Unassociated Document
B.H.
(Barney) Adams
Chairman
of the Board
Adams
Golf, Inc.
300
Delaware Avenue, Suite 572
Wilmington,
Delaware 19801
April
18,
2007
Dear
Adams Golf Stockholder:
I
am
pleased to invite you to Adams Golf’s Annual Meeting of
Stockholders. The meeting will be held at 9:00 a.m. central daylight
time on Tuesday, May 15, 2007 at Adams Golf, Ltd.’s offices, 2801 E. Plano
Parkway, Plano, Texas.
At
the
meeting, you and the other stockholders will be asked to (1) re-elect three
directors to the Adams Golf Board and (2) ratify the appointment of KBA Group
LLP as our independent auditors for the current fiscal year. You will
also have the opportunity to ask questions about our business. You
will find other detailed information about Adams Golf and its operations,
including its audited consolidated financial statements, in the enclosed Annual
Report.
We
hope
you can join us on May 15th. Whether
or not you can attend, please read the enclosed Proxy Statement. When
you have done so, please mark
your
votes on the enclosed proxy, sign and
date the proxy, and
return
it to us
in the enclosed envelope. Your vote is important, so please return
your proxy promptly.
Yours
truly,
B.H.
(Barney) Adams
Adams
Golf, Inc.
300
Delaware Avenue, Suite 572
Wilmington,
Delaware 19801
April
18,
2007
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held May 15, 2007
Adams
Golf will hold its Annual Meeting of Stockholders at the principal executive
offices of Adams Golf, Ltd., 2801 E. Plano Parkway, Plano, Texas, 75074 on
Tuesday, May 15, 2007 at 9:00 a.m. central daylight time.
We
are
holding this meeting:
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·
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to
re-elect three Class III directors to serve until the 2010 Annual
Meeting
of Stockholders; and
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·
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to
ratify the appointment of KBA Group LLP as our independent auditors
for
the year ending December 31, 2007.
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Your
Board of Directors has selected March 23, 2007 as the record date for
determining stockholders entitled to vote at the meeting. A list of
stockholders on that date will be available for inspection at Adams Golf, Ltd.,
2801 East Plano Parkway, Plano, Texas for at least ten days before the
meeting.
This
Notice of Annual Meeting, Proxy Statement, Proxy and Adams Golf’s 2006 Annual
Report to Stockholders are being distributed on or about April 18,
2007.
By
Order
of the Board of Directors,
Eric
T.
Logan
Secretary
ADAMS
GOLF, INC.
Proxy
Statement
for
the
Annual
Meeting of Stockholders
to
be
held
May
15,
2007
This
Proxy Statement and Form of Proxy are being distributed on or about April 18,
2007
TABLE
OF CONTENTS
Proxy
Statement
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1
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Proposal
No. 1 - Election of Directors
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6
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Corporate
Governance
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8
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Certain
Relationships and Related Party Transactions
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9
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Board
Structure and Committee Membership
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9
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Director
Nomination Process
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14
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Compensation
Discussion and Analysis
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17
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Compensation
Committee Report
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27
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Executive
Compensation
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28
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Director
Compensation
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33
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Common
Stock Ownership of Certain Beneficial Owners, Directors and Executive
Officers
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36
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Proposal
No. 2 - Ratification of Independent Registered Public Accounting
Firm
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38
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Audit
Committee Report
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38
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Additional
Information
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40
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Please
see the back cover of this Proxy Statement for directions to the Annual
Meeting.
PROXY
STATEMENT
FOR
THE 2007 ANNUAL MEETING OF STOCKHOLDERS
The
Board
of Directors (the “Board”) of Adams Golf, Inc. is soliciting proxies for the
Annual Meeting of Stockholders. You are receiving a proxy statement because
you
own shares of Adams Golf common stock that entitle you to vote at the meeting.
By use of a proxy, you can vote whether or not you attend the meeting. The
proxy
statement describes the matters we would like you to vote and provides
information on those matters so you can make an informed decision.
This
proxy statement includes information relating to the proposals to be voted
on at
the meeting, the voting process, compensation of our directors and most highly
paid officers, and other required information.
In
this
proxy statement, unless otherwise indicated, the words “the Company,” “Adams
Golf,” “we,” “our” and “us” refer to Adams Golf, Inc.
Purpose
of the Annual Meeting
The
purpose of the Annual Meeting is to elect directors, to ratify the Audit
Committee’s selection of the independent registered public accounting firm, and
to transact such other business as may properly come before the Annual
Meeting.
Annual
Meeting Admission
You
are
invited to attend the meeting in person. The meeting will be held at 9:00 a.m.
central daylight time on Tuesday, May 15, 2007 at our offices at 2801 E. Plano
Parkway, Plano, Texas.
Quorum
A
majority of the outstanding shares of our common stock must be represented
in
person or by proxy at the meeting to establish a quorum. Both abstentions and
broker non-votes are counted as present for determining the presence of a
quorum. Broker non-votes occur when you fail to provide voting instructions
for
shares you hold in “street name.” In that case, your broker may be authorized to
vote your shares on routine items but is prohibited from voting your shares
on
other matters. The “non-votes” on those other matters are known as “broker
non-votes.”
Stockholders
Entitled to Vote
Each
share of our common stock outstanding as of the close of business on March
23,
2007, the record date, is entitled to one vote per share at the Annual Meeting
on each matter properly brought before the meeting. As of that date, there
were
24,007,356 shares of common stock issued
and outstanding. This number does not include treasury shares, which are not
entitled to be voted at the meeting.
Adams
Golf stockholders hold their shares both through a stockbroker, bank, trustee,
or other nominee and directly in their own name. As summarized below, there
are
some distinctions between shares held of record and those owned
beneficially:
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·
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Stockholder
of Record
-
If your shares are registered directly in your name with Adams Golf’s
transfer agent, The Bank of New York, you are the record stockholder
of
those shares and these proxy materials are being sent directly to
you by
Adams Golf. As the stockholder of record, you have the right to grant
your
voting proxy directly to Adams Golf or to vote in person at the
meeting.
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·
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Beneficial
Owner
-
If your shares are held in a stock brokerage account, by a bank,
trustee,
or other nominee, you are considered to be the beneficial owner of
shares
held in street name and these proxy materials are being forwarded
to you
by your broker, trustee, or nominee who is considered the record
stockholder of those shares. As the beneficial owner, you have the
right
to direct your broker, trustee or nominee on how to vote and are
also
invited to attend the meeting. However, since you are not the stockholder
of record, you many not vote these shares in person at the meeting.
Your
broker, trustee, or nominee is obligated to provide you with a voting
instruction card for your use.
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Proposals
You are Asked to Vote on and the Board’s Voting
Recommendations
The
following proposals are scheduled to be voted on at the meeting. Our Board
recommends that you vote your shares as indicated below:
Proposal
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The
Board’s Voting Recommendation
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1.
The Election of Three Director Nominees
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“FOR”
Each
nominee to the Board
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2.
Ratification of Independent Registered Public Accounting
Firm
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“FOR”
Ratification
of the Independent Registered Public Accounting
Firm
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Other
than the proposals described in this proxy statement, the Board is not aware
of
any other matters to be presented for a vote at the Annual Meeting. If you
grant
a proxy, any of the persons named as proxy holders will have the discretion
to
vote your shares on any additional matters properly presented for a vote at
the
meeting. If any of our nominees is unavailable as a candidate for director,
the
proxy holders will vote your proxy for another candidate or candidates as they
may be nominated by the Board.
Required
Vote
The
nominees for election as directors at the Annual Meeting will be elected by
a
plurality of the votes cast at the meeting. This means that the director nominee
with the most votes for a particular slot is elected for that slot. Votes
withheld from one or more director nominees will have no effect on the election
of any director from whom votes are withheld.
The
approval of each other proposal requires the affirmative “FOR” vote of a
majority of those shares present and in person or represented by proxy at the
meeting and entitled to vote on the matter. If you are a beneficial owner and
you do not provide the stockholder of record with voting instructions, your
shares may constitute broker non-votes, as described in the section on page
1
entitled Quorum.
In
tabulating the voting result for any particular proposal, shares that constitute
broker non-votes will have no effect on the outcome of any vote.
Voting
Methods
If
you are a “stockholder of record,”
you may
vote your shares in person at the Meeting or by submitting your proxy. If you
hold your shares in “street name,” you must obtain a proxy from your broker,
banker, trustee or nominee, giving you the right to vote the shares at the
Meeting.
If
you are a “stockholder of record,”
you can
vote your proxy by mailing in the enclosed proxy card or over the telephone.
Please refer to the specific instructions set forth on the enclosed proxy
card.
If
you hold your shares in “street name,”
your
broker/banker/trustee/nominee will provide you with materials and instructions
for voting your shares.
Revoking
Your Proxy
You
may
revoke your proxy by doing one of the following:
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·
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by
sending a written notice of revocation to the Secretary of the Company
that is received prior to the Meeting, stating that you revoke your
proxy;
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by
signing a later-dated proxy card and submitting it so that it is
received
prior to the Meeting in accordance with the instructions included
in the
proxy card; or
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·
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by
attending the Meeting and voting your shares in
person.
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Counting
the Vote
In
the
election of directors, you may vote “FOR” all of the nominees or your vote may
be “WITHHELD” from one or more of the nominees. With respect to each proposal,
you may vote “FOR,” “AGAINST,” or “ABSTAIN.” If you sign your proxy card or
broker voting instructions card with no further instructions, your shares will
be voted in accordance with the recommendations of the Board.
Results
of the Vote
We
will
announce preliminary voting results at the meeting and publish final results
in
our Quarterly Report on Form 10-Q for the quarter ending June 30, 2007.
Delivery
of Proxy Materials
Security
and Exchange Commission rules now allow us to deliver a single copy of an annual
report and proxy statement to any household at which two or more stockholders
reside, if we believe the stockholders are members of the same family. This
rule
benefits both you and the Company. We believe it eliminates duplicate mailings
that stockholders living at the same address receive and it reduces our printing
and mailing costs. This rule applies to any annual reports, proxy statements,
proxy statements combined with a prospectus, or information statements. Each
stockholder will continue to receive a separate proxy card or voting instruction
card.
Your
household may have received a single set of proxy materials this year. If you
prefer to receive your own copy now or in future years, please request a
duplicate set by contacting Ms. Patty Walsh, Director, Investor Relations at
(972) 673-9000 or by mail at 2801 E. Plano Parkway, Plano, Texas
75074.
If
a
broker or other nominee holds your shares, you may continue to receive some
duplicate mailings. Certain brokers will eliminate duplicate account mailings
by
allowing stockholders to consent to such elimination, or through implied consent
if a stockholder does not request continuation of duplicate mailings. Since
not
all brokers and nominees may offer stockholders the opportunity this year to
eliminate duplicate mailings, you may need to contact your broker or nominee
directly to discontinue duplicate mailings.
List
of Stockholders
The
names
of stockholders of record entitled to vote at the Annual Meeting will be
available at the Annual Meeting for any purpose germane to the meeting. The
list
will be available between the hours of 9:00 am and 4:30 p.m. at our principal
executive offices at 2801 East Plano Parkway, Plano, Texas, by contacting Ms.
Patty Walsh, Director, Investor Relations.
