<PAGE> 1
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 (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>
THE ARNOLD PALMER GOLF COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
THE ARNOLD PALMER GOLF COMPANY
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
January 22, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
The Arnold Palmer Golf Company (the "Company") to be held at 10:00 a.m.,
Thursday, February 20, 1997, at the offices of the Company, 6201 Mountain View
Road, Ooltewah, Tennessee 37363. At the meeting, you will be asked to elect
seven directors to serve on the Board of Directors for the ensuing year, 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. You should note that the
Company has recently changed its fiscal year-end to September 30.
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
THE ARNOLD PALMER GOLF COMPANY
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 20, 1997
---------------------
To the Shareholders of The Arnold Palmer Golf Company:
The Annual Meeting of Shareholders of The Arnold Palmer Golf Company (the
"Company") will be held at 10:00 a.m., Thursday, February 20, 1997, at the
offices of the Company at 6201 Mountain View Road, Ooltewah, Tennessee 37363,
for the following purposes:
1. To elect seven Directors for the ensuing year;
2. To ratify the appointment of Arthur Andersen LLP as independent
public accountants for the upcoming fiscal year; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on January 8, 1997 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 Arnold Palmer Golf Company Annual Report for the seven-month
transition period ended September 30, 1996 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
January 22, 1997
Ooltewah, Tennessee
<PAGE> 4
THE ARNOLD PALMER GOLF COMPANY
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
---------------------
PROXY STATEMENT
---------------------
This proxy statement is being mailed to shareholders of The Arnold Palmer
Golf Company, a Tennessee corporation (the "Company"), on or about January 22,
1997 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 Thursday, February 20, 1997, at the
offices of the Company at 6201 Mountain View Road, Ooltewah, Tennessee 37363.
The Company has recently changed its fiscal year end to September 30. All
references herein to the past fiscal year relate to the seven-month transition
period ended September 30, 1996. You should note for comparative purposes that
the information presented herein with respect to the past fiscal year covers
only the seven-month transition period.
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") and
Series NB Preferred Stock, $.50 par value (the "Preferred 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 and one vote for each share of Preferred
Stock owned of record at the close of business on January 8, 1997.
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 January 8, 1997, 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 2,962,805 shares of Common Stock and 833,333
shares of Preferred Stock. The following table sets forth information regarding
beneficial ownership of the Company's Common Stock and Preferred Stock as of
January 8, 1997, 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 or Preferred Stock, (ii) each director and nominee,
(iii) the Chief Executive Officer, and the four other most highly compensated
executive officers during the seven-month transition period ended September 30,
1996, 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 6.0
Robert H. Caldwell.............................................. 2,500 *
David S. Gonzenbach............................................. 315 *
James L. E. Hill................................................ 4,000 *
Richard J. Horton............................................... 500(4) *
John T. Lupton(5)............................................... 2,233,272(6) 47.7
George H. Nichols............................................... 66,866 1.7
Arnold D. Palmer(7)............................................. 354,445(8) 9.1
Joel W. Richardson, Jr.......................................... 0 *
EXECUTIVE OFFICERS
Frederick J. Frazier, III....................................... 5,000 *
Robert R. Winskowicz............................................ 7,000 *
D. Scudder Graybeal............................................. 29,862 *
5% OR MORE SHAREHOLDERS
C. C. Wang(9)................................................... 538,500(10) 12.8
Richard E. Wenz(11)............................................. 240,392 6.1
All Executive Officers and Directors as a group (14 persons).... 2,948,773 58.7
</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 January 8, 1997 under the
Company's Amended and Restated Employee Incentive Stock Option Plan or the
1992 Stock Option Plan: Mr. Becker -- 135,013 shares; Mr. Nichols -- 66,666
shares; Mr. Frazier -- 5,000 shares; Mr. Winskowicz -- 7,000 shares; Mr.
Graybeal -- 10,000 shares; Mr. Wenz -- 165,392 shares; and all executive
officers and directors as a group -- 399,071 shares. Also includes the
following numbers of shares subject to purchase pursuant to the exercise of
warrants that are exercisable within 60 days of January 8, 1997; Mr.
Lupton -- 890,000 shares; Mr. Palmer -- 100,000 shares; and all executive
officers and directors as a group -- 990,000 shares.
