<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (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 Section 240.14a-11(c) or Section 240.14a-12
ASHWORTH, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
ASHWORTH, INC.
2791 LOKER AVENUE WEST
CARLSBAD, CALIFORNIA 92008
(760) 438-6610
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 27, 1998
TO THE STOCKHOLDERS OF ASHWORTH, INC.
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
Ashworth, Inc., a Delaware corporation (the Company), will be held in the
Westin Hotel, South Coast Plaza, 686 Anton Boulevard, Costa Mesa, California,
on March 27, 1998, at 2:00 p.m., Pacific Time, and at any and all adjournments
thereof, for the purpose of considering and acting upon the following matters:
1. To elect a director of the Company to serve until the Annual Meeting of
Stockholders to be held in the year 2001 and until a successor has been
duly elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
A proxy statement explaining the matters to be acted upon at the meeting is
enclosed. Please read it carefully.
Only holders of record of the $.001 par value Common Stock of the Company at
the close of business on January 30, 1998, will be entitled to notice of and
to vote at the meeting or at any adjournment or adjournments thereof. The
proxies are being solicited by the Board of Directors of the Company.
All stockholders, whether or not they expect to attend the annual meeting of
stockholders in person, are urged to sign and date the enclosed proxy and
return it promptly in the enclosed postage-paid envelope which requires no
additional postage if mailed in the United States. The giving of a proxy will
not affect your right to vote in person if you attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Halina Balys
Secretary
Carlsbad, California
February 5, 1998
<PAGE>
ASHWORTH, INC.
2791 LOKER AVENUE WEST
CARLSBAD, CALIFORNIA 92008
(760) 438-6610
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 27, 1998
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Ashworth, Inc., a Delaware corporation (the Company), for use at the
Company's Annual Meeting of Stockholders to be held in the Westin Hotel, South
Coast Plaza, 686 Anton Boulevard, Costa Mesa, California, on March 27, 1998,
at 2:00 p.m., Pacific Time, and at any and all adjournments thereof. It is
anticipated that this proxy statement and the accompanying proxy will be
mailed to the Company's stockholders on or about February 5, 1998. All shares
represented by valid proxies will be voted in accordance therewith at the
meeting.
THE BOARD OF DIRECTORS URGES EACH STOCKHOLDER TO MARK, SIGN AND MAIL THE
ENCLOSED PROXY CARD IN THE RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
Any person signing and returning the enclosed proxy may revoke it at any
time before it is voted by (i) giving a later dated written revocation of
proxy to the Company, or (ii) providing a later dated amended proxy to the
Company, or (iii) voting in person at the meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to stockholders, will be borne by the Company. It is anticipated that
solicitations of proxies for the meeting will be made only by use of the
mails; however, the Company may use the services of its directors, officers
and employees to solicit proxies personally or by telephone, without
additional salary or compensation to them. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
materials to the beneficial owners of the Company's shares held of record by
such persons, and the Company will reimburse such persons for the reasonable
out-of-pocket expenses incurred by them in that connection.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
$.001 par value Common Stock, with each share entitled to one vote. Only
stockholders of record at the close of business on January 30, 1998 (the
record date), are entitled to notice of and to vote at the meeting or any
adjournment thereof. On the record date, the Company had 13,992,395 shares of
its $.001 par value Common Stock outstanding, each share of which is entitled
to one vote on all matters to be voted upon at the meeting, including the
election of the director.
Under Delaware law, unless otherwise provided in the Company's certificate
of incorporation or bylaws, directors are elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. The Company's certificate of
incorporation and bylaws do not require a greater or lesser vote. Only those
votes cast FOR the election of a director or WITHHELD will be counted for
purposes of determining the number of votes required to elect the director.
Abstentions and broker non-votes will not be counted in the election of a
director but will be counted for the purpose of establishing a quorum.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of 13,552,830
issued and outstanding shares of the Company's $.001 par value Common Stock
owned beneficially, as of December 31, 1997 by (1) any person who is known to
the Company to be, or to claim to be, the beneficial owner of more than 5% of
such Common Stock, (2) by each of the directors, (3) each of the executive
officers, and (4) all directors and officers as a group. Each person has sole
voting power and sole investment powers with respect to the shares.
