UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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☐ Soliciting Material Under §240.14a-12
Callaway Golf Company
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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March 18, 2019 , 2021
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders (“Annual Meeting”) of Callaway Golf Company (the “Company”), which will be held on Tuesday,Wednesday, May 7, 2019, at our offices located at 2180 Rutherford Road, Carlsbad, California 92008,19, 2021, solely by means of remote communication in a virtual-only format, commencing at 8:00 a.m. (Pacific Time). A map is provided onYou will not be able to attend the back page of these materials for your reference. Your Board of DirectorsAnnual Meeting physically. You will be able to attend and management look forwardparticipate in the Annual Meeting online by visiting www.meetingcenter.io/210865261, where you will be able to greeting personally those shareholders who attend.listen to the meeting live, submit questions and vote.
At the meeting, your Board of Directors will ask shareholders to (i) elect tentwelve directors; (ii) ratify, on an advisory basis, the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and2021; (iii) approve, on an advisory basis, the compensation of our named executive officers.officers; and (iv) approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000. These matters are described more fully in the accompanying Proxy Statement, which you are urged to read thoroughly. Your Board of Directors recommends a vote “FOR” each of the director nominees, “FOR” ratification of the appointment of our independent registered public accounting firm, and “FOR” the approval of the compensation of our named executive officers.officers and “FOR” the amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000.
We have elected to take advantage of Securities and Exchange Commission rules that allow companies to furnish proxy materials to their shareholders by providing notice of and access to these documents on the Internet instead of mailing printed copies. Those rules allow a company to provide its shareholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of the annual meeting.Annual Meeting. Most of our shareholders will not receive printed copies of our proxy materials unless requested, but instead will receive a notice with instructions on how they may access and review our proxy materials on the Internet and how they may cast their vote via the Internet. If you would like to receive a printed ore-mail copy of our proxy materials, please follow the instructions for requesting the materials in the Notice of Internet Availability that is being sent to you.
Your vote is important. Whether or not you plan to attend the annual meeting,virtual Annual Meeting, please vote as soon as possible. If you received the Notice of Internet Availability, a proxy card was not sent to you and you may vote only via the Internet unless you attend the annual meetingvirtual Annual Meeting or request that a proxy card and proxy materials be mailed to you. If you have requested that a proxy card and proxy materials be mailed to you, and you have received those materials, then you may vote via the Internet, by telephone or by mailing a completed proxy card. For specific voting instructions, please refer to the information provided in the accompanying Proxy Statement and in the Notice of Internet Availability.
Thank you for your continued interest in and support of Callaway Golf Company.
Sincerely,
Oliver G. (Chip) Brewer III
President and Chief Executive Officer
CALLAWAY GOLF COMPANY
2180 Rutherford Road
Carlsbad, California 92008
NOTICE OF 20192021 ANNUAL MEETING OF SHAREHOLDERS
When | Wednesday, May | |
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Where | The 2021 annual meeting of shareholders will be held entirely online. You will be able to attend and participate in the annual meeting online by visiting www.meetingcenter.io/210865261, where you will be able to listen to the meeting live, submit questions and vote. | |
Items of Business | 1. To elect as directors the
2. To ratify, on an advisory basis, the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for the
3. To approve, on an advisory basis, the compensation of the company’s named executive officers.
4. To approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000. 5. To transact such other business as may properly come before the annual meeting and at any adjournments or postponements thereof. | |
Record Date | March | |
How to Vote | Please vote your shares promptly to ensure the presence of a quorum at the annual |
Carlsbad, California
| By Order of the Board of Directors,
Sarah E. Kim Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May | The Annual Report and Proxy Statement are available on the Internet at: http://www.allianceproxy.com/callawaygolf/ |
CALLAWAY GOLF COMPANY
2180 Rutherford Road
Carlsbad, California 92008
PROXY STATEMENT
2019
2021 ANNUAL MEETING OF SHAREHOLDERS
Why am I receiving these materials?
Callaway Golf Company (the “Company”) has prepared these materials for its 20192021 annual meeting of shareholders and any adjournment or postponement thereof (the “Annual Meeting”). The Annual Meeting is scheduled to be held at the Company’s offices located at 2180 Rutherford Road, Carlsbad, California 92008 on Tuesday,Wednesday, May 7, 201919, 2021, solely by means of remote communication in a virtual-only format, commencing at 8:00 a.m. (Pacific Time). You are invited to attend and are requested to vote on the proposals described in this Proxy Statement. The Company is soliciting proxies for use at the Annual Meeting.
The proxy materials were first sent or made available to shareholders on or about March 28, 2019., 2021.
What is included in these proxy materials?
The Notice of 20192021 Annual Meeting of Shareholders
This Proxy Statement
The Company’s 20182020 Annual Report to Shareholders
If you requested printed versions by mail, you will also will receive a proxy card or voting instruction form.
Why did I receive aone-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
In accordance with rules of the Securities and Exchange Commission (“SEC”), the Company uses the Internet as the primary means of furnishing proxy materials to its shareholders. Accordingly, the Company is sending a Notice of Internet Availability of Proxy Materials to its shareholders who have not previously requested paper proxy materials with instructions on how to access the proxy materials over the Internet or request a printed copy of the materials, and for voting over the Internet.
Shareholders may follow the instructions in the Notice of Internet Availability of Proxy Materials to elect to receive future proxy materials in print by mail or electronically by email. The Company encourages its shareholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of its annual meetings and reduce the cost to the Company associated with the printing and mailing of proxy materials.
What items will be voted on at the Annual Meeting?
There are threefour items that shareholders may vote on at the Annual Meeting:
To elect to the Company’s Board of Directors (the “Board”) the tentwelve nominees named in this Proxy Statement;
To ratify, on an advisory basis, the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and2021;
To approve, on an advisory basis, the compensation of the Company’s named executive officers.officers; and
To approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000.
Will any other business be conducted at the Annual Meeting?
Other than the proposals described in this Proxy Statement, the Company knows of no other matters to be submitted to the shareholders at the Annual Meeting. If any other matter properly comes before the shareholders at the Annual Meeting, it is the intention of the persons named as proxy holders to vote upon such matters in accordance with the Board’s recommendation.
Who may vote at the Annual Meeting?
Only holders of record of the Company’s common stock (the “Common Stock”) as of the close of business on March 11, 2019,23, 2021, the record date for the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting. The Company had no other class of capital stock outstanding as of the record date, and no other shares are entitled to notice of, or to vote at, the Annual Meeting. To access the virtual Annual Meeting, you may visit www.meetingcenter.io/210865261.
What is the difference between a shareholder of record and a beneficial owner of shares held in street name?
If, on the record date, your shares are registered directly in your name with the Company’s registrar and transfer agent, Computershare Trust Company, N.A., you are considered a shareholder of record with respect to those shares and the Company’s proxy materials have been made available to you by the Company. As a shareholder of record, you may vote at the Annual Meeting if you attend online or vote by proxy.
If your shares are held in a stock brokerage account, by a bank, broker, trustee or other nominee, you are considered the beneficial owner of shares held in street name and the Company’s proxy materials are being forwarded to you by your bank, broker, trustee or other nominee that is considered the owner of record of those shares. As the beneficial owner, you have the right to instruct your bank, broker, trustee or other nominee on how to vote your shares.
If I am a shareholder of record of the Company’s shares, how do I vote?
If you are a shareholder of record, there are four ways to vote:
• | Via the Internet. You may vote by proxy via the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials. |
• | By Telephone. If you request printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by calling the toll free number found on the proxy card. |
• | By Mail. If you request printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by completing, signing and dating the proxy card and returning it. |
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Votes submitted by proxy via the Internet, by telephone or by mail must be received by 1:00 a.m., Pacific Time, on May 19, 2021. Votes may also be submitted during the virtual Annual Meeting.
If I am a beneficial owner of the Company’s shares held in street name, how do I vote?
YouIf you are a beneficial owner of shares registered in the name of your bank, broker, trustee or other nominee, you will receive instructions from the holder of record that you must follow in order for your shares to be voted. The availability of telephonic or Internet voting will depend on your bank’s, broker’s, trustee’s or other nominee’s voting process. Please check with your bank, broker, trustee or other nominee and follow the voting instructions they provide to vote your shares.
If you wish to attend the virtual Annual Meeting and participate in and vote in personyour shares at the virtual Annual Meeting, you must register online in advance. To register online in advance, you must obtain a “legal proxy” from your bank, broker, trustee or other nominee that holds your shares. Once you have received a legal proxy from your bank, broker, trustee or other nominee, please email a scan or image of it to our transfer agent, Computershare, at legalproxy@computershare.com, with “Legal Proxy” noted in the subject line. If you do request a legal proxy from your bank, broker, trustee or other nominee, the issuance of the legal proxy will invalidate any prior voting instructions you have given and will prevent you from giving any further voting instructions to your bank, broker, trustee or other nominee to vote on your behalf, and, in that holds your shares and present that proxy and proof of identificationcase, you would only be able to vote at the virtual Annual Meeting. Requests for registration must be received by Computershare no later than 5:00 p.m., Eastern Time, on May 14, 2021.
Upon receipt of your valid legal proxy, Computershare will provide you with a control number by email. Once provided, you can attend and participate in the virtual Annual Meeting by accessing the link www.meetingcenter.io/210865261 and selecting “I have a Control Number.” Enter the control number provided by Computershare and the password, which is ELY2021.
How are proxies voted?
All shares represented by valid proxies received on a timely basis prior to the taking of the vote at the virtual Annual Meeting will be voted and, where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder’s instructions. Similarly, if you transmit your voting instructions by telephone or via the Internet, your shares will be voted as you have instructed.
What happens if I do not give specific voting instructions?
Shareholders of Record. If you are a shareholder of record and you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, then your shares will be voted at the virtual Annual Meeting in accordance with the Board’s recommendation on all matters presented for a vote at the virtual Annual Meeting. Similarly, if you sign and return a proxy card but do not indicate how you want to vote your shares for a particular proposal or for all of the proposals, then for any proposal for which you do not so indicate, your shares will be voted at the virtual Annual Meeting in accordance with the Board’s recommendation.
Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, then, under applicable New York Stock Exchange (“NYSE”) rules, the organization that holds your shares may generally vote your shares in their discretion on “routine” matters but cannot vote on“non-routine” matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on anon-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on that matter with respect to your shares. This is generally referred to as a “brokernon-vote.”
Which proposals are considered “routine” or“non-routine”?
The ratification, on an advisory basis, of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm is considered a routine matter. A bank, broker, trustee or other nominee may generally vote your shares on routine matters even without receiving instructions from you, and therefore no brokernon-votes are expected with respect to this proposal.
The election of directors, and the approval, on an advisory basis, of the compensation of the Company’s named executive officers and approval of the amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to
360,000,000 are considerednon-routine matters. Brokers and other nominees cannot vote your shares on these proposals without receiving instructions from you, and therefore brokernon-votes may occur with respect to these proposals.
How does the Board recommend that I vote?
The Board recommends that you vote:
“FOR” each of the twelve nominees for election as director as set forth in this Proxy Statement;
“FOR” ratification, on an advisory basis, of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and2021;
“FOR” the approval, on an advisory basis, of the compensation of the Company’s named executive officers.officers; and
“FOR” the approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000.
By returning your proxy via the Internet or by telephone or mail, unless you notify the Company’s Corporate Secretary in writing to the contrary, you are also authorizing the proxies to vote your shares in accordance with the Board’s recommendation on any other matter that may properly come before the Annual Meeting. The Company does not currently know of any such other matter.
What is the quorum requirement for the Annual Meeting?
As of the record date for the Annual Meeting, there were 94,818,838 shares of Common Stock issued and outstanding. Under Delaware law and the Company’sSeventh Amended and Restated Bylaws of the Company (the “Company’s Bylaws”), the holders of a majority of the Common Stock issued and outstanding and entitled to vote at the Annual Meeting, present in person (including by virtual attendance) or represented by proxy, constitute a quorum for the transaction of business at the Annual Meeting. If you submit a properly executed proxy via the Internet or by telephone or mail, regardless of whether you abstain from voting on one or more matters, your shares will be counted as present at the
Annual Meeting for the purpose of determining a quorum. Brokernon-votes will also be counted as present for the purpose of determining the presence of a quorum at the Annual Meeting. The inspector of election will determine whether a quorum is present and will tabulate the votes cast at the Annual Meeting.
How many votes does each share have?
Holders of Common Stock have one vote for each share on any matter that may be presented for consideration and action by the shareholders at the Annual Meeting, except that shareholders have cumulative voting rights with respect to the election of directors. Cumulative voting rights entitle each shareholder to cast as many votes as are equal to the number of directors to be elected multiplied by the number of shares owned by such shareholder, which votes may be cast for one candidate or distributed among two or more candidates. A shareholder of record may exercise cumulative voting rights by indicating on the proxy card the manner in which such votes should be allocated, or if such shareholder votes in person at the Annual Meeting, such shareholder must submit a ballot and make an explicit statement of the intent to cumulate votes. A shareholder who holds shares beneficially through a bank, broker, trustee or other nominee and wishes to cumulate votes, should contact his, her or its bank, broker, trustee or other nominee. Internet and telephone voting cannot accommodate cumulative voting.Meeting.
What is the voting requirement to approve each of the proposals?
Assuming a quorum is present at the Annual Meeting, the ten nominees for director receivingaffirmative vote of the highestholders of a majority of the votes cast (meaning the number of votes atshares voted “FOR” a nominee must exceed the Annual Meeting will be elected. Returning a proxy giving authority to votenumber of shares voted “AGAINST” such nominee) is required for the nominees named in this Proxy Statement will also give discretion to the designated proxies to cumulate votes and cast such votes in favor of the election of some or alleach of the applicable directortwelve nominees in their sole discretion.for director.
Assuming a quorum is present at the Annual Meeting, the affirmative vote of the holders of a majority of the shares having voting power present in person or represented by proxy at the Annual Meeting is required for (i) the ratification, on an advisory basis, of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm and for(ii) the approval, on an advisory basis, of the compensation of the Company’s named executive officers.
Assuming a quorum is present at the Annual Meeting, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock is required for the approval of the amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000.
How are abstentions and brokernon-votes treated?
As noted above, abstentions and brokernon-votes are counted for purposes of determining a quorum. For purposes of determining whether a proposal is approved (other than the election of directors), abstentions are counted in the tabulation of shares present in person or represented by proxy and have the same effect as voting against a proposal. BrokerFor the election of directors, abstentions do not count as a vote cast and will have no effect on the outcome of the proposal.
With regard to the election of directors, the ratification, on an advisory basis, of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm and the approval, on an advisory basis, of the compensation of the Company’s named executive officers, broker non-votes are not considered as votes cast (for the election of directors) or as shares having voting power present in person or represented by proxy (for such proposals other than the election of directors) and will not be counted toward the vote total and therefore will have no effect on the outcome of a proposal. With regard to the approval of the amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000, a broker non-vote will have the same effect as voting against the proposal.
Can I change my vote or revoke my proxy after I have voted?
Shareholders of Record. You may revoke your proxy and change your vote at any time before your shares are voted at the Annual Meeting by taking any of the following actions:
filing with the Company’s Corporate Secretary either a written notice of revocation or a duly executed proxy dated later than the proxy you wish to revoke;
voting again on a later date via the Internet or by telephone by no later than 1:00 a.m., Pacific Time, on May 19, 2021 (in which case only your latest Internet or telephone proxy submitted will be counted); or
attending the virtual Annual Meeting via the link www.meetingcenter.io/210865261 and voting in personat the virtual Annual Meeting (your attendance at the virtual Annual Meeting, in and of itself, will not revoke your proxy).
Any written notice of revocation or later dated proxy that is mailed must be received by the Company’s Corporate Secretary before the close of business on May 6, 2019,18, 2021, and should be addressed as follows: Callaway Golf Company, Attention: Corporate Secretary, 2180 Rutherford Road, Carlsbad, California 92008. Alternatively, you may hand deliver a written revocation notice or a later dated proxy to the Company’s Corporate Secretaryvote at the virtual Annual Meeting before voting begins.Meeting.
Beneficial Owners of Shares Held in Street Name. You must follow the instructions provided by your bank, broker, trustee or other nominee if you wish to change your vote.
Why did I receive more than one Notice of Internet Availability of Proxy Materials or proxy card?
If you receive more than one Notice of Internet Availability of Proxy Materials or proxy card, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, please mark your votes and date, sign and return each proxy card, or vote your proxy via the Internet or by telephone as instructed on each proxy card.
Who is soliciting these proxies and who is paying the solicitation costs?
The cost of preparing, assembling, printing and mailing the Notice of Internet Availability of Proxy Materials and proxy materials and, if applicable, proxy card, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company may request banks, brokers and other third parties to solicit their customers who beneficially own Common Stock listed of record in the name of such bank, broker or other third party, and the Company will reimburse such banks, brokers and third parties for their reasonableout-of-pocket expenses for such solicitations. The solicitation of proxies by mail may be supplemented by telephone, facsimile, Internet and personal solicitation by directors, officers and other employees of the Company, but no additional compensation will be paid to such individuals. The Company has retained Alliance Advisors LLC to assist in the solicitation of proxies for a base fee of approximately $11,500,$14,500, plusout-of-pocket expenses.
I share an address with another shareholder, and we received only one paper copy of the proxy materials. How can I obtain an additional copy?
With regard to the delivery of annual reports and proxy statements, under certain circumstances the SEC permits the Company to send a single set of such proxy materials or, where applicable, one Notice of Internet Availability of Proxy Materials, to any household at which two or more shareholders reside if they appear to be members of the same family (unless otherwise requested by one or more of such shareholders). Each shareholder, however, still receives a separate proxy card if he or she receives paper copies. This procedure, known as “householding,” reduces the amount of duplicate information received at a household and reduces mailing and printing costs as well. This year, the Company will be mailing primarily Notices of Internet Availability of Proxy Materials and only a small number of printed copies of the annual report and Proxy Statement to parties who have requested paper copies.
A number of banks, brokers and other third parties have instituted householding and have previously sent a notice to that effect to certain of the Company’s beneficial shareholders whose shares are registered in the name of the bank, broker or other third party. As a result, unless the shareholders receiving such notice gave contrary instructions, only one annual report and one proxy statementProxy Statement or one Notice of Internet Availability of Proxy Materials will be mailed to an address at which two or more such shareholders reside. If any shareholder residing at such an address wishes to receive a separate annual report and proxy statement or Notice of Internet Availability of Proxy Materials in the future, such shareholder should telephone the householding election system (toll-free) at1-800-522-6645.
In addition, (i) if any shareholder who previously consented to householding desires to promptly receive a separate copy of the annual report and proxy statementProxy Statement or Notice of Internet Availability of Proxy Materials, for each shareholder at his or her same address, or (ii) if any shareholder shares an address with another shareholder and both shareholders at such address desire to receive only a single copy of the annual report and proxy statementProxy Statement or Notice of Internet Availability of Proxy Materials, then such shareholder should, if such shareholder is a beneficial shareholder, contact his or her bank, broker or other third party in whose name the shares are registered or, if such shareholder is a shareholder of record, contact the Company as follows: Callaway Golf Company, Attention: Investor Relations, 2180 Rutherford Road, Carlsbad, California 92008, telephone(760) 931-1771. Upon written or oral request, the Company will promptly deliver a separate copy of the annual report and proxy statementProxy Statement or Notice of Internet Availability of Proxy Materials to any shareholder at a shared address to which a single copy of such material was delivered.
How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. If final voting results are not available to the Company in time to file a Form 8-K within four business days after the meeting, the Company intends to file a Form 8-K to publish preliminary results and, within four business days after the final results are known, file an additional Form 8-K to publish the final results.
What else is expected to take place at the Annual Meeting?
The main purpose of the Annual Meeting is to conduct the business described in this Proxy Statement. As such, the Company intends to conduct the required business and then have a short question and answer period. The Company does not intend to make a formal presentation to shareholders. Since no presentation is planned, it is expected that the meeting will last only a few minutes.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Corporate Governance Guidelines
Corporate governance is the system by which corporations ensure that they are managed ethically and in the best interests of their shareholders. The Company is committed to maintaining high standards of corporate governance, and the Board has adopted Corporate Governance Guidelines to provide the Company’s shareholders and other interested parties with insight into the Company’s corporate governance practices. The Corporate Governance Guidelines are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Guidelines is available on the Company’s website at www.callawaygolf.com under Investor Relations — Relations—Corporate Governance. They address, among other topics:
• Board size • Board leadership • Board oversight responsibility • Succession planning • Director, CEO and executive officer stock ownership guidelines | • Director independence • Director emeritus • Limits on directors serving on other boards • • Director | • Board membership criteria • • Board access to independent auditors and advisors • Annual Board assessment |
The current size of the Board is thirteen members and, following the Annual Meeting, will be reduced to twelve directors. The Company’s Bylaws and Corporate Governance Guidelines provide that a substantial majority of the Company’s directors must be independent. A director is independent only if the director is not a Company employee and the Board has determined that the director has no direct or indirect material relationship to the Company. To be independent, a director must also satisfy any other independence requirements under applicable law or regulation and the listing standards of the New York Stock Exchange (the “NYSE”).NYSE. In evaluating a particular relationship, the Board considers the materiality of the relationship to the Company, to the director and, if applicable, to any organization with which the director is affiliated. To assist in its independence evaluation, the Board adopted categorical independence standards, which are listed in Appendix A to the Corporate Governance Guidelines. Compliance with these internal and NYSE independence standards is reviewed at least annually. The Board has determined that eacheleven of the ninethirteen currentnon-management directors isare independent. Oliver G. Brewer III, the Company’s President and Chief Executive Officer, isand Erik J Anderson are the only current directordirectors who are not independent. For a description of the relationship that led to the Board’s determination that Mr. Anderson is not independent.independent, see the section below entitled, “—Compensation Committee Interlocks and Insider Participation.” Therefore, a substantial majority of the Board members is independent, and all director nominees other than Mr. Brewer and Mr. Anderson are independent.
The Nominating and Corporate Governance Committee is responsible, among other things, for developing and recommending to the Board criteria for Board membership and for identifying and recruiting potential Board candidates based on the identified criteria in the context of the Board as a whole and in light of the Board’s needs at a particular time. The Nominating and Corporate Governance Committee has worked with the Board to identify certain minimum criteria that every candidate must meet in order to be considered eligible to serve on the Board: a candidate must (i) exhibit very high personal and professional ethics, integrity and values; (ii) not have any conflicting interest that would materially impair his or her ability to discharge the fiduciary duties of a director; (iii) be committed to the best interests of the Company’s shareholders and be able to represent fairly and equally all shareholders without favoring or advancing any particular shareholder or other
constituency; and (iv) be able to devote adequate time to Board activities. A potential candidate will not be considered for a directorship unless he or she satisfies these threshold criteria.