Cost
of Proxy Solicitation
Adams
Golf will pay for the cost of preparing, assembling, printing, mailing and
distributing these proxy materials. In addition to mailing these proxy
materials, the solicitation of proxies or votes may be made in person, by
telephone, or by electronic communication by our directors, officers and
employees who do not receive any additional compensation for these solicitation
activities. We will also reimburse brokerage houses and other custodians,
nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to beneficial owners of stock.
Transfer
Agent
Our
Transfer Agent is The Bank of New York. All communications concerning record
stockholder accounts, including address changes, name changes, common stock
transfer requirements, and similar issues can be handled by contacting our
Transfer Agent at 800-524-4458 or on the internet at
www.stockbny.com.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Our
Board
of Directors is divided into three classes. One class of directors is elected
at
each Annual Meeting of Stockholders for a three-year term of
office.
The
directors elected at this meeting will serve until the Annual Meeting of
Stockholders held in 2010. Directors not up for election this year will continue
in office for the remainder of their terms.
The
Board
of Directors has nominated three directors to serve for a three-year term
expiring in 2010.
If
a
nominee is unavailable for election, proxy holders will vote for another nominee
proposed by the Board or, as an alternative, the Board may reduce the number
of
directors to be elected at the meeting.
The
Board
of Directors unanimously recommends a vote FOR the election of these director
nominees.
Directors
Up for Election in 2007 for Terms Expiring in
2010
Name
and Principal Occupation
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Age
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Director
Class
(Terms)
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Director
Since
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Other
Directorships
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B.H.
(Barney) Adams
Chairman
of the Board of the
Company
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68
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Class
III
(Exp.
2010)
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1987
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n/a
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Paul
F. Brown Jr.
Vice
President, Finance
and
Chief Financial Officer
of
Royal Holding Company, Inc.
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60
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Class
III
(Exp.
2010)
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1995
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n/a
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Mark
R. Mulvoy
Retired
Editor of Sports
Illustrated
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65
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Class
III
(Exp.
2010)
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1998
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n/a
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B.H.
(Barney) Adams
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Age 68, a director since 1987.
Mr
Adams founded Adams Golf in 1987 and has served as our Chairman of the Board
since that time. Mr. Adams served as our Chief Executive Officer from 1987
until
January 2002, and as our President from 1987 until August 2000. Mr. Adams is
the
inventor of the Tight Lies® Fairway Wood.
Paul
F. Brown Jr.
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Age 60, a director since August 1995.
Since
1990, Mr. Brown has been the Vice President, Finance and Chief Financial Officer
of Royal Holding Company, Inc., a privately owned investment company whose
primary business is in the exploration, development and production of crude
oil
and natural gas.
Mark
R. Mulvoy
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Age 65, a director since April 1998.
Mr.
Mulvoy is a retired executive of Sports
Illustrated
magazine
where he was employed from 1965 to 1996. He was Managing Editor of Sports
Illustrated
from
1984 through 1996 and Publisher from 1990 to 1992.
Directors
Continuing in Office
Name
and Principal Occupation
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Age
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Director
Class
(Term)
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Director
Since
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Other
Directorships
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Oliver
G. (Chip) Brewer III
President
and Chief Executive
Officer
of the Company
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43
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Class
II
(Exp.
2009)
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2000
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n/a
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Russell
L. Fleischer
Executive
in Residence
Golden
Gate Capital
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39
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Class
II
(Exp.
2009)
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2005
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n/a
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Stephen
R. Patchin
President
and Chief Executive
Officer
of Royal Oil and
Gas
Corp.
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48
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Class
I
(Exp.
2008)
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1993
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n/a
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Robert
D. Rogers
Retired
President, Chief
Executive
Officer and
Chairman
of the Board
of
Texas Industries, Inc.
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70
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Class
I
(Exp.
2008)
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2004
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Texas
Industries, Inc.
Con-Way,
Inc.
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Oliver
G. (Chip) Brewer III
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Age 43, a director since October 2000.
Mr.
Brewer has served as the President and Chief Executive Officer of Adams Golf
since January 2002. He was our President and Chief Operating Officer from August
2000 to January 2002 and our Senior Vice President of Sales and Marketing from
September 1998 to August 2000.
Russell
L. Fleischer
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Age 39, a director since February 2005.
Mr.
Fleischer has been an Executive in Residence for Golden Gate Capital since
September 2006. From December 2002 until September 2006, Mr. Fleischer was
the
Chief Executive Officer and a director of TriSyn Group, a privately held
software company. He was Vice President and Chief Financial Officer of Adams
Golf from November 2000 to December 2002.
Stephen
R. Patchin
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Age 48, a director since October 1993.
Mr.
Patchin has served as President and Chief Executive Officer of Royal Oil and
Gas
Corp., an oil and gas exploration and production company and wholly owned
subsidiary of Royal Holding Company, Inc., since June 1985 and as President
and
Chief Executive Officer of Royal Holding Company, Inc. since February
1990.
Robert
D. Rogers
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Age 70, a director since February 2004.
Mr.
Rogers has been a director of Texas Industries, Inc. since 1970, and was elected
as Chairman of the Board in October 2004. He retired from the position of
President and CEO of Texas Industries in May 2004, a position he had held since
1970. Mr. Rogers is also a director for Con-Way, Inc. (NYSE: CNW) and serves
on
that company’s finance committee. He is also a member of the Executive Board for
Southern Methodist University Cox School of Business.
CORPORATE
GOVERNANCE
Our
business, property and affairs are managed under the direction of our Board
of
Directors. Members of our Board are kept informed of our business through
discussions with our Chairman and Chief Executive Officer and other officers,
by
reviewing materials provided to them, by visiting our offices and production
facility, and by participating in meetings of the Board and its Committees.
The
Board of Directors is committed to good business practices, transparency of
financial reporting and sound corporate governance.
Executive
Sessions of Independent Directors
Independent
directors occasionally meet in executive sessions without management and may
or
may not select a director to facilitate the meeting. In 2006, our independent
directors held one such meeting.
Communication
with Directors
Stockholders
may communicate with the Independent Directors or Chairs of our Audit and
Compensation Committees on board-related issues by writing to the Committee
Chairs or to the outside directors as a group c/o Ms. Patty Walsh, Director,
Investor Relations at Adams Golf, 2801 E. Plano Parkway, Plano, Texas, 75074.
The envelope should clearly indicate the person or persons to whom the
communication should be forwarded.
Communications
will be distributed to the Board, or to any individual director or directors
as
appropriate, depending on the facts and circumstances outlined in the
communications. The Board of Directors has directed that certain items that
are
unrelated to the duties and responsi-bilities of the Board do not need to be
forwarded to our Directors, such as:
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junk
mail and mass mailings
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product
inquiries and suggestions
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resumes
and other forms of job inquiries
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·
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business
solicitation or advertisements
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In
addition, material that is unduly hostile, threatening, illegal or similarly
unsuitable will be excluded, with the provision that any communication that
is
filtered out must be available to any outside director upon
request.
Code
of Conduct
Adams
Golf has adopted a code of conduct that applies to all of our directors,
officers and employees. To obtain a copy of our Code of Conduct, please contact
Ms. Patty Walsh, Director, Investor Relations, c/o Adams Golf, 2801 E. Plano
Parkway, Plano, Texas, 75074.
Related
Third Party Transactions
We
do not
have a specific set of policies and procedures related to third party
transactions. Our published Code of Conduct, which is mentioned on page 8 and
is
found in our Employee
Information Guide,
governs
our decision-making around third party transactions. In general, related third
party transactions are infrequent in nature and are always disclosed to the
Board. If a related third party transaction affects a specific Board member,
that Board member will be recused from the voting with respect to the approval
of the third party transaction. In fiscal 2006, there were no third party
transactions that were reviewed for approval.
Our
Chairman, Barney Adams owns 60% of Plano Paper and Supply; Mr. Adams’ daughter,
Ms. Cindy Herington and son-in-law, Mr. Tom Herington each own 20% of Plano
Paper and Supply. In June 2005, Adams Golf, in an open bid process, selected
Plano Paper and Supply as a supplier of shipping boxes for our products. In
2006, we made total purchases of $232,124 from Plano Paper and
Supply.
Relationships
Two
adult
children of our Chairman, Barney Adams are employees of Adams Golf. Mr. Edwin
Adams serves as our General Counsel. In 2006, Edwin Adams received an annual
base salary of $131,950 and a performance bonus of $32,744. Ms. Cindy
Adams-Herington holds the position of Vice President, Advertising and Marketing
and received an annual base salary in 2006 of $159,135 and a performance bonus
of $78,409. Neither Edwin Adams nor Cindy Herington has employment contracts
or
change of control arrangements with us.
Director
Attendance at Annual Meeting of Stockholders
The
Company’s policy is that our Directors are expected to attend the Annual Meeting
of Stockholders unless extenuating circumstances prevent them from attending.
All of our then serving Directors attended last year’s Annual Meeting of
Stockholders.
BOARD
STRUCTURE AND COMMITTEE MEMBERSHIP
The
Board
is divided into three classes serving staggered three-year terms. The Board
has
seven Directors and two committees: the Audit Committee and the Compensation
Committee. The membership during fiscal 2006 and the function of each Committee
are described below.
During
fiscal 2006, the Board of Directors held four meetings. The Audit Committee
held
four meetings and the Compensation Committee held two meetings during fiscal
2006. All of our Directors attended at least 75% of the meetings of the Board
and all committees on which he served.
The
following chart shows the composition of the committees of the Board of
Directors and the number of meetings held by each committee during fiscal year
2006.
Director
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Audit
Committee
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Compensation
Committee
|
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Independent
Director
(1)
|
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B.H.
(Barney) Adams
|
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Paul
F. Brown Jr.
|
|
|
|
|
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Russell
L. Fleischer
|
|
X
|
|
|
|
X
|
Mark
R. Mulvoy
|
|
|
|
X
|
|
X
|
Stephen
R. Patchin
|
|
|
|
X
|
|
|
Robert
D. Rogers
|
|
X
|
|
|
|
X
|
Oliver
G. (Chip) Brewer III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2006 Meetings
|
|
4
|
|
2
|
|
|
(1)
Individuals who are independent directors in accordance with Nasdaq’s
independence standards
set forth in Rule 4200(a)(15).
Audit
Committee
The
Audit
Committee assists the Board in its oversight of the integrity of the Company’s
financial statements, compliance with legal and regulatory requirements, the
qualifications, independence and performance of the Company’s independent
auditor, and the performance of the Company’s internal auditing department. In
addition, the Audit Committee:
|
·
|
Reviews
the annual audited and quarterly consolidated financial
statements;
|
|
·
|
Reviews
the Company’s financial reporting process and disclosure and internal
controls and procedures, including major issues regarding accounting
principles and financial statement presentation, and critical accounting
policies to be used in the consolidated financial
statements;
|
|
·
|
Appoints,
oversees and approves compensation of the independent
auditor;
|
|
·
|
Reviews
with the independent auditor the scope of the annual audit, including
fees
and staffing, and approves all audit and permitted non-audit services
provided by the auditor;
|
|
·
|
Reviews
findings and recommendations of the independent auditor and management’s
response to the recommendations of the independent auditor;
and
|
|
·
|
Discusses
policies with respect to risk assessment and risk management, the
Company’s major risk exposures, and the steps management has taken to
monitor and mitigate such
exposures.
|
The
Board
of Directors has determined that our Audit Committee members are independent
and
both members qualify under the Nasdaq listing standards as “audit committee
financial experts” within the meaning of the rules of the Securities and
Exchange Commission. The charter of the Audit Committee is available at
www.adamsgolf.com under Corporate
- Corporate Governance.
