<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 25, 1999
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.,
Tuesday, February 23, 1999, at the auditorium of the Tennessee Aquarium, One
Market Street, Chattanooga, Tennessee 37401. 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 Anderson LLP as independent public
accountants for the upcoming fiscal year and to transact such other business as
may properly come before the meeting or any adjournment thereof.
Your vote is very important, regardless of the number of shares you own.
Whether or not you plan to attend the meeting in person, we urge you to sign,
date and mail the enclosed proxy card promptly in the accompanying postage
prepaid envelope. If you attend the meeting, you may vote your shares in person,
even though you have previously signed and returned your proxy.
Sincerely,
/s/ JOHN T. LUPTON
JOHN T. LUPTON
Chairman
<PAGE> 3
THE ARNOLD PALMER GOLF COMPANY
6201 MOUNTAIN VIEW ROAD
OOLTEWAH, TENNESSEE 37363
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 1999
---------------------
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., Tuesday, February 23, 1999, at the
auditorium of the Tennessee Aquarium, One Market Street, Chattanooga, Tennessee
37401, 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 December 22, 1998 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 fiscal year
ended September 30, 1998 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
DAVID J. KIRBY
Vice President -- Finance
January 25, 1999
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 25,
1999 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 Tuesday, February 23, 1999, at the
auditorium of the Tennessee Aquarium, One Market Street, Chattanooga, Tennessee
37401.
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies and will
reimburse brokers, custodians, nominees and fiduciaries for their reasonable
expenses in sending solicitation material to the beneficial owners of the
Company's shares. In addition to soliciting proxies through the mail, proxies
may also be solicited by officers and employees of the Company by telephone or
otherwise.
Granting a proxy does not preclude the right of the person giving the proxy
to vote in person, and a person may revoke his or her proxy at any time before
it has been exercised, by giving written notice to the Company, by delivering a
later dated proxy or by voting in person at the Annual Meeting.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock, $.50 par value, (the "Common Stock") which
are entitled to vote is necessary to constitute a quorum at the Annual Meeting.
If a quorum is not present or represented at the Annual Meeting, the
shareholders entitled to vote, whether present in person or represented by
proxy, have the power to adjourn the Annual Meeting from time to time, without
notice other than announcement at the Annual Meeting, until a quorum is present
or represented. At any such adjourned Annual Meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the Annual Meeting as originally noticed.
On all matters submitted to a vote of the shareholders at the Annual
Meeting or any adjournment(s) thereof, each shareholder will be entitled to one
vote for each share of Common Stock owned of record at the close of business on
December 22, 1998.
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 December 22, 1998, 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 3,887,700 shares of Common Stock. The following
table sets forth information regarding beneficial ownership of the Company's
Common Stock as of December 22, 1998, except as otherwise noted, with respect to
(i) each person known by the Company to own beneficially more than five percent
of the outstanding Common Stock, (ii) each director and nominee, (iii) the Chief
Executive Officers of the Company and the other most highly compensated
executive officer during the fiscal year ended September 30, 1998, 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
David S. Gonzenbach......................................... 1,000 *
Richard J. Horton........................................... 500(3) *
Nancy Lopez................................................. 80,000 2.0
John T. Lupton(4)........................................... 2,233,272(5) 46.7
Charles S. Mechem, Jr....................................... 20,000(6) *
Arnold D. Palmer(7)......................................... 354,445(8) 8.9
Joel W. Richardson, Jr...................................... 0 *
EXECUTIVE OFFICERS
Cindy L. Davis.............................................. 10,000 *
George H. Nichols........................................... 200,200 4.9
D. Scudder Graybeal......................................... 29,862 *
5% OR MORE SHAREHOLDERS
C.C. Wang(9)................................................ 538,500(10) 12.6
All Executive Officers and Directors as a group (10
persons).................................................. 2,719,079 52.4
</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 December 22, 1998 under the
Company's Amended and Restated Employee Incentive Stock Option Plan or the
1992 Stock Option Plan: Ms. Lopez -- 80,000 shares; Mr. Nichols -- 200,000
shares; Ms. Davis -- 10,000 shares; Mr. Graybeal -- 10,000 shares; and all
executive officers and directors as a group -- 310,000 shares. Also
includes the following numbers of shares subject to purchase pursuant to
the exercise of warrants that are exercisable within 60 days of December
22, 1998: 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, the shares issuable pursuant to presently
exercisable stock options or warrants held by such beneficial owner are
deemed to be outstanding. Such options are not deemed to be outstanding for
the purpose of computing the percentage owned by any other person.
(3) Includes 500 shares held in a trust for the benefit of Mr. Horton's child,
as to which shares Mr. Horton disclaims beneficial ownership.
