SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 3, 1998
CARLYLE GOLF, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO 0-24160 84-1218066
(State of Incorporation) (Commission File (IRS Employer ID
Number) Number)
10550 East 54th Avenue, Unit E
Denver, Colorado 80239
(Address of Principal Executive Offices)
(303) 371-2889
(Registrant's Telephone Number)
Item 5. Other Events
See the Registrant's press release, labeled Attachment A, attached hereto
and incorporated by reference to this report. The Registrant executed
the asset liquidation agreement referenced therein on the same date as the
press release.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
Exhibit 10 Agreement between the Company and Norwest Business
Credit, Inc. dated February 2, 1998.
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 hereunto duly authorized.
Date: February 18, 1998 CARLYLE GOLF, INC.
By:/s/Wendy K. Williams
Wendy K. Williams
Chief Financial Officer
ATTACHMENT A
CARLYLE GOLF
NEWS RELEASE
Company Contact:
Jerome M. Hause
President
Carlyle Golf, Inc.
(303)371-2889
CARLYLE GOLF ANNOUNCES ASSET LIQUIDATION AGREEMENT
Denver, CO - February 3, 1998 - Carlyle Golf, Inc. (NASDAQ:CRLG,CRLGW), a
producer of high quality men's golf apparel, announced today that, while
it is continuing its efforts to raise additional capital, the Company
plans to enter into an asset liquidation agreement with its primary lender
effective immediately. Under the agreement, the Company will sell, as the
lender's agent, the assets secured by the bank's loan to satisfy that $1.8
million obligation. The announcement covers both the Carlyle Golf
division and Pro-Line Cap division located in Ft. Worth, Texas.
Jerome M. Hause, President and COO, indicated that "Capital for small
start-up companies is extremely difficult to obtain and the effort, while
very extensive, has not yet turned up any sources of the capital needed to
purchase inventory and raw materials for the production of shirts, wind
shirts, and caps". Hause further stated that "the need to enter into the
agreement is a major disappointment to everyone involved".
The Company had grown revenues from $1.7MM in its first full year of
operations in 1994 to over $9.0 MM in 1997, but had failed to produce any
net income over that time. The golf market is a very competitive market
and creating a sufficient gross profit was very challenging. Mr. Hause
indicated that the Company expects that this bank agreement will lead to
the eventual liquidation of all of its assets, including but not limited
to inventory, equipment, and its intangible assets, such as the Company's
rights to the Carlyle name. In such an event, the Company is hopeful that
an arrangement can be reached for another company to assume the Carlyle
name and maintain its existing distribution network, including pending
orders.
Carlyle Golf, with headquarters and warehouse facilities in Denver,
designs, contracts for the manufacture of and markets men's golf apparel
to both domestic and international customers. Through its Ft. Worth based
headwear division, Pro-Line Cap Company, Carlyle Golf also manufactures
athletic headwear which it markets and sells to college bookstores,
baseball teams, corporations, and various customers in the golf industry,
including its golf apparel customers. Products are sold under both the
Carlyle label and the Pro-Line label.
EXHIBIT INDEX
No. Description Method of Filing
10 Agreement between the
Company and Norwest
Business Credit, Inc.
dated February 2, 1998 Filed herewith electronically
AGREEMENT
This Agreement is made this 2nd day of February, 1998 by and between
CARLYLE GOLF, INC., a Colorado corporation (the "Borrower"), and NORWEST
BUSINESS CREDIT, INC., Minnesota corporation (the "Lender").
Recitals
Pursuant to a Credit and Security Agreement dated July 7, 1995, as
amended (the "Credit Agreement"), the Borrower is indebted to the Lender
in the principal amount of $1,761,326.50, together with interest thereon
and certain reimbursable costs and expenses in connection therewith (all
indebtedness of the Borrower to the Lender, including, without limitation,
the principal thereof, interest thereon and reimbursable costs and
expenses in connection therewith is hereinafter referred to as
"Indebtedness").