(2) For the purpose of computing the percentage of outstanding shares owned by
each beneficial owner, shares of Common Stock and Preferred Stock are
included. In addition, the shares issuable pursuant to presently
exercisable stock options or warrants held by such beneficial owner are
deemed to be outstanding. Such shares 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 833,333 shares of Preferred Stock held by the Thomas Cartter
Lupton Trust f/b/o John T. Lupton and issue, which shares constitute all of
the outstanding Preferred Stock of the Company.
2
<PAGE> 6
(7) The address of this beneficial owner is P.O. Box 52, Youngstown,
Pennsylvania 15696.
(8) Includes 100,000 warrants exercisable within 60 days of January 8, 1997
held by Arnold Palmer Enterprises, Inc., a company in which Mr. Palmer is
the majority shareholder.
(9) The address for this beneficial owner is 600 Third Avenue, New York, New
York 10016.
(10) Includes 118,500 shares and 400,000 warrants exercisable within 60 days of
January 8, 1997, 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 filed on December 29, 1994.
(11) 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. Russell B.
Newton, III, formerly a director of the Company, resigned from the Board of
Directors since the date of the 1996 Annual Meeting of Shareholders. Joel W.
Richardson, Jr. was elected to the Board of Directors since the date of the 1996
Annual Meeting of Shareholders. Messrs. Arthur P. Becker and Robert H. Caldwell,
currently directors of the Company, will not stand for re-election to the Board
of Directors when their terms expire. 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>
David S. Gonzenbach.................... 42 From 1988 to present, an 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....................... 61 From 1996 to present, Chairman of River
Valley Partners, Inc., a non-profit
economic development agency; from
1995 to 1996, 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; a Director of the
Company since March, 1995.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
Richard J. Horton...................... 47 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 1991 to present,
President of the Tennessee Golf
Foundation; a Director of the Company
since February, 1996.
John T. Lupton......................... 70 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.
George H. Nichols...................... 57 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....................... 67 Professional golfer; President of
Arnold Palmer Enterprises, Inc.;
President and Director of TBHC, Inc.
dba The Bay Hill Club and Lodge;
Director of TGC, Inc. dba The Golf
Channel; Director of the Company from
1972 to 1990 and since February,
1992.
Joel W. Richardson, Jr................. 62 From 1977 to present, partner with the
law firm of Miller & Martin, general
counsel to the Company; Director of
the Company since July, 1996.
</TABLE>
DIRECTORS' MEETINGS
The Board of Directors held three meetings during the seven-month
transition period ended September 30, 1996. Each director attended in person or
by telephone each of the meetings of the Board during the tenure of such
director except that Messrs. Becker and Newton were each absent from one
meeting.
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, Gonzenbach, Richardson and Nichols 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.
4
<PAGE> 8
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 Enterprises divide
sub-licensing royalties. The Company believes the License Agreement
significantly enhances its advertisement, promotion and sale of golf equipment.
The term of the License Agreement currently extends through March 1, 2007.
On August 21, 1996, the Company sold 833,333 shares of its Preferred Stock
to the Thomas Cartter Lupton Trust f/b/o John T. Lupton and issue in exchange
for $5 million in cash. Messrs. Lupton, Gonzenbach and Richardson, directors of
the Company, are also trustees of the Trust. The Preferred Stock has a stated
value of $6.00 per share, is entitled to one vote per share, is convertible into
an equal number of shares of Common Stock and has certain dividend and
liquidation preferences. The proceeds from the sale of the Preferred Stock were
used by the Company to purchase 625,000 shares of Series D Preferred Stock of
Nevada Bob's Holdings, Inc., parent company of a nationwide retailer of golf
equipment and accessories. The Preferred Stock is entitled to a cumulative
dividend equal to 30 percent of the earnings realized by the Company from its
investment in Nevada Bob's Holdings, Inc. The Company received an opinion from
an investment banking firm that the terms of the transaction were fair to the
shareholders from a financial point of view.
Subsequent to September 30, 1996, the Company agreed to terms with a bank,
which, effective December 30, 1996, converted $12 million of the current
revolver debt of the Company to a three year unsecured term loan and provided an
additional unsecured revolving credit facility of $12 million. Both the term
loan and the revolving credit facility are unconditionally guaranteed by Mr.