Compensation
Committee
The
primary functions of the Compensation Committee are to review and refine our
executive compensation philosophy and guiding principles to reflect Adams Golf’s
mission, values and long-term strategic objectives and to adopt and administer
executive compensation programs in a manner that furthers the interests of
our
stockholders.
None
of
the members of the Compensation Committee (i) was an officer or employee of
the
Company during the fiscal year 2006, or (ii) had any relationship requiring
disclosure by the Company under the rules of the Securities and Exchange
Commission requiring disclosure of certain relationships and related party
transactions. None of our executive officers serves as a member of the board
of
directors or compensation committee of any entity that has one or more executive
officers serving on our Board of Directors or Compensation Committee.
Steven
R.
Patchin and Mark R. Mulvoy are the members of the Compensation Committee. Mr.
Patchin serves as the Compensation Committee Chairman. Mr. Mulvoy qualifies
as
an independent director under the Nasdaq listing standards. The Compensation
Committee does not currently operate under a Compensation Committee
charter.
Role
of Committee
The
fundamental responsibilities of our Compensation Committee are:
|
·
|
to
adopt, review and refine the Company’s executive compensation philosophy
and guiding principles that reflect Adams Golf’s mission, values and
long-term strategic objectives;
|
|
·
|
to
administer Adams Golf’s executive compensation program in a manner that
furthers Adams Golf’s strategic goals and serves the interest of our
stockholders;
|
|
·
|
to
establish compensation-related performance objectives for executive
officers that support our strategic
plan;
|
|
·
|
to
evaluate the job performance of the Chief Executive Officer in light
of
those goals and objectives;
|
|
·
|
to
determine the total compensation levels of the senior executive officers
and to allocate total compensation among the various components of
executive pay;
|
|
·
|
to
make recommendations to the Board of Directors regarding incentive
and
equity-based compensation plans;
and
|
|
·
|
to
recommend to the Board the compensation arrangements with non-employee
directors.
|
Committee
Meetings
Our
Compensation Committee meets as often as necessary to perform its duties and
responsibilities. We held two meetings during fiscal year 2006.
We
receive and review materials in advance of each meeting. These materials are
compiled by management and include information that management believes will
be
helpful to the Committee as well as materials that we have specifically
requested. Depending on the agenda for the particular meeting, these materials
may include:
|
·
|
financial
reports on year-to-date performance versus budget and compared to
prior
year performance;
|
|
·
|
calculations
and reports on levels of achievement of individual and corporate
performance objectives;
|
|
·
|
information
on the executive officers’ stock ownership and option
holdings;
|
The
Compensation Committee Process
A
Continuing Process
Although
many compensation decisions are made in the fourth quarter of the fiscal year,
our compensation planning process neither begins nor ends with any particular
Committee meeting. Compensation decisions are designed to promote our
fundamental business objectives and strategy. Business and succession planning,
evaluation of management performance and consideration of the business
environment are year-round processes.
Management’s
Role in the Compensation-Setting Process
Management
plays a significant role in the compensation-setting process. The most
significant aspects of management’s role are:
|
·
|
evaluating
employee performance;
|
|
·
|
establishing
business performance targets and
objectives;
|
|
·
|
recommending
salary levels and option awards;
and
|
|
·
|
preparing
meeting information for each Compensation Committee
meeting.
|
The
Chief
Executive Officer also participates in the Committee meetings, at the
Committee’s request, to provide:
|
·
|
background
information regarding Adams Golf’s strategic
objectives
|
|
·
|
his
evaluation of the performance of the senior executive officers;
and
|
|
·
|
compensation
recommendations as to senior executive officers other than
himself.
|
Committee
Advisors
The
Compensation Committee has the direct authority to hire and fire our advisors
and compensation consultants, and to approve their compensation by Adams Golf,
who is obligated to pay our advisors and consultants. These advisors report
directly to the Compensation Committee. We have in the past used compensation
consultants to help give direction to the Compensation Committee regarding
executive pay. We do not currently have an engagement with a specific
compensation consultant but may decide to use one again in the future.
Additional information regarding our use of compensation consultants can be
found on page 19.
Annual
Evaluation
We
meet
as required to evaluate the performance of the Named Executive Officers (the
“Officers”) -- our President and Chief Executive Officer and our Chief Financial
Officer -- to determine their annual bonuses for the current year, to establish
their annual performance objectives for the next year, and to consider and
approve any grants to them of equity incentive compensation.
Performance
Objectives
Our
process begins with establishing corporate performance objectives for Adams
Golf
in the fourth quarter of each fiscal year for the next fiscal year. We engage
in
an active dialogue with the Chief Executive Officer concerning strategic
objectives and performance targets. We review the appropriateness of the
financial measures used in incentive plans and the degree of difficulty in
achieving specific performance targets. Corporate performance objectives are
typically established on the basis of targeted revenue growth and earnings
before interest, depreciation and amortization (EBITDA) metrics for Adams
Golf.
Benchmarking
We
do not
believe that it is appropriate to establish compensation levels based primarily
on benchmarking. We do believe that information regarding pay practices at
other
companies is useful in the respect that we recognize that our compensation
practices must be competitive in the marketplace.
Accordingly,
we review compensation levels for our Officers against compensation levels
at
companies that have been identified by our compensation consultant, when we
have
engaged a consultant in the past.
Targeted
Compensation Levels
Together
with performance objectives, we establish targeted total compensation levels
(i.e., maximum achievable compensation) for each of the Officers. We also
consider historical compensation levels, competitive pay practices at comparable
companies, and the relative compensation levels among the Company’s Officers. We
may also consider industry conditions, corporate performance versus a peer
group
of companies, and the overall effectiveness of our compensation program in
achieving desired performance levels.
Performance
Pay
As
targeted total compensation levels are determined, we also determine the portion
of total compensation that will be contingent, performance-based pay.
Performance-based pay generally includes cash bonuses for achievement of
specified performance objectives and option-based compensation, the value of
which is dependent upon long-term appreciation in stock price.
DIRECTOR
NOMINATION PROCESS
We
do not
currently have a standing nominating committee or a charter with respect to
the
nominating process. Our Board of Directors believes that it is not necessary
to
have such a committee because the Board’s size and composition allow it to
adequately identify and evaluate qualified candidates for directors. However,
our Board of Directors may consider appointing such a committee at some time
in
the future. Currently, all of our directors participate in the consideration
of
director nominees including four directors who are not independent in accordance
with the Nasdaq independence standards set forth in Rule 4200(a)(15). Subject
to
the rights of the holders of preferred stock or any other class of our capital
stock (other than common stock), or any series of the foregoing that has been
outstanding, nominations for the election of directors may be made by our Board
of Directors, any committee appointed by our Board, or by any stockholder
entitled to vote for the election of directors. If one or more positions on
the
Board of Directors were to become vacant for any reason, the vacancy would
be
filled by the Board of Directors, and all directors would participate in the
selection of a person to fill each such vacancy.
Our
Board
of Directors evaluates candidates based on financial literacy, knowledge of
our
industry or other background relevant to our needs, status as one of our
stockholders, “independence” for purposes of compliance with the rules of the
SEC and Nasdaq, moral character and willingness, ability and availability for
service. Aside from the qualities stated above, our Board does not have a set
of
minimum qualifications that must be met by director nominees.
We
have
not paid fees to any third party to assist in the process of identifying or
evaluating director candidates. Because we do not have a standing nominating
committee, this year’s nominees (all of whom are currently serving as directors)
were selected for re-election by our entire Board.
Nominations
by Stockholders at the Annual Meeting
Our
By-laws provide that stockholder proposals and director nominations by
stockholders may be made in compliance with certain advance notice,
informational and other applicable requirements. For a detailed description
of
our Annual Meeting advance notice requirements and our stockholder nomination
procedures, please see page 40 of this document.
EXECUTIVE
OFFICERS
Below
are
the names and ages of the executive officers of Adams Golf as of December 31,
2006 and a brief description of their prior experience and
qualifications.
Name
|
|
Age
|
|
Position
|
Oliver
G. (Chip) Brewer III
|
|
43
|
|
President
and Chief Executive Officer
|
Eric
T. Logan
|
|
41
|
|
Senior
Vice President and Chief Financial
Officer
|
Oliver
G. (Chip) Brewer III -
Please
see biography of Mr. Brewer on page 7.
Eric
T. Logan
-
Age
41.
Mr.
Logan has served as Senior Vice President and Chief Financial Officer of Adams
Golf since October 2003. He also serves as Secretary and Treasurer of the
Company. Mr. Logan was Chief Financial Officer of Daisytek International from
May 2003 to October 2003 and U.S. Chief Financial Officer of Daisytek
International from September 2002 to May 2003.
COMPENSATION
DISCUSSION AND ANALYSIS
Our
Compensation Discussion and Analysis addresses the following
topics:
|
·
|
the
members and role of our Compensation
Committee;
|
|
·
|
our
compensation-setting process;
|
|
·
|
our
compensation philosophy and policies regarding executive
compensation;
|
|
·
|
the
components of our executive compensation program;
and
|
|
·
|
our
compensation decisions for fiscal year 2006 and the first quarter
of
fiscal 2007.
|
In
this
Compensation
Discussion and Analysis
section,
the terms “we,” “our,” “us,” and the “Committee” refer to the Compensation
Committee of Adams Golf’s Board of Directors.
Compensation
Philosophy and Objectives
Our
compensation philosophy and objectives are intended to align the interests
of
management with those of our stockholders. The following principles influence
and guide our compensation decisions.
We
Focus on Results and Strategic Objectives
Our
compensation analysis begins with an examination of Adams Golf’s business plan
and strategic objectives. In analyzing Adams Golf’s business plan and strategic
objectives, the Compensation Committee may consider any of the
following:
|
·
|
Adams
Golf products to be launched in the fiscal
year;
|
|
·
|
the
competitive environment;
|
|
·
|
targeted
revenue growth rates;
|
|
·
|
targeted
profitability rates;
|
|
·
|
investments
in the current fiscal year, including, but not limited to, personnel,
marketing, tour pro investment and capital
expenditures;
|
|
·
|
customer
concentration and channel mix changes;
and
|
|
·
|
market
share data by product category.
|
Our
compensation discussions for Officers are made following a detailed discussion
of the aforementioned business plan and strategic objectives. We intend that
our
compensation decisions will reward key management and employees for their
participation in advancing Adams Golf’s strategic initiatives and financial
performance measures. The most significant financial performance measures
considered in setting compensation are:
|
·
|
revenue
growth versus business plan for the current fiscal
year;
|
|
·
|
profitability
versus business plan for the current fiscal year;
and
|
|
·
|
prudent
investments to build the Adams Golf brand and to focus on long-term
growth
and the health of the company.
|
At
Adams
Golf, our most significant profitability measure is EBITDA (earnings before
interest, taxes, depreciation and amortization).
