SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
ADAMS GOLF, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
* Set forth amount on which the filing is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[ADAMS GOLF, INC. LOGO]
B.H. (Barney) Adams
Chairman of the Board,
Chief Executive Officer
and President
April 7, 1999
Dear Adams Golf Stockholder:
I am pleased to invite you to Adams Golf's Annual Meeting of
Stockholders. The meeting will be held at 10:00 a.m. on
Wednesday, May 5, 1999 at the Omni Richardson Hotel, 701
East Campbell Road, Richardson, Texas.
At the meeting, you and the other stockholders will be asked
to (1) elect two directors to the Adams Golf Board; (2)
approve the 1999 Non-Employee Director Plan, which
authorizes the granting of non-qualified stock options to
non-employee directors; and (3) ratify the appointment of
KPMG LLP as the Company's independent auditors for the
current fiscal year. You will also have the opportunity to
hear what has happened in our business in the past year and
to ask questions. You will find other detailed information
about Adams Golf and its operations, including its audited
financial statements, in the enclosed Annual Report.
We hope you can join us on May 5th. 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
<PAGE>
[ADAMS GOLF, INC. LOGO]
Adams Golf, Inc.
300 Delaware Avenue, Suite 548
Wilmington, Delaware 19801
April 7, 1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 5, 1999
Adams Golf will hold its Annual Meeting of Stockholders at
the Omni Richardson Hotel, 701 East Campbell Road,
Richardson, Texas on Wednesday, May 5, 1999 at 10:00 a.m.
We are holding this meeting:
* To elect two Class I directors to serve until the 2002
Annual Meeting of Stockholders;
* To approve the 1999 Non-Employee Director Plan of
Adams Golf, Inc.;
* To ratify the appointment of KPMG LLP as the
independent auditors of the Company for the year
ending December 31, 1999; and
* To transact any other business that properly comes
before the meeting.
Your Board of Directors has selected March 31, 1999 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, 2801 East Plano
Parkway, Plano, Texas, for ten days before the meeting.
This Notice of Annual Meeting, Proxy Statement, proxy and
Adams Golf's 1998 Annual Report to Stockholders are being
distributed on or about April 7, 1999.
By Order of the Board of Directors,
Richard H. Murtland
Secretary
<PAGE>
[ADAMS GOLF, INC. LOGO]
ADAMS GOLF, INC.
Proxy Statement
for meeting to be held
May 5, 1999
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION........................................ 1
ITEM 1. ELECTION OF DIRECTORS.............................. 3
Nominees for Election to a Three Year Term Ending
with the 2002 Annual Meeting......................... 3
Directors Continuing in Office Until the 2001
Annual Meeting of Stockholders........................ 3
Directors Continuing in Office Until the 2000
Annual Meeting of Stockholders........................ 4
Compensation of Directors................................ 4
Committees of the Board of Directors; Meetings........... 5
STOCK OWNERSHIP............................................ 6
Beneficial Ownership of Certain Stockholders,
Directors and Executive Officers...................... 6
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 7
MANAGEMENT................................................. 7
Executive Officers....................................... 7
Compensation of Executive Officers....................... 8
Employment Contracts and Change in Control
Arrangements.......................................... 10
Compensation Committee Interlocks and Insider
Participation......................................... 10
Certain Transactions..................................... 10
BOARD REPORT ON EXECUTIVE COMPENSATION..................... 13
Compensation Policy...................................... 13
1998 Company Performance................................. 14
1998 Executive Compensation.............................. 14
1998 Chief Executive Compensation........................ 14
Company Policy on Qualifying Compensation................ 14
PERFORMANCE GRAPH.......................................... 15
ITEM 2. APPROVAL OF 1999 NON-EMPLOYEE DIRECTOR PLAN........ 16
General.................................................. 16
Terms and Conditions..................................... 16
Termination of Director Option Plan...................... 17
Federal Income Tax Consequences.......................... 17
1999 Non-Employee Director Plan Option Grants............ 17
ITEM 3. RATIFICATION OF KPMG LLP AS INDEPENDENT AUDITORS... 18
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS................. 19
ATTACHMENTS
1999 Non-Employee Director Plan of Adams Golf, Inc. ..... A-1
Please see the back cover of this booklet
for directions to the Annual Meeting.
<PAGE>
GENERAL INFORMATION
Q: Who is soliciting my proxy?
A: 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 1999 Annual Meeting of
Stockholders. Certain directors, officers and employees of
Adams Golf also may solicit proxies on our behalf by mail,
phone, fax or in person.
Q: Who is paying for this solicitation?
A: 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.
Q: What am I voting on?
A: Three items: (1) the election of Robert F. MacNally and
Stephen R. Patchin to the Board of Directors; (2) the
approval of the 1999 Non-Employee Director Plan; and (3) the
ratification of KPMG LLP as the Company's independent
auditors for the current fiscal year.
Q: Who can vote?
A: Only those who owned common stock at the close of business on
March 31, 1999, 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.
Q: How do I vote?
A: You may vote your shares either in person or by proxy. To vote
by proxy, you should mark, date, sign and mail the enclosed
proxy 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 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 both nominees for director, FOR the approval
of the 1999 Non-Employee Director Plan and FOR ratification
of KPMG as the Company's independent auditors.
Q: What constitutes a quorum?
A: 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, Adams
Golf had 22,479,282 voting shares of common stock
outstanding. Both abstentions and broker non-votes
(situations in which a broker holding your shares in
"street" or "nominee" name indicates to us on a proxy that
you have not voted and it lacks discretionary authority to
vote your shares) are counted as present for purposes of
establishing the quorum necessary for the meeting to
proceed.
-1-
<PAGE>
Q: What vote of the stockholders will result in the matters being
passed?
A: Election of Directors. Directors need the affirmative vote of
holders of a plurality of the voting power present to be
elected. At this year's meeting, the two 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.
Approval of Non-Employee Director Plan. To approve the 1999 Non-
Employee Director Plan, stockholders holding a majority of
the shares represented in person or by proxy at the meeting
must affirmatively vote to approve the matter. In this case,
abstentions have the same effect as a vote "against" the
proposal, while broker non-votes have no effect at all.
Ratification of KPMG. Like the vote required to approve the 1999
Non-Employee Director Plan, stockholders holding a majority
of the shares represented in person or by proxy at the
upcoming Annual Meeting must affirmatively vote to ratify
KPMG as the Company's 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.
Q: How does the Board recommend that we vote on the matters
proposed?
A: The Board of Directors of Adams Golf unanimously recommends
that stockholders vote FOR each of the proposals submitted
at the upcoming Annual Meeting.
Q: Will there be other matters proposed at the 1999 Annual
Meeting?
A: Adams Golf's Bylaws 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 stockholders so long as the stockholder
gives the secretary written notice of the matter on or
before April 17, 1999. We do not expect any other matter to
come before the 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.
Q: When are 2000 stockholder proposals due if they are to be
included in the Company's proxy materials?
A: To be considered for presentation at Adams Golf's 2000 Annual
Meeting of Stockholders and included in the Company's proxy
statement, a stockholder proposal must be received at Adams
Golf's offices no later than December 8, 1999. To curtail
controversy as to the date on which a proposal was received
by the Company, we suggest that proponents submit their
proposals by certified mail, return receipt requested.
-2-
<PAGE>
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors of Adams Golf has currently set the
number of directors constituting the whole board at eight. As
established by the Company's 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 I directors whose term expires at
the 2002 Annual Meeting. Mr. Patchin is now a member of the
Board of Directors. If elected, Mr. MacNally will be a new
member of the 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 either 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 both nominees.
Below are the names and ages of the nominees for Class I
director, the Class II and Class III directors, the years they
became directors, their principal occupations or employment for
at least the past five years and certain of their other
directorships, if any.