(4) The address for this beneficial owner is 702 Tallan Building, Two Union
Square, Chattanooga, Tennessee 37402.
(5) Includes 833,333 shares of Common Stock held by the Thomas Cartter Lupton
Trust f/b/o John T. Lupton and issue.
(6) Includes 20,000 shares held in a trust for the benefit of Mr. Mechem.
(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 December 22, 1998
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
December 22, 1998, held by the Wang Group, Inc., an investment company
wholly-owned by Mr. Wang, and 20,000 shares held by
2
<PAGE> 6
U.S. Summit Corporation, an investment company controlled by Mr. Wang. This
information is based solely upon a Schedule 13D filed by Mr. Wang on July
29, 1994, an Amendment No. 1 to Schedule 13D filed on November 14, 1994 and
an Amendment No. 2 to Schedule 13D on December 29, 1994.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of eight members. Nancy Lopez was
appointed to the Board of Directors since the date of the 1998 Annual Meeting of
Shareholders. James L.E. Hill, a director of the Company, will not stand for
re-election to the Board of Directors at the Annual Meeting. 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.................... 44 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.
Richard J. Horton...................... 49 From 1973 to present, Executive
Director and Chief Executive Officer
of the Tennessee Section of the
Professional Golf Association of
America and the Tennessee Golf
Association; from 1990 to present,
President of the Tennessee Golf
Foundation; a Director of the Company
since February, 1996.
Nancy Lopez............................ 42 Professional golfer; President of Nancy
Lopez Enterprises, Inc.; Director of
the Security Bank of Albany, Georgia;
Director of the Company since
September, 1998.
John T. Lupton......................... 72 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
from March, 1995 through February,
1997, and from November, 1997 through
March, 1998.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Charles S. Mechem, Jr.................. 68 From 1996 to present, Chairman of the
Board of Cincinnati Bell Inc.; from
1991 to 1995, Commissioner of the
Ladies Professional Golf Association;
Director of Mead Corporation, Ohio
National Life Insurance Company, The
J.M. Smucker Company and Firstar
Corporation; Director of the Company
since November, 1997.
Arnold D. Palmer....................... 69 Professional golfer; President of
Arnold Palmer Enterprises, Inc.;
President and Director of TBHC, Inc.
dba The Bay Hill Club and Lodge;
Director of TCG, Inc. dba The Golf
Channel; Director of the Company from
1972 to 1990 and since February,
1992.
Joel W. Richardson, Jr................. 64 From 1997 to present, an executive
officer of the Lupton Company, LLC, a
private investment company; from 1977
to 1997, partner and since 1997, of
counsel, with the law firm of Miller
& Martin LLP, general counsel to the
Company; Director of the Company
since July, 1996.
</TABLE>
DIRECTORS' MEETINGS
The Board of Directors held three meetings during the fiscal year ended
September 30, 1998. Each director attended in person or by telephone each of the
meetings of the Board during the tenure of such director.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee. The
functions of the Executive Committee are to exercise the powers of the Board of
Directors, to the extent legally permissible, between meetings of the full Board
of Directors. Messrs. Lupton, Palmer, Gonzenbach and Richardson serve as the
members of the Executive Committee. The Executive Committee meets periodically.
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 prerequisites and performing such
other duties as shall be delegated to the Committee by the Board.
The Board of Directors has also established an Audit Committee for the
Company. Messrs. Lupton, Gonzenbach and Richardson serve as the members of the
Audit Committee. The Audit 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 Audit 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. The Audit Committee did not meet during the
fiscal year ended September 30, 1998.
4
<PAGE> 8
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
"Palmer Agreement") with Arnold Palmer Enterprises, Inc. ("Palmer 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
Palmer Agreement expands the scope of the Palmer license previously utilized by
the Company. In exchange for the grant of the license, the Company pays Palmer
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 Palmer
Agreement also sets forth the manner in which the Company and Palmer Enterprises
divide sub-licensing royalties. The Company believes the Palmer Agreement
significantly enhances its advertisement, promotion and sale of golf equipment.
The term of the Palmer Agreement currently extends through March 1, 2007.
As of January 1, 1998, the Company entered into a license agreement (the
"Lopez Agreement") with Nancy Lopez Enterprises, Inc. ("Lopez Enterprises"),
pursuant to which the Company obtained a license to use the name, likeness,
endorsement and trademarks of Nancy Lopez ("Lopez") in connection with the
advertisement, promotion and sale of golf clubs, bags, gloves, shoes, balls,
apparel and other related golf products. In exchange for the rights granted to
the Company, the Company agreed to pay Lopez Enterprises royalties equal to
3.25% of its net sales of licensed products. The Company also pays a minimum
annual royalty regardless of the amount of royalty determined as a percentage of
net sales. The Company believes the Lopez Agreement significantly enhances its
advertisement, promotion and sale of golf equipment. The term of the Lopez
Agreement extends through December 31, 2007.