In addition to these minimum threshold criteria, the Board believes that, as a whole, the Board should possess a combination of skills, professional experience, and diversity of backgrounds necessary to oversee the Company’s business. In this regard, the Board has determined that one or more of its members, among other things, should (i) be currently serving as an active executive of another corporation, (ii) have prior experience as a chief executive officer or an operating executive with significant responsibility for operating results, (iii) have public company executive experience, (iv) have public company board experience, (v) have corporate governance experience, (vi) have executive compensation experience, and (vii) have consumer products experience. The Board also believes that one or more of its members should have functional expertise in each of finance, accounting, legal matters, investment banking, human resources and compensation, technology, manufacturing, international business, research and development, strategic planning, consumer sales and marketing, retail business, and mergers and acquisitions.acquisitions, and environmental, social and governance (“ESG”) matters. Potential candidates are evaluated based upon the factors described above as well as their independence and relevant business and industry experience.
The annual evaluation and assessment of the Board and its committees that is performed under the direction of the Nominating and Corporate Governance Committee enables the Board to update its determination of the skills and experience it seeks on the Board as a whole and in individual directors as the Company’s needs evolve and change over time. See the section below entitled, “—Annual Board and Committee Evaluation and Assessment.” In identifying director candidates from time to time, the Board or Nominating and Corporate Governance Committee may establish specific skills and experience that it believes the Company should seek in order to constitute a balanced and effective board.board of directors.
In addition, althoughThe Company is committed to inclusiveness and to pursuing diversity of the members of its Board in terms of background, experience, education, skills and perspective. Although the Board does not have a formal policy regarding diversity, it believes that ethnic, gender and cultural diversity among its members can provide distinct value and is important. InAs such, when considering a potential new candidate, the Nominating and Corporate Governance Committee and the Board considers whether he or she wouldconsider candidates with diverse backgrounds in terms of knowledge, experience, skills, and other characteristics, in an effort to increase the Board’s ethnic, gender or cultural diversity. The Board currently includes two female members and one member who self-identifies as a member of an underrepresented community.
The Board believes that its composition appropriately reflects the knowledge, experience, skills, diversity, and other characteristics required to fulfill its duties. In addition to the diversity of our directors’ skills and experience that the Nominating and Corporate Governance Committee considers, our nominees for director are also diverse in age, race and gender, which we believe allows our directors to better represent our customers, employees and other stakeholders.
Identification of Potential Director Candidates
The Nominating and Corporate Governance Committee uses a variety of methods for identifying director candidates, including professional search firms and recommendations from the Company’s officers, directors, shareholders or other persons. If a shareholder believes that he or she has identified an appropriate candidate who is willing to serve on the Board, the shareholder may submit a written recommendation to the Chair of the Nominating and Corporate Governance Committee, c/o Corporate Secretary at 2180 Rutherford Road, Carlsbad, California 92008. Such recommendation must include detailed biographical information concerning the recommended candidate, including a statement regarding the candidate’s qualifications.The Nominating and Corporate Governance Committee may require such further information and obtain such further assurances concerning the recommended
candidate as it deems reasonably necessary. The Nominating and Corporate Governance Committee will evaluate director candidates properly submitted by shareholders in the same manner as it evaluates all other director candidates. In addition to bringing potential qualified candidates to the attention of the Nominating and Corporate Governance Committee as discussed above, a nomination of a person for election to the Board at an annual meeting of shareholders may be made by shareholders who meet the qualifications set forth in the Company’s Bylaws, including the requirement to provide certain specified information with respect to such shareholder and its candidate for nomination, and who make such nominations in a timely manner in accordance with the procedures set forth in the Company’s Bylaws, including the procedures described under the section entitled “Shareholder Nominations and Proposals” in this Proxy Statement.
The Nominating and Corporate Governance Committee believes that the continuing service of qualified incumbents promotes stability and continuity on the Board and contributes to its ability to function effectively. The continuing service of qualified incumbents also provides the Company with the benefit of the familiarity with and insight into the Company’s affairs that its directors have accumulated
during their tenure. As a result, in considering candidates for nomination for each annual meeting of shareholders, the Nominating and Corporate Governance Committee first considers the Company’s incumbent directors who desire to continue their service. The Nominating and Corporate Governance Committee will generally recommend to the Board an incumbent director forre-election if the Nominating and Corporate Governance Committee has determined that (i) the incumbent director continues to satisfy the threshold criteria described above, (ii) the incumbent director has satisfactorily performed his or her duties as a director during the most recent term and (iii) there exists no reason why, in the Nominating and Corporate Governance Committee’s view, the incumbent director should not bere-elected. If a Board vacancy becomes available as a result of the death, resignation or removal of an incumbent director or as a result of action taken by the Board to increase its size, the Nominating and Corporate Governance Committee proceeds to identify candidates who meet the required criteria and attributes.
Service on Other Public Boards
Under the Company’s Corporate Governance Guidelines, a director may not serve on the board of directors of more than four other public corporations in addition to the Company’s Board. A director who also serves as the chief executive officer of a publicly traded company should not serve on more than three boards of publicly traded companies (including the company for which the director is CEO). In addition, in advance of accepting an invitation to serve on the board of another public corporation, directors should consult with the Board Chairman or the Chair of the Nominating and Corporate Governance Committee to confirm that service on such other board does not interfere with the director’s service on the Company’s Board or create an unacceptable conflict of interest. Further, no member of the Audit Committee may serve on the audit committee (or board committee performing similar functions) of more than two other public corporations without the prior approval of the Company’s Board. Regardless of a director’s outside activities, a director is always required to be able to devote sufficient time and attention to the Company’s business and to the performance of the director’s duties as a member of the Company’s Board.
Majority Vote PolicyVoting Standard
The Company’s Bylaws include a majority voting standard for the election of directors in uncontested elections, which are generally defined as elections in which the number of nominees does not exceed the number of directors to be elected at the meeting. In the election of directors, you may either vote “FOR” or “AGAINST” as to each nominee. Cumulative voting is not permitted. Under the majority voting standard, in uncontested elections of directors such as this election, each director must
be elected by the affirmative vote of the holders of a majority of the votes cast present in person or represented by proxy and entitled to vote, assuming a quorum is present at the Annual Meeting. A majority of the votes cast means that the number of shares voted “FOR” a nominee for director exceeds the number of votes “AGAINST” as to that nominee for director.
In the event that a director nominee fails to receive an affirmative majority of the votes cast in an uncontested election, the Board, within its powers, may take any appropriate action, including decreasing the number of directors or filling a vacancy.
Under the Company’s Corporate Governance Guidelines, all nominees for director are required to tender, prior to the mailing of the proxy statement for the meeting at which they are to be re-elected as directors, irrevocable resignations that will be effective upon the occurrence of both (i) the failure to receive the required vote for re-election at any meeting at which they are nominated for re-election and (ii) the Board’s acceptance of such resignation. In the event that, in an uncontested election of directors, any nominee who has a greater number of votes “withheld” from hisfails to receive the required vote for election or her election than votes “for” such election, which the Company refers to as a “Majority Withheld Vote,” is required to submit in writing an offer to resign to the Board Chairman promptly upon certification of the shareholder vote. The Chairman refers the matter tore-election, the Nominating and Corporate Governance Committee which in turnor, under certain circumstances, a committee of independent directors, will consider all factors it considers relevant, including, among other things, the reasons for the Majority Withheld Voteany “against” votes, and will recommend to the Board whether or not to accept the nominee’s previously tendered resignation offer. The Board will consider such recommendation and will determine within 90 days from the date of the certification of the election results whether to accept the resignation and, if it does not acceptresignation. If the resignation whether any further action is needednot accepted, the director will continue to addressserve until the reasons fordirector’s successor is duly elected and qualifies or until the Majority Withheld Vote.director’s earlier resignation or removal. The Board is required to publicly disclose such determination and the basis therefor.determination. The director nominee who receivedfailed to receive the Majority Withheld Voterequired vote for election or re-election does not participate in the Nominating and Corporate Governance Committee’s recommendation or the Board’s decision.
Shareholder Nominees—Proxy Access
The Company’s shareholders possess the right to nominate candidates to the Board through proxy access provisions of the Company’s Bylaws. The Company’s Bylaws permit any shareholder (or group of up to 20 shareholders) owning three percent or more of the Company’s outstanding Common Stock continuously for at least the previous three years to nominate a candidate for election to the Board and to include in the Company’s proxy materials for its annual meeting of shareholders. The maximum number of shareholder-nominated candidates is equal to the greater of (i) two or (ii) twenty percent of the number of directors then serving on the Board (rounding down to the closest whole number). Such nominations are subject to additional eligibility, procedural and disclosure requirements set forth in the Company’s Bylaws. The foregoing is a summary of Section 2.7 of the Company’s Bylaws and is qualified in its entirety by the text of that section. For additional information, see “Shareholder Nominations and Proposals—Requirements for Shareholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials.”
Annual Board and Committee Assessment and Evaluation
Pursuant to the Company’s Corporate Governance Guidelines, the Board and each of its committees conduct, under the direction of the Nominating and Corporate Governance Committee, an annual assessment of their functionality and effectiveness, including an assessment of the skills and experience that are currently represented on the Board and that the Board will find valuable in the future given the Company’s current situation and strategic plans. As part of this process, the Nominating and Corporate Governance Committee invites input from each director on the performance of each of the other directors. The Nominating and Corporate Governance Committee considers individual director performance at least annually when deciding whether to nominate an incumbent director forre-election.
The Board believes that strong, independent board leadership is a critical aspect of effective corporate governance. The Board Chairman is selected by the Board as it deems to be in the best interests of the Company from time to time, and may be either a management or anon-management director. The Company’s Corporate Governance Guidelines provide that if the Board Chairman is not an independent director (e.g., when the Board Chairman is also the Chief Executive Officer), then the Board will appoint a lead independent director. The independent chairman or the lead independent director, as the case may be, works with the Company’s Chief Executive Officer and the Company’s Corporate Secretary to set the Board’s work program and meeting agendas, presides over Board meetings and the executive sessions (without management) of the independent directors, coordinates the activities of the independent directors, and serves as a liaison between the Company’s Chief Executive Officer and the independent directors, and presides at the executive sessions (without management) of the independent directors.
The Company currently separates the positions of Board Chairman and Chief Executive Officer in recognition of the differences between the two roles. The Board Chairman is Ronald S. Beard,currently John F. Lundgren, and Mr. Brewer is ourthe Company’s Chief Executive Officer. Separating these positions and having the Board Chairman lead the Board in its oversight responsibilities enables the Company’s Chief Executive Officer to focus onday-to-day business and his other responsibilities. Erik J Anderson also serves as the Vice Chairman of the Board. The Board has determined that the Company’s Board leadership structure is the most appropriate at this time, given the specific characteristics and circumstances of the Company, and the unique skills and experience of each of Mr. BeardLundgren, Mr. Anderson and Mr. Brewer. Accordingly, because Mr. Beard,Lundgren, who is an independent director, is serving as Board Chairman, the Board therefore does not currently have a director with the title of lead independent director. A copy of the charter for the Board Chairman position is available on the Company’s website at www.callawaygolf.com under Investor Relations — Relations—Corporate Governance — Governance—Board Memberships.
The Board oversees an enterprise-wide approach to risk management and works with the Audit Committee and management in executing its oversight responsibility for risk management. The Board generally oversees risks related to the Company’s strategic and operational objectives and is responsible for overseeing the amounts and types of risks taken by management in executing those objectives. In addition, the Board has delegated to the Audit Committee the responsibility for oversight of certain of the Company’s risk oversight and compliance matters, including oversight of (i) material legal proceedings and material contingent liabilities, (ii) the Company’s policies regarding risk assessment and management, (iii) the Company’s compliance programs with respect to legal and regulatory requirements and the Company’s Code of Conduct and (iv) the establishment of procedures for (a) the receipt, retention and handlingtreatment of complaints regarding accounting, internal accounting controls, auditing and federal securities law matters and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting, internal accounting controls, auditing matters and federal securities law matters. The Board has delegated to the Nominating and Corporate Governance Committee the responsibility for overseeing any related party transactions.
On aday-to-day basis, it is management’s responsibility to manage risk and bring to the attention of the Board any significant risks facing the Company and the controls in place to manage those risks. As part of this responsibility, management conducts a periodic enterprise risk management assessment, which is led by the Company’s corporate audit department. All members of management responsible for key business functions and operations participate in this assessment. The assessment includes an identification, and quantificationevaluation of the likelihood and potential impact, of the top risks facing the Company and the controls in place to mitigate such risks as well as possible opportunities to reduce such risks. This report is shared with the Audit Committee and the full Board.
The Board also considers information technology and cybersecurity an important risk, and the Audit Committee receives regular updates from the Company’s management on at least a semiannual basis on IT and cybersecurity strategy and risks specific to the Company. The Company prioritizes the protection of data in its care and is committed to the ongoing enhancement of its cybersecurity and privacy capabilities. The Company conducts annual Sarbanes Oxley 404 audits, maintains its compliance with the Payment Card Industry Data Security Standard (“PCI-DSS”), and engages an industry-leading third party audit firm to perform regular National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”) cybersecurity assessments for all of the Company’s global brands and subsidiaries, benchmarked against peers in the manufacturing and retail industries. The Company’s cybersecurity team, which includes the VP of Global IT and the Director of Global Information Security, works closely with the Company’s auditors to prioritize and remediate findings from the NIST CSF assessments, and has consistently improved the Company’s NIST CSF cybersecurity score year-over-year since 2014.
See “Executive Officer Compensation—Governance and Other Considerations—Risk Assessment of Compensation Programs” below for information regarding the Company’s risk assessment of its compensation programs.
The Board currently has three standing committees:
the Audit Committee;
the Compensation and Management Succession Committee (sometimes referred to as the “Compensation Committee” in this Proxy Statement); and
the Nominating and Corporate Governance Committee.
The Board has adopted written charters for each of the three standing committees that satisfy the applicable standards of the SEC and the NYSE, copies of which are available on the Company’s website atwww.callawaygolf.comunder Investor Relations — Relations—Corporate Governance — Governance—Board Committees. Upon request, the Company will provide to any person without charge a copy of such charters. Any such request may be made by contacting the Company’s Investor Relations Department by telephone at(760) 931-1771 or by mail at Callaway Golf Company, Attention: Investor Relations, 2180 Rutherford Road, Carlsbad, California 92008.
The Board has determined that the chair of each committee and all committee members are independent under applicable NYSE and SEC rules for committee memberships. The members of the committees are shown in the table below.
Director | Independent | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||||
Erik J Anderson(1) | — | — | — | — | ||||
Samuel H. Armacost | ||||||||
| ✓ | Member | Member | — | ||||
Scott H. Baxter | ✓ | — | Member | — | ||||
Oliver G. Brewer III | — | — | — | — | ||||
John C. Cushman, III(2) | ✓ | — | Member | Member | ||||
| ✓ | — | — | — | ||||
Laura J. Flanagan | ✓ | — | Member | — | ||||
Russell L. Fleischer | ✓ | — | — | |||||
John F. Lundgren | ✓ | Member | Member | |||||
Scott M. Marimow(1) | ✓ | — | — | — | ||||
Adebayo O. Ogunlesi | ✓ | Member | — | Chair | ||||
Linda B. Segre | ✓ | — | Member | |||||
Anthony S. Thornley | ✓ | Member | — | Member |
(1) Ms. FlanaganMr. Anderson, Mr. Dundon and Mr. Marimow each joined the Board in November 2018March 2021 and therefore she ishave not yet been appointed as a member of any of the committees.
(2) Following the Annual Meeting, Mr. Cushman will no longer serve as a member of any of the committees as he is not standing for re-election to the Board. Mr. Cushman will, however, remain involved with the Company following the Annual Meeting as a Director Emeritus.
Audit Committee. The Audit Committee is a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee’s role includes representing and assisting the Board in discharging its oversight responsibility relating to: (a) the accounting, reporting and financial practices of the Company and its subsidiaries, including the integrity of the Company’s financial statements; (b) the Company’s outside auditors, including their qualifications, performance and independence; (c) the performance of the Company’s internal audit function; and (d) the Company’s compliance with legal and regulatory requirements. The Audit Committee:
is responsible for all matters relating to the Company’s outside auditors, including their appointment, compensation, evaluation, retention, oversight and termination;
approves in advance all services to be performed by the outside auditors, including pre-approval of any permissible non-audit service to be provided by the outside auditors;
obtains and reviews, at least annually, a report by the outside auditors describing (a) the outside auditors’ internal quality-control procedures and (b) any material issues raised by the most recent internal quality-control review, or peer review, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the outside auditor, and any steps taken to deal with any such issues;
reviews and considers, at least annually, the independence of the outside auditors;
annually reviews and discusses the performance and effectiveness of the internal audit function;
reviews and discusses the adequacy and effectiveness of the Company’s internal controls, including any material weaknesses or significant deficiencies in internal controls and significant changes in such controls reported to the Audit Committee by the outside auditors or management;
reviews and discusses the adequacy and effectiveness of the Company’s disclosure controls and procedures and management reports thereon;
reviews and discusses the Company’s policies with respect to risk assessment and risk management; and
oversees the Company’s compliance programs with respect to legal and regulatory requirements and the Company’s Code of Conduct, including review of conflict of interest issues.
Audit Committee Financial Sophistication and Expertise.The Board has determined that each Audit Committee member is financially literate and has the accounting or related financial management expertise within the meaning of NYSE listing standards. The Board has also determined that at least one Audit Committee member qualifies as an Audit Committee Financial Expert as defined by Item 407(d)(5) of RegulationS-K. The Board has designated Mr. ArmacostFleischer as the Audit Committee Financial Expert. The Board also believes that the collective experiences of the other Audit Committee members make them well qualified to serve on the Audit Committee. Shareholders should understand that Mr. Armacost’sFleischer’s designation as an Audit Committee Financial Expert is an SEC disclosure requirement, and it does not impose on Mr. ArmacostFleischer any duties, obligations or liabilities that are greater than those which are generally imposed on him as a member of the Audit Committee and the Board, and his designation as an Audit Committee Financial Expert pursuant to this requirement does not affect the duties, obligations or liabilities of any other member of the Audit Committee or the Board.
In addition, the Audit Committee annually evaluates the performance of the Audit Committee and assesses the adequacy of its written charter. Additional information regarding the Audit Committee’s responsibilities can be found under the sections entitled “—Risk Oversight,” above and “Audit Committee Report” and “Information Concerning Independent Registered Public Accounting Firm,” below.
Compensation and Management Succession Committee. The Compensation Committee:
oversees the Company’s overall compensation philosophy, policies and programs, and assesses whether the Company’s compensation philosophy establishes appropriate incentives given the Company’s strategic and operational objectives;
administers and makes recommendations to the Board with respect to the Company’s incentive-compensation plans and equity-based compensation plans, including granting awards under any such plans, and approves, amends or modifies the terms of compensation and benefit plans as appropriate;
is responsible for discharging the Board’s responsibilities relating to compensation of the Company’s executive officers;
reviews and approves corporate goals and objectives relevant to the compensation of the Company’s chief executive officer,Chief Executive Officer, evaluates his or her performance in light of those goals and objectives, and, together with the other independent members of the Board, determines and approves the chief executive officer’sChief Executive Officer’s compensation level based on this evaluation;
evaluates the performance of the Company’s other executive officers and sets their compensation after considering the recommendation of the Company’s chief executive officer;Chief Executive Officer;
reviews and approves employment agreements and severance arrangements for the Company’s executive officers, includingchange-in-control provisions, plans or agreement;agreements;
is responsible for assisting the Board with chief executive officerChief Executive Officer and other management succession issues and planning;
reviews, as appropriate, compensation and benefits plans affecting employees in addition to those applicable to the Company’s executive officers; and
reviews the compensation of directors for service on the Board and its committees and recommend changes in compensation to the Board.Board;
oversees the assessment of the risks related to the Company’s compensation policies and programs applicable to officers and employees, and reviews the results of this assessment;
at least annually assesses whether the work of compensation consultants involved in determining or recommending executive or director compensation has raised any conflict of interest that is required to be disclosed in the Company’s annual report and proxy statement; and
oversees or participates in the Company’s engagement efforts with shareholders on the subject of executive compensation.
In addition, the Compensation Committee annually evaluates the performance of the Compensation Committee and assesses the adequacy of its written charter. Additional information regarding the Compensation Committee’s responsibilities can be found under the section entitled “Executive Officer Compensation,” below.
Nominating and Corporate Governance Committee.The Nominating and Corporate Governance Committee:
identifies and recommends to the Board individuals who are qualified to serve on the Board and who should stand for election at each annual meeting of shareholders;
develops and recommends to the Board standards to be used in assessing director independence;
oversees the Company’s corporate governance matters and policies, including the Company’s Corporate Governance Guidelines;
oversees the annual evaluation and assessment of the Board and its committees;
reviews the leadership structure of the Board and recommends changes to the Board as appropriate;
makes recommendations to the Board concerning the structure, composition and functioning of the Board and its committees;
recommends candidates to the Board for appointment to its committees; and
reviews related person transactions and periodically reviewsadopts policies and procedures for the review, approval and ratification of related person transactions.
In addition, the Nominating and Corporate Governance Committee annually evaluates the performance of the Nominating and Corporate Governance Committee and assesses the adequacy of its written charter. Additional information regarding the Nominating and Corporate Governance Committee’s responsibilities can be found under the sections entitled “—Director Qualifications,” “—Identification of Potential Director Candidates,” “—Nomination Process” and “—Annual Board and Committee Assessment and Evaluation,” above.
Meetings and Director Attendance
During 2018,2020, as a result of the Company’s financing and strategic transaction efforts, as well as matters relating to the COVID-19 pandemic, the Board met nine14 times, and the independent directors met in executive session at fivesix of those meetings and determined that there was no need to meet in executive session at the other meetings; the Audit Committee met eight times; the Compensation Committee met fivesix times; and the Nominating and Corporate Governance Committee met four times.
In addition to meetings, the members of the Board and its committees sometimes take action by written consent in lieu of a meeting, which is permitted under Delaware corporate law, or discuss Company business without calling a formal meeting.
During 2018,2020, all of the Company’s directors attended in excess of 75% of the meetings of the Board and of its committees on which they served. All of the directors standing forre-election are expected to attend the annual meetings of shareholders, and all such directors who were serving on the Board at such time attended the 20182020 virtual annual meeting of shareholders.
Shareholders and other interested parties may contact the Board Chairman or thenon-management directors as a group bye-mail at:non-managementdirectors@callawaygolf.com,or by mail to: Board of Directors, Callaway Golf Company, 2180 Rutherford Road, Carlsbad, California 92008. The Company’s Corporate Secretary’s office reviews all incoming communications and filters out solicitations and junk mail. All legitimatenon-solicitation andnon-junk mail communications are distributed to thenon-management directors or handled as appropriate as directed by the Board Chairman.
The Board has adopted a Code of Conduct that applies to all of the Company’s employees, including its senior financial and executive officers, as well as the Company’s directors. The Code of Conduct covers the basic standards of conduct applicable to all directors, officers and employees of the Company, as well as the Company’s Conflicts of Interest and Ethics Policy and other specific compliance standards and related matters. The Company will promptly disclose any waivers of certain provisions of our Code of Conduct, or amendments to such provisions, that apply to the Company’s directors and senior financial and executive officers on its website atwww.callawaygolf.com.