Nominees for Election to a Three Year Term Ending with the 2002
Annual Meeting
Class I Directors
* Robert F. MacNally Age 66, nominee for director.
Retired-Chairman of the Board of
Tommy Armour Golf Company
from 1995 until 1997; President
and CEO of Tommy Armour Golf
Company from 1979 to 1997. Also
a director of C.O. Tools, Inc.
* Stephen R. Patchin Age 40, a director since October 1993.
President and Chief Executive
Officer of Royal Oil and Gas
Corp. since June 1985; President
and Chief Executive Officer of
Royal Holding Company, Inc. since
February 1990.
Directors Continuing in Office Until the 2001 Annual Meeting of
Stockholders
Class III Directors
* B.H. (Barney) Adams Age 60, a director since 1987.
Founder of Adams Golf and our
Chairman of the Board, Chief
Executive Officer and President.
* Paul F. Brown, Jr. Age 52, a director since August 1995.
Vice President, Finance and Chief
Financial Officer of Royal
Holding Company, Inc. since 1990.
-3-
<PAGE>
* Mark R. Mulvoy Age 57, a director since April 1998.
Retired-Managing Editor of Sports
Illustrated magazine from 1984
through 1996; Publisher of Sports
Illustrated magazine from 1990 to
1992. Also a director of Tosco
Corporation.
Directors Continuing in Office Until the 2000 Annual Meeting of
Stockholders
Class II Directors
* Richard H. Murtland Age 58, a director since April 1996.
Corporate Secretary and Treasurer
since August 1995. Vice President-
Research and Development of Adams
Golf since April 1998; Vice
President-Operations of Adams
Golf from May 1994 to April 1998;
Project Manager of ARCO
International Oil and Gas Company
from June 1976 to March 1994.
* Roland E. Casati Age 68, a director since November 1995.
Chairman of the Board of
Continental Offices, Ltd. for
more than five years. Also a
director of Convergent
Communications, Inc. and Virtual
Visits, Inc.
* John S. Simpson Age 47, a director since July 1998.
Principal, John Simpson
Associates since January 1997;
Manager, International Management
Group (UK) Inc. from June 1978
until December 1996.
Under the terms of an agreement
between Adams Golf and Nick
Faldo, the Company has agreed
that, for so long as royalties
remain payable to Mr. Faldo, it
will cause a designee of Mr.
Faldo to be nominated for, and
elected to, the Board. Mr.
Simpson is currently Mr. Faldo's
designee to the Board.
COMPENSATION OF DIRECTORS
In 1998, Adams Golf did not provide compensation to
directors but the Company did reimburse its directors for
reasonable expenses incurred in traveling to and from board
meetings (or a committee thereof). The Company has adopted, and
is asking the stockholders to approve at the upcoming Annual
Meeting, the 1999 Non-Employee Director Plan which authorizes the
discretionary issuance of up to 200,000 shares of common stock to
the non-employee directors of Adams Golf.
-4-
<PAGE>
Commencing with the first quarter of 1999, each non-employee
director who serves as a member of the Board of Directors for at
least one month during that quarter will receive a director fee
of $5,000 plus $1,000 per meeting attended in person or by
telephone (whether of the full Board or a committee thereof). In
addition, each non-employee director serving as a chairperson of
any committee of the Board will receive an additional $1,000 per
quarter provided such person serves in such capacity for at least
one month during that quarter. The Company also provides its non-
employee directors with Travel/Accidental Death and Dismemberment
coverage in the amount of $250,000.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
Adams Golf has two standing committees.
The Audit Committee
- -------------------
* Meets periodically with Adams Golf's independent auditors
to review the general scope of audit coverage,
including consideration of the Company's accounting
practices and procedures, its system of internal
accounting controls and financial reporting.
* Makes recommendations to the Board of Directors with
respect to appointment of the Committee's independent
auditors.
During the fiscal year ended December 31, 1998, the members
of the Audit Committee were Paul F. Brown, Jr. and Finis F.
Conner. The Audit Committee met one time in 1998. Mr.
Conner resigned as a director of the Company effective
February 1999. The Company anticipates that, if elected,
Mr. MacNally will serve on the Audit Committee.
The Compensation/Plan Committee
- -------------------------------
* Recommends to the Board of Directors annual salaries for
senior management.
* Recommends to the Board of Directors the administration and
grant of awards under the Adams Golf 1998 Stock
Incentive Plan and Management Incentive Award Plan.
The current members of the Compensation/Plan Committee are
Roland E. Casati, Mark R. Mulvoy and Stephen R. Patchin.
During the year ended December 31, 1998, the
Compensation/Plan Committee had no formal meetings; however,
the committee took action from time to time by unanimous
written consent in lieu of a meeting.
Entire Board
- ------------
* During the year ended December 31, 1998, the entire Board
of Directors of Adams Golf met seven times. During
fiscal 1998, each director attended at least 75% of the
total of all meetings of the Board of Directors and any
committee on which he served.
-5-
<PAGE>
STOCK OWNERSHIP
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS, DIRECTORS AND
EXECUTIVE OFFICERS
This table shows, as of March 31, 1999, the beneficial
ownership of Adams Golf common stock by: (1) each person known
by the Company to be the beneficial owner of more than 5% of the
common stock, (2) each director of the Company, (3) each nominee
for director of the Company, (4) each executive officer named in
the Summary Compensation Table on page 8, and (5) all directors
and executive officers as a group, as reported by each person.
Except as noted, each person has sole voting and investment power
over the shares shown in this table.
<TABLE>
<CAPTION>
Amount and Nature of
Common Stock Beneficially Owned (1)
-----------------------------------------------
Number of Shares Right to Percent
Name of Beneficial Owners Beneficially Owned Acquire (2) of Class (3)
- -------------------------------------------- ------------------ -------------- ------------
<S> <C> <C> <C>
Beneficial Owners of 5% or More
of the Company's Common Stock
Royal Holding Company, Inc. (4) 6,374,511 0 28.4%
Finis F. Conner (5) 1,554,221 0 6.9
Directors and Named Executive Officers
B.H. Adams 3,317,319 0 14.8
Richard H. Murtland 250,464 0 1.1
Paul F. Brown, Jr. (6) 6,374,511 0 28.4
Roland E. Casati 1,838,600 0 8.2
Mark R. Mulvoy 1,000 0 *
Stephen R. Patchin (6) 6,374,511 0 28.4
John S. Simpson (7) 135,000 0 0.6
Darl P. Hatfield 2,000 45,000 *
Steven P. Sanazaro (8) 1,500 0 *
Mark D. Gonsalves (8) 0 0 0.0
Nominee for Director
Robert F. MacNally 0 0 0.0
All Executive Officers and Directors as a
Group (7 persons) 11,920,394 0 53.0
- ----------------
* 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, 1999
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 22,479,282
voting shares of common stock outstanding on March 31, 1999.
(4) The address for Royal Holding Company, Inc. is 300 Delaware
Avenue, Suite 306, Wilmington, Delaware 19801.
(5) The shares of common stock beneficially owned by Mr. Conner
are held directly by the Conner Family Trust DTD 2/23/91
(the "Trust") of which Mr. Conner is co-trustee and co-
beneficiary. Mr. Conner's and the Trust's address is P.O.
Box S-3115, Carmel, California 93921.
(6) Includes 6,374,511 shares of common stock owned directly by
Royal Holding Company, Inc. Messrs. Patchin and Brown are
the (1) Chief Executive Officer and President and (2) Chief
Financial Officer and Vice President-Finance, respectively,
of Royal Holding Company, Inc. and by virtue of these
positions 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. Each of
Messrs. Patchin and Brown disclaim beneficial ownership of
the shares of common stock held by Royal.
