<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended January 2, 1998 Commission File Number 0-921
----------------- ---------
THE ARNOLD PALMER GOLF COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0331019
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
6201 Mountain View Road, Ooltewah, Tennessee 37363
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 423-238-5890
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes x . No .
------ -------
As of January 30, 1998, 833,333 shares of Series NB Preferred Stock and
3,054,367 shares of Common Stock were outstanding.
<PAGE> 2
INDEX
Pages
-----
Part I. Financial Information
Balance Sheets - January 2, 1998 and
September 30, 1997 1
Statements of Operations - Three Months Ended
January 2, 1998 and December 31, 1996
2
Statements of Cash Flows - Three Months Ended
January 2, 1998 and December 31, 1996 3
Notes to Financial Statements 4 - 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 9
Part II. Other Information 10
Signature Page 11
<PAGE> 3
Page 1 Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BALANCE SHEETS
JANUARY 2, 1998 AND SEPTEMBER 30, 1997
($ in thousands)
<TABLE>
<CAPTION>
Jan 2, 1998 Sept 30, 1997
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 121 $ 703
Trade receivables 4,539 6,154
less: allowance for doubtful accounts (778) (843)
-------- --------
Net receivables 3,761 5,311
Inventories, net 8,524 7,375
Prepaid expenses and other 1,049 847
-------- --------
Total current assets 13,455 14,236
Property, plant and equipment 4,498 4,465
less: accumulated depreciation (3,121) (2,972)
-------- --------
Net property, plant and equipment 1,377 1,493
Other assets:
Investment in NBHI 5,000 5,000
Property held for sale 170 170
Goodwill 495 502
Other 1,417 1,352
-------- --------
7,082 7,024
-------- --------
TOTAL ASSETS $ 21,914 $ 22,753
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations $ 109 $ 102
Short-term borrowings 1,050 150
Accounts payable 3,045 2,121
Accrued liabilities 1,846 1,370
-------- --------
Total current liabilities 6,050 3,743
Long-term obligations, net of
current maturities 26,235 26,162
Redeemable preferred stock 5,000 5,000
Stockholders' equity (deficit):
Common stock, $.50 par value,
10,000,000 shares authorized,
3,004,367 shares issued and
outstanding at January 2, 1998
and September 30, 1997 1,502 1,502
Additional paid-in capital 6,313 6,313
Accumulated deficit (23,186) (19,967)
-------- --------
Total stockholders' equity (deficit) (15,371) (12,152)
-------- --------
TOTAL LIABILITIES & STOCK-
HOLDERS' EQUITY (DEFICIT) $ 21,914 $ 22,753
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 4
Page 2 Form 10-Q
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 2, 1998 AND DECEMBER 31, 1996
(UNAUDITED)
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
JAN 2, 1998 DEC 31, 1996
----------- ------------
<S> <C> <C>
NET SALES $ 3,987 $ 4,928
COST OF SALES 3,471 3,664
------- -------
GROSS PROFIT 516 1,264
SELLING AND MARKETING EXPENSES 1,654 1,350
GENERAL AND ADMINISTRATIVE EXPENSES 1,146 850
SEVERANCE AND RESTRUCTURING EXPENSES 670 --
------- -------
LOSS FROM OPERATIONS (2,954) (936)
OTHER INCOME:
ROYALTY AND SUB-LICENSE INCOME, NET 361 483
OTHER, NET 4 55
------- -------
365 538
LOSS BEFORE INTEREST AND INCOME TAXES (2,589) (398)
INTEREST EXPENSE 629 433
LOSS BEFORE INCOME TAXES (3,218) (831)
PROVISION FOR INCOME TAXES -- --
------- -------
NET LOSS $(3,218) $ (831)
======= =======
NET LOSS PER SHARE - BASIC $ (1.07) $ (0.28)
======= =======
NET LOSS PER SHARE - DILUTED $ (1.07) $ (0.28)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Page 3 Form 10-Q
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 2, 1998 AND DECEMBER 31, 1996
(Unaudited)
($ in thousands)
<TABLE>
<CAPTION>
Jan. 2, 1998 Dec. 31, 1996
------------ -------------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $(3,218) $ (831)
Adjustments to reconcile net loss
to net cash used for operating activities -
Depreciation 148 59
Amortization 96 120
(Gain) loss on sale of assets -- (1)
Changes in operating assets
and liabilities -
Receivables 1,550 (587)
Inventories (1,149) (2,274)
Prepaid expenses and other (268) (45)
Accounts payable 924 1,344
Accrued liabilities 476 (329)
------- -------
Net cash used for operating activities (1,441) (2,544)
------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Additions to property, plant and
equipment (33) (146)
Proceeds from sale of property,
plant & equipment -- 2
------- -------
Net cash used for
investing activities (33) (144)
======= =======
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase in short-term
borrowings from bank $ 900 $ 1,754
Advance from shareholder -- 1,100
Principal payments on long-term
obligations (8) (18)
Net cash provided by
financing activities 892 2,836
------- -------
NET CHANGE IN CASH (582) 148
CASH, beginning of period 703 47
------- -------
CASH, end of period $ 121 $ 195
======= =======
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 477 $ 322
======= =======
Income taxes $-- $--
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
Page 4 Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The quarterly financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission for interim financial information. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the Company's latest annual report on Form 10-K. In the opinion of
management of the Company, all adjustments necessary, consisting only of normal
recurring adjustments, to present fairly (1) the financial position of The
Arnold Palmer Golf Company as of January 2, 1998; and (2) the results of its
operations and its cash flows for the three months ended January 2, 1998 and
December 31, 1996, have been included. The results of operations for the interim
periods are not necessarily indicative of the results for the full year.
Reference is also made to the Company's annual report on Form 10-K for the year
ended September 30, 1997, for a discussion of the Company's significant
accounting policies.
NOTE 2
INCOME TAXES:
The Company had federal tax loss carry forwards of approximately $32.3 million
at September 30, 1997. There was no current income tax provision or benefit
recorded during the three months ending January 2, 1998 and December 31, 1996
due to the losses sustained by the Company.
<PAGE> 7
Page 5 Form 10-Q
NOTE 3
SHORT-TERM BORROWINGS:
Short-term borrowings consist of advances under a $12.0 million line of credit
agreement with a bank. There are no financial covenants under the line of
credit, which is unconditionally guaranteed by the Company's Chairman and Chief
Executive Officer (the "Guarantor").
At the option of the borrower, advances under the line of credit bear interest
at prime minus 0.50% or one, two or three month LIBOR plus 2.0% (8.0% at January
2, 1998).
NOTE 4
NET INCOME (LOSS) PER COMMON SHARE:
The computation of basic net loss per share is based on the weighted average
number of common shares outstanding during the period. Diluted earnings per
share would also include common share equivalents outstanding. Due to the
Company's net loss for all periods presented, all common stock equivalents would
be anti-dilutive to Basic EPS.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------
Jan 2, 1998 Dec 31, 1996
-------------------------------- -------------------------------
Loss Shares Per Share Loss Shares Per Share
------- ------ --------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss - Basic and Diluted $(3,218) 3,004 $(1.07) $(821) 2,926 $(.28)
</TABLE>
At January 2, 1998, there were options outstanding to purchase 629,395 shares of
stock, with per share prices ranging from $2.94 to $10.93. Additionally there
were warrants outstanding to purchase 1,390,000 shares of stock with per share
prices ranging from $5.00 to $5.50. Also, the Company has 833,333 shares of
redeemable preferred stock, which have a stated value of $6.00 per share and are
convertible to common on a one to one ratio.