Compensation
Decisions Should Promote the Interests of Stockholders
At
the
core of our compensation philosophy is our guiding belief that pay should be
directly linked to performance. Linking pay to performance, in our opinion,
aligns the objectives of our senior executives with the interests of our
stockholders. This philosophy has guided many of our compensation related
decisions, such as:
|
·
|
A
substantial portion of senior executive compensation is contingent
on, and
variable with, achievement of objective corporate and/or individual
performance goals. A substantial majority of the variable or bonus-related
component of compensation is determined by corporate revenue growth
and
profitability metrics. We believe that linking the payment of bonuses
to
our senior executives to the achievement of our most significant
financial
performance measures as noted above aligns the objectives of our
executive
officers with the interests of our
stockholders.
|
|
·
|
We
believe that equity ownership by our senior executives aligns their
long-term incentives with those of Adams Golf’s
stockholders.
|
Compensation
Should be Reasonable and Responsible
It
is
essential that Adams Golf’s overall compensation levels be sufficiently
competitive to attract talented leaders and motivate those leaders to achieve
superior results. At the same time, we believe that compensation should be
set
at responsible levels. We believe that our compensation policies are responsible
if our executive compensation programs are consistent with Adams Golf’s constant
focus on controlling costs while remaining competitive to allow Adams Golf
to
attract highly qualified candidates for management positions.
Compensation
Disclosures Should be Clear and Complete
We
believe that all aspects of executive compensation should be clearly,
comprehensibly and promptly disclosed in plain English to stockholders. We
believe that compensation disclosures should provide all of the information
necessary to permit stockholders to understand our compensation philosophy
and
objectives, our compensation-setting process and how much our executives are
paid.
The
Use of Compensation Consultants
We
have
in the past engaged compensation consultants to help provide guidance on median
pay and equity ownership levels for executives in similarly-sized companies
in
comparable industries. Most recently, we engaged Mercer Human Resource
Consulting to consult with us regarding the compensation package of our
President and CEO, Chip Brewer for his 2005 employment agreement.
Mercer
created a peer list of similarly-sized companies in comparable industries in
order to benchmark executive compensation levels against companies that have
executive positions with responsibilities similar in breadth and scope to ours.
Since there are a paucity of publicly traded, similarly-sized golf equipment
and
golf component businesses, Mercer included in its peer group analysis
similarly-sized companies in the sporting goods and apparel categories. The
following are several of the companies used in the peer group for Adams Golf:
Ashworth, Cutter & Buck, Radica Games, Cybex International, Fountain
Powerboat Industries, Gametech International, Vermont Teddy Bear and Aldila.
The
Compensation Committee reviewed a summary of the compensation data prepared
by
Mercer to ensure that our Officers’ compensation programs were
competitive.
We
do not
currently have Mercer or any other compensation consultant under engagement.
In
our opinion, our relatively small size and the fact that the compensation
package of our CEO is determined by his employment agreement restricts our
need
for a continuing engagement with a consultant. The Compensation Committee may
engage a compensation consultant in the future if the needs of the business
so
dictate.
Elements
of Executive Compensation
Base
Salary
Base
pay
is a critical element of executive compensation because it provides executives
with a base level of monthly income. In determining base salaries, we consider
the executive’s qualifications and experience, scope of responsibilities and
future potential, the goals and objectives established for the executive, the
executive’s past performance, competitive salary practices at comparable
companies, and internal pay equity and the tax deductibility of base
salary.
For
our
Officers, we establish base salaries at a level so that a significant portion
of
the total compensation that such Officers can earn is performance-based pay.
Base salary is targeted at median levels for similarly-sized companies in
comparable industries, as defined by our compensation consultant.
Annual
Management Incentive Compensation Plan
Our
Annual Management Incentive Compensation Plan (the “Plan”) was established in
1998. The Plan provides Officers and key employees an opportunity to earn a
semi-annual cash bonus for achieving specified performance-based goals
established for each half of the fiscal year. Performance goals are tied to
measures of financial performance rather than appreciation in stock price.
Performance goals are generally based on financial results as defined by our
business plan and bonus evaluations are made in July and January. The Officers
and other key employees are evaluated and paid primarily on:
|
·
|
revenue
growth versus plan for the current fiscal
year;
|
|
·
|
profitability
versus plan for the current fiscal year;
and
|
|
·
|
prudent
investments to build the Adams Golf brand and to focus on long-term
growth
and the health of the company.
|
At
Adams
Golf our most significant profitability measure is EBITDA (earnings before
interest, taxes, depreciation and amortization).
The
Compensation Committee has been pleased with the Plan and with the balance
inherent in the measures upon which the Officers and other key employees are
paid under the Plan. We are committed to growing revenue and maintaining
profitability in the short term, and making prudent long-term, brand-building
investments such as our commitments on the professional golf tours and our
commitment to growing our research and development capabilities.
The
Compensation Committee sets targeted incentive payout percentages as a
percentage of base salary for each Officer. These targets are based on
competitive practices for each comparable position based on survey results
from
our compensation consultant. The majority of the weighting of whether the
Officer achieves his or her semi-annual bonus is determined by the financial
performance metrics mentioned previously in this section. In addition, each
Officer has individual semi-annual goals that must be achieved, in full or
in
part, in order to attain the targeted payout of the semi-annual bonus.
Performance above or below the targeted payout can be achieved based on numerous
factors including our performance versus semi-annual financial metrics and
the
Officer’s individual performance versus his or her specific semi-annual
performance goals.
Equity-Based
Compensation
We
believe that equity compensation is the most effective and most widely-accepted
means of creating a long-term link between the compensation provided to Officers
and other key management personnel with gains realized by the stockholders.
The
Compensation Committee’s objective is to provide Officers with long-term
incentive opportunities that are consistent with those of comparable companies
identified by our compensation consultant.
The
2002
Equity Incentive Plan governs the granting of all equity-denominated securities
to Adams Golf employees and was approved by the Company’s stockholders in May
2002. The 2002 Equity Incentive Plan allows us to grant Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Awards, Dividend Equivalents or Other Stock-Based Awards (all terms defined
in
the 2002 Equity Incentive Plan). To date, we have only awarded stock options
under the 2002 Equity Incentive Plan. The Compensation Committee regularly
discusses and evaluates the use of alternative types of awards under the 2002
Equity Incentive Plan and may use such alternative awards in the future.
Currently, stock option grants most effectively carry out the Compensation
Committee’s objectives in providing equity-based compensation.
All
stock
option awards incorporate the following features:
|
·
|
The
term of the grant does not exceed 10
years;
|
|
·
|
The
grant prices of future option grants will not be less than the market
price on the date of grant;
|
|
·
|
Grants
do not include “reload” provisions;
and
|
|
·
|
Options
generally vest 25% per year over four years beginning with the first
anniversary of the date of grant. In some instances we have used
six-month
and one-year option vesting
periods.
|
We
will
continue to use stock options as a long-term incentive vehicle
because:
|
·
|
Stock
options align the interests of executives with those of the stockholders,
support a pay-for-performance culture, foster employee stock ownership,
and focus the management team on increasing value for the
stockholders.
|
|
·
|
All
of the value received by the recipient from a stock option is based
on the
growth of the stock price above the exercise
price.
|
|
·
|
Stock
options help to provide a balance to the overall compensation program;
our
annual bonus incentive program focuses on the achievement of annual
performance targets; the four-year vesting period for stock option
awards
creates incentives for increases in stockholder value over a longer
term.
|
|
·
|
The
vesting period encourages executive retention and the preservation
of
stockholder value.
|
In
determining the number of options to be granted to Officers and other key
employees, we take into account the individual’s position, scope of
responsibility, ability to affect revenue growth, profitability and stockholder
value, as well as the individual’s historic and recent performance and the value
of stock options in relation to other elements of total
compensation.
Option
grants for our President and CEO, Chip Brewer, have been made concurrent with
his employment agreements of 2002 and 2005. The grants were approved by the
Compensation Committee and the entire Board. There have been two option grants
for our CFO, Eric Logan—one made concurrent with the beginning of his employment
in October 2003, and the other made in a key employee grant in November 2004.
The grants were approved by the Compensation Committee and the entire Board.
The
date of Board approval is generally the date at which the option agreement
becomes effective.
In
the
past, we have granted stock options with an exercise price less than the market
price of the stock at the date of grant. The grants were meant to incentivize
key employees to help to turn around the Company. The grants were made at a
time
when there was minimal Black Scholes value in options granted with an exercise
price equal to market price on the date of grant. We believe the grants have
achieved their purpose, as we have been profitable for the previous four fiscal
years and the executive team and key employees have remained intact.
The
expenses from these options have been accounted for from the inception of the
option grants. Given current IRS tax rulings in Section 409A, we do not expect
to grant stock options in the future with exercise prices less than the market
price of the stock at the date of grant. We may also grant other types of
incentive awards under the 2002 Equity Incentive Plan in the future to the
extent such awards are consistent with and further our compensation
objectives.
The
application of Section 409A of the Internal Revenue Service tax code resulted
in
many option holders designating option exercise dates in advance for some
options that were granted with an exercise price less than the market price
of
the stock at the date of grant. For more information about the scheduled timing
of these exercises for our employees, please consult our Annual Report for
the
year ended December 31, 2006, a copy of which is included with this proxy
statement. In particular, please see Note 13 of the financial statements to
the
Annual Report regarding Stockholders’ Equity.
Additional
Benefits
Executive
officers participate in other employee benefit plans generally available to
all
employees on the same terms as similarly situated employees. We offer a variety
of health and welfare and retirement savings programs to all eligible employees.
The Officers generally are eligible for the same benefit programs on the same
basis as the rest of the Company’s employees. The health and welfare programs
are intended to protect employees against catastrophic loss and to encourage
a
healthy lifestyle. Our health and welfare programs include medical,
wellness, pharmacy,
dental, vision, life insurance and accidental death and disability. All
employees are eligible for our 401(k) program.
In
addition, certain executive officers receive certain other additional
perquisites that are described in this Proxy Statement under the heading
Executive
Compensation.
These
perquisites include:
|
·
|
Life
Insurance & Accidental Death & Dismemberment Coverage: We pay 100%
of the premium for both term life insurance and accidental death
and
dismemberment coverage, equal to two times the Officer’s base salary. This
benefit is available to all
employees.
|
|
·
|
Supplemental
Life Insurance: Supplemental life insurance benefits are provided
to the
Officers and to all other employees. The Officers and employees must
pay
for any supplemental insurance coverage they decide to
buy.
|
|
·
|
Short-term
and Long-term Disability: We pay 100% of the premium cost for these
benefit programs for Officers and all other employees. The short-term
disability program provides income replacement at 67% of base pay
level
for up to 13 weeks of recovery. Upon expiration of the 13 week short-term
disability period, the long-term disability program provides income
replacement at 60% of base pay level, up to a maximum of $6,000 per
month,
until age 65 or recovery per the terms and conditions of the
program.
|
We
requested that Adams Golf disclose all perquisites provided to the Officers
shown in the Summary Compensation Table even if the perquisites fall below
the
disclosure thresholds required under Securities and Exchange Commission rules.
Our
Compensation Decisions
This
section describes the compensation decisions that we made with respect to the
Officers for fiscal year 2006.
Executive
Summary
In
2006
and the first quarter of 2007, we continued to apply the compensation principles
previously described in determining the compensation of our Officers. These
compensation decisions were made in the context of Adams Golf’s recent financial
performance.