(7) Includes 49,000 shares of common stock owned directly by
trusts of which Mr. Simpson serves as a co-trustee.
(8) Neither Mr. Sanazaro nor Mr. Gonsalves was serving as an
executive officer of the Company at the end of the last
completed fiscal year. Mr. Sanazaro resigned from the
Company as of December 31, 1998 and Mr. Gonsalves resigned
from the Company as of September 25, 1998.
</TABLE>
-6-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under 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
its review of copies of the reports filed with the Securities and
Exchange Commission and written representations of its directors
and executive offers, Adams Golf believes all persons subject to
reporting filed the required reports on time in 1998 except for
the following: Royal Holding Company, Inc. did not timely file
its Form 3. In addition, Forms 4 filed by Darl Hatfield, an
officer of the Company, and James Farrell and Steve Sanazaro,
former officers of the Company, were deemed filed one day late
due to difficulties in transmitting such reports via the EDGAR
filing system, and Mark Mulvoy, a director of the Company, was
delinquent in filing a Form 4 to report an acquisition of 1,000
shares of common stock. The reports of Mr. Hatfield and Mr.
Farrell each reported two transactions and the reports of Mr.
Sanazaro and Mr. Mulvoy each reported one transaction.
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.
* B.H. (Barney) Adams See biography of Mr. Adams on
page 3.
* Richard H. Murtland See biography of Mr. Murtland on
page 4.
* Darl P. Hatfield Age 52, Senior Vice President -
Finance and Administration and
Chief Financial Officer since
May 1998. From July 1977 to April
1998, Mr. Hatfield was a
partner with KPMG. Mr.
Hatfield is also a Certified
Public Accountant with over 30
years of experience in
accounting.
* Oliver G. Brewer III Age 35, Senior Vice President -
Sales and Marketing since September
1998. Vice President of Sales
and Marketing, Mead
Containerboard, a division of
the Mead Corporation from July
1997 through August 1998;
Regional Vice President-Asia
Pacific, Union Camp Business
Development Corporation from
December 1994 through July
1997; Team Manager-Board
Grades Production Team, Union
Camp Fine Paper Division from
October 1993 to December 1994.
-7-
<PAGE>
Compensation of Executive Officers
- ----------------------------------
The following table shows for the fiscal years ended
December 31, 1997 and 1998, compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and its other
executive officers whose salary plus bonus exceeded $100,000 for
either of the fiscal years indicated.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Long Term
Compen-
sation
Awards
Annual Compensation ------------
------------------------------------------------- Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options (#) Compensation (1)
- --------------------------------- ------- --------------- --------------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
B.H. Adams 1998 $ 240,000 $ 120,000 - 0 $ 1,313
Chairman of the Board, President 1997 162,940 10,015,000(2) $2,541,688(3) 0 4,185
and Chief Executive Officer
Richard H. Murtland 1998 125,000 62,500 - 0 795
Vice President-Research 1997 72,548 40,000 - 0 0
and Development, Secretary and
Treasurer
Darl P. Hatfield 1998 100,000(4) 45,000 - 90,000 636
Senior Vice President-
Finance and Administration, and
Chief Financial Officer
Steven P. Sanazaro (5) 1998 120,984 62,500 - 0 509
Former Vice President-
Information Technology
Mark D. Gonsalves (5) 1998 110,894 200,000 - 0 18
Former Vice President-Sales and 1997 62,400 352,144(6) - 0 0
Marketing, Retail
___________
(1) In each case, represents group life insurance premiums paid on
behalf of such officer.
(2) Represents (a) $15,000 cash bonus and (b) value of 2,000,000
shares of common stock granted effective on December 31,
1997 having a fair market value, as determined by the Board
of Directors, of $5.00 per share on the date of grant. See
"Certain Transactions."
(3) Represents reimbursement of federal income tax and Medicare
tax liabilities associated with the grant of certain
restricted shares of common stock.
(4) Mr. Hatfield became employed by the Company in May 1998.
(5) Neither Mr. Sanazaro nor Mr. Gonsalves was serving as an
executive officer of the Company at the end of the last
completed fiscal year. Mr. Sanazaro resigned from the
Company as of December 31, 1998 and Mr. Gonsalves resigned
from the Company as of September 25, 1998.
(6) Represents bonus earned in 1997 pursuant to the terms of a
sales commission agreement, which expired by its terms on
December 31, 1997.
</TABLE>
-8-
<PAGE>
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------------
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees Price Expiration Grant Date
Name Options Granted In Fiscal Year Per Share Date Present Value
- ------------------------- --------------- --------------- ----------- ----------- --------------
<C> <C> <C> <C> <C> <C>
B.H. Adams 0 0 0 - 0
Richard H. Murtland 0 0 0 - 0
Darl P. Hatfield 90,000(1) 19% $ 2.50 5/1/03 $846,000(2)
Steven P. Sanazaro 0 0 0 - 0
Mark D. Gonsalves 0 0 0 - 0
___________
(1) The Board of Directors granted the option noted to Mr.
Hatfield on May 1, 1998. The option is non-transferrable. The
options vested as to 45,000 shares upon consummation of the
Company's initial public offering (July 9, 1998) and will vest as
to an additional 15,000 shares on July 9, 1999, July 9, 2000 and
July 9, 2001.
(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. Using this valuation
methodology, the option granted to Mr. Hatfield has a value of
$9.40 per option share. The actual value, if any, an executive
realizes will depend on whether the stock price at exercise is
greater than the grant price, as well as the executive's
continued employment through the vesting period and the 5-year
option term. The following assumptions were used to calculated
the Black-Scholes value:
Stock price at date of grant $11.25
Option exercise price $2.50
Option term Five years
Risk-free rate of return 6%
</TABLE>
AGGREGATED OPTION EXERCISES IN 1998
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares $ Options at Fiscal Year-End(#) At Fiscal Year End($) (2)
Acquired on Value ----------------------------- ---------------------------
Name Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------ ------------ ------------ ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
B.H. Adams 1,520,768 $7,033,552 0 0 0 0
Richard H. Murtland 222,214 1,027,740 0 0 0 0
Darl P. Hatfield 0 0 45,000 45,000 $ 71,719 $ 71,719
Steven P. Sanazaro 0 0 0 0 0 0
Mark D. Gonsalves 333,320 1,541,605 0 0 0 0
___________
(1) Calculated by determining the difference between the fair
market value of the common stock underlying the options at
the date of exercise and the exercise price of such options.
(2) Calculated by determining the difference between the fair
market value of the common stock underlying the options at
December 31, 1998 ($4.09 per share) and the exercise price
of such options.
</TABLE>
-9-
<PAGE>
Employment Contracts and Change in Control Arrangements
- -------------------------------------------------------
At the time of his employment, Adams Golf and Mr. Darl
Hatfield (the Company's Senior Vice President-Finance and
Administration and Chief Financial Officer) executed a
letter agreement defining certain matters related to
Mr. Hatfield's employment. The agreement provides that
Mr. Hatfield is entitled to a base salary of $150,000
annually and may receive bonuses of up to 80% of this salary
based on achieving certain revenue and/or department goals
to be defined by the Company. In addition, the agreement
provides that, upon Mr. Hatfield's termination without cause
following certain change of control events, Mr. Hatfield's
stock options will become fully vested and Mr. Hatfield will
be paid an amount equal to one year of his base salary. The
agreement with Mr. Hatfield is of an unspecified term.
Adams Golf has not entered into an employment contract
with any of its other executive officers.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Prior to April 29, 1998, Adams Golf did not have a
Compensation Committee or other committee of the Board of
Directors performing similar functions. Prior to this time,
decisions concerning compensation of the executive officers
were generally made by Mr. Adams in consultation with the
other members of the Board of Directors. Currently, the
Compensation Committee consists of Messrs. Casati, Mulvoy
and Patchin.
