U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended April 30, 1996
Commission file number 0-24160
CARLYLE GOLF, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1218066
(State or other jurisdiction
of incorporation) (IRS Employer
Identification No.)
10550 East 54th Avenue, Unit E
Denver, Colorado 80239
(Address of principal executive offices)
(303) 371-2889
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 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. [X] Yes [ ] No
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date:
Class Outstanding at June 6,
1996
Common Stock, $.001 par value 4,258,601
Transitional Small Business Disclosure Format (check one): Yes[
] No[X]
<PAGE>
INDEX
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PAGE
PART I - Financial Information
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ITEM 1 - Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . .3-4
Statements of Operations . . . . . . . . . . . . . . .5
Statements of Cash Flows . . . . . . . . . . . . . . .6
Notes to Financial Statements. . . . . . . . . . . . .7
ITEM 2 - Management's Discussion and Analysis of
Financial Conditions and Results of Operations . . 8-10
PART II - Other Information
ITEMS 1 through 6 . . . . . . . . . . . . . . . . . . .11-12
Signature Page. . . . . . . . . . . . . . . . . . . . . . 13
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CARLYLE GOLF, INC.
BALANCE SHEETS
April 30, 1996 and October 31, 1995
(UNAUDITED)
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1996 1995
Assets
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Current Assets:
Cash and cash equivalents $ 35,285 $ 55,770
Trade accounts receivable, net of
allowance for doubtful accounts
of $50,000 and $100,000,
respectively 923,545 549,806
Inventories 1,689,190 1,774,658
Prepaid and other assets 189,872 157,828
---------- ---------
Total current assets 2,837,892 2,538,062
Property and equipment, at cost:
Property and equipment 632,829 614,972
Less accumulated depreciation (140,468) (88,634)
---------- ---------
492,361 526,338
Other assets 50,857 90,352
---------- ---------
Total Assets $3,381,109 $3,154,752
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Note payable to bank $1,116,597 $ 561,092
Accounts payable 552,864 301,574
Accrued liabilities 98,826 230,808
Capitalized lease obligations 3,653 10,162
---------- ---------
Total Current Liabilities 1,771,940 1,103,636
Stockholders' Equity:
Preferred stock, $.001 par value,
authorized 2,500,001 shares,
none issued
Common stock, $.001 par value,
authorized 30,000,000 shares;
issued 4,255,201 and 4,221,201
shares, respectively $ 4,255 $ 4,221
Additional paid-in capital 6,006,675 5,937,214
Compensation payable in common
stock (53,000 and 40,500 shares,
respectively) 80,725 98,420
Unearned compensation (143,411) (205,243)
Accumulated deficit (4,339,075) (3,783,496)
---------- ----------
Total Stockholders' Equity 1,609,170 2,051,116
---------- ----------
Total Liabilities and
Stockholders' Equity $3,381,109 $3,154,752
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CARLYLE GOLF, INC.
Statements of Operations
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(UNAUDITED) Quarter Ended April 30, Six Months Ended
April 30,
- - -----------------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
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Net revenue $1,392,530 $1,227,088 $1,826,022 $1,633,129
Cost of Sales 1,085,488 862,484 1,469,450 1,199,777
---------- ---------- ---------- ----------
Gross Margin 307,042 364,604 356,572 433,352
Selling, general, and
administrative
expenses 454,599 536,779 856,136 1,083,687
---------- ---------- ---------- ----------
Loss from operations (147,557) (172,175) (499,564) (650,335)
Other income (expenses):
Interest expense (35,514) (626) (56,015) (1,733)
Other - 3,616 - 20,559
---------- ---------- ---------- ----------
(35,514) 2,990 (56,015) 18,826
---------- ---------- ---------- ----------
Net loss $(183,071) $ (169,185) $ (555,579) $ (631,509)
========== ========== ========== ==========
Net loss per
common share $ (0.04) $ (0.04) $ (0.13) $ (0.15)
========== ========== ========== ==========
Weighted average
common shares
outstanding 4,303,278 4,250,521 4,291,472 4,228,613
========== ========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CARLYLE GOLF, INC.
