<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>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</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):
/ / $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:
/X/ 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
PRO GROUP LOGO
PROGROUP, INC.
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
June 14, 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,
/s/ JOHN T. LUPTON
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 14, 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 14, 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.
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.
<PAGE> 5
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)............................................... 1,349,939 36.8
Russell B. Newton, III.......................................... 115,000(6) 4.1
George H. Nichols............................................... 200 *
Arnold D. Palmer(7)............................................. 344,445(8) 11.8
EXECUTIVE OFFICERS
Frederick J. Frazier, III....................................... 10,000 *
W. Ryland Dooley, III(9)........................................ 0 *
Raymond W. Pilgrim(10).......................................... 0 *
5% OR MORE SHAREHOLDERS
C. C. Wang(11).................................................. 498,500(12) 15.6
Richard E. Wenz(13)............................................. 240,392 8.0
All Executive Officers and Directors as a group (15 persons).... 2,100,774 53.7
</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.
2
<PAGE> 6
(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.
(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) Mr. Pilgrim resigned as Vice President -- Operations of the Company on
September 22, 1995.
(11) The address for this beneficial owner is 600 Third Avenue, New York, New
York 10016.
(12) Includes 118,500 shares and 360,000 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 solely upon a Schedule 13D filed by Mr. Wang on July 29, 1994, an
Amendment No. 1 to Schedule 13D filed on November 14, 1994 and an Amendment
No. 2 to Schedule 13D on December 29, 1994.
(13) The address for this beneficial owner is believed to be 1293 Old Mill Lane,
Elk Grove Village, Illinois 60007.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members. 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 a 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:
NOMINEES FOR DIRECTORSHIPS
<TABLE>
<CAPTION>
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.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
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, LLC, 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, LLC, 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 of Dixie Yarns,
Inc.; a Director of the Company since
March, 1995.
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.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
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.
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 from 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 determined as a percentage of product sales. The License
Agreement also sets forth the manner in which the Company and
5
<PAGE> 9
Enterprises divide sub-licensing royalties. The Company believes the License
Agreement significantly enhances its advertisement, promotion and sale of golf
equipment. 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 (the "Facility") with Mr. Lupton, 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 inadvertently failed to
file in a timely fashion a Form 3 upon his appointment as President and Chief
Operating Officer of the Company, which omission was corrected in a filing on
March 5, 1996, and Messrs. Frazier and Kirby inadvertently failed to file a
timely Form 3 upon their respective appointments as executive officers of the
Company, which omissions were corrected in filings on May 24, 1996.
6
<PAGE> 10
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
ANNUAL COMPENSATION OTHER COMPENSATION
FISCAL ------------------- ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION SARS(#) COMPENSATION
- - ------------------------------- ------ -------- -------- ------------ ------------ ------------
<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 -- Golf Club 1995 97,194 0 0 -- 0
Division 1994 53,250 0 0 15,000(4) 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, III (8)...... 1996 99,997 100,000 0 -- 0
Former Chief Operating 1995 86,410 0 0 -- 0
Officer
Raymond W. Pilgrim(9).......... 1996 130,000 25,000 0 -- 0
Former Vice President -- 1995 47,308 0 0 -- 0
Operations
</TABLE>
- - ---------------
(1) Bonuses are accrued at the end of the fiscal year based on predetermined
Company performance objectives and paid, after recommendation by the
Executive 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.
(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 $50,000 in monthly
installments for so long as Mr. Becker served as Chairman of the Board of
Directors.
(8) Mr. Dooley resigned as Chief Operating Officer of the Company on June 5,
1995.
(9) Mr. Pilgrim resigned as Vice President -- Operations of the Company on
September 22, 1995.