During the year ended December 31, 1998, Adams Golf
paid Virtual Visits, Inc., a company engaged in the design
of Internet Web sites for the promotion of golf products,
approximately $62,000. Mr. Conner, a former director of the
Company, and Mr. Casati, a director of the Company, are also
directors and significant stockholders of Virtual Visits,
Inc.
Certain Transactions
- --------------------
In December 1997, the Board of Directors of Adams Golf
granted to Mr. Adams 2,000,000 shares of common stock and a
cash payment of $2,541,688, an amount equal to the federal
income tax and Medicare tax liabilities associated with such
grant and bonus. In the first quarter of 1998, Mr. Adams
loaned $1.1 million of such funds back to the Company
pursuant to an unsecured promissory note at an interest rate
of 5.39% per annum. The Company repaid $600,142 of the note
on April 14, 1998 and $312,500 of the note on December 15,
1998. The remaining principal amount of the note ($175,000)
is payable on April 14, 1999. In determining that the stock
grant and bonus to Mr. Adams were appropriate and in the
best interests of the Company and its stockholders, the
Board of Directors considered, among other factors, the
Company's revenue and operating income growth and improved
competitive position under Mr. Adams' leadership, Mr. Adams'
historical cash compensation, and the Board of Directors'
desire to increase Mr. Adams' equity interest in the Company
to a level commensurate with his contributions to and role
with the Company. The Board of Directors determined that the
value of Mr. Adams' services to the Company exceeded the
fair market value of the stock ($10,000,000) and bonus. The
Company does not consider these payments to be indicative of
future levels of compensation to Mr. Adams or other
executives of the Company.
-10-
<PAGE>
The agreement between Adams Golf and Nick Faldo became
effective May 1, 1998 and provides that Mr. Faldo will
exclusively endorse the Company's clubs and undertake
certain other promotional activities. Pursuant to this
agreement, Adams Golf and Mr. Faldo will continue to design
a line of clubs to be used by Mr. Faldo in tournaments and
other events, provided such clubs are suitable for
Mr. Faldo's use. Under the agreement, the Company has
licensed the worldwide rights to the Nick Faldo trademark
for use in connection with the distribution of its golf
clubs, head covers, golf bags, travel covers, golf towels
and umbrellas that it designs or manufactures.
As compensation for the licensing and endorsement
arrangement, the Company granted 900,000 shares of common
stock to Mr. Faldo. Subject to certain exceptions including
transfers to Mr. Faldo's agent, John S. Simpson, Mr. Faldo
may not transfer, dispose of or otherwise assign any rights
in more than 100,000 shares of common stock in any calendar
year prior to 2002. In addition, Mr. Faldo is entitled to
receive a royalty of 5% of the net sales price of all Adams
golf clubs (other than certain specialty items for which the
royalty equals 10% of the net sales price) sold outside the
U.S. throughout the term of the agreement. The agreement
provides for a minimum royalty of $1.5 million in 1999
escalating to $4.0 million for years 2004 through 2008. From
2009 through 2014, the minimum royalty is $1.5 million, as
adjusted for changes in the consumer price index. After
2014, the agreement does not provide for a minimum royalty.
Commencing with 2009, however, the agreement provides for a
maximum royalty of $4.0 million, as adjusted for changes in
the consumer price index. In the event Mr. Faldo does not
compete in a minimum number of worldwide golf events each
year, such royalty payments shall be reduced on a pro-rata
basis, unless such events are missed as a result of illness
or injury. The Company has also agreed that through the year
2008, it will support the "Faldo Junior Series" in the
United Kingdom by making an annual contribution to the
sponsoring organization of not less than $45,000 for each
year the tournament is played under that name.
The agreement with Mr. Faldo further provides that, so
long as royalties remain payable thereunder, the Company
will cause a designee of Mr. Faldo to be nominated for, and
elected to, the Board of Directors of the Company. Mr.
Faldo has currently designated John S. Simpson under this
arrangement.
The agreement with Mr. Faldo extends through Mr.
Faldo's lifetime; however, the Company has the right to
terminate the agreement earlier if Mr. Faldo (a) is unable
to perform the duties required for a period of 12
consecutive months, (b) retires or becomes officially
ineligible to compete on the PGA and/or Senior PGA tour, or
(c) has engaged in illegal or immoral conduct resulting in a
felony conviction, or has otherwise conducted himself in a
manner not in keeping with the standards of professional
conduct set forth in the agreement. In the event of the
death of Mr. Faldo prior to May 1, 2030, the Company may, at
its option, continue the terms of the agreement until May 1,
2030, in which case, Mr. Faldo's heirs or estate shall be
entitled to any royalties due.
-11-
<PAGE>
In February 1999, Adams Golf signed a letter of intent
to purchase substantially all of the assets and assume
certain liabilities of Dimensions in Sport, Ltd., a
distributor of golf equipment in the United Kingdom ("DIS").
Adams Golf expects to pay the net book value of equipment
and inventory (approximately $200,000) and assume going
forward obligations under certain leases. Adams Golf also
agreed to make an additional $200,000 contingent earnings
payment based upon the achievement of certain minimum levels
of operating results for 1999. DIS is controlled by Mr.
Faldo.
KPMG, a public accounting firm in which Mr. Hatfield
was a partner until April 30, 1998, has provided consulting,
accounting and auditing services to the Company since 1997.
The amounts paid to KPMG for services rendered during 1998
were approximately $2,521,000. Mr. Hatfield is currently
Senior Vice President-Finance and Administration and Chief
Financial Officer of Adams Golf. The Company expects to pay
KPMG for additional services that are expected to be
performed by it for the Company during fiscal year 1999.
During the year ended December 31, 1998, Adams Golf
paid Virtual Visits, Inc., a company engaged in the design
of Internet Web sites for the promotion of golf products,
approximately $62,000. Mr. Conner, a former director of the
Company, and Mr. Casati, a director of the Company, are also
directors and significant stockholders of Virtual Visits,
Inc.
In January 1998, the Company made loans of $83,330 and
$125,000 to Mr. Murtland, the Company's Vice President-
Research and Development and Mr. Gonsalves, a former officer
of the Company, to finance the aggregate exercise price of
stock options then exercised by such individuals. The loans
bore interest at the rate of 5% per annum and were due
January 14, 2001. The loan to Mr. Murtland was repaid in
April 1998 and the loan to Mr. Gonsalves was repaid in July
1998.
-12-
<PAGE>
BOARD REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
- -------------------
Compensation decisions for the executive officers of
Adams Golf (other than Barney Adams) for compensation paid
during the year ended December 31, 1998, were generally made
by Mr. Adams in consultation with other members of the Board
of Directors. Mr. Adams' compensation was set by the whole
Board. The Compensation/Plan Committee (consisting of
Messrs. Casati, Mulvoy and Patchin) is expected to recommend
annual salaries for senior management commencing with fiscal
1999.
The Company's goal is to attract, retain and reward a
highly competent and productive employee group. To do so,
the Board of Directors, as a whole, has determined that it
is in the best interest of the Company to provide a total
compensation package that competes favorably with those
offered within the sports equipment industry, general
industry and the geographic areas in which Adams Golf
operates. The Company's current compensation package
includes a mix of base salary, short-term and long-term
incentive opportunities and other employee benefits.
Changes in compensation are based on the individual's
performance, the Company's financial performance and the
competitive marketplace. The Board considered the median
level of the market as competitive.
Base Salary. The base salary policy provides for
compensation at competitive levels. Increases in executive
base salary are awarded for individual performance based on
the executive's performance plan. These performance plans
contain specific measures, both quantitative and
qualitative, related to financial achievements of the
Company. Increases generally reflect established merit
increase guidelines applicable to all salaried employees.