Statements of Cash Flows
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<CAPTION>
(UNAUDITED) Quarter Ended April 30, Six Months End
April 30,
- - --------------------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
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Cash flows from
operating
activities:
Net loss $(183,071) $ (169,185) $ (555,579) $ (631,509)
Adjustments to
reconcile net loss
to net cash used by
operating
activities:
Depreciation 26,069 16,395 51,834 23,328
Amortization
of deferred
compensation 36,019 35,681 77,404 45,001
Issuance of stock
for services,
net 17,001 - 36,229 29,521
Changes in operating
assets and
liabilities:
(Increase) decrease
in:
Trade receivables (495,679) (404,555) (373,739) (320,894)
Inventories 328,383 (79,138) 85,468 (386,364)
Prepaid and other
assets 33,945 (14,787) 7,451 (48,039)
Increase (decrease)
in:
Accounts payable (71,454) 165,150 251,290 (8,687)
Accrued liabilities(21,032) 14,424 (131,982) 77,479
Other liabilities - (22,121) - 18,987
--------- ---------- ---------- ---------
Net cash used by
operating activities (329,819) (458,136) (551,624) (1,201,177)
--------- ---------- ---------- ----------
Cash flows from investing
activity -
Purchase of property
and equipment (4,990) (76,453) (17,857) (416,142)
--------- ---------- ---------- ----------
Cash flows from
financing activities:
Repayment of
capitalized lease
obligations (3,707) (2,244) (6,509) (5,401)
Proceeds from note
payable to
bank, net 324,375 - 555,505 -
--------- ---------- ---------- ----------
Net cash provided
(used) by financing
activities 320,668 (2,244) 548,996 (5,401)
--------- ---------- ---------- ----------
Net decrease in cash (14,141) (536,833) (20,485) (1,622,720)
--------- ---------- ---------- ----------
Cash and cash equivalents,
beginning of period 49,426 640,394 55,770 1,726,281
--------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 35,285 $ 103,561 $ 35,285 $ 103,561
========= ========== ========== ==========
Supplemental disclosure
of cash flow
information -
Cash paid for interest $ 31,678 $ 908 $ 52,088 $ 1,733
========= ========== ========== ==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
CARLYLE GOLF, INC.
NOTES TO FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS:
The unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such
rules and regulations. In the opinion of management, the
accompanying financial statements contain all of the normal
recurring adjustments necessary to present fairly the
financial position of the Company as of April 30, 1996, and
the results of its operations, and its cash flows for the
period then ended.
The operating results for the six month period ended April
30, 1996 are not necessarily indicative of the results that
may be expected for the year ending October 31, 1996. The
accompanying financial statements should be read in
conjunction with the audited financial statements of the
Company and notes thereto for the fiscal year ended
October 31, 1995.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales for the quarter ended April 30, 1996, were $1,392,530,
an increase of $165,442, or 13%, from net sales of $1,227,088 for
the same quarter in 1995. Net sales for the six months ended
April 30, 1996, were $1,826,022, an increase of $192,893, or 12%,
from net sales of $1,633,129 for the same period in 1995. The
relatively modest increase in net sales is primarily attributable
to weather related delays in current season shipments and the
shipment of a significant amount of prior season inventory which
was sold at reduced prices.
Cost of goods sold as a percentage of net sales was 78% and 70%
for the quarters ended April 30, 1996 and April 30, 1995,
respectively. The Company's decrease in gross margin from the
prior year is primarily due to a larger proportion of sales of
older inventory which was sold at lower prices. Management
believes that the Company will improve its gross margin during
the remainder of 1996 as a result of increased shipments of the
Company's current lines. However, the gross margin will continue
to be affected negatively by the sale of older inventory for the
rest of the fiscal year.
Selling, general and administrative expenses decreased as a
percentage of net sales to 33% for the quarter ended April 30,
1996 from 44% for the same quarter in 1995. Selling, general and
administrative expenses for the six months ended April 30, 1996
were 47% of net sales as compared to 66% for the same period in
1995. The decreases reflect the absence of certain non-recurring
expenses included in 1995, as well as reductions in 1996.
Loss per share was $(.04) for both the quarters ended April 30,
1996 and 1995. Loss per share was $(.13) for the six months
ended April 30, 1996, as compared to $(.15) for the same period
in 1995. The loss per share for the quarter end periods are
based on 4,303,278 and 4,250,521 weighted average shares
outstanding for 1996 and 1995, respectively. The loss per share
for the six month periods are based on 4,291,472 and 4,228,613
weighted average shares outstanding for 1996 and 1995,
respectively.