The Code of Conduct is available on the Company’s website at www.callawaygolf.com under Investor Relations — Relations—Corporate Governance—Governance Overview—Code of Conduct. Upon request, the Company will provide to any person without charge a copy of the Code of Conduct. Any such request may be made by contacting the Company’s Investor Relations department by telephone at(760) 931-1771 or by mail at Callaway Golf Company, Attention: Investor Relations, 2180 Rutherford Road, Carlsbad, California 92008.
In 2019, the Company, at the direction of its Chief Executive Officer and Board of Directors, launched the Sustainability Program with the goal of enhancing and improving the Company’s overall performance with respect to environmental and social sustainability. Core team members known as Sustainability Champions were selected throughout the organization at the executive and management levels to drive global enterprise-wide initiatives and promote employee-driven projects at the local levels. These initiatives are benchmarked against the sustainability frameworks published by the Global Reporting Initiative (“GRI”) and the Sustainability Accounting Standards Board (“SASB”) with respect to sustainability issues that are likely to affect the financial conditions or operating performances of companies in the consumer goods and apparel sectors.
The Sustainability Program created a more formalized platform within the Company to continue building on the Company’s existing and ongoing efforts to preserve and protect the environment and conduct business in a socially-responsible manner. This centralized platform also allows for enhanced collaboration across the Company’s brands, which has a synergistic effect as the organization adopts a more holistic approach in standardizing and updating its sustainability policies and practices on a global scale.
In connection with the launch of the Sustainability Program, the Company established the Executive Sustainability Committee comprised of its Chief Executive Officer, Chief Financial Officer and other executive officers. The progress made through the Sustainability Program is reported quarterly to the Executive Sustainability Committee and annually to the Board of Directors. This promotes transparency regarding key environmental and social initiatives undertaken by the Company as well as related risks and opportunities for improvement.
Environmental, Health and Safety Responsibility
The Company is committed to conducting its business in a sustainable manner and maintains policies and procedures that establish the foundation of its environmental responsibility program. The Company is committed to empowering employees and suppliers at all levels to promote safe and environmentally responsible practices. In this regard, the Company focuses on initiatives such as reduction of hazardous waste, reduction in water usage, implementation of energy efficiency projects in collaboration with local utilities/landlords and sustainable design strategies that involve the elimination or reduction of undesirable chemicals and solvents in favor of safer and environmentally preferred alternatives. These efforts are visible in the following areas among others:
Carbon/Climate and Energy
i. | In 2020, approximately 33% of the energy used at the Company’s corporate headquarters came from renewable sources, representing an increase from 27% in 2019. |
ii. | In 2020, the Company completed installation of a battery storage system at its corporate headquarters, allowing increased usage of renewable energy during peak times of the day. |
iii. | The Company’s North America truck-based logistics increased over the years from 50% SmartWay-certified carriers in 2016 to 87% in 2019 (U.S. Environmental Protection Agency’s SmartWay Certification promotes environmentally-efficient transportation, improving efficiency and reducing the Company’s carbon footprint). |
iv. | Jack Wolfskin’s Idstein headquarters, Jack Wolfskin Hamburg distribution center and Jack Wolfskin retail stores in Germany, Austria and Switzerland all use 100% green electricity. |
v. | The Company installed high efficiency LED light bulbs in its Carlsbad headquarters, TravisMathew’s Huntington Beach headquarters and distribution center facilities located in Korea, which reduce energy consumption and increase bulb lifecycle. |
Water
i. | Water withdrawal and scarcity risks are both factors the Company considers in the procurement of ethically sourced textiles, such as bluesign® approved fabrics and accessories, where less water is used during the manufacturing process and utilizing eco-friendly substances and processes. |
ii. | Jack Wolfskin requested that tier 2 suppliers perform wastewater testing according to Zero Discharge of Hazardous Chemicals (“ZDHC”) guidelines. |
iii. | Since the Spring/Summer 2020 collection, Jack Wolfskin suppliers have saved approximately 760,000 liters of water and 23.8 tons of chemicals during production by using dyeing technologies that use less water and chemicals. |
iv. | At the Company’s golf ball manufacturing facility in Chicopee, 95% of the water used in one of the key manufacturing processes is recycled by filtering and reusing it. |
Waste and Recycling
i. | Reduced amount of single-use plastics used in the Company’s U.K. and Japan Pre-Owned Golf Club packaging by 53,000 pieces per year. |
ii. | In 2020, the diversion rate (percentage of total waste diverted from disposal through reuse/recycling/composting programs) for waste generated at the Company’s corporate headquarters, North America distribution center and North America club assembly facility was 56%. |
iii. | Jack Wolfskin implemented 100% recycled anti-mold polybags and biodegradable desiccants, allowing planned discontinuation of silica gel desiccants. |
iv. | Launched the “I Love a Green Callaway” program to make the Company’s corporate headquarters and Australia subdivision more green (i.e., using less plastic and Styrofoam, providing reusable dishware options, improving labeling and placement for recycling bins, defaulting printers to duplex printing, etc.). |
In furtherance of these initiatives, the Company has adopted an Environmental, Health and Safety Policy, which is available on the Company’s website at www.callawaygolf.com under Investor Relations—Corporate Governance—Environmental, Health and Safety Responsibility.
The Company seeks to focus on social issues important to its employees, shareholders and customers, which include raising awareness with employees and within the Company’s supply chain about how the Company and its employees can make the right decisions on issues like product safety and work environments affecting those who help the Company make its products. In addition, the Company focuses on initiatives such as supporting diversity and inclusion efforts, implementing COVID-19 policies and procedures, and maintaining product safety and quality. These efforts are visible in the following areas among others:
Human Rights
i. | Implemented a supplier product compliance scorecard designed to reduce risk and drive improvement of best practices with suppliers and to be used as a criterion for supplier selection. |
ii. | Since 2019, over half of the management level position new hires and promotions within the United States across the Company and its subsidiaries have been either women or diverse candidates. |
iii. | Participated in job fairs and career days in conjunction with and in support of PGA Works, which is a strategic initiative designed to diversify the golf industry’s workforce. |
iv. | Sponsored Howard University’s Golf Team through the Company’s partnership with Stephen Curry as part of efforts to increase diversity and inclusion in (and awareness of) golf. |
v. | TravisMathew donated over $500,000 to the Oscar de la Hoya Foundation, which aims to create more opportunities for people coming from underprivileged communities in the greater Los Angeles area, such as supporting various after-school programs and local medical centers. |
Labor, Health & Safety
i. | Qualified a new golf ball manufacturing process for injection molding, providing a safer environment for workers as an alternative to the existing process, which requires more handling of a hazardous chemical and therefore greater risk for exposure. |
ii. | Established a global COVID-19 core team (including senior leadership) to strategize about impacts to employees and customers, develop and implement comprehensive COVID-19 policies, procedures, and reopening plans in support of federal, state, and local guidelines, and train employees on site-specific protocols. |
Product Safety, Quality & Brand
i. | Maintained product safety and quality standards by means of the Jack Wolfskin Green Book, TravisMathew Quality Manual, and AAFA Restricted Substances List. |
ii. | Experienced no product recalls due to safety or environmental compliance across all brands in 2020. |
In addition to the above, the Company participates in environmental, social and product compliance working groups through the American Apparel and Footwear Association (“AAFA”) and is a signatory to the Responsible Recruiting Commitment and Cambodia (Worker’s Rights) Brand Letter. Also, Jack Wolfskin’s engagement in the Fair Wear Foundation promotes social responsibility and transparency in the supply chain. These groups and engagements help the Company stay up-to-date with industry news, trends, issues and best practices.
In furtherance of these initiatives, the Company has adopted an Enterprise Human Rights Policy, which is available on the Company’s website at www.callawaygolf.com under Investor Relations—Corporate Governance—Social Responsibility.
In order to promote ownership of the Common Stock by the Company’snon-management directors and executive officers and thereby more closely align their interests with the interests of the Company’s shareholders, the Board has adopted stock ownership guidelines requiring the Company’snon-managementnon-employee directors and executive officers to own Common Stock interests with a value equal to at least the following minimum amounts:
Chief Executive Officer | 5x Base Salary | |
Other Executive Officers | 2x Base Salary | |
Non-Employee Directors | 5x Annual |
The minimum share ownership amounts are required to be achieved within five years of an individual first becoming subject to these guidelines. All shares for which a director or an executive officer is deemed to be the beneficial owner under Section 16 of the Exchange Act, including shares held in a living trust for the individual’s benefit of the individual or a member of his or her family, count toward this ownership requirement. Additionally, for those directors who are employed by or otherwise affiliated with a shareholder of the Company, shares owned by such affiliated entity count towards this ownership requirement in the discretion of the Compensation Committee. Restricted stock and service-based restricted stock unit awards held by the director or executive count toward the holding requirements. Performance-based restricted stock units do not count toward this ownership requirement unless and until the performance criteria are satisfied. Stock options, stock appreciation rights, and phantom stock units do not count toward this ownership requirement unless and until any underlying shares are issued. Unless anon-managementnon-employee director or executive officer is in compliance with these guidelines, he or she is required to retain and hold 50% of any “net shares” of Common Stock issued in connection with any equity-based awards granted under the Company’s compensation plans after suchnon-managementnon-employee director or executive officer first becomes subject to these guidelines. “Net shares” are those shares that remain after shares are sold or withheld (i) to pay the exercise price and withholding taxes in the case of stock options or (ii) to pay withholding taxes in the case of other awards. Compliance with these guidelines is assessed on an annual basis.basis by the Compensation Committee. At the time compliance was assessed in 2018,2020, all directors and executive officers attained the minimum ownership levels.
the minimum ownership levels or were otherwise in compliance with the Company’s stock ownership guidelines.
Policy on Speculative Trading Activities — Activities—Anti-Hedging and Pledging Policy
The Company’s insider trading policy provides, among other things, that directors, officers and other employees may not engage in certain types of speculative activities with respect to the Company’s securities, including short sales, transactions in put options, call options or other derivative securities, hedging transactions, pledging of Company stock as collateral for a loan, or holding shares of Company stock in a margin account.
Compensation Committee Interlocks and Insider Participation
In 2018,2020, the Company’s executive officer compensation matters were handled by the Compensation Committee. The Company’s Compensation Committee which was during 2018 and is currently comprised of the following directors: Mses. Flanagan and Segre (Chair) and Messrs. Armacost, Baxter, Cushman, and Lundgren. During 2020 and prior to May 12, 2020, Ronald S. Beard Cushman, Lundgren and Ms. Segre.served as a member of the Compensation Committee until his retirement at the 2020 annual meeting of shareholders. During the times of their committee service during 2018,2020, all of such members (current and former) were determined to be independent and there were no compensation committee interlocks.
Mr. Brewer, the Company’s Chief Executive Officer and member of the Board, served as a member of the compensation committee of Topgolf during 2020 and until the Company’s merger with Topgolf in March 2021. During that time, Mr. Anderson, a director of the Company, served as the Executive Chairman of Topgolf until the closing of the merger in March 2021.
Directors who are not also Company employees are compensated for their service on the Board and its committees with a mix of cash and equity-based compensation. Directors are also reimbursed for their travel expenses incurred in connection with their duties, and receive other benefits such as the right to use, and the right to purchase at a discount, the Company’s products. As discussed above, the Compensation Committee periodically reviews the compensation and benefits the directors receive from the Company for service on the Board and on Board committees and recommends changes to the Board.
Mr. Brewer, as the Company’s President and Chief Executive Officer, does not receive any additional cash or equity-based compensation for serving on the Board.
In determining the reasonableness of the Company’s director compensation, the Compensation Committee periodically consults with, and reviews market data provided by, our independent compensation consultant. The primary source of the market data is from the same group of companies that are used for executive compensation purposes (the “Compensation Comparison Group”). We do not target a specific level of director compensation relative to the market reference information, but rather use such information, along with information on broader trends and practices, to help guide our decisions related to our director compensation program. In 2020, our independent compensation consultant reviewed our director compensation program relative to broad trends as well as practices of the Compensation Comparison Group and advised that the director compensation be increased in 2021 to bring director compensation in line with market practices.The increases in the annual cash retainer and annual equity grant align individual director pay with peer levels.
Cash Compensation. During 2018,Typically, non-employee directors wereare paid an annual base cash compensation of $75,000.Non-employee directors who serve as chairs of Board committees are paid an additional annual retainer fee. The Chair of the Audit Committee is paid $15,000; the Chair of the Compensation Committee is paid $12,500; the Chair of the Nominating and Corporate Governance
Committee is paid $10,000; and the Board Chairman is paid an additional annual $40,000 cash retainer. In 2020, due to the COVID-19 pandemic, the members of the Board elected to forego their cash retainer for three out of the four quarters in 2020, resulting in the reduced cash retainers for 2020 set forth in the chart below. As a result of a review of our Board compensation by our independent compensation consultant as described above, effective May 19, 2021, the Board approved an increase to the annual retainer from $75,000 to $100,000 and an increase in the additional annual cash retainer paid to the Board Chairman from $40,000 to $50,000.
Equity-Based Compensation. Upon the initial election or appointment of a new director and for each year of continuing service on the Board, anon-employee director is granted restricted stock units generally (but may be granted stock options, restricted stock, restricted stock units, or a combination thereof, as permitted under the Company’s 2013 Non-Employee Directors Stock Incentive Plan) with an aggregate grant date fair value of approximately $100,000 (which may be prorated as determined by the Board) as the long-term incentive portion of director compensation. Such equity-based awards are made as of the date of appointment orre-election in the form and amount as determined by the Board on the recommendation of the Compensation Committee. The value and the number of equity awards granted to the directors in 20182020 are reported in the table below. As a result of a review of our Board compensation by our independent compensation consultant as described above, effective for the annual awards to be made commencing in 2021, the Board approved an increase to the annual equity award from $100,000 to $125,000.
In connection with their commencement of service on the Board in connection with the closing of our merger with Topgolf International, Inc. (“Topgolf”) on March 8, 2021, each of Messrs. Anderson, Dundon and Marimow received a prorated award of 573 restricted stock units, which represented a grant value of $16,667 converted into a number of restricted stock units based on the 20-day trailing average price of our common stock preceding the date of approval of such awards by the Board. These awards will vest on the first anniversary of the grant date, subject to continued service through such date.
Other Benefits. The Company has a policy that thenon-employee directors should promote the Company’s products by using the Company’s current products whenever they play golf. To assist them in complying with this policy,non-employee directors are entitled to receive a limited amount of the Company’s golf club and golf ball products, free of charge, for their own personal use and the use of immediate family members residing in their households.Non-employee directors also receive a limited amount of other products (e.g., apparel and other accessories) free of charge and the right to purchase a limited amount of additional golf clubs, balls and accessories at a discount that is not material in amount.discount. The aggregate value of this personal benefit did not exceed $10,000 for any director in 20182020 and is therefore not required to be reported in the table below.
Director Compensation in Fiscal Year 20182020
The following table summarizes the compensation of the Company’snon-employee directors for fiscal year 2018:2020:
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
Samuel H. Armacost | $ | 90,000 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 193,632 | $ | 18,750 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 119,823 | ||||||||||||||||||||||||||||
Ronald S. Beard | $ | 115,000 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 218,632 | ||||||||||||||||||||||||||||||||||||||||||
Scott H. Baxter | $ | 18,750 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 119,823 | ||||||||||||||||||||||||||||||||||||||||||
Ronald S. Beard(3) | $ | 9 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 9 | ||||||||||||||||||||||||||||||||||||||||||
John C. Cushman, III | $ | 75,000 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 178,632 | $ | 18,750 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 119,823 | ||||||||||||||||||||||||||||
Laura J. Flanagan(3) | $ | 11,413 | $ | 98,634 | $ | — | $ | — | $ | — | $ | — | $ | 110,047 | ||||||||||||||||||||||||||||||||||||||||||
Russell L. Fleischer(4) | $ | 48,626 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 152,258 | ||||||||||||||||||||||||||||||||||||||||||
Laura J. Flanagan | $ | 18,750 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 119,823 | ||||||||||||||||||||||||||||||||||||||||||
Russell L. Fleischer | $ | 22,500 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 123,573 | ||||||||||||||||||||||||||||||||||||||||||
John F. Lundgren | $ | 87,500 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 191,132 | $ | 28,750 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 129,823 | ||||||||||||||||||||||||||||
Adebayo O. Ogunlesi | $ | 85,000 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 188,632 | $ | 21,250 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 122,323 | ||||||||||||||||||||||||||||
Linda B. Segre | $ | 75,000 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 178,632 | $ | 21,875 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 122,948 | ||||||||||||||||||||||||||||
Anthony S. Thornley | $ | 75,000 | $ | 103,632 | $ | — | $ | — | $ | — | $ | — | $ | 178,632 | $ | 18,750 | $ | 101,073 | $ | — | $ | — | $ | — | $ | — | $ | 119,823 |
(1) Mr. BeardLundgren was paid an additional $40,000$10,000 for service as Board Chair.Chairman. Mr. ArmacostFleischer was paid an additional $15,000$3,750 for service as Audit Committee Chair. Mr. LundgrenMs. Segre was paid an additional $12,500$3,125 for service as Compensation Committee Chair. Mr. Ogunlesi was paid an additional $10,000$2,500 for service as Nominating and Corporate Governance Committee Chair. In 2020, due to the COVID-19 pandemic, the members of the Board elected to forego their cash retainer for three out of the four quarters in 2020, resulting in the reduced cash retainers for 2020 set forth in the chart above.
(2) Represents the aggregate grant date fair value of restricted stock units (“RSUs”) calculated for financial reporting purposes for the year utilizing the provisions of Accounting Standards Codification Topic 718, “Compensation — “Compensation—Stock Compensation” (“ASC 718”). See Note 15, “Share-Based Compensation,” to the Company’s Audited Consolidated Financial Statements set forth in the Company’s Form10-K for the year ended December 31, 20182020 for information concerning the ASC 718 values, which are based on the fair value of the Common Stock on the date of grant. In 2018,2020, eachnon-employee director who wasre-elected to the Board was granted 5,8458,224 RSUs with a grant date fair value of $103,632$101,073 as continuing service awards, which, subject to continued service, generally vest on theone-year anniversary of the grant date. In connection with the appointment of Ms. Flanagan to the Board in November 2018, Ms. Flanagan was granted 4,451 RSUs with a grant date value of $98,634, which, subject to continued service, vest on theone-year anniversary of the grant date.
The table below shows the number of outstanding RSUs held by ournon-employee directors asAs of December 31, 2018,2020, each non-employee director listed in the table above held 8,229 RSUs, including accrued share dividend equivalents:equivalents, other than Mr. Beard, who did not hold any outstanding equity awards.
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(3) Ms. Flanagan joinedMr. Beard did not stand for reelection at the 2020 annual meeting and ceased serving on the Board in November 2018.
(4) Mr. Fleischer joined the Board in May 2018.
on such date.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The terms of all of the Company’s directors expire at the Annual Meeting. The current size of the Company’s Board is thirteen members. PEP TG Investments LP (“Providence”), DDFS Partnership LP and Dundon 2009 Gift Trust (together, “Dundon”) and TGP Investors, LLC, TGP Investors II, LLC and TGP Advisors, LLC (together, “WestRiver”), each of which became 5% or greater shareholders of the Company in connection with the Company’s merger with Topgolf, are parties to a Stockholders Agreement with the Company, dated as of October 27, 2020 (the “Stockholders Agreement”), pursuant to which each of Providence, Dundon and WestRiver have the right to designate one person (for a total of three persons) to be appointed or nominated, as the case may be, for election to the Board for so long as such shareholder maintains beneficial ownership of 50% or more of the shares of Common Stock owned by them on the closing date of the merger with Topgolf, which occurred on March 8, 2021. Accordingly, upon the completion of the Company’s merger with Topgolf on March 8, 2021, each of Scott M. Marimow, Thomas G. Dundon and Erik J Anderson (collectively, the “Topgolf Directors”) was appointed to the Board by Providence, Dundon and WestRiver, respectively, pursuant to the terms of the Stockholders Agreement. In connection with his appointment to the Board, Mr. Anderson was also appointed as Vice Chairman of the Board. On February 24, 2021, Mr. John C. Cushman, III notified the Company that he plans to retire from the Board at the end of his current term as director and will not stand for re-election to the Board at the Annual Meeting. Mr. Cushman has served as a director since 2003, and will remain involved with the Company following the Annual Meeting as a Director Emeritus. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has determined that, in connection with Mr. Cushman’s retirement and decision to not stand for re-election to the Board, it is in the best interests of the Company and its shareholders to decrease the number of directors constituting the whole Board from thirteen to twelve effective as of the date of the Annual Meeting. Also, upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the tentwelve current directors identified in the table below to stand for election at the Annual Meeting to serve until the 20202022 annual meeting of shareholders and until their respective successors are elected and qualified. Each of the nominees currently serves as a director of the Company. Following the Annual Meeting, the size of the Board will be twelve directors.
Director Nominee | Positions with the Company | |
Oliver G. (Chip) Brewer III | Director and President and Chief Executive Officer | |
| Chairman of the Board | |
Erik J Anderson | Vice Chairman of the Board | |
Samuel H. Armacost | Director | |
| Director | |
Thomas G. Dundon | Director | |
Laura J. Flanagan | Director | |
Russell | Director | |
| Director | |
Adebayo O. Ogunlesi | Director | |
Linda B. Segre | Director | |
Anthony S. Thornley | Director |
Each director nominee has consented to being named in this Proxy Statement as a nominee and has agreed to serve as a director if elected. If any one or more of such nominees should for any reason become unavailable for election, the persons named in the accompanying form of proxy may vote for the election of such substitute nominees as the Board may propose. The accompanying form of proxy contains a discretionary grant of authority with respect to this matter. There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer.
Oliver G. (Chip) Brewer III | Director and President and Chief Executive Officer | |
Age:
Director
Board | Since 2012, Mr. Brewer has served as the Company’s President and Chief Executive Officer and as a member of the Board. He
Specific Qualifications, Attributes, Skills & Experience Mr. Brewer is highly qualified, and was renominated, to serve on the Board, among other reasons, because the Board believes it is important to have the Company’s Chief Executive Officer serve on the Board as he is the one closest to the Company’sday-to-day operations. In addition, Mr. Brewer has extensive experience in the golf industry, public golf company board and executive officer experience, and has functional expertise in finance, human resources, manufacturing, international business, research and development, strategic planning, consumer sales and marketing, selling to retailers, |
John F. Lundgren | Chairman of the Board | |
Age:
Director Since:
Board Committees: Audit, Compensation and Nominating and Corporate Governance | Mr.
Specific Qualifications, Attributes, Skills & Experience Mr. |
Erik J Anderson | Vice Chairman of the Board | |
Age: 62 Director Since: 2021 Board Committees: None | Mr. Anderson is the Vice Chairman of the Board of Directors at the Company. From 2008 until the completion of the Company’s merger with Topgolf in March 2021, Mr. Anderson served as Specific Qualifications, Attributes, Skills & Experience Mr. Anderson is highly qualified to serve on the Board, among other
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Samuel H. Armacost | Director | |
Age:
Director Since:2003
Board Committees: Audit, | From 1981 to 2010, Mr. Armacost served as a Director of SRI International (formerly Stanford Research Institute), an independent nonprofit research institute, and was its Chairman from 1998 to March 2010 and Chairman Emeritus from April 2010 through December 2016. He was Managing Director of Weiss, Peck & Greer LLC (an investment management and venture capital firm) from 1990 to 1998. He was Managing Director of Merrill Lynch Capital Markets from 1987 to 1990. He was President and Chief Executive Officer of BankAmerica Corporation from 1981 to 1986. He also served as Chief Financial Officer of BankAmerica Corporation from 1979 to 1981. Mr. Armacost also served as a board member of Chevron Corporation from 1982 to 2011, of Del Monte Foods, Inc. from 2002 to 2011, of Exponent, Inc. from 1989 to 2013 and of Franklin Resources, Inc. from 2004 to 2014. Mr. Armacost is a graduate of Denison University and received his MBA from Stanford University in 1964.