Management Incentive Award Plan. The Management
Incentive Award Plan provides the potential for quarterly
cash incentives. The plan was designed to create an
incentive for key employees, including the Chief Executive
Officer, other named officers, and management employees, who
are in a position to contribute to, and, therefore
influence, Adams Golf's annual financial performance. The
plan does not permit awards unless the Company's earnings
meet specified minimum requirements.
Stock Incentive Plan. The purpose of the stock
incentive plan is to further align employees' interests with
the Company's long-term performance and, therefore, the long-
term interests of the stockholders. Options were granted to
employees who were in the position to influence business
results. Because the exercise prices provided in the
options represent the fair market value of the common stock
when granted, the options have no value unless the common
stock appreciates in the future. The options vest in 25%
increments on the first, second, third and fourth
anniversaries of the date of grant.
-13-
<PAGE>
1998 Company Performance
- ------------------------
In 1998 Adams Golf's diluted income per common share
was $.61, compared to a 1997 diluted loss per common share
of $.37. Net revenues grew to $84.6 million in 1998
compared to $36.7 million in 1997. Operating profit for
1998 reached $18.5 million as compared to an operating loss
in 1997 of $4.0 million.
1998 Executive Compensation
- ---------------------------
Base salary adjustments for 1998 were granted to
Richard H. Murtland, Vice President-Research and
Development, Secretary and Treasurer, and Mark D. Gonsalves,
Vice President-Sales and Marketing, Retail. Adjustments
were determined by individual performance, Company financial
performance, and competitive market analysis. Mr. Murtland
and Mr. Gonsalves were not issued stock options under the
Stock Incentive Plan in 1998. Bonus awards were issued
under the 1998 Management Incentive Plan in the amounts of
$62,500 for Mr. Murtland, and $200,000 for Mr. Gonsalves,
and were determined by individual and Company performance.
1998 Chief Executive Compensation
- ---------------------------------
The compensation of Chairman, Chief Executive Officer
and President, B.H. Adams, similarly consisted of base
salary and bonus compensation under the Management Incentive
Plan. In determining base salary, the Board of Directors
considered Chief Executive Officer pay of similarly sized
companies within the sports equipment industry. Mr. Adams
was not issued stock options under the Stock Incentive Plan
in 1998. Mr. Adams was awarded an annual bonus under the
Company's Management Incentive Plan in the amount of
$120,000. In determining the bonus incentive amount, the
Board considered the Company's performance compared to its
performance plan, individual performance, and Mr. Adams'
potential.
Company Policy on Qualifying Compensation
- -----------------------------------------
The Board has reviewed the applicability of Section
162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which disallows a tax deduction for compensation to
an executive officer in excess of $1.0 million per year.
The Board does not anticipate that compensation subject to
this threshold will be paid to any executive officer in the
foreseeable future. The Board intends to periodically
review the potential consequences of Section 162(m) and may
in the future structure the performance-based portion of its
executive officer compensation to comply with certain
exemptions provided in Section 162(m).
Board of Directors
B.H. (Barney) Adams
Roland E. Casati
Paul F. Brown, Jr.
Mark R. Mulvoy
Richard H. Murtland
Stephen R. Patchin
John S. Simpson
-14-
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the
performance of the Adams Golf common stock to the Standard &
Poor's Small Cap 600 index and an industry peer group,
selected in good faith, for the period from July 10, 1998,
the first day of trading for the Company's shares, through
December 31, 1998. The graph assumes that the value of the
investment in the Company's common stock and each index was
$100.00 at July 10, 1998, and that all dividends were
reinvested. The Company has paid no dividends. Performance
data is provided for the last trading day closest to month
end for each month in 1998.
Comparison of Cumulative Total Returns
[Performance Graph for period from
July 10, 1998 through December 1998]
July 10, July Aug. Sept. Oct. Nov. Dec.
Company 1998 1998 1998 1998 1998 1998 1998
------------------ -------- ----- ----- ----- ----- ----- -----
Adams Golf, Inc. 100 62 32 26 29 25 26
Peer Group (1) 100 63 52 54 55 66 52
S&P Small Cap 600 100 96 78 82 86 91 97
________________
(1) Peer Group consists of: Callaway Golf Company, TearDrop
Golf Company, Aldila, Inc. and Coastcast Corp.
-15-
<PAGE>
ITEM 2.
APPROVAL OF 1999 NON-EMPLOYEE DIRECTOR PLAN
General
- -------
On February 3, 1999, the Board of Directors adopted,
subject to stockholder approval, the 1999 Non-Employee
Director Plan of Adams Golf, Inc. (the "Director Plan"), the
text of which is attached as Annex A to this Proxy
Statement. Unless the Director Plan is approved by the
stockholders on or before January 1, 2000, it and all awards
granted pursuant to the Director Plan will, under the terms
of the plan, be null and void. The material features of the
Director Plan are discussed below, but the description is
subject to and is qualified in its entirety by the full text
of the Director Plan.
The purpose of the Director Plan is to advance the
interests of the Company by providing additional incentives
to attract and retain qualified and competent non-employee
directors, upon whose efforts and judgment the success of
the Company (including its subsidiaries) is largely
dependent. In furtherance of this purpose, the Director Plan
authorizes the granting of non-qualified stock options
("Director Options") to purchase common stock to such non-
employee directors. A total of 200,000 shares of common
stock (subject to adjustment as described below) are
reserved for issuance upon the exercise of Director Options.
Terms and Conditions
- --------------------
Subject to stockholder approval, the Director Plan
provides that the Company's Board of Directors (or, to the
extent one is later elected, a committee of two or more non-
employee directors appointed to administer the Director
Plan) may, at any time during the term of the Director Plan,
grant any non-employee director an option exercisable for
such number of shares of common stock as it shall deem to be
in the best interest of Adams Golf and which will serve to
further the purposes of the Director Plan. By Board
resolution, the Board indicated its present intent that no
director receive, as his or her initial grant of options
under the Director Plan, an option exercisable for more than
10,000 shares of common stock nor may any subsequent grant
to any director exceed 2,500 shares. Director Options
granted to the directors under the Director Plan will vest
according to the vesting schedule provided in the applicable
option agreement executed between the Company and the
director.
Under the Director Plan, Director Options must be
granted at an exercise price per share that is equal to the
fair market value of the common stock at the date of grant.
The exercise price of a Director Option may be paid in cash,
certified or cashier's check, money order, or by delivery of
already owned shares of common stock having a fair market
value equal to the exercise price (to the extent such shares
have been owned by the optionee for at least six months and
only if permitted by the applicable option agreement), or by
delivery of a combination of such methods.
To prevent dilution of the rights of a holder of a
Director Option, the Director Plan provides for the
adjustment of (1) the number of shares upon which Director
Options may be granted, (2) the number of shares subject to
outstanding Director Options and (3) the exercise price of a
Director Option, in the event of any subdivision or
consolidation of shares of common stock, any stock dividend,
recapitalization or other capital adjustment.
-16-
<PAGE>
The Director Options are not assignable or transferable
other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations
order. During the lifetime of an optionee, the Director
Option is exercisable only by him, his guardian or legal
representative.
A Director Option will terminate on the earlier to
occur of (1) 30 days after the date that the optionee ceases
to be a Director, except that if the optionee dies while a
director, the Director Option will expire one year therefrom
or six months therefrom if the optionee dies during the 30-
day period referenced above, or (2) the expiration date
applicable to the particular Director Option as set forth in
the option agreement.
Termination of Director Option Plan
- -----------------------------------
The Director Plan will terminate on January 1, 2009,
and any Director Option outstanding on such date will remain
outstanding until it has either expired or been exercised.