In
summary, the compensation decisions made in 2006 and the first quarter of 2007
for the Officers were as follows:
|
·
|
For
fiscal year 2007, the base salary levels for all Officers will remain
the
same as fiscal year 2006 levels. The base salary level for the President
and CEO, Chip Brewer is governed by his employment agreement, which
did
not dictate an increase in base salary for
2007.
|
|
·
|
In
2006, the President and CEO, Chip Brewer and the CFO, Eric Logan
were paid
their targeted incentive bonuses, as Adams Golf achieved its 2006
Annual
Plan revenue and EBITDA targets.
|
We
believe that these decisions are consistent with our core compensation
principles and objectives:
|
·
|
We
believe in a “pay-for-performance”
culture;
|
|
·
|
Compensation
decisions should promote the interests of long-term stockholders;
and
|
|
·
|
Compensation
should be reasonable and
responsible.
|
Base
Salary Decisions
We
adjust
base salaries on a calendar year basis. There were no adjustments made to the
base salaries of the Officers for calendar year 2007.
Name
|
|
Title
|
|
2007
Base Salary
|
|
2006
Base Salary
|
|
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
|
|
|
President
and CEO
|
|
$
|
400,000
|
|
$
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
|
|
|
Senior
Vice President and CFO
|
|
|
200,000
|
|
|
200,000
|
|
In
setting these base salaries, we considered:
|
·
|
our
compensation philosophy and guiding principles described
above;
|
|
·
|
the
experience and industry knowledge of the Officers and the quality
and
effectiveness of their leadership at the
Company;
|
|
·
|
all
of the components of executive compensation, including base salary,
incentive compensation, stock options, and benefits and
perquisites;
|
|
·
|
the
mix of performance pay to total compensation;
and
|
|
·
|
internal
pay equity among Adams Golf’s senior
executives.
|
The
2006
and 2007 base salary of the President and CEO, Chip Brewer is determined by
his
employment agreement. For a more detailed description of Mr. Brewer’s employment
agreement please see Employment
Contracts and Change in Control Arrangements
on page
29.
Annual
Management Incentive Compensation Plan Decisions
Our
Annual Management Incentive Compensation Plan provides our Officers and key
employees an opportunity to earn a semi-annual cash bonus for achieving
specified performance-based goals established for the fiscal year. In recent
years (including 2006 and 2007), the Compensation Committee has established
performance objectives for the Officers based on targeted levels of revenue
growth and EBITDA (earnings before interest, taxes, depreciation and
amortization). We believe that focusing on revenue growth is important because
there are distinct advantages to scale in the golf equipment business, such
as
the ability to advertise on network-televised golf events, to sponsor
professional tour pros, and the ability to compete for strong R&D talent. We
believe that focusing on EBITDA is important because it is the most
widely-accepted metric for the cash flow generated by a business. The
performance objectives allow the Officers to earn a cash bonus up to a specified
percentage of their base salary if Adams Golf achieves at least a specified
threshold of the above metrics.
The
targeted bonus levels as a percentage of salary for 2006 and 2007 for the
Officers are specified below:
|
|
|
|
Bonus
as Percentage (%) of Salary (1)
|
|
Name
|
|
Title
|
|
Threshold
|
|
Target
|
|
Stretch
|
|
|
|
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
|
|
|
President
and CEO
|
|
|
—
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
|
|
|
Senior
Vice President and CFO
|
|
|
|
|
|
50
|
%
|
|
|
|
(1)
The
Officers are eligible to receive a bonus equal to up to the specified percentage
of their base salary if Adams Golf achieves the specified level of revenue
growth and EBITDA as defined in the Company’s business plan.
Stock
Option Grant Decisions
In
2006,
we did not grant stock options or other forms of equity compensation to the
Officers. The granting of stock options to our President and CEO, Chip Brewer,
is governed by his employment agreement, which dictated that all his options
under his 2005 employment agreement (which lasts through December 31, 2007)
would be granted in 2005.
At
present, the Officers hold the following unvested stock options that would
become vested upon a change in control.
Name
|
|
No.
of Shares Underlying Unvested Options (#)
|
|
Unrealized
Value of Unvested Options ($)
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
|
|
|
300,113
|
|
$
|
414,156
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
|
|
|
200,000
|
|
|
215,500
|
|
Note:
The
unrealized value of unvested options was calculated by multiplying the number
of
shares underlying the unvested options by the closing price of the stock as
of
the date of grant and then deducting the aggregate exercise price for the
options.
Reasonableness
of Compensation
After
considering all components of the compensation paid to the Officers, the
Compensation Committee has determined that the compensation is reasonable and
is
not excessive. In making this determination, we considered many factors,
including the following:
|
·
|
Management
has consistently led Adams Golf to increasing levels of profitability
and
revenue growth in recent years.
|
|
·
|
Management’s
compensation as compared to the compensation of executives at peer
list
companies studied in the past.
|
|
·
|
The
stockholder return performance of Adams Golf over the past five years
has
significantly outpaced the performance of companies in Adams Golf’s peer
group.
|
|
·
|
The
compensation program for Officers and other key employees has generally
achieved the goals of retaining and attracting talented management
members
who can and have helped us return the company to
profitability.
|
Compensation
Policies
The
Tax Deductibility of Compensation Should be Maximized Where
Appropriate
The
Company generally seeks to maximize the deductibility for tax purposes of all
elements of compensation. For example, the Company has always issued
nonqualified stock options that result in a tax deduction to Adams Golf upon
exercise. Section 162(m) of the Internal Revenue Code generally disallows a
tax
deduction to public corporations for non-qualifying compensation in excess
of
$1.0 million paid to any such persons in any fiscal year. We review compensation
plans in light of applicable tax provisions, including Section 162(m), and
may
revise compensation plans from time to time to maximize deductibility. However,
we may approve compensation that does not qualify for deductibility when we
deem
it to be in the best interest of Adams Golf.
Financial
Restatement
It
is the
Board of Directors’ policy that the Compensation Committee will, to the extent
permitted by governing law, have the sole and absolute authority to make
retroactive adjustments to any cash or equity-based incentive compensation
paid
to Officers and certain other key management where the payment was predicated
on
the achievement of certain financial results that were subsequently the subject
of restatement. Where applicable, the company will seek to recover any amount
determined to have been inappropriately received by the individual involved.
We
have not had to pursue recovery from any individual as a result of a
restatement.
Stock
Ownership Guidelines
We
have
not adopted formal stock ownership guidelines for our Officers however, we
do
believe that Officers owning stock helps align their interest with those of
long-term stockholders.
Timing
of Stock Option Grants
Adams
Golf has adopted a policy on stock option grants that includes the following
provisions relating to the timing of option grants:
|
·
|
The
grant date of stock options is always the date of approval of the
grants
(or a specified later date if for any reason the grant is approved
during
a time when Adams Golf is in possession of material, non-public
information).
|
|
·
|
The
exercise price is the closing price of the underlying common stock
on the
grant date for those stock options that may be granted in the
future.
|
COMPENSATION
COMMITTEE REPORT
We
have
reviewed and discussed the foregoing Compensation Discussion and Analysis with
management. Based on our review and discussion with management, we have
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement.
Submitted
by:
Stephen
R. Patchin
Mark
R. Mulvoy
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth information concerning the compensation of our
Officers who served in such capacities during the fiscal year ended December
31,
2006.
The
salary and stock option awards for our President and CEO are determined by
his
employment agreement with the Company. For a more detailed description of the
Employment Agreement, please see Employment
Contracts and Change in Control Arrangements
beginning on page 29. Bonuses for our CEO and CFO are paid semi-annually under
the terms of the Company’s Annual Management Incentive Compensation Plan. The
following table presents the total amount of bonuses paid to the Company’s
Officers for fiscal year 2006. For a more detailed description of the Company’s
Annual Management Incentive Compensation Plan, please see Annual
Management Incentive Compensation Plan
on page
20.
Name
and
Principal
Position
|
|
Salary
|
|
Bonus
|
|
Stock
Option
Awards
|
|
All
Other
Compensation
|
|
|
Total
Fiscal
Year 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
President
and Chief
Executive
Officer
|
|
$
|
400,000
|
|
$
|
325,000
|
|
|
|
|
$
|
61,172
|
(1)
|
|
$
|
786,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
Senior
Vice President and
Chief
Financial Officer
|
|
|
200,000
|
|
|
100,000
|
|
|
|
|
|
15,994
|
(2)
|
|
|
315,994
|
|
(1)
|
Includes
$24,686 of automobile expenses; $900 for Group Term Life insurance
premiums; $9,683 for health and welfare benefits;
$3,307 of non-reimbursed business expenses; $16,952 for country club
memberships and $5,643 of 401k matching contributions.
|
|
|
(2)
|
Includes
$420 for Group Term Life insurance premiums; $9,455 for health and
welfare
benefits; and $6,119 of 401k matching
contributions.
|
Grants
of Plan-Based Awards
There
were no option grants given to the Officers during the fiscal year ended
December 31, 2006.
|
|
|
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards
|
|
All
Other
Option
Awards:
Number
of
Securities
|
|
Exercise
or
Base
Price
of
|
|
Name
|
|
Grant
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Underlying
Options
|
|
Option
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information concerning stock options held by the
Officers at December 31, 2006.
Name
|
|
Grant
Date
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
|
|
|
1/16/2002
|
|
|
975,000
|
|
|
|
|
$
|
0.01
|
|
|
1/16/2012
|
|
|
|
|
2/14/2003
|
|
|
389,897
|
|
|
|
|
|
0.01
|
|
|
2/14/2013
|
|
|
|
|
7/31/2003
|
|
|
479,110
|
|
|
|
|
|
0.01
|
|
|
7/31/2013
|
|
|
|
|
1/15/2004
|
|
|
266,775
|
|
|
|
|
|
0.01
|
|
|
1/15/2014
|
|
|
|
|
1/6/2005
|
|
|
272,861
|
|
|
600,226
|
|
|
0.01
|
|
|
1/6/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
|
|
|
10/24/2003
|
|
|
25,000
|
|
|
25,000
|
|
|
0.01
|
|
|
10/24/2013
|
|
|
|
|
11/8/2004
|
|
|
62,500
|
|
|
125,000
|
|
|
0.01
|
|
|
11/8/2014
|
|
|
|
|
1/1/2005
|
|
|
25,000
|
|
|
75,000
|
|
|
0.01
|
|
|
1/1/2015
|
|
(1)
All
information in this table relates to nonqualified stock options. The company
has
not granted any incentive stock
options or stock appreciation rights (“SARs”).
Employment
Contracts and Change in Control Arrangements
Oliver
G. (Chip) Brewer III
On
February 19, 2005, we entered into an employment contract with Chip Brewer,
our
President and Chief Executive Officer. The term of this employment agreement
runs from January 1, 2005 through December 31, 2007, unless earlier terminated.
Mr. Brewer will receive an annual base salary of at least $400,000 during the
term of the agreement and is eligible for semi-annual performance bonuses each
in an amount equal to up to one-half of Mr. Brewer's annual base salary then
in
effect.
The
employment agreement also provides for retention awards of options to purchase
our common stock, subject to proper authorization from our Board of Directors
and compliance with all applicable laws and regulations. No later than the
end
of January of each calendar year during the term of the agreement, Mr. Brewer
will be granted one percent of our company's fully diluted stock in stock
options at an option strike price of $0.01 per share. The options vest one
year
after the date of the grant. If we sell or transfer a majority of our capital
stock or substantially all of our company assets to an unaffiliated entity,
all
of Mr. Brewer's potential stock options under the employment agreement shall
be
granted and vested no later than the calendar day immediately preceding the
sale
or closing date of the transaction.