The Indebtedness is secured by a valid and perfected first security
interest in the accounts receivable, inventory, equipment and general
intangibles of the Borrower (collectively, the "Collateral").
The Indebtedness is now in default and the Lender has declared the
Indebtedness to be immediately due and payable.
In order to facilitate payment of the Indebtedness, the parties are
entering into the agreement to provide for orderly liquidation of the
Collateral.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties hereto agree as follows:
1. INDEBTEDNESS. The Borrower acknowledges and agrees that as of
the date hereof, the Indebtedness consists of the principal amount of
outstanding advances made pursuant to the Credit Agreement of
$1,761,326.50, accrued and unpaid interest thereon through such date in
the amount of $20,954.95, and fees, expenses and other amounts which the
Borrower is obligated to pay of $60,161.54, and that all such amounts are
the valid and enforceable obligations of the Borrower and are not subject
to any defenses or setoffs of any kind or nature. The Borrower further
acknowledges and agrees that such amounts may increase as the Lender makes
additional advances to the Borrower, as additional interest accrues or as
the Lender incurs additional expenses which the Borrower is obligated to
pay, and that all the Indebtedness, including Indebtedness incurred or
accrued after the date hereof, is secured by a valid and perfected first
security interest in the Collateral.
2. CESSATION OF OPERATIONS; VOLUNTARY LIQUIDATION OF COLLATERAL.
Unless the Lender provides the Borrower with written notice waiving the
provisions of this Agreement, the Borrower shall, effective February 2,
1998, discontinue normal operations (except for the completion of any work
in progress, the value of which the Borrower believes will be
significantly enhanced by completion after taking into account the cost of
completion) and shall commence the orderly liquidation, at the highest
available prices, of the Collateral consisting of tangible personal
property and the collection of Collateral consisting of accounts
receivable and general intangibles. Except as otherwise agreed to by
Lender, all proceeds received from the sale or collection of any
Collateral after the date hereof shall be subject to Paragraph 7 hereof.
The Borrower shall consult with the Lender concerning its plan for the
liquidation of the Collateral and, prior to any bulk sale of the
Collateral, shall obtain the Lender's consent to the terms of the sale.
3. TURNOVER. The Lender shall be the sole judge of the progress of
the liquidation of the Collateral pursuant to Paragraph 2 hereof. If the
Lender is dissatisfied with the method or results of the liquidation, the
Borrower shall, upon written demand therefore by the Lender, deliver to
the Lender pursuant to Section 9-503 of the Uniform Commercial Code as in
effect in the State of Colorado (with respect to Collateral located in the
State of Colorado) or as in effect in the State of Texas (with respect to
Collateral located in the State of Texas), exclusive possession of all
Collateral consisting of inventory, equipment or other tangible personal
property, and all records and data (including computer files) with respect
to Collateral consisting of accounts receivable and general intangibles.
Possession of such Collateral, records and data when delivered to the
Lender shall be in place at the locations of such Collateral, records and
data; provided, however, that at the request of the Lender, the Borrower
agrees to assemble the Collateral and make it available to the Lender at a
location designated by the Lender. The Borrower acknowledges and agrees
that by delivering possession of the Collateral to the Lender as provided
herein, the Indebtedness is not discharged and shall remain a valid and
binding obligation of the Borrower until actually paid by application of
proceeds from the sale or collection of Collateral or otherwise. The
Borrower further acknowledges and agrees that following the delivery of
exclusive possession of the Collateral to the Lender pursuant to this
agreement, it has no right to, and shall not, sell or otherwise dispose of
any of the Collateral except as agent of the Lender and then only at the
express written direction of the Lender.