Information as to beneficial ownership is based upon statements furnished to
the Company by such persons.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------
PERCENT
NAME SHARES OPTIONS(1)(2) TOTAL OWNED(3)
- ---- --------- ------------- --------- --------
(#) (#) (#) (%)
<S> <C> <C> <C> <C>
Gerald W. Montiel (4)............... 25,840 835,625 861,465 6.0
Randall L. Herrel, Sr............... 4,000 106,094 110,094 *
John L. Ashworth.................... 3,109 190,000 193,109 1.4
John Newman......................... 0 78,000 78,000 *
Mary Montiel........................ 0 83,500 83,500 *
Paul Gilbert........................ 0 6,500 6,500 *
Andre P. Gambucci................... 32,000 47,500 79,500 *
John M. Hanson, Jr.................. 0 37,500 37,500 *
All executive officers and directors
as a group (7 persons)............. 64,949 1,384,719 1,449,668 9.7
J.P. Morgan & Co., Inc (5).......... 1,277,500 0 1,277,500 9.4
Fred Couples (6).................... 693,000 700,000 1,393,000 9.8
</TABLE>
- --------
* Less than one percent.
(1) Represents shares of Common Stock which may be acquired pursuant to
presently exercisable stock options, including stock options exercisable
within 60 days of December 31, 1997.
(2) All of these options have exercise prices which are less than the market
price of the Company's Common Stock on December 31, 1997 ($11.00).
(3) For the purpose of computing the percentage of outstanding shares owned by
each of the above persons, the shares issuable pursuant to presently
exercisable stock options held by such person are deemed to be outstanding
and have been added to the shares actually issued and outstanding, at
December 31, 1997, pursuant to Rule 13d-3(d)(1) of the Securities Exchange
Act of 1934. Such options are not deemed to be outstanding for the purpose
of computing the percentage owned by any other person, except for all
officers and directors as a group.
(4) The options for 835,625 shares include options for 110,000 shares
transferred by Mr. Montiel to members of his family in 1997.
(5) J.P. Morgan & Co., Inc., of 60 Wall Street, New York, NY 10260, is the
beneficial owner of 1,277,300 shares. It has sole power to vote 1,077,300
of these shares, has no power to vote 200,000 shares, and sole power to
dispose of all of them.
(6) Fred Couples, 1851 Alexander Bell Drive, Suite 410, Reston, VA 22091.
-2-
<PAGE>
ELECTION OF DIRECTOR
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ANDRE P. GAMBUCCI AS A
DIRECTOR. If elected, Mr. Gambucci will hold office until the annual meeting
of stockholders to be held in the year 2001 and until his successor is elected
and qualified or his earlier death, resignation or removal. IT IS INTENDED
THAT SHARES REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL BE VOTED
"FOR" THE ELECTION OF MR. GAMBUCCI UNLESS A CONTRARY DIRECTION IS INDICATED.
If at the time of the meeting, Mr. Gambucci is unable to serve, which event is
not expected to occur, the discretionary authority provided in the proxy will
be exercised to vote for such substitute nominee, if any, as shall be
designated by the Board of Directors.
None of the directors hold a directorship in any other company having a
class of securities registered under the Securities Exchange Act of 1934, as
amended, or in any company registered as an investment company under the
Investment Company Act of 1940, as amended.
MEETINGS AND COMMITTEES OF THE BOARD
During the 1997 fiscal year, the Board of Directors met in person three
times and took corporate action twenty-three times by unanimous written
consent of the directors in lieu of meetings of the directors. The audit
committee composed of Andre P. Gambucci, Chair, and John M. Hanson, Jr., met
in person once in fiscal 1997. This committee was formed to oversee the
accounting controls for the Company. Pursuant to the requirements of the
Company's NASDAQ National Market System agreement, the audit committee
consists of a majority of outside directors. During the 1997 fiscal year, the
compensation committee, composed of Messrs. Gambucci and Hanson, took action
once by unanimous written consent in lieu of a meeting of the committee. This
committee recommends to the Board of Directors the compensation for executive
officers and, until November 1, 1996, administered the Company's Stock Option
Plans. At the present time, the Board of Directors administers the Stock
Option Plans.