The Company currently sells to domestic and foreign customers.
The Company obtains a letter of credit, when deemed necessary, on
foreign sales. The Company requires remittance in United States
currency on all foreign sales. Therefore, there is no risk
associated with currency fluctuation on foreign sales.
Liquidity and Capital Resources
During its earliest years of operations, the Company focused on
developing its products, marketing strategy and distribution
network as the foundation for growth. Despite a recent focus on
increasing sales volumes, improving margins and better managing
inventory, the Company has continued to incur losses from
operations, which amount to $4,339,075 since the Company's
inception. The ability of the Company to achieve profitable
operations is dependent ultimately upon its ability to increase
sales and improve gross margins.
During the quarter ended April 30, 1996, the Company announced
the impending private placement of the Company's common stock to
an inside investor group to raise $1,023,100. The transaction
will be completed during June 1996. The proceeds of the
transaction will be used to finance future growth and working
capital needs. Should the Company require additional capital in
the future to fund its operations and to sustain growth, the
Company may sell additional debt or equity securities to raise
the needed capital. However, there can be no assurance that
additional capital will be available from private or public
markets.
The Company is continuing its efforts to improve gross margins by
controlling the quantity of inventory purchases to correspond
more closely to its sales orders. As of April 30, 1996, the
remaining Spring 1996 inventory was 38% of the total quantity
purchased as compared to 57% of Spring 1995 inventory remaining
as of April 30, 1995. These percentages do not include open
orders as of those dates. The Company has also reduced
corporate overhead, including salary reductions for key
management personnel. The Company continues to reduce inventory
levels by disposing of older styles in bulk sales, which sales
also improve the Company's liquidity. The Company expects that,
with funds provided through increased sales, improved gross
margins, expense reductions, liquidation of older inventory and
the additional equity to be raised in the private placement, it
will be able to fund its growth through fiscal 1996 and into
fiscal 1997. There can be no assurance, however, that the
Company will achieve the level of sales, gross profit margins and
expense reductions needed to achieve profitable operations during
fiscal 1996.
The Company has funded its operations from inception through
April 30, 1996 from both the proceeds of its initial public
offering and from a working capital line of credit obtained from
a bank. The $1,500,000 line of credit is secured by accounts
receivable, inventory and equipment. Advances under the line of
credit are limited to certain percentages of accounts receivable
and inventory. The borrowing limit was approximately $1,117,000
at April 30, 1996, all of which was drawn down on that date.
Management believes that funds available under the working
capital line of credit, together with the additional capital to
be raised in the June 1996 private placement, will be sufficient
to meet the Company's working capital requirements through fiscal
1996. If available funds are insufficient, or if working capital
requirements are greater than estimated, the Company may be
required to obtain additional financing. There can be no
assurance that the Company will be able to obtain the additional
financing to meet its working capital requirements.
As of April 30, 1996, the Company had $35,284 in cash and cash
equivalents on hand. As of April 30, 1996, the Company had
working capital of $1,065,952.
Operating activities produced negative cash flows of $329,819 for
the quarter ended April 30, 1996, and $551,624 for the six months
ended April 30, 1996. The primary uses of cash were to fund the
Company's year to date net loss and to finance current inventory
purchases.
Financing activities produced positive cash flows of $320,668 for
the quarter ended April 30, 1996, and $548,996 for the six months
ended April 30, 1996. The primary use of cash from the funding
of the line of credit was to reduce trade payables.
The Company's investing activities were comprised of property and
equipment purchases totaling $4,990 for the quarter ended April
30, 1996, and $17,857 for the six month period ended April 30,
1996. The purchases include miscellaneous office and warehouse equipment.
Forward Looking Statements
To the extent that this report includes predictions of the
Company's future performance or discloses the expectations of
management of the Company as to such performance, such statements
are forward looking statements the accuracy of which cannot be
guaranteed by the Company or its management. For example, a
downturn in general economic conditions, adverse developments in
the "green grass" golf apparel industry, unanticipated problems
with or delays by the Company's cutting and sewing contractors or
fabric suppliers, or the failure of presently anticipated funding
sources to materialize or continue, among other possibilities,
could cause these forward looking statements to prove to be
incorrect.