Federal Income Tax Consequences
- -------------------------------
The federal income tax consequences summarized below
are based upon current tax laws and thus are subject to
change. Moreover, this summary is not intended to be a
complete description of all federal, state and local tax
consequences of the Director Plan.
The Director Plan permits non-employee directors to
receive grants of non-qualified stock options. Adams Golf
has been advised that under the Code, an optionee will not
recognize any income for federal income tax purposes at the
time a non-qualified stock option is granted, nor will the
Company be entitled to a tax deduction at that time. At the
time of exercise, however, the optionee will recognize
ordinary income in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the
option price of such shares. Adams Golf generally will be
entitled to a federal income tax deduction in an amount
equal to the ordinary income recognized by the optionee upon
exercise of a non-qualified stock option.
The Board of Directors believes that the Director Plan
will assist in attracting and retaining qualified members of
the Board of Directors and will have the effect of more
significantly aligning the interests of the members of the
Board of Directors with the Adams Golf stockholders.
1999 Non-Employee Director Plan Option Grants
- ---------------------------------------------
On February 3, 1999, the Board of Directors granted
Mark R. Mulvoy an option to purchase 10,000 shares of Adams
Golf common stock at an exercise price of $4.75 per share
under the Director Plan. As of March 31, 1999, no other
options had been granted under the Director Plan.
We recommend a vote FOR the approval of the 1999 Non-
Employee Director Plan of Adams Golf, Inc.
-17-
<PAGE>
ITEM 3.
RATIFICATION OF KPMG AS INDEPENDENT AUDITORS
The Board of Directors of the Company, upon
recommendation of its Audit Committee, has appointed KPMG as
independent auditors to examine the Company's consolidated
financial statements for the fiscal year ending December 31,
1999 and to render other professional services as required.
The Company is submitting the appointment of KPMG to
stockholders to obtain your ratification. KPMG has served as
independent auditors to the Company since 1997.
Representatives of KPMG 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 KPMG as the
independent auditors for the current fiscal year.
-18-
<PAGE>
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
Adams Golf's Bylaws 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 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: (1) such persons' names and addresses, (2) the
class and number of shares of Adams Golf stock that are
beneficially owned by such persons and (3) any material
interest of such persons in the matter presented. The notice
must also describe the business desired to be brought before
the meeting and the reasons for conducting such business at
the annual meeting. The notice must be delivered to the
secretary of the Company (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.
A stockholder may recommend a nominee to become a
director of Adams Golf by giving the secretary of the
Company (at the address set forth above) a written notice
setting forth certain information, including: (1) the name,
age, business and residence address of the person intended
to be nominated, (2) 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, (3) a description of all arrangements
between the nominating stockholder, the nominee and other
persons concerning the nomination, (4) any other information
about the nominee that must be disclosed in proxy
solicitations under Rule 14(a) of the Securities Exchange
Act of 1934 and (5) the nominee's written consent to serve,
if elected. Such nominations must be made pursuant to the
same advance notice requirements for stockholder proposals
set forth in the preceding paragraph.
Adams Golf annual meetings are traditionally held on
the first Wednesday of May of each year. Accordingly, the
Company's 2000 annual meeting of stockholders is currently
scheduled for May 3, 2000. Copies of the Company's Bylaws
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 the
Company's Bylaws.
It is important that proxies be returned promptly.
-19-
<PAGE>
ANNEX A
1999 NON-EMPLOYEE DIRECTOR PLAN OF
ADAMS GOLF, INC.
1. PURPOSE. The purpose of this Plan is to advance the
interests of Adams Golf, Inc., a Delaware corporation (the
"Company"), by providing an additional incentive to attract and
retain qualified and competent directors, upon whose efforts and
judgment the success of the Company is largely dependent, through
the encouragement of stock ownership in the Company by such
persons.
2. DEFINITIONS. As used herein, the following terms shall
have the meaning indicated:
(a) "Board" shall mean the Board of Directors of Adams
Golf, Inc.
(b) "Committee" shall mean the committee, if any,
appointed by the Board pursuant to Section 12 hereof.
(c) "Common Stock" shall mean the common stock, par
value one tenth of one cent ($0.001) of the Company.
(d) "Date of Grant" shall mean the date on which an
Option is granted to an Eligible Person pursuant to this Plan.
(e) "Director" shall mean a member of the Board.
(f) "Eligible Person(s)" shall mean those persons who
are Directors of the Company and who are not employees of the
Company or a Subsidiary.
(g) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(h) "Fair Market Value" of a Share on any date means the
closing price on the business day immediately preceding such
date. For this purpose, the closing price of a Share on any
business day shall be (i) if the Common Stock is listed or
admitted for trading on any United States national securities
exchange, the last reported sale price of the Common Stock on
such exchange, as reported in any newspaper of general
circulation, (ii) if actual transactions in the Common Stock
are included in the Nasdaq National Market or are reported on
a consolidated transaction reporting system, the closing sales
price of the Common Stock on such system, (iii) if the Common
Stock is otherwise quoted on the Nasdaq system, or any similar
system of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid
and low asked quotations for such day of the Common Stock on
such system, (iv) if none of clause (i), (ii) or (iii) is
applicable, the mean between the high bid and low asked
quotations for the Common Stock as reported by the National
Daily
A-1
<PAGE>
Quotation Service if at least two securities dealers have
inserted both bid and asked quotations for the Common Stock on
at least five (5) of the ten (10) preceding days and (v) if
none of clause (i), (ii), (iii) or (iv) is applicable, the
price determined by the Board in the exercise of its good
faith discretion.
(i) "Internal Revenue Code" or "Code" shall mean the
Internal Revenue Code of 1986, as it now exists or may be
amended from time to time.
(j) "Non-Employee Director" shall have the meaning set
forth in Rule 16b-3 of the Exchange Act or any successor
provision thereof.
(k) "Nonqualified Stock Option" shall mean an option
that is not an incentive stock option as defined in Section
422 of the Internal Revenue Code.
(l) "Option" (when capitalized) shall mean any option
granted under Section 4 of this Plan.
(m) "Optionee" shall mean a person to whom an Option is
granted under this Plan or any successor to the rights of such
person under this Plan by reason of the death of such person.
(n) "Plan" shall mean this 1999 Non-Employee Director
Plan of Adams Golf, Inc.
(o) "Share(s)" shall mean a share or shares of the
Common Stock.
(p) "Subsidiary" shall mean any corporation or other
entity, whether domestic or foreign, in which the Company has
or obtains, directly or indirectly, a proprietary interest of
more than fifty percent (50%) by reason of stock ownership or
otherwise.
Other terms shall have the meanings set forth elsewhere herein.
3. SHARES AND OPTIONS.
(a) The maximum number of Shares to be issued pursuant
to Options under this Plan, shall be Two Hundred Thousand
(200,000) Shares. Shares issued pursuant to Options granted
under this Plan may be issued from Shares held in the
Company's treasury or from authorized and unissued Shares. If
any Option granted under this Plan shall terminate, expire, or
be canceled or surrendered as to any Shares, new Options may
thereafter be granted covering such Shares.
(b) Each Option granted hereunder shall be evidenced by
an option agreement (an "Option Agreement") and shall contain
such terms as are not inconsistent with this Plan or any
applicable law. Any person who files with the Committee, in a
form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the
duration of such waiver. Any Option granted hereunder shall
be a Nonqualified Stock Option.
A-2
<PAGE>
(c) Neither the Plan nor any Option granted under the
Plan shall confer upon any person any right to continue to
serve as a Director.