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are:
<TABLE>
<CAPTION>
NAME (AGE) POSITION
---------- --------
<S> <C>
Gerald W. Montiel (51) Chairman of the Board
Randall L. Herrel, Sr. (47) President and Chief Executive Officer
John Newman (61) Vice President--Finance, Chief Financial Officer,
Chief Accounting Officer, and Treasurer
Mary Montiel (45) Vice President--Manufacturing
Paul Gilbert (39) General Manager, Ashworth U.K., Ltd.
Andre P. Gambucci (69) Director
John M. Hanson, Jr. (57) Director
</TABLE>
The directors are divided into three classes, each class as nearly equal in
number as possible, with an annual election of each class for a term of three
years.
Mr. Gambucci's term expires in 1998. The stockholders are being asked to
elect him for an additional three-year term expiring in the year 2001. John
Ashworth will not serve as a director following expiration of his term in
1998. No person is being nominated to replace Mr. Ashworth as a director. Mr.
Montiel's term expires in 1999, and the terms of Messrs. Hanson and Herrel
expire in the year 2000. The directors serve until their terms expire and
until their successors are duly elected and qualified or until their death,
resignation or removal. The executive officers of the Company are elected at
the annual meeting of the Board of Directors and serve at its discretion.
-3-
<PAGE>
BUSINESS EXPERIENCE
GERALD W. MONTIEL is a founder of the Company and has been its chairman of
the board of directors since the inception of the Company in March 1987. He
served as chief executive officer from 1988 to April 1995 and president from
the Company's inception to October 1993 and again from January 15, 1996, to
December 8, 1996. Mr. Montiel also served as treasurer from October 1989 to
December 1991 and chief financial officer from January 1990 to December 1991.
Mr. Montiel received a B.S. degree in Business Administration from Colorado
State University.
RANDALL L. HERREL, SR. has been a director, president, and chief executive
officer since December 9, 1996. For the two years prior to this, Mr. Herrel
served as president and chief operating officer of Quiksilver, Inc., a sports
apparel company in Costa Mesa, California. Mr. Herrel joined Quiksilver in
June 1989 and also served at various times as chief financial officer,
treasurer and secretary. Mr. Herrel holds a B.S. degree in Engineering from
Purdue University, an M.S. degree in Engineering from Northrop University and
an M.B.A. from Stanford University.
ANDRE P. GAMBUCCI has been a director of the Company since June 1991. Mr.
Gambucci was a senior vice president and director of marketing of Acordia of
Colorado, a general insurance agency and insurance brokerage firm in Colorado
Springs, Colorado, from 1982 until December 31, 1995, when he retired. He is
now a consultant for Acordia National and special assistant to the president
of American Specialty Services, an insurance company. Mr. Gambucci received a
degree in Political Science from the Colorado College.
JOHN M. HANSON, JR. has been a director of the Company since April 1994. Mr.
Hanson has been a shareholder and officer of John M. Hanson & Company, a
professional corporation practicing accounting, from 1968 to the present. Mr.
Hanson has a B.S. degree in Business Administration from the University of
Denver, and a Masters degree in Taxation from the University of Denver Law
School. He is a Certified Public Accountant.
JOHN NEWMAN has served as chief accounting officer since January 1990 and
vice president--finance, treasurer, and chief financial officer since December
1991. He also served as the company's controller from 1988 to January 1990 and
secretary from January 1990 until May 1993. Mr. Newman is an English Chartered
Certified Accountant and an English Chartered Secretary.
MARY MONTIEL was elected vice president--manufacturing and design in
December 1994 and is currently vice president--manufacturing. She served as
production manager from April 1991 until December 1994. Ms. Montiel is the
sister of Gerald Montiel, the Company's chairman of the board.