Specific Qualifications, Attributes, Skills & Experience Mr. Armacost is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his extensive experience with the Company as a Board member as well as his prior chief executive officer experience of a public company, his other public company board experience, and his experience with corporate governance and executive compensation. He also has functional expertise in finance, accounting, investment banking, human resources/compensation, technology, international business, research and development, strategic planning, and mergers and acquisitions. |
Scott H. Baxter | Director | |
Age:
Director Since:
Board Committees:Compensation | Mr.
Specific Qualifications, Attributes, Skills & Experience Mr. |
Thomas G. Dundon | Director | |
Age: 49 Director Since: 2021 Board Committees: None | From 2011 until the completion of the merger with Specific Qualifications, Attributes, Skills & Experience Mr. Dundon is highly qualified to serve on the Board, among other reasons, due to his prior service as a member of the Topgolf Board, his experience as a chairman and chief executive officer of a public company; as well as his |
Laura J. Flanagan | Director | |
Age:
Director Since:2018
Board Committees: Compensation | Ms. Flanagan has served as the Chief Executive Officer and a member of the board of directors of Ripple Foods, a plant-based food and beverage company, since October 2019. Ms. Flanagan served as the Chief Executive Officer of Foster Farms, a leader in branded and private label poultry, headquartered in Livingston, California from 2016 until February 2019.
Specific Qualifications, Attributes, Skills & Experience Ms. Flanagan is highly qualified, and was renominated, to serve on the Board of the Company, among other reasons, due to her extensive experience as a Chief Executive Officer, her prior operating experience, retail channel experience, supply chain, marketing and |
Russell L. Fleischer | Director | |
Age:
Director Since:2018
Board Committees:Audit (Chair) | Mr. Fleischer has served as a general partner at Battery Ventures, a global investment firm providing venture capital and private equity, since 2015, after joining as a partner in 2014. Mr. Fleischer has experience serving as Chief Executive Officer of three privately held corporations: HighJump Software, a supply chain management software company, from 2010 to 2014; Healthvision Software, a healthcare information technology provider, and TriSyn Group, a core banking applications software provider. Mr. Fleischer has been both a public and private company Chief Financial Officer, including for Adams Golf from 2000 to 2002. Mr. Fleischer also served as a board member of Adams Golf from 2005 to 2012. Mr. Fleischer earned a B.A. in Economics from Johns Hopkins University and an MBA from Vanderbilt University.
Specific Qualifications, Attributes, Skills & Experience Mr. Fleischer is highly qualified, and was renominated, to serve on the Board of the Company, among other reasons, due to his prior chief executive officer experience as well as his extensive financial executive experience with significant experience in the golf industry and experience in mergers and acquisitions, capital raising,
| |
Scott M. Marimow | Director | |
Age:
Director Since:
Board Committees: | From 2016 until the completion of the merger with Topgolf in March 2021, Mr.
Specific Qualifications, Attributes, Skills & Experience Mr. |
Adebayo O. Ogunlesi | Director | |
Age:
Director Since:2010
Board Committees:Audit, Nominating and Corporate Governance (Chair) | Mr. Ogunlesi is Chairman and Managing Partner of Global Infrastructure Management, LLC, a private equity firm
Specific Qualifications, Attributes, Skills & Experience Mr. Ogunlesi is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his prior service on the Company’s Board, his current executive officer position at Global Infrastructure Management, LLC, and his experience with investment banking, legal matters, corporate governance and executive compensation. Mr. Ogunlesi also has functional expertise in finance, international business, strategic planning,
|
Linda B. Segre | Director | |
Age:
Director Since:2015
Board Committees:Compensation (Chair), Nominating and Corporate Governance | Ms. Segre served as Executive Vice President, Chief Strategy and People Officer of Diamond Foods, Inc., a San Francisco-based, publicly-traded company that produced premium snack food and culinary nut products, from 2009 until its sale in February 2016. Ms. Segre first joined Diamond Foods in 2009 as Senior Vice President, Corporate Strategy. Before joining Diamond Foods, Ms. Segre served as Managing Director of Google.org and Vice President and Managing Director of The Boston Consulting Group’s San Francisco Office. From 1981 until 1985, Ms. Segre was a touring golf professional in the United States, Europe and Asia having won five tournaments including the Irish Open and the Reno Open. Ms. Segre
Specific Qualifications, Attributes, Skills & Experience Ms. Segre is highly qualified, and was renominated, to serve on the Board, among other reasons, due to her extensive public company executive officer experience, her prior service on the Company’s Board, her extensive knowledge of corporate strategy and the consumer products industry and the unique perspective regarding the golf business that she brings as a former professional golfer. Ms. Segre also has functional expertise in finance, investor relations, human resources, executive compensation, strategic planning, |
Anthony S. Thornley | Director | |
Age:
Director Since:2004
Board Committees:Audit, Nominating and Corporate Governance | Mr. Thornley served as interim President and Chief Executive Officer of the Company from June 2011 to March 2012. From 2002 to 2005, he served as President and Chief Operating Officer of QUALCOMM Incorporated, the San Diego-based company that pioneered and developed technologies used in wireless networks throughout much of the world. He previously served as QUALCOMM’s Chief Financial Officer beginning in 1994, while also holding titles of Vice President, Senior Vice President and Executive Vice President. Prior to joining QUALCOMM, Mr. Thornley worked for Nortel Networks for 16 years, serving in various financial and information systems management positions including Vice President of Public Networks, Vice President of Finance NT World Trade, and Corporate Controller Northern Telecom Limited. Before Nortel, Mr. Thornley worked for Coopers & Lybrand. Mr. Thornley also served as a board member of Transdel Pharmaceuticals, Inc. from 2007 to 2011 and Peregrine Semiconductor Corp. from 2010 to 2014. Mr. Thornley previously served as a board member of Cavium, Inc., from 2006 to 2018. Mr. Thornley received his degree in chemistry from Manchester University, England, and qualified as a chartered accountant.
Specific Qualifications, Attributes, Skills & Experience Mr. Thornley is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his prior service as interim President and Chief Executive Officer of the Company, extensive experience with the Company as a Board member as well as his prior executive and operational experience, his other public company board experience, and his experience with audit, corporate governance and executive compensation matters. He also has functional expertise in finance, accounting, human resources/compensation, technology, manufacturing, international business matters, research and development, strategic planning, consumer sales and marketing, acquisitions and environmental, social and governance matters. |
Vote Required.Assuming a quorum is present, the
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES LISTED ABOVE.
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Management has the responsibility for the preparation, presentation and integrity of the Company’s financial statements and for its financial reporting process and theinternal controls over financial reporting. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformance of the Company’s financial statements to accounting principles generally accepted in the United States.States and on the effectiveness of the Company’s internal controls over financial reporting. The Audit Committee is responsible for reviewing and discussing with management and the Company’s independent registered public accounting firm the Company’s annual and quarterly financial statements, and financial reporting process and internal controls over financial reporting and for providing advice, counsel and direction on such matters based upon the information it receives, its discussions with management and the independent registered public accounting firm and the experience of the Audit Committee members in business, financial and accounting matters.
Consistent with and in furtherance of its chartered duties, the Audit Committee has adopted: (i) a written policy restricting the hiring of candidates for accounting or financial reporting positions if such candidates have certain current or former relationships with the Company’s independent registered public accounting firm; (ii) procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, auditing and federal securities laws matters and the confidential, anonymous submission by employees of any concerns regarding any of the foregoing; and (iii) a written policy governing the preapproval of audit andnon-audit services to be provided by the Company’s independent registered public accounting firm and of the fees therefor. See “Information Concerning Independent Registered Public Accounting Firm—Policy for Preapproval of Auditor Fees and Services,” below.
Internal Audit
The Company has an internal audit department that, among other things, is responsible for objectively reviewing and evaluating the adequacy and effectiveness of the Company’s system of internal controls, including controls relating to financial reporting reliability. The internal audit department reports directly to the Audit Committee and, for administrative purposes, to the Company’s Chief Financial Officer.
20182020 Audit Committee Activities
Following a formal evaluation by the Audit Committee and by the Company’s management of the performance of Deloitte & Touche LLP (“Deloitte”), the Audit Committee appointed Deloitte to serve as the Company’s independent registered public accounting firm for 2018.the fiscal year ended December 31, 2020. The Audit Committee reviewed and discussed with management and Deloitte the Company’s quarterly and audited annual financial statements for the year ended December 31, 2018.2020. The Audit Committee also reviewed the report of management contained in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 20182020 (the “2018“2020 Form10-K”), as well as Deloitte’s Report of Independent Registered Public Accounting Firm included in the 20182020 Form10-K related to its audit of the consolidated financial statements. The Audit Committee met privately with Deloitte and discussed issues deemed significant by Deloitte. The Audit Committee also discussed with Deloitte the matters required to be discussed by Auditing Standard No. 16 (Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board (“PCAOB”).
During the course of 2018,2020, the Audit Committee also oversaw management’s evaluation of the Company’s internal control over financial reporting. The principal internal auditor and management documented, tested and evaluated the Company’s internal control over financial reporting system in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice during the process. In connection with this oversight, the Audit Committee
received periodic updates provided by the principal internal auditor, management and Deloitte at least
quarterly at an Audit Committee meeting. Upon completion of the evaluation, the principal internal auditor and management reported to the Audit Committee regarding the effectiveness of the Company’s internal control over financial reporting and the Audit Committee reviewed and discussed with Deloitte its Report of Independent Registered Public Accounting Firm included in the 20182020 Form10-K related to its audit of the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company’s efforts related to its internal control over financial reporting.
In addition, the Audit Committee has received from Deloitte the written disclosures and the letter required by PCAOB Rule 3526 (Communications with Audit Committees Concerning Independence) and has discussed with Deloitte its independence. The Audit Committee actively engaged in a dialogue with Deloitte with respect to any disclosed relationships or services that might affect Deloitte’s objectivity and independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the 20182020 Form10-K for filing with the SEC.
MEMBERSOFTHE AUDIT COMMITTEE
Samuel H. ArmacostRussell L. Fleischer (Chair) | Ronald S. BeardSamuel H. Armacost | Russell L. Fleischer
John F. Lundgren | Adebayo O. Ogunlesi | Anthony S. Thornley
INFORMATION CONCERNING INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Fees of Independent Registered Public Accounting Firm
The following table shows the fees billed by Deloitte & Touche LLP for the years ended December 31, 20182020 and December 31, 2017:2019:
2018 | 2017 | Description | 2020 | 2019 | Description | |||||||||||||||
Audit Fees | $2,147,000 | $2,007,800 | Includes fees for (i) the audit of the Company’s annual financial statements, (ii) the review of the Company’s interim financial statements, (iii) the audit of the Company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, (iv) statutory audits and related services for the Company’s international subsidiaries, and (v) other services that generally only the independent auditor can reasonably provide, including comfort letters, statutory audits, attest services, and consents and assistance with and review of documents filed with the SEC. The Company reimburses Deloitte for expenses incurred in connection with the audit in an amount not to exceed 6% of the audit fees. The amounts of these reimbursements are not included in the audit fees shown.
| $3,778,370 | $3,280,500 | Includes fees for (i) the audit of the Company’s annual financial statements, (ii) the review of the Company’s interim financial statements, (iii) the audit of the Company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), (iv) statutory audits and related services for the Company’s international subsidiaries, and (v) other services that generally only the independent auditor can reasonably provide, including comfort letters, statutory audits, attest services, and consents and assistance with and review of documents filed with the SEC. The Company reimburses Deloitte for expenses incurred in connection with the audit in an amount not to exceed 6% of the audit fees. The amounts of these reimbursements are not included in the audit fees shown. The increase in audit fees in 2020 compared to 2019 was primarily related to (i) an increase in the scope of SOX testing due to the inclusion of Jack Wolfskin; (ii) procedures rendered, in addition to the comfort letter issued, in connection with the Convertible Notes issued in May 2020; and (iii) professional services rendered in connection with the filing of the Company’s registration statement on Form S-4 related to the pending merger with Topgolf. Audit fees in 2019 includes incremental fees due to the addition of Jack Wolfskin following its acquisition by the Company in January 2019.
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Audit-Related Fees | $870,748 | $281,335 | Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. The fees incurred in 2018 were primarily related to due diligence services rendered in connection with the acquisition of Jack Wolfskin as well as other corporate development projects.
| $550,000 | — | Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. The fees incurred in 2020 were related to due diligence services rendered in connection with the Company’s merger with Topgolf. There were no audit-related fees incurred in 2019.
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Tax Fees | $906,645 | $103,400 | Includes fees for services performed by the professional staff in Deloitte’s tax department except for those tax services that could be classified as audit or audit-related services, including routine foreign tax compliance, tax advice and transfer price studies.
| $290,813 | $275,118 | Includes fees for services performed by the professional staff in Deloitte’s tax department except for those tax services that could be classified as audit or audit-related services, including routine foreign tax compliance, tax advice and transfer price studies.
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All Other Fees | — | — | Includes fees for all services except those described above.
| — | — | Includes fees for all services except those described above.
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None of the fees listed above were approved by the Audit Committee in reliance on a waiver frompre-approval under Rule2-01(c)(7)(i)(C) of RegulationS-X.
Policy for Preapproval of Auditor Fees and Services
The Audit Committee has adopted a policy that it must preapprove all audit andnon-audit services to be performed by the Company’s independent registered public accounting firm before the firm is engaged to perform the services. The Audit Committee must also preapprove the estimated fees for such services, as well as any material change to the terms, conditions or fees related thereto. The
Audit Committee will only preapprove those services that would not impair the independence of the independent registered public accounting firm and only those audit-related, tax ornon-audit services that are consistent with the SEC’s and PCAOB’s rules on auditor independence. The policy specifically provides that the followingnon-audit services will not be preapproved: (i) bookkeeping or other services related to the Company’s accounting records or financial statements, (ii) financial information systems design and implementation, (iii) appraisal or valuation services, fairness opinions orcontribution-in-kind reports, (iv) actuarial services, (v) internal audit outsourcing services, (vi) management functions, (vii) human resources, (viii) broker-dealer, investment adviser or investment banking services, (ix) legal services and (x) expert services unrelated to an audit for the purpose of advocating the Company’s interests in litigation or in a regulatory or administrative proceeding or investigation.
The Audit Committee has delegated to the Audit Committee Chair the authority (within specified limits) to preapprove services consistent with the policy if it is not practical to wait until the next Audit Committee meeting to seek such approval. The Audit Committee Chair must report any services it preapproves to the Audit Committee at its next meeting.
Under the policy, the Audit Committee at least annually will review and where appropriate preapprove the services expected to be performed by the Company’s independent registered public accounting firm. Any subsequent request to have the independent registered public accounting firm perform any additional services must be submitted to the Audit Committee by the Company’s Chief Financial Officer or Chief Accounting Officer, together with the independent registered public accounting firm, and must include an affirmation that the provision of such services is consistent with the SEC’s and PCAOB’s rules on auditor independence.
PROPOSAL NO. 2 - RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee, which is comprised entirely of independent directors, has appointed Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.2021. This appointment was made following the Audit Committee’s formal evaluation of Deloitte’s performance in 2018.2020. Deloitte has served as the Company’s independent registered public accounting firm since December 2002. Information concerning the services performed by Deloitte and the fees for such services for 20182020 and 20172019 are set forth above under “Information Concerning Independent Registered Public Accounting Firm—Fees of Independent Registered Public Accounting Firm,” above.Firm”. Deloitte representatives are expected to attend the Annual Meeting and to be available to respond to appropriate questions, and if they desire, will have the opportunity to make a statement.
The Audit Committee and the Board seek shareholder ratification of the Audit Committee’s appointment of Deloitte as the Company’s independent registered public accounting firm to audit the Company’s and its subsidiaries’ financial statements for the fiscal year ending December 31, 20192021 and to audit the Company’s internal control over financial reporting. Ratification of this appointment is not required to be submitted to shareholders. However, such ratification is being sought as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will reconsider it. Because the Audit Committee is directly responsible for appointing the Company’s independent registered public accounting firm, however, the ultimate decision to retain or appoint Deloitte in the future as the Company’s independent registered public accounting firm will be made by the Audit Committee based upon the best interests of the Company at that time.
Vote
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF DELOITTE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31,
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EXECUTIVE OFFICER COMPENSATION
COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE REPORT
The Compensation and Management Succession Committee (“Compensation Committee”) reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K. Based on such review and discussion, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement for filing with the SEC.
COMPENSATIONAND MANAGEMENT SUCCESSION COMMITTEE
John F. LundgrenLinda B. Segre (Chair) | Samuel H. Armacost
Ronald S. BeardScott H. Baxter | John C. Cushman, III |
Linda B. SegreLaura J. Flanagan | John F. Lundgren
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis (“CD&A”) is designed to provide shareholders with an understanding of the Company’s compensation philosophy and objectives as well as the analysis that the Company performed in setting executive compensation for 2018.2020. The Board has delegated to the Compensation Committee the general responsibility for oversight of the Company’s compensation philosophy, policies and programs, including those applicable to the Company’s named executive officers (“NEOs”). This CD&A discusses the Compensation Committee’s determination of how and why, in addition to what, compensation actions were taken during 20182020 for the NEOs. The NEOs, as determined in accordance with SEC rules, for 20182020 were:
Oliver G. (Chip) Brewer III | President and Chief Executive Officer | |
Brian P. Lynch | Executive Vice President, Chief Financial Officer | |
Joseph B. Flannery(1) | Executive Vice President, Apparel and Soft Goods | |
Glenn F. Hickey | Executive Vice President, | |
Mark F. Leposky | Executive Vice President, Global Operations | |
Melody Harris-Jensbach(2) |
(1) Mr. Flannery’s employment with the Company commenced on February 21, 2020.
(2) Ms. Harris-Jensbach’s employment with the Company ended on December 31, 2020.
Investors are encouraged to read this CD&A in conjunction with the compensation tables and related notes, which include more detailed information about the compensation of the NEOs for 2018.2020. See “2018“2020 Compensation Tables,” below.
Overview and Impact of COVID-191
Corporate 20182020 Performance and Business Environment.On a financial, strategic and operational performance basis, 20182020 was a very strongchallenging year for the Company. The Company not only
1Non-GAAPCOVID-19 Information.started to impact the overall business fairly significantly at the end of Q1 2020 and throughout most of Q2 2020, but our golf business rebounded quickly, starting in Q2 2020, and our outdoor apparel businesses also showed good resilience in the second half of 2020. In order to assist interested parties with period-over-period comparisons on a consistent and comparable basis, the discussion set forthsecond half of 2020, all of our businesses ended up benefiting from having strong outdoor components. This resulted in this section provides certainnon-GAAP information regarding the Company’s financial results, including net income, diluted earnings per share and earnings before interest, taxes, and depreciation and amortization expenses, adjusted for, in 2017, thenon-recurring transaction and transition-related expenses of the OGIO and travisMathew acquisitions in 2017 and thenon-recurring impacts of the 2017 Tax Cuts and Jobs Act and other tax adjustments; and for 2018, thenon-recurring transaction expenses for the Jack Wolfskin acquisition. Thisnon-GAAP information may includenon-GAAP financial measures within the meaning of Regulation G. Appendix A to this Proxy Statement includes a reconciliation of suchnon-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.
achieved record net sales and operating income, but also continued executing its strategyAdjusted EBITDAS1 for the second half of investing in growth opportunities in golf and in areas tangential to golf, including continuing to capitalize on the Company’s recent acquisitions. In January 2017, the Company acquired OGIO International, Inc. This acquisition both enhanced the Company’s presence in golf and provided a platform for growth in the active lifestyle category. In August 2017, the Company acquired travisMathew, LLC., a dynamic golf and lifestyle apparel company. This acquisition expanded the Company’s presence in the apparel category. In early 2019, the Company further added to the size and complexity of its operations, brand and product portfolio with the acquisition of Jack Wolfskin, a German-based premium outdoor and active lifestyle brand.2020.
Some specific 20182020 highlights include:
Net sales increased $194 million, or 19%decreased 7%, to a record $1.243$1.589 billion in 20182020 compared to $1.049$1.701 billion in 2017.
Gross margin increased 70 basis points2019, with record net sales increasing 15% to 46.5% in 2018$850 million during the second half of 2020 compared to 45.8%$738 million during the same period in 2017.
Operating income increased $49.6 million (63%) to a record $128.4 million in 2018 compared to $78.8 million in 2017.
Non-GAAP net income (adjusted for items mentioned in the footnote above) increased $52.8 million (103%) to $104.1 million in 2018 compared toNon-GAAP net income of $51.3 million in 2017. GAAP net income increased $63.9 million (157%) from $40.8 million in 2017 to $104.7 million in 2018.
Non-GAAP diluted earnings per share (“EPS”) (adjusted for items mentioned in the footnote above) increased $0.54 (102%) to $1.07 in 2018 compared toNon-GAAP diluted EPS in 2017. GAAP diluted EPS increased $0.66 (157%) to $1.08 in 2018 compared to GAAP diluted EPS in 2017 of $0.42.2019.
Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) (adjusted for items mentioned in the footnote above) increased $54.9 million (55%)EBITDAS decreased 22%, to $154.9$164.5 million in 20182020 compared to $210.3 million in 2019, with record Adjusted EBITDAEBITDAS increasing 48% to $76 million during the second half of 2020 compared to $51 million during the same period in 2017 of $100.0 million.
Total shareholder return in 2018 was 10%, on top of 27% in 2017.2019.
Overview of 20182020 Executive Compensation Decisions.Set forth below is a summary of certain compensation-related decisions the Company made during 20182020 and early 2019,2021, and the status of certain compensation practices:
2020 NEO Compensation Declined from 2019 Levels—The overall compensation of the NEOs was lower in 2020 than in 2019 due to the voluntary base salary reductions that the NEOs took in 2020 in order to mitigate the impact from the COVID-19 pandemic and no annual incentive payments being paid to the NEOs based on the Company’s performance in 2020.
Market-Based Base Salary Increases—The Compensation Committee, as part of its annual executive base salary review process and prior to the onset of the COVID-19 pandemic, approved 20182020 base salary increases for the Chief Executive Officer, Executive Vice PresidentNEOs, with the exceptions of Mr. Flannery, who commenced employment with the Company in 2020, and Chief Financial Officer, and the other NEOs,Ms. Harris-Jensbach. Increases were based upon individual performance, scope of responsibilities, market competitiveness, and alignment with the overall strategy of attracting and retaining top executive talent. The 2020 base salary for Ms. Harris-Jensbach, as described in the “Base Salary” discussion below, remained at her 2018 level.