<PAGE> 8
Page 6 Form 10-Q
NOTE 5
INVENTORIES:
Inventories as of January 2, 1998 and September 30, 1997, were as follows (in
thousands):
<TABLE>
<CAPTION>
------ ---------
Jan. 2, Sept. 30,
1998 1997
------ ------
<S> <C> <C>
Inventories:
Raw Materials $3,286 $3,602
Work-in-process 6 14
Finished Goods 5,232 3,759
------ ------
Total $8,524 $7,375
====== ======
</TABLE>
NOTE 6
SEVERANCE AND RESTRUCTURING EXPENSES:
In the quarter ended January 2, 1998, certain executives left the Company under
severance agreements. Additionally, further work force reductions were
announced. As a result of these items, the Company recorded a charge of $0.67
million in the quarter.
<PAGE> 9
Page 7 Form 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
As of January 2, 1998, the Company had working capital of $7.4 million and a
current ratio of 2.2 to one. As of September 30, 1997, the Company's working
capital was $10.5 million and its current ratio was 3.8 to one. Major components
of the change in working capital were decreases in cash of $0.6 million and
accounts receivable of $1.5 million, while inventory increased $1.1 million.
Accounts payable and accrued liabilities increased $1.4 million and borrowings
under the Company's line of credit increased $0.9 million.
Due to the Company's terms of sale and the seasonality of the golf industry,
receivable collections are historically slower during the Company's first and
second fiscal quarters, which consists of the period from October through March.
The Company also maintains higher inventory levels during the second and third
fiscal quarters, January through June. The company's working capital
requirements will be met primarily through increased borrowings under its line
of credit through the month of May. The Company has available a $12.0 million
line of credit agreement with a bank, due December 31, 1998. Borrowings under
the line of credit were $1.05 million at January 2, 1998. The Company's capital
expenditures are expected to total approximately $1.0 million for fiscal 1998,
and will be funded through borrowings and internally generated cash.
RESULTS OF OPERATIONS
The table below compares net sales by market segment and product line for the
quarters ending January 2, 1998 and December 31, 1996.
<PAGE> 10
Page 8 Form 10-Q
Sales by Product Line
($'s in thousands)
<TABLE>
<CAPTION>
--------------------------------------
Jan 2, 1998 Dec. 31, 1996 % Change
--------------------------------------
<S> <C> <C> <C>
Clubs 2,052 2,696 -23.9%
Bags 1,421 1,911 -25.6%
Outlet Stores 189 147 28.6%
Components 268 174 54.9%
Apparel 57 -- --
--------------------------------------
Total 3,987 4,928 -19.1%
--------------------------------------
</TABLE>
Sales by Market Segment
($'s in thousands)
<TABLE>
<CAPTION>
--------------------------------------
Jan 2, 1998 Dec. 31, 1996 % Change
--------------------------------------
<S> <C> <C> <C>
Pro 2,390 2,912 -17.9%
Retail 973 1,297 -37.9%
Outlet Stores 189 147 28.6%
Components 268 174 54.9%
Export 41 55 -25.5%
Contract 126 73 72.6%
--------------------------------------
Total 3,987 4,928 -19.1%
--------------------------------------
</TABLE>
Total sales for the quarter ending January 2, 1998, were $4.0 million compared
to $4.9 million for the quarter ending December 31, 1996, a 19.1% decrease. The
primary decrease in club sales related to the Company's Gripless driver. Net
sales of this product were approximately $0.5 million less in the first quarter
of 1998, compared to last year. The decrease in bag sales was the result of a
major retailer buying their fall merchandise in the Company's fourth fiscal 1997
quarter. Historically, this major retailer placed orders for their fall
merchandise in the Companys first fiscal quarter. Additionally, a number of the
Company's off-course accounts had excess inventory remaining from the summer
season, thus orders for the Christmas season were not as strong in the Company's
first fiscal quarter of 1998. Contract sales represent direct shipments to
customers from the Company's bag manufacturer in China.
The Company realized gross profit of $0.5 million on sales of $4.0 million for
quarter ending January 2, 1998. This compares to gross profit for quarter ending
December 31, 1996 of $1.3 million on sales of $4.9 million. The decline in gross
profit contribution is attributable to margins on club sales as well as higher
closeout sales for the Company's first fiscal quarter. Fiscal 1997's first
quarter club sales included the Gripless driver, which generated higher than
average margins.
<PAGE> 11
Page 9 Form 10-Q
Selling and marketing expenses increased $0.3 million for the quarter ending
January 2, 1998 over the comparable prior year period. The increase in selling
expense was primarily in payroll and related personnel costs for additional
sales management personnel not in place as of December 31, 1996. Marketing
expenses increased as the Company began promoting its Nancy Lopez Golf division.
General and administrative expenses increased $0.3 million for quarter ending
January 2, 1998 compared to quarter ending December 31, 1996. The increase
relates to the Company's management change in its fiscal 1997 fourth quarter.
Severance and restructuring charges of $0.67 million relates to severance of
certain executives as well as other layoffs and related charges.
Interest expense increased approximately $0.2 million during quarter ending
January 2, 1998 over the comparable prior year period. The increase was due to
maintaining higher borrowings under the Company's credit facility during its
fiscal 1998 first quarter. Due to operating losses sustained during fiscal 1997,
the Company's average borrowings were $7.9 million greater during its current
fiscal quarter over the same prior year period.
<PAGE> 12
Page 10 Form 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
See Exhibit Index on page 12 of this Form 10-Q.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during
the quarter ending January 2, 1998. Subsequent to the end of
the quarter, the Registrant filed a Form 8-K on January 30,
1998 announcing the delisting from the NASDAQ SmallCap
Market.
<PAGE> 13
Page 11 Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ARNOLD PALMER GOLF COMPANY
------------------------------------
(Registrant)
/s/ John T. Lupton
------------------------------------
John T. Lupton
Chairman and Chief Executive Officer
/s/ David J. Kirby
------------------------------------
David J. Kirby
Vice President Finance
(Chief Accounting Officer)
Date February 12, 1998
<PAGE> 14
Page 12 Form 10-Q
Exhibit Index
Exhibit
Number Description
- ------ -----------
3.1* Amended and Restated Charter of The Arnold Palmer
Golf Company.
3.2** Amended and Restated Bylaws of ProGroup, Inc.
10.1 Term Note of the Company in the amount of $10,000,000 dated
December 29, 1997
10.2 Master Note of the Company in the amount of $12,000,000 dated
December 29, 1997
27 Financial Data Schedule.
* Incorporated by reference herein from the Company's Form 10-Q
for the quarter ended August 31, 1996.
** Incorporated by reference herein from the Company's Form 10-K
for the year ended February 25, 1995.
