by management and approved by the Board of
Directors. In addition, the Company granted 200,000 stock options to the COO
under the Incentive Option Plan.
The Executive Committee has adopted similar policies with
respect to compensation of other executive officers of the Company. Using
salary survey data from various sources, the committee establishes base
salaries that are within the range of salaries for persons holding
similarly-responsible positions at other companies. In addition, the committee
considers factors such as relative Company performance, the individual's past
performance and future potential in establishing the base salaries of executive
officers.
The committee's policy regarding other elements of the
compensation package for senior executive officers is similar to
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<PAGE> 18
that of the COO's in that the annual bonus is tied to achievement of performance
targets. In addition to the Company's achievement of targeted earnings before
taxes and return on net assets levels as described above, the Executive
Committee also considers the executive officer's achievement of individual
performance objectives relating to the overall success of the Company, such as
increased sales, improved productivity, enhanced operational efficiencies, and
other factors which lead to greater overall profitability.
Submitted by the Executive Committee of the Company's Board of Directors
John T. Lupton, Chairman
James L.E. Hill, Member
David S. Gonzenbach, Member
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<PAGE> 19
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total
returns to shareholders of the Company, assuming reinvestment of dividends, for
the five-year period ending at the end of the 1996 fiscal year, with the return
from: (i) the NASDAQ Stock Market Total Return Index and (ii) an Index for
NASDAQ stocks in Standard Industrial Classification 394 (Toys and Sporting
Goods Companies).
<TABLE>
<CAPTION> NASDAQ Stocks (SIC 3940-3949 US Companies)
Measurement Period Nasdaq Stock Market Dolls, Toys, Games and
(Fiscal Year Covered) PROGROUP, INC. (US Companies) Sporting and Athletic Goods
<S> <C> <C> <C>
03/01/1996 92.0 248.5 111.5
02/24/1995 122.7 180.2 118.9
02/25/1994 241.0 176.3 155.5
02/26/1993 170.9 150.7 125.3
02/28/1992 149.0 141.5 139.3
03/01/1991 100.0 100.0 100.0
</TABLE>
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<PAGE> 20
PROPOSAL 2: CHANGE OF CORPORATE NAME
The Board of Directors of the Company has adopted, and is
recommending to the shareholders for their approval at the Annual Meeting, a
resolution to amend the Company's Restated Charter (the "Charter") to change
the corporate name of the Company from "ProGroup, Inc." to "The Arnold Palmer
Golf Company." Since January 17, 1996, the Company has been using "The Arnold
Palmer Golf Company" as its trade name in all aspects of its business and
operations. The amendment of the Charter to change the corporate name is
undertaken to ratify the prior use of the trade name by the Company and to
formalize the adoption of the new name for its future operations. No other
change is proposed to be made to the Company's Charter.
In the judgment of the Board of Directors, the change of
corporate name is desirable to further the identification of the Company with
Mr. Palmer, its chief professional endorser and promoter. The name change is
in accord with the overall changing character and strategic focus of the
Company to develop its strong ties with Mr. Palmer to their fullest potential
through collaborative product development and marketing.
The right to use the name "The Arnold Palmer Golf Company" has
been granted to the Company pursuant to the terms of the License Agreement with
Enterprises. The License Agreement grants to the Company a non-exclusive
worldwide license to use and commercially exploit the name "The Arnold Palmer
Golf Company," provided however, that the name of the Company is to immediately
revert to "ProGroup, Inc.", without further action on the part of the directors
or shareholders of the Compan upon the expiration or termination of the License
Agreement. Accordingly, the use of the name "The Arnold Palmer Golf Company"
as the corporate name of the Company will continue only as long as the License
Agreement remains in full force and effect.
Currently, the License Agreement will expire on March 1, 2007.
In addition, the License Agreement will terminate if (i) the Company is
adjudicated as insolvent or declares bankruptcy, (ii) at any time the Company
is not controlled by Mr. Lupton or an entity controlled by Mr. Lupton,
Enterprises reasonably believes the Company is insolvent or having difficulty
meeting its financial obligations, (iii) the Company fails to make any payment
due to Enterprises and does not rectify such failure within 15 days following
receipt of notice of such failure from Enterprises, or (iv) the Company
breaches any other material provision of the License Agreement and does not
cure such breach within 30 days following receipt of notice of such breach from
Enterprises.