Above-target bonusesVoluntary NEO Base Salary Reduction—In response to the unforeseen business impact of the COVID-19 pandemic, the NEOs voluntarily took short term pay reductions
(1) | Non-GAAP Information. In order to assist interested parties with period-over-period comparisons on a consistent and comparable basis, the discussion set forth in this section provides certain non-GAAP information regarding the Company’s financial results, including “Adjusted EBITDAS” which is earnings before interest, taxes, depreciation and amortization expenses, and non-cash stock compensation expenses, in addition to costs associated with (i) the Topgolf merger announced in October 2020; (ii) the Company’s cost reduction initiatives in response to the COVID-19 pandemic; (iii) the Company’s transition to its new North America Distribution Center; and (iv) the implementation of new IT systems for Jack Wolfskin. For the year ended December 31, 2019, costs include (i) transaction costs associated with the acquisition of Jack Wolfskin, including banker’s fees, legal fees, consulting and travel expenses; (ii) costs associated with transitioning and reporting on the Jack Wolfskin business, including consulting fees, audit fees for SEC reporting requirements and valuation services associated with preparing Jack Wolfskin’s opening balance sheet; (iii) the recognition of a foreign currency exchange loss primarily related to the re-measurement of a foreign currency contract established to mitigate the risk of foreign currency fluctuations on the purchase price of Jack Wolfskin, which was denominated in Euros; and (iv) consulting fees to address an activist investor. This non-GAAP information may include non-GAAP financial measures within the meaning of Regulation G. Appendix A to this Proxy Statement includes a reconciliation of such non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP. |
as part of the broader Company-wide expense reduction initiatives. With the exception of Mr. Brewer, effective in April, base salaries were reduced by 20% for the three-month period of April through June, and by 10% for the three-month period of July through September. Mr. Brewer’s base salary was reduced to zero from April through May, was restored to 60% of his 2020 base salary rate for the month of June and 80% of his 2020 base salary rate from July through September. All NEO salaries were restored to pre-reduction levels as of October 2020, but no true-up payments were made to the NEOs for their voluntarily reduced salaries. |
No Annual Incentive Payout—No annual incentives were paid to the NEOs, with the exception of Mr. Flannery, due to the unforeseen business impact of the COVID-19 pandemic. The Company achieved financial results below the threshold level required to fund the annual incentives for 2018 under the Company’s 2018NEOs, with no action taken by the Board or the Compensation Committee to adjust the metrics in response to the impact of the pandemic. Mr. Flannery was entitled to a guaranteed 2020 annual incentive program as part of his employment agreement in connection with the Company exceededcommencement of his employment in 2020, which is described in the maximum financial performance goals under the program, reflecting the Company’s exceptional operational performance.2020 Summary Compensation Table below.
Majority of Long-Term Incentive Awards Tied To Performance—In 2018,2020, with the exception of Ms. Harris-Jensbach, the Company granted to the NEOs performance-based restricted stock units (“PRSUs”) and service-based restricted stock units (“RSUs”) as long-term incentive awards.
Ms. Harris-Jensbach was in the last year of her employment agreement and did not receive an equity award in 2020. As was the case in 2017,2019, a majority of the long-term incentive awards granted in 20182020 to the NEOs were PRSUs.
The framework of the 2018 PRSUs for executive officers remainedgranted in 2020 under the 2020-2022 Long-Term Incentive Plan (“LTIP”) was consistent with the 2017 framework. Thenew program initially used in 2019, and the vesting of the 2020 PRSUs granted in 2018 vest after three years based on cumulative is tied to two equally weighted metrics—currency neutral adjusted EPS goalsearnings per share (“EPS”) and relative Total Shareholder Return (“rTSR”)—each measured over a three year performance period beginning January 1, 20182020 and ending December 31, 2020,2022, with opportunities to bank a limited portion of the EPS related award based on interim year performance.
In 2018, The total shareholder return (“TSR”) of the Company revised its compensation peer group by removing three corporations that were either in strong purchase discussions, experiencing financial
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In 2018, the Board adopted updated stock ownership guidelines. Per the newly adopted guidelines, each of the non-employee directors is required to own Common Stock interests with a value equal to at least 5x his or her annual base cash compensation (instead of 3x which was the prior multiplier). The Company’s Chief Executive Officer is required to own Common Stock interests with a value equal to at least 5x his or her base salary (instead of 3x which was the prior multiplier), and each of the other executive officers is required to own Common Stock interests with a value equal to at least 2x his or her base salary (instead of 1x which was the prior multiplier).
In early 2019, the Company modified the framework for the 2019 PRSUs for executive officers to add a second metric, relative Total Shareholder Return (rTSR). The new rTSR metric will compare the Company’s TSR againstbe calculated over the three-year performance period and ranked on a percentile basis in comparison to the calculated TSR for the companies listed in the Consumer Durables & Apparel sector of the S&P 1500 Index, excluding home builders. builders (the “LTIP Reference Group”). There is no banking mechanism for the rTSR related award based on interim year performance. All PRSUs granted in 2020 will vest after three years based on performance against the respective metrics for each portion of the award.
The currentPRSUs granted under the 2018—2020 LTIP achieved currency neutral adjusted cumulative EPS and newresults above maximum level, resulting in 200% of the underlying PRSU awards having been earned by the NEOs who held such awards. There was no rTSR metrics will be equally weighted. The limited interim-year banking opportunities will remain in placemetric for the 50%PRSU awards granted in 2018.
Consideration of Say-on-Pay Vote Results and Shareholder Engagement
The Board and management value the feedback provided by the Company’s shareholders and have discussions with shareholders regarding various corporate governance topics. The Board and management actively seek input from our shareholders, and in 2020, the Board and management met or has been in contact with several of our largest shareholders to discuss various matters, including compensation and governance, environmental and social responsibilities and long term strategies to drive shareholder value. Based on this outreach, the Company believes the combination of actions we have taken present an overall compensation and governance structure responsive to their view.
Shareholders are provided with the opportunity to cast an annual advisory vote on executive compensation. At the Company’s 2020 and 2019 annual meetings of shareholders, shareholders expressed approval of the award based on currency neutral adjusted EPS. No banking mechanism appliesexecutive compensation program with approximately 98% of the shares cast being voted for approval of the compensation of the NEOs in each such prior year.
The Compensation Committee considers the outcome of the say-on-pay votes and other shareholder feedback when designing future compensation programs. While we incorporated a relative TSR metric into our long-term incentive compensation program for 2019, in light of the strong shareholder support of our executive compensation program over the past two years, no additional significant changes were made to our executive compensation program in 2020 as a result of the three-year rTSR metric.say-on-pay vote results from the previous year and the Compensation Committee determined to continue the general design of the executive compensation program from 2019.
Compensation Best Practices. In 20182020 and early 2019,2021, the Company continued the following compensation practices:
What We Do | What We Do Not Do | |||||
✓ | Link annual incentive pay to objective,pre-established Company financial goals, while also taking into account individual executive performance | × | No excise tax gross ups | |||
✓ | Grant | × | No single triggerchange-in-control severance payments | |||
✓ | Grant equity awards under a policy that has strict controls on grant processes and timing | × | No single trigger accelerated vesting of equity awards in the event of achange-in-control | |||
✓ | Include clawback provisions in U.S. executive employment agreements | × | No dividends on RSUs prior to vesting | |||
✓ | Maintain stock ownership guidelines and holding requirements for executive officers and directors | × | No dividends on PRSUs | |||
✓ | Engage an independent compensation consultant through the Compensation Committee | × | No pension benefits to executives | |||
✓ | Engage with shareholders as appropriate and consider their input in the Company’s executive compensation programs | × | Nore-pricing of stock options without shareholder approval | |||
✓ | Conduct an annual risk assessment of the Company’s executive and broad-based compensation programs | |||||
✓ | Prohibit hedging, short sales and pledging of Company stock by executive officers and directors |
Purpose of Executive Compensation Programs
Callaway Golf Company is a publicly traded corporation engaged in the manufacture and sale of golf clubs and golf balls; the sale of other golf-related products, including golf bags, footwear and accessories; and golf and lifestyle apparel, backpacks and other gear. The Company has operations in the United States, the United Kingdom, Japan, Canada, Korea, Australia, China, India and other regions, and directly, or indirectly through third party distributors, sells its products in over 100 countries worldwide. In 2017, the Company added to the size and complexity of its operations, brand and product portfolio with the addition of the OGIO and travisMathew brands. In early 2019, the Company further expanded its operations by acquiring Jack Wolfskin.Wolfskin, a premium outdoor and active lifestyle brand, with primary operations in Germany. Within this context, the Board must recruit and appoint highly qualified individuals to serve as the Company’s executive officers to oversee and manage the Company’s complex global operations. The purpose of the Company’s executive compensation program is to attract, retain, motivate and appropriately reward these executive officers and to align their interests with those of the Company’s shareholders by incentivizing the executive officers to operate the Company in a manner that creates shareholder value.
Guiding Principles for Executive Compensation
In developing appropriate executive compensation programs, the Compensation Committee is generally guided by the following principles:
Compensation levels should be sufficiently competitive to attract and retain the executive talent needed.The Company’s overall compensation levels are targeted to attract the management talent needed to achieve and maintain a leadership position in the businesses where the Company chooses to compete. As discussed below under “—The Role of the Compensation Committee—Committee’s Role—The Role of Peer Companies and Benchmarking,Competitive Market Data,” the Company does not target or position compensation at a specific percentile relative to market data. Instead, given the complexity and competitiveness of the Company’s business, as well as the high cost of living in the San Diego area where its principal offices are located, this information is used as a general guide in setting and assessing executive compensation levels and practices.
A significant portion of total compensation should be related to performance.Executive compensation should be linked to Company or business unit and individual performance. The annual incentive compensation element is tied directly to short-term corporate or business unit performance but the final payout may be affected by individual performance, and a majority of the long-term incentive compensation element is tied to corporate performance. Over time, there is a strong correlation between the Company’s long-term performance and the Company’s stock price. Under the Company’s plans, performance above targeted goals generally results in compensation above targeted levels, and performance below targeted goals generally results in compensation below targeted levels.
Compensation should reflect position and responsibility, and incentive compensation should be a greater proportion of total compensation for more senior positions.Total compensation should generally increase with position and responsibility. At the same time, a greater percentage of total compensation should be tied to corporate and individual performance, and therefore at risk, as position and responsibility increases. Accordingly, individuals with greater roles and responsibility for achieving the Company’s performance targets should bear a greater proportion of the risk that those goals are not achieved and should receive a greater proportion of the reward if goals are met or surpassed.
Incentive compensation should strike a balance between short-term and long-term performance.performance.The Company’s compensation plans focus management on achieving strong annual performance in a manner that supports the Company’s long-term success and profitability. Accordingly, the Company uses both annual incentives and long-term incentives, with the proportion of long-term incentives increasing at higher levels of responsibility where individuals have the greatest influence over the Company’s strategic direction and results over time.
A significant portion of executive compensation should be stock-based.In order to further align the interests of the Company’s executive officers with those of the Company’s shareholders, the Compensation Committee believes that a significant portion of executive compensation should be stock-based compensation. The executive officers are also subject to stock ownership guidelines which require the executive officers to own a specified minimum amount of Common Stock interests and hold a portion of the shares of Common Stock received from the long-term incentive awards if not in compliance with the guidelines.
The Compensation Committee uses various resources to guide its compensation decisions.In setting compensation, the Compensation Committee works with the Company’s Chief Executive Officer and Senior Vice President of Global Human Resources. In addition, the Compensation Committee has engaged an outside independent compensation consultant to provide independent advice and information on executive compensation matters. See below “—The Compensation Committee’s Role—The Independent Compensation Consultant’s Role,” below.Role”.
The Compensation Committee’s Role
The Board has delegated to the Compensation Committee the general responsibility for oversight of the Company’s compensation philosophy, policies and programs, including those applicable to the NEOs.
The Compensation Committee, comprised entirely of independent directors, has the responsibility for, among other things, approving and overseeing the Company’s executive compensation programs, including the design and implementation of those programs to ensure that the programs are reasonable and not excessive, that they reward corporate and individual performance, and that they provide appropriate incentives for the executive officers and do not encourage excessive risk taking. This responsibility includes setting base salaries, developing appropriate short-term and long-term incentives, approving stock-based award plans and grants, approving employment agreements (including severance andchange-in-control provisions), and approving other compensation or benefit plans, arrangements and agreements applicable to executive officers.
The Compensation Committee, in consultation with the other independent directors, sets the compensation of the Chief Executive Officer, and the Compensation Committee, in consultation with the Chief Executive Officer, sets the compensation of the other executive officers. The Compensation Committee consults with outside compensation advisors and legal counselcounsels as it deems appropriate.
The Compensation Committee reviews the performance of the executive officers. The review includes a detailed comparison of the Company’s financial performance in absolute terms and against its annual operating plan, a review of performance against stipulated metrics and performance criteria in various compensation plans, a review of the respective executive’s accomplishments including performance against any agreed-upon objectives, and any other relevant factors pertinent to that year’s results as discussed below. In the case of the Company’s Chief Executive Officer, the review also includes a written evaluation of his performance by the independent directors based upon a review of the Chief Executive Officer’s agreed-upon annual objectives and accomplishments as well as his self-appraisal of his performance. The Compensation Committee also seeks input from the Chief Executive Officer’s direct reports as appropriate. Following this detailed review, all of the independent directors participate in executive session to review this information and provide input to the Compensation Committee in its consideration of any changes in compensation for the Chief Executive Officer. Mr. Brewer is not present during voting or deliberations by the independent directors regarding his own compensation.
The Compensation Committee routinely reviews the Company’s executive compensation programs and makes modifications as appropriate in light of Company and industry dynamics as well as current trends and best practices. The amounts paid to an individual executive in any given year reflect the Company’s current compensation programs, continuing prior commitments under previous programs or contracts, and the current performance of that executive.
Additional information concerning the Compensation Committee’s responsibilities can be found under the section entitled “Board of Directors and Corporate Governance—Board Committees,” above.
The Chief Executive Officer’s Role
At the Compensation Committee’s request, the Company’s Chief Executive Officer, Mr. Brewer, provides input regarding the performance and appropriate compensation of the Company’s other executive officers. The Compensation Committee considers Mr. Brewer’s evaluation of the other executive officers because of his direct knowledge of each executive officer’s performance and contributions. The Compensation Committee sets the compensation of the Company’s other executive officers after considering Mr. Brewer’s input.
The Independent Compensation Consultant’s Role
The Compensation Committee selects and retains the services of its own independent compensation consultant and annually reviews the performance of the selected consultant. As part of the review process, the Compensation Committee considers the independence of the consultant in accordance with applicable SEC and NYSE rules.
In 2018,2020, the Compensation Committee engaged Mercer LLC as its compensation consultant to provide independent advice and information on executive compensation matters. Mercer representatives report directly to the Compensation Committee and provide comparative market data, information on compensation trends, and an objective view of compensation matters. Mercer representatives generally interact with the Compensation Committee Chair and with senior management at the direction of the Compensation Committee, attend Compensation Committee meetings, and meet in executive session with Compensation Committee members and, for matters relating to the compensation of the Company’s Chief Executive Officer, with the other independent directors as well.
The Company does not use Mercer for any other purpose, except that the Company occasionally purchases broad industry compensation survey data from Mercer that it makes available for third parties to purchase. The Compensation Committee requires that the Company obtain the committee’sCompensation Committee’s approval prior to engaging Mercer for any other purpose. The Compensation Committee has reviewed an assessment of any potential conflicts of interest raised by Mercer’s work for the Compensation Committee, which assessment considered the following six factors: (i) the provision of other services to the Company by Mercer and its affiliates; (ii) the amount of fees received from the Company by Mercer and its affiliates, as a percentage of Mercer’s and its affiliates’ total revenue; (iii) the policies and procedures of Mercer that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Mercer consultant with a member of the Compensation Committee; (v) any Company stock owned by the Mercer consultants; and (vi) any business or personal relationship of the Mercer consultant or Mercer and its affiliates with any of the Company’s executive officers. The Compensation Committee assessed Mercer’s independence in light of these standards and determined that there were no conflict of interest or independence concerns with respect to Mercer. The Compensation Committee also receives advice from legal counsel as appropriate and conducts a review of the same six factors with regard to the outside legal counsel providing such advice.
The Role of Peer Companies and BenchmarkingCompetitive Market Data
In determining the reasonableness and competitiveness of the Company’s executive officer compensation, the Compensation Committee periodically reviews market data for comparisons to the Company’s programs. These comparisons are used as reference guides to aid the Compensation Committee in assessing the reasonableness of the Company’s proposed compensation levels and targets in any given year. The Company, however, does not target or position compensation at a specific percentile relative to this market data.
Depending upon the particular issue or circumstance, the Compensation Committee will use (i) summary broad industry survey data (without disclosure of the individual corporations) from AON Radford Equilar and Mercer for companies of similar revenue size as the Company and/or (ii) a small predetermined group of corporations in the leisure equipment and products and textiles, apparel and luxury goods industries (the “Compensation Comparison Group”).
The Compensation Comparison Group consists of companies that are similar in revenue size to, and have similar business characteristics as, the Company. In addition, the Company often competes for executive talent with corporations outside the golf industry, and the complexity of the Company’s operations, brand and product portfolio continues to expand. The Compensation Committee therefore compares executive compensation levels to companies in industries with similar industries.characteristics. The Compensation Comparison Group is reviewed periodically as warranted and revised as appropriate to ensure that the companies in the group continue to be a reasonable comparison for compensation purposes.
The companies included in the Compensation Comparison Group were changedunchanged in 2018,2020, as recommended by the Company’s outside independent compensation consultant. Changes to the Compensation Comparison Group included the removal of three companies that were in purchase discussions, were experiencing financial distress, or had fallen outside the general parameters used for selection of representative companies. Specifically, Perry Ellis International, Inc., Jakks Pacific, Inc.,consultant, and Sturm, Ruger & Company, Inc. were removed from the group. These were replaced by two new companies within a similar revenue range and with similar industry characteristics, Wolverine Worldwide, Inc., and Fitbit, Inc. The revised Compensation Comparison Group adopted in 2018 was comprised of 12 companies that were approximately 0.5 to 2.0 times the Company’s 2018 revenue:are listed below.
American Outdoor Brands Corporation | Fitbit, Inc. | |||
Acushnet Holdings Corp. | ||||
Crocs, Inc. | Vista Outdoors, Inc. | |||
Deckers Outdoor Corporation | Wolverine Worldwide, Inc. | |||
The Compensation Committee reviews broad industry survey data and the compensation practices and program design at peer companies, including those in the Compensation Comparison Group, to inform its decision-making process in setting compensation. The Company, however, does not target or position compensation at a specific percentile relative to this market data. The Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee, market data, and input provided by the Compensation Committee’s independent compensation consultant.
Consideration ofSay-on-Pay Vote Results
The Board and the Compensation Committee value the feedback provided by the Company’s shareholders and have discussions with shareholders regarding various corporate governance topics, including executive compensation. Shareholders are provided with the opportunity to cast an annual advisory vote on executive compensation. At the Company’s 2018 and 2017 annual meetings of shareholders, shareholders expressed approval of the executive compensation program with approximately 98% of the shares cast being voted for approval of the compensation of the NEOs in each such prior year.
The Compensation Committee considers the outcome of thesay-on-pay votes and other shareholder feedback when designing future compensation programs. In light of the strong shareholder support of our executive compensation program over the past two years, no additional significant changes were made to our executive compensation program in 2018 as a result of thesay-on-pay vote results from the previous year and the Compensation Committee determined to continue the general design of the executive compensation program from 2017.
Components of the 20182020 Executive Compensation Program
The 20182020 executive compensation program had three elements of total direct compensation: base salary, annual incentives and long-term incentives, which are summarized in the table below. The Company also provides NEOs with perquisites and benefits, as described below. Each element of total direct compensation is intended to reward and motivate executives in different ways consistent with the Company’s overall guiding principles for compensation described above. Mercer advised the Compensation Committee that the 20182020 executive compensation program was generally consistent with the Compensation Committee’s guiding principles and was reasonably based and not excessive under the circumstances. The Compensation Committee intends to continue working with Mercer to ensure the Company’s compensation practices continue to be aligned with shareholder interests and with evolving best practices.
Element | Purpose & Characteristics | Tie to Compensation Philosophy | ||
Base Salary | • Fixed cash compensation recognizing individual performance, time in role, scope of responsibility, leadership skills and experience.
• Compensates for day to day job responsibilities.
• Reviewed annually and adjusted when appropriate based upon individual performance, expanded duties and changes in the competitive marketplace. |
• Increases are not automatic or guaranteed, to promote a performance culture.
• The Compensation Committee also considers how an executive’s base salary compares to the base salaries of the other executives. |
Element | Purpose & Characteristics | Tie to Compensation Philosophy | ||
Annual Incentive | • Variable compensation based on performance against annually established targets and individual performance; payable in cash.
• Intended to provide an incentive to drive a high level of corporate and individual performance without excessive risk taking. | • | ||
Long-Term Incentive | • Variable compensation; payable in the form of
• Designed to drive long-term Company performance, provide a means for retaining executives through long-term vesting, and align the interests of the executives with the interests of shareholders through stock-based incentives.
• A multiple of the target number of PRSUs
• RSUs vest ratably over three-years. | • Target award value,
• RSUs are designed to motivate an executive to remain with the Company and to align an executive’s interests with shareholders.
• PRSUs reward executives for achieving longer term financial and operational goals, as well as creating long-term shareholder value.
• Awards are consistent with the Compensation Committee’s guiding principles in that a majority of these long-term incentives are performance-based and all are equity-based. • Awards for U.S.-based NEOs weighted equally towards currency neutral adjusted EPS and rTSR objectives. |
The amount of total direct compensation intended to come from each element varies with position and level of responsibility, reflecting the principles that total compensation should increase with position and responsibility and that a greater percentage of an executive’s compensation should be performance based, and therefore at risk, as position and responsibility increase.
Consistent with the Company’s compensation philosophy, the 20182020 executive compensation program incorporated a balance between guaranteed andat-risk compensation, a balance between cash and stock-based compensation, and a balance between short-term and long-term compensation. In 2018,2020, (i) approximately 53%55% of the Chief Executive Officer’s targeted total direct compensation, and approximately 42%40% to 45%48% of the targeted total direct compensation for each of the other NEOs, was comprised of short-term and long-term incentives that were subject to corporate and individual performance and therefore at risk (annualnon-equity incentive plan compensation and PRSUs) and (ii) approximately 67% of the Chief Executive Officer’s targeted total direct compensation, and approximately 34%40% to 42%45% of the targeted total direct compensation for the other NEOs, was provided in the form of long-term, stock-based compensation (PRSUs and RSUs).
Base Salary
In setting the amount of base salaries, the Compensation Committee reviews the complexity of the job requirements and performance expectations, the market data described above, including, as warranted, information from the Compensation Comparison Group, and consults with its independent
compensation consultant. The annualized base salaries of the NEOs during 20182020 and 20172019 and the percentage of increase between the two years are set forth in the table below. The increases were merit based, and were made after a review of individual performance and relevant competitive market data, and reflect these factors as well as recognition of the continuedincreased scope and complexity of the business. The more material base salary increases into the CEO and CFO were made to better align their salaries with the median competitive market share and profitability.data.