PAUL GILBERT has been the director of sales and marketing for Ashworth U.K.,
Ltd., since the subsidiary was founded in September 1993. He was appointed to
the position of general manager on November 1, 1996. He was the owner of Golf
Wholesale, a distributor of golf apparel and golf clubs for many years prior
to September 1993. The Company purchased the goodwill of Golf Wholesale in
September 1993.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors, and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership of the Company's securities with the
Securities and Exchange Commission. These persons are required to furnish the
Company with information concerning their ownership of the securities and with
copies of such filings. During the fiscal year ended October 31, 1997, Fred
Couples became the beneficial owner of more than ten percent of the Company's
Common Stock. J.P. Morgan & Co., Inc filed a schedule 13G with the Commission
on October 31, 1997, stating that it beneficially owned 10.1% of the Company's
common stock. However, during the October 1997 quarter, the exercise of stock
options increased the number of shares issued and outstanding and, on October
31, 1997, and on December 31, 1997, to the best of the Company's information
and belief, no person beneficially owned more than ten percent of the
Company's securities. Based solely on a review of such information and the
copies of the filings furnished by these persons, the Company believes that
all Section 16(a) filing requirements applicable to these persons were
complied with during fiscal 1997 on a timely basis.
-4-
<PAGE>
EXECUTIVE COMPENSATION
The following information sets forth the executive compensation of each of
the persons who served as the Company's chief executive officer during fiscal
1997 and each of the four most highly compensated executive officers other
than the CEO.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ------------------------
OTHER STOCK LONG TERM
NAME AND ANNUAL OPTION INCENTIVE
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS PAYOUTS
- ------------------ ---- ------- ------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
RANDALL L. HERREL, SR. 1997 276,250 -0- -0- 106,094 50,000
Chief Executive Officer 1996 75,000 -0- 300,000 -0-
(From December 9, 1996) 1995 -0- -0- -0- -0-
GERALD W. MONTIEL 1997 282,474 -0- 5,405 5,625 -0-
Chief Executive Officer 1996 314,483 -0- 5,722 450,000 -0-
(Until December 8, 1996) 1995 315,065 -0- 5,073 300,000 -0-
JOHN L. ASHWORTH 1997 173,671 -0- 3,512 4,922 -0-
Snr. Exec. Vice President 1996 264,668 -0- 2,795 125,000 -0-
1995 264,741 -0- 3,385 260,000 -0-
JOHN NEWMAN 1997 148,924 -0- 2,729 3,000 -0-
Vice President--Finance 1996 161,230 -0- 2,551 45,000 -0-
1995 160,385 -0- 2,430 -0- -0-
MARY MONTIEL 1997 148,924 -0- 2,440 3,000 -0-
Vice President-- 1996 146,904 -0- 1,043 60,000 -0-
Manufacturing 1995 112,693 -0- -0- 5,000 -0-
PAUL GILBERT 1997 139,188 56,669 -0- -0- -0-
General Manager, 1996 154,380 24,045 -0- 9,000 -0-
Ashworth U.K., Ltd. 1995 79,602 20,556 71,866 -0- -0-
</TABLE>
(Mr. Gilbert's "Other Annual Compensation" relates to commission paid to him
for sales of Ashworth products in fiscal year 1995. From fiscal year 1996, his
compensation has been based on salary and an annual incentive bonus.)
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------- ---------------------
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE
SECURITIES EMPLOYEES OR
UNDERLYING IN FISCAL BASE EXPIRATION
NAME OPTIONS GRANTED YEAR PRICE DATE 5% 10%
- ---- --------------- ---------- -------- ---------- ---------- ----------
(#) ($/SH)
<S> <C> <C> <C> <C> <C> <C>
Gerald W. Montiel....... 5,625 1.3 5.75 07/31/02 8,936 19,746
Randall L. Herrel, Sr... 6,094 5.75 07/31/02 9,681 21,393
100,000(a) 24.9 6.50 12/31/04 264,615 616,666
John L. Ashworth........ 4,922 1.2 5.75 07/31/02 7,819 17,278
John Newman............. 3,000 0.7 5.75 07/31/02 4,766 10,531
Mary Montiel............ 3,000 0.7 5.75 07/31/02 4,766 10,531
Paul Gilbert............ -0-
</TABLE>
- --------
(a) These options are not exercisable until January 1, 1999.