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<PAGE> 21
Accordingly, the shareholders are requested to adopt the
following resolutions as and for resolutions of the shareholders of the
Company:
RESOLVED, that Part I, Paragraph 1. of the Amended and
Restated Charter of the Company be amended to read in its
entirety as follows:
"The name of the corporation is
THE ARNOLD PALMER GOLF COMPANY."
and it is further
RESOLVED, that upon the expiration or termination of that
certain Agreement dated as of March 1, 1992, by and between
the Company and Arnold Palmer Enterprises, Inc., as amended,
that Part I, Paragraph 1. of the Amended and Restated Charter
of the Company shall be amended to read in its entirety as
follows:
"The name of the corporation is
PROGROUP, INC."
and it is further
RESOLVED, that the appropriate officers of the Company are
hereby authorized to do and perform, in the name and on behalf
of the Company, all such further actions and to execute and
deliver all such further documents and instruments, and to
take all such further steps as they may deem to be necessary,
advisable, convenient or proper to carry out the intent of
these resolutions and to perform fully the provisions of that
certain Agreement dated as of March 1, 1992, by and between
the Company and Arnold Palmer Enterprises, Inc., as amended,
as they relate to the corporate name of the Company and any
other document or instrument related thereto.
To be adopted, the resolutions require the affirmative vote of
the holders of a majority of the outstanding shares of the Common Stock of the
Company present and entitled to vote at the Annual Meeting. The Board of
Directors of the Company believes that it is in the best interests of the
Company and its
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<PAGE> 22
shareholders to adopt the resolutions to give effect to the proposed amendment
to the Charter.
If the resolutions are adopted, it is the intention of the
Company to file the proposed amendment to the Company's Charter as soon as
practicable after the date of the Annual Meeting. If the amendment to the
Company's Charter is adopted, shareholders will not be required to exchange
outstanding stock certificates for new certificates.
The Board of Directors unanimously recommends a vote "FOR" the
approval of the resolutions adopting an amendment to the Company's Charter to
change the corporate name of the Company from "ProGroup, Inc." to "The Arnold
Palmer Golf Company."
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF AUDITORS
Upon the recommendation of the Executive Committee, the Board
of Directors appointed Arthur Andersen LLP, independent public accountants, to
serve for the fiscal year ending September 30, 1996. Although shareholder
ratification is not required by the Company's Charter or by-laws, or under
applicable law, the Board of Directors requests your ratification.
Representatives of Arthur Andersen LLP will be present at the
annual meeting and will be given an opportunity to make a statement, if they
desire, and to respond to questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the
Annual Meeting for the fiscal year ended September 30, 1996, must be received
by the Company not later than September 1, 1996 for inclusion in its Proxy
Statement and form of proxy relating to that meeting. Any such proposals, as
well as any questions relating thereto, should be directed to the attention of
David J. Kirby, Vice President, The Arnold Palmer Golf Company, 6201 Mountain
View Road, Ooltewah, Tennessee 37363.
June 10, 1996
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<PAGE> 23
APPENDIX A
PROGROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of PROGROUP, INC. appoints George
H. Nichols and A. Alexander Taylor, II, or either of them, proxies, with full
power of substitution, to vote at the offices of the Company at 6201 Mountain
View Road, Ooltewah, Tennessee at 10:00 a.m., Monday, July 15, 1996, and any
adjournment or adjournments thereof, the shares of Common Stock of PROGROUP,
INC. which the undersigned is entitled to vote, on all matters that may
properly come before the Meeting.
1. The election of nine Directors for the ensuing year.
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all
nominees listed
below.
Nominees:
Arthur P. Becker, Robert H. Caldwell, David S. Gonzenbach,
James L. E. Hill, Richard J. Horton, John T. Lupton,
Russell B. Newton, III, George H. Nichols, Arnold D. Palmer
(INSTRUCTION: To withhold your vote for any individual nominee, write
--------------
that nominee's name in the space provided below.)
2. To approve the resolutions authorizing an amendment to the Company's
Charter to change the corporate name of the Company from "ProGroup,
Inc." to "The Arnold Palmer Golf Company."
___ FOR ___ AGAINST ___ ABSTAIN
_______________________________________________________________________________
(Continued on Other Side)
<PAGE> 24
(Continued from Other Side)
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending September 30, 1996.
___ FOR ___ AGAINST ___ ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
You are urged to cast your vote by marking the appropriate boxes. PLEASE
NOTE THAT UNLESS A CONTRARY DISPOSITION IS INDICATED, THIS PROXY WILL BE VOTED
FOR ITEMS 1, 2 AND 3.
___________________________________
(Signature)
___________________________________
(Signature)
Dated:__________________, 1996
IMPORTANT: Please sign your name or names exactly as shown hereon and date
your proxy in the blank space provided above. For joint accounts, each joint
owner must sign. When signing as attorney, executor, administrator, trustee,
or guardian, please give your full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer.
