SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] 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 Section 240.14a-11(c) or Section 240.14a-12
CARLYLE GOLF, INC.
(Name of Registrant as Specified in Its Charter)
GORSUCH KIRGIS L.L.C.
(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)(4) 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:
CARLYLE GOLF, INC.
10550 East 54th Avenue, Unit E
Denver, Colorado 80239
(303) 371-2889
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 4, 1997
TO THE SHAREHOLDERS OF CARLYLE GOLF, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Carlyle
Golf, Inc., a Colorado corporation, will be held at the Embassy Suites, 4444
North Havana Street, Denver, Colorado, on Friday, April 4, 1997, at 2:00 p.m.
Mountain Standard Time, and at any and all adjournments thereof, for the purpose
of considering and acting upon the following matters:
1. The election of seven (7) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified;
2. The ratification of the appointment of KPMG Peat Marwick LLP as the
independent public accountants of the Company for the fiscal year ending October
31, 1997;
3. The approval of certain amendments to the Stock Option and Stock
Appreciation Rights Plan designed to conform with recent amendments to SEC Rule
16b-3, and to permit greater flexibility in the administration of the Plan; and
4. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
A Proxy Statement explaining the matters to be acted upon at the meeting is
enclosed. Please read it carefully.
Only holders of record of the $.001 par value common stock of the Company
(the "Common Stock") and holders of record of the $.001 par value convertible
preferred stock of the Company (the "Preferred Stock") at the close of business
on Monday, February 3, 1997, will be entitled to notice of and to vote at the
Meeting or at any adjournment or adjournments thereof. The Proxies are being
solicited by the Board of Directors of the Company.
All Shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy and
return it promptly in the enclosed postage-paid envelope which requires no
additional postage if mailed in the United States. The giving of a Proxy will
not affect your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Denver, Colorado JEROME M. HAUSE
February 28, 1997 PRESIDENT
CARLYLE GOLF, INC.
10550 East 54th Avenue, Unit E
Denver, Colorado 80239
(303) 371-2889
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 4, 1997
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of Carlyle Golf, Inc., a Colorado corporation (the "Company"), for use at the
Company's Annual Meeting of Shareholders (the "Meeting") to be held at the
Embassy Suites, 4444 Havana Street, Denver, Colorado, on Friday, April 4, 1997,
at 2:00 p.m., Mountain Standard Time, and at any adjournment thereof. It is
anticipated that this Proxy Statement and the accompanying Proxy will be mailed
to the Company's Shareholders on or about February 28, 1997.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by (i) giving a later dated written revocation of Proxy
to the Company, or (ii) providing a later dated amended Proxy to the Company, or
(iii) voting in person at the Meeting. The expense of soliciting Proxies,
including the cost of preparing, assembling and mailing this Proxy material to
Shareholders, will be borne by the Company. It is anticipated that
solicitations of Proxies for the Meeting will be made only by use of the mails;
however, the Company may use the services of its Directors, Officers and
employees to solicit Proxies personally or by telephone, without additional
salary or compensation to them. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the Proxy soliciting materials to the
beneficial owners of the Company's shares held of record by such persons, and
the Company will reimburse such persons for the reasonable out-of-pocket
expenses incurred by them in that connection.
All shares represented by valid Proxies will be voted in accordance
therewith at the Meeting.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
Common and Preferred Stock, and only those Shareholders of record at the close
of business on Monday, February 3, 1997, are entitled to notice of and to vote
at the Meeting or any adjournment thereof. On February 3, 1997, the Company had
5,234,899 shares of its Common Stock outstanding and 1,320,432 shares of its
Preferred Stock outstanding. Each share of Common Stock is entitled to one vote
on all matters to be voted upon at the Meeting, including the election of
Directors. The holders of the Preferred Stock are entitled to one vote for each
share of Common Stock into which each share of Preferred Stock held by them is
convertible, an aggregate of 528,174 shares of Common Stock. Cumulative voting
in the election of Directors is not permitted.
A majority of the Company's outstanding Common Stock represented in person
or by Proxy shall constitute a quorum at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of the
Company's Common and Preferred Stock owned beneficially, as of February 3, 1997,
by any person who is known to the Company to be the beneficial owner of 5% or
more of such Common or Preferred Stock, and, in addition, by each Director and
nominee for Director of the Company, by each Executive Officer of the Company,
and by all Directors and Executive Officers of the Company as a group. For
purposes of this disclosure, the amount of the Company's Common and Preferred
Stock beneficially owned is the aggregate number of shares of the Common Stock
outstanding on such date plus an amount equal to the aggregate amount of Common
Stock which could be issued upon the exercise of stock options within 60 days of
such date by each individual. The 1,320,432 shares of Preferred Stock
outstanding, while not convertible within 60 days, may be voted by the holders
thereof on an as converted basis as an aggregate of 528,174 shares of Common
Stock.
SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED
COMMON PREFERRED
Kenneth R. LaBounty 1,572,213 -0-
Route 1, Box 164B
Two Harbors, MN 55616
William A. Clymor(2) 682,212 -0-
6385 East Tufts Avenue
Englewood, CO 80111
David J. Bullock(3) 325,000 -0-
2750 Garden Lane
Littleton, CO 80121
Timothy B. Kneen 325,000 -0-
370 - 17th Street
Suite 1100
Denver, CO 80202
Jerome M. Hause(4) 96,539 -0-
10550 E. 54th Avenue
Unit E
Denver, CO 80239
W. Clayton Cole(5) 64,023 -0-
4125 South University Blvd.
Englewood, CO 80010
Warren F. Mack(6) 63,812 -0-
13152 Summit Creek Road
Jacksonville, FL 32224
Grant M. Beeman(7) 33,562 -0-
10550 E. 54th Avenue
Unit E
Denver, CO 80239
Wendy K. Williams(8) 8,225 -0-
10550 E. 54th Avenue
Unit E
Denver, CO 80239
Edward S. Adams, Jr. 5,000 -0-
5401 S. Race Ct.
Littleton, CO 80121
Walter E. Kellogg III 5,000 -0-
6700 Race St.
Denver, CO 80229
Laurence H. Anton 522,375(9) 1,320,432(10)
1315 Shady Oaks Lane
Fort Worth, TX 76107
All Directors and 3,052,961 1,320,432
Executive Officers
as a Group
(10 Persons)
NAME AND ADDRESS PERCENTAGE
OF BENEFICIAL OWNER OWNED
COMBINED
VOTING
COMMON PREFERRED POWER(1)
Kenneth R. LaBounty 30.0% 0% 27.3%
Route 1, Box 164B
Two Harbors, MN 55616
William A. Clymor(2) 12.3% 0% 11.3%
6385 East Tufts Avenue
Englewood, CO 80111
David J. Bullock(3) 6.2% 0% 5.6%
2750 Garden Lane
Littleton, CO 80121
Timothy B. Kneen 6.2% 0% 5.6%
370 - 17th Street
Suite 1100
Denver, CO 80202
Jerome M. Hause(4) 1.8% 0% 1.6%
10550 E. 54th Avenue
Unit E
Denver, CO 80239
W. Clayton Cole(5) 1.2% 0% 1.1%
4125 South University Blvd.
Englewood, CO 80010
Warren F. Mack(6) 1.2% 0% 1.1%
13152 Summit Creek Road
Jacksonville, FL 32224
Grant M. Beeman(7) * 0% *
10550 E. 54th Avenue
Unit E
Denver, CO 80239
Wendy K. Williams(8) * 0% *
10550 E. 54th Avenue
Unit E
Denver, CO 80239
Edward S. Adams, Jr. * 0% *
5401 S. Race Ct.
Littleton, CO 80121
Walter E. Kellogg III * 0% *
6700 Race St.
Denver, CO 80229
Laurence H. Anton 9.6% 100% 17.6%
1315 Shady Oaks Lane
Fort Worth, TX 76107
All Directors and 52.2% 100% 56.1%
Executive Officers
as a Group
(10 Persons)
- -------------------------------
* Less than one percent
(1) Pursuant to the Company's Articles of Incorporation, the Preferred Stock
votes with the Common Stock on an as converted basis. This column
represents the percentage of the total voting stock held by each individual
and group.
(2) Includes 309,712 shares owned by Clymor Partners, Ltd. LLP. Also includes
options to purchase 300,000 shares, but does not include options for an
additional 200,000 shares which are not currently vested.
(3) Does not include 25,000 shares previously gifted to Mr. Bullock's father,
Harry Bullock, for which Mr. Bullock disclaims beneficial ownership.
Includes options to purchase 25,000 shares.
(4) Includes options to purchase 92,420 shares, but does not include options
for an additional 60,000 shares which are not currently vested.
(5) Includes options to purchase 3,000 shares.
(6) Includes options to purchase 10,500 shares, but does not include options
for an additional 10,000 shares which are not currently vested.
(7) Includes options to purchase 8,500 shares, but does not include options for
an additional 10,000 shares which are not currently vested.
(8) Includes options to purchase 5,100 shares, but does not include options for
an additional 10,000 shares which are not currently vested.
(9) Includes 322,375 shares owned by Star Point Enterprises, Inc. Also
includes options to purchase 200,000 shares, but does not include 528,174
shares of Common Stock issuable upon the conversion of 1,320,432 shares of
Preferred Stock which are not currently convertible. See footnote (10)
below.
(10) Convertible into 528,174 shares of Common Stock on or after January 25,
1998 and presently voted together with the Common Stock on an as converted
basis. While 1,117,893 shares of the Preferred Stock (447,128 shares of
Common Stock on an as converted basis) may be deemed to be beneficially
owned by Mr. Anton in his capacity as remainderman for his mother, Shirley
G. Anton, and as trustee of the Shirley Anton Ten-Year Grit Trust, Mr.
Anton disclaims beneficial ownership thereof. Because Mr. Anton's father,
Charles Anton, owns 202,539 shares of the Preferred Stock (81,016 shares of
Common Stock on an as converted basis), and Charles Anton is a member of
the Anton Group which, as noted below, has the right under the Debt
Conversion and Registration Rights Agreement to designate one person to be
nominated as a director of the Company, the shares held by Mr. Anton are
included in the amount beneficially owned by Laurence Anton. Both Laurence
Anton and Charles Anton, however, disclaim beneficial ownership of each
other's shares of the Company's stock. See "Transactions with Management
and Others" below.
ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the seven
(7) nominees listed below. The seven nominees, if elected, will hold office
until the next annual meeting of Shareholders and until their successors are
elected and qualified or until their earlier death, resignation or removal. IT
IS INTENDED THAT SHARES REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW UNLESS A CONTRARY DIRECTION
IS INDICATED. If at the time of the Meeting any of the nominees named below
should be unable to serve, which event is not expected to occur, the
discretionary authority provided in the Proxy will be exercised to vote for such
substitute nominee or nominees, if any, as shall be designated by the Board of
Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently held
by him, and the period during which he has served as a Director:
ALL POSITIONS AND OFFICES PERIOD SERVED AS
NAME AGE HELD WITH THE COMPANY DIRECTOR OF THE COMPANY
William A. Clymor 56 Chairman, Chief Since 1992
Executive Officer
and Director
Jerome M. Hause 48 President, Chief Since 1995
Operating Officer
and Director
W. Clayton Cole 55 Director Since 1992
Kenneth R. LaBounty 41 Director Since 1993
Edward S. Adams, Jr. 46 Director Since 1997
Walter E. Kellogg III46 Director Since 1997
Laurence H. Anton 50 Director Since 1997
None of the nominees hold directorships in any other company having a class
of securities registered under the Securities Exchange Act of 1934, as amended,
or in any company registered as an investment company under the Investment
Company Act of 1940, as amended.
MEETINGS AND COMMITTEES OF THE BOARD
The Company has a Compensation Committee, which Committee makes
recommendations on executive compensation and selects those persons eligible to
receive grants of stock, stock options and appreciation rights under the
Company's Employee Stock Bonus Plan, its Stock Purchase and Redemption Plan for
PGA Touring Professionals and Club Professionals and its Stock Option and Stock
Appreciation Rights Plan. The Committee was composed of two outside Directors,
G. Richard Oscarson and W. Clayton Cole, during the last fiscal year. The
Committee conducted two meetings by unanimous written consent during the last
fiscal year. Mr. Oscarson resigned as a Director and as a member of the
Committee on October 31, 1996. Effective as of January 1, 1997, the members of
the Committee are Edward S. Adams, Jr. and Walter E. Kellogg III.
The Audit Committee oversees the accounting controls for the Company and
was composed of G. Richard Oscarson and Kenneth R. LaBounty during the last
fiscal year. The Committee met two times during the last fiscal year. Mr.
Oscarson resigned from this Committee on October 31, 1996. Effective as of
January 1, 1997, W. Clayton Cole was appointed as a member of the Committee to
serve with Mr. LaBounty.
The Board of Directors met in person three times during the last fiscal
year. Six other meetings were conducted by unanimous written consent of the
Directors. There are no incumbent Directors who during the last fiscal year
attended fewer than 75% of the aggregate of all meetings of the Board and all of
the committees of the Board on which he serves.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names of all Directors and Executive Officers of
the Company, their ages, all positions and offices held by each such person, the
period during which he has served as such, and the principal occupations and
employment of such persons during the last five years:
WILLIAM A. CLYMOR. Mr. Clymor, age 56, has served as a Director of the
Company since 1992 and became Chairman of the Board and Chief Executive Officer
on November 8, 1994. In 1984, Mr. Clymor purchased Imperial Headwear, Inc. and
in 1987, he acquired Sun-Day Sports, an Arizona-based manufacturer of slip-on
visors, which he merged into Imperial Headwear. Mr. Clymor acted as Chairman
and CEO of Imperial Headwear until he sold the company in 1993. He also served
as President and CEO of Western Farm Companies, an agricultural service company,
from 1980 to 1984. Prior to acquiring Imperial Headwear, Mr. Clymor owned a
private advisory firm specializing in mergers and acquisitions. Mr. Clymor
attended Lambuth University where he earned a Bachelor of Science degree in
Economics in 1963.
JEROME M. HAUSE. Mr. Hause, age 48, became President and Chief Operating
Officer of the Company on September 29, 1994 and was appointed to the Board of
Directors on December 6, 1995. Mr. Hause was President of Imperial Headwear,
Inc. from 1990 to 1994. From 1988 to 1990, he was President of Cherry Creek
National Bank. Mr. Hause also worked in various other positions in the banking
industry from 1971 to 1988. He earned a Bachelor of Science degree in Economics
from Colorado State University in 1970 and a Masters in Business Administration
from the University of Denver in 1974.
WARREN F. MACK. Mr. Mack, age 45, became a Senior Vice President - Sales
and National Marketing Director of the Company on May 1, 1993. Mr. Mack came to
Carlyle from IZOD Lacoste Golf and Tennis where he spent 15 years in sales and
marketing, the latter part of which he served as one of IZOD's four Regional
Sales Managers with specific responsibility for the Southern Region of the
United States. Mr. Mack's responsibilities at IZOD also included service as the
PGA tour representative and involvement in design work. Mr. Mack earned a
Bachelor of Science degree from Jacksonville University in 1973. Mr. Mack was a
golf professional prior to joining IZOD.
GRANT M. BEEMAN. Mr. Beeman, age 38, has served as Vice President of
Design and Manufacturing of the Company since May of 1993. Mr. Beeman is
responsible for design, production, manufacturing and warehouse operations. He
has worked in the clothing design field since 1982. Prior to joining the
Company, Mr. Beeman owned On And Off The Field from 1982 to 1993, where he
designed active sportswear for polo clubs in the United States. Other companies
for which he has designed products include Bloomingdale's, Marriott Corporation,
Kaelin Sports, Bolle, Deline Box Co. and Republic Packaging. Mr. Beeman was
awarded a Bachelor of Fine Arts degree from Western State College in 1982.
WENDY K. WILLIAMS. Ms. Williams, age 35, became Vice President of Finance,
Secretary and Treasurer in May of 1995. Ms. Williams is a Certified Public
Accountant. She worked for Laventhal & Horwath from January 1985 to April 1989
where she was promoted to Supervisor in June 1988. Ms. Williams was Accounting
Manager for Imperial Headwear, Inc. from May 1989 to February 1991 when she
became the Corporate Controller. She served in that position until May 1995.
She received a Bachelor of Science degree in Accounting from the University of
Denver in 1984.
W. CLAYTON COLE. Mr. Cole, age 55, has served as a Director of the Company
since 1992 and is Chairman of the Company's Advisory Council. Since 1991, Mr.
Cole has been the Head Golf Professional at Cherry Hills Country Club in
Englewood, Colorado, which has hosted nine major professional golf
championships, including three U.S. Open Championships, two PGA Championships
and the 1993 U.S. Senior Open. From 1986 to 1991, he was the Director of Golf
at the Hills of Lakeway, a 54-hole complex in Austin, Texas and also directed
the Academy of Golf teaching academy there. Mr. Cole served as an assistant pro
at Cherry Hills from 1970 to 1974, when he became the Head Professional at the
Dallas Country Club in Dallas, Texas, and served in that position until 1986.
In 1985, Mr. Cole was voted the Professional of the Year in the Northern Texas
section of the PGA. He played golf on the PGA tour in 1969. He attended the
University of Houston where he was awarded a Bachelor of Science degree in
Business Administration in 1963.
KENNETH R. LABOUNTY. Mr. LaBounty, age 41, has served as a Director of the
Company since 1993. He also served as a Senior Vice President from 1993 until
January 1997. Mr. LaBounty was a founder of LaBounty Manufacturing, a company
that specializes in the manufacturing of materials handling and processing
equipment for the demolition and recycling industries. He served as Executive
Vice President and managing director of LaBounty Manufacturing from 1980 to
1992. Prior to that time, he was a foreman and manufacturing manager from 1973
to 1980. Mr. LaBounty developed and patented ten products for the industry
while serving as Vice President of LaBounty Manufacturing, which was sold to
Stanley Works in 1991. Mr. LaBounty attended classes at the University of
Minnesota-Duluth and the University of Minnesota-Minneapolis between 1981 and
1986.
EDWARD S. ADAMS, JR. Mr. Adams, age 46, was elected as a Director of the
Company effective January 1, 1997. Since February 1979 he has been the
President, Chief Executive Officer and a member of the Board of Directors of
Professional Travel Corp., a travel management company. Mr. Adams is a part
owner, Secretary and Director of GSA Corp., a personal investment company, and
is also a Director of Charter West, another investment company. In addition, he
is a member of the Board of Trustees for Regis University and the Boards of
Directors of St. Joseph's Hospital, Primera Healthcare, and Public Education and
Business Coalition, and Colorado Junior Achievement and serves on the Board of
Advisors for the College of Business at the University of Colorado at Denver.
Mr. Adams attended the University of Colorado where he was awarded a Bachelor of
Science degree in Business in 1974 and a Master of Public Administration in
1977.
WALTER E. KELLOGG III. Mr. Kellogg, age 46, was elected as a Director of
the Company effective January 1, 1997. He is the President, Chief Executive
Officer and a Director of Kellogg Lumber Company, a Denver, Colorado retail
lumber company. Prior to becoming the President and Chief Executive Officer and
sole owner in 1996, he served as the Secretary of the company beginning in 1979.
Mr. Kellogg attended the University of Colorado where he received a Bachelor of
Science degree in Business in 1974.
LAURENCE H. ANTON. Mr. Anton, age 50, was elected as a Director of the
Company effective January 24, 1997. Since 1991, he has been the President, sole
Director and sole shareholder of Star Point Enterprises, Inc., d/b/a Pro-Line
Cap Company, of Fort Worth, Texas, a company which was a producer of athletic
and golf headwear until the sale of substantially all of its assets, including
the name "Pro-Line Cap Company," to the Company on January 24, 1997. See
"Transactions with Management and Others" below. Mr. Anton is also the
President of Larry Anton & Associates, Inc., a Fort Worth marketing and
management consulting services company, and of U.S. Performance, Inc., a Fort
Worth automotive parts marketing and merchandising company. He attended Texas
Christian University where he was awarded a Bachelor of Arts degree in Political
Science and Business in 1968.