-5-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- --------------- --------- ---------------------- --------------------
(#) ($) (#) ($)
<S> <C> <C> <C> <C>
Gerald W. Montiel....... 170,000 858,108 685,625/150,000 2,113,555/515,625
Randall L. Herrel, Sr... -0- -0- 56,094/350,000 222,394/1,328,125
John L. Ashworth........ 534,922 1,826,049 190,000/-0- 273,125/-0-
John Newman............. 10,000 35,787 78,000/-0- 215,375/-0-
Mary Montiel............ -0- -0- 58,500/25,000 169,844/85,938
Paul Gilbert............ -0- -0- 6,500/2,500 24,344/8,594
</TABLE>
REPORT OF REPRICING OPTIONS
On November 1, 1996, the Board of Directors authorized the repricing and
extension of the expiration dates of certain options held by the two outside
directors. These options could not be repriced and extended at the time the
options of the Company's management were restructured, in fiscal year 1996,
due to restrictions in force at that time for formula plans. Those
restrictions no longer applied as at November 1, 1996, and the Directors
determined that it would be in the best interests of the Company to
acknowledge the services provided by the two outside directors, by repricing
some of their options at a price below that of the original grant. The
exercise price was set at $0.25 above the market price of the Company's common
stock at the close of business on October 31, 1996. The following schedule
sets forth the repriced and extended options.
This Report was furnished by the Board of Directors.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF EXERCISE OPTION TERM
SECURITIES MARKET PRICE PRICE AT REMAINING
UNDERLYING OF STOCK TIME OF AT DATE OF
OPTIONS AT TIME OF REPRICING NEW REPRICING
REPRICED OR REPRICING OR OR EXERCISE OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- ---- ------- ----------- ------------ ---------- -------- -----------
(#) ($) ($) ($) (MONTHS)
<S> <C> <C> <C> <C> <C> <C>
Andre P. Gambucci 11/1/96 2,500 $6.50 $11.63 $6.75 24
Director 11/1/96 2,500 $6.50 $10.50 $6.75 27
11/1/96 2,500 $6.50 $11.00 $6.75 30
11/1/96 2,500 $6.50 $ 9.75 $6.75 33
11/1/96 2,500 $6.50 $10.50 $6.75 36
11/1/96 2,500 $6.50 $10.50 $6.75 39
John M. Hanson, Jr 11/1/96 2,500 $6.50 $11.00 $6.75 30
Director 11/1/96 2,500 $6.50 $ 9.75 $6.75 33
11/1/96 2,500 $6.50 $10.50 $6.75 36
11/1/96 2,500 $6.50 $10.50 $6.75 39
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company each receive annual
compensation of $12,000 plus $1,000 and expenses for attendance at each board
meeting. Such directors also receive quarterly stock options to purchase
shares of the Company's $.001 par value Common Stock for each quarter during
which they serve as directors and for each committee on which they serve
during each quarter. All directors receive an annual $1,000 apparel allowance.
No other arrangement exists pursuant to which any director of the Company was
compensated during the Company's last fiscal year for any service provided as
a director.