Part II - Other Information
Item 1 Legal Proceedings
Not applicable
Item 2 Changes in Securities
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on
April 1, 1996. At the meeting, William A. Clymor, W. Clayton
Cole, Kenneth R. LaBounty, G. Richard Oscarson, Michael D. Reid
and Jerome M. Hause were elected as directors. Also approved at
the meeting was the ratification of the appointment of KPMG Peat
Marwick LLP as the independent public accountants for the Company
for the year ending October 31, 1996, and an amendment to the
Company's Stock Purchase and Redemption and Nonqualified Stock
Option Plan for Club Professionals and PGA Tour Players (the
"Plan") to remove the limitation on the maximum number of shares
subject to stock grants.
The number of votes cast for or withheld for each director
nominee was as follows:
Nominee For Withheld
------- --- --------
William A. Clymor 3,479,705 891
W. Clayton Cole 3,479,705 891
Kenneth R. LaBounty 3,479,705 891
G. Richard Oscarson 3,479,705 891
Michael D. Reid 3,479,705 891
Jerome M. Hause 3,475,705 4,891
The number of votes cast for and against, and abstentions
from, ratification of the selection of KPMG Peat Marwick LLP as
the Company's independent auditors for the year ending October
31, 1996 was as follows:
For Against Abstain
--- ------- -------
3,461,639 5,570 13,387
The number of votes cast for and against, and abstentions
from, approval of the amendment to the Plan was as follows:
Part II - Other Information (continued)
For Against Abstain
--- ------- -------
3,261,385 30,467 26,966
Because the election of directors, retention of auditors and
amendment to the Plan were considered routine under applicable
stock exchange rules, all proxy shares held in the names of
brokers as nominees which were not voted at the meeting by the
beneficial holders thereof were voted by the brokers in favor of
the nominees for the Board of Directors, the retention of the
auditors and the amendment to the Plan.
Item 5 Other Information
Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Carlyle Golf, Inc. Stock
Purchase and Redemption and Nonqualified Stock
Option Plan for Club Professionals and PGA Tour
Players.
27 Financial Data Schedule
(b) Reports on Form 8-K
A Report on Form 8-K dated April 1, 1996 under Item 5
of Form 8-K reported the announcement of a private
investment of a minimum of one million dollars in the
Company's common stock.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CARLYLE GOLF, INC.
(Registrant)
Date: June 13, 1996 By:/s/ William A. Clymor
William A. Clymor,
Chairman of the Board and
Chief Executive Officer
Date: June 13, 1996 By:/s/ Wendy K. Williams
Wendy K. Williams
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
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EXHIBIT METHOD OF FILING
<S> <C> <C>
10.1 Amended and Restated Carlyle Golf,
Inc. Stock Purchase and Redemption
Nonqualified Stock Option Plan for
Club Professionals and PGA Tour
Players Filed Electronically
Herewith
27 Financial Data Schedule Filed Electronically
Herewith
</TABLE>
AMENDED AND RESTATED CARLYLE GOLF, INC.
STOCK PURCHASE AND REDEMPTION AND
NONQUALIFIED STOCK OPTION PLAN FOR
CLUB PROFESSIONALS AND PGA TOUR PLAYERS
APRIL 11, 1994
PART A - PURPOSE
The purpose of the CARLYLE GOLF, INC. (the "Company") Amended and
Restated Stock Purchase and Redemption and Nonqualified Stock Option Plan
(the "Amended and Restated Plan") is (i) to provide incentives to certain
Club Professionals and PGA Tour Players ("Players") to promote the
financial success and progress of the Company by granting Players options
to purchase shares of stock of the Company ("Option"), as set forth in
Part C hereof, and (ii) to provide for the transfer of property, in the
form of shares of common stock of the Company, to Players in connection
with their performance of services for the Company ("Stock Grant"), as set
forth in Part D hereof.
PART B - GENERAL PROVISIONS
Section 1. Applicability. The provisions of this Part B shall
apply to both Stock Grants and Options granted pursuant to the Amended and
Restated Plan and to Stock Grants granted pursuant to the Company's Stock
Purchase and Redemption Plan as Amended May 1, 1993 (the "Previous Plan")
(collectively, "the Plan").