The
agreement provides that Mr. Brewer is eligible for a one-time long term
incentive payment at the conclusion of the agreement. The amount of the payment
is contingent upon achievement of a minimum performance goal and may be
increased if certain additional performance criteria are met or
exceeded.
The
agreement may be terminated without cause either by us (a "termination without
cause") or by Mr. Brewer (a "termination without good reason") upon delivery
of
60 days written notice, or by the mutual agreement of Mr. Brewer and us. We
can
terminate "for cause" if Mr. Brewer (a) deliberately and intentionally breaches
any material provision of the agreement without curing such a breach within
30
days of written notice of the breach; (b) deliberately and intentionally engages
in gross misconduct that is materially harmful to our best interests; or (c)
is
convicted of a felony or crime involving moral turpitude, fraud or deceit.
Mr.
Brewer can terminate "for good reason" upon delivery of 30 days written notice
if we (a) materially breach any material provision of the agreement without
curing such breach within 30 days of written notice of the breach; (b) assign
Mr. Brewer any duties inconsistent in any material respect with his position
or
diminish Mr. Brewer's status and reporting requirements, his authority, duties,
powers or responsibilities, other than an isolated incident which is remedied
within 30 days notice from Mr. Brewer; (c) fail to obtain a written agreement
to
assume the obligations of this agreement five days before a merger,
consolidation or sale of all or substantially all of our assets; (d) reduce
Mr.
Brewer's total compensation, other than as the result of Mr. Brewer's failure
to
meet certain performance based goals established for purposes of determining
incentive based compensation; or (e) relocate our principal offices to a
location more than 75 miles from Plano, Texas. The agreement shall terminate
by
its terms upon Mr. Brewer's disability, if he is unable to perform his duties
on
a full time basis for a period of 60 days, or upon his death.
In
the
event that either we terminate the employment agreement without cause or Mr.
Brewer terminates for good reason, then Mr. Brewer will be entitled to receive
(a) his annual base salary for a period of one year after the later of the
date
of termination or the expiration of the notice period; (b) all retention based
stock options that Mr. Brewer was potentially eligible to receive during the
calendar year in which the termination occurred, pro rated, with such options
being vested at the time of termination; (c) a payment equal to both semi-annual
bonuses for which Mr. Brewer was potentially eligible in the calendar year
of
termination, paid as if we achieved our internal financial goals for that
period; and (d) the long term incentive payment for which Mr. Brewer was
potentially eligible, paid as if certain performance criteria for that period
had been achieved.
Mr.
Brewer may also terminate the agreement in the event of our failure to set
certain internal financial goals. In the event that (i) we fail to set internal
financial goals; (ii) Mr. Brewer becomes disabled or upon his death; (iii)
the
agreement is terminated by mutual agreement; (iv) we terminate Mr. Brewer's
employment with cause; or (v) Mr. Brewer terminates his employment without
good
reason, Mr. Brewer will be entitled to receive his accrued salary and benefits
through the date of termination, reimbursements for expenses actually incurred
and benefits under any benefit and indemnification plans for Mr. Brewer or
his
dependants through the date of termination, and any continuing coverage as
required by law.
If
necessary, we will negotiate with Mr. Brewer an amendment to the employment
agreement in order to avoid adverse tax consequences to Mr. Brewer under Section
409A of the Internal Revenue Code.
The
following table shows the potential payments upon termination or a change in
control of the Company for Mr. Chip Brewer, the Company’s President and Chief
Executive Officer.
Executive
Benefits
and
Payments
Upon
Separation
|
|
For
Cause
Termination
on
12/31/06
|
|
Resignation
Without
Good
Reason
on
12/31/06
|
|
Without
Cause
Termination
on
12/31/06
|
|
Involuntary
For
Good
Reason
Termination
(Change-in-
Control)
on
12/31/06
|
|
Disability
on
12/31/06
|
|
Death
on
12/31/06
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
|
(1)
|
|
|
(1)
|
$
|
400,000
|
(1)
|
$
|
400,000
|
(1)
|
$
|
400,000
|
(2)
|
$
|
400,000
|
(1)
|
Expenses
|
|
|
|
(3)
|
|
|
(3)
|
|
|
(3)
|
|
|
(3)
|
|
|
|
|
|
(3)
|
Stock
Options
|
|
|
|
|
|
|
|
|
414,156
|
(4)
|
|
414,156
|
(4)
|
|
|
|
|
|
|
Performance
Bonus
|
|
|
|
|
|
|
|
|
400,000
|
|
|
400,000
|
|
|
400,000
|
|
|
|
|
Long
Term Incentive
Plan
|
|
|
|
|
|
|
|
|
1,000,000
|
(5)
|
|
1,000,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
& Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
and Welfare
Plans
|
|
|
|
(6)
|
|
|
(6)
|
|
39,018
|
(7)
|
|
39,018
|
(7)
|
|
|
|
|
|
|
Life
Insurance
Benefits
|
|
|
|
(6)
|
|
|
(6)
|
|
900
|
(8)
|
|
900
|
(8)
|
|
|
|
|
|
|
(1)
|
An
additional sum equal to accrued but unpaid base salary would also
be
payable to Mr. Brewer
|
(2)
|
Reflects
the total amount to be paid to Mr. Brewer including any Social Security
proceeds and disability payments.
|
(3)
|
An
additional sum equal to accrued but unpaid business expenses would
also be
payable to Mr. Brewer.
|
(4)
|
Per
Mr. Brewer’s employment agreement, these options would be pro-rated for
the months in service for the calendar year. The amount reflected
in the
table above assumes a full year of
service.
|
(5)
|
If
EBITDA achieved by the Company accumulates to greater than a targeted
level over the term of Mr. Brewer’s employment agreement, Mr. Brewer would
receive an additional payment equal to $0.05 for each dollar over
the
EBITDA target.
|
(6)
|
An
additional sum equal to accrued but unpaid health and welfare plan
and
life insurance plan benefits.
|
(7)
|
Reflects
the estimated lump-sum present value of all future costs which will
be
paid on behalf of Mr. Brewer under the Company’s health and welfare and
employee benefit plans.
|
(8)
|
Reflects
the estimated lump-sum present value of the cost of coverage for
life
insurance policies provided by the Company to Mr.
Brewer.
|
Eric
T. Logan
On
March
29, 2006, we renewed our Change of Control Agreement with Mr. Eric Logan, Senior
Vice President and Chief Financial Officer of Adams Golf. On March 29, 2006,
we
filed a Form 8-K with the Securities and Exchange Commission describing the
terms of this agreement. The Change of Control Agreement runs for two years
from
the date of the Agreement and provides that Mr. Logan shall be entitled to
certain compensation and benefits upon a qualifying event. Generally, qualifying
events include termination of employment upon our sale, change of control (as
defined), or upon certain restructuring events. The compensation and benefits
include (i) payment of earned and unpaid compensation, (ii) payment of “base
salary” for a period of nine months after the qualifying event, (iii) continued
substantially equal medical benefits for six months after the qualifying event,
and (iv) the immediate vesting of any stock options granted and 120 days after
such vesting to exercise those options. Termination for “cause” is not a
qualifying event, and for purposes of the Change of Control Agreement, “cause”
is defined to mean (i) the admission or conviction of a felony, (ii) the
commission of an act of dishonesty in the course of duties, (iii) repeated
disregard of policy directives, (iv) failure to satisfactorily perform assigned
duties, or (v) breach of fiduciary responsibilities or fiduciary duties as
an
employee.
The
following table shows the potential payments upon termination or a change in
control of the Company for Mr. Eric Logan, the Company’s Chief Financial
Officer.
Executive
Benefits
and
Payments
Upon
Separation
|
|
For
Cause
Termination
on
12/31/06
|
|
Resignation
Without
Good
Reason
on
12/31/06
|
|
Without
Cause
Termination
on
12/31/06
|
|
Involuntary
For
Good
Reason
Termination
(Change-in-
Control)
on
12/31/06
|
|
Disability
on
12/31/06
|
|
Death
on
12/31/06
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
n/a
|
(1)
|
|
n/a
|
(1)
|
|
n/a
|
(1)
|
$
|
$
150,000
|
(1)
|
|
n/a
|
|
|
n/a
|
|
Stock
Options
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
249,250
|
|
|
n/a
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
& Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
and Welfare Plans
(2)
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
10,919
|
|
|
n/a
|
|
|
n/a
|
|
Life
Insurance
Benefits
(3)
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
210
|
|
|
n/a
|
|
|
n/a
|
|
(1)
|
An
additional sum equal to accrued but unpaid base salary would also
be
payable to Mr. Logan.
|
(2)
|
Reflects
the estimated lump-sum present value of all future costs which will
be
paid on behalf of Mr. Logan under the Company’s health and welfare benefit
plans.
|
(3)
|
Reflects
the estimated lump-sum present value of the cost of coverage for
life
insurance policies provided by the Company to Mr.
Logan.
|
Option
Exercises and Stock Vested
During
fiscal 2006, the Officers exercised stock options as shown in the table
below.
|
|
Option
Awards
|
|
Name
|
|
Number
of
Shares
Acquired
or
Exercised
|
|
Value
Realized
on
Exercise
|
|
|
|
|
|
|
|
Oliver
G. (Chip) Brewer III
|
|
|
699,712
|
|
$
|
972,232
|
|
|
|
|
|
|
|
|
|
Eric
T. Logan
|
|
|
112,500
|
|
|
154,463
|
|
Nonqualified
Deferred Compensation
Neither
of the Officers received any nonqualified deferred compensation.
DIRECTOR
COMPENSATION
Compensation
Arrangements for Fiscal 2006
The
following table describes the compensation arrangements with our non-employee
directors for the 2006 fiscal year.
|
|
2006
|
|
Annual
Cash Retainer (1)
|
|
$
|
20,000
|
|
Attendance
Fee per Meeting (2)
|
|
|
1,000
|
|
Committee
Stipends (3):
|
|
|
|
|
Audit
Committee Chair
|
|
|
4,000
|
|
Compensation
Committee Chair
|
|
|
4,000
|
|
Adams
Golf Annual Product Allowance (4)
|
|
|
1,000
|
|
(1)
|
Each
non-employee director who serves as a member of the Board of Directors
for
at least one month of each quarter receives a quarterly director
fee of
$5,000.
|
|
|
(2)
|
Each
non-employee director who serves as a member of the Board of Directors
for
at least one month of each quarter receives $1,000 per meeting attended
in
person or by telephone. We reimburse our directors for travel and
lodging
expenses that they incur in connection with their attendance of directors’
meetings and meetings of stockholders of the Company.
|
|
|
(3)
|
Each
non-employee director serving as chairperson of any committee of
the Board
receives an additional $1,000 per quarter provided such person serves
in
such capacity for at least one month during that
quarter.
|
|
|
(4)
|
Our
non-employee directors are also entitled to receive, at no charge,
up to
$1,000 of Adams Golf products annually for promotional
purposes.
|
Actual
Fiscal 2006 Director Compensation
The
following table shows the compensation paid to our non-employee directors for
the 2006 fiscal year. Neither Mr. Adams nor Mr. Brewer receives fees for serving
as directors of the Company. For a description of each type of compensation
shown below, please see the footnotes above for the table entitled Compensation
Arrangements for 2006.