-6-
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has executive employment agreements with Gerald W. Montiel and
Randall L. Herrel, Sr. Under the terms of the agreement with Mr. Montiel, the
Company may terminate the executive's employment without notice, and the
executive may terminate his employment upon 90 days notice to the Company. The
agreement with Mr. Herrel provides for employment for an initial term of three
years through November 30, 1999, with automatic renewal each year unless
either party gives to the other six-month written notice of non-renewal. The
agreements provide that base salary is to be determined periodically at the
discretion of the board of directors on the basis of merit and the Company's
financial success and progress. A $50,000 bonus was awarded to Mr. Herrel,
payable in January 1998, based on the Company's improved earnings per share in
fiscal year 1997. For fiscal year 1998, Mr. Herrel will be paid a bonus based
on earnings per share. If the earnings per share are at least $.55 he will be
paid a bonus of $75,000. For each $.01 increase in earnings per share over
$.55 he will be paid an additional $25,000, to a maximum total bonus of
$200,000. The Company agreed to pay the executives an annual bonus equal to
the premium due on life insurance policies with a face value of $2,000,000 for
Mr. Montiel and $1,000,000 for Mr. Herrel. The Company also pays the premium
on a split dollar insurance policy with a face value of $1,000,000 on the life
of Mr. Montiel. The agreement with Mr. Montiel includes a noncompete provision
following termination of employment for which the Company has agreed to pay
the executive compensation based upon a percentage of his then current salary
as consideration for the noncompete agreement. The noncompete period is ten
years with the noncompete consideration to be an amount equal to 100% of the
executive's then current salary for the first year and 40% of such salary for
the next nine years. In the event of the executive's death during employment
with the Company, his beneficiary or estate will receive an amount equal to
the noncompete consideration. The agreement with Mr. Herrel includes severance
payments upon termination of employment under specific circumstances, such
payments ranging from one-half to two times his then annual base salary. John
Ashworth resigned as a vice president and elected to terminate his employee
relationship with the Company in June 1997. His contract has a ten year
noncompete agreement which provides for payment of the equivalent of full
salary for the first year following termination of employment, and 40% of the
first year amount in each of the following nine years. Mr. Ashworth received
the first year payment in June 1997. The Company has key person life insurance
payable to the Company on the life of Mr. Montiel in the amount of $2,000,000.
BOARD COMPENSATION COMMITTEE REPORT
The members of the Compensation Committee of the Board of Directors during
fiscal 1997 included Andre Gambucci and John M. Hanson, Jr. Under the
supervision of the Compensation Committee, the Company has developed and
implemented compensation policies intended to attract, retain, and stimulate
the performance of the Company's executive officers, provide such officers the
opportunity to acquire a proprietary interest in the Company and an increased
personal interest in the profitability of the Company, and thus stockholders'
value, and provide competitive levels of long-term compensation for such
officers. The criteria for determining a specific officer's compensation
includes length of employment or previous experience, level of responsibility,
contribution to the overall success of the Company, and individual performance
with respect to achievement of the Company's goals. The goals, which include
individual, department, and Company goals, are set at the beginning of each
fiscal year and reviewed quarterly. The goals include sales, market share,
quality control, production, inventory, and earnings per share. In reviewing
management performance and compensation, the Committee also considers
management's commitment and expected contribution to the long-term success of
the Company through expansion of its international as well as domestic market,
development of new products, and operational improvements. Compensation of the
executive officers includes a base salary and annual and long-term incentive
compensation consisting primarily of stock options.
The compensation for the Company's chief executive officer is primarily
based upon the rate of the Company's growth from year to year in terms of
sales, expenses, and earnings per share.
This report was furnished by Mr. Gambucci and Mr. Hanson.
-7-
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph provided by R.R. Donnelly Financial, Los
Angeles, California and prepared for them by Media General, comparing the
yearly percentage change in the Company's cumulative total shareholder returns
on the Company's Common Stock with the cumulative total return of the Nasdaq
Stock Market (U. S. Companies) and the Stocks of Companies in the same
Standard Industrial Classification as the Company (SIC 2300-2399).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG ASHWORTH, INC., INDUSTRY INDEX AND BROAD MARKET
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period INDUSTRY BROAD
(Fiscal Year Covered) ASHWORTH, INC. INDEX MARKET
- ------------------- ------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1992 $100.00 $100.00 $100.00
FYE 1993 $232.50 $116.60 $131.23
FYE 1994 $210.00 $ 92.49 $139.52
FYE 1995 $135.00 $ 90.76 $165.50
FYE 1996 $130.00 $ 98.09 $194.35
FYE 1997 $198.75 $104.10 $254.71
</TABLE>
-8-
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
John Ashworth resigned as senior executive vice president and terminated his
employment with the Company in June 1997 and commenced receiving payment from
the Company under the terms of his employment agreement. The agreement
provides that Mr. Ashworth will receive payment of $262,500 (his agreement
salary) in the first year and forty percent of that amount in each of the next
nine years for not competing with the Company. At the time of his resignation,
Mr. Ashworth entered into an agreement to provide consulting services to the
Company for no more than 80 days a year during the term of the noncompete
arrangement.