The Company's Executive Officers are elected by the Board of Directors at
the first meeting after each annual meeting of Shareholders, and hold office
until the next such meeting of the Board of Directors or their earlier
resignation or removal.
There is no arrangement or understanding between any such Director or
Executive Officer and any other person or persons pursuant to which he or she
was or is to be selected as a Director or Executive Officer, other than (i) the
employment agreement of William A. Clymor, which calls for him to serve as the
Chairman of the Board and Chief Executive Officer of the Company but does not
mandate his election as a director and (ii) the Debt Conversion and Registration
Rights Agreement dated as of December 31, 1996 between the Company and Star
Point Enterprises, Inc. d/b/a Pro-Line Cap Company, Laurence H. Anton and
certain relatives of Mr. Anton and their affiliates (the "Anton Group"), which
provides that, so long as the Anton Group holds either (A) Common or Preferred
Stock of the Company with ten percent (10%) or more of the combined voting power
of those classes or (B) ten percent (10%) or more of the outstanding Common
Stock, the Anton Group shall have the right to designate one person for
nomination to the Board of Directors. There is no family relationship between
or among any of the Company's Directors or Executive Officers.
EXECUTIVE COMPENSATION
The following table summarizes the compensation through October 31, 1996
paid to the Company's Chief Executive Officer and its mostly highly compensated
Executive Officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND
PRINCIPAL OTHER ANNUAL
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION
(a) (b) (c) (d) (e)
William A. Clymor 1996 $59,473 0 $32,160(1)
Chairman of the 1995 $75,000 0 $32,160(1)
Board, CEO 1994 0 0 0
Jerome M. Hause 1996 $113,201 0 $0
President, COO 1995 $120,000 0 $4,200(3)
1994 $10,000 0 0
Warren F. Mack 1996 $96,317 0 0
Senior Vice 1995 $105,000 0 0
President 1994 $105,000 0 0
LONG-TERM
COMPENSATION AWARDS
AWARDS
RESTRICTED SECURITIES
STOCK UNDERLYING
AWARDS ($) OPTIONS/SARs(#)
(f) (g)
William A. Clymor 0 0
Chairman of the 0 500,000(2)
Board, CEO 0 0
Jerome M. Hause 0 62,420
President, COO 0 70,000(4)
0 0
Warren F. Mack 0 10,500
Senior Vice 0 0
President 0 0
(1) Consists of an office expense reimbursement and insurance premiums.
(2) Mr. Clymor's grant of 500,000 stock options by the Compensation Committee
on November 9, 1994 vested as to 100,000 shares immediately, 100,000 shares
on November 7, 1995, and 100,000 shares on November 7, 1996. An additional
100,000 shares will vest on November 7, 1997 and another 100,000 shares on
November 7, 1998 if he still holds the offices of Chairman of the Board and
Chief Executive Officer on those dates.
(3) Consists of an auto allowance.
(4) Mr. Hause's grant of 70,000 stock options by the Compensation Committee on
November 9, 1994 vested as to 15,000 shares on September 29, 1995 and as to
15,000 shares on September 29, 1996. An additional 20,000 shares will vest
on September 29, 1997 and another 20,000 shares on January 1, 1998 if he is
still employed by the Company on those dates.
EMPLOYMENT AGREEMENT -- WILLIAM A. CLYMOR
The Company entered into an employment agreement with William A. Clymor,
effective beginning November 8, 1994 and continuing until November 7, 1999, to
act as Chairman of the Board and Chief Executive Officer. The Company or Mr.
Clymor may elect to terminate the agreement effective November 7, 1998 upon 30
days written notice. The agreement provides for a base salary of $75,000 per
year and ten year options to purchase up to 500,000 shares of the Company's
Common Stock at an exercise price of $2.66. Of the 500,000 shares, 100,000
vested November 7, 1994, 100,000 vested on November 7, 1995 and 100,000 vested
November 7, 1996. Of the remaining shares, 100,000 will vest on November 7,
1997 and 100,000 on November 7, 1998 if Mr. Clymor still holds the offices of
Chairman of the Board and Chief Executive Officer on those dates.
In the event of an involuntary termination of Mr. Clymor's employment which
occurs after a change in control of the Company for any reason other than breach
of the agreement, fraud, or illegal activities or misrepresentation, he will be
entitled to receive 2.99 times his salary over a period of 5 years, together
with interest thereon. In the case of an involuntary termination which does not
occur after a change of control for any reason other than a breach of the
agreement, fraud, or illegal activities or misrepresentation, he will be
entitled to receive severance pay in the amount of one year's salary.
Under the agreement, an involuntary termination is any termination except a
voluntary termination, termination by mutual agreement, or termination as a
result of death, disability or normal retirement. A change of control is deemed
to have occurred if (i) any person becomes the owner of more than 50% of the
Company's stock; (ii) as a result of certain transactions, the persons who were
directors of the Company before the transactions cease to constitute a majority
of the Board; (iii) a merger or consolidation; (iv) a tender offer for more than
50% of the Company's stock is consummated; or (v) the Company transfers
substantially all of its assets.
EMPLOYMENT AGREEMENT -- WARREN F. MACK
The Company entered into an employment agreement with Warren F. Mack,
effective beginning May 1, 1993 and continuing until December 31, 1996, to act
as Senior Vice President and National Sales Director. The agreement provides
for a minimum annual base salary for the first year of $105,000. Each year
thereafter, the annual base salary may be increased depending upon the level of
annual sales of the Company. The agreement requires that annual bonuses will be
awarded to Mr. Mack if certain minimum levels of annual sales are achieved by
the Company. In the event of an involuntary termination of Mr. Mack's
employment by the Company during the term of the agreement for any reason other
than breach of the agreement, fraud, or illegal activities or misrepresentation,
he will be entitled to receive his base salary set forth in the agreement for
the remaining term of the agreement. If involuntary termination occurs after
December 31, 1996 for any reason other than breach of the agreement, fraud, or
illegal activities or misrepresentation, Mr. Mack is entitled to receive
severance pay in the amount of three months of his then base salary. Pursuant
to the agreement, Mr. Mack purchased 50,000 shares of Common Stock of the
Company for $.02 per share on May 1, 1993.
Both Messrs. Clymor and Mack voluntarily took a pay cut in their base
salaries for the period from January 1, 1996 through October 31, 1996 in order
to encourage the Company's continued growth.
CONSULTING AGREEMENT -- LAURENCE H. ANTON
The Company has entered into an agreement with Mr. Anton pursuant to which
Mr. Anton will render certain consulting services to the Company for a period of
three years beginning January 24, 1997, the date of the acquisition of
substantially all of the assets of Star Point Enterprises, Inc., which will be
paid in 36 monthly installments of $9,028. See "Transactions with Management
and Others" below. Mr. Anton also received from the Company a five-year option
to purchase 200,000 shares of the Company's Common Stock at $2.08 per share.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the information concerning individual grants
of stock options and appreciation rights during the last fiscal year to each of
the named Executive Officers:
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS GRANTED EXERCISE OR
OPTIONS/ TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME SARS GRANTED(#) FISCAL YEAR ($/SH) DATE
(a) (b) (c) (d) (e)
W. A. Clymor 0 N/A N/A N/A
J. M. Hause 62,420(1) 65.9% $1.25 12-21-05
W. F. Mack 10,500(1) 11.1% $1.25 12-21-05
(1) All grants were tandem grants of incentive stock options and SARs except
that, to the extent required by the Plan and the Internal Revenue Code,
some of the options were nonqualified stock options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning each exercise of
stock options during the last fiscal year by each of the named Executive
Officers and the fiscal year end value of unexercised options:
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
SHARES ACQUIRED OPTIONS/SARS AT AT FISCAL
NAME ON EXERCISE(#) VALUE REALIZED($) FISCAL YEAR-END(#) YEAR-END($)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
(a) (b) (c) (d) (e)
W.A. Clymor 0 $0 200,000/300,000 $0/0
J.M. Hause 0 $0 92,420/60,000 $11,704/0
W.F. Mack 0 $0 10,500/0 $1,969/0
DIRECTORS COMPENSATION
The Company had an arrangement whereby each Director earned $250 a day for
attendance at each meeting of the Board of Directors or Committee, except where
a Committee met in conjunction with a full Board meeting. On December 9, 1996,
the Board of Directors agreed to change the arrangement so that, instead of all
of the Directors receiving cash compensation, each of the outside Directors,
currently Messrs. LaBounty, Adams, Kellogg and Anton, would receive 500 shares
of the Company's Common Stock for attendance at each meeting of the Board and
would also receive 200 shares for attendance at each meeting of a Committee
except where the Committee meets in conjunction with a full Board meeting. The
shares would be granted from the Company's Stock Bonus Plan for Officers,
Directors, Employees and Consultants.
In addition, pursuant to the Company's Stock Option and Stock Appreciation
Rights Plan (the "Stock Option Plan"), the members of the Compensation Committee
receive 500 fully vested nonqualified stock options on June 30 of each year for
each Board or Committee meeting attended. In fiscal 1996, Mr. Cole received
2,000 and Mr. Oscarson 1,500 ten-year nonqualified stock options. All of the
Directors are eligible to receive stock options under the Stock Option Plan.
On October 31, 1996, Mr. Oscarson resigned as a Director and as a member of
the Company's Audit and Compensation Committees. On the same date, the Company
entered into a two year consulting agreement with Mr. Oscarson pursuant to which
he received 5,000 fully vested nonqualified stock options as compensation for
services to be rendered to the Company during the term of the agreement. In
addition, pursuant to the agreement, his currently vested options under the
Stock Option Plan would continue to be exercisable during the term of the
agreement and, in accordance with the Stock Option Plan, for a period of three
months thereafter.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In January 1993 the Company and two of its former executive officers
entered into an Investment Agreement with Kenneth R. LaBounty, who is currently
a Director of the Company. Pursuant to that Agreement, Mr. LaBounty purchased
2,500,001 shares of Convertible Preferred Stock in three installments during
1993 for $0.32 per share, for a total of $800,000. The 2,500,001 shares
purchased by Mr. LaBounty represented all of the authorized and outstanding
shares of Preferred Stock prior to its conversion into 1,250,001 shares of
Common Stock (the "Conversion") on August 19, 1994 (the "Conversion"). The
Investment Agreement provided for the Company to reimburse Mr. LaBounty for
interest costs he incurred on amounts borrowed to make the capital contributions
required by the Agreement to the extent that such interest costs did not exceed
the Wall Street Journal prime rate plus one percent (1%). The Company
reimbursed Mr. LaBounty $73,809 for these costs which were accounted for as
dividends on the Preferred Stock.