On April 1, 1997, an affiliate of the Thomas Cartter Lupton Trust f/b/o
John T. Lupton (the "Lupton Trust") purchased the building leased by the Company
for its corporate offices and, pursuant to the purchase, was assigned the
existing lease with the Company. The existing lease with the Company provided
for rental payments of approximately $166,000 per year for approximately $20,000
square feet of office space. The lease was subsequently amended effective
October 1, 1997, to provide approximately 77,000 square feet of additional space
to the Company for manufacturing and warehousing operations and the base rental
payments were correspondingly adjusted to approximately $378,000 per year. The
Company believes that the terms of the lease are at least as favorable as the
terms that could have been obtained from an unaffiliated third party.
On August 21, 1996, the Company sold 833,333 shares of its Preferred Stock
to the Lupton Trust in exchange for $5 million in cash. The proceeds from the
sale were used by the Company to purchase 625,000 shares of Series D Preferred
Stock of Nevada Bob's Holdings, Inc., a nationwide retailer of golf equipment
and accessories. The Preferred Stock was 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. On October 20, 1998, the Lupton Trust purchased
the Company's shares of the Series D Preferred Stock of Nevada Bob's Holdings,
Inc. for a total purchase price of $5 million. In addition, the Lupton Trust
agreed to pay as additional purchase price 70 percent of the earnings realized
by the Lupton Trust from its investment in Nevada Bob's Holdings, Inc. The
Company believes that the terms of the sale of the Series D Preferred Stock to
the Lupton Trust are at least as favorable as the terms that could have been
obtained from an unaffiliated third party.
On October 30, 1998, the Lupton Trust purchased the Company's existing
revolver debt of approximately $7.3 million and the Company's long-term debt of
$22 million from the Company's commercial lender. The Lupton Trust has agreed to
forego accrued interest from the period of October 30, 1998 through December 31,
1998 and to extend the maturity date for such loans until December 31, 1999.
5
<PAGE> 9
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 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.
6
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth information concerning compensation paid or
accrued for the past three fiscal years including the short fiscal year ended
September 30, 1996, to the Chief Executive Officers of the Company and the other
most highly compensated executive officer during the fiscal year ended September
30, 1998. Salary and other compensation amounts 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)....................... 1998 $ 0 $ 0 -- $ 3,000(3)
Chairman and Chief 1997 0 0 -- 4,000(3)
Executive Officer 1996(2) 0 0 -- 3,000(3)
George H. Nichols(4).................... 1998 37,500 0 -- 187,500(5)
President and Chief Executive 1997 225,000 0 -- 1,829(6)
Officer 1996(2) 146,877 0 -- 42,927(7)
Cindy L. Davis(8)....................... 1998 178,750 0 120,000 14,793(7)
President and Chief 1997 38,231 0 30,000 10,536(7)
Executive Officer
D. Scudder Graybeal..................... 1998 109,042 0 -- 325(6)
Vice President -- Special 1997 102,397 0 -- 1,480(6)
Markets 1996(2) 58,422 0 -- 876(6)
</TABLE>
- ---------------
(1) Mr. Lupton was Chairman and Chief Executive Officer of the Company from
March 9, 1995, through February 20, 1997, and from November 21, 1997,
through March 16, 1998. Mr. Lupton served 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 resigned as Chairman and Chief Executive Officer on November 21,
1997.
(5) Represents severance payments made to the named individual.
(6) Represents the Company's contributions to the Company's 401(k) profit
sharing plan on behalf of the named individual.
(7) Represents reimbursed relocation expenses of the named individual.
(8) Ms. Davis was appointed Vice President -- Business Development on June 23,
1997. Ms. Davis was appointed as President and Chief Executive Officer on
March 16, 1998.