Name | 2018 | 2017 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Oliver G. (Chip) Brewer III(1) | $ | 850,000 | $ | 800,000 | 6.3 | % | $ | 1,000,000 | $ | 900,000 | 11.1 | % | ||||||||||||
Brian P. Lynch(2) | $ | 450,000 | $ | 400,000 | 12.5 | % | $ | 525,000 | $ | 475,000 | 10.5 | % | ||||||||||||
Richard H. Arnett | $ | 410,000 | $ | 400,000 | 2.5 | % | ||||||||||||||||||
Joseph B. Flannery | $ | 440,000 | N/A | N/A | ||||||||||||||||||||
Glenn F. Hickey | $ | 461,250 | $ | 450,000 | 2.5 | % | ||||||||||||||||||
Mark F. Leposky | $ | 435,095 | $ | 424,483 | 2.5 | % | $ | 461,250 | $ | 450,000 | 2.5 | % | ||||||||||||
Alan Hocknell | $ | 381,306 | $ | 372,006 | 2.5 | % | ||||||||||||||||||
Melody Harris-Jensbach(3) | $ | 856,425 | $ | 839,603 | 2.0 | % |
(1) Mr. Brewer’s base salary increase of 6.3%11.1% in early 20182020 reflected his performance and the additional scope of responsibilities associated with the acquisitionsacquisition of travisMathew and OGIOJack Wolfskin in 2017.2019.
(2) Mr. Lynch’s base salary increase of 12.5%10.5% in early 20182020 reflected his performance during his first full year as the Company’s Chief Financial Officer and also as the Company’s General Counsel, and the additional scope of responsibilities associated with the acquisitionsacquisition of travisMathewJack Wolfskin in 2019.
(3) Ms. Harris-Jensbach’s base salary reflects a 2.0% change from 2019 when measured in U.S. dollars, as a result of foreign currency exchange conversion rates.
As described earlier, in response to the unforeseen business impact of the COVID-19 pandemic, the NEOs voluntarily took short term pay reductions as part of the broader Company-wide expense reduction initiatives. With the exception of Mr. Brewer, effective in April, base salaries were reduced by 20% for the three-month period of April through June, and OGIO in 2017.by 10% for the three-month period of July through September. Mr. Brewer’s base salary was reduced to zero from April through May, was restored to 60% of his 2020 base salary rate for the month of June, and 80% of his 2020 base salary rate from July through September. All NEO salaries were restored to the pre-reduction levels as of October 2020, but no true-up payments were made to the NEOs for their voluntarily reduced salaries.
Annual Incentive
Overview
The annual incentive bonus serves as the short-term incentiveperformance-based compensation element of the executive compensation program. The bonusincentive isat-risk, with payment based upon designated corporate goals and individual performance. The bonusincentive is intended to provide an incentive formotivate an executive to drive a high level of corporate and individual performance without excessive risk taking. The payout of annual bonusesincentives to executive officers is subject to the Compensation Committee’s approval following its review and assessment of corporate and of individual performance.
Bonus Pool FundingHow Incentive Opportunity and Payout is Determined
In 2018, the Company accrued a maximum pool of funds to be usedThe annual incentive payout for the bonus payouts toNEOs is determined using the executive officers underfollowing process, with the exception of Ms. Harris-Jensbach (whose annual incentive program. The amount ofdetermination is described below):
First, the bonus pool was determined based uponparticipant’s annual base salary is multiplied by the Company’s performance in 2018. The funding formula, which provided
fundingparticipant’s target incentive percentage and by the company-wide Adjusted EBITDAS modifier to coverdetermine the maximum bonuses payable to each eligible executive officer, was the aggregate of the following for each of the executive officers:participant’s baseline incentive payout.
Participant’s Annual Base Salary | X | Participant’s Target
Incentive % | X | Company-wide Adjusted EBITDAS Modifier % |
|
|
|
| Incentive Payout |
The 150%
Second, the participant’s baseline incentive payout may be adjusted upward or downward based on individual performance modifier was intendedfactors in the sole discretion of the Compensation and Management Succession Committee to provide funding to allow for a modest level of discretion to recognize exceptional individual performance.determine the final incentive payout. The Compensation Committee may adjust funding downward to result in an individual executive’s final payoutupward adjustments based on performance against agreed-upon objectives (or other performance during the year not anticipated at the beginning of the year when objectives are set)individual factors is limited to no more than 33%. The finalUnder no circumstances shall a participant be paid an incentive payout amount cannot exceedthat exceeds 200% of the executive’sparticipant’s target bonus percentage regardless of performance.
How Bonus Opportunity and Payout is Determined
Base Salary. The amount of an executive officer’s annual incentive bonus is generally based upon the level of achievement of the corporate performance metric as well as individual performance and accomplishments for the applicable year, including the degree to which predetermined regional or department goals are achieved. The base salary component of the formula is the executive’s 2018 annualized base salary.incentive.
Target Bonus.Incentive. The target bonusincentive percentage, which the Compensation Committee sets each year, is a percentage of the executive’s base salary and is the amount the executive could earn based upon the corporate performance portion of the bonus assuming the Company achieved its target corporate goals and the executive achieved hishis/her individual objectives and otherwise met performance expectations. The target bonusincentive percentages for 20182020 were based on each executive’s position and were set to be generally consistent with market data and the range of total direct compensation that the Compensation Committee targets for the NEOs. The 2018 target bonus percentage for each NEO was unchanged from 2017. The target bonusincentive percentages for 2018 are set out2020 for the NEOs were as follows: Mr. Brewer, 125%, Mr. Lynch, 75%, Mr. Leposky, 60%, Mr. Hickey, 60%, and Mr. Flannery, 60%. In 2019, the target incentive percentages for the NEOs were as follows: Mr. Brewer, 110%, Mr. Lynch, 70%, Mr. Leposky, 55%, and Mr. Hickey, 55%. Mr. Flannery was not an employee in the table under “—2018 Annual Incentive Payouts” below.2019. As discussed below, the actual bonusincentive payouts for each executive can vary from zero to 200% of such executive’s target bonusincentive percentage.
EBITDA Modifier.Corporate Performance Goals. Adjusted EBITDAEBITDAS, as further adjusted for items mentioned in the footnote below, was chosen as the corporate performance metric for 2018 because the primary objective for 2018 was sustaining the Company’s earnings growth and increasing liquidity. In addition, many of the Company’s investors value the Company based upon multiples of EBITDA.2020. The 2018 adjusted EBITDA2020 Adjusted EBITDAS performance goals were set at threshold, target and maximum levels by the Compensation Committee in January, 2018.2020. In setting these goals, the Compensation Committee considered the Company’s 20172019 performance, the Company’s 20182020 operational goals, and the 20182020 budget. Prior to approving the goals, the Compensation Committee discussed them with management and with its outside compensation consultant. The 2020 corporate performance goals were set by the Compensation Committee prior to the onset of the COVID-19 pandemic, and there were no subsequent adjustments made to such goals in light of the impact of the pandemic on the Company performance.
The threshold, target and maximum adjusted EBITDAAdjusted EBITDAS performance goals for 20182020 were $106.7$193.0 million, $116.6$211.4 million, and $126.3$244.6 million, respectively. No annual incentive bonus is paid unless the threshold performance goal is achieved. The target performance goal was consistent with the Company’s budget for 2018 and approximately 121% greater than the 2017 target performance goal.2020. The 2018 target goal reflected both an anticipated increase in sales in 2018 as well as the significant positive effect the 2017 acquisitions travisMathew and OGIO were expected to have on the Company’s business. The EBITDA ModifierAdjusted EBITDAS modifier is capped even if performance exceeds the maximum goals.
Potential payouts attributable to the EBITDAAdjusted EBITDAS modifier are determined based on the EBITDAAdjusted EBITDAS performance level achieved and are interpolated on a straight linestraight-line basis for achievement between the
threshold, target and maximum performance goals. The table below shows the relationship between the performance goals and the EBITDAAdjusted EBITDAS modifier for purposes of determining the potential payout:
Threshold | Target | Maximum | Actual Performance | |||||||
Adjusted EBITDA2 | $106.7 million | $116.6 million | $126.3 million | $154.9 million | ||||||
EBITDA Modifier | 50% | 100% | 150% | 150% |
Threshold | Target | Maximum | Actual Performance | |||||||
Adjusted EBITDAS(1) | $193.0 million | $211.4 million | $244.6 million | $164.5 million | ||||||
Adjusted EBITDAS Modifier | 50% | 100% | 200% | —% |
Individual Performance Modifier.The individual performance modifier(1) Adjusted EBITDAS is for funding purposes onlyearnings before interest, taxes, depreciation and is applied afteramortization expenses, and non-cash stock compensation expenses, in addition to costs associated with (i) the calculation ofTopgolf merger announced in October 2020; (ii) the EBITDA modifier. It is fixed at 150% to allow for the Compensation Committee to exercise negative discretion from the maximum individual funded payout levels to arrive at the final payout for the executive. In making its determination of the final bonus for a particular executive, the Compensation Committee considers the executive’s individual performance and accomplishments, and other than with respectCompany’s cost reduction initiatives in response to the Chief Executive Officer, the Chief Executive Officer’s recommendation.
2018 Annual Incentive Payouts
The Company achieved Adjusted EBITDA of $154.9 million for 2018, which represents a 55% increase over 2017 Adjusted EBITDA. 2018 Adjusted EBITDA exceeded the maximum performance goal under the terms of the bonus plan. However, the EBITDA modifier was capped at 150% for each of the NEOs.
In determining the final recommended bonus of each NEO, the Compensation Committee considered the exceptional 2018 financial and market share performance ofCOVID-19 pandemic; (iii) the Company’s core business,transition to its new North America Distribution Center; and (iv) the assessmentimplementation of each NEO’s strong individual performance toward the expansion of the Company beyond the core business operations. The Compensation Committee believed that the individual performance of each NEO was strong in 2018, resulting in a $194 million, or 19%, increase in net sales in 2018 compared to 2017; a 70 basis point increase in gross margin in 2018 compared to 2017, a $50 million, or 63%, increase in operating income in 2018 compared to 2017; expanded market opportunitiesnew IT systems for the Company; total shareholder return in 2018 of 10%; and other achievements, including those listed above under “Compensation Discussion and Analysis—Overview—Corporate 2018 Performance and Business Environment.” In light of the foregoing, the Compensation Committee recommended for Mr. Brewer, and the Board approved, a bonus of $1,700,000, which is equal to 200% of the target amount for Mr. Brewer. Based upon an assessment of individual performance and accomplishments in 2018, along with the exceptional overall corporate performance, the Company’s Chief Executive Officer recommended, and the Compensation Committee approved, 200% maximum bonus payouts for all other NEOs. (Also summarized in the table below).
The table below provides the actual bonus amounts reflecting the results from the application of the formulas above:
Name | Base Salary | X | Bonus Target % | X | ( | EBITDA Modifier | X | Individual Performance Modifier | = | Total Maximum Bonus Opportunity(1) | ) | = | Maximum Potential Payout | Actual Bonus $ | Actual Bonus % of Target | |||||||||||||||||||||||||||||||||||||||||||||
Mr. Brewer | $ | 850,000 | X | 100 | % | X | ( | 150 | % | X | 150 | % | = | 200 | % | ) | = | $ | 1,700,000 | $ | 1,700,000 | 200.0 | % | |||||||||||||||||||||||||||||||||||||
Mr. Lynch | $ | 450,000 | X | 65 | % | X | ( | 150 | % | X | 150 | % | = | 200 | % | ) | = | $ | 585,000 | $ | 585,000 | 200.0 | % | |||||||||||||||||||||||||||||||||||||
Mr. Arnett | $ | 410,000 | X | 55 | % | X | ( | 150 | % | X | 150 | % | = | 200 | % | ) | = | $ | 451,000 | $ | 451,000 | 200.0 | % | |||||||||||||||||||||||||||||||||||||
Mr. Leposky | $ | 435,095 | X | 55 | % | X | ( | 150 | % | X | 150 | % | = | 200 | % | ) | = | $ | 478,605 | $ | 478,605 | 200.0 | % | |||||||||||||||||||||||||||||||||||||
Mr. Hocknell | $ | 381,306 | X | 55 | % | X | ( | 150 | % | X | 150 | % | = | 200 | % | ) | = | $ | 419,437 | $ | 419,437 | 200.0 | % |
(1) Bonuses are capped at 200% of target.
2 Adjusted EBITDA is anon-GAAP financial measure within the meaning of Regulation G.Jack Wolfskin. Appendix A to this Proxy Statement includes a reconciliation of adjusted EBITDAAdjusted EBITDAS to the most directly comparable financial measures prepared in accordance with GAAP.
Annual Incentive for Ms. Harris-Jensbach. Ms. Harris-Jensbach’s target annual incentive award for 2020 was EUR 509,000, representing approximately 68% of her annual base salary. Her 2020 incentive opportunity was based upon measurement of overall Jack Wolfskin AdjustedEBIT,which is defined as Jack Wolfskin earnings before interest and taxes, in addition to costs associated with the
implementation of new IT systems for Jack Wolfskin. The Jack Wolfskin Adjusted EBIT threshold, target and maximum levels for 2020 were EUR 13.6 million, EUR 16.1 million and EUR 18.1 million, corresponding to 50%, 100% and 125% payout levels, with payouts between levels interpolated on a straight line basis. Jack Wolfskin EBIT for 2020 was EUR (24.0) million, resulting in a 0% achievement percentage.
2020 Annual Incentive Payouts for NEOs
As a result of the unforeseen business impacts of the COVID-19 pandemic, the Company failed to achieve threshold level Adjusted EBITDAS performance required to fund annual incentive payouts to the NEOs. Similarly, Jack Wolfskin did not achieve threshold level Jack Wolfskin Adjusted EBIT performance required to fund an incentive for Ms. Harris-Jensbach. As a result, with the exception of Mr. Flannery, no annual incentives were earned by the NEOs for 2020. For 2020 only, Mr. Flannery received a guaranteed annual incentive of $150,000 pursuant to the terms of his negotiated compensation package in connection with the commencement of employment in 2020.
Long-Term Incentive
Overview
Consistent with the Compensation Committee’s goal of aligning executive compensation with long-term Company performance and with the Compensation Committee’s guiding principle that a majority of the long-term incentives should be performance-based and that all should be equity-based, the Compensation Committee determined to award PRSUs and RSUs to the NEOs in 2018.2020, with the exception of Ms. Harris-Jensbach, who was in the final year of her employment agreement and did not receive any equity awards during 2020.
These awards were designed to motivate our executives to remain with the Company, achieve strong long-term operational performance and increase shareholder value. PRSUs tie executives to the interests of shareholders by focusing and rewarding our executives for achievement of key financial objectives that link to the creation of shareholder value. RSUs provide a retention incentive as they vest solely based upon continued service and upon vesting provide an ownership stake in the Company. They also further align the interests of the executives with those of the Company’s shareholders as the executives generally have the same long-term economic benefits and risks as those of a shareholder.
All executive officer awards in 20182020 were made under the Callaway Golf Company Amended and Restated 2004 Incentive Plan, as amended (the “Equity Plan”). The 20182020 awards granted to the NEOs were approved on January 31, 201830, 2020 and were granted on February 9, 2018.12, 2020, with the exception of Mr. Flannery, whose awards were granted on his hire date, February 21, 2020.
How the Awards are Determined
For each of the NEOs, the Compensation Committee sets a targeted long-term incentive award value. The targeted value for all of the Company’s officers generally varies by position and responsibility and is reviewed annually. In setting the targeted value, the Compensation Committee generally consults with its independent compensation consultant and periodically compares the targeted value to applicable market data, including broad industry data and, as warranted, data from the Compensation Comparison Group. It also considers the effect the long-term incentive element would have upon the executive’s total direct compensation.
The Compensation Committee then allocates the targeted long-term incentive award value between PRSUs and RSUs. The mix of the awards was intended to align with the Company’s philosophy that a majority of the long-term incentive awards for senior executives should be performance based. The target number of shares underlying the PRSUs and the number of shares underlying the RSUs is determined by multiplying the targeted long-term incentive award value by 55% and 45%, respectively, and dividing that number by the average closing price of the Common Stock for
the20-trading days immediately preceding the date on which the Compensation Committee approves the awards. A20-trading day average price, as opposed to a single price on the approval date, is used to mitigate the potential impact of single trading day aberrations on the number of shares granted.
The table below sets forth the targeted long-term incentive value, the “target” number of PRSUs and the number of RSUs for each of the NEOs for 2018:2020:
Name | 2018 Targeted Long-term Incentive Award Value | Target No. of Shares Underlying PRSUs(1) | No. of Shares Underlying RSUs | |||||
Oliver G. (Chip) Brewer III | $ | 3,500,000 | 134,427 | 109,986 | ||||
Brian P. Lynch | $ | 450,000 | 17,284 | 14,141 | ||||
Richard H. Arnett | $ | 450,000 | 17,284 | 14,141 | ||||
Mark F. Leposky | $ | 350,000 | 13,443 | 10,999 | ||||
Alan Hocknell | $ | 350,000 | 13,443 | 10,999 | ||||
(1) As explained below, zero to 200% of the target number of shares underlying the PRSUs will be eligible to vest after three years depending on the Company’s currency neutral adjusted EPS achievement over a three year performance period with opportunities to bank a limited portion of the award based upon interim year performance. |
Name | 2020 Targeted Long-Term Incentive Award Value | Target No. of PRSUs(1) | No. of Shares Underlying RSUs | |||||
Oliver G. (Chip) Brewer III | $ | 4,500,000 | 114,372 | 93,577 | ||||
Brian P. Lynch | $ | 750,000 | 19,062 | 15,596 | ||||
Joseph B. Flannery | $ | 500,000 | 12,708 | 10,397 | ||||
Glenn F. Hickey | $ | 500,000 | 12,708 | 10,397 | ||||
Mark F. Leposky | $ | 500,000 | 12,708 | 10,397 | ||||
(1) As explained below, zero to 200% of the target number of shares underlying the PRSUs will be eligible to vest after three years with 50% of the PRSUs depending on the Company’s calculated three-year TSR relative to the calculated three-year TSR of the LTIP Reference Group over the three year performance period, and the remaining 50% of the PRSUs depending on the Company’s currency neutral adjusted EPS achievement over a three year performance period, with opportunities to bank a limited portion of the award based upon interim year performance. |
Other than with respect to Messrs. Brewer and Lynch, the 2018The 2020 targeted long-term incentive value for all of the NEOs was unchangedincreased from 2017. Following2019 as a result of the increased revenue size and complexity of the business resulting from the acquisition of Jack Wolfskin, and a review of comparative compensation data by the Company’s performance, a discussionoutside compensation consultant. With the exception of Mr. Brewer’s leadership and contribution to that performance, as well as applicable market compensation data, Mr. Brewer received aFlannery, who was not employed by the Company in 2019, the changes in targeted long-term incentive award of $3,500,000 in 2018, as comparedvalues from 2019 to $3,000,000 in 2017. The increase reflects the Compensation Committee’s recognition of Mr. Brewer’s role2020 are summarized in the significant improvement in the Company’s operating performance as well as an incentive to drive further improvements going forward. Mr. Lynch’s targeted long-term incentive award was increased to $450,000 in 2018 from $350,000 in 2017. The increase reflects Mr. Lynch’s 2017 promotion to the role of Chief Financial Officer, and consideration of applicable market compensation data for this new role.table below.
Name | 2019 Targeted Long-term Incentive Award Value | 2020 Targeted Long-term Incentive Award Value | Value Change ($$) | ||||||||||||
Oliver G. (Chip) Brewer III | $ | 4,000,000 | $ | 4,500,000 | $ | 500,000 | |||||||||
Brian P. Lynch | $ | 600,000 | $ | 750,000 | $ | 150,000 | |||||||||
Glenn F. Hickey | $ | 450,000 | $ | 500,000 | $ | 50,000 | |||||||||
Mark F. Leposky | $ | 450,000 | $ | 500,000 | $ | 50,000 |
How the2020 Long-Term Incentive Awards Vest
Both RSUs and PRSUs are contingent rights to receive one share of Common Stock upon vesting of the applicable award.
RSUs. The RSUs granted in 20182020 vest and the restrictions lapse in three equal annual installments commencing on theone-year anniversary of the grant date, subject to continued employment through each applicable vesting date. This schedule means that, to receive the full benefit of the RSUs, the recipient must generally perform three years of continuous service following the grant date.
PRSUs.
The PRSUs granted in 20182020 are subject to both service-based and performance-based and service-based vesting. The Company’svesting with performance relativetied to the measurement of two equally weighted performance metrics, currency neutral adjusted EPS willand rTSR. Both are to be measured over a three-year performance period beginning January 1, 20182020 and ending December 31, 2020. 2022.
The number of shares earned may vary from zero to 200% of the target number of shares underlying the PRSUs dependingbased on the Company’s currency neutral adjusted EPS performance during thisover the three-year period.period may vary from 0% to 200%. A portion of the total award may be “banked” at the end of each interim year based on cumulative currency neutral adjusted EPS achievement during the interim performance period relative to the threshold target and maximumtarget levels established by the Compensation Committee in January 2018.2020. However, final vesting of the PRSUs will not occur until the end of the three-year performance period and will be
subject to continued employment through that date. Banked awards cannot be decreased based on performance in subsequent years. In addition, banked awards during the first year of the three-year performance period are capped at 50% of the currency neutral adjusted EPS “target” award (i.e. 25% of the total target PRSU award), and cumulative banked awards after the second year of the three-year performance period are capped at 80% of the currency neutral adjusted EPS “target” award which equates to(i.e. 40% of the maximum award.total target PRSU award). As such, vesting of the PRSUs tied to EPS above these levels can only be achieved if the Company’s cumulative currency neutral adjusted EPS performance is at or above the three-year target performance goal. The maximum award available based on currency neutral adjusted EPS performance alone would equate to no more than the overall total target PRSU award.
The TSR of the Company for the three-year performance period will be ranked on a percentile basis in comparison to the calculated TSR for companies listed in the LTIP Reference Group. There is no banking mechanism for the rTSR related award based on interim year performance. The number of shares earned based on the Company’s calculated rTSR over the three-year performance period compared to the companies listed in the LTIP Reference Group also may vary from 0% to 200%. The final calculation will be based only on those companies included in the LTIP Reference Group as of the end of the performance period, and therefore, if a company is removed from the index during the three-year performance period, they will be removed from the LTIP Reference Group for purposes of the final calculation. The performance goals for rTSR relative to the LTIP Reference Group, and related award levels, are detailed in the table below, with performance between levels interpolated on a straight-line basis.
Performance Period | No Payout | Threshold (50% Award) | Target | Maximum Award (200% Award) | ||||
2020 - 2022 | Below 25th Percentile | 25th Percentile | Median (50th Percentile) | 75th Percentile or Above |
The extent to which PRSUs are eligible to vest is determined based on the performance level achieved for each metric, and award levels are interpolated on a straight line basis for achievement between the respective threshold, target and maximum performance goals.goals for each metric. Performance below the threshold performance goal for a particular metric results in no PRSUs tied to that metric being eligible to vest. If the Compensation Committee determines that vesting of the PRSUs is accelerated in connection with a change in control prior to the completion of the performance period for the performance metricmetrics pursuant to the terms of the PRSU agreements, the value of the PRSUs will vest upon closure and be paid out at the target performance level.
