ADAMS GOLF
B.H. (Barney) Adams
Chairman of the Board
Adams Golf, Inc.
300 Delaware Avenue, Suite 572
Wilmington, Delaware 19801
April 12, 2006
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 Wednesday, May 17,
2006 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 two
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 17th. 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
/s/ Barney Adams
ADAMS GOLF
Adams Golf, Inc.
300 Delaware Avenue, Suite 572
Wilmington, Delaware 19801
April 12, 2006
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 17, 2006
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 Wednesday, May 17, 2006 at 9:00 a.m. central daylight time.
We are holding this meeting:
o to re-elect two Class II directors to serve until the 2009 Annual Meeting
of Stockholders; and
o to ratify the appointment of KBA Group LLP as our independent auditors for
the year ending December 31, 2006.
Your Board of Directors has selected March 31, 2006 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 2005
Annual Report to Stockholders are being distributed on or about April 12, 2006.
By Order of the Board of Directors,
/s/ Eric T. Logan
Eric T. Logan
Secretary
ADAMS GOLF
ADAMS GOLF, INC.
Proxy Statement
for the
Annual Meeting of Stockholders
to be held
May 17, 2006
This Proxy Statement and Form of Proxy are being distributed
on or about April 12, 2006
TABLE OF CONTENTS
GENERAL INFORMATION ........................................................ 1
ITEM 1. ELECTION OF DIRECTORS ............................................. 3
Nominees for Election to a Three-Year Term Ending
with the 2009 Annual Meeting. ............................................ 3
Directors Continuing in Office Until the 2008
Annual Meeting of Stockholders ........................................... 4
Directors Continuing in Office Until the 2007
Annual Meeting of Stockholders ........................................... 4
Standard Compensation of Directors ....................................... 4
Committees of the Board of Directors; Meetings ........................... 5
STOCK OWNERSHIP
Beneficial Ownership of Certain Stockholders,
Directors and Executive Officers ......................................... 11
Section 16(a) Beneficial Ownership Reporting Compliance .................. 12
MANAGEMENT
Executive Officers ....................................................... 12
Compensation of Executive Officers ....................................... 13
Employment Contracts and Change in Control Arrangements .................. 15
Certain Relationships and Related Transactions ........................... 17
Compensation Committee Interlocks and Insider Participation .............. 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policy ...................................................... 19
2005 Company Performance ................................................. 20
2005 Executive Compensation .............................................. 20
2005 Chief Executive Compensation ........................................ 20
Company Policy on Qualifying Compensation ................................ 20
AUDIT COMMITTEE REPORT ..................................................... 21
PERFORMANCE GRAPH .......................................................... 23
ITEM 2. RATIFICATION OF KBA GROUP LLP AS INDEPENDENT AUDITORS ............. 24
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS ................................. 25
STOCKHOLDER NOMINATION PROCEDURES .......................................... 25
COMMUNICATIONS WITH DIRECTORS .............................................. 26
Please see the back cover of this Proxy Statement for
directions to the Annual Meeting.
GENERAL INFORMATION
1. Who is soliciting my proxy?
We, the Board of Directors of Adams Golf, are sending you this Proxy
Statement in connection with our solicitation of proxies for use at Adams Golf's
2006 Annual Meeting of Stockholders. Certain directors, officers and employees
of Adams Golf may also solicit proxies on our behalf by mail, phone, fax or in
person.
2. Who is paying for this solicitation?
Adams Golf will pay for the solicitation of proxies. Adams Golf will also
reimburse banks, brokers, custodians, nominees and fiduciaries for their
reasonable charges and expenses in forwarding our proxy materials to the
beneficial owners of Adams Golf common stock.
3. What am I voting on?
Two items: (1) the re-election of Oliver G. Brewer III and Russell L.
Fleischer to the Board of Directors, and (2) the ratification of KBA Group LLP
as our independent auditors for the current fiscal year.
4. Who can vote?
Only those who owned common stock at the close of business on March 31,
2006, the record date for the Annual Meeting, can vote. If you owned common
stock on the record date, you have one vote per share for each matter presented
at the Annual Meeting.
5. How do I vote?
You may vote your shares either in person or by proxy. To vote by proxy,
you should mark, date, sign and mail it in the enclosed prepaid envelope. Giving
a proxy will not affect your right to vote your shares if you attend the Annual
Meeting and want to vote in person - - by voting at the Annual Meeting, you
automatically revoke your proxy. You also may revoke your proxy at any time
before the voting by giving the secretary of Adams Golf written notice of your
revocation or by submitting a later-dated proxy. If you execute, date and return
your proxy but do not mark your voting preference, the individuals named as
proxies will vote your shares FOR the election of the nominees for director and
FOR ratification of KBA Group as our independent auditors.