The Investment Agreement also conferred certain rights with respect to the
registration of stock under the Securities Act of 1933 (the "Securities Act")
upon owners of Preferred Stock, which rights continued after the Company's
initial public offering (the "Offering") was declared effective August 12, 1994
and the Conversion. As the sole owner of the Preferred Stock prior to the
Conversion, Mr. LaBounty may require the Company to register the shares of
Common Stock he received in the Conversion unless all of his shares may be sold
without registration under Rule 144 promulgated under the Securities Act. Mr.
LaBounty, or his assignees, may also require the Company to register those
shares on any other registration statement filed by the Company under the
Securities Act, except for filings on Forms S-4 or S-8. Finally, the Company
agreed to use its best efforts to qualify the Common Stock received upon the
Conversion for registration on Form S-3 within 12 months following the effective
date of the Company's first registered public offering. Mr. LaBounty, or his
assignees, then has the right to up to three registrations on Form S-3 in any
12-month period thereafter until their shares have all been sold. The holders
of shares participating in any of the foregoing registrations are required to
share in their pro rata share of the underwriting discount and commissions,
transfer taxes, fees and disbursements of counsel and accountants retained by
the selling security holders but all other expenses are to be borne by the
Company.
On October 31, 1996, the Board of Directors (with William A. Clymor
abstaining) agreed to indemnify Mr. Clymor against liability to the maximum
extent permitted by law, including reasonable expenses, if any, incurred if Hat
Brands, Inc. seeks to enforce its Non-Compete Agreement with Mr. Clymor as a
result of the Company's purchase of the assets of Star Point Enterprises, Inc.
d/b/a Pro-Line Cap Company of Fort Worth, Texas ("Star Point"). Upon receipt by
the Company of a written affirmation by Mr. Clymor of his good faith belief that
he had at all times conducted himself in good faith, and that his conduct was in
the Company's best interest, along his written undertaking to repay any amounts
advanced for his defense if it is ultimately determined that he did not meet the
standard of conduct cited above, the officers of the Company were instructed by
the Board to advance to Mr. Clymor his reasonable expenses, including legal
fees, if any such legal action should arise.
On January 24, 1997, the Company acquired substantially all of the assets
of Star Point, a producer of high quality sized and adjustable athletic and golf
headwear, pursuant to an Asset Purchase Agreement effective December 31, 1996 by
and among the Company, Star Point and Mr. Anton, the President and sole
shareholder of Star Point (the "Asset Purchase Agreement"). The purchase price
for the acquired assets pursuant to the Asset Purchase Agreement totaled
approximately $6.0 million, including approximately $4.8 million for certain
assets necessary for the Company to operate the Star Point business (the
"Transferred Assets"), approximately $600,000 for the purchase of the building
located at 8224 White Settlement Road, Fort Worth, Texas, from Shirley G. Anton
and Mr. Anton (collectively, the "Building Owner") and $325,008 payable to Mr.
Anton for consulting services to be provided over three years. In connection
with the acquisition, the Company also entered into lease agreements for
properties located at 8314 White Settlement Road and 512 Jennings, both in Fort
Worth, Texas.
Effective January 24, 1997, the Board of Directors agreed to indemnify
Laurence H. Anton against any claims which may be brought against him or against
his agents, assigns or affiliates by third parties for actions taken by any of
them as a shareholder, director, officer, agent or employee of the Company or of
Star Point to the fullest extent permitted by law, including any of their
actions in connection with the purchase by the Company of substantially all of
the assets of Star Point (the "Acquisition") except that they shall not be
indemnified by the Company for any claims brought by or on behalf of the Company
or its officers, directors, shareholders or affiliates (including but not
limited to claims by or under the Asset Purchase Agreement or the other
agreements contemplated by the Acquisition) nor shall they be indemnified
against any claims arising out of the business of Star Point prior to the sale
of its assets to the Company other than actions in furtherance of the sale of
its assets to the Company.
Payment of the purchase price for the Transferred Assets consisted of the
assumption of certain liabilities totaling approximately $3.0 million; the
assumption and simultaneous conversion of certain current and long-term debt
totaling $976,489 into 976,489 shares of the Company's Convertible Preferred
Stock pursuant to that certain Debt Conversion and Registration Rights Agreement
effective December 31, 1996 by and among the Company, Star Point, Mr. Anton and
the Building Owner (the "Registration Rights Agreement"); and the issuance of
322,375 shares of the Company's Common Stock to Star Point with an agreed upon
value of $670,540, or $2.08 per share (representing the average of the closing
ask price of the Common Stock for the ten (10) trading days beginning five (5)
trading days prior to January 9, 1997). The payment of approximately $600,000
to the Building Owner consisted of the issuance of a secured promissory note in
the principal amount of $223,421 and the issuance of 343,943 shares of the
Company's Convertible Preferred Stock. The Company's Convertible Preferred
Stock is convertible into Common Stock of the Company at a rate of .4 shares of
Common Stock for each share of Preferred Stock converted, subject to certain
adjustments.
In connection with the acquisition, Star Point loaned to the Company the
sum of $1,243,000, and the Company agreed to use its best efforts to obtain
additional capital financing and to repay this loan.
The Company has entered into an agreement with Mr. Anton pursuant to which
Mr. Anton will render certain consulting services to the Company for a period of
three years following the acquisition, which will be paid in 36 monthly
installments of $9,028. Mr. Anton also received from the Company a five-year
option to purchase 200,000 shares of the Company's Common Stock at $2.08 per
share (the "Option").
The holders of the Option, Common Stock and Convertible Preferred Stock
issued in connection with this transaction are entitled to certain registration
rights pursuant to the Registration Rights Agreement.
The assets acquired by the Company have been used by Star Point in the
manufacture, marketing and sale of high quality sized and adjustable athletic
and golf headwear. Prior to the acquisition, Star Point sold its line of
traditional and contemporary headwear styles into the licensed products,
college, team dealer, corporate and golf markets. The Company will continue
producing headwear in the acquired facilities under the Pro-Line name for
customers across the United States. In addition, the Company plans to expand
Pro-Line's golf market segment to complement its own men's apparel line which
currently includes knit, woven and wind shirts, shorts and sweaters all sold
under the Carlyle(TM) label, and to serve its existing customer base, which
includes resorts, on-course golf pro shops, major golf tournament events and
corporations.
The terms of the acquisition resulted from arms-length negotiations between
the representatives of Star Point and the Company.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accounting firm of KPMG Peat Marwick LLP ("KPMG")
audited the financial statements for the period ended October 31, 1996. At the
direction of the Board of Directors, the ratification of the appointment of KPMG
for the fiscal year ending October 31, 1997 is being presented to the
Shareholders for approval at the meeting. Although ratification of the
appointment of KPMG for the fiscal year ending October 31, 1997 is not required
by Colorado law, the Company's Articles of Incorporation, as amended, or Bylaws,
the Board of Directors believes a decision of this nature should be made with
consideration of the Company's Shareholders. Accordingly, Shareholders are
being asked to consider ratification of the selection of KPMG for the fiscal
year ending October 31, 1997. If a significant number of shares are voted
against the selection or if either the services or price offered by KPMG are not
satisfactory to the Board of Directors, the Board of Directors will reconsider
the selection of KPMG for the fiscal year ending October 31, 1997.
A representative of KPMG is expected to be present at the Meeting to
respond to appropriate questions, and will be given the opportunity to make a
statement if he or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING OCTOBER 31, 1997.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
The Stock Option and Stock Appreciation Rights Plan (the "Stock Option
Plan") was adopted by the Board of Directors on February 24, 1995 and by the
Shareholders of the Company on April 11, 1994. On February 21, 1997, the
Compensation Committee (the "Committee) approved certain amendments to the Stock
Option Plan to conform to recent changes in Rule 16b-3, 17 C.F.R. 240.16b-3
("Rule 16b-3"), under the Securities Exchange of 1934, as amended (the "Exchange
Act"), and to permit greater flexibility in the administration of the Stock
Option Plan. In sum, the proposed amendments would (i) eliminate the
requirement that members of the Committee administering the Stock Option Plan be
disinterested persons as had been previously required by Rule 16b-3; (ii) while
the Committee is expected to continue to administer the Stock Option Plan for
the foreseeable future, permit the Board of Directors to make grants of stock
options or otherwise administer the Stock Option Plan if and to the extent such
administration would be consistent with applicable law; (iii) permit the Board
of Directors or the Committee administering the Stock Option Plan to determine
the fair market value of the Company's Common Stock for purposes of the Stock
Option Plan by averaging the price over a period of up to 90 days preceding the
grant of any option or stock appreciation right; (iv) permit the Board of
Directors or the Committee administering the Stock Option Plan to make grants of
nonqualified stock options or stock appreciation rights at not less than 50% of
the fair market value; (v) permit, to the extent consistent with applicable law,
discretionary grants of options and stock appreciation rights to members of the
Board of Directors or the Committee administering the Stock Option Plan; (vi)
require shareholder approval of amendments to the Stock Option Plan only if the
amendment would (A) increase the total number of shares available for grants of
options or rights or (B) require shareholder approval under applicable law; and
(vii) in accordance with recent Internal Revenue Service rulings, give the Board
of Directors or the Committee administering the Stock Option Plan the discretion
to permit a participant to effect a net exercise of an option without tendering
shares of the Company's stock as payment for the option. In such an event, the
participant would be deemed to have paid for the exercise of the option with
shares of the Company's stock and would receive from the Company a number of
shares equal to the difference between the shares that would have been tendered
and the number of options exercised.