Director
Compensation for Fiscal 2006
|
Name
|
|
Fees
Earned
or
Paid
In
Cash
|
|
Option
Awards
|
|
|
Other
|
|
|
Total
Compensation
|
|
B.H.
(Barney) Adams
|
|
|
—
|
|
|
—
|
|
|
|
$
|
421,698
|
|
(1)
|
|
$
|
421,698
|
|
Paul
F. Brown Jr.
|
|
$
|
25,000
|
|
|
—
|
|
|
|
|
2,347
|
|
(2)
|
|
|
27,347
|
|
Russell
L. Fleischer
|
|
|
27,000
|
|
$
|
43,445
|
|
(3)
|
|
|
108
|
|
(2)
|
|
|
70,553
|
|
Mark
R. Mulvoy
|
|
|
25,000
|
|
|
—
|
|
|
|
|
2,332
|
|
(2)
|
|
|
27,332
|
|
Stephen
R. Patchin
|
|
|
29,000
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
29,000
|
|
Robert
D. Rogers
|
|
|
27,000
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
27,000
|
|
(1)
|
Includes
$254,400 in salary, $120,000 in bonus pay, $23,892 in automobile
expenses,
$7,231 in group term life insurance premiums, $8,568 for health and
welfare benefits, $1,489 of non-reimbursed business expenses and
$6,117 of
401k company matching contributions.
|
|
|
(2)
|
Represents
reimbursement of travel expenses related to meeting
attendance.
|
|
|
(3)
|
Our
directors are entitled to participate in our 2002 Equity Incentive
Plan.
At the February 9, 2006 Board Meeting, our Board of Directors approved
a
one-time grant of 50,000 shares of our common stock to Mr. Fleischer
at an
exercise price per share of $1.18. These options vest in four equal
installments beginning on the first anniversary of the grant date
and
continuing on three successive anniversaries thereafter. The method
used
to determine the option award value is the Black Scholes valuation
method.
The options have a ten-year term expiring February 9,
2016.
|
Although
Mr. Adams is not an executive officer of Adams Golf, he is compensated for
services he provides both as Chairman of the Board and as an employee of Adams
Golf pursuant to an employment agreement entered into on February 16, 2006.
Mr.
Adams is the founder of Adams Golf and its former Chief Executive Officer,
and
continues to participate in certain aspects of Adams Golf’s business and
operations in addition to his service as Chairman of the Board. Mr. Adams has
been Chairman of the Board of Adams Golf since its inception. Accordingly,
the
Compensation Committee and the Board of Directors, excluding Mr. Adams, agreed
that Mr. Adams should be compensated in a different manner from that of the
other non-executive directors of the company.
The
term
of Mr. Adams’ employment agreement began on January 1, 2006 and continues until
December 31, 2008, unless earlier terminated. Mr. Adams receives an annual
base
salary of $254,400 during the term of the agreement. Mr. Adams serves as our
non-executive Chairman of the Board of Directors pursuant to the agreement
and
performs such duties as would be reasonably expected of a non-executive Chairman
of the Board of Directors of a similarly-sized corporation.
The
agreement may be terminated without cause by us (a "termination without cause")
at anytime, by Mr. Adams (a "termination without good reason") upon delivery
of
60 days written notice, or by the mutual agreement of Mr. Adams and us. We
can
terminate "for cause" if Mr. Adams (a) deliberately and intentionally breaches
any material provision of the agreement without curing such a breach within
30
days of written notice of the breach; (b) deliberately and intentionally engages
in gross misconduct that is materially harmful to our best interests; or (c)
is
convicted of a felony or crime involving moral turpitude, fraud or deceit.
Mr.
Adams can terminate "for good reason" upon delivery of 30 days written notice
if
we (a) materially breach any provision or fail to perform any covenant of the
agreement without curing such breach or failure to perform within 30 days of
written notice of the breach or failure to perform; (b) substantially reduce
Mr.
Adams' title, position, reporting requirements, responsibilities or duties,
which shall not be remedied within 30 days notice from Mr. Adams; (c) reduce
Mr.
Adams' base compensation; (d) fail to obtain a written agreement from any
successor to assume the obligations of this agreement five days before a merger,
consolidation or sale of all or substantially all of our assets; or (e) deliver
to Mr. Adams written notice of our approval for Mr. Adams to tender his
resignation with good reason.
In
the
event that either we terminate the employment agreement without cause or Mr.
Adams terminates for good reason, then Mr. Adams will be entitled to receive
his
annual base salary for a period of one year after such termination plus any
accrued but unpaid base salary as of the date of such termination.
The
Compensation Committee determined that Mr. Adams’ compensation was not only
consistent with the compensation philosophy and objectives of Adams Golf but
comparable to companies with similar revenues in similar industries. Adams
Golf
engaged the services of a compensation consultant to analyze the compensation
practices for similar non-executive chairpersons and presented such analysis
to
the Compensation Committee prior to finalizing the terms of Mr. Adams’
compensation. Although Mr. Adams’ compensation is subject to the terms of his
agreement, the Compensation Committee may periodically review the terms of
his
compensation arrangements to confirm that it continues to be consistent with
Adams Golf’s compensation philosophy and objectives, and comparable to current
compensation for non-executive chairpersons within Adams Golf’s
industry.
The
following table shows the potential payments upon termination or a change in
control of the Company for Mr. Barney Adams, the Company’s Chairman of the
Board.
Executive
Benefits and
Payments Upon
Separation
|
|
For
Cause
Termi-nation
on
12/31/06
|
|
|
Resig-nation
Without
Good
Reason
on
12/31/06
|
|
|
Without
Cause
Termi-nation
on
12/31/06
|
|
|
Involuntary
For
Good
Reason
Termi-nation
(Change-in-
Control)
on
12/31/06
|
|
|
Disability
on
12/31/06
|
|
|
Death
on
12/31/06
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
—
|
|
(1)
|
|
|
—
|
|
(1)
|
|
$
|
254,400
|
|
(1)
|
|
$
|
254,400
|
|
(1)
|
|
$
|
254,400
|
|
(2)
|
|
$
|
254,400
|
|
(1)
|
|
Expenses
|
|
|
—
|
|
(3)
|
|
|
—
|
|
(3)
|
|
|
—
|
|
(3)
|
|
|
—
|
|
(3)
|
|
|
—
|
|
|
|
|
—
|
|
(3)
|
|
Performance
Bonus
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Benefits
& Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
and Welfare
Plans
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
17,769
|
|
(4)
|
|
|
17,769
|
|
(4)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Life
Insurance
Benefits
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
7,232
|
|
(5)
|
|
|
7,232
|
|
(5)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(1)
|
An
additional sum equal to accrued but unpaid base salary would also
be
payable to Mr. Adams
|
(2)
|
Reflects
the total amount to be paid to Mr. Adams including disability
payments.
|
(3) |
An
additional sum equal to accrued but unpaid business expenses would
also be
payable to Mr. Adams
|
(4)
|
Reflects
the estimated lump-sum present value of all future costs which will
be
paid on behalf of Mr. Adams under the Company’s health and welfare benefit
plans.
|
(5)
|
Reflects
the estimated lump-sum present value of the cost of coverage for
life
insurance policies provided by the Company to Mr.
Adams.
|
STOCK
OWNERSHIP
Beneficial
Ownership of Certain Stockholders, Directors and Executive
Officers
This
table shows, as of March 31, 2007, the beneficial ownership of Adams Golf common
stock by (1) each person known to us to be the beneficial owner of more than
5%
of our common stock; (2) each director and nominee for director; (3) each
Officer set forth in the Summary Compensation Table on page 28; and (4) all
directors and executive officers as a group. The address of each
executive officer and director is c/o Adams Golf, Ltd., 2801 E. Plano Parkway,
Plano, Texas 75074.
|
|
Amount
and Nature of Common
Stock Beneficially Owned (1)
|
|
Name
of Beneficial Owners
|
|
Shares
Owned
as
of
March
31, 2007
|
|
|
|
Shares
Subject to
Options
Which Are or
Will
Become
Exercisable
Prior
to May 31, 2007
|
|
Total
Beneficial
Ownership
|
|
|
|
Beneficial
Owners of 5% or
|
|
|
|
|
|
|
|
|
|
|
|
More
of Our Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
Royal
Holding Company, Inc
|
|
|
6,374,511
|
|
|
(4
|
)
|
|
0
|
|
|
6,374,511
|
|
|
26.6
|
%
|
Richard
L. Scott
|
|
|
1,875,909
|
|
|
(5
|
)
|
|
0
|
|
|
1,875,909
|
|
|
7.9
|
%
|
Roland
E. Casati
|
|
|
1,838,600
|
|
|
(6
|
)
|
|
0
|
|
|
1,838,600
|
|
|
7.7
|
%
|
MicroCapital
LLC
|
|
|
1,423,000
|
|
|
(7
|
)
|
|
0
|
|
|
1,423,000
|
|
|
6.0
|
%
|
SJ
Strategic Investments LLC
|
|
|
1,210,500
|
|
|
(8
|
)
|
|
0
|
|
|
1,210,500
|
|
|
5.1
|
%
|
Directors
and Named
Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.H.
(Barney) Adams
|
|
|
2,471,913
|
|
|
(9
|
)
|
|
0
|
|
|
2,471,913
|
|
|
10.3
|
%
|
Paul
F. Brown, Jr.
|
|
|
6,384,511
|
|
|
(10
|
)
|
|
50,000
|
|
|
6,434,511
|
|
|
26.8
|
%
|
Russell
L. Fleischer
|
|
|
0
|
|
|
|
|
|
12,500
|
|
|
12,500
|
|
|
*
|
|
Mark
R. Mulvoy
|
|
|
1,000
|
|
|
|
|
|
50,000
|
|
|
51,000
|
|
|
*
|
|
Stephen
R. Patchin
|
|
|
6,374,511
|
|
|
(11
|
)
|
|
50,000
|
|
|
6,424,511
|
|
|
26.8
|
%
|
Robert
D. Rogers
|
|
|
5,000
|
|
|
(12
|
)
|
|
37,500
|
|
|
42,500
|
|
|
*
|
|
Oliver
G. (Chip) Brewer III
|
|
|
313,772
|
|
|
|
|
|
2,683,756
|
|
|
2,997,528
|
|
|
11.3
|
%
|
Eric
T. Logan
|
|
|
36,873
|
|
|
|
|
|
137,500
|
|
|
174,373
|
|
|
*
|
|
All
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as
a Group (8 persons)
|
|
|
9,213,069
|
|
|
|
|
|
3,021,256
|
|
|
12,234,325
|
|
|
45.3
|
%
|
*
|
Less
than one percent.
|
|
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the Securities
and
Exchange Commission and generally includes voting or investment power
with
respect to securities.
|
|
|
(2)
|
Shares
of common stock subject to options that are presently exercisable
or
exercisable within 60 days of March 31, 2007 are deemed to be beneficially
owned by the person holding such options for the purpose of computing
the
beneficial ownership of such person, but are not treated as outstanding
for the purpose of computing the beneficial ownership of any other
person.
|
|
|
(3)
|
Applicable
percentage of ownership is based on 24,008,606 voting shares of common
stock outstanding on March 31, 2007.
|
|
|
(4)
|
The
address for Royal Holding Company, Inc. is 300 Delaware Avenue, Suite
306,
Wilmington, Delaware 19801.
|
|
|
(5)
|
The
address for Mr. Scott is 700 11th
Street S., Suite 101, Naples, FL 34102
|
|
|
(6)
|
The
address for Mr. Casati is Continental Offices, Ltd., 2700 River Road,
Suite 211, Des Plaines, IL 60018.
|
|
|
(7)
|
The
address for MicroCapital LLC is 201 Post Street, Suite 1001, San
Francisco, CA 94108.
|
|
|
(8)
|
The
address for Strategic Investments LLC is 340 Edgemont Avenue, Suite
200,
Bristol, TN 37620
|
|
|
(9)
|
Includes
2,471,913 shares Mr. Adams holds jointly with Jackie Adams, his
spouse.
|
|
|
(10)
|
Represents
(a) 10,000 shares Mr. Brown holds jointly with Diane L. Brown, his
spouse;
and (b) 6,374,511 shares of common stock owned directly by Royal
Holding
Company, Inc. Mr. Brown is the Chief Financial Officer and Vice
President-Finance of Royal Holding Company, Inc. and by virtue of
this
position may be deemed to share the power to vote or direct the vote
of,
and to share the power to dispose or direct the disposition of, these
shares of common stock. Mr.