Section 2. Administration. The Plan shall be administered by a
committee comprised of two or more independent outside directors
designated by the Board of Directors of the Company (the "Committee").
Any action of the Committee shall be taken by majority vote or the
unanimous written consent of the Committee members.
Section 3. Authority of Committee. Subject to other provisions of
the Plan, and with a view towards furtherance of its purpose, the
Committee shall have sole authority and absolute discretion:
a. to construe and interpret the Plan;
b. to define the terms used herein;
c. to prescribe, amend and rescind rules and regulations
relating to the Plan;
d. to determine the persons to whom Stock Grants and/or
Options shall be granted under the Plan;
e. to determine the time or times at which Stock Grants
and/or Options shall be granted under the Plan;
f. to determine the number of shares included in Stock
Grants and the number of shares subject to each Option,
the price and the duration of each Option;
g. to determine all of the other terms and conditions of
Stock Grants and Options; and
h. to make all other determinations necessary or advisable
for the administration of the Plan and to do everything
necessary or appropriate to administer the Plan.
All decisions, determinations and interpretations made by the Committee
shall be binding and conclusive on all participants in the Plan and on
their legal representatives, heirs and beneficiaries.
Section 4. Maximum Number of Shares Subject to the Plan. The
maximum aggregate number of shares of common stock subject to the Plan
shall be 1,010,000 (after the 2 for 1 reverse stock split effective April
11, 1994), subject to adjustment as provided in the Plan. If any Stock
Grants granted under the Plan shall be redeemed pursuant to the terms of
the Plan, the redeemed shares shall again be available for purposes of the
Plan. If any Options granted under the Plan expire or terminate for any
reason before they have been exercised in full, the unpurchased shares
subject to expiration or termination shall again be available for the
purposes of the Plan.*
Section 5. Eligibility and Participation. Subject to the terms of
the Plan, Stock Grants and Options may be granted only to Players that
have entered into PGA Tour Players' Agreements and Advisory Council
Agreements with the Company and that the Committee has selected from time
to time in its sole discretion. A Player may be granted more than one
Stock Grant or one Option under the Plan.
Section 6. Effective Date of Plan. The Plan shall be submitted to
the shareholders of the Company for their approval and adoption at a
meeting to be held on April 11, 1994, or at any adjournment thereof. The
shareholders shall be deemed to have approved and adopted the Plan only
after it is approved and adopted by a majority of the shares present at a
duly held meeting of the shareholders lawfully convened in the manner
required by the laws of the State of Colorado.
Section 7. Termination and Amendment of Plan. The Plan shall
terminate on April 10, 2004. No Stock Grants or Options shall be granted
under the Plan after that date. Subject to the limitation contained in
Section 9 of Part B, the Committee may at any time, and without the
concurrence of the Players, amend or revise the terms of the Plan,
including the form and substance of the Grants or Options to be used
hereunder, provided that no amendment or revision shall (i) increase the
maximum aggregate number of shares that may be sold, pursuant to Options
granted under the Plan, except as permitted under Section 10 of Part B;
(ii) change the minimum purchase price for shares under the Plan; or (iii)
permit the granting of a Stock Grant or Option to any person other than as
provided in Section 5 of Part B.
Section 8. Prior Stock Grants, Options and Obligations. No
amendment, suspension or termination of the Plan shall, without the
consent of the Player who has received a Stock Grant or an Option under
the Plan or the Previous Plan, (i) deprive any Player of any vested
interest in the shares allocated to such Player under any Stock Grant
granted prior to that amendment, suspension or termination, or (ii) alter
or impair any of that Player's options or obligations under any Stock
Grant or Option granted prior to that amendment, suspension or
termination.
Section 9. Adjustments. If the outstanding shares of the Company's
common stock are increased, decreased, changed into or exchanged for a
different number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse
stock split, an appropriate and proportionate adjustment shall be made in
the maximum number and kind of shares as to which Stock Grants and Options
may be granted under the Plan. A corresponding adjustment changing the
number or kind of shares allocated to unexercised Options or portions
thereof, which shall have been granted prior to any such change, shall
likewise be made. Any such adjustment in outstanding Options shall be
made without change in the aggregate purchase price applicable to the
unexercised portion of the Option, but with a corresponding adjustment in
the price for each share covered by the Option.