6. What constitutes a quorum?
Voting can take place at the Annual Meeting only if stockholders owning a
majority of the voting power of the common stock (that is, a majority of the
total number of votes entitled to be cast) are present in person or represented
by effective proxies. On the record date, we had 22,844,153 voting shares of
common stock outstanding with each share entitled to one vote. Both abstentions
and broker non-votes are counted as present for purposes of establishing the
quorum necessary for the meeting to proceed. A broker non-vote results from a
situation in which a broker holding your shares in "street" or "nominee" name
indicates to us on a proxy that it lacks discretionary authority to vote your
shares.
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7. What vote of the stockholders will result in the matter being passed?
Election of Directors. Directors need the affirmative vote of holders of a
plurality of the voting power present at the Annual Meeting to be elected. At
this year's meeting, the nominees receiving the greatest number of votes will be
deemed to have received a plurality of the voting power present. Neither
abstentions nor broker non-votes will have any effect on the election of
directors.
Ratification of KBA Group. Stockholders holding a majority of the shares
represented in person or by proxy at the upcoming Annual Meeting must
affirmatively vote to ratify KBA Group as our independent auditors for the
current fiscal year. Abstentions continue to have the same effect as votes
"against" the proposal and broker non-votes continue to have no effect at all.
8. How does the Board recommend that we vote on the matters proposed?
The Board of Directors of Adams Golf unanimously recommends that
stockholders vote FOR the election of each of the nominees for director and FOR
the proposal to ratify KBA Group as our independent auditors for the current
fiscal year.
9. Will there be other matters proposed at the 2006 Annual Meeting?
Adams Golf's By-laws limit the matters presented at the upcoming Annual
Meeting to those in the notice of the meeting, those otherwise properly
presented by the Board of Directors, and those presented by the stockholders so
long as the stockholders gave the secretary written notice of the matter on or
before February 16, 2006. We do not expect any matters other than those
described in this proxy statement to come before the Annual Meeting. If any
other matter is presented at the Annual Meeting, your signed proxy gives the
individuals named as proxies authority to vote your shares in their discretion.
10. When are stockholder proposals due if they are to be included in our proxy
materials for our 2007 Annual Meeting?
To be considered for presentation at Adams Golf's 2007 Annual Meeting of
Stockholders and included in our proxy statement, a stockholder proposal must be
received at Adams Golf's offices no later than December 13, 2006. To curtail
controversy as to the date on which a proposal was received by us, we suggest
that proponents submit their proposals by certified mail, return receipt
requested.
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ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors of Adams Golf has currently set the number of
directors constituting the whole Board at seven. As established by our Amended
and Restated Certificate of Incorporation, these directors are divided into
three classes serving staggered three-year terms. At the upcoming Annual
Meeting, you and the other stockholders will elect two individuals to serve as
Class II directors whose terms will expire at the 2009 Annual Meeting. The
nominees for this position, Mr. Brewer and Mr. Fleischer, currently serve on our
Board of Directors.
The individuals named as proxies will vote the enclosed proxy FOR the
election of both nominees unless you direct them to withhold your votes. If a
nominee becomes unable to serve as a director before the meeting (or decides not
to serve), the individuals named as proxies may vote for a substitute, or we may
reduce the number of members of the Board.
We recommend a vote FOR each of the nominees.
Below are the names and ages of the nominees for Class II director, the
Class I and Class III continuing directors, the years they became directors,
their principal occupations or employment for at least the past five years, and
certain of their directorships, if any.
Nominees for Election to a Three-Year Term Ending with the 2009 Annual
Meeting Class II Directors
o Oliver G. Brewer III - Age 42, 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.
o Russell L. Fleischer - Age 38, a director since February 2005. Mr.
Fleischer has been the Chief Executive Officer and a director of TriSyn
Group, a privately held software company, since December 2002. He was Vice
President and Chief Financial Officer of Adams Golf from November 2000 to
December 2002. Prior to joining Adams Golf, Mr. Fleischer was a corporate
officer and Senior Vice President of Finance and Administration at
InterWorld Corporation, a publicly traded e-commerce infrastructure
company. Mr. Fleisher also serves as a director of Ecometry, a privately
held multi-channel retail software company, a position he has held since
December 2004.
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Directors Continuing in Office Until the 2008 Annual Meeting of
Stockholders Class I Directors
o Stephen R. Patchin - Age 47, 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.
o Robert D. Rogers - Age 69, 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 his position of
President and CEO of Texas Industries in May 2004, a position he had held
since 1970. Mr. Rogers is also a Director of CNF Inc. (NYSE: CNF) and
serves on that company's finance and director affairs committees. He is
also a member of the Executive Board for Southern Methodist University Cox
School of Business.