The Company's Board of Directors and its Compensation Committee (presently
consisting of Edward S. Adams, Jr. and Walter E. Kellogg III, both of whom are
outside directors) believe that these changes are important to permit the
Company to attract and retain officers, directors, key employees, advisors and
consultants, to encourage stock ownership by employees and management and to
give the Committee flexibility in administering the Stock Option Plan to provide
incentives and promote the financial success and progress of the Company.
DESCRIPTION OF THE STOCK OPTION PLAN
ADMINISTRATION
The Stock Option Plan is presently administered by the Compensation
Committee of the Company's Board of Directors (the "Committee"). If the
proposed amendments are approved, the Stock Option Plan could in the future be
administered by the Board of Directors if and to the extent such administration
is consistent with applicable law. The Committee presently consists of Messrs.
Adams and Kellogg. Subject to the Stock Option Plan, the Committee has the
authority to determine to whom stock options and stock appreciation rights may
be granted, the time or times at which options and rights are granted, the
number of shares covered by each such grant, and the duration of the options and
rights. In addition, the Company will withhold or require the payment by
participant of any state, federal or local taxes resulting from the exercise of
an option or stock appreciation right, provided that, to the extent permitted by
law, the Committee may in its discretion, permit some or all of such withholding
obligation to be satisfied by the delivery by the participant of, or the
retention by the Company of, shares of its Common Stock. All decisions and
interpretations made by the Committee are binding and conclusive on all
participants in the Stock Option Plan.
Prior to the proposed amendments, all members of the Committee were
required to be "disinterested persons" as that term had been defined in Rule
16b-3 under the Exchange Act. Insofar as Rule 16b-3 has been amended to delete
this requirement, the Stock Option Plan is also proposed to be amended to remove
the requirement. In addition, the Stock Option Plan is being amended to permit
the Board of Directors to administer the Stock Option Plan if and to the extent
that such administration would be consistent with applicable law.
UNDERLYING SECURITIES
The securities underlying stock options and stock appreciation rights under
the Stock Option Plan are shares of the Company's $.001 par value Common Stock.
Pursuant to the Stock Option Plan, the maximum number of shares of Common Stock
that may be issued upon exercise or payment will not exceed 750,000 shares. If
any options granted under the Stock Option Plan are surrendered, or for any
other reason cease to be exercisable in whole or in part, the shares as to which
the option ceases to be exercisable are available for options to be granted to
the same or other participants under the Stock Option Plan, except to the extent
that an option is deemed surrendered by the exercise of a tandem stock
appreciation right and that right is paid by the Company in stock in which event
the shares issued in satisfaction of the right are not available for new options
or stock appreciation rights under the Stock Option Plan.
The market value of the total shares authorized as of February 21, 1997 was
$1,687,500.
ELIGIBLE EMPLOYEES AND OTHERS
Officers, directors, and employees of the Company and advisors and
consultants to the Company are eligible to receive options and stock
appreciation rights except that (i) incentive stock options ("ISOs") may only be
granted to employees of the Company (including officers and directors who are
employees) or its subsidiaries and (ii) advisors and consultants are eligible
for grants only if they provide bona fide services not rendered in connection
with the offer or sale of securities or in a capital-raising transaction. The
Committee's discretion in granting options or stock appreciation rights to its
members is limited. See "Formula Grants to Committee Members" below. No
participant may be granted more than 250,000 options under the Stock Option
Plan.
As of February 21, 1997, the Company has approximately 208 employees and
other persons eligible to receive grants under the Stock Option Plan.
FORMULA GRANTS TO COMMITTEE MEMBERS
On June 30 of each year each member of the Committee receives an automatic
grant of ten year, fully vested, nonqualified stock options for 500 shares for
every meeting of the Board of Directors or a committee thereof attended in
person by the member in the twelve months preceding June 30, exercisable at the
fair market value of the stock determined in accordance with the Stock Option
Plan (see "Option Price and Duration" below) based on a valuation period of 30
days. Upon the approval of the proposed amendments, the Committee would have
discretion in granting options or stock appreciation rights to members of the
Committee only to the extent permitted by applicable law.
Prior to the proposed amendments, the fair market value on the date of
grant was determined by reference to a single quoted price on June 30 of each
year and the Committee had no discretion in granting options or stock
appreciation rights to members of the Committee.
PLAN BENEFITS
Set forth below in tabular form are the benefits or amounts received or to
be received by or allocated to each of the named persons or groups under the
Stock Option Plan during fiscal 1997. The Committee or the Board of Directors
determines the number of stock options and stock appreciation rights which may
be granted to officers, directors, and employees of, and advisors and
consultants to, the Company (the "eligible persons") under the Stock Option
Plan. The number of stock options and stock appreciation rights to be granted
is entirely in the discretion of the Committee or the Board of Directors, except
for the two outside Directors who are eligible to receive stock options through
the provisions for automatic grants to Committee members for meetings attended
described above. See "Formula Grants to Committee Members." Other than the
grants already made in fiscal 1997 to certain executive officers of the Company,
the benefits or amounts to be received by or allocated to the eligible persons
in fiscal 1997 and future years are not determinable.
STOCK OPTION PLAN
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF SHARES
William A. Clymor, Chairman of the -0- 250,000
Board and Chief Executive Officer(2)
Jerome M. Hause, President and -0- 152,420
Chief Operating Officer(3)
Warren F. Mack, Senior Vice -0- 20,500
President(4)
Executive Officer Group (5 persons)(5) -0- 456,520
Non-Executive Officer Director
Group (5 persons)(6) -0- 3,000
Nominee for Director Group (7 persons)(7) -0- 405,420
Associate of Director, Executive
Officer or Nominee Group (0 persons) -0- -0-
5% or More Recipient Group (0 persons) -0- -0-
Non-Executive Officer Employee
Group (205 persons) -0- 8,200
- ----------------------
(1) All options have been granted at not less than the fair market value on the
date of grant. The dollar value to the grantee is solely dependent on the
increase in the stock price subsequent to the date of grant.
(2) Mr. Clymor was granted 250,000 options in fiscal 1994 which are subject to
a vesting schedule.
(3) Mr. Hause was granted 70,000 options in fiscal 1994, 62,420 options in
fiscal 1996 and 20,000 options in fiscal 1997, 90,000 of which are subject
to a vesting schedule.
(4) Mr. Mack was granted 10,500 options in fiscal 1995 and 10,000 options in
fiscal 1997, 10,000 of which are subject to a vesting schedule.
(5) In addition to Messrs. Clymor, Hause and Mack, two other executive officers
were granted 13,600 options in fiscal 1996 and 20,000 in fiscal 1997,
20,000 of which are subject to a vesting schedule.
(6) Mr. Cole was granted 2,000 options in fiscal 1995 and 1,000 options in
fiscal 1997.
(7) Includes Messrs. Clymor, Hause and Cole.
OPTION PRICE AND DURATION
Upon the approval of the proposed amendments, for nonqualified stock
options, the option price may be less than the fair market value of the stock on
the date of grant, but in no event will the option price be less than 50% of the
fair market value of the stock on the date of the grant. For ISOs, the option
price is equal to 100% of the fair market value of the stock on the date the
option is granted; provided, however, in the case of ISOs granted to employees
holding more than 10% of the total combined voting power of all classes of stock
of the Company, the option price is 110% of the fair market value of the Common
Stock on the date of grant.
Pursuant to the proposed amendments, "fair market value" means (a) if there
is an established market for the Company's Common Stock on a stock exchange, in
an over-the-counter market or otherwise, the mean of the highest and lowest
quoted selling prices on the valuation date, or (b) if there were no such sales
on the valuation date, then in accordance with Treas. Reg. Sec. 20.2031-2 or
successor regulations. Unless otherwise specified by the Committee at the time
of grant or in the Plan (as in the case of automatic grants to Committee
members), the valuation date for purposes of determining fair market value is
the date of grant. The Committee may, however, specify in any grant of an
Option or Stock Appreciation Right that, instead of the date of the grant, the
valuation date shall be a valuation period of up to ninety (90) days prior to
the date of grant, and fair market value for purposes of such grant shall be the
average over the valuation period of the mean of the highest and lowest quoted
selling prices on each date on which sales were made in the valuation period.
Prior to the proposed amendments, the exercise price per share of all
options granted under the Stock Option Plan was always the fair market value of
the Common Stock on a single date, the grant date.
Unless otherwise prescribed by the Committee or the Stock Option Plan,
options expire ten (10) years from the date of grant, or in the case of ISOs
granted to employees holding more than 10% of the total combined voting power of
all classes of stock of the Company, five (5) years from the date of grant.
EXERCISE OF OPTIONS AND PAYMENT FOR STOCK
Options are exercisable in accordance with the terms and conditions of the
grant to the participant. The exercise price of options may be paid in cash or
in shares of the Company's Common Stock (valued at the fair market value of the
shares on the date of exercise) or by a combination thereof. If the proposed
amendments are approved, the Committee or the Board of Directors may elect to
permit a participant to effect a net exercise of an option without tendering
shares of the Company's stock as payment for the option. In such an event, the
participant would be deemed to have paid for the exercise of the option with
shares of the Company's stock and would receive from the Company a number of
shares equal to the difference between the shares that would have been tendered
and the number of options exercised.
Prior to the proposed amendments, a participant who desired to use shares
of the Company's stock in payment of the exercise price for the option being
exercised was required to tender a stock certificate for the appropriate number
of shares of the Company's stock sufficient to pay the exercise price.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted by the Committee only in
connection with an option granted under the Stock Option Plan and any rights so
granted will be alternative to the related option. A stock appreciation right
entitles its holder to receive the excess of the fair market value (at the date
of exercise) of a share of Common Stock over the option price provided for in
the related option.
EXERCISE OF STOCK APPRECIATION RIGHTS
A stock appreciation right is exercisable at the same time or times that
the related option is exercisable. Exercise of a stock appreciation right is
effected by written notice to the Company. The Company may pay the stock
appreciation right in cash or shares of Common Stock in its sole discretion.
The exercise of a stock appreciation right automatically results in the
cancellation of the related option on a share-for-share basis.