Section 10. Reservation of Shares of Common Stock. During the term
of the Plan, the Company will at all times reserve and keep available such
number of shares of its common stock as shall be sufficient to satisfy the
requirements of the Plan. In addition, the Company will from time to
time, as is necessary to accomplish the purposes of the Plan, seek or
obtain from any regulatory agency having jurisdiction any requisite
authority in order to issue shares of common stock hereunder. The
inability of the Company to obtain from any regulatory agency having
jurisdiction the authority deemed by the Company's counsel to be necessary
to the lawful issuance of any shares of its stock hereunder shall relieve
the Company of any liability in respect of the nonissuance of the stock as
to which the requisite authority shall not have been obtained.
Section 11. No Waiver. No provision of the Plan may be waived
except by a written instrument signed by the waiving party. A waiver of
any restriction, limitation, condition, term or provision of the Plan or
policy thereunder shall not be construed as waiver of any other term or
provision.
Section 12. Construction. Throughout the Plan, the singular shall
include the plural; the plural shall include the singular; and the
masculine and neuter shall include the feminine, wherever the context so
requires.
Section 13. Text to Control. The headings of paragraphs are included
solely for convenience of reference. If any conflict between any heading
and the text of the Plan exists, the text shall control.
Section 14. Severability. If any provision of the Plan is declared
by any arbitration tribunal or court of competent jurisdiction to be
invalid for any reason, such invalidity shall not affect the remaining
provisions. Such remaining provisions shall be fully severable, and the
Plan shall be construed and enforced as if such invalid provisions never
had been inserted in the Plan.
Section 15. Arbitration. Any controversy or claim arising out of or
relating to the Plan, including the equity participation under the Plan,
or the breach thereof, shall be settled by arbitration in Denver, Colorado
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
Section 16. Binding Effect. The Plan shall be binding upon the
Players, their heirs, legal representatives, successors, and assigns.
Section 17. No Trust. Nothing contained in the Plan, and no action
taken pursuant to the provisions of the Plan, shall create or be construed
to create a trust of any kind, or a fiduciary relationship between the
Company and Players. The Plan is intended to establish a nonqualified
stock grant and stock option plan to be maintained by the Company
primarily for the purpose of providing deferred compensation for a select
group of consultants and independent contractors to the Company and is
thereby not subject to the requirements of the Employee Retirement Income
Security Act of 1974.
Section 18. Rights of Players. Except as provided in the Plan,
neither the Plan, the award of shares, nor other actions of the Company,
with respect to the Plan, shall be construed as giving any legal or
equitable right to any Player, or independent contractor of the Company
against the Company, its shareholders or the officers, employees and other
representatives of the Company. The Plan does not give any Player, or
independent contractor any right to be retained in the employment of or
provide services to the Company. The Company reserves the right to hire,
retain and discharge any Player at any time with or without cause, as if
the Plan had not been adopted, and any such discharged Player shall have
only such rights or shares as may be specified in the Plan.
Section 19. Restrictions. Players shall hold their shares subject to
the restrictions, limitations, conditions, terms and other provisions of
the Plan and of the stock certificate, and the restrictions applicable to
such shares of stock under the federal securities laws. The Company may
impose such other restrictions on the shares of stock allocated to Players
as it may deem advisable, including, without limitation, restrictions
under the Securities Act of 1933, as amended or other securities laws. It
is contemplated by the Company that the income tax consequences to the
Company and the Players under current law with respect to Stock Grants
will be governed by section 83 of the Internal Revenue Code of 1986, as
amended.
Section 20. Governing Law. The Plan shall be construed in accordance
with and governed by the laws of the State of Colorado.
PART C - STOCK OPTIONS
Section 1. Applicability. The provisions of this Part C shall apply
to Options granted pursuant to the Plan.
Section 2. Option Terms and Conditions. The terms and conditions
of Options granted under the Plan may differ from one another as the
Committee shall in its discretion determine so long as all Options granted
under the Plan satisfy the requirements of the Plan.
Section 3. Duration of Options. Each Option granted pursuant to the
Plan shall expire on the date determined by the Committee which shall be
not later than ten years after the date of grant. In addition, each
Option shall be subject to early termination as provided in the Plan.