Directors Continuing in Office Until the 2007 Annual Meeting of
Stockholders Class III Directors
o B.H. (Barney) Adams - Age 67, 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(R) Fairway Wood.
o Paul F. Brown, Jr. - Age 59, a director since August 1995. Since 1990, Mr.
Brown has been the Vice President, Finance and Chief Financial Officer of
Royal Holding Company, a privately owned investment company whose primary
business is in the exploration, development and production of crude oil
and natural gas.
o Mark R. Mulvoy - Age 64, 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.
Standard Compensation of Directors
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 plus $1,000 per Board meeting attended in person or by telephone.
In addition, each non-employee director serving as a 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.
During the year ended December 31, 2005, we paid our directors an aggregate of
$124,000 in director fees.
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.
Our directors are also entitled to participate in our 2002 Equity
Incentive Plan. During the year ended December 31, 2005, our Board of Directors
approved a one-time grant of options to purchase 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 the three successive anniversaries thereafter. The
options have a ten-year term expiring on May 27, 2015.
The Company entered into an employment agreement with Mr. Adams whereby he
serves as our Chairman of the Board and with Mr. Brewer whereby he serves as
President and Chief Executive Officer. The terms and conditions of Messrs.
Adams' and Brewer's employment agreements are set forth on pages 15 through 17
under the caption "Employment Contracts and Change in Control Agreements."
Committees of the Board of Directors; Meetings
Adams Golf has two standing committees, namely the Audit Committee and the
Compensation Committee.
The Audit Committee
Audit Committee Purpose
The Audit Committee
o makes recommendations to the full Board of Directors with respect to the
Company's independent auditors;
o meets periodically with our independent auditors to review the general
scope of audit coverage;
o monitors the Company's policies and procedures to prevent improper
conflicts of interest;
o monitors the integrity of the Company's financial reporting and systems of
internal controls regarding finance and legal compliance;
o monitors the independence of the Company's auditors; and
o provides an avenue of communication among the independent auditors,
management and the Board of Directors
5
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and has, at all times, direct
access to the independent auditors as well as any employee of the Company. The
Audit Committee has the ability to retain, at the Company's expense, special
legal, accounting or other consultants or experts that it deems necessary in the
performance of its duties.
Audit Committee Composition and Meetings
The Audit Committee is comprised of two or more directors as determined by
the full Board. All members of the Audit Committee are required to have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee must
have accounting or related financial management expertise.
Audit Committee members are appointed by the Board of Directors. If an
Audit Committee Chair is not designated or present, the members of the Committee
may designate a Chair by majority of the Committee membership. The Audit
Committee currently functions without an individual named as its Chair.
The Audit Committee is required to meet at least three times annually, but
may meet more frequently as circumstances dictate. The Committee meets
privately, at least annually with management, the independent auditors, and as a
committee to discuss any matters that the Committee or any of these groups
believe should be discussed. In addition, the Committee communicates with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors' limited
review procedures.
The following is our Audit Committee Charter:
Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of the Audit Committee Charter at
least annually. Submit the Charter to the Board of Directors for
approval and have the document published at least every three years
in accordance with SEC regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices and judgments.
3. In consultation with management, the independent auditors should
consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures
and the steps management has taken to monitor, control and report
such exposures. Review significant findings prepared by the
independent auditors together with management's responses.
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4. Review with financial management and the independent auditors the
Company's quarterly and annual financial results prior to the
release of earnings and/or prior to filing or distributing the
Company's financial statements. Discuss any significant changes to
the Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with SAS 61.
The Chair of the Committee may represent the entire Audit Committee
for purposes of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall
review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of auditors when
circumstances warrant.
6. Approve the fees and other significant compensation to be paid to
the independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with
the Company that could impair the auditors' independence.
8. Review the independent auditors' audit plan; discuss scope,
staffing, locations, reliance upon management and general audit
approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters
required to be communicated to audit committees in accordance with
AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
11. Obtain from the independent auditor assurance that Section 10A of
the Securities Exchange Act of 1934 has not been implicated.
Internal Audit Department and Legal Compliance
12. Review the budget, plan, changes in the plan, activities,
organizational structure and qualifications of the internal audit
department, as needed.
13. Review the appointment, performance and replacement of the senior
internal audit executive.
14. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
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Other Audit Committee Responsibilities
15. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's annual proxy statement.
16. Perform any other activities consistent with the Audit Committee
Charter, the Company's by-laws and governing law, as the Committee
or the Board deems necessary or appropriate.
17. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the foregoing activities.