<PAGE> 1
Exhibit 10.1
TERM NOTE
(SINGLE PRINCIPAL PAYMENT)
(CORPORATION, PARTNERSHIP, OR JOINT VENTURE)
This Note has been executed by The Arnold Palmer Golf Company, a
corporation formed under the laws of the State of Tennessee ("Borrower"); if
more than one entity executes this Note, the term "Borrower" refers to each of
them individually and some or all of them collectively, and their obligations
hereunder shall be joint and several.* If a land trustee executes this Note,
"Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies)
of the land trust.
FOR VALUE RECEIVED, Borrower promises to pay to the order of THE NORTHERN TRUST
COMPANY, an Illinois banking corporation (hereafter, together with any
subsequent holder hereof, called "Lender"), at its main banking office at 50
South LaSalle Street, Chicago, Illinois 60675, or at such other place as Lender
may direct, the principal sum of Ten Million and no/100 United States Dollars
($10,000,000.00) (the "Loan"), payable in full on December 29, 1999, the
scheduled maturity date of this Note.
1. INTEREST.
Borrower agrees to pay interest on the unpaid principal amount from time
to time outstanding hereunder at the indicated rate (rate basis) per year, which
shall remain the same for the life of the Loan:
[CHECK ONE ONLY]
[ ] (i) The "Prime-Based Rate", which shall mean the Prime Rate (as defined
below) plus _______ percent (_____%).
[ ] (ii) The "WSI Prime Rate", meaning the Wall Street Journal Prime Rate plus
_______ percent (___%). "Wall Street Journal Prime Rate" means the highest
domestic Prime Rate as reported in the Money Rate Section of The Wall Street
Journal, in the edition covering the state where the main banking office of
Lender is located. If The Wall Street Journal stops reporting the "Wall Street
Journal Prime Rate", or if the "Wall Street Journal Prime Rate" is not available
on the relevant day. Lender will select a comparable index as a substitute for
the Wall Street Journal Prime Rate and will notify Borrower. Changes in the
interest rate resulting from a change in the Wall Street Journal Prime Rate
shall take effect on the date announced in The Wall Street Journal.
[X] (iii) The "Fixed Rate", meaning a rate of interest equal to __________
percent (__________%).
"Prime Rate" means that rate of interest announced from time to time by Lender
called its prime rate, which rate may not at any time be the lowest rate
charged by Lender. Changes in the rate of interest on the Loan resulting from a
change in the Prime Rate shall take effect on the date set forth in each
announcement of a change in the Prime Rate.
After the maturity of the Loan, whether by acceleration or otherwise, the
Loan shall bear interest until paid, at a rate equal to two percent (2%) in
addition to the rate in effect immediately prior to maturity (but not less than
the Prime Rate in effect at maturity).
N/A Notwithstanding the foregoing, the maximum interest rate hereunder will not
exceed _______% per year.**
Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days, including the date the Loan is made and
excluding the date the Loan or any portion thereof is paid or prepaid. Interest
shall be due and payable as follows:
[X] Monthly, on the last day of each month, beginning January 31, 1998, with
all accrued but unpaid interest being due and payable in full with the final
principal payment due hereunder.
[ ] Quarterly, on the ______________ day of each __________, ________,
_______, and ________ in each year, beginning ____________, with all accrued
but unpaid interest being due and payable in full with the final principal
payment due hereunder.
[X] Other: ______________________________________.
After maturity interest shall be payable on demand.
2. PREPAYMENTS.
If the Loan bears interest at the Prime-Based Rate or the WSJ Prime Rate,
Borrower may prepay the Loan without penalty or premium. If the Loan bears
interest at the Fixed Rate, and Borrower prepays the Loan in whole or in part,
or the maturity of the Loan is accelerated, then, to the fullest extent
permitted by law Borrower shall also pay Lender for all losses (including but
not limited to interest rate margin and any other losses of anticipated profits)
and expenses incurred by reason of the liquidation or re-employment of deposits
acquired by Lender to make the Loan or maintain principal outstanding at the
Fixed Rate. Upon Lender's demand in writing specifying such losses and expenses,
Borrower shall promptly pay them; Lender's specification shall be deemed correct
in the absence of manifest error. If bearing interest at the Fixed Rate, the
Loan shall be conclusively deemed to have been funded by or on behalf of Lender
by the purchase of a deposit corresponding in amount and in maturity to the
Loan.***
3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN &
OTHER AGREEMENTS. (CHECK AS APPLICABLE)
[ ] This Note evidences a transaction or term loan in the amount of this Note.
[ ] This Note amends, restates, renews and replaces in its entirety the
note(s) dated ____________ in the amount of $ ________, and any previously
renewed note(s). Borrower hereby expressly confirms that all collateral and
guaranties given for such prior note(s) shall secure or guarantee this Note.
All amounts outstanding under such previous note(s) shall be deemed
automatically outstanding hereunder.
[X] This Note is secured without limitation as provided in the following and
all related documents, in each case as amended, modified, renewed, restated or
replaced from time to time:
[X] Security Agreement dated as of May 15, 1997.
[ ] Mortgage dated as of ____________________ on property all or part of
which is commonly known as ____________________________________________.
[X] Pledge Agreement dated as of date hereof.
[ ] Other (describe) ______________________________________________.
[X] Payment of this Note has been unconditionally guaranteed by John T. Lupton
(each individually and all collectively referred to as "guarantor") as provided
in separately executed guaranties.
[X] This Note has been executed pursuant to a Note Purchase Agreement, dated
as of the date hereof, as amended, modified, restated, renewed, or replaced
from time to time, containing covenants and other terms, to which reference is
hereby made.
4. USE OF PROCEEDS. CHECK ONE:
[X] Borrower represents and warrants that the proceeds of this Note will be
used solely for business purposes, and not for personal, family
*by the John T. Lupton Trust under the will of Thomas Cartte Lupton
*Insert "N/A" in any blank in this Note which is not applicable. This Note may
be used for single principal payment (bullet) term loans. **Fill in if Loans is
subject to Truth-in-Lending, secured by a dwelling and at the WSI Prime Rate
(maturity limit is 359 days, and do not use Prime-Based Rate in this case).
***Notwithstanding the above, if this Note is executed by a land trustee upon
the direction of an individual beneficiary(ies), unless the Loan is for
business purposes the Borrower shall NOT be liable for any such losses or
expenses, or any other charges for prepayment, if this Note is secured by
residential real estate and the interest rate hereon does or could exceed eight
per cent (8%) per annum on a calendar-year basis.
<PAGE> 2
[ ] Borrower represents that the proceeds of this Note will be used for
personal, family or household use.**
If Loan proceeds will be used to purchase or refinance the purchase of any
property describe: n/a
Notwithstanding any other provision hereof, if this Note is covered by
Regulation Z of the Federal Reserve Board (Truth in Lending)or any like
disclosure requirement, this Note shall be secured by collateral referenced
herein or in any other document only if disclosed in a related disclosure
statement.