In accordance with the terms of the plan, in evaluating the Company’s performance against the applicable currency neutral adjusted EPS goals, the Compensation Committee excludedtakes into consideration certain non-recurring items, including the following: (i) the $0.11 per share gain on the sale of a portion of the Company’s investment in Topgolf International, Inc. in 2016, (ii) the non-cash benefit of $1.63 per share from the reversal of the Company’s deferred tax valuation allowance in 2016, (iii) the non-cash net tax expense of $0.04 per share in 2017 as a result of the 2017 Tax Cuts and Jobs Act, and (iv) the non-recurring transaction and transition expenses, of $0.07 per sharenon-cash purchase accounting expenses and other non-recurring expenses related to the OGIO, TravisMathew and travisMathew acquisitions in 2017 and $0.01 per share benefit in 2018 related to the Jack Wolfskin acquisition. In addition, to eliminate the
non-recurring tax benefits resulting from the reversal of the deferred tax valuation allowance in 2016 and from the unexpected 2017 Tax Cuts and Jobs Act reduction in tax rates compared to the rates used to set the performance goals, the Compensation Committee used the budgeted tax rates that were used at the time the performance goals were set for the 2016-2018 and 2017-2019 plans.
For the 2016-20182018 - 2020 LTIP awards, thePlan. The cumulative threshold, target, and maximum currency neutral adjusted EPS objectives, and the actual cumulative performance level, for the full three-year performance period endingthat ended on December 31, 2018 were $0.45 (threshold), $0.75 (target), and $1.05 (maximum). For2020 are described in the cumulative actual performance during the performance period, thetable below. The Company exceeded the maximum currency neutral adjusted EPS objective, with final cumulative currency neutral adjusted EPS results of $1.60. $2.83. The final cumulative currency neutral adjusted EPS, excluded costs related to intangible assets from the acquisitions of OGIO, TravisMathew and Jack Wolfskin, costs related to the non-cash discount on the convertible notes, one-time costs related to the Jack Wolfskin acquisition and Topgolf merger, costs related to severance expense related to the Company’s cost reduction initiatives in response to the COVID-19 pandemic, costs related to the implementation of new IT systems for Jack Wolfskin, and costs related to the Company’s transition to its new North America Distribution Center. In addition to the above exclusions, the results were adjusted for the 2018
budgeted foreign currency rates.On January 31, 2019,February 3, 2021, the Compensation Committee determined that, based on these results, the maximum 200% of the target 2016-20182018-2020 PRSUs were earned, and these units vested in February 2019.2021.
For the 2017-2019
Final 2018 - 2020 LTIP Plan Summary | ||||||||||||||||
Threshold | Target | Maximum | Actual | |||||||||||||
Cumulative EPS | $ | 1.77 | $ | 2.04 | $ | 2.28 | $ | 2.83 | ||||||||
Award Level | 50 | % | 100 | % | 200 | % | 200 | % |
2019 - 2021 LTIP awards, thePlan. The cumulative threshold and target currency neutral adjusted EPS objectives, and the actual cumulative performance level, for the two year period endingthat ended on December 31, 2018 that would2020 are described in the table below. As a result in up to 80% of the award being banked were $0.32 (threshold) and $0.45 (target). Forunforeseen business impact of the COVID-19 pandemic, incremental 2020 performance negatively impacted cumulative performance. As a result, for the two year period endingthat ended on December 31, 2018,2020, the Company exceededdid not achieve the targetcumulative threshold currency neutral adjusted EPS goal, with cumulative currency neutral adjusted EPS results of $1.06.$1.74. The cumulative currency neutral adjusted EPS excluded costs related to the Jack Wolfskin acquisition, amortization costs related to the TravisMathew and OGIO acquisitions, and was adjusted for the 2019 budgeted foreign currency rates. Above target currency neutral adjusted EPS performance in the first year of the 2019-2021 PRSUs resulted in 50% of the EPS-related award (or 25% of the total overall target award) being banked at the end of 2019. On January 31, 2019,February 3, 2021, the Compensation Committee determined that, based on these results, 80%no incremental EPS-based award shares would be banked for the cumulative 2019-2020 performance period. The previously banked 50% of the target 2017-2019 PRSUs were deemed to be banked underEPS-related units (25% of the terms of these PRSUs and these banked unitstotal overall award) will vest on the third anniversary of the grant date, subject to continued employment through the vesting date.
For the 2018-2020 LTIP awards, the threshold
2019 - 2021 LTIP EPS-Related Award Summary as of 12/31/2020 | ||||||||||||||
| Cumulative Metrics / Performance | |||||||||||||
Performance Period | Threshold | Target | Maximum | Actual | ||||||||||
Year 1 - 2019 | $ | 0.86 | $ | 0.97 | N/A | $ | 1.10 | |||||||
Actual interim year award banking(1) | 25 | % | 50 | % | N/A | 50 | % | |||||||
Year 2 - 2020 | $ | 1.75 | $ | 2.00 | N/A | $ | 1.74 | |||||||
Cumulative actual interim years award banking(1) | 40 | % | 80 | % | N/A | 50 | % |
(1) EPS-related performance and banking levels above target currency neutral adjusted EPS objectives for 2018 that would resultnot evaluated until completion of full three-year performance period. Awards banked in up to 50% of the award being banked were $0.59 (threshold) and $0.67 (target). For 2018, the Company exceeded the target currency neutral adjusted EPS, with cumulative currency neutral adjusted EPS results of $0.96. On January 31, 2019, the Compensation Committee determined that,interim years cannot be reduced based on such results, 50% of the target 2018-2020 PRSUs were deemed to be banked under the terms of the PRSUs and these banked units will vest on the third anniversary of the grant date, subject to continued employment through the vesting date.subsequent year performance.
These “banked” PRSUs from both the 2017–2019 and 2018–2020 LTIP2019–2021 PRSU awards are reported in the “Number of Shares or Units of Stock That Have Not Vested” column of the “Outstanding Equity Awards at Fiscal-Year End 20182020 Table.” Each NEO remains eligible to vest in the remaining 2019-2021 PRSUs reflected in the original awards (up to a total of 200% of the “target” PRSUs) subject to the Company’s cumulative currency neutral adjusted EPS achievement and rTSR achievement during the remainder of the respective performance periods (and subject to additional potential “banking” following the completion of each interim performance year).period. The number of PRSUs in which a NEO remains eligible to vest is reported in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column of the “Outstanding Equity Awards at Fiscal-Year End 20182020 Table.” See “2018“2020 Compensation Tables—Outstanding Equity Awards at Fiscal-Year End 20182020 Table” below.
Approval2020 - 2022 LTIP Plan. The threshold and Timingtarget currency neutral adjusted EPS objectives for 2020, and the actual performance level, for the one year period that ended on December 31, 2020, are described in the table below. As a result of Grants
the unforeseen business impact of the COVID-19 pandemic, for 2020 the Company did not achieve the threshold currency neutral adjusted EPS threshold, with currency neutral adjusted EPS results of $0.68. The Compensation Committee has adopted specific guidelines that governfinal cumulative currency neutral adjusted EPS excluded costs related to the approvalJack Wolfskin acquisition, amortization costs related to the TravisMathew and timing of stock-based awards. The guidelines provide that (i) all equity award grants shall be approved byOGIO acquisitions, and was adjusted for the 2020 budgeted foreign currency rates. On February 3, 2021, the Compensation Committee (or authorized subcommittee thereof) under the authority delegated to it by the Company’s Boarddetermined that, based on such results, none of Directors, (ii) the annual equity award grants shall be approved at a regularly-scheduled or special meeting of the Compensation Committee during the first quarter each year prior to the Company’s earnings release announcing the financial results for the most recently completed fiscal year, to be effective as of the second trading day following the issuance of the earnings release, (iii) equity award grants that are made outside the annual award process relating to a promotion or other special circumstances shall be effective as of the date on which approval is obtained, and (iv) equity award grants that are made outside the annual award process to a new hire shall be approved at a regularly-scheduled or special meeting of the Compensation Committee (or authorized subcommittee) prior to the date employee commences employment with the Company or
the first regularly scheduled meetingtarget 2020-2022 PRSUs tied to currency neutral adjusted EPS performance (25% of the Compensation Committee (or authorized subcommittee) followingtotal target PRSU award) were deemed to be banked under the date of hire. The new hire awards shall be effective (i) on the date of hire if the approval of the awards occurred prior to the date of hire or (ii) as of the date on which approval is obtained if the approval of the awards occurred subsequent to the date of hire. The Compensation Committee’s (or authorized subcommittee’s) approval includes the eligible participants, type of awards, the size of award for each participant, the performance criteria where applicable, as well as the other terms of the PRSUs.
2020 - 2022 EPS-Related Award Summary as of 12/31/2020 | ||||||||||||||
| Cumulative Metrics / Performance | |||||||||||||
Performance Period | Threshold | Target | Maximum | Actual | ||||||||||
Year 1 - 2020 | $ | 0.81 | $ | 0.99 | N/A | $ | 0.68 | |||||||
Max / Actual Interim year award banking | 25 | % | 50 | % | N/A | 0 | % |
Each NEO remains eligible to vest in the remaining 2020-2022 PRSUs reflected in the original awards and program. Equity award grants may be approved by written consent in limited special circumstances. In accordance with these guidelines, the 2018 annual long-term incentive awards for the NEOs were approved by the Compensation Committee on January 31, 2018 and the awards were granted on February 9, 2018. The average closing price(up to a total of 200% of the Common Stock for“target” PRSUs) subject to the20-trading days immediately preceding Company’s cumulative currency neutral adjusted EPS achievement and rTSR achievement during the dateremainder of approval by the performance period, and subject to additional potential “banking” following the completion of each interim performance year. The number of PRSUs in which a NEO remains eligible to vest is reported in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column of the “Outstanding Equity Awards at Fiscal-Year End 2020 Table.” See “2020 Compensation Committee of these awards was $14.32 and on the date of grant was $14.80.Tables—Outstanding Equity Awards at Fiscal-Year End 2020 Table” below.
Dividend Equivalents
None of the PRSUs include dividend equivalents. Unvested RSUs granted to all of the Company’s employees, including the NEOs, have dividend equivalents in the form of additional RSUs. Dividend equivalents entitle holders of RSUs to the same dividend value per share as holders of Common Stock but are accrued in additional RSUs. Dividend equivalents are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs. The additional RSUs accrued in respect of dividends are accumulated and issued when and to the extent the underlying RSUs vest. In August 2020, as part of the Company’s effort to manage costs and capital allocation most efficiently, the Company announced the cessation of its quarterly dividends.
Benefits and Perquisites
Various benefits are established for the NEOs to enhance productivity, provide for healthcare needs, and encourage work/life balance. Consistent with the benefits provided to other U.S. employees, the Company’s primary benefits for executives include the Company’s health, dental and vision plans, and various insurance plans, including life, long-term disability, and accidental death and dismemberment insurance, as well as paid time off. Ms. Harris-Jensbach received health insurance at Company expense, an automobile allowance, travel reimbursement and life and accident insurance at Company expense. The Company covers the costs of an annual physical, the costs of tax and estate planning fees, and, consistent with the Company’s position as a leader in the golf industry, many executives are provided subsidized country club memberships or a limited amount of green fee reimbursements and a limited amount of the Company’s products. The Company from time to time provides other benefits to employees or officers as a group or to an individual officer as warranted. See the “2018“2020 Compensation Tables—20182020 Summary Compensation Table,” below for additional information about the value of benefits and perquisites provided to the NEOs in 2018.2020.
Retirement Plans
The Company does not provide the executive officers with any defined benefit pension plans or supplemental executive retirement plans, (SERPs), or other similar types of retirement benefits. The only retirement benefit the Company currently provides the NEOs, except for Ms. Harris-Jensbach, is the right to participate in the Company’s 401(k) Retirement Investment Plan. This retirement benefit is provided to all US Company employees and, except for Ms. Harris-Jensbach, the NEOs’ right to participate is the same as other Company employees.
The Company’s 401(k) plan allows participants to contribute a portion of their compensation into the plan with the Company providing a matching contribution up to 3% of the participant’s compensation (subject to a maximum matching contribution of up to $8,250$8,550 in 2018)2020). The funds held in the 401(k) plan are invested through Vanguard in various funds selected by the participant.
Deferred Compensation Plan
In December 2016, The Company suspended the Company adopted401(k) plan match for all employees, except for employees who are unionized and are covered under a collective bargaining agreement, effective with the Callaway Golf Company Deferred Compensation Plan (the “DCP”). The DCP was intended to help build a supplemental source of savings and retirement income throughpre-taxbi-weekly deferrals of eligible compensation, which included base
salary, annual cash bonus awards,sign-on cash bonus awards, commissions, long term cash incentive compensation, stock unit awards and/or any other payments designated as eligible for deferral under the DCP from time to time. Effective November 2017, as a result of minimal participation, and expressed lack of future interestpay period beginning April 13, 2020, in additional participation by eligible employees, and in considerationlight of the administrative costbusiness and time requirements necessary to support the DCP long-term, the DCP was terminated. As a result of this action, no further deferral opportunities will be provided. Any deferrals will be distributed to the participants no earlier than 12 months, and no later than 24 months, following the termination of the DCP in accordance with the requirements of Section 409A of the Code.
Employees at a vice president level or above were eligible to participate in the DCP. Mr. Brewer was the only NEO currently employedfinancial uncertainties created by the Company who elected to make deferrals underCOVID-19 pandemic. The suspension remained in place through December 31, 2020, and starting January 1, 2021, the DCP. Under the DCP, the Company provided participants with the opportunity to make annual elections to defer a specified percentage of up to 80% of their eligible cash compensation and up to 100% of their stock unit awards. No deferrals of cash compensation were made under the DCP. Elective deferrals of stock unit awards are credited to a bookkeeping account established in the name of the participant with respect to an equivalent number of shares of Common Stock, and such credited shares are subject to the same vesting conditions as are applicable to the stock unit award subject to the election.
At the time of deferral, deferrals of stock unit awards under the DCP are deemed rights to receive an issuance of Common Stock and may not be deemed allocated to any investment fund.
Under the DCP, with respect to deferrals of restricted stock units, the Company will be obligated to issue shares of Common Stock on a future date (the “Obligations”). The Obligations are unfunded, unsecured general obligations of the Company and rank in parity with the Company’s other unsecured and unsubordinated indebtedness, subject to the claims of the Company’s general creditors. The Obligations are not transferable except upon death of the participant.
Prior to the termination of the DCP, payments were to be distributed in connection with either the participant’s separation of service, a change in control of the Company or a selected specified distribution date or dates, depending upon the distribution election made by the participant at the time of deferral. For amounts elected for distribution upon a specified date, participants were able to elect the form of payment as a single lump sum payment or annual installment payments of up to five years. However, if a participant’s service with the Company terminates prior to the selected specified distribution date or dates, payment would instead be made or commence in connection with such separation from service. Participants were able to elect the form of payment as a lump sum or annual installments of up to fifteen years for distributions to be made upon the participant’s separation from service due to retirement, which means a separation from service after the participant has attained age 55 and has at least five years of service with the Company. Any distribution triggered by a separation from service that occurs prior to the participant’s retirement would be paid in a single lump sum. Additionally, if a participant’s service terminates with us due to death or disability, or the participant is receiving installment payments and dies or becomes disabled prior to payment of all the installments, the Obligation would become immediately payable in a single lump sum. In addition, participants were entitled to receive payments through certain unforeseeable emergency withdrawals. Due to the termination of the DCP, any deferrals will be distributed to the participants no earlier than 12 months, and no later than 24 months, following the termination of the DCP in accordance with the requirements of Section 409A of the Code. Currently, the Company expects to distribute any remaining deferrals in November 2019.401(k) plan match was reinstated.
Employment and Change in Control Agreements
Employment Agreements of NEOs other than Ms. Harris-Jensbach
The Company has entered into an employment agreement with each of the NEOs, copies of which have been filed with the SEC. The Company believes that employment agreements are beneficial to it as they provide, among other things, protections related to the Company’s trade secrets and intellectual property. Each employment agreement generally requires the executive officer to
devote his or her full productive time and best efforts to the Company, to hold in confidence all trade secrets and proprietary information he or she receives from the Company and to disclose and assign to the Company any inventions and innovations he or she develops during the course of employment with the Company. The employment agreements set forth the base salary, incentive compensation, and, in general terms, the benefits and perquisites that the executive officer is entitled to as described above. The employment agreements also set forth the benefits and rights the executive officer is entitled to upon termination of employment and upon achange-in-control of the Company. These rights are described below, and tables quantifying the potential payments to the NEOs upon the occurrence of such events are included with the other compensation tables included in this Proxy Statement.
Termination of Employment Generally other than Ms. Harris-Jensbach
In general, whether a NEO is entitled to severance benefits upon termination of employment depends upon the reason for the termination of employment. If an executive voluntarily resigns without “good reason” or the Company terminates the executive’s employment for “substantial cause,” then the executive is generally not entitled to any severance benefits. If the Company terminates the executive’s employment without substantial cause or if the executive resigns for good reason or because the Company elected not to renew the executive’s employment agreement at the expiration of its term, then the executive is generally entitled to severance benefits described below.
“Substantial cause” means the executive’s (i) failure to substantially perform the executive’s duties, (ii) material breach of the executive’s employment agreement, (iii) misconduct, including use or possession of illegal drugs during work and/or any other action that is damaging or detrimental in a significant manner to the Company, (iv) conviction of, or plea of guilty ornolo contendere to, a felony, or (v) failure to cooperate with, or any attempt to obstruct or improperly influence, any investigation authorized by the Board or any governmental or regulatory agency. “Good reason” means a material breach of the employment agreement by the Company, and with respect to Mr. Brewer, also means any material diminishment in his position or duties or any requirement that he relocate his principal residence.
The severance benefits to which the NEOs may be entitled are based upon an assessment of competitive market terms and a determination of what is needed to attract and retain the executive officers. Having negotiated these terms in advance allows for an orderly and amicable separation and, with respect to certain of these benefits, for the obtainment for the Company’s benefit of a release of claims, and provides an incentive for the executive not to compete with the Company.
Termination Event | Cash Payments | Equity Award Vesting | Other Benefits | |||
By executive without “good reason” or by Company with “substantial cause”
| None. | None. | None. | |||
By the Company without “substantial cause,” by executive for “good reason,” or failure by the Company to renew expired employment agreement | An amount equal to the annual incentive payment
Severance Payment: A payment of .50 times (.75 times for Mr. Brewer) the sum of his most recent base salary and annual target incentive payable over 12 months (18 months for Mr. Brewer).(2)
Incentive Payment: A payment of .50 times (.75 times for Mr. Brewer) the sum of his most recent base salary and annual target incentive payable over 12 months (18 months for Mr. Brewer) (the “Incentive Payments”)(3) | Accelerated vesting of all long-term incentive compensation awards held by the executive that would have vested had termination.(1) | Payment of COBRA and/or CalCOBRA premiums and the continuation of the financial, tax and estate planning services benefit for 12 months (18 months for Mr. Brewer) and outplacement services for one year.(2) |
(1) These benefits will be paid after the completion of the relevant performance period and after the evaluation of whether, and the degree to which, the performance criteria have been met. Performance-based awards will only accelerate to the extent the underlying performance objectives are achieved.
(2) Subject to the executive executing a release of claims in favor of the Company, the executive not engaging in any disparaging conduct or communications and his compliance with certain other requirements of his employment agreement.
(3) Payable so long as the executive chooses not to engage in any business that competes with the Company.
Termination of Employment Due to Disability or Death other than Ms. Harris-Jensbach
In the event of a NEO’s permanent disability, then the executive is generally entitled to the following benefits (i) a cash payment based on the incentive payment the executive would have received in light of the Company’s actual performance as measured against the requirements of the annual incentive plan andpro-rated to the date of permanent disability; (ii) a lump sum payment equal to six months of then current base salary; (iii) the vesting of all unvested long-term incentive compensation awards held by the executive that would have vested had hethe executive continued to perform services pursuant to histhe employment agreement for 12 months (18 months for Mr. Brewer) from the date of permanent disability; and (iv) the payment of premiums owed for COBRA insurance benefits for 12 months (18 months for Mr. Brewer) from the date of permanent disability. The payment of any benefits described in clauses (i) and (iii) above will be paid after the completion of the relevant performance period and the evaluation of whether, and the degree to which, the performance criteria have been met.
In the event of a NEO’s death, the executive’s estate is generally entitled to accelerated vesting of all service-based full value long-term incentive awards held by the executive.
Change-in-Control Arrangements with NEOs other than Ms. Harris-Jensbach
To provide independent leadership consistent with the shareholders’ best interests in the event of an actual or threatenedchange-in-control of the Company, the Company’s employment agreements with its officers, including the NEOs, provide certain protections in the event of achange-in-control. A“change-in-control” of the Company is defined, in general, as the acquisition by any person of beneficial ownership of 30% or more of the voting stock of the Company, the incumbent members of the Board cease to constitute a majority of the Board, certain business combinations of the Company, or any shareholder-approved or court-ordered plan of liquidation of the Company.
The Company’schange-in-control benefits require a double trigger prior to payment. In other words, there must be achange-in-control and a “termination event” (described below) within one year following achange-in-control. A “termination event” generally means the occurrence of any of the following within one year of thechange-in-control: (i) the termination without substantial cause or a material breach of the employment agreement by the Company, (ii) failure by the successor company to assume the employment agreement, (iii) any material diminishment in the position or duties that the executive had immediately prior to thechange-in-control, (iv) any reduction in compensation or benefits, or (v) any requirement that the executive relocate his principal residence.
In the event there is such achange-in-control and termination event, each named executive officer currently employed by the Company is generally entitled to the following benefits:
Cash Payments | Equity Award Vesting | Other Benefits | ||||
An amount equal to the annual incentive payment
Severance Payment: A payment of 1.0 times the sum of
Incentive Payment: A payment of 1.0 times the sum of | Accelerated vesting of all long-term incentive compensation awards held by the executive that would have vested had | Payment of COBRA and/or CalCOBRA premiums and the continuation of the financial, tax and estate planning services benefit for 24 months and outplacement services for one year.(2) |
(1) These benefits will be paid after the completion of the relevant performance period and after the evaluation of whether, and the degree to which, the performance criteria have been met. Performance-based awards will only accelerate to the extent the underlying performance objectives are achieved.
(2) Subject to the executive executing a release of claims in favor of the Company, the executive not engaging in any disparaging conduct or communications and his compliance with certain other requirements of his employment agreement.
(3) Payable so long as the executive chooses not to engage in any business that competes with the Company.