Section 4. Option Price. The option price for shares acquired
pursuant to the exercise of any Option, in whole or in part, shall be
determined by the Committee at the time of the grant of the Option. Such
option price may be less than the market price of the Company's Common
Stock on the date of grant, but in no event shall the option price be less
than fifty percent (50%) of the fair market value of the shares on the
date of grant. The Committee shall make the determination as to the "fair
market value" of shares of the Company's common stock under the Plan,
provided that, if at the time the determination of fair market value is
made, those shares are admitted to trading on a national securities
exchange for which sale prices are regularly reported, the fair market
value of those shares shall not be less than the lower of (i) the mean
between the closing bid and asked prices reported for, or (ii) the last
trade price of a 100-share lot of, the common stock on that exchange on
the day or most recent trading day preceding the date on which the
determination of fair market value is made. For purposes of the preceding
sentence, the term "national securities exchange" shall include the
National Association of Securities Dealers Automated Quotation System and
over-the-counter market.
Section 5. Exercise of Options. Each Option shall be exercisable in
one or more installments during its term, and the right to exercise may be
cumulative, as determined by the Committee. No Option may be exercised
for a fraction of a share of common stock. The option price shall be paid
at the time of exercise of the Option (i) in cash or shares of the
Company's common stock or a combination thereof. If permitted by the
Committee, payment may also be made by delivering a properly executed
notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds attributable to
the shares purchased needed to pay the exercise price. If any portion of
the purchase price at the time of exercise is paid in shares of common
stock, those shares shall be tendered at their then fair market value.
Section 6. Acceleration of Options. Notwithstanding the first
sentence of Section 4 of Part C of the Plan, if the Company or its
shareholders enter into an agreement to dispose of all or substantially
all of the assets or stock of the Company by means of a sale, merger or
other reorganization, liquidation, or otherwise, any Option granted
pursuant to the Plan shall become immediately exercisable with respect to
the full number of shares subject to that Option during the period
commencing as of the date of the agreement to dispose of all or
substantially all of the assets or stock of the Company and ending when
the disposition of assets or stock contemplated by that agreement is
consummated or the Option is otherwise terminated in accordance with its
provisions or the provisions of the Plan, whichever occurs first; provided
that no Option shall be immediately exercisable under this Section on
account of any agreement of merger or other reorganization where the
shareholders of the Company immediately before the consummation of the
transaction will own at least 50% of the total combined voting power of
all classes of stock entitled to vote of the surviving entity (whether the
Company or some other entity) immediately after the consummation of the
transaction. In the event the transaction contemplated by the agreement
referred to in this Section 6 is not consummated, but rather is
terminated, cancelled or expires, the Options granted pursuant to the Plan
shall thereafter be treated as if that agreement had never been entered
into.
Section 7. Written Notice Required. Any Option granted pursuant to
the Plan shall be exercised when written notice of that exercise has been
given to the Company at its principal office by the person entitled to
exercise the Option and full payment for the shares with respect to which
the Option is exercised has been received by the Company.
Section 8. Compliance with Securities Laws. Shares shall not be
issued with respect to any Option granted under the Plan unless the
exercise of that Option and the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of state and
federal law, including, without limitation, the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder and the
requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. Further, each Optionee shall
consent to the imposition of a legend on the certificate representing the
shares of common stock issued upon the exercise of the Option restricting
their transferability as required by law, the Option, or by the Plan.
Section 9. Retainer of Optionee. Each Optionee, if requested by the
Committee, must agree in writing as a condition of the granting of his or
her Option to remain as a consultant or independent contractor to the
Company, following the date of the granting of that Option for a period or
periods specified by the Committee, which period(s) shall in no event
exceed an aggregate of four years. Nothing in the Plan or in any Option
granted hereunder shall confer upon any Optionee any right to continued
retainer by the Company or limit in any way the right of the Company at
any time to terminate or alter the terms of that consulting or independent
contractor arrangement.
Section 10. Option Rights Upon Termination of Consultant or
Independent Contractor Status. If an Optionee ceases to serve as a
consultant or independent contractor of the Company, for any reason other
than death or retirement, his or her Option shall immediately terminate;
provided that the Committee may, in its discretion, allow the Option to
remain exercisable (to the extent exercisable on the date of termination
of retainer) for up to one additional year for each year of service to the
Company by the Optionee (up to a maximum of five years after the date of
termination), unless either the Option or the Plan provides otherwise for
such earlier termination.