7
<PAGE> 11
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 named executives during the fiscal year ended September 30, 1998:
OPTIONS/GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
OF TOTAL ANNUAL
OPTIONS RATES OF STOCK 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........ -- -- -- -- -- --
Cindy L. Davis........... 120,000(1) 100.0 1.547 8/14/08 116,744 295,862
D. Scudder Graybeal...... -- -- -- -- -- --
</TABLE>
- ---------------
(1) 13,333.33 of the options become exercisable on each of the first three
anniversary dates of the grant. The remaining 80,000 of the options become
exercisable on September 1, 2007, or with respect to 40,000 options at such
earlier time as the Company achieves a positive cash flow for a fiscal year,
or with respect to 40,000 options, at such earlier time as the Company
achieves cash flow of $5,000,000 for a fiscal year.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executives concerning the exercise of options during the fiscal year ended
September 30, 1998 and unexercised options held as of September 30, 1998:
AGGREGATED EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES FY-END(#) OPTIONS AT FY-END($)
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 0 200,000/0 --/--
Cindy L. Davis........................ 0 0 10,000/140,000 --/--
D. Scudder Graybeal................... 0 0 10,000/0 --/--
</TABLE>
RETIREMENT PLAN
Prior to December 31, 1993, substantially all full-time salaried employees
of the Company who had completed one credited year of service were eligible to
receive benefits under the Company's Salaried Retirement Plan (the "Plan").
During fiscal 1994, the Company curtailed the benefits under the Plan. Under
this curtailment, nonunion employees that are not at least age 50 with at least
five years of service will accrue no further benefits under the Plan. During
fiscal 1994, the Company established a 401(k) profit-sharing plan covering
substantially all employees at least 21 years of age with six months of service.
The 401(k) plan allows for employees to contribute a portion of their
compensation subject to certain limitations. The Company may make discretionary
contributions to the 401(k) plan.
8
<PAGE> 12
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 four independent, non-employee directors each
of whom have no 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 Executive Committee. The
aggregate number of shares that may be issued under the Incentive Option Plan is
950,000. As of September 30, 1998, 482,805 shares remained available for future
issuance. The option price per share under the Incentive Option Plan cannot be
less than the fair market value of the Common Stock at the date of grant and the
term of the option cannot exceed 10 years.
EXECUTIVE OFFICER COMPENSATION
The salary of the current Chief Executive Officer of the Company is based
upon a review of the salary data for comparable positions for
comparably-capitalized companies. The Chief Executive Officer has also been
granted stock options designed to increase the incentives for the Chief
Executive Officer to work for the benefit of the shareholders of the Company. Of
the 120,000 options granted to the Chief Executive Officer in the fiscal year
ended September 30, 1998, 40,000 vest over a three-year period with the
remaining 80,000 vesting upon the achievement of cash flow targets established
by the Committee.
The Executive Committee also annually reviews the compensation arrangements
of the 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
comparably-capitalized 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 tied to achievement of performance targets. In
addition to the Company's achievement of targeted earnings before taxes and
return on net assets levels, 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
Arnold D. Palmer, Member
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, including 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).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
THE ARNOLD PALMER GOLF COMPANY
Prepared by the Center for Research in Security Prices
Produced on 01/13/99 including data to 09/30/98
(COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS GRAPH)
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 02/25/94 02/24/95 03/01/96 09/30/96 09/30/97 09/30/98
- ------- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------ [ ] THE ARNOLD PALMER GOLF COMPANY 100.0 50.9 38.2 40.0 23.0 5.2
... -- . * Nasdaq Stock Market (US Companies) 100.0 102.2 141.0 160.5 220.3 225.1
- -------- + NASDAQ Stocks (SIC 3940-3949 US Companies) 100.0 76.5 71.6 69.2 53.1 25.6
Dolls, Toys, Games and Sporting and Athletic Goods
</TABLE>
NOTES:
<TABLE>
<S> <C>
A. The lines represent monthly index levels derived from
compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is
not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on
02/25/94.
E. Data for THE ARNOLD PALMER GOLF COMPANY after 01/20/98 was
provided by the Company.
</TABLE>
10
<PAGE> 14
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
appointed Arthur Andersen LLP, independent public accountants, to serve for the
fiscal year ending September 30, 1999. 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 2000 Annual
Meeting of Shareholders, must be received by the Company no later than September
27, 1999 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 25, 1999
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 John
T. Lupton and Joel W. Richardson, Jr., or either of them, proxies, with full
power of substitution, to vote at the auditorium of the Tennessee Aquarium at
One Market Street, Chattanooga, Tennessee at 10:00 a.m., Tuesday, February 23,
1999, and any adjournment or adjournments thereof, the shares of Common 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.
[ ]FOR all nominees listed below
(except as marked to the contrary)
[ ]WITHHOLD AUTHORITY to vote for all nominees listed below.
Nominees:
David S. Gonzenbach, Richard J. Horton, Nancy Lopez, John T.
Lupton, Charles S. Mechem, Jr., Arnold D. Palmer and Joel W.
Richardson, Jr.
(INSTRUCTION: To withhold your vote for any individual nominee, write that
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending September 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED ON OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
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.
Dated: , 1999
----------------------------
-------------------------------
(Signature)
-------------------------------
(Signature)
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.