Brown disclaims beneficial ownership of the shares of common stock
held by
Royal Holding Company, Inc.
|
|
|
(11)
|
Represents
6,374,511 shares of common stock owned directly by Royal Holding
Company,
Inc. Mr. Patchin is the Chief Executive Officer and President
of Royal Holding Company, Inc. and by virtue of this position may
be
deemed to share the power to vote or direct the vote of, and to share
the
power to dispose or direct the disposition of, these shares of common
stock. Mr. Patchin disclaims beneficial ownership of the shares
of common stock held by Royal Holding Company, Inc.
|
|
|
(12)
|
Represents
shares of common stock held by a trust for which Mr. Rogers has sole
voting and dispositive power over the shares held by the
trust.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Under
the
U.S. securities laws, directors, certain executive officers and persons holding
more than 10% of Adams Golf’s common stock must report their initial ownership
of the common stock, and any changes in that ownership, to the Securities and
Exchange Commission. The Securities and Exchange Commission has designated
specific due dates for these reports. Based solely on our review of
copies of the reports filed with the Securities and Exchange Commission and
written representations of our directors and executive officers, we believe
all
persons subject to reporting filed the required reports on time in
2006.
PROPOSAL
NO. 2
RATIFICATION
OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The
Audit
Committee has selected KBA Group LLP as the Company’s independent registered
public accounting firm to examine the consolidated financial statements of
the
Company for fiscal year 2007. The Board of Directors seeks an indication from
stockholders of their approval or disapproval of the Audit Committee’s
appointment of KBA Group as independent registered public accounting firm
(auditors) for fiscal year 2007.
KBA
Group
has been our independent auditors since 2005, and no relationship exists, other
than the usual relationship between auditor and client. Representatives of
KBA
Group will be available to respond to questions at the Annual Meeting of
Stockholders.
Audit
and Non-Audit Fees
Service
Provided
|
|
Fiscal
2006
|
|
|
|
Fiscal
2005
|
|
Audit
Fees (1)
|
|
|
|
|
|
|
|
Annual
Audit
|
|
$
|
80,955
|
|
|
|
|
$
|
98,255
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
Related Fees
|
|
|
|
|
|
|
|
|
|
|
Certification
of Prior Year’s Audit
|
|
|
27,800
|
|
|
(2
|
)
|
|
20,000
|
|
Total
Fees
|
|
$
|
108,755
|
|
|
|
|
$
|
118,255
|
|
(1)
|
Audit
fees consisted of audit work performed in the preparation of the
financial
statements and in the assessment of internal controls over financial
reporting, as well as work that generally only the independent auditor
can
reasonably be expected to provide, such as statutory
audits.
|
|
|
(2)
|
Audit
related fees consisted of fees paid to KPMG, our former certified
independent public accountants for professional services rendered
for the
audit of our consolidated financial statements included in our 2005
Annual
Report.
|
The
Company’s Board of Directors recommends that you vote “FOR” Proposal No.
2.
AUDIT
COMMITTEE REPORT
The
Audit
Committee reviews the Company’s financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the financial
statements and the reporting process, including the system of internal
controls.
In
this
context, the Committee has met and held discussions with management and the
independent registered public accounting firm regarding the fair and complete
presentation of the Company’s results and the assessment of the Company’s
internal control over financial reporting. The Audit Committee has discussed
significant accounting policies applied to the Company in its financial
statements, as well as alternative treatments. Management represented to the
Audit Committee that the Company’s consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the
United States of America, and the Audit Committee has reviewed and discussed
the
consolidated financial statements with management and the independent registered
public accounting firm. The Audit Committee discussed with the independent
registered public accounting firm matters required to be discussed by Statement
on Auditing Standards No. 61, as amended (Communications with Audit
Committees).
In
addition, the Audit Committee has discussed with the independent registered
public accounting firm the auditor’s independence from the Company and its
management, including the matters in the written disclosures required by the
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit
Committees). The Audit Committee also had considered whether the independent
registered public accounting firm’s provision of non-audit services to the
Company is compatible with the auditor’s independence. The Audit Committee has
concluded that the independent registered public accounting firm is independent
from the Company and its management.
The
Audit
Committee reviewed and discussed Company policies with respect to risk
assessment and risk management.
The
Audit
Committee discussed with the Company’s internal auditor and independent
registered public accounting firm the overall scope and plans for their
respective audits. The Audit Committee met with the internal auditor and the
independent registered public accounting firm, with and without management
present, to discuss the result of their examinations, the evaluations of the
Company’s internal controls, and the overall quality of the Company’s financial
reporting.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2006, for filing with the Securities and
Exchange Commission. The Committee has selected KBA Group LLP as the Company’s
independent registered public accounting firm for fiscal 2007.
Submitted
by:
Russell
L. Fleischer
Robert
D. Rogers
Members
of the Audit Committee
ANNUAL
MEETING ADVANCE NOTICE REQUIREMENTS
Our
By-laws provide that stockholder proposals and director nominations by
stockholders may be made in compliance with certain advance notice,
informational and other applicable requirements. With respect to
stockholder proposals (concerning matters other than the nomination of
directors), the individual submitting the proposal must file a written notice
with the secretary of Adams Golf c/o Adams Golf, Ltd. at 2801 E. Plano Parkway,
Plano, Texas 75074 setting forth certain information about the stockholder
and
all persons acting in concert with him or her, including the following
information:
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a
brief description of the business desired to be brought before the
meeting
and the reasons for conducting such business at the Annual
Meeting;
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the
names and addresses of the supporting
stockholders;
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the
class and number of shares of our stock that are beneficially owned
by
such persons; and
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any
material interest of such persons in the matter
presented.
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The
notice must be delivered to the secretary (1) at least 90 days before any
scheduled meeting or (2) if less than 100 days notice or prior public disclosure
of the meeting is given, by the close of business on the 10th
day
following the giving of notice or the date public disclosure was made, whichever
is earlier.
Stockholder
Nomination Procedures
A
stockholder may recommend a nominee to become a director of Adams Golf by giving
the secretary (at the address set forth above) a written notice setting forth
certain information, including:
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the
name, age, business and residence address of the person intended
to be
nominated;
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a
representation that the nominating stockholder is in fact a holder
of
record of Adams Golf common stock entitled to vote at the meeting
and that
he or she intends to be present at the meeting to nominate the person
specified;
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a
description of all arrangements between the nominating stockholder,
the
nominee and other persons concerning the
nomination;
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any
other information about the nominee that must be disclosed in the
proxy
solicitations under Rule 14(a) of the Securities Exchange Act of
1934, as
amended; and
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the
nominee’s written consent to serve, if
elected.
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Such
nominations must be made pursuant to the same advance notice requirements for
stockholder proposals set forth in the preceding paragraph. We
currently plan to hold our annual meetings on the third Wednesday in May of
each
year. Accordingly, our 2008 Annual Meeting of Stockholders is
currently scheduled for May 21, 2008 but we reserve the right to change the
date
in the future. Copies of our By-laws are available upon written
request made to the secretary of Adams Golf at the above address. The
requirements described above do not supersede the requirements or conditions
established by the Securities and Exchange Commission for stockholder proposals
to be included in Adams Golf’s proxy materials for a meeting of
stockholders. The Chairman of the meeting may refuse to bring before
a meeting any business not brought in compliance with applicable law and our
By-laws.
Communications
with Directors
Our
stockholders may communicate directly with members of our Board of Directors.
For direct communication with any member of Adams Golf’s Board, please send your
communication in a sealed envelope addressed to the applicable director inside
of another envelope addressed to Ms. Patty Walsh, Director, Investor Relations,
c/o Adams Golf, 2801 E. Plano Parkway, Plano, Texas, 75074. Ms. Walsh will
forward such communication to the indicated director.
2801
E.
Plano Parkway
Plano,
Texas 75074
(972)
673-9000
Directions
to Adams Golf’s Annual Meeting of Stockholders
From
DFW Airport: Proceed
to North exit from terminal. After the tollbooth, stay left to enter
Hwy. 121 North. Stay right on Hwy. 121 for a short distance to Hwy.
635 East exit. Follow Hwy. 635 east to Hwy. I-75
North. Follow I-75 north approximately six miles to the Plano Parkway
exit. Turn right on Plano Parkway and follow approximately two miles
through the Jupiter Road intersection. Adams Golf is located on the left (north)
side of E. Plano Parkway.
From
Love Field: Exit
Love Field and turn left on Mockingbird Lane. Proceed to North Dallas
Tollway, go left (north) to the Hwy. 635 exit. Follow Hwy. 635 east
to Hwy. I-75 North. Follow I-75 north approximately six miles to the
Plano Parkway exit. Turn right on Plano Parkway and follow
approximately two miles through the Jupiter Road intersection. Our
offices are located on the left (north) side of E. Plano Parkway.
Annual
Report
The
2006 Annual Report accompanies this Proxy Statement. We will provide without
charge upon written request, to any person receiving a copy of this proxy
statement, a copy of Adams Golf’s 2006 Form 10-K annual report, including the
audited consolidated financial statements and the financial statement schedules
thereto. These requests should be addressed to Ms. Patty Walsh, Director,
Investor Relations, c/o Adams Golf, Ltd., 2801 E. Plano Parkway, Plano, Texas
75074 (972-673-9000).
We
are
delivering one copy of this Proxy Statement and the accompanying Annual Report
to households even when multiple stockholders share the same address unless
we
have received instructions to the contrary from one of these
stockholders. Upon a written or verbal request from a stockholder at
a shared address, we will deliver a separate copy of this proxy statement and
Annual Report, including the audited consolidated financial statements and
the
financial statement schedules thereto, and will deliver separate copies of
any
future Proxy Statement or Annual Report if desired. Such a request
may be made by contacting Ms. Patty Walsh, Director, Investor Relations, c/o
Adams Golf, Ltd., 2801 E. Plano Parkway, Plano, TX 75074
(972-673-9000).