7
<PAGE> 11
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's Amended and Restated ProGroup Employee Incentive
Stock Option Plan to the Chief Executive Officer, the former Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company during the fiscal year ended March 2, 1996:
OPTIONS/GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL
OF TOTAL RATES OF STOCK
OPTIONS PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -------------------
NAME GRANTED(4) YEAR ($/SH) DATE 5%($) 10%($)
- - ----------------------------------- ---------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
John T. Lupton..................... -- -- -- -- -- --
George H. Nichols.................. 200,000(1) 84.7 3.75 1/1/2006 471,671 1,195,307
Frederick J. Frazier, III.......... 15,000(1) 6.4 7.625 3/1/2005 71,930 182,284
Arthur P. Becker................... -- -- -- -- -- --
W. Ryland Dooley, III.............. -- -- -- -- -- --
Raymond W. Pilgrim................. -- -- -- -- -- --
</TABLE>
- - ---------------
(1) One-third of the options become exercisable on each of the first three
anniversary dates of the grant.
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>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES FY-END(#) OPTIONS AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) 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. Frazier, III............... 0 0 5,000/0 0/0
5,000/10,000 0/0
Arthur P. Becker........................ 0 0 0 0
W. Ryland Dooley, III................... 0 0 0 0
Raymond W. Pilgrim...................... 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").
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 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.
8
<PAGE> 12
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
The Company has entered into an employment agreement with Mr. Nichols as of
January 1, 1996, pursuant to which Mr. Nichols is engaged for an initial term of
three years to serve as the President and Chief Operating Officer of the
Company. Mr. Nichols is to be paid a base salary of $225,000 per annum for each
of the three years of his engagement, such amount to be adjusted in the
discretion of the Executive Committee of the Company based upon an annual review
of Mr. Nichols' performance. Mr. Nichols will also be entitled to an incentive
bonus of up to 50 percent of his base salary if the Company achieves annual
budgeted pretax earnings as approved by the Board of Directors. Pursuant to the
terms of the employment agreement, Mr. Nichols was also awarded options to
purchase 200,000 shares of stock of the Company at a price of $3.75 per share
with one-third of the options vesting on each of the first three anniversary
dates of the grant.
The employment agreement terminates at the end of the third year unless
extended for an additional three-year term by the mutual consent of Mr. Nichols
and the Company, and may be earlier terminated upon the death or disability of
Mr. Nichols, by the Company with or without cause and by Mr. Nichols upon a
change in control of the Company. If the Company terminates Mr. Nichols'
employment other than for cause, the Company shall pay to Mr. Nichols his base
salary for a period of 18 months after termination and all options previously
granted will be deemed to have vested. If Mr. Nichols is terminated for cause,
no additional compensation will be paid to Mr. Nichols by the Company and the
options previously granted will be deemed forfeited and cancelled.
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.
REPORT ON REPRICING OF OPTIONS
In March, 1995, the Company authorized the repricing of certain options
issued to Mr. Frazier under the Incentive Option Plan to improve the incentives
provided by the options. The repricing was accomplished through the grant of
replacement options and the cancellation of options granted in July, 1993. The
following table sets forth information with respect to the repricing:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
PRICE OF EXERCISE OPTION
NUMBER OF STOCK AT PRICE AT NEW TERM
OPTIONS TIME OF TIME OF EXERCISE REMAINING
REPRICED REPRICING REPRICING PRICE AT DATE OF
NAME DATE (#) ($) ($) ($) REPRICING
---------------------------- ------ --------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frederick J. Frazier, III... 3/1/95 10,000 7.625 14.25 7.625 8.25 years
</TABLE>
9
<PAGE> 13
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 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
10
<PAGE> 14
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).
[GRAPH]
<TABLE>
<CAPTION>
03/01/91 02/28/92 02/26/93 02/25/94 02/24/95 03/01/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PROGROUP, INC. 100.0 149.0 170.9 241.0 122.7 92.0
Nasdaq Stock Market 100.0 141.5 150.7 176.3 180.2 248.5
US Companies)
NASDAQ Stocks (SIC 3940-3949 100.0 139.3 125.3 155.5 118.9 111.5
US Companies) Dolls, Toys,
Games and Sporting
and Athletic Goods
</TABLE>
11
<PAGE> 15
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 Company 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.
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
12
<PAGE> 16
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
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 14, 1996
13
<PAGE> 17
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> 18
(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.