Section 12. Option Rights Upon Death of Optionee. Except as
otherwise limited by the Committee at the time of the grant of an Option,
if an Optionee dies while he or she is a consultant or independent
contractor of the Company, his or her Option shall remain exercisable for
one year after the date of death, unless either the Option or the Plan
otherwise provides for earlier termination. During such exercise period
after death, the Option may be fully exercised, to the extent that it
remains unexercised on the date of death, by the person or persons to whom
the Optionee's rights under the Option shall pass by will or by laws of
descent and distribution.
Section 13. Options Not Transferable. Options granted pursuant to
the Plan may not be sold, pledged, assigned or transferred in any manner
otherwise than by will or the laws of descent and distribution and may be
exercised during the lifetime of an Optionee only by that Optionee or by
his or her guardian or legal representative.
Section 14. Adjustments to Number and Purchase Price of Optioned
Shares. All Options granted pursuant to the Plan shall be adjusted in the
manner prescribed by Section 9 of Part B of the Plan.
Section 15. Reports to Shareholders. The Company shall furnish to
each Optionee a copy of the annual report sent to the Company's
shareholders. Upon written request, the Company shall furnish to each
Optionee a copy of its most recent Form 10-K Annual Report to the
Securities and Exchange Commission and each Form 10-Q or quarterly report
to shareholders issued since the end of the Company's most recent fiscal
year.
Section 16. Privileges of Stock Ownership. Notwithstanding the
exercise of any Option granted pursuant to the terms of the Plan, no
person shall have any of the rights or privileges of a shareholder of the
Company in respect of any shares of stock issuable upon the exercise of
his or her Option until certificates representing the shares have been
issued and delivered. No shares shall be required to be issued and
delivered upon exercise of any Option until all of the requirements of law
and of all regulatory agencies having jurisdiction over the issuance and
delivery of the securities shall have been fully complied with.
Section 17. Tax Withholding. The exercise of any Option is subject
to the condition that if at any time the Company shall determine, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or
purchase of shares pursuant thereto, then in such event, the exercise of
the Option shall not be effective unless such withholding shall have been
effected or obtained in a manner acceptable to the Company.
PART D - STOCK PURCHASE AND REDEMPTION
Section 1. Applicability. The provisions of this Part D shall apply
to Stock Grants granted pursuant to the Plan.
Section 2. Redemption by the Company. For the three year period
commencing on the date of the Previous Plan, the Company shall have the
right to redeem the shares awarded under the Advisory Council Agreements
for the par value of such shares pursuant to the terms of those
Agreements. Such right of redemption shall not apply with respect to
shares awarded to PGA Tour Players.
Section 3. Purchase by Company. After the Company's right of
redemption expires, the Company may, but is not required to, purchase any
shares of stock awarded to Players.
Section 4. Award Upon Acquisition. If the Company is acquired for
cash or securities and there are shares authorized under the Plan that
have not been awarded to Players, such shares shall be awarded and
allocated at that time by the Committee to employees of the Company with
management responsibilities and consultants of the Company as shall be
then determined by the Committee.
Section 5. Voting Rights and Dividends. Notwithstanding the
Company's right of redemption of shares acquired by Stock Grants, Players
shall have all of the rights of a beneficial owner of shares in the
Company, subject to the restrictions, limitations, conditions and other
provisions of the Plan, including dividends, if any, paid to its
shareholders.
Section 6. Tax Withholding. Stock Grants are subject to the
condition that if at any time the Company shall determine, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or
purchase of shares pursuant thereto, then in such event, such Stock Grants
shall not be effective unless such withholding shall have been effected or
obtained in a manner acceptable to the Company.
The award of shares of stock, may be subject to taxation and tax
withholding by the Player under federal or state law. The award of shares
of stock may not be effected unless applicable tax withholding is paid for
by the Player in a manner acceptable to the Company.
Adopted by the Board of Directors of the Company on February 25, 1994, as
amended, and approved by the shareholders of the Company on April 11,
1994.
CARLYLE GOLF, INC.
* The deletion of the last sentence of Part B, Section 4, was approved at
the Annual Meeting of Shareholders on April 1, 1996. The sentence read as
follows: The maximum number of shares subject to Stock Grants pursuant to
the Plan, including all prior grants, is 407,600.*
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