4. DISCRETIONARY GRANTS OF OPTIONS.
(a) At any time and from time to time during the term of
this Plan and subject to the provisions herein, Options may be
granted by the Committee to any Eligible Person for such
number of Shares as the Committee in its discretion shall deem
to be in the best interest of the Company and which will serve
to further the purposes of the Plan. Upon the grant of an
Option, the Company shall promptly deliver to such Eligible
Person an Option Agreement. Options granted pursuant to this
Section 4(a) shall vest according to the vesting schedule
provided in the Option Agreement and shall be exercisable for
the term provided in the Option Agreement. In the event no
term is provided in the Option Agreement, such term shall be
ten (10) years.
(b) The Options granted to Directors pursuant to Section
4(a) herein shall be in addition to any other benefits with
respect to the Director's position with the Company or its
Subsidiaries.
5. OPTION PRICE. The option price per Share of any Option
granted pursuant to this Plan shall be one hundred percent (100%)
of the Fair Market Value per Share on the Date of Grant.
6. EXERCISE OF OPTIONS. Options may be exercised at any
time after the date on which the Options, or any portion thereof,
are vested until the Option expires pursuant to Section 7;
provided, however, that at least six months must elapse from the
date of the acquisition of the Option to the date of disposition of
the Option (other than upon exercise or conversion) or the
underlying Shares. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in
accordance with the terms of the Option Agreement, (ii) full
payment of the aggregate option price of the Shares as to which the
Option is exercised has been made and (iii) arrangements that are
satisfactory to the Committee in its sole discretion have been made
for the Optionee's payment to the Company of the amount, if any,
that the Committee determines to be necessary for the Company to
withhold in accordance with applicable federal or state income tax
withholding requirements. Pursuant to procedures approved by the
Committee, tax withholding requirements, at the option of an
Optionee, may be met by withholding Shares otherwise deliverable to
the Optionee upon the exercise of an Option. Unless further
limited by the Committee in any Option Agreement, the Option price
of any Shares purchased shall be paid solely in cash, by certified
or cashier's check, by money order, with Shares (but with Shares
that have been owned by the Optionee for at least six months and
only if permitted by the Option Agreement or otherwise permitted by
the Committee in its sole discretion at the time of exercise) or by
a combination of the above; provided, however, that the Committee
in its sole discretion may accept a personal check in full or
partial payment of any Shares. If the exercise price is paid in
whole or in part with Shares, the value of the Shares surrendered
shall be their Fair Market Value on the date the Shares are
received by the Company. An Option shall not at any time be
exercisable with respect to less than 100 Shares unless the
remaining Shares covered by the Option are less than 100 Shares.
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7. TERMINATION OF OPTION PERIOD. The unexercised portion of
an Option shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the
following:
(a) sixty (60) days after the date that an Optionee
ceases to be a Director regardless of the reason therefor
other than as a result of such termination by death of the
Optionee;
(b) one (1) year after the date that an Optionee ceases
to be a Director by reason of death of the Optionee or six (6)
months after the Optionee shall die if that shall occur during
the sixty-day period described in Subsection 7(a) herein; or
(c) the expiration date of the term of such Option.
8. ADJUSTMENT OF PROVISIONS.
(a) If at any time while this Plan is in effect or
unexercised Options are outstanding, (1) there shall be any
increase or decrease in the number of issued and outstanding
Shares through the declaration of a stock dividend, stock
split, combination of shares or through any recapitalization
resulting in a stock split-up, spin-off, combination or
exchange of Shares or any other change in capital structure of
the Company, or (2) the value of the outstanding shares of
Common Stock of the Company is reduced by reason of an
extraordinary cash dividend, then and in each such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares then subject to being optioned
under this Plan, so that the same proportion of the
Company's issued and outstanding Shares shall continue to
be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof
then subject to any outstanding Option, so that the same
proportion of the Company's issued and outstanding Shares
shall remain subject to purchase at the same aggregate
exercise price.
(b) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any
class, or securities convertible into shares of capital stock
of any class, either in connection with a direct sale or upon
the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with
respect to, the number of or exercise price of Shares then
subject to outstanding Options granted under this Plan.
(c) Without limiting the generality of the foregoing,
the existence of outstanding Options granted under this Plan
shall not affect in any manner the right or power of the
Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or
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its business; (ii) any merger or consolidation of the Company;
(iii) any issue by the Company of debt securities, or
preferred or preference stock that would rank above the Shares
subject to outstanding Options; (iv) the dissolution or
liquidation of the Company; (v) any sale, transfer or
assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding,
whether of a similar character or otherwise.
9. REORGANIZATIONS.
(a) Notwithstanding anything contained in this Plan or
any Option Agreement to the contrary, in the event of a Change
of Control, as defined below, all or any of the following may,
in the sole discretion of the Committee, occur with respect to
any and all Options outstanding as of such Change of Control:
(i) automatic acceleration of the vesting of such
Options so that such Options may be immediately exercised
in full on or before the relevant date fixed in the
Option Agreement;
(ii) upon exercise of an Option during the 60-day
period from and after the date of a Change of Control,
the Optionee exercising the Option may in lieu of the
receipt of Shares upon the exercise of the Option, elect
by written notice to the Company to receive an amount in
cash equal to the excess of the aggregate Value (as
defined below) of the Shares covered by the Option or
portion thereof surrendered determined on the date the
Option is exercised, over the aggregate exercise price of
the Option (such excess is referred to herein as the
"Aggregate Spread"); provided, however, and
notwithstanding any other provision of this Plan, if the
end of such 60-day period from and after the date of a
Change of Control is within six months of the Date of
Grant, such Option shall be canceled in exchange for a
cash payment to the Optionee equal to the Aggregate
Spread on the day which is six months and one day after
the Date of Grant of such Option. As used in this Section
9(a), the term "Value" means the higher of (i) the
highest Fair Market Value during the 60-day period from
and after the date of a Change of Control and (ii) if the
Change of Control is the result of a transaction or
series of transactions described in paragraphs (i) or
(iii) of the definition of Change of Control, the highest
price per share of the Common Stock paid in such
transaction or series of transactions (which in the case
of paragraph (i) shall be the highest price per Share as
reflected in a Schedule 13D filed by the person having
made the acquisition);
(iii)if an Optionee ceases to be a Director
regardless of the reason therefor other than death
following a Change of Control, any Option held by such
Optionee may be exercised by such Optionee until the
earlier of sixty (60) days after the Optionee ceases to
be a Director or the expiration date of such Option;
(iv) all Options become non-cancelable;
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(v) if the Option shall remain exercisable after
any such Change of Control, from and after such Change of
Control, any such Option shall be exercisable only for
the kind and amount of securities and/or other property,
or the cash equivalent thereof, receivable as a result of
such Change of Control by the holder of a number of
shares of stock for which such Option could have been
exercised immediately prior to such Change of Control.
(b) "Change of Control" of the Company shall be deemed
to have occurred upon the happening of any of the following
events:
(i) the acquisition, other than from the Company,
by any individual, entity or group (within the meaning of
Section 13(d)(3) of the Exchange Act) other than Royal
Holding Company, Inc. or B. H. Adams of beneficial
ownership of thirty percent (30%) or more of either the
then outstanding shares of Common Stock of the Company or
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors;
(ii) individuals who, as of January 1, 1999,
constitute the Board as of the date thereof (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any
individual becoming a Director subsequent to such date
whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at
least a majority of the Directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of the Directors (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange
Act);
(iii)approval by the stockholders of the Company of
a reorganization, merger or consolidation of the Company,
in each case, with respect to which the individuals and
entities who were the respective beneficial owners of the
Common Stock and voting securities of the Company
immediately prior to such reorganization, merger or
consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or
indirectly, more than sixty percent (60%) of,
respectively, the then outstanding shares of Common Stock
and the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, as the case may be, of the Company
resulting from such reorganization, merger or
consolidation;
(iv) consummation by the Company of the sale or
other disposition by the Company of all or substantially
all of the Company's assets; or
(v) approval by the stockholders of the Company or
any order by a court of competent jurisdiction of a plan
of liquidation of the Company.