5. REPRESENTATIONS.
Borrower hereby represents and warrants to Lender that:
(i) Borrower and any "Subsidiary" (as defined below) are existing and
in good standing under the laws of their state of formation, are duly
qualified, in good standing and authorized to do business in each
jurisdiction where failure to do so might have a material adverse
impact on the consolidated assets, condition or prospects of Borrower;
the execution, delivery and performance of this Note and all related
documents and instruments are within Borrower's powers and have been
authorized by all necessary corporate, action;
(ii) the execution, delivery and performance of this Note and all
related documents and instruments have received any and all necessary
governmental approval, and do not and will not contravene or conflict
with any provision of law or of the charter or by-laws of Borrower or
any agreement affecting Borrower or its property; and
(iii) there has been no material adverse change in the business,
condition, properties, assets, operations or prospects of Borrower or
any guarantor since the date of the latest financial statements
provided on behalf of Borrower or any guarantor to Lender.
"Subsidiary" means any corporation, partnership, joint venture, trust, or
other legal entity of which Borrower owns directly or indirectly fifty percent
(50%) or more of the outstanding voting stock or interest, or of which Borrower
has effective control, by contract or otherwise.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
(a)failure to pay, when and as due, any principal, interest or other
amounts payable hereunder; failure to comply with or perform any agreement or
covenant of Borrower contained herein; or failure to furnish (or caused to be
furnished to) Lender when and as requested by Lender (but not more often than
once ever twelve months) fully completed financial statement(s) of any guarantor
on Lender's then-standard form together with such supporting information as
Lender may reasonably request; or
(b) any default, event of default, or similar event shall occur or
continue under any other instrument, document, note, agreement, or guaranty
delivered to Lender in connection with this Note, or any such instrument,
document, note, agreement, or guaranty shall not be, or shall cease to be,
enforceable in accordance with its terms; or
(c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
any Subsidiary, or any guarantor, or under the terms of any indenture,
agreement, or instrument under which any such evidence of indebtedness or other
agreement is issued, assumed, secured, or guaranteed, and such event shall
continue beyond any applicable period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, or any guarantor to Lender is false or misleading in
any material respect on the date as of which the facts therein set forth are
stated or certified; or
(e) any guaranty of or pledge of collateral security for this Note shall
be repudiated or become unenforceable or incapable of performance; or
(f) Borrower or any Subsidiary shall fail to maintain their existence in
good standing in their state of formation or shall fail to be duly qualified,
in good standing and authorized to do business in each jurisdiction where
failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects of Borrower; or
(g) Borrower, any Subsidiary, or any guarantor shall die, become
incompetent, dissolve, liquidate, merge, consolidate, or cease to be in
existence for any reason;
(h) any person or entity presently not in control of Borrower, or any
guarantor, shall obtain control directly or indirectly of Borrower, or any
guarantor, whether by purchase or gift of stock or assets, by contract, or
otherwise; or against Borrower, any Subsidiary, or any guarantor, or with
respect to any assets of Borrower, any Subsidiary, or any guarantor, which
shall threaten to have a material and adverse effect on the assets, condition
or prospects of Borrower, any Subsidiary, or any guarantor; or final
judgment(s) and/or settlement(s) in an aggregate amount in excess of One
Hundred Thousand and no/100 UNITED STATES DOLLARS ($100,000.00) in excess of
insurance for which the insurer has confirmed coverage in writing, a copy of
which writing has been furnished to Lender, shall be entered in any suit or
action commenced against Borrower, any Subsidiary, or any guarantor; or
(j) Borrower shall grant or any person (other than Lender) shall obtain a
security interest in any collateral for this Note; Borrower or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Lender does not have a first-priority security interest in any
of the collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower or any
general partner shall be filed with any public recorder; or
(k) there shall be any material loss or depreciation in the value of any
collateral for this Note for any reason, or Lender shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by the related documents,
all or any part of any collateral for this Note or any direct, indirect, legal,
equitable or beneficial interest therein is assigned, transferred or sold
without Lender's prior written consent; or
(l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, any Subsidiary, or any guarantor; or
Borrower, any Subsidiary, or any guarantor shall take any steps toward, or to
authorize, such a proceeding; or
(m) Borrower, any Subsidiary, or any guarantor shall become insolvent,
generally shall fail or be unable to pay its debts as they mature, shall admit
in writing its inability to pay its debts as they mature, shall make a general
assignment for the benefit of its creditors, shall enter into any composition
or similar agreement, or shall suspend the transaction of all or a substantial
portion of its usual business.
7. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of Default
specified in Section 6(a)-(k), Lender at its option may declare this Note
(principal, interest and other amounts) immediately due and payable without
notice or demand of any kind. Upon the occurrence of any Event of Default
specified in Section 6(l)-(m), this Note (principal, interest and other
amounts) shall be immediately and automatically due and payable without action
of any kind on the part of Lender. Upon the occurrence and during the
continuance of any Event of Default, Lender may exercise any rights and
remedies under this Note, any related document or instrument (including without
limitation any pertaining to collateral), and at law or in equity.
(b) Lender may, by written notice to Borrower, at any time and from time
to time, waive any Event of Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver, Lender and
Borrower shall be restored to their former position and rights hereunder, and
any Event of Default or Unmatured Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to or impair any
subsequent or other Event of Default or Unmatured Event of Default. No failure
to exercise, and no delay in exercising, on the part of Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of Lender herein provided are cumulative and not exclusive of any
rights or remedies provided by law. "Unmatured Event of Default" means any
event or condition which would become an Event of Default with notice or the
passage of time or both.
8. NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend or
expect to charge, accept or collect any interest which, when added to any fee
or other charge upon the principal which may legally be treated as interest,
shall be in excess of the highest lawful rate. If acceleration, prepayment or
any other charges upon the principal or any portion thereof, or any other
circumstance, result in the computation or earning of interest in excess of the
highest lawful rate, then any and all such excess is hereby waived and shall be
applied against the remaining principal balance. Without limiting the
generality of the foregoing, and notwithstanding anything to the contrary
contained herein or otherwise, no deposit of funds shall be required in
connection herewith which will, when deducted from the principal amount
outstanding hereunder, cause the rate of interest hereunder to exceed the
highest lawful rate.
9. PAYMENTS, ETC.
All payments hereunder shall be made in immediately available funds and
shall be applied first to accrued interest and then to principal; however, if
an Event of Default occurs, Lender may, in its sole discretion, and in such
order as it may choose, apply any payment to interest, principal and/or lawful
charges and expenses then accrued. Borrower shall receive immediate credit on
payments received during Lender's normal banking hours if made in cash,
immediately available funds, or by debit to available balances in an account at
Lender; otherwise payments shall be credited after clearance through normal
banking channels. Borrowers authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes duties, or
other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, the Loan shall be credited to an
account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE THE LOAN
HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED
TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT
Page 2
<PAGE> 3
LIMITATION INSTRUCTIONS TO MAKE TRANSFERS TO THIRD PARTIES, REASONABLY BELIEVED
BY LENDER TO HAVE BEEN GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT
INQUIRY OF ANY TYPE. All payments shall be made without deduction for or on
account of any present or future taxes, duties or other charges levied or
imposed on this Note or the proceeds, Lender or Borrower by any government or
political subdivision thereof. Borrower shall upon request of Lender pay all
such taxes, duties or other charges in addition to principal and interest,
including without limitation all documentary stamp and intangible taxes, but
excluding income taxes based solely on Lender's income.