NONTRANSFERABILITY
During a participant's lifetime, an option may be exercisable only by the
participant and options granted under the Stock Option Plan may not be
transferred except by will or the applicable laws of descent and distribution.
AMENDMENT, SUSPENSION AND TERMINATION
The Committee may at any time amend, suspend or terminate the Stock Option
Plan, except that any such amendment cannot impair any rights or obligations
under any option or stock appreciation right previously granted under the Stock
Option Plan. Shareholder approval is required for any amendment which (i)
increases the number of shares reserved to the Stock Option Plan or (ii) is
required to be approved by shareholders under applicable law.
Prior to the proposed amendments, shareholder approval was also required
for any amendment which materially modified the benefits to participants or the
eligibility requirements for grants under the Stock Option Plan. In addition,
the Stock Option Plan previously included a limit on the number of amendments to
the Committee's formula grants which had been required under Rule 16b-3.
FEDERAL INCOME TAX CONSEQUENCES
(1) INCENTIVE STOCK OPTIONS. The following general rules are applicable
for Federal income tax purposes under existing law to employees of the Company
who receive and exercise ISOs granted under the Stock Option Plan:
1. Generally, no taxable income results to the optionee upon the
grant of an ISO or upon the issuance of shares to him or her upon exercise of
the ISO.
2. No tax deduction is allowed to the Company upon either grant or
exercise of an ISO under the Stock Option Plan.
3. If shares acquired upon exercise of an ISO are not disposed of
prior to the later of (i) two years following the date the option was granted or
(ii) one year following the date the shares are transferred to the optionee
pursuant to the exercise of the Option, the difference between the amount
realized on any subsequent disposition of the shares and the exercise price will
generally be treated as long-term gain or loss to the optionee.
4. If shares acquired upon exercise of an ISO are disposed of before
the expiration of one or both of the requisite holding periods (a "disqualifying
disposition"), then in most cases the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the option over the
exercise price or (ii) the actual gain on disposition, will be treated as
compensation to the optionee and will be taxed as ordinary income in the year of
such disposition.
5. In any year that an optionee recognizes compensation income on a
disqualifying disposition of shares acquired by exercising an ISO, the Company
will generally be entitled to a corresponding deduction for income tax purposes.
6. Any excess of the amount realized by the optionee as the result
of a disqualifying disposition over the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be treated
as either long-term or short-term capital gain, depending upon the time elapsed
between receipt and disposition of such shares.
7. The bargain element at the time of exercise of an ISO, i.e., the
amount by which the fair market value of the Common Stock acquired upon exercise
of the ISO exceeds the exercise price, may be taxable to the optionee under the
"alternative minimum tax" provisions of the Internal Revenue Code (the "Code").
(2) NONQUALIFIED OPTIONS. Nonqualified Options are taxed in accordance
with Section 83 of the Code and the Regulations issued thereunder. The
following general rules are applicable to United States holders of such options
and to the Company for Federal income tax purposes under existing law:
1. The optionee does not realize any taxable income upon the grant
of a Nonqualified Option, and the Company is not allowed a business expense
deduction by reason of such grant.
2. The optionee will recognize ordinary compensation income at the
time of exercise of a Nonqualified Option in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over the
exercise price. The Company will require employees to make appropriate
arrangements for the withholding of taxes on this amount.
3. When the optionee sells the shares, he or she will recognize a
capital gain or loss in an amount equal to the difference between the amount
realized upon the sale of the shares and his or her basis in the shares (i.e.,
the exercise price plus the amount taxed to the optionee as compensation
income). If the optionee holds the shares for longer than one year, this gain
or loss will be a long-term capital gain or loss.
4. In general, the Company will be entitled to a tax deduction in
the year in which compensation income is recognized by the optionee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO THE
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was not
aware of any other matter to be presented at the Meeting other than as set forth
herein. However, if any other matters are properly brought before the Meeting,
the shares represented by valid Proxies will be voted with respect to such
matters in accordance with the judgment of the persons voting them.
Under Colorado law, unless otherwise provided in the Company's Articles of
Incorporation, for the election of directors, of the shares represented in
person or by proxy at the meeting and entitled to vote, that number of
candidates equaling the number of directors to be elected, having the highest
number of votes cast in favor of their election, are elected to the board of
directors. For the ratification of auditors, of the shares represented in
person or by proxy at the meeting and entitled to vote, the votes cast favoring
the ratification must exceed the votes opposing it. The Company's Articles of
Incorporation do not require a greater or lesser vote. Abstentions and broker
non-votes will be counted for purposes of establishing a quorum only. Only
those votes cast for election of directors and ratification will be counted as
votes in favor or affirmative votes.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended October 31, 1996
accompanies this Proxy Statement. The audited financial statements of the
Company are included in such Annual Report. Copies of the Form 10-KSB for the
fiscal year ended October 31, 1996 and the exhibits thereto are available from
the Company upon written request of a shareholder to Jerome M. Hause, President,
10550 East 54th Avenue, Unit E, Denver, Colorado 80239 and payment of the
Company's out-of-pocket expenses.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN APRIL 1998
Any proposal from a Shareholder intended to be presented at the Company's
Annual Meeting of Shareholders to be held in April 1998, must be received at the
offices of the Company, 10550 East 54th Avenue, Unit E, Denver, Colorado 80239
no later than October 31, 1997, in order to be included in the Company's proxy
statement and proxy relating to that meeting.
Denver, Colorado JEROME M. HAUSE
February 28, 1997 PRESIDENT
APPENDIX
CARLYLE GOLF, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William A. Clymor and Jerome M. Hause, each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote as designated below, all the shares of Common Stock of
Carlyle Golf, Inc. held of record by the undersigned on February 3, 1997, at the
Annual Meeting of Shareholders to be held on April 4, 1997 or any adjournment
thereof.
1. ELECTION OF SEVEN DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed below
William A. Clymor Edward S. Adams, Jr.
W. Clayton Cole Walter E. Kellogg III
Kenneth R. LaBounty Laurence H. Anton
Jerome M. Hause
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE,
CROSS OUT THAT NOMINEE'S NAME ABOVE.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE YEAR ENDING OCTOBER 31,
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE CERTAIN AMENDMENTS TO THE STOCK OPTION AND STOCK
APPRECIATION RIGHTS PLAN TO CONFORM WITH RECENT AMENDMENTS TO SEC RULE 16b-3,
AND TO PERMIT GREATER FLEXIBILITY IN THE ADMINISTRATION OF THE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3. THIS PROXY CONFERS DISCRETIONARY AUTHORITY
IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement furnished herewith.
Dated: ------------------, 1997
--------------------------------------------
Signature
--------------------------------------------
Signature if held jointly
Signature(s) should agree with the name(s) stenciled
hereon. Executors, administrators, trustees,
guardians and attorneys should indicate when
signing. Attorneys should submit powers of
attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING OR TO SUBMIT A LATER DATED REVOCATION OR AMENDMENT TO THIS PROXY ON
ANY OF THE ISSUES SET FORTH ABOVE.
APPENDIX
CARLYLE GOLF, INC.
STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
AS AMENDED FEBRUARY 21, 1997
1. PURPOSE. Carlyle Golf, Inc. (the "Company") hereby establishes the
Stock Option and Stock Appreciation Rights Plan (the "Plan"). The purpose of
the Plan is to advance the interests of the Company and its stockholders by
providing a means by which the Company shall be able to attract and retain
competent officers, directors, key employees, advisors and consultants by
providing them with an opportunity to participate in the increased value of the
Company which their effort, initiative, and skill have helped produce.
2. GENERAL PROVISIONS.
(a) The Plan will be administered by the Compensation Committee of
the Board of Directors of the Company (the "Committee"). The Committee shall be
comprised of two or more independent outside directors designated by the Board
of Directors. Notwithstanding the foregoing, if it would be consistent with all
applicable laws, including, without limitation, Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3") and the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder (including, without limitation, the regulations relating to Section
162(m) of the Code), then the Plan may be administered by the Board of
Directors, and if so administered all subsequent references to the Committee
shall be read as referring to the Board of Directors. The Committee shall have
full power to construe and interpret the Plan and to establish and amend rules
and regulations for its administration. Any action of the Committee with
respect to the Plan shall be taken by majority vote or by the unanimous written
consent of the Committee members.
(b) The Committee shall determine, in its sole discretion, which
participants under the Plan shall be granted stock options or stock appreciation
rights, the time or times at which options and rights are granted, as well as
the number of shares and the duration of the options or rights which are granted
to participants, provided, however, that no participant may be granted more than
250,000 options under the Plan.
(c) The Committee shall also determine any other terms and conditions
relating to options and rights granted under the Plan as the Committee may
prescribe, in its sole discretion.
(d) The Committee may, in its discretion, delegate its administrative
duties with respect to the Plan to an officer or employees, or to a committee
composed of officers or employees, of the Company.
(e) The Committee shall make all other determinations and take all
other actions which it deems necessary or advisable for the administration of
the Plan.
(f) 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.
(g) Notwithstanding anything to the contrary herein, the Committee
shall have no authority to determine the amount, price or timing of grants
hereunder to members of the Committee, unless, and only to the extent that, its
exercise of such authority is consistent with all applicable laws, including
without limitation Rule 16b-3.
3. ELIGIBILITY. Officers, directors and employees of the Company and
advisors and consultants to the Company shall be eligible to participate in the
Plan and to receive options and rights hereunder, provided, however, that: (1)
Incentive Stock Options may only be granted to employees (including officers and
directors who are employees) of the Company or its subsidiaries; and (2)
advisors and consultants shall be eligible for grants only if they provide bona
fide services that are not rendered in connection with the offer or sale of
securities or in a capital-raising transaction.