Lupton. Prior to the effective date of this $24 million financing arrangement,
the Company borrowed $1.1 million from Mr. Lupton to provide short-term funding
until the effective date of the new $24 million financing arrangement. The
Company expects to repay the $1.1 million no later than January 31, 1997. The
Company's Board of Directors is considering appropriate compensation to be paid
to Mr. Lupton in consideration of his guarantee of the new credit facility.
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 Messrs. Caldwell and Hill each
inadvertently failed to file a timely Form 4 with respect to a transaction in
the Company's Common Stock.
5
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth information concerning compensation paid or
accrued for the past four fiscal years to the Chief Executive Officer of the
Company and the four other most highly compensated executive officers during the
seven-month transition period ended September 30, 1996. Salary amounts reported
for the transition period ended September 30, 1996, represent only a seven-month
period and have not been adjusted or annualized for comparative purposes.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
FISCAL ------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS(#) COMPENSATION
- ---------------------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John T. Lupton(1)....................... 1996(2) $ 0 $ 0 -- $ 3,000(3)
Chairman and Chief Executive 1996 0 0 -- 3,000(3)
Officer
George H. Nichols(4).................... 1996(2) 146,877 0 -- 42,927(5)
President and Chief Operating 1996 29,168 0 200,000 34,155(6)
Officer
Robert R. Winskowicz(7)................. 1996(2) 67,083 0 -- 6,069(8)
Vice President -- Sales and 1996 23,958 0 21,000 4,730(8)
Marketing
Frederick J. Frazier, III(9)............ 1996(2) 60,667 0 15,000 903(12)
Vice President -- Golf Club 1996 100,888 0 15,000(10) 1,076(12)
Division 1995 97,194 0 -- 720(12)
1994 53,520 0 15,000(11) 0
D. Scudder Graybeal..................... 1996(2) 58,422 0 -- 876(12)
Vice President -- Special 1996 96,300 0 -- 1,355(12)
Markets 1995 94,941 0 -- 790(12)
1994 94,400 0 -- 0
</TABLE>
- ---------------
(1) Mr. Lupton was appointed Chairman and Chief Executive Officer of the
Company on March 9, 1995, and serves without compensation in such capacity.
(2) Represents the seven-month transition period ended September 30, 1996.
(3) Represents directors fees paid to the named individual.
(4) Mr. Nichols was hired as President and Chief Operating Officer on January
1, 1996.
(5) Represents reimbursed relocation expenses of the named individual.
(6) Represents payments of $29,168 by the Company to Mr. Nichols under a
consulting arrangement prior to his employment with the Company on January
1, 1996 and reimbursed relocation expenses of $4,987.
(7) Mr. Winskowicz was hired as Vice President -- Sales and Marketing on
December 15, 1995.
(8) Represents temporary housing and meals allowance for the named individual.
(9) Mr. Frazier was hired as Director of Marketing -- Golf Clubs on July 19,
1993.
(10) The options granted to Mr. Frazier in March, 1995 were cancelled in
conjunction with the issuance of new options in July, 1996.
(11) 10,000 of the options granted to Mr. Frazier in July, 1993 were cancelled
in conjunction with the issuance of new options in March, 1995.
(12) Represents the Company's contributions to the Company's 401(k) profit
sharing plan on behalf of the named individual.
6
<PAGE> 10
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's Amended and Restated Employee Incentive Stock Option
Plan to the Chief Executive Officer of the Company and the four other most
highly compensated executive officers of the Company during the seven-month
transition period ended September 30, 1996:
OPTIONS/GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL
OF TOTAL RATES OF STOCK
OPTIONS PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------------------- ---------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
John T. Lupton..................... -- -- -- -- -- --
George H. Nichols.................. -- -- -- -- -- --
Robert R. Winskowicz............... -- -- -- -- -- --
Frederick J. Frazier, III.......... 15,000(1) 18.75 5.375 7/11/06 50,705 128,495
D. Scudder Graybeal................ -- -- -- -- -- --
</TABLE>
- ---------------
(1) One-third of the options become exercisable on each of the first three
anniversary dates of employment after the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executives concerning the exercise of options during the seven-month transition