Carol Kettela, sister of Gerald Montiel and Mary Montiel, has resigned from
her position as the Company's human resources manager. During fiscal year
1997, Ms. Kettela was paid salary and severance pay totaling $58,484. On
October 16, 1997, Ms. Kettela exercised an option for 2,181 shares of Ashworth
Common Stock and received a benefit of $9,516. Ms. Kettela had been employed
by the Company since April 1992, initially in the position of administrative
assistant to the chief executive officer. She was the human resources manager
from January 1996 to May 1997.
David Kettela, brother-in-law of Gerald Montiel and husband of Carol
Kettela, has resigned from his position as the Company's outlet stores
operations manager. During fiscal year 1997, Mr. Kettela was paid salary and
severance pay totalling $65,987. On October 16, 1997, Mr. Kettela exercised an
option for 2,359 shares of Ashworth Common Stock and received a benefit of
$10,137. Mr. Kettela had been employed by the Company since January 25, 1993
serving in various positions. He was the Company's outlet stores operations
manager from March 1994 to May 1997.
Eric Montiel, son of Gerald Montiel, has resigned from his position as the
Company's Excess Resource Materials Manager, effective January 30, 1998. In
the year ended October 31, 1997, he earned a salary of $58,173 and his annual
salary at the time of his resignation was $70,000. During the fiscal year
1997, Mr. Montiel exercised options for 6,172 shares of Ashworth Common Stock
and received a benefit of $20,103. Mr. Montiel has been an employee or sales
representative of the Company from time to time since May 1991, his most
recent employment period commencing January 1996.
Mary Montiel, sister of Gerald Montiel, is an executive officer and employee
of the Company. Her compensation is set forth above under Executive
Compensation. She is currently receiving an annual salary of $160,000. Ms.
Montiel has been an employee of the Company serving in various positions since
April 16, 1992. She served as production manager from April 1992 until
December 1994, vice president of manufacturing and design until May 1997, and
vice president of manufacturing since that date.
Michelle Zafiropoulos, daughter of Gerald Montiel, is an employee of the
Company. She is currently responsible for the development and management of
the Company's new concept store in Costa Mesa, California. She is also
responsible for developing lifestyle products which will be sold through the
Company's concept store and, eventually, through current distribution
channels. Previously Ms. Zafiropoulos was employed in the Company's Design and
Product Development Department as a design manager. In the year ended October
31, 1997, she had earned a salary of $67,481 and is currently receiving an
annual salary of $85,000. During the fiscal year 1997, Ms. Zafiropoulos
exercised options for 6,859 shares of Ashworth Common Stock and received a
benefit of $32,528. Ms. Zafiropoulos has been an employee of the Company since
March 18, 1991, except for a brief period from April 28, 1995 to January 1,
1996.
Hank Ashworth, brother of John Ashworth, is a sales representative of the
Company. Hank and a partner are independent contractors who operate under the
name of C & A Enterprises. During the year ended October 31, 1997, C & A
Enterprises earned $254,976 in sales commissions from the Company. Mr.
Ashworth earned $18,160 in sales commission before he and his partner formed C
& A Enterprises.
Laura Gambucci, daughter of Mr. Gambucci, is an employee in the Company's
Design and Product Development Department as a Design Manager. In the year
ended October 31, 1997, she earned a salary of $78,185 and is currently
receiving an annual salary of $86,250. Ms. Gambucci has been an employee of
the Company since November 6, 1989.