4. NUMBER OF SHARES SUBJECT TO PLAN. The aggregate number of shares of
the Company's $.001 par value Common Stock which may be granted to participants
shall be 750,000 shares (1,500,000 shares prior to the April 11, 1994 2 for 1
reverse stock split), subject to adjustment only as provided in Sections 5(h)
and 7 hereof. These shares may consist of shares of the Company's authorized
but unissued Common Stock or shares of the Company's authorized and issued
Common Stock reacquired by the Company and held in its treasury or any
combination thereof. For purposes of calculating the maximum number of shares
of Common Stock which may be issued under the Plan, (a) all shares issued
(including the shares, if any, withheld for tax withholding requirements) shall
be counted when cash is used as full payment for shares issued upon exercise of
an option; (b) only the shares issued (including the shares, if any, withheld
for tax withholding requirements) as a result of an exercise of appreciation
rights shall be counted; and (c) only the net shares issued (including the
shares, if any, withheld for tax withholding requirements) shall be counted when
shares of Common Stock are used as full or partial payment for shares issued
upon exercise of an option. If an option granted under this Plan is
surrendered, or for any other reason ceases to be exercisable in whole or in
part, the shares as to which the option ceases to be exercisable shall be
available for options to be granted to the same or other participants under the
Plan, except to the extent that an option is deemed surrendered by the exercise
of a tandem stock appreciation right and that right is paid by the Company in
stock, in which event the shares issued in satisfaction of the right shall not
be available for new options or rights under the Plan.
5. STOCK OPTION.
(a) TYPE OF OPTIONS. Options may be either Nonqualified Stock
Options or Incentive Stock Options as determined by the Committee in its sole
discretion and as reflected in the Notice of Grant issued by the Committee.
"Incentive Stock Option" means an option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code. "Nonqualified Stock
Option" means an option not intended to qualify as an Incentive Stock Option or
an Incentive Stock Option which is converted to a Nonqualified Stock Option
under Section 5(f) hereof.
(b) OPTION PRICE. The price at which options may be granted under
the Plan shall be determined as follows:
(i) For Incentive Stock Options the option price shall be equal
to 100% of the Fair Market Value of the stock on the date the option is granted;
provided, however, that Incentive Stock Options granted to any person who, at
the time such option is granted owns (as defined in Section 422 of the Code)
shares possessing more than 10% of the total combined voting power of all
classes of shares of the Company or its parent or subsidiary corporation, the
Option Price shall be 110% of the Fair Market Value.
(ii) For Nonqualified Stock Options the option price may be less
than the Fair Market Value of the 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 stock on the date of grant.
(iii) For purposes of this Plan, and except as otherwise set
forth herein, "Fair Market Value" shall mean: (a) if there is an established
market for the Company's Common Stock on a stock exchange, in an over-the-
counter market or otherwise, the mean of the highest and lowest quoted selling
prices on the valuation date, or (b) if there were no such sales on the
valuation date, then in accordance with Treas. Reg. Sec. 20.2031-2 or successor
regulations. Unless otherwise specified by the Committee at the time of grant,
or in the Plan (as in the case of automatic grants to Committee members), the
valuation date for purposes of determining Fair Market Value shall be the date
of grant. The Committee may, however, specify in any grant of an Option or
Stock Appreciation Right that, instead of the date of the grant, the valuation
date shall be a valuation period of up to ninety (90) days prior to the date of
grant, and Fair Market Value for purposes of such grant shall be the average
over the valuation period of the mean of the highest and lowest quoted selling
prices on each date on which sales were made in the valuation period, provided,
however, that if the Committee fails to specify a valuation period and there
were no sales on the date of grant then "Fair Market Value" shall be determined
as if the Committee had specified a thirty (30) day valuation period for such
determination, unless there is no established market for the Company's Common
Stock in which case the determination of "Fair Market Value" shall be in
accordance with clause (b) above.
(c) EXERCISE OF OPTION. The right to purchase shares covered by any
option or options under this Plan shall be exercisable only in accordance with
the terms and conditions of the grant to the participant. Such terms and
conditions may include a time period or schedule whereby some of the options
granted may become exercisable, or "vested", over time and certain conditions,
such as continuous service or specified performance criteria or goals, must be
satisfied for such vesting. The determination as to whether to impose any such
vesting schedule or requirements, and the terms of such schedule or
requirements, shall be within the sole discretion of the Committee. These terms
and conditions may be different for different participants so long as all
options satisfy the requirements of the Plan.
Options shall be paid for in cash or in shares of the Company's
Common Stock, which shares shall be valued at the Fair Market Value of the
shares on the date of exercise, or any combination thereof. The Committee may,
in its discretion and subject to ratification by the entire Board of Directors,
loan one or more participants all or a portion of the exercise price for up to
three (3) years with interest payable at the prime rate quoted in the Wall
Street Journal on the date of exercise. Members of the Committee may receive
such loans for the exercise of their options without Committee approval or Board
ratification.
The Committee may also permit a participant to effect a net
exercise of an option without tendering any shares of the Company's stock as
payment for the option. In such an event, the participant will be deemed to
have paid for the exercise of the option with shares of the Company's stock and
shall receive from the Company a number of shares equal to the difference
between the shares that would have been tendered and the number of options
exercised.
The Committee may also cause the Company to enter into
arrangements with one or more licensed stock brokerage firms whereby
participants may exercise options without payment therefor but with irrevocable
orders to such brokerage firm to immediately sell the number of shares necessary
to pay the exercise price for the option and the withholding taxes, if any, and
then to transmit the proceeds from such sales directly to the Company in
satisfaction of such obligations.
(d) DURATION OF OPTIONS. Unless otherwise prescribed by the
Committee or this Plan, or required by law, options granted hereunder shall
expire ten (10) years from the date of grant, subject to early termination as
provided in Section 5(f) hereof.
(e) INCENTIVE STOCK OPTIONS LIMITATIONS. In no event shall an
Incentive Stock Option be granted to any person who, at the time such option is
granted, owns (as defined in Section 422 of the Code) shares possessing more
than 10% of the total combined voting power of all classes of shares of the
Company or of its parent or subsidiary corporation, unless the option price is
at least 110% of the Fair Market Value of the stock subject to the Option, and
such Option is by its terms not exercisable after the expiration of five (5)
years from the date such Option is granted. Moreover, the aggregate Fair Market
Value (determined as of the time that option is granted) of the shares with
respect to which Incentive Stock Options are exercisable for the first time by
any individual employee during any single calendar year under the Plan shall not
exceed $100,000. Under the Code, in order to receive the full tax benefits of
an Incentive Stock Option, the employee must not resell or otherwise dispose of
the stock acquired upon exercise of the Incentive Stock Option until two (2)
years after the date the option was granted and one (1) year after it was
exercised.
(f) EARLY TERMINATION OF OPTIONS. In the event a participant's
employment with or service to the Company shall terminate as the result of total
disability or the result of retirement at 65 years of age or later, then any
options granted to such participant shall terminate and may no longer be
exercised three (3) months after the time such participant is no longer an
employee, officer or director of, or advisor or consultant to, the Company. If
the participant dies while employed or engaged by the Company, to the extent
that the option was exercisable at the time of the participant's death, such
option may, within one year after the participant's death, be exercised by the
person or persons to whom the participant's rights under the option shall pass
by will or by the applicable laws of descent and distribution; provided,
however, that an option may not be exercised to any extent after the expiration
of the option as originally granted. In the event a participant's employment or
engagement by the Company shall terminate as the result of any circumstances
other than those referred to above, whether terminated by the participant or the
Company, with or without cause, then all options granted to such participant
under this Plan shall terminate and no longer be exercisable as of the date of
such termination, provided, however, that if an employee with an Incentive Stock
Option terminates employment prior to its exercise, but after such termination
becomes or remains a non-employee officer, director, advisor or consultant
eligible for Nonqualified Stock Options hereunder, then the Incentive Stock
Option shall be converted to a Nonqualified Stock Option on the date the
Incentive Stock Option would otherwise have terminated.
An employee who is absent from work with the Company because of
total disability, as defined below, shall not by virtue of such absence alone be
deemed to have terminated such participant's employment with the Company. All
rights which such participant would have had to exercise options granted
hereunder will be suspended during the period of such absence and may be
exercised cumulatively by such participant upon his return to the Company so
long as such rights are exercised prior to the expiration of the option as
originally granted. For purposes of this Plan, "total disability" shall mean
disability, as a result of sickness or injury, to the extent that the
participant is prevented from engaging in any substantial gainful activity and
is eligible for and receives a disability benefit under Title II of the Federal
Social Security Act.
(g) AUTOMATIC GRANTS TO COMMITTEE MEMBERS. Except as provided in
Section 2(g) hereof, no action may be taken by the Committee to grant any
options to members of the Committee. Notwithstanding the foregoing and
irrespective of any action by the Committee, each member of the Committee on
June 30 of each year shall receive a grant of a ten year, fully vested,
nonqualified options to purchase shares of the Company's Common Stock at an
exercise price equal to the Fair Market Value in accordance with Section 5(b)
with a valuation period of thirty (30) days in an amount equal to 500 shares for
every meeting of the Board of Directors or a committee thereof attended in
person by the member in the twelve months preceding June 30. Each option
granted in accordance with this Section 5(g) shall include authorization for a
reload option in accordance with Section 6 of the Plan.
(h) RELOAD BY PAYMENT IN SHARES. To the extent that a participant
pays for the exercise of an option with shares of the Company's stock rather
than cash, the tendered shares shall be deemed to be added back to the Plan,
increasing the total number of shares subject to and reserved for the Plan by
that amount.
6. RELOAD OPTIONS. Concurrently with the award of options to any
participant under the Plan, the Committee may authorize reload options to
purchase for cash or shares a number of shares of Common Stock. The number of
reload options shall equal the number of shares of Common Stock used to exercise
the underlying option. The grant of a reload option shall be effective upon the
exercise of the underlying option, through the use of shares of Common Stock
held by the optionee for at least 12 months. Notwithstanding the fact that the
underlying option is an Incentive Stock Option, a reload option is not intended
to qualify as an incentive stock option (within the meaning of Section 422 of
the Code).
(a) RELOAD OPTION AMENDMENT. Each notice evidencing the grant of an
option shall state whether the Committee has authorized reload options with
respect to the underlying option. Upon the exercise of an underlying option
through the use of shares of Common Stock, the reload option will be evidenced
by an amendment to the notice of grant of the underlying option. Reload options
shall be subject to the terms and conditions specified in the notice of grant of
the underlying option and shall be subject to the terms and conditions of the
Plan.