While the Audit Committee has the responsibilities and powers set forth in
the Audit Committee Charter, it is not the duty of the Audit Committee to plan
or conduct audits or to determine that our financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
These are the responsibilities of management and the independent auditor. Nor is
it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor, or to
assure compliance with laws and regulations.
During the fiscal year ended December 31, 2005, the members of the Audit
Committee were Mark R. Mulvoy, Robert D. Rogers and Russell L. Fleischer. At
January 1, 2005, the Audit Committee consisted of Mr. Mulvoy and Mr. Rogers. On
February 10, 2005, our Board of Directors elected Russell L. Fleischer to serve
on the Board of Directors and on our Audit Committee. On May 23, 2005, Mr.
Mulvoy resigned from the Audit Committee. Mr. Rogers and Mr. Fleischer currently
serve as the members of our Audit Committee and both serve as our Audit
Committee Financial Experts. The Audit Committee met five times in 2005.
Independent Accountant Fees and Services
In fiscal year 2005, we paid KBA Group, our independent public accountants,
an aggregate of $98,255 for professional services rendered for the audit of our
2005 consolidated financial statements included in our 2005 Annual Report on
Form 10-K and for the reviews of the consolidated quarterly financial statements
included in our Quarterly Reports on Form 10-Q filed with the Securities and
Exchange Commission. We also paid KPMG, our former independent public accounts
$20,000 for professional services rendered for the audit of our consolidated
financial statements included in our 2004 Annual Report.
In fiscal year 2004, we paid KBA Group $25,200 for professional services
rendered for the audit of our consolidated financial statements included in our
2004 Annual Report on Form 10-K and for the reviews of the consolidated
quarterly financial statements included in our Quarterly Reports on Form 10-Q
8
filed with the Securities and Exchange Commission. We also paid KPMG, our former
previous independent public accountants, an aggregate of $84,985 in fiscal year
2004 for professional services rendered for the audit of our consolidated
financial statements included in our 2003 Annual Report.
Tax Fees
We did not pay any fees to KBA Group or KPMG in 2005 for tax work. In 2004,
we paid $6,300 to KPMG, our auditors in fiscal year 2003, for tax work related
to statutory compliance with certain local and international taxing authorities.
All Other Fees
We did not pay any additional fees to KBA Group in 2005 or in 2004.
The Audit Committee determined that KBA Group retained its independence. In
making its determination regarding the independence of KBA Group, the Audit
Committee considered whether the provision of the services described above was
compatible with maintaining such independence. All services to be performed for
us by our independent public accountants must be pre-approved by the Audit
Committee, which has chosen not to adopt any pre-approval policies for
enumerated services and situations, but instead has retained the sole authority
for such approvals.
The Compensation Committee
The Compensation Committee
o recommends to the Board of Directors annual salaries for senior management
and
o recommends to the Board of Directors the administration and grant of awards
under Adams Golf's 2002 Equity Incentive Plan.
During the fiscal year ended December 31, 2005, the members of the
Compensation Committee were Mark R. Mulvoy and Stephen R. Patchin. The
Compensation Committee met twice in 2005.
Nominating Procedures
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. 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
9
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. Specific instructions for stockholder nominations can be
found on page 25 of this Proxy Statement. Each of our directors, with the
exception of Messrs. Adams, Patchin, Brown and Brewer, are independent as
defined under the rules of the Nasdaq Stock Market. 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 (both of whom are currently serving
as directors) were selected for re-election by our entire Board.
Board Meetings
During the year ended December 31, 2005, the entire Board of Directors of
Adams Golf met four times. During fiscal 2005, each director attended at least
75% of the total of all meetings of the Board of Directors and any committee on
which he served. All of our directors attended the Annual Stockholders' Meeting
in 2005.
Code of Conduct
We have adopted a Code of Conduct that applies to all of our directors,
officers and employees. To receive a copy of our Code of Conduct, please contact
Ms. Patty Walsh, Director, Investor Relations at (972) 673-9000. We will
disclose subsequent amendments and waivers to our code of conduct as an Item 10
disclosure in a Current Report on Form 8-K.