10. SETOFF.
At any time and without notice of any kind, any account, deposit or other
indebtedness owing by Lender to Borrower, and any securities or other property
of Borrower delivered to or left in the possession of Lender or its nominee or
bailee, may be set off against and applied in payment of any obligation
hereunder, whether due or not.
11. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, Wealth Management Division), and if to Borrower to
its address set forth below, or to such other address as may be hereafter
designated in writing by the respective parties hereto or, as to Borrower, may
appear in Lender's records.
12. MISCELLANEOUS.
This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the other. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document
in which they are contained are references to this Note. This Note shall bind
Borrower, its heirs, trustees (including without limitation successor and
replacement trustees), executors, personal representatives, successors and
assigns, and shall inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its rights or interest
hereunder without the prior written consent of Lender. Borrower agrees to pay
upon demand all expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be employees of
Lender, in each case whether in or out of court, in original or appellate
proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof
in connection with the enforcement or preservation of its rights hereunder or
under any document or instrument executed in connection herewith. Borrower
expressly and irrevocably waives notice of dishonor or default as well as
presentment, protest, demand and notice of any kind in connection herewith.
If there shall be more than one person or entity constituting Borrower, each of
them shall be primarily, jointly and severally liable for all obligations
hereunder.
13. WAIVER OF JURY TRIAL, ETC.
BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND
ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO,
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OR ANY LOCAL, STATE OR FEDERAL COURT
LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR
CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
[X] See Rider attached hereto and incorporated herein by reference.
Lender is hereby authorized by Borrower without notice to Borrower to fill in
any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms upon which the Loan evidenced hereby
is or may be made, for which purpose Lender shall be deemed to have been
granted an irrevocable power of attorney coupled with an interest.
The Arnold Palmer Golf Company
By: /s/ John T. Lupton
-----------------------------
Title: Chairman of the Board
----------------------------
Address for Notices:
6201 Mountain View Road
- -----------------------------------
Ooltewah, Tennessee 37363
- -----------------------------------
- -----------------------------------
Attention:
-------------------------
<PAGE> 1
Exhibit 10.2
MASTER NOTE
(Corporation, Partnership, or Joint Venture)
This Note has been executed by The Arnold Palmer Golf Company, a corporation
formed under the laws of the State of Tennessee ("Borrower"); if more than one
entity executes this Note, the term "Borrower" refers to each of them
individually and some or all of them collectively, and their obligations
hereunder shall be joint and several.* If a land trustee executes this Note,
"Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies)
of the land trust.**
FOR VALUE RECEIVED, on or before December 29, 1998, the scheduled maturity
date hereof, Borrower promises to pay to the order of THE NORTHERN TRUST
COMPANY, an Illinois banking corporation (hereafter, together with any
subsequent holder hereof, called "Lender"), at its main banking office at 50
South LaSalle Street, Chicago, Illinois 60675, or at such other place as Lender
may direct, the aggregate unpaid principal balance of each advance (a "Loan"
and collectively the "Loans") made by Lender to Borrower hereunder. The total
principal amount of Loans outstanding at any one time hereunder shall not
exceed Twelve Million and no/100 UNITED STATES DOLLARS ($12,000,000).
Lender is hereby authorized by Borrower at any time and from time to time
at Lender's sole option to attach a schedule (grid) to this Note and to endorse
thereon notations with respect to each Loan specifying the date and principal
amount thereof, the Interim Maturity Date (as defined below) (if applicable),
the applicable interest rate and rate option, and the date and amount of each
payment of principal and interest made by Borrower with respect to each such
Loan. Lender's endorsements as well as its records relating to Loans shall be
rebuttably presumptive evidence of the outstanding principal and interest on
the Loans, and, in the event of inconsistency, shall prevail over any records
of Borrower and any written confirmations of Loans given by Borrower.
If Borrower wishes to obtain a Loan under this Note, Borrower shall notify
Lender orally or in writing on a banking day. Any such notice shall be
irrevocable; if the notice is received after 10:00 AM Chicago time the Loan may
not be available until the next banking day. Additional procedures for "Bank
Offered Rate" Loans, if available, are set forth below.
Each request for a Loan shall be deemed to be a representation and
warranty by Borrower to Lender that: (i) no Event of Default or Unmatured Event
of Default (in each case as defined below) has occurred and is continuing as of
the date of such request or would result from the making of the Loan; and (ii)
Borrower's representations and warranties herein are true and correct as of
such date as though made on such date. Upon receipt of each Loan request Lender
in its sole discretion shall have the right to request that Borrower provide to
Lender, prior to Lender's funding of the Loan, a certificate executed by
Borrower's President, Treasurer, or Chief Financial Officer (if Borrower is a
corporation), or a general partner or joint venturer of Borrower (if Borrower
is a partnership or joint venture) to such effect.
<PAGE> 2
2. PREPAYMENTS.
3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN &
OTHER AGREEMENTS. (CHECK AS APPLICABLE)
LINE OF CREDIT: This Note has been executed pursuant to a line of credit. At
the present time Lender intends to make available to Borrower credit as
outlined herein or in any related letter until the maturity day indicated above
unless in Lender's sole judgment there has occurred an adverse change in the
assets, condition or prospects of Borrower or any guarantor. THE LINE OF CREDIT
MAY BE CANCELLED OR REDUCED BY LENDER AT LENDER'S SOLE OPTION WITHOUT PRIOR
NOTICE TO BORROWER OR ANY OTHER PERSON OR ENTITY. THE LINE OF CREDIT IS
REVOCABLE NOTWITHSTANDING PAYMENT OF ANY FEES OR MAINTENANCE OF ANY ACCOUNT
BALANCES, AS AND IF PROVIDED IN ANY ACCOMPANYING LETTER OR OTHER DOCUMENT
PERTAINING TO SUCH FEES AND/OR BALANCES. Any such fees and/or balances shall be
deemed compensation to Lender for being prepared to respond to Borrower's
requests for credit under this Note.
[X] This Note amends, restates, renews and replaces in its entirety the note
dated December 30, 1996 in the amount of $12,000,000.00, and any previously
renewed note(s). Borrower hereby expressly confirms that all collateral and
guaranties given for such prior note(s) shall secure or guarantee this Note.
All amounts outstanding under such previous note(s) shall be deemed
automatically outstanding hereunder.
[X] This Note is secured without limitation as provided in the following and
all related documents, in each case as amended, modified, renewed, restated or
replaced from time to time:
[X] Security Agreement dated as of May 15, 1997.
[ ] Mortgage dated as of ___________________on property all or part of
which is commonly known as _______________________________________________.
[X] Pledge Agreement dated as of date hereof.
[ ] Other (describe) __________________________________________________.
[X] Payment of this Note has been unconditionally guaranteed by John T. Lupton
(each individually and all collectively referred to as "guarantor") as provided
in separately executed guaranties.
[X] This Note has been executed pursuant to a Note Purchase by the
John T. Lupton Trust U/W Thomas Cartter Lupton Agreement, dated as
of the date hereof, as amended, modified, restated, renewed, or replaced from
time to time, containing covenants and other terms, to which reference is
hereby made.
4. USE OF PROCEEDS. CHECK ONE:
[X] Borrower represents and warrants that the proceeds of this Note will be
used solely for business purposes, and not for personal, family or household
use, within the meaning of Federal Truth-in-Lending and similar state laws and
regulations.