-9-
<PAGE>
The Company has a promotion agreement with Fred Couples. Effective February
1997, Mr. Couples contract was amended so that, from that date, he would
provide his services to the Company as an employee rather than as independent
contractor. The agreement requires Mr. Couples' exclusive endorsement and
promotion of Ashworth products during his lifetime. The Company has agreed to
compensate Mr. Couples for such services, the present value of which
compensation is approximately $5,300,000. In addition, the Company has granted
to Mr. Couples the right to receive options to purchase the Company's Common
Stock upon his performance of specified services, including his participation
in PGA tournaments. The exercise price of the options will be the fair market
value of the Company's Common Stock at the time the options are granted, and
the options will be exercisable for a period of seven years. The Company has
also made certain price guaranties with respect to the options. On September
21, 1997, the Company loaned Mr. Couples $843,750 to purchase, from the
Company, 150,000 shares of Ashworth Common Stock pursuant to a stock option
that had been granted to him in 1996. The note is secured by 150,000 shares of
Ashworth, Inc Common Stock, the certificate for which is held by the Company.
The note is to be repaid in March 1998 with interest at 8% per annum. Mr.
Couples owns of record or beneficially more than 5% of the Company's Common
Stock.
SELECTION OF INDEPENDENT AUDITORS
The independent public accounting firm of KPMG Peat Marwick LLP audited the
financial statements of the Company for the period ended October 31, 1997. The
Board of Directors has appointed KPMG Peat Marwick LLP as the Company's
independent public accounting firm to audit the financial statements for the
period ending October 31, 1998. A representative of KPMG Peat Marwick LLP is
expected to be present at the stockholders' meeting and available to respond
to appropriate questions.
OTHER BUSINESS
As of the date of this proxy statement, management of the Company was not
aware of any other matter to be presented at the meeting other than as set
forth herein. However, if any other matters are properly brought before the
meeting, the shares represented by valid proxies will be voted with respect to
such matters in accordance with the judgment of the persons voting them. An
affirmative vote of a majority of shares present in person or represented by
proxy at the meeting is necessary to approve any such matters.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended October 31, 1997,
accompanies this proxy statement. The audited financial statements of the
Company are included in such Annual Report. Copies of the Form 10-K for the
fiscal year ended October 31, 1997 and the exhibits thereto are available from
the Company upon written request of a stockholder and payment of the Company's
out- of-pocket expenses.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN MARCH 1999
Any proposal from a stockholder intended to be presented at the Company's
Annual Meeting of Stockholders to be held in March 1999, must be received at
the offices of the Company, 2791 Loker Avenue West, Carlsbad, California
92008, no later than October 24, 1998, in order to be included in the
Company's proxy statement and proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ HALINA BALYS
HALINA BALYS
Secretary
Carlsbad, California February 5, 1998
-10-
<PAGE>
PROXY ASHWORTH, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gerald W. Montiel and John Newman as proxies
with the power to appoint their substitutes and hereby authorizes them to
represent and vote, as designated below, all of the shares of Common Stock of
Ashworth, Inc., held by the undersigned on February 14, 1998, at the Annual
Meeting of Stockholders to be held on March 27, 1998, or any adjournment
thereof, with like effect as if the undersigned were personally present and
voting upon the following matters.
1. ELECT A DIRECTOR to serve until the Annual Meeting of Stockholders to be
held in the year 2001 and until a successor has been duly elected and
qualified.
[_] FOR ANDRE P. GAMBUCCI [_] WITHHOLD AUTHORITY TO VOTE
FOR ANDRE P. GAMBUCCI
2. TRANSACT such other business as may properly come before the meeting or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ANDRE P. GAMBUCCI AS A DIRECTOR.
THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR
DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS TO THE UNDERSIGNED.
The undersigned hereby
acknowledges receipt of the
Notice of Annual Meeting of
Stockholders and Proxy Statement
furnished herewith.
DATE: , 1998, 1998
----------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
SIGNATURE SHOULD AGREE WITH THE
NAME(S) PRINTED HEREON.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND ATTORNEYS
SHOULD SO INDICATE WHEN SIGNING.
ATTORNEYS SHOULD SUBMIT POWERS OF
ATTORNEY.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. THE
GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING, OR TO SUBMIT A LATER DATED REVOCATION OR AMENDMENT TO THIS PROXY
ON ANY OF THE ISSUES SET FORTH ABOVE.