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STOCK OWNERSHIP
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
This table shows, as of March 31, 2006, 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 "Named Executive Officer" set forth in the Summary Compensation Table
on page 13; 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)
--------------------------------------------------------------
Number of Shares Right to Percent of
Name of Beneficial Owners Beneficially Owned Acquire (2) Class (3)
----------------------------------------- -------------------- ---------------- -------------
Beneficial Owners of 5% or More
of Our Common Stock
Royal Holding Company, Inc 6,374,511 (4) 0 27.9%
Richard L. Scott 2,393,060 (5) 0 10.5%
Roland E. Casati 1,838,600 (6) 0 8.0%
Steven N. Bronson 1,180,100 (7) 0 5.2%
Directors and Named Executive Officers
B.H. Adams 2,694,222 (8) 0 11.8%
Paul F. Brown, Jr. 6,384,511 (9) 37,500 28.1%
Russell L. Fleischer 0 0 *
Mark R. Mulvoy 1,000 37,500 *
Stephen R. Patchin 6,374,511 (10) 37,500 28.0%
Robert D. Rogers 5,000 (11) 25,000 *
Oliver G. Brewer III 10,000 3,083,355 11.9%
Eric T. Logan 0 137,500 *
All Directors and Named Executive Officers
as a Group (8 persons) 9,094,733 3,358,355 47.5%
-----------
* 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, 2006 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 22,844,153 voting shares
of common stock outstanding on March 31, 2006.
(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 Mr. Bronson is 100 Mill Plain Road, Danbury, CT 06811.
(8) Includes 2,694,222 shares Mr. Adams holds jointly with Jackie Adams, his
spouse.
(9) 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.
(10) 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.
(11) 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.
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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 2005 with the
exception of the 293,822 options granted to Mr. Brewer on May 26, 2005. A Form 4
for this option grant has now been filed with the Securities and Exchange
Commission.
MANAGEMENT
Executive Officers
Below are the names and ages of the executive officers of Adams Golf and a
brief description of their prior experience and qualifications.
o B.H. (Barney) Adams - Please see biography of Mr. Adams on page 4.
o Oliver G. Brewer III - Please see biography of Mr. Brewer on page 3.
o Eric T. Logan - Age 40. Mr. Logan has served as Senior Vice President and
Chief Financial Officer of Adams Golf since October 2003. He was U.S.
Chief Financial Officer of Daisytek International from September 2002 to
May 2003 and Chief Financial Officer of Daisytek International from May
2003 to October 2003. From May 2001 to July 2002, Mr. Logan was Vice
President, Finance and Planning for CompX International, Inc. He was
Controller for ServiceLane.com, an Internet driven home improvement
company, from July 2000 through May 2001.
12
Compensation of Executive Officers
The following table shows for the fiscal years ended December 31, 2003,
2004 and 2005, compensation awarded, paid to or earned by (i) our Chief
Executive Officer; and (ii) our other most highly compensated individuals who
were serving as executive officers as of December 31, 2005.
Summary Compensation Table
Long Term
Compen-
sation
Annual Compensation Awards
----------------------------- ------------
Securities All Other
Name and Underlying Compen-
Principal Positions Year Salary Bonus Options (#) Sation
------------------------------- -------- ------------- ---------- ------------ -----------
B.H. Adams 2005 $240,000 $120,000 -- $36,746 (1)
Chairman of the Board 2004 240,000 120,000 -- 34,463 (2)
2003 240,000 100,000 -- 28,409 (3)
Oliver G. Brewer III 2005 400,000 250,000 1,194,161 22,358 (4)
President and 2004 250,000 250,000 645,413 20,036 (5)
Chief Executive Officer 2003 250,000 187,500 869,007 20,282 (6)
Eric T. Logan 2005 200,000 88,750 100,000 420 (7)
Senior Vice President, 2004 175,000 65,625 250,000 324 (7)
Chief Financial Officer, 2003 38,478 (8) -- 100,000 81 (7)
Secretary and Treasurer
----------------
(1) Represents perquisites of $14,400, fringe benefits of $15,813 and $6,533
in group life insurance premiums paid on behalf of Mr. Adams.
(2) Represents perquisites of $14,400, fringe benefits of $13,530 and $6,533
in group life insurance premiums paid on behalf of Mr. Adams.
(3) Represents perquisites of $23,182, fringe benefits of $2,821 and $2,406
in group life insurance premiums paid on behalf of Mr. Adams.
(4) Represents perquisites of $6,110, fringe benefits of $15,348 and $900 in
group life insurance premiums paid on behalf of Mr. Brewer.
(5) Represents perquisites of $7,625, fringe benefits of $11,871 and $540 in
group life insurance premiums paid on behalf of Mr. Brewer.
(6) Represents perquisites of $9,450, fringe benefits of $10,291 and $540 in
group life insurance premiums paid on behalf of Mr. Brewer.
(7) Represents group life insurance premiums paid on behalf of Mr. Logan.
(8) Mr. Logan became employed by Adams Golf in October 2003. Mr. Logan's
annualized salary for 2003 was $175,000.