[ ] ****Borrower represents that the proceeds of this Note will be used for
personal, family or household use. IF THIS OPTION IS CHECKED, THE FIRST LOAN
MUST BE IN THE AMOUNT OF $25,001 OR MORE.
If Loan proceeds will be used to purchase or refinance the purchase of any
property describe:
n/a
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Notwithstanding any other provision hereof, if this Note is covered by
Regulation Z of the Federal Reserve Board (Truth in Lending) or any like
disclosure requirement, this Note shall be secured by collateral referenced
herein or in any other document only if disclosed in a related disclosure
statement.
5. REPRESENTATIONS.
Borrower hereby represents and warrants to Lender that:
(a) Borrower and any "subsidiary" (as defined below) are existing and in
good standing under the laws of their state of formation, are duly
qualified, in good standing and authorized to do business in each
jurisdiction where failure to do so might have a material adverse impact
on the consolidated assets, condition or prospects of borrower, the
execution, delivery and performance of this Note and all related documents
and instruments are within Borrower's powers and have been authorized by all
necessary corporate action;
(b) the execution, delivery and performance of this Note and all related
documents and instruments have received any and all necessary governmental
approval, and do not and will not contravene or conflict with any provision
of law or of the charter or by-laws of Borrower or any agreement affecting
Borrower or its property; and
(c) there has been no material adverse change in the business, condition,
properties, assets, operations or prospects of Borrower or any guarantor
since the date of the latest financial statements provided on behalf of
Borrower or any guarantor to Lender prior to the execution of this Note.
"Subsidiary" means any corporation, partnership, joint venture, trust, or other
legal entity of which Borrower owns directly or indirectly fifty percent (50%)
or more of the outstanding voting stock or interest, or of which Borrower has
effective control, by contract or otherwise.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default":
(a) failure to pay, when and as due, any principal, interest or other amounts
payable hereunder; failure to comply with or perform any agreement or covenant
of Borrower contained herein; or failure to furnish (or caused to be furnished
to) Lender when and as requested by Lender (but not more often than once every
twelve months) fully completed financial statement(s) of any guarantor on
Lender's then-standard form together with such supporting information as Lender
may reasonably request; or
(b) any default, event of default, or similar event shall occur or continue
under any other instrument, document, note, agreement, or guaranty delivered to
Lender in connection with this Note, or any such instrument, document, note,
agreement, or guaranty shall not be, or shall cease to be, enforceable in
accordance with its terms; or
(c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
any Subsidiary, or any guarantor, or under the terms of any indenture,
agreement, or instrument under which any such evidence of indebtedness or other
agreement is issued, assumed, secured, or guaranteed, and such event shall
continue beyond any applicable period of grace; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, or any guarantor to Lender is false or misleading in
any material respect on the date as of which the facts therein set forth are
stated or certified; or
(e) any guaranty of or pledge of collateral security for this Note shall be
repudiated or become unenforceable or incapable of performance; or
(f) Borrower or any Subsidiary shall fail to maintain their existence in
good standing in their state of formation or shall fail to be duly qualified,
in good standing and authorized to do business in each jurisdiction where
failure to do so might have a material adverse impact on the consolidated
assets, condition or prospects of Borrower; or
(g) Borrower, any Subsidiary, or any guarantor shall die, become
incompetent, dissolve, liquidate, merge, consolidate, or cease to be in
existence for any reason; or
(h) any person or entity presently not in control of a Borrower, or any
guarantor, shall obtain control directly or indirectly of Borrower, or any
guarantor, whether by purchase or gift of stock or assets, by contract, or
otherwise; or
(i) any proceeding (judicial or administrative) shall be commenced against
Borrower, any Subsidiary, or any guarantor, or with respect to any assets of
Borrower, any Subsidiary, or any guarantor which shall threaten to have a
material and adverse effect on the assets, condition or prospects of Borrower,
any Subsidiary, or any guarantor; or final judgment(s) and/or settlement(s) in
an aggregate amount in excess of One Hundred Thousand and no/100 UNITED STATES
DOLLARS ($100,000.00) in excess of insurance for which the insurer has
confirmed coverage in writing, a copy of which writing has been furnished to
Lender, shall be entered or agreed to in any suit or action commenced against
Borrower, any Subsidiary, or any guarantor; or
(j) Borrower shall grant or any person (other than Lender) shall obtain a
security interest in any collateral for this Note; Borrower or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Lender does not have a first-priority security interest in any
of the collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower shall
be filed with any public recorder; or
****If this box is checked and a land trustee is signing the Note, do not take
real estate as collateral.
<PAGE> 3
(k) there shall be any material loss or depreciation in the value of any
collateral for this Note for any reason, or Lender shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by the related documents,
all or any part of any collateral for this Note or any direct, indirect, legal,
equitable or beneficial interest therein is assigned, transferred or sold
without Lender's prior written consent; or
(l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, any Subsidiary, or any guarantor; or
Borrower, any Subsidiary, or any guarantor shall take any steps toward, or to
authorize, such a proceeding; or
(m) Borrower, any Subsidiary, or any guarantor shall become insolvent,
generally shall fail or be unable to pay its debts as they mature, shall admit
in writing its inability to pay its debts as they mature, shall make a general
assignment for the benefit of its creditors, shall enter into any composition
or similar agreement, or shall suspend the transaction of all or a substantial
portion of its usual business.
7. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of Default
specified in Section 6(a)-(k), Lender at its option may declare this Note
(principal, interest and other amounts) immediately due and payable without
notice or demand of any kind. Upon the occurrence of any Event of Default
specified in Section 6(l)-(m), this Note (principal, interest and other
amounts) shall be immediately and automatically due and payable without action
of any kind on the part of Lender. Upon the occurrence and during the
continuance of any Event of Default, Lender may exercise any rights and
remedies under this Note, any related document or instrument (including without
limitation any pertaining to collateral), and at law or in equity.
(b) Lender may, by written notice to Borrower, at any time and from time
to time, waive any Event of Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver, Lender and
Borrower shall be restored to their former position and rights hereunder, and
any Event of Default or Unmatured Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to or impair any
subsequent or other Event of Default or Unmatured Event of Default. No failure
to exercise, and no delay in exercising, on the part of Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of Lender herein provided are cumulative and not exclusive of any
rights or remedies provided by law. "Unmatured Event of Default" means any
event or condition which would become an Event of Default with notice or the
passage of time or both.
8. NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend or
expect to charge, accept or collect any interest which, when added to any fee
or other charge upon the principal which may legally be treated as interest,
shall be in excess of the highest lawful rate. If acceleration, prepayment or
any other charges upon the principal or any portion thereof, or any other
circumstance, result in the computation or earning of interest in excess of the
highest lawful rate, then any and all such excess is hereby waived and shall be
applied against the remaining principal balance. Without limiting the
generality of the foregoing, and notwithstanding anything to the contrary
contained herein or otherwise, no deposit of funds shall be required in
connection herewith which will, when deducted from the principal amount
outstanding hereunder, cause the rate of interest hereunder to exceed the
highest lawful rate.