4. ACCESS TO COLLATERAL; OCCUPANCY OF PREMISES. Following the
delivery of possession of the Collateral to the Lender pursuant to
Paragraph 3 hereof, the Lender and its officers, agents and employees
shall have unlimited access to the premises of the Borrower for the
purposes of inventorying, assembling, finishing, preserving or selling any
Collateral consisting of tangible personal property, and inventorying,
preserving, collection or selling Collateral consisting of accounts
receivable and general intangibles and for any activity reasonably related
thereto. Access to such premises shall include access to the Borrower's
computer system located at such premises. The Borrower shall provide the
Lender and its officers, agents and employees with keys and computer pass
codes to facilitate the right of access granted hereby. The Lender shall
not be required to pay any rent for the access granted hereby and the
Borrower agrees to keep all of the rent payable by the Borrower with
respect to such premises current.
5. ASSISTANCE WITH LIQUIDATION. Pursuant to a Support Agreement
dated July 7, 1995, the Borrower agreed to cause Jerome M. Hause to exert
his best efforts and devote all of his regular working hours to the
liquidation of the Collateral on behalf of the Lender. The Borrower
hereby agrees that from the date hereof until the earlier of the date that
the Indebtedness is paid in full or all Collateral securing such
Indebtedness has been sold or otherwise disposed of, Mr. Hause's primary
duties as an employee of the Borrower shall be to assist the Lender in the
sale or other disposition of the Collateral and the collection for the
benefit of the Lender of Collateral consisting of accounts receivable and
general intangibles. In performance of such duties, Mr. Hause is
authorized and directed to take direction directly from authorized agents
and employees of the Lender and is authorized and directed to freely
discuss the financial and business affairs of the Borrower with the
Lender. In recognition of the fact that the Indebtedness of the Borrower
will be minimized by assisting the Lender with the efficient liquidation
of the Collateral, the Borrower also agrees that any other employees of
the Borrower shall be available to Mr. Hause and the Lender to assist the
Lender in the liquidation of the Collateral and the collection of
Collateral consisting of accounts receivable and other rights to payment.
Notwithstanding the foregoing, neither Mr. Hause or any other employee of
the Borrower shall be deemed to be an employee of the Lender as a result
of the services performed pursuant to this Agreement and, unless and until
the Lender otherwise agrees in writing, the Borrower shall be responsible
for payment of all wages, employment taxes and other amounts payable with
respect to the employment of Mr. Hause or any such other employees of the
Borrower.
6. WAIVER OF NOTICE, SALES COMMERCIALLY REASONABLE. The Borrower
hereby waives to the fullest extent permitted by law, any notice in
respect to any public or private sale of the Collateral, and agrees that
the approval by Jerome M. Hause of any sale of any Collateral shall be
conclusive proof that such sale was commercially reasonable.
7. PAYMENTS IN RESPECT OF COLLATERAL. The Borrower (i) agrees that
if the Borrower receives any proceeds from the sale of any Collateral or
from the collection of any Collateral consisting of accounts receivable or
general intangibles, it shall immediately deliver such proceeds to the
Lender in the form received (except for the provision of any necessary
endorsement), and until so delivered to the Lender, such proceeds shall be
held by the Borrower separate from any other funds of the Borrower as
trust funds for the Lender, and (ii) consents to the continued maintenance
of the lockbox and collateral account arrangements currently in place.
The Borrower further acknowledges and agrees that the Lender may apply any
amounts received by it in payment of the Indebtedness, including but not
limited to, the proceeds of any Collateral, to payment of the Indebtedness
in such order of application as the Lender, in its sole discretion, may
determine.
8. RETURN OF REMAINING COLLATERAL AFTER PAYMENT OF INDEBTEDNESS.
If the Lender takes possession of the Collateral pursuant to Paragraph 3
hereof, it may return possession of the Collateral to the Borrower at any
time by written notice to the Borrower, and, after payment of the
Indebtedness in full, the Lender shall promptly provide the Borrower with
written notice that it is no longer in possession of any remaining
Collateral. Upon receipt of any such notice, the Borrower shall be deemed
to have been restored to possession of any remaining Collateral and may,
subject to the rights of any other creditors, use, sell or otherwise
dispose of any such Collateral.