13
Option Grants in 2005
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise Grant Date
Date of Options In Fiscal Price per Expiration Present
Name Grant Granted (1) Year Share Date Value (2)
--------------------- --------- ------------- ----------- ------------ ------------ ------------
Eric T. Logan 01/01/05 100,000 (3) 7.8% $0.01 01/01/15 $1.35 (6)
Oliver G. Brewer III 05/26/05 293,822 (4) 22.7% $0.01 05/26/15 $1.35 (7)
Oliver G. Brewer III 09/06/05 900,339 (5) 69.5% $0.01 09/06/15 $1.38 (8)
--------------
(1) All options noted are non-transferable except in the event of the death
of the optionee.
(2) We calculated this amount using the Black-Scholes option pricing model, a
complex mathematical formula that uses six different market-related
factors to estimate the value of stock options. The factors are stock
price at date of grant, option exercise price, option term, risk-free
rate of return, stock volatility and dividend yield. The Black-Scholes
model generates an estimate of the value of the right to purchase a share
of stock at a fixed price over a fixed period.
(3) Mr. Logan's options vest in four equal installments on the anniversary of
the grant date.
(4) The options granted to Mr. Brewer on May 26, 2005 vested in one
installment on July 30, 2005.
(5) The options granted to Mr. Brewer on September 6, 2005 vest in three
equal installments on January 1 of 2006, 2007 and 2008.
(6) Using the Black-Scholes option pricing model as described in footnote
(2), the options granted to Mr. Logan in January 2005 had a value of
$1.35 per share at December 31, 2005. The actual value, if any Mr. Logan
realizes will depend on whether the stock price at exercise is greater
than the grant price, as well as Mr. Logan's continued employment through
the vesting period and the ten-year option term. The following
assumptions were used to calculate the Black-Scholes value for Mr.
Logan's options:
Stock price at date of grant $1.36 Option term Ten years
Option exercise price $0.01 Risk-free rate of return 3.5%
Dividend yield 0% Volatility 114.31%
(7) Using the Black-Scholes option pricing model as described in footnote
(2), the options granted to Mr. Brewer in May 2005 had a value of $1.35
per share at December 31, 2005. The actual value, if any Mr. Brewer
realizes will depend on whether the stock price at exercise is greater
than the grant price, as well as Mr. Brewer's continued employment
through the vesting period and the ten-year option term. The following
assumptions were used to calculate the Black-Scholes value for Mr.
Brewer's options:
Stock price at date of grant $1.36 Option term Ten years
Option exercise price $0.01 Risk-free rate of return 3.5%
Dividend yield 0% Volatility 113.96%
(8) Using the Black-Scholes option pricing model as described in footnote
(2), the options granted to Mr. Brewer in September 2005 had a value of
$1.38 per share at December 31, 2005. The actual value, if any Mr. Brewer
realizes will depend on whether the stock price at exercise is greater
than the grant price, as well as Mr. Brewer's continued employment
through the vesting period and the ten-year option term. The following
assumptions were used to calculate the Black-Scholes value for Mr.
Brewer's options:
Stock price at date of grant $1.39 Option term Ten years
Option exercise price $0.01 Risk-free rate of return 3.5%
Dividend yield 0% Volatility 110.28%
14
Securities Underlying Unexercised Options at Fiscal Year End
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at Fiscal Year End (#) at Fiscal Year End ($)
------------------------------------ -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---------------------------- --------------- -------------- -------------- --------------
Oliver G. Brewer III 2,863,242 900,339 $3,435,890 $1,080,407
Employment Contracts and Change in Control Arrangements
B.H. Adams
On February 16, 2006, we executed an employment contract with Mr. Barney
Adams, Chairman of our Board of Directors. The term of this employment agreement
runs retroactively from January 1, 2006 until December 31, 2008, unless earlier
terminated. Mr. Adams will receive an annual base salary of $254,400 during the
term of the agreement. Mr. Adams will serve as our non-executive Chairman of the
Board of Directors pursuant to the agreement and will perform 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.
Oliver G. Brewer III
On February 19, 2005, we entered into an employment contract with Mr.
Oliver G. "Chip" Brewer III, 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.
15
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.
16
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.
Eric T. Logan
On March 29, 2006, we renewed our Change of Control Agreement with Mr.
Logan, our Chief Financial Officer. On March 31, 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.
Certain Relationships and Related Transactions
Two adult children of our Chairman, Mr. B.H. Adams, are employees of Adams
Golf. Edwin Adams serves as our General Counsel. In 2005, Mr. Edwin Adams
received an annual base salary of $130,000 and a performance bonus of $32,266.
Ms. Cindy Adams-Herington holds the position of Vice President, Advertising and
Marketing and received an annual base salary in 2005 of $154,500 and a
performance bonus of $76,125. Neither Edwin Adams nor Cindy Herington has
employment contracts or change of control arrangements with us.