9. PAYMENTS, ETC.
All payments hereunder shall be made in immediately available funds, and
shall be applied first to accrued interest and then to principal; however, if
an Event of Default occurs, Lender may, in its sole discretion, and in such
order as it may choose, apply any payment to interest, principal and/or lawful
charges and expenses then accrued. Borrower shall receive immediate credit on
payments received during Lender's normal banking hours if made in cash,
immediately available funds, or by debit to available balances in an account at
Lender; otherwise payments shall be credited after clearance through normal
banking channels. Borrower authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes, duties,
or other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, all Loans shall be credited to an
account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS
HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED
TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO
MAKE TRANSFERS TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN
GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All
payments shall be made without deduction for or on account of any present or
future taxes, duties or other charges levied or imposed on this Note or the
proceeds, Lender or Borrower by any government or political subdivision thereof.
Borrower shall upon request of Lender pay all such taxes, duties or other
charges in addition to principal and interest, including without limitation all
documentary stamp and intangible taxes, but excluding income taxes based solely
on Lender's income.
10. SETOFF.
At any time and without notice of any kind, any account, deposit or other
indebtedness owing by Lender to Borrower, and any securities or other property
of Borrower delivered to or left in the possession of Lender or its nominee or
bailee, may be set off against and applied in payment of any obligation
hereunder, whether due or not.
11. NOTICES.
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, *** Division), and if to Borrower to its address set
forth below, or to such other address as may be hereafter designated in writing
by the respective parties hereto or, as to Borrower, may appear in Lender's
records. *** Wealth Management
12. MISCELLANEOUS.
This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the other. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document
in which they are contained are references to this Note. This Note shall bind
Borrower, its heirs, trustees (including without limitation successor and
replacement trustees), executors, personal representatives, successors and
assigns, and shall inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its rights or interest
hereunder without the prior written consent of Lender. Borrower agrees to pay
upon demand all expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be employees of
Lender, in each case whether in or out of court, in original or appellate
proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof
in connection with the enforcement or preservation of its rights hereunder or
under any document or instrument executed in connection herewith. Borrower
expressly and irrevocably waives notice of dishonor or default as well as
presentment, protest, demand and notice of any kind in connection herewith. If
there shall be more than one person or entity constituting Borrower, each of
them shall be primarily, jointly and severally liable for all obligations
hereunder.
13. WAIVER OF JURY TRAIL, ETC.
BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND
ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO,
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR
CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
[X] See Rider attached hereto and incorporated herein by reference.
Lender is hereby authorized by Borrower without notice to Borrower to fill
in any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms upon which the Loan(s) evidenced hereby
are or may be made, for which purpose Lender shall be deemed to have been
granted an irrevocable power of attorney coupled with an interest.
Address for Notices:
6201 Mountain View Road
---------------------------------
The Arnold Palmer Golf Company Ooltewah, Tennessee 37363
- --------------------------------- ---------------------------------
By: /s/ John T. Lupton
----------------------------- ---------------------------------
Title: Chairman of the Board Attention:
-------------------------- -----------------------
<PAGE> 4
Rider To
Master Note (Form 9601)
(Prime or LIBOR)
(At Lender Option LIBOR Periods May Extend Beyond Note Maturity)
DATED AS OF DECEMBER 29, 1997, EXECUTED BY THE ARNOLD PALMER GOLF COMPANY (the
"Borrower") IN FAVOR OF THE NORTHERN TRUST COMPANY (the "Lender")
1. This Rider is attached to and forms an integral part of the
above-referenced Master Note (as amended, the "Note"). Capitalized terms defined
in the remainder of the Note and not otherwise defined in this Rider shall have
the same meaning in this Rider as in the remainder of the Note. Wherever
possible this Rider and the remainder of the Note shall be construed so as to be
consistent with each other; however, if and to the extent that the terms of this
Rider conflict or are inconsistent with the remainder of the Note, the terms of
this Rider shall prevail. Except as modified by this Rider, the terms of the
remainder of the Note shall apply.
2. Sections 1 ("INTEREST") and 2 ("PREPAYMENTS") of the Note are deleted
and the following is substituted in lieu thereof.
"SECTION 1. INTEREST.
1.1 INTEREST RATES. The unpaid principal amount from time to time
outstanding hereunder shall bear interest at the following rates per year:
(a) before maturity of any Loan, whether by acceleration or otherwise, at
the option of Borrower, subject to the terms hereof at a rate equal to:
(i) the "Prime-Based Rate," which shall mean the Prime Rate (as
defined below), less 1/2 percent (.50%). Changes in the rate of
interest on the Loans resulting from a change in the Prime Rate
shall take effect on the date set forth in each announcement
for a change in the Prime Rate. "Prime Rate" means the rate
announced from time to time by the Lender called its prime rate,
which may not at any time be the lowest rate charged by the
Lender; or
(ii) "LIBOR," which shall mean that fixed rate of interest per
year for deposits with maturity periods of (to be determined)
month(s)(which maturity period Borrower shall select subject to
the terms stated herein) in United States dollars offered to
Lender in or through the London or another offshore interbank
market, as determined by the Lender in its sole discretion for
or as of the borrowing date requested by the Borrower, divided by
one minus any applicable reserve
1
<PAGE> 5
requirement (expressed as a decimal) on Eurodollar deposits of
the same amount and maturity as determined by Lender in its sole
discretion, plus two percent (2.0)%.
(b) after the maturity of any Loan, until paid, at a rate equal to 2%
in addition to the Prime Rate (but not less than the Prime Rate in
effect at maturity).
1.2 RATE SELECTION. Borrower shall select and change its selection of the
interest rate as between the Prime-Based Rate and LIBOR to apply to at least
$100,000 and in integral multiples of $100,000 thereafter (or the remaining
amount available hereunder) of any advance (Loan), subject to the requirements
herein stated:
(a) At the time any advance is made;
(b) At the expiration of the particular LIBOR maturity period selected
for the outstanding principal balance of any advance currently bearing
interest at the LIBOR Rate; and
(c) At any time for the outstanding principal balance of any advance
currently bearing interest at the Prime-Based Rate.
1.3 RATE CHANGES AND NOTIFICATIONS.
(a) LIBOR. If Borrower wishes to borrow funds at LIBOR or if Borrower
wishes to change the rate of interest on any advance, within the
limits described above, from the Prime-Based Rate to LIBOR, it shall,
not less than three banking days of the Lender prior to the banking
day of the Lender on which such rate is to take effect, give Lender
written or telephonic notice thereof, which shall be irrevocable. Such
notice shall specify the advance to which LIBOR is to apply, and, in
addition, the desired LIBOR maturity period (but not to exceed the
maturity date of this Note unless the Lender consents otherwise).
(b) Failure to Notify. If Borrower does not notify Lender at the
expiration of a selected maturity period with respect to any principal
outstanding at LIBOR, then in the absence of such notice Borrower
shall be deemed to have elected to have such principal accrue interest
after the respective LIBOR maturity period at the Prime-Based Rate. If
Borrower wishes to borrow money at the Prime-Based Rate, it shall
notify Lender on the date of borrowing or conversion; if any such
notification is not received before 10:00 AM Chicago time on a banking
day of the Lender, at Lender's option the borrowing or conversion may
not be effected until the next banking day. If Borrower does not
notify Lender as to its selection of the interest rate option with
respect to any new advance of principal, then in the absence of such
notice Borrower shall be deemed to have elected to have such advance
accrue interest at the Prime-Based Rate.