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(c) If the Company shall consummate any merger,
consolidation or other reorganization not involving a Change
of Control (a "Reorganization") in which holders of shares of
Common Stock are entitled to receive in respect of such shares
any securities, cash or other consideration (including,
without limitation, a different number of shares of Common
Stock), each Option outstanding under this Plan shall
thereafter be exercisable, in accordance with this Plan, only
for the kind and amount of securities, cash and/or other
consideration receivable upon such Reorganization by a holder
of the same number of shares of Common Stock as are subject to
that Option immediately prior to such Reorganization, and any
adjustments will be made to the terms of the Option in the
sole discretion of the Committee as it may deem appropriate to
give effect to the Reorganization.
10. TRANSFERABILITY OF OPTIONS. Each Option Agreement shall
provide that such Option shall not be transferable by the Optionee
otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and that so long
as an Optionee lives, only such Optionee or his or her guardian or
legal representative shall have the right to exercise the related
Option.
11. ISSUANCE OF SHARES. No person shall be, or have any of
the rights or privileges of, a stockholder of the Company with
respect to any of the Shares subject to an Option unless and until
certificates representing such Shares shall have been issued and
delivered to such person. As a condition of any transfer of the
certificate for Shares, the Committee may obtain such agreements or
undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of this Plan, any Option
Agreement or any law or regulation, including, but not limited to,
the following:
(i) A representation, warranty or agreement by the
Optionee to the Company, at the time any Option is
exercised, that he or she is acquiring the Shares to be
issued to him or her for investment and not with a view
to, or for sale in connection with, the distribution of
any such Shares; and
(ii) A representation, warranty or agreement to be
bound by any legends that are, in the opinion of the
Committee, necessary or appropriate to comply with the
provisions of any securities law deemed by the Committee
to be applicable to the issuance of the Shares and are
endorsed upon the Share certificates.
Share certificates issued to an Optionee who is a party to any
stockholder agreement or a similar agreement shall bear the legends
contained in such agreements.
12. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by a stock option
committee (the "Committee") consisting of not fewer than two
(2) Non-Employee Directors; provided, however, that if no
Committee is appointed, the full Board shall administer this
Plan and in such case all references to the Committee shall be
deemed to be references to the Board. The Committee shall
have all of the powers of the Board with respect to this Plan.
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<PAGE>
Any member of the Committee may be removed at any time, with
or without cause, by resolution of the Board, and any vacancy
occurring in the membership of the Committee may be filled by
appointment by the Board.
(b) The Committee, from time to time, may adopt rules
and regulations for carrying out the purposes of this Plan.
The Committee may at any time terminate this Plan or make such
modification or amendment thereof as it deems advisable.
Termination or any modification or amendment of this Plan
shall not, without consent of an Optionee, adversely affect
his rights under an Option previously granted to him. The
determinations and the interpretation and construction of any
provision of this Plan by the Committee shall be final and
conclusive.
(c) Any and all decisions or determinations of the
Committee shall be made either (i) by a majority vote of the
members of the Committee at a meeting or (ii) without a
meeting by the written approval of all of the members of the
Committee.
13. INTERPRETATION.
(a) If any provision of this Plan is held invalid for
any reason, such holding shall not affect the remaining
provisions hereof, but instead this Plan shall be construed
and enforced as if such provision had never been included in
this Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO DELAWARE
CONFLICT OF LAW PROVISIONS.
(c) Headings contained in this Plan are for convenience
only and shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine or neuter
gender shall be a reference to such other gender as is
appropriate.
14. SECTION 83(b) ELECTION. If as a result of exercising an
Option an Optionee receives Shares that are subject to a
"substantial risk of forfeiture" and are not "transferable" as
those terms are defined for purposes of Section 83(a) of the Code,
then such Optionee may elect under Section 83(b) of the Code to
include in his gross income, for his taxable year in which the
Shares are transferred to such Optionee, the excess of the Fair
Market Value of such Shares at the time of transfer (determined
without regard to any restriction other than one which by its terms
will never lapse), over the amount paid for the Shares. If the
Optionee makes the Section 83(b) election described above, the
Optionee shall (i) make such election in a manner that is
satisfactory to the Committee, (ii) provide the Company with a copy
of such election, (iii) agree to promptly notify the Company if any
Internal Revenue Service or state tax agent, on audit or otherwise,
questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv)
agree to such withholding as the Committee may reasonably require
in its sole and absolute discretion.
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15. EFFECTIVE DATE AND TERMINATION DATE. The effective date
of this Plan is February 3, 1999 and the effective date of any
amendment to this Plan is the date on which the Board adopted such
amendment; provided, however, if this Plan is not approved by the
stockholders of the Company within twelve (12) months after the
effective date, then, in such event, this Plan and all Options
granted pursuant to this Plan shall be null and void. This Plan
shall terminate on February 2, 2009, and any Option outstanding on
such date will remain outstanding until it has either expired or
has been exercised.
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<PAGE>
[ADAMS GOLF, INC. LOGO]
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 eastward
to Hwy I-75 North. Keep far left on Hwy 635 for the I-75 exit
ramp. Follow I-75 North approximately 5 miles to Campbell Road
exit.
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 eastward to Hwy I-75 North. Keep far
left on Hwy 635 for the I-75 exit ramp. Follow I-75 North
approximately 5 miles to Campbell Road exit.
Transportation - Transportation to the Omni Richardson Hotel is
available to and from DFW Airport and Love Field either by TBS
Transportation or by Super Shuttle. Special rates are available
for both. For information, call TBS at (817) 267-5150 or Super
Shuttle at (817) 329-2000.
<PAGE>
ADAMS GOLF, INC.
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors
of Adams Golf, Inc. for the Annual Meeting of Stockholders
to be held on May 5, 1999
The undersigned appoints B.H. Adams, Richard H. Murtland
and Darl P. Hatfield, and each of them, with full power of
substitution in each, the proxies of the undersigned, to
represent the undersigned and vote all shares of Adams Golf,
Inc. Common Stock which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders to be held on
May 5, 1999, and at any adjournment or postponement thereof,
as indicated on the reverse side.
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned stockholder. If no
direction is given, this proxy will be voted FOR proposals
1, 2 and 3.
Comments:___________________________
____________________________________
____________________________________
____________________________________ ADAMS GOLF, INC.
If you have written in the above P.O. Box 11207
space, please mark the comments New York, N.Y. 10203-0207
notification box on the reverse
side.
(Continued, and to be signed and
dated on the reverse side.)
<PAGE>
The Board of Directors recommends a vote "FOR" Items 1, 2 and 3.
1. Election of Directors
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote all nominees listed below
[ ] EXCEPTIONS
Nominees: Robert F. MacNally and Stephen R. Patchin
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the "Exceptions" box and write
that nominee's name in the space provided below.)
Exceptions ______________________________________
2. Directors' Proposal - Approve 1999 Non-Employee Director Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Directors' Proposal - Ratify appointment of KPMG LLP as the
Company's independent auditors for 1999
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
I have included comments or have
included a change of address. [ ]
I plan to attend the Annual
Meeting [ ]
I do not wish to receive an
Annual Report for this
account, at this address [ ]
Please sign exactly as name or names appear on the proxy. When
signing as attorney, executor, administrator, trustee, custodian,
guardian or corporate officer, give full title. If more than
one trustee, all should sign.
DATED:______________________, 1999
_________________________________
Signature of Stockholder
_________________________________
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK [X]
Mark, Sign, Date and Return the Proxy Card Promptly Using the
Enclosed Envelope.