Our Chairman 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 2005, we
made total purchases of $100,065 from Plano Paper and Supply.
17
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee has at any time been an officer or
employee of ours or our subsidiaries. None of our executive officers serves as a
member of the compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors or compensation
committee. Furthermore, none of our executive officers serves as a director of
any entity that has one or more executive officers serving as a member of our
compensation committee.
18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
The Compensation Committee of the Board of Directors establishes and
administers our executive compensation programs. The full Board of Directors of
Adams Golf reviews the Committee's recommendations and approves the salaries of
all elected officers, including the "Named Executive Officers" who appear in the
Summary Compensation Table on page 13. The Committee reviews salary
recommendations for executive officers and is responsible for all other elements
of executive compensation, including annual and long-term incentive awards.
Our goal is to attract, retain and reward a highly competent and productive
employee group. To do so, both the Compensation Committee and the Board of
Directors, as a whole, have determined that it is in our best interests to
provide a total compensation package that competes favorably with those offered
within the sports equipment industry and geographic areas in which Adams Golf
operates.
Our current compensation package consists of three basic components: base
salary, bonus awards under the Management Incentive Plan, and stock option
grants under our 2002 Equity Incentive Plan. Executive officer salary
adjustments are determined by a subjective evaluation of the individual's
performance and our financial and operational performance. Although we do not
utilize any formal mathematical formulae or objective thresholds (except in the
case of awards under our Management Incentive Plan) particular attention is
given to the operating results of Adams Golf. We believe that specific formulae
restrict flexibility and are too rigid at this stage of our development.
Base Salary. The base salary policy provides for compensation at
competitive levels. Increases in executive base salary are awarded for
individual and overall company performance and generally reflect established
merit increase guidelines applicable to all salaried employees.
Management Incentive Plan. The Management Incentive Plan provides the
potential for semi-annual incentives. The plan was designed to create an
incentive for key employees, including our Chief Executive Officer, other Named
Executive Officers, and management employees who are in a position to contribute
to, and therefore influence, our annual financial performance. Under the plan,
we set semi-annual target objectives for overall company performance. In 2005,
we met our target objectives for both the first and second six months of the
year.
Stock Incentive Plan. The purpose of our stock incentive plan is to further
align employees' interests with our long-term performance and, therefore, the
long-term interests of our stockholders. Options are granted to employees who
are in the position to influence business results. The options vest either in
25% increments on the first, second, third and fourth anniversaries of the grant
date, at 100% on the first anniversary of the grant date, or at 100% on the
six-month anniversary of the grant date.
19
2005 Company Performance
In 2005, our diluted income per common share was $0.12 compared to 2004
diluted income per common share of $0.12. Net revenues were $56.4 million in
2005 compared to $56.8 million in 2004. The net income for 2005 was $3.2 million
as compared to net income in 2004 of $3.1 million.
During 2005, we introduced new products in our Ovation, Redline RPM and GT2
product lines, including the Ovation driver, the Redline RPM 430Q and 460 Dual
drivers, and the GT2 drivers, fairway woods and irons. In addition, in the fall
of 2005, we introduced the Idea a2 and a2 OS lines of irons and hybrid clubs.
2005 Executive Compensation
In January 2005, Eric T. Logan, our Chief Financial Officer received a base
salary increase of $25,000 over his 2004 annual base salary.
2005 Chief Executive Compensation
The compensation of our President and Chief Executive Officer, Mr. Brewer,
is described on pages 15 through 17.
Company Policy on Qualifying Compensation
The Compensation Committee intends to continue its practice of paying
competitive compensation to attract and retain senior executives to manage our
business in the best interests of the Company and its stockholders. Compensation
decisions for the executive officers are made with the full consideration of
Internal Revenue Code Section 162(m) implications. Although the Committee
intends to structure arrangements in a manner that preserves deductibility under
Section 162(m), it believes that maintaining flexibility is important and may
pay amounts or make awards that are nondeductible. Under Section 162(m) of the
Internal Revenue Code, annual compensation in excess of $1 million that is not
paid pursuant to plans approved by stockholders and does not include specific
performance criteria is not deductible as a compensation expense to Adams Golf.
Annual compensation paid to Mr. Brewer under his current employment agreement in
excess of $1 million will not be deductible under Section 162(m).
We intend to periodically review the potential consequences of Section
162(m) and may in the future structure the performance-based portion of our
executive officer compensation to comply with certain exemptions provided in
Section 162(m).
The foregoing report on executive compensation is provided by the following
non-employee directors, who constituted the Compensation Committee during 2005.
The Compensation Committee
Mark R. Mulvoy Stephen R. Patchin
20
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors oversees our financial
reporting process on behalf of the Board of Directors and operates under a
written charter adopted by the Board of Directors.