2
<PAGE> 6
1.4 INTEREST PAYMENT DATES. Accrued interest shall be paid in respect of
each portion of principal to which:
(a) the Prime-Based Rate applies, monthly on the _______ day of each
month/quarterly on the ____________________________ day of each
________________________ [STRIKE INAPPLICABLE TERMS] of each year,
beginning with the first of such dates to occur after the date of the first
advance, at maturity of this Note, and upon payment in full, whichever is
earlier or more frequent; and
(b) LIBOR applies, monthly on the _____ day of each month/quarterly on the
_______________________ day of each _____________________ [STRIKE
INAPPLICABLE TERMS OR INSERT "N/A"], at the end of each respective maturity
period (unless interest is payable monthly or quarterly as provided above),
every three months (unless interest is payable monthly or quarterly as
provided above), at maturity of this Note, and upon payment in full,
whichever is earlier or more frequent.
After maturity, interest shall be payable upon demand.
1.5 ADDITIONAL PROVISIONS WITH RESPECT TO LIBOR LOANS.
The selection by Borrower of LIBOR and the maintenance of advances at such
rate shall be subject to the following additional terms and conditions:
(a) Availability of Deposits at a Determinable Rate. If, after Borrower has
elected to borrow or maintain any advance at LIBOR, Lender notifies
Borrower that:
(i) United States dollar deposits in the amount and for the maturity
requested are not available to Lender in the London interbank market;
or
(ii) Reasonable means do not exist for Lender to determine LIBOR for
the amount and maturity requested,
all as determined by the Lender in its sole discretion, then the principal
subject or to be subject to LIBOR shall accrue or shall continue to accrue
interest at the Prime-Based Rate.
(b) Prohibition of Making, Maintaining, or Repayment of Principal at LIBOR.
If any treaty, statute, regulation, interpretation thereof, or any
directive, guideline, or otherwise by a central bank or fiscal authority
(whether or not having the force of law) shall either prohibit or extend
the time at which any principal subject to LIBOR may be purchased,
maintained, or repaid, then on and as of the date the
3
<PAGE> 7
prohibition becomes effective, the principal subject to that prohibition
shall continue at the Prime-Based Rate.
(c) Payments of Principal and Interest to be Net of Any Taxes or Costs. All
payments of principal and interest shall be made net of any taxes and costs
incurred by Lender resulting from having principal outstanding hereunder at
LIBOR. Without limiting the generality of the preceding obligation,
illustrations of such taxes and costs are:
(i) Taxes (or the withholding of amounts for taxes) of any nature
whatsoever including income, excise, and interest equalization taxes
(other than income taxes imposed by the United States or any state
thereof on the income of Lender), as well as all levies, imposts,
duties, or fees whether now in existence or resulting from a change
in, or promulgation of, any treaty, statute, regulation,
interpretation thereof, or any directive, guideline, or otherwise, by
a central bank or fiscal authority (whether or not having the force of
law) or a change in the basis of, or time of payment of, such taxes
and other amounts resulting therefrom;
(ii) Any reserve or special deposit requirements against assets or
liabilities of, or deposits with or for the account of, Lender with
respect to principal outstanding at LIBOR (including those imposed
under Regulation D of the Federal Reserve Board) or resulting from a
change in, or the promulgation of, such requirements by treaty,
statute, regulation, interpretation thereof, or any directive,
guideline, or otherwise by a central bank or fiscal authority (whether
or not having the force of law);
(iii) Any other costs resulting from compliance with treaties,
statutes, regulations, interpretations, or any directives or
guidelines, or otherwise by a central bank or fiscal authority
(whether or not having the force of law);
(iv) Any loss (including loss of anticipated profits) or expense
incurred by reason of the liquidation or re-employment of deposits
acquired by Lender to make advances or maintain principal outstanding
at LIBOR:
(A) As the result of a voluntary prepayment at a date other than
the maturity date selected for principal outstanding at LIBOR; or
(B) As the result of a mandatory repayment at a date other than
the maturity date selected for principal outstanding at LIBOR as
a result of (i) Borrower exceeding any applicable borrowing
4
<PAGE> 8
base, (ii) the occurrence of an Event of Default and the
acceleration of any portion of the indebtedness hereunder, or
(iii) the scheduled maturity date of this Note occurring prior to
the LIBOR maturity date due to Borrower's selection of a LIBOR
maturity period which extends beyond the scheduled maturity date
of this Note; or
(C) As the result of a prohibition on making, maintaining, or
repaying principal outstanding at LIBOR.
If Lender incurs any such taxes or costs, Borrower, upon demand in writing
specifying such taxes and costs, shall promptly pay them; save for manifest
error Lender's specification shall be presumptively deemed correct. All advances
made at LIBOR shall be conclusively deemed to have been funded by or on behalf
of Lender in the London interbank market by the purchase of deposits
corresponding in amount and maturity to the amount and interest periods selected
(or deemed to have been selected) by Borrower under this Note.
SECTION 2. PAYMENT.
2.1 PAYMENT AND PREPAYMENT. Borrower may from time to time, upon at least
three days' prior written notice to Lender, prepay any principal bearing
interest at the Prime-Based Rate in whole or in part at any time and may prepay
any principal bearing interest at LIBOR at the end of the maturity period chosen
or agreed to by Borrower applicable to the advance or portion of the advance
being prepaid, without premium or penalty, provided that any partial prepayment
shall be in an aggregate principal amount of at least $10,000. Any prepayment of
an amount bearing interest at LIBOR at a date other than the maturity date
applicable to the advance or the portion of the advance being prepaid shall be
subject to the provisions of Section 1.5. All prepayments of principal shall
include interest accrued to the date of prepayment on the principal amount being
prepaid.
2.2 BASIS OF COMPUTATION. Interest shall be computed for the actual number
of days elapsed on the basis of a year consisting of 360 days, including the
date a Loan is made and excluding the date a Loan or any portion thereof is paid
or prepaid."
- ----------------------------------------------
Type Name
------------------------------------
- ----------------------------------------------
Type Name
------------------------------------
The Arnold Palmer Golf Company
By /s/ John T. Lupton
------------------------------------------
Title Chairman of the Board
----------------------------------------
5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JAN-02-1998
<CASH> 121
<SECURITIES> 0
<RECEIVABLES> 4,539
<ALLOWANCES> 778
<INVENTORY> 8,524
<CURRENT-ASSETS> 13,455
<PP&E> 4,498
<DEPRECIATION> 3,121
<TOTAL-ASSETS> 21,914
<CURRENT-LIABILITIES> 6,050
<BONDS> 0
5,000
0
<COMMON> 1,502
<OTHER-SE> (16,873)
<TOTAL-LIABILITY-AND-EQUITY> 21,914
<SALES> 3,987
<TOTAL-REVENUES> 3,987
<CGS> 3,471
<TOTAL-COSTS> 3,471
<OTHER-EXPENSES> 3,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 629
<INCOME-PRETAX> (3,218)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,218)
<EPS-PRIMARY> $(1.07)
<EPS-DILUTED> $(1.07)
</TABLE>