period ended September 30, 1996 and unexercised options held as of September 30,
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 -- /350,000
Robert R. Winskowicz.................... 0 0 0/21,000 -- /26,250
Frederick J. Frazier III................ 0 0 5,000/10,000 625/1,250
D. Scudder Graybeal..................... 0 0 10,000/0 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.
7
<PAGE> 11
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
The Company entered into an employment agreement with Mr. Nichols as of
January 1, 1996, pursuant to which Mr. Nichols was engaged for an initial term
of three years to serve as the President and Chief Operating Officer of the
Company. Mr. Nichols is 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 is also 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 and
one employee director none of whom have interlocking relationships as defined by
the Securities and Exchange Commission.
EMPLOYEE INCENTIVE STOCK OPTION PLAN
The Company maintains an Amended and Restated 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 Board of Directors based upon
the recommendations of the Executive Committee. The aggregate number of shares
that may be issued under the Incentive Option Plan is 500,000. As of September
30, 1996, 7,400 shares remained available for future issuance. The option price
per share 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. The Board of
Directors is currently considering the adoption of a new incentive stock plan.
8
<PAGE> 12
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
15,000 replacement options and the cancellation of 10,000 options granted in
July, 1993. These options, were, in turn repriced in July, 1996, through the
grant of 15,000 replacement options and the cancellation of the 20,000
outstanding options. The following table sets forth information with respect to
these repricings:
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
7/11/96 20,000 5.375 7.625 5.375 8.75 years
</TABLE>
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 President
and Chief Operating Officer (the "President") is heavily influenced by Company
performance. Major elements of the President's compensation package are directly
tied to Company performance. Incentive awards to the President are granted on an
annual basis to the extent the Company has achieved certain target levels of
earnings before taxes approved by the Board of Directors. In addition, the
Company has granted 200,000 stock options to the President 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 President's in that the
annual bonus is tied to achievement of performance targets. 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
David S. Gonzenbach, Member
Joel W. Richardson, Jr., Member
George H. Nichols, Member, abstaining
9
<PAGE> 13
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns to
shareholders of the Company, assuming reinvestment of dividends, for the prior
five fiscal years of the Company ending at the end of the seven-month transition
period ended September 30, 1996, 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 THE ARNOLD PALMER Nasdaq Stock Market Dolls, Toys, Games and
(Fiscal Year Covered) GOLF COMPANY (US Companies) Sporting and Athletic Goods
<S> <C> <C> <C>
09/30/96 62.9 201.2 78.8
03/01/96 60.0 176.7 81.5
02/24/95 80.0 128.1 86.9
02/25/94 157.1 125.3 113.6
02/26/93 111.4 107.1 91.6
02/21/92 100.0 100.0 100.0
</TABLE>
10
<PAGE> 14
PROPOSAL 2: 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, 1997. 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 1998 Annual
Meeting of Shareholders, must be received by the Company not later than
September 24, 1997 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 -- Finance, The Arnold Palmer Golf Company, 6201 Mountain View Road,
Ooltewah, Tennessee 37363.
January 22, 1997
11
<PAGE> 15
Appendix A
THE ARNOLD PALMER GOLF COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of THE ARNOLD PALMER GOLF COMPANY 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., Thursday, February 20,
1997, and any adjournment or adjournments thereof, the shares of Common Stock
and Preferred Stock of THE ARNOLD PALMER GOLF COMPANY which the undersigned is
entitled to vote, on all matters that may properly come before the Meeting.
1. The election of seven Directors for the ensuing year.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary) nominees listed below.
</TABLE>
Nominees:
David S. Gonzenbach, James L. E. Hill, Richard J. Horton, John T.
Lupton, George H. Nichols, Arnold D. Palmer, Joel W. Richardson, Jr.
(INSTRUCTION: To withhold your vote for any individual nominee, write that
nominee's name in the space provided below.)
(CONTINUED ON OTHER SIDE)
<PAGE> 16
(CONTINUED FROM OTHER SIDE)
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending September 30, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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 AND 2.
---------------------------------------
(Signature)
---------------------------------------
(Signature)
Dated: , 1997
-------------------------
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.