(b) RELOAD OPTION PRICE. The option price per share of Common Stock
deliverable upon exercise of a reload option shall be the fair market value of a
share of Common Stock on the date of exercise of the underlying option.
(c) TERM AND EXERCISE. Each reload option is fully exercisable from
the date of exercise of the underlying option and shall remain exercisable for
the remaining option term of the underlying option. Reload options may be
exercised in the same manner as the underlying options in accordance with
Section 5(c) hereof.
(d) TERMINATION OF RELATIONSHIP. No additional reload options shall
be granted to participants in the Plan when an option or reload option is
exercised pursuant to the terms of the Plan following termination of the
participant's employment or the cessation of the participant's service to the
Company as a director, adviser or consultant.
7. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted by the Committee
under this Plan upon such terms and conditions as it may prescribe. A stock
appreciation right may be granted only in conjunction with an option previously
granted to or to be granted under this Plan. Each stock appreciation right
shall become nonexercisable and be forfeited if the related option is exercised.
Stock appreciation rights granted in conjunction with Incentive Stock Options
may only be granted in accordance with the Code and the IRS regulations relating
thereto. "Stock appreciation right" as used in this Plan means a right to
receive the excess of Fair Market Value, on the date of exercise, of a share of
the Company's Common Stock on which an appreciation right is exercised over the
option price provided for in the related option and is issued in consideration
of services performed for the Company or for its benefit by the participant.
Such excess is hereafter called "the differential."
(b) EXERCISE OF STOCK APPRECIATION RIGHTS. Stock appreciation rights
shall be exercisable and be payable in the following manner:
(i) A stock appreciation right shall be exercisable by the
participant at the same time or times that the option to which it relates could
be exercised. A participant wishing to exercise a stock appreciation right
shall give written notice of such exercise to the Company. Upon receipt of such
notice, the Company shall determine, in its sole discretion, whether the
participant's stock appreciation rights shall be paid in cash or in shares of
the Company's Common Stock or any combination of cash and shares and thereupon
shall, without deducting any transfer or issue tax, deliver to the person
exercising such right an amount of cash or shares of the Company's Common Stock
or a combination thereof with a value equal to the differential. The date the
Company receives the written notice of exercise hereunder is the exercise date.
The shares issued upon the exercise of a stock appreciation right may consist of
shares of the Company's authorized but unissued Common Stock or of its
authorized and issued Common Stock reacquired by the Company and held in its
treasury or any combination thereof. No fractional share of Common Stock shall
be issued; rather, the Committee shall determine whether cash shall be given in
lieu of such fractional share or whether such fractional share shall be
eliminated.
(ii) The exercise of a stock appreciation right shall
automatically result in the surrender of the related stock option by the
participant on a share for share basis. Likewise, the exercise of a stock
option shall automatically result in the surrender of the related stock
appreciation right. Shares covered by surrendered options shall be available
for granting further options under this Plan except to the extent and in the
amount that such rights are paid by the Company with shares of stock, as more
fully discussed in Section 4 hereof.
(iii) The Committee may impose any other terms and conditions
it prescribes upon the exercise of a stock appreciation right, which conditions
may include a condition that the stock appreciation right may only be exercised
in accordance with relevant provisions of the Code and regulations relating
thereto or with rules and regulations adopted by the Committee from time to
time.
(c) LIMITATION ON PAYMENTS. Notwithstanding any other provision of
this Plan, the Committee may from time to time determine, including at the time
of exercise, the maximum amount of cash or stock which may be given upon
exercise of any stock appreciation right in any year, provided, however, that
all such amounts shall be paid in full no later than the end of the year
immediately following the year in which the participant exercised such stock
appreciation rights. Any determination under this paragraph may be changed by
the Committee from time to time provided that no such change shall require the
participant to return to the Company any amount theretofore received or to
extend the period within which the Company is required to make full payment of
the amount due as the result of the exercise of the participant's stock
appreciation rights.
(d) EXPIRATION OR TERMINATION OF STOCK APPRECIATION RIGHTS.
(i) Each stock appreciation right and all rights and obligations
thereunder shall expire on the date on which the related option expires or
terminates.
(ii) A stock appreciation right shall terminate and may no longer
be exercised upon the expiration or termination of the related option.
8. CAPITAL ADJUSTMENTS. The aggregate number of shares of the Company's
Common Stock subject to this Plan, the maximum number of shares as to which
options may be granted to any one participant hereunder, and the number of
shares and the price per share subject to outstanding options, shall be
appropriately adjusted by the Committee for any increase or decrease in the
number of shares of Common Stock which the Company has issued resulting from any
stock split, reverse stock split, stock dividend, combination of shares or any
other change, or any exchange for other securities or any reclassification,
merger, reorganization, consolidation, redesignation, recapitalization, or
otherwise. Similar adjustments shall be made to the terms of stock appreciation
rights.
9. NONTRANSFERABILITY. An option or right granted under the Plan may not
be transferred except by will or the laws of descent and distribution and,
during the lifetime of the participant to whom the option or right was granted,
may be exercised only by such participant.
10. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN. The Board of Directors
or the Committee may at any time suspend or terminate the Plan and may amend it
from time to time in such respects as the Board of Directors or the Committee
may deem advisable in order that options and rights granted hereunder shall
conform to any change in the law, or in any other respect which the Board of
Directors or the Committee may deem to be in the best interests of the Company;
provided, however, that no such amendment shall, without the participant's
consent, alter or impair any of the rights or obligations under any option or
stock appreciation rights theretofore granted to him under the plan; and
provided further that no such amendment shall, without shareholder approval:
(a) increase the total number of shares available for grants of options or
rights under the Plan (except as provided by Section 8 hereof); or (b) effect
any change to the Plan which is required to be approved by shareholders by law,
including without limitation, the regulations promulgated under Section 422 and
162(m) of the Code. In addition, the provisions of Section 5(g) relating to the
amount, price and timing of grants to members of the Committee shall not be
amended more than once every six (6) months other than to comport with
applicable changes to the Code, the Employee Retirement Income Security Act or
rules thereunder.
11. EFFECTIVE DATE. The effective date of the Plan shall be April 11,
1994 and no stock option may be granted hereunder before that date. If the Plan
is not approved by the affirmative vote of a majority of the Company's
shareholders on or before April 10, 1995, then all options granted hereunder
shall be Nonqualified Stock Options.
12. TERMINATION DATE. Unless this Plan shall have been previously
terminated by the Committee, this Plan shall terminate on April 10, 2004, except
as to options and rights theretofore granted and outstanding under the Plan at
that date, and no stock option or stock appreciation rights shall be granted
after that date.
13. RESALE OF SHARES PURCHASED. All shares of stock purchased under this
Plan may be freely resold, subject to applicable state and federal securities
laws restricting their transfer. As a condition to exercise of an option, the
Company may impose various conditions, including a requirement that the person
exercising such option represent and warrant that, at the time of such exercise,
the shares of Common Stock being purchased are being purchased for investment
and not with a view to resale or distribution thereof. Under the Code, the
resale of shares purchased upon the exercise of Incentive Stock Options may
cause the employee to lose certain tax benefits if the employee fails to comply
with the holding period requirements described in Section 5(e) hereof.
14. ACCELERATION OF OPTIONS. 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 50% or more 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 is not consummated, but rather is terminated,
canceled or expires, the options granted pursuant to the Plan shall thereafter
be treated as if that agreement had never been entered into.
15. WRITTEN NOTICE REQUIRED; TAX WITHHOLDING. Any option or right granted
pursuant to the Plan shall be exercised when written notice of that exercise by
the participant has been received by the Company at its principal office and,
with respect to options, when such notice is received and full payment for the
shares with respect to which the option is exercised has been received by the
Company. Participant agrees that, to the extent required by law, the Company
shall withhold or require the payment by participant of any state, federal or
local taxes resulting from the exercise of an option or right, provided,
however, that to the extent permitted by law, the Committee may in its
discretion, permit some or all of such withholding obligation to be satisfied by
the delivery by the participant of, or the retention by the Company of, shares
of its Common Stock.
16. COMPLIANCE WITH SECURITIES LAWS. Shares shall not be issued with
respect to any option or right 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 or automated
quotation system upon which the shares may then be listed or traded, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance. Further, each participant must consent to the imposition of a
legend on the certificate representing the shares of Common Stock issued upon
the exercise of the option or right restricting their transferability as may be
required by law, the option, or the Plan.
17. WAIVER OF VESTING RESTRICTIONS BY COMMITTEE. Notwithstanding any
provision of the Plan, in the event a participant dies, becomes disabled,
retires as an employee, officer or director of, or as an advisor or consultant
to, the Company, the Committee shall have the discretion to waive any vesting
restrictions on the retiree's options, or the early termination of any
Nonqualified Stock Options held by the retiree.
18. REPORTS TO PARTICIPANTS. The Company shall furnish to each
participant a copy of the annual report sent to the Company's shareholders.
Upon written request, the Company shall furnish to each participant a copy of
its most recent annual report and each quarterly report to shareholders issued
since the end of the Company's most recent fiscal year.
19. NO EMPLOYEE CONTRACT. The grant of an option or right under the Plan
shall not confer upon any participant any right with respect to continuation of
employment by, or the rendition of advisory or consulting services to, the
Company, nor shall it interfere in any way with the Company's right to terminate
the participant's employment or services at any time.
20. STOCK OPTIONS HELD BY BULLOCK AND KNEEN. The Company previously
granted Messrs. Bullock and Kneen certain stock options dated September 29, 1992
as modified and amended pursuant to action by the Company's Board of Directors
on February 8, 1993. To the extent not inconsistent with the terms thereof,
these previously granted stock options shall be subject to the terms and
conditions of nonqualified options granted pursuant to the Plan.
Adopted by the Board of Directors of the Company on February 25, 1994 and
adopted by the shareholders of the Company on April 11, 1994.
Amended by the Compensation Committee of the Board of Directors of the Company
on February 21, 1997 with amendments to be approved by the shareholders of the
Company on April 4, 1997.
CARLYLE GOLF, INC.