Messrs. Fleischer and Rogers currently serve as our Audit Committee members
for fiscal year 2006. Messrs. Fleischer and Rogers each satisfy the independence
requirements established for Audit Committee members under the Nasdaq Stock
Exchange Listing Standards.
Management has the primary responsibility for the financial statements and
the reporting process, including the systems of internal controls. In fulfilling
its oversight responsibilities, the committee reviewed the audited consolidated
financial statements in the Annual Report with management. The review included a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Audit Committee reviewed with our independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of our accounting
principles and such other matters as are required to be discussed with the
committee under generally accepted auditing standards. In addition, the Audit
Committee has discussed with the independent auditors the auditors' independence
from management and the company in general, including the matters in the written
disclosures required by the Independence Standards Board.
The Audit Committee discussed with our independent auditors the overall
scope and plans for their respective audits. The Committee met with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of our internal controls and
the overall quality of our financial reporting. The Audit Committee held five
meetings during the fiscal year 2005.
In reliance on the reviews and discussion referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited consolidated financial statements be included in the Annual
Report on Form 10-K for the fiscal year ended December 31, 2005 for filing with
the Securities and Exchange Commission. The committee and the Board have also
recommended the selection of the Company's independent auditors for fiscal year
2006.
The Audit Committee
Russell L. Fleischer Robert D. Rogers
21
In accordance with the rules of the Securities and Exchange Commission, the
foregoing Compensation Committee and Audit Committee Reports, which is required
by paragraphs (a) and (b) of Regulation S-K Item 306, shall not be deemed to be
"soliciting material" or to be "filed" with the Commission or subject to the
Commission's Regulation 14A, other than as provided in the Item, or to the
liabilities of Section 18 of the Securities Exchange Act of 1934, except to the
extent that we specifically request that the information be treated as
soliciting material or specifically incorporate it by reference into a document
filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
22
PERFORMANCE GRAPH
The following performance graph compares the performance of our common
stock to the Standard and Poor's Small Cap 600 index and an industry peer group,
selected in good faith, for the period from December 31, 2000, through December
31, 2005. The graph assumes that the value of the investment in our common stock
and each index was $100 at December 31, 2000 and that all dividends were
reinvested. We have paid no dividends. Performance data is provided for the last
trading day closest to year end for each 2001, 2002, 2003, 2004, and 2005.
COMPARISON OF CUMULATIVE TOTAL RETURNS
Assumes Initial Investment of $100
December 2005
[GRAPHIC OMITTED/ SEE GRAPH IN SUPPLEMENTAL PDF]
December December December December December December
Company 2000 2001 2002 2003 2004 2005
---------------------- ----------- ----------- ----------- ----------- ----------- -----------
Adams Golf, Inc. $ 100 $ 94 $ 62 $ 175 $ 345 $ 295
S&P Small Cap 600 100 107 91 126 155 167
Peer Group A (1) 100 101 72 97 89 95
------------
(1) Peer Group consists of Callaway Golf Company, Aldila, Inc. and Cutter &
Buck Inc.
Our stock is listed and traded on the OTC Bulletin Board (OTCBB) under the
symbol "ADGO".
23
ITEM 2.
RATIFICATION OF KBA GROUP LLP AS INDEPENDENT AUDITORS
The Audit Committee of our Board of Directors determined on March 8, 2006
to appoint KBA Group LLP to serve as our independent auditors for the fiscal
year ending December 31, 2006.
We are submitting the appointment of KBA to stockholders to obtain your
ratification. Representatives of KBA will be present at the meeting, will have
the opportunity to make a statement if they desire to do so, and are expected to
be available to respond to questions.
We recommend a vote FOR the ratification of KBA as our independent auditors
for the current fiscal year.
24
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:
o a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the Annual
Meeting;
o the names and addresses of the supporting stockholders;
o the class and number of shares of our stock that are beneficially
owned by such persons; and
o any material interest of such persons in the matter presented.
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:
o the name, age, business and residence address of the person intended
to be nominated;
o 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;
o a description of all arrangements between the nominating stockholder,
the nominee and other persons concerning the nomination;
o 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
o the nominee's written consent to serve, if elected.
25
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 2007 Annual Meeting of Stockholders is currently
scheduled for May 16, 2007. Copies of our By-laws are available upon written
request made to the secretary of Adams Golf at the above address. The
require-ments 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 of
Investor Relations, c/o Adams Golf, 2801 E. Plano Parkway, Plano, Texas, 75074.
Ms. Walsh will forward such communication to the indicated director.
26
ADAMS GOLF
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 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 Plano Parkway.
Annual Report
The 2005 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 2005 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 of 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).