9. INSURANCE. Until the Indebtedness is paid in full, the Borrower
shall maintain in full force and effect any insurance required by the
Credit Agreement, including, without limitation, hazard, general liability
and workers compensation insurance.
10. INTERIM FUNDING BY THE LENDER. The parties acknowledge that the
liquidation of sufficient Collateral to pay the indebtedness in full is
anticipated to take approximately 11 weeks and that the Borrower will
necessarily incur certain expenses during such liquidation period. The
Borrower has provided the Lender with a Budget, a copy of which is
attached hereto as Exhibit A (the "Budget") which sets out all the
expenses that the Borrower reasonably expects to incur and all of the
expenditures that the Borrower reasonably expects to make from the date
hereto to and including April 17, 1998. The Borrower agrees that from and
after the date hereof, it will not knowingly or voluntarily incur any
expenses other than those expenses covered by the Budget without Lender's
consent. The Lender agrees that in order to enable the Borrower to meet
its necessary expenses of operation to and including April 17, 1998, to
consider making at its discretion (but shall have no obligation to make)
additional advances to the Borrower pursuant to the Credit Agreement from
the date hereof to and including April 17, 1998 in an aggregate principal
amount not to exceed in any week 110% of the budgeted expenditures for
such week as set forth in the Budget and not to exceed 100% of the
budgeted expenditures in the aggregate from the date hereof to and
including April 17, 1998. All such advances shall from the date made bear
interest at an annual rate equal to the sum of the "base rate" publicly
announced from time to time by Norwest Bank Minnesota, National
Association plus 4-1/4% shall be secured by the Collateral, shall be
payable on demand and shall be included in the Indebtedness within the
meaning of this Agreement.
Lender recognizes that Borrower may incur unanticipated expenses not
reflected in the Budget. To the extent such expenses do not exceed 15% of
the amount budgeted (excluding Lender principal and interest expenses) for
the period in which the over-run occurs, then Borrower shall be deemed in
compliance with the Budget and provided Lender is promptly notified of the
over-run.
In addition to the Budget, Borrower has provided Lender with a
schedule setting forth a time table for the orderly liquidation of the
Collateral. The time table represents Borrower's best approximation of
the dates on which it will have collected the amounts indicated.
Provided, and as long as, Borrower remains in substantial conformance with
the time table with respect to the collection of accounts receivable and
the sale of inventory and equipment (and provided expenses remain within
the Budget), Lender agrees that it will not exercise its rights under
Paragraph 3 of this Agreement. Substantial conformance with the time
table means collection of at least 90% of the amount indicated by the date
indicated on the time table or at least 95% by a date no more than three
business days following the date indicated. If Borrower is not, at any
time, in substantial conformance with the time table, Lender shall give
Borrower five days for an opportunity cure the nonconformance.
Notwithstanding any of the foregoing, liquidation must be completed by
April 30, 1998.
During the period of liquidation, Lender agrees to meet with Borrower
at least weekly at Borrower's request to review proposals that may affect
the Budget and plan of liquidation. To the extent that such plans or
proposal may require modification of the Budget and/or the plan of
liquidation, Lender agrees that it shall consider such proposals in good
faith.
11. RELEASE. The Borrower, on behalf of itself and its officers,
directors and shareholders, hereby releases and agrees that none of the
Lender, its officers, directors, agents or employees shall have any
liability of any kind or nature with respect to the borrower-lender
relationship between the Borrower and the Lender or the administration or
collection of the loans made pursuant to the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
CARLYLE GOLF, INC.
By:/s/Jerome M. Hause
Its: President
NORWEST BUSINESS CREDIT, INC.
By:/s/Brenda Swedlund
Its: Commercial Banking Officer