Our current form of long-term equity award agreements provide that upon a change of controlchange-in-control the Compensation Committee will determine (based upon the nature of thechange-in-control transaction) whether the awards are assumed or continued or a substitute award is issued or whether, in the event the awards are not assumed or continued or substituted for, the awards vest on an accelerated basis. For this purpose, if the Compensation Committee determines that the awards vest on an accelerated basis, performance awards will vest at “target” if the performance period has not been completed. In addition, for awards that are assumed, continued or substituted for in a change-in-control, our current form of long-term equity award agreements provide for accelerated vesting in the event of an executive’s termination other than for substantial cause or resignation for good reason, in either case within one year following a change-in-control (with the PRSUs vesting at “target” levels), which acceleration is in addition to the accelerated vesting provided in the employment agreements. The Company’s 401(k) Retirement Investment Plan also provides for full vesting of all participant accounts immediately prior to achange-in-control (as defined in the plan).
Managing Director Agreement with Ms. Harris-Jensbach; Consulting Agreement with Ms. Harris-Jensbach
The Company entered into a Managing Director Agreement with Ms. Harris-Jensbach, a copy of which has been filed with the SEC. Her Managing Director Agreement set forth the base salary, incentive compensation, and, in general terms, the benefits and perquisites that she was entitled to during her employment. The Managing Director Agreement also sets forth the benefits and rights she was entitled to upon termination of employment. These rights are described below, and tables quantifying the potential payments to her upon the occurrence of such events are included with the other compensation tables included in this Proxy Statement. The Managing Director Agreement expired by its terms on December 31, 2020.
Under her Managing Director Agreement, Ms. Harris-Jensbach was entitled to certain termination benefits upon termination of employment depending upon the reason for the termination of employment. If she voluntarily resigned or the Company terminated her employment for “good cause,” then she was generally not entitled to any termination benefits. The Managing Director Agreement also contained post-termination nonsolicitation covenants that continue for 18 months and noncompetition covenants that continue for 12 months (unless the Company elected to waive the non-compete in which case the Company’s payment obligation is reduced as set forth in the chart below).
Ms. Harris-Jensbach’s employment terminated effective December 31, 2020 as a result of the expiration of the term of her Managing Director Agreement. Because her employment terminated as a result of the expiration of the term of the agreement, and because the Company timely waived the post-termination non-compete provisions in the Managing Director Agreement, she is not entitled to any post-termination benefits under the Managing Director Agreement. Effective January 1, 2021, the Company entered into a consulting agreement with Ms. Jensbach-Harris pursuant to which she will provide consulting services for one year following her termination of employment, in exchange for consulting fees of €100,000 (or U.S. $114,145 using the 2020 average exchange rate of EUR 1 = 1.14145 USD).
Governance and Other Considerations
Clawbacks
Each of the employment agreements for our U.S.-based NEOs contains “clawback” provisions. If the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirements under the U.S. securities laws as a result of the intentional misconduct or gross negligence of a NEO, then the applicable NEO is required to forfeit and reimburse the Company for all of the following: (i) any incentive or incentive compensation or equity compensation paid based upon such erroneously stated financial information, (ii) any incentive or incentive compensation or equity compensation received by the applicable NEO during the12-month period following the earlier of the first public issuance or filing with the SEC of the financial document embodying the financial reporting requirement, (iii) any profits realized from the sale of Company securities during that same12-month period, and (iv) if the individual’s employment is terminated, the right to receive special severance and incentive payments and any unvested and/or unexercised long-term incentive compensation awards.
In addition, if the NEO is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 and the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under the United States securities laws as a result of misconduct of such NEO (within the meaning of Section 304, but other than as a result of intentional misconduct or gross negligence (which are covered by the paragraph above)), then the applicable individual is required, by Section 304, to forfeit and reimburse the Company for all of the following: (i) any incentive or incentive compensation or equity compensation received by Employee during the twelve (12) month period following the earlier of the first public
issuance or filing with the SEC of the financial document embodying the financial reporting requirement and (ii) any profits realized from the sale of Company securities during that same twelve (12) month period.
Risk Assessment of Compensation Programs
The Company has determined that its compensation policies, plans and practices are consistent with the Company’s strategic objectives, are appropriately balanced and do not create risks that are reasonably likely to have a material adverse effect on the Company. In making this determination, the Company’s human resources and law departments conducted their annual review of the compensation policies, plans and practices for its executive officers, as well as for all other employees, and then discussed their findings with the Company’s Chief Executive Officer, the Compensation Committee and the Compensation Committee’s independent compensation consultant. The Company identified its compensation policies, plans and practices that: covered its employee
population; were structured differently from those of other business units; or represented a significant portion of its compensation expense. The Company then assessed the risk-taking incentives inherent in the design and operation of these policies, plans and practices, including the following features of such policies, plans and practices: design, payment methodology, potential payment volatility, relationship to financial results, length of performance period, performance measures and goals, oversight and controls, and plan features and values compared to market practices. The Company also assessed the various controls that mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines and forfeiture provisions contained in the employment agreements of the named executive officers that enable the recovery of certain incentive compensation payments in certain circumstances.
Based on this review, the Company believes that its compensation policies, plans and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. This conclusion is based on, among other things, the approach employed by the Company in developing its compensation policies and practices, including the following:
In setting these policies and practices, the Company was careful to ensure that they were consistent with the Company’s strategic objectives and that none of the policies or practices varied significantly from the overall risk and reward structure of the Company. As a result, by design, no individual award is large enough such that its value could create material financial risk to the Company.
The Company employed a balanced approach to its policies and practices. More specifically, in setting these policies and practices, the Company balanced short-term and long-term incentives; cash and stock-based compensation; service-based and performance-based compensation; and corporate and individual performance incentives. The Company believes that this overall balanced approach significantly reduces the risk that the Company’s compensation policies or practices could have a material adverse effect on the Company.
The Company’s performance incentive plans could not be easily manipulated as they provide for a minimum level of overall corporate profitability before any payout occurs.
The Company believes that certain of its policies and programs, such as its stock ownership guidelines and compensation forfeiture provisions applicable to certain senior officers, also mitigate any risk-taking incentive inherent in any compensation policies or practices.
The Compensation Committee, which is comprised solely of independent directors, has the authority in certain circumstances to consider factors outside of the incentive plans and to exercise discretion to adjust the funding of incentive awards.
Excise Taxes
The employment agreements for the NEOs do not obligate the Company to provide indemnification for excise taxes. Furthermore, the employment agreements for the NEOs provide that to the extent that any or all of thechange-in-control payments and benefits provided to the executive under the employment agreement or any other agreement constitute “parachute payments” within the meaning of Section 280G of the Code and would otherwise be subject to the excise tax imposed by Section 4999 of the Code, then the aggregate amount of suchchange-in-control payments and benefits would be reduced by the minimum amounts necessary to equal one dollar less than the amount which would result in such payments and benefits being subject to such excise tax.
Stock Ownership Guidelines
In May 2018, theThe Board previously adopted updated stock ownership guidelines after review and consultation with our independent compensation consultant regarding best practices. Per the newly
adopted guidelines, which increased holding requirements for non-employee directors and executive officers, the Company’s executive officers are required to own Common Stock interests with a value equal to at least the following minimum amounts:
Chief Executive Officer | 5x Base Salary | |
Other Executive Officers | 2x Base Salary |
The minimum share ownership amounts are required to be achieved within five years of an individual first becoming subject to these guidelines. Compliance with these guidelines is assessed on an annual basis. At the time compliance was assessed in 2018,2020, all of the NEOs were in compliance with these guidelines. For more information regarding the stock ownership guidelines, see “Board of Directors and Corporate Governance — Governance—Stock Ownership Guidelines,” above.
Policy on Speculative Trading Activities — Activities—Anti-Hedging and Pledging Policy
The Company’s insider trading policy provides, among other things, that directors, officers and other employees may not engage in certain types of speculative activities with respect to the Company’s securities, including short sales, transactions in put options, call options or other derivative securities, hedging transactions, pledging of Company stock as collateral for a loan, or holding shares of Company stock in a margin account.
Tax Deductibility of Executive Compensation.
In designing and approving the Company’s executive compensation plans, the Compensation Committee considers the effect of all applicable tax regulations, including Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), which generally disallows a tax deduction to public corporations fornon-qualifying compensation in excess of $1.0 million paid to the ”covered employees.” Prior to the 2017 Tax Cuts and Jobs Act, covered employees generally consisted of our Chief Executive Officer and each of the next three highest compensated officers serving at the end of the taxable year other than our Chief Financial Officer, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As part of the 2017 Tax Cuts and Jobs Act, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the definition of covered employees was expanded to generally include all named executive officers. Although the tax deductibility of executive compensation is an important consideration, the Compensation Committee may approve compensation that does not qualify for deductibility where it is appropriate to do so. In addition, although we historically maintained certain performance-based incentive plans that originally were intended to permit the payment of compensation deductible under Section 162(m), subject to the limited transition relief rules in the 2017 Tax Cuts and Jobs Act, we may no longer be able to take a deduction for any compensation in excess of $1 million that is paid to a covered employee.
20182020 Summary Compensation Table
The following table summarizes the compensation paid to or earned by the Company’s NEOs. For a description of the components of the Company’s 20182020 executive compensation program, see “Executive Officer Compensation—Compensation Discussion and Analysis—Components of the 20182020 Executive Compensation Program.”
Name and Principal Position(a) | Year(b) | Salary(c) | Bonus(d) | Stock Awards(1)(e) | Option Awards(f) | Non-Equity Incentive Plan Compen- sation(2)(g) | Change in Pension Value and Nonqualified Deferred Compen- sation Earnings(h) | All Other Compen sation(3)(4)(i) | Total(j) | Year(b) | Salary(1)(c) | Bonus(d) | Stock Awards (2)(e) | Option Awards(f) | Non-Equity Incentive Plan Compen- sation(3)(g) | Change in Pension Value and Nonqualified Deferred Compen- sation Earnings(h) | All Other Compen- sation (4)(5)(i) | Total(j) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oliver G. (Chip) Brewer III | 2018 | $ | 845,205 | $ | — | $ | 3,617,313 | $ | — | $ | 1,700,000 | $ | — | $ | 67,038 | (5) | $ | 6,229,556 | 2020 | $ | 761,475 | $ | — | $ | 4,098,675 | $ | — | $ | — | $ | — | $ | 69,231 | (6) | $ | 4,929,381 | |||||||||||||||||||||||||||||||||||||||||||||
President and Chief | 2017 | $ | 800,000 | $ | — | $ | 2,681,419 | $ | — | $ | 1,600,000 | $ | — | $ | 67,225 | $ | 5,148,644 | 2019 | $ | 895,205 | $ | — | $ | 3,843,484 | $ | — | $ | 1,023,660 | $ | — | $ | 68,965 | $ | 5,831,314 | |||||||||||||||||||||||||||||||||||||||||||||||
Executive Officer
| 2016 | $ | 796,986 | $ | — | $ | 2,454,384 | $ | — | $ | 1,500,000 | $ | — | $ | 65,735 | $ | 4,817,105 | 2018 | $ | 845,205 | $ | — | $ | 3,617,313 | $ | — | $ | 1,700,000 | $ | — | $ | 67,038 | $ | 6,229,556 | |||||||||||||||||||||||||||||||||||||||||||||||
Brian P. Lynch | 2018 | $ | 445,205 | $ | 465,090 | $ | — | $ | 585,000 | $ | — | $ | 35,660 | (6) | $ | 1,530,955 | 2020 | $ | 488,361 | $ | — | $ | 683,109 | $ | — | $ | — | $ | — | $ | 30,360 | (7) | $ | 1,201,830 | |||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and | 2017 | $ | 393,728 | $ | — | $ | 812,840 | $ | — | $ | 520,000 | $ | — | $ | 33,107 | $ | 1,759,675 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer
| 2016 | $ | 338,366 | $ | — | $ | 343,617 | $ | — | $ | 371,943 | $ | — | $ | 32,831 | $ | 1,086,757 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard H. Arnett | 2018 | $ | 408,986 | $ | — | $ | 465,090 | $ | — | $ | 451,000 | $ | — | $ | 29,929 | (8) | $ | 1,355,005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President | 2019 | $ | 473,564 | $ | — | $ | 576,511 | $ | — | $ | 343,805 | $ | — | $ | 35,350 | $ | 1,429,230 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and Chief Financial Officer | 2018 | $ | 445,205 | $ | — | $ | 465,090 | $ | — | $ | 585,000 | $ | — | $ | 35,660 | $ | 1,530,955 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph B. Flannery | 2020 | $ | 408,611 | $ | 200,000 | (8) | $ | 433,912 | $ | — | $ | — | $ | — | $ | 276,634 | (9) | $ | 1,319,157 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 2017 | $ | 396,626 | $ | — | $ | 402,212 | $ | — | $ | 440,000 | $ | — | $ | 27,086 | $ | 1,265,924 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Global Marketing and Callaway Brands
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Goods |
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Glenn F. Hickey | 2020 | $ | 432,006 | $ | — | $ | 455,400 | $ | — | $ | — | $ | — | $ | 12,847 | (10) | $ | 900,253 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 2019 | $ | 439,469 | $ | — | $ | 432,388 | $ | — | $ | 255,915 | $ | — | $ | 15,655 | $ | 1,143,427 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Callaway Golf |
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Mark F. Leposky | 2018 | $ | 434,077 | $ | — | $ | 361,741 | $ | — | $ | 478,605 | $ | — | $ | 14,416 | (7) | $ | 1,288,839 | 2020 | $ | 432,006 | $ | — | $ | 455,400 | $ | — | $ | — | $ | — | $ | 11,787 | (11) | $ | 899,193 | |||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 2017 | $ | 423,639 | $ | — | $ | 759,733 | $ | — | $ | 466,931 | $ | — | $ | 14,290 | $ | 1,664,593 | 2019 | $ | 448,571 | $ | — | $ | 432,388 | $ | — | $ | 255,915 | $ | — | $ | 15,457 | $ | 1,152,331 | |||||||||||||||||||||||||||||||||||||||||||||||
Global Operations
| 2016 | $ | 416,451 | $ | — | $ | 343,617 | $ | — | $ | 368,332 | $ | — | $ | 14,262 | $ | 1,142,662 | 2018 | $ | 434,077 | $ | — | $ | 361,741 | $ | — | $ | 478,605 | $ | — | $ | 14,416 | $ | 1,288,839 | |||||||||||||||||||||||||||||||||||||||||||||||
Alan Hocknell | 2018 | $ | 380,414 | $ | — | $ | 361,742 | $ | — | $ | 419,437 | $ | — | $ | 25,059 | (9) | $ | 1,186,652 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, | 2017 | $ | 371,267 | $ | — | $ | 312,828 | $ | — | $ | 409,207 | $ | — | $ | 24,661 | $ | 1,117,963 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Development
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Melody Harris-Jensbach | 2020 | $ | 856,088 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 120,470 | (12) | $ | 976,558 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Former CEO, Jack | 2019 | $ | 839,603 | $ | 246,283 | $ | 930,680 | $ | — | $ | 113,962 | $ | — | $ | 13,641 | $ | 2,144,169 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wolfskin |
(1) | In response to the unforeseen business impact of the COVID-19 pandemic, the NEOs voluntarily took short term pay reductions as part of the broader Company-wide expense reduction initiatives. With the exception of Mr. Brewer, effective in April, base salaries were reduced by 20% for the three-month period of April through June, and by 10% for the three-month period of July through September. Mr. Brewer’s base salary was reduced to zero from April through May, was restored to 60% of his base salary rate for the month of June, and 80% of his base salary rate from July through September. All NEO salaries were restored to pre-reduction levels as of October 2020, but no true-up payments were made to the NEOs for their voluntarily reduced salaries. |
(2) | Represents the aggregate grant date fair value of RSUs and PRSUs calculated for financial reporting purposes for the year in accordance with Accounting Standards Codification Topic 718, “Compensation—Stock Compensation” (“ASC 718”). See Note |
free interest rate of 2.43% derived from the yield on U.S. government bonds of appropriate term from the U.S. Department of Treasury; (c) a dividend yield of 0.2% based on historic and future dividend yield estimates; (d) stock price volatility of 29% based on an analysis of the historical stock price volatility of the Company and each company in the LTIP Reference Group over the three years prior to the date of grant to conform to the term of the awards; and (e) initial TSR performance of -5.3% based on the actual historical TSR performance for the Company and each company in the LTIP Reference Group. Based on this methodology, the valuation of the PRSUs tied to rTSR performance granted during the fiscal year ended December 31, 2019 was 111.8% of the closing price of the Company’s stock on the date of grant. The highest level of performance that may be achieved for the PRSUs is 200% of the target. The |
The amounts in this column represent the actual amounts earned under the Company’s annual incentive program for the applicable year. No amounts were paid to our NEOs earned under the annual incentive program for 2020. For additional information regarding this program, see “Executive Officer Compensation—Compensation Discussion and Analysis—Components of the |
Includes perquisites and personal benefits. All NEOs were eligible to receive any or all of the following perquisites during all or a portion of |
The Company believes the dollar value of dividends paid or accrued on the stock awards reported in column (e) is factored into the grant date fair value of the stock awards reported in those columns. Accordingly, the dollar value of dividends paid or accrued is not reported as “All Other Compensation” in this column (i). |
Consists of (i) |
|
(7) | Consists of (i) |
(8) |
|
(9) | Consists of (i) |
(10) | Consists of (i) a $4,219 Company matching contribution under its 401(k) Retirement Investment Plan, (ii) $8,096 of total perquisites and other personal benefits comprised of items |
(11) | Consists of (i) a $4,219 Company matching contribution under its 401(k) Retirement Investment Plan, (ii) $6,149 of total perquisites and other personal benefits comprised of item (b) described in footnote 3, and (iii) $1,419 of paid-time-off paid out during 2020. |
(12) | Consists of perquisites and benefits including (i) $2,377 for a directors and officers insurance policy, (ii) $1,677 for the reimbursement of costs related to life and accident insurance policies, (iii) the related tax gross-up of $1,515 for income imputed under local income tax laws in Germany, (iv) $575 for lease payments in connection with the use of a Company car, and (v) $181 for personal travel expenses. In addition, Ms. Harris-Jensbach is entitled to compensation in the amount of €100,000 (or U.S. $114,145 using the 2020 average exchange rate as provided below) pursuant to the terms of a consulting agreement executed in connection with Ms. Harris-Jensbach’s departure from the Company. Amounts reported for Ms. Harris-Jensbach were paid in Euros and were converted to US Dollars using the 2020 average exchange rate of EUR 1 = 1.14145 USD. |
Grants of Plan-Based Awards in Fiscal Year 20182020
The following table sets forth certain information with respect to grants of awards to the NEOs under the Company’snon-equity and equity incentive plans during fiscal year 2018.2020. For additional information concerning the annual and long-term incentives included in the Company’s executive compensation programs, see “Executive Officer Compensation—Compensation Discussion and Analysis—Components of the 20182020 Executive Compensation Program.”
Name | Grant Date(1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | Grant Date(1) |
Estimated Future Payouts Under Non-Equity Incentive |
Estimated Future Payouts Under Equity Incentive | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oliver G. (Chip) Brewer III | N/A (2) | 425,000 | 850,000 | 1,700,000 | N/A(2) | 625,000 | 1,250,000 | 2,500,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/9/2018(3) | 67,214 | 134,427 | 268,854 | 1,989,520 | 2/12/2020(3) | 57,186 | 114,372 | 228,744 | 2,254,272 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018
|
|
| 109,986(4)
|
|
| 1,627,793
|
| 2/12/2020(4) | 93,577 | 1,844,403 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brian P. Lynch | N/A (2) | 146,250 | 292,500 | 585,000 | N/A(2) | 196,875 | 393,750 | 787,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/9/2018(3) | 8,642 | 17,284 | 34,568 | 255,803 | 2/12/2020(3) | 9,531 | 19,062 | 38,124 | 375,712 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018
|
|
| 14,141(4)
|
|
| 209,287
|
| 2/12/2020(4) | 15,596 | 307,397 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard H. Arnett | N/A (2) | 112,750 | 225,500 | 451,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph B. Flannery | N/A(2) | 132,000 | 264,000 | 528,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2020(3) | 6,354 | 12,708 | 25,416 | 238,656 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2020(4) | 10,397 | 195,256 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Glenn F. Hickey | N/A(2) | 138,375 | 276,750 | 553,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/9/2018(3) | 8,642 | 17,284 | 34,568 | 255,803 | 2/12/2020(3) | 6,354 | 12,708 | 25,416 | 250,475 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018
|
|
| 14,141(4)
|
|
| 209,287
|
| 2/12/2020(4) | 10,397 | 204,925 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark F. Leposky | N/A (2) | 119,651 | 239,302 | 478,605 | N/A(2) | 138,375 | 276,750 | 553,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/9/2018(3) | 6,722 | 13,443 | 26,886 | 198,956 | 2/12/2020(3) | 6,354 | 12,708 | 25,416 | 250,475 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018
|
|
| 10,999(4)
|
|
| 162,785
|
| 2/12/2020(4) | 10,397 | 204,925 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alan Hocknell | N/A (2) | 104,859 | 209,718 | 419,437 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/9/2018(3) | 6,722 | 13,443 | 26,886 | 198,956 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018
|
|
| 10,999(4)
|
|
| 162,785
|
|
(1) | The Compensation Committee approved the grants of the equity-based awards to the NEOs as of January |
(2) | The amounts shown in this row reflect the estimated threshold, target and maximum amounts that could have been paid to the NEO under the |
(3) | The amounts shown represent the threshold, target and maximum number of shares subject to PRSU awards granted to the NEOs in |
(4) | The amounts shown reflect the number of shares underlying RSU awards granted to the NEOs in |
Outstanding Equity Awards at FiscalYear-End 20182020
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexcercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date(2) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||
Oliver G. (Chip) Brewer III | 2/9/2018(4) | — | — | — | — | — | 67,214 | $ | 1,028,374 | 67,213 | $ | 1,028,359 | ||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 110,222 | $ | 1,686,400 | — | — | ||||||||||||||||||||||||||||||
2/6/2017(6) | — | — | — | — | — | 116,814 | $ | 1,787,254 | 29,204 | $ | 446,821 | |||||||||||||||||||||||||||||
2/6/2017(5) | — | — | — | — | — | 120,097 | $ | 1,837,487 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(7) | — | — | — | — | — | 313,568 | $ | 4,797,590 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(5) | — | — | — | — | — | 43,151 | $ | 660,207 | — | — | ||||||||||||||||||||||||||||||
| 2/1/2013
|
|
| 497,537
|
|
| —
|
|
| —
|
| $
| 6.52
|
|
| 2/1/2023
|
| $
|
|
|
| —
|
|
| —
|
| ||||||||||||||
Brian P. Lynch. | 2/9/2018(4) | — | — | — | — | — | 8,642 | $ | 132,223 | 8,642 | $ | 132,223 | ||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 14,171 | $ | 216,822 | — | — | ||||||||||||||||||||||||||||||
8/1/2017(8) | — | — | — | — | — | 39,234 | $ | 600,276 | — | — | ||||||||||||||||||||||||||||||
2/6/2017(6) | — | — | — | — | — | 13,628 | $ | 208,508 | 3,407 | $ | 52,127 | |||||||||||||||||||||||||||||
2/6/2017(5) | — | — | — | — | — | 9,341 | $ | 142,915 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(7) | — | — | — | — | — | 43,900 | $ | 671,670 | — | — | ||||||||||||||||||||||||||||||
| 2/8/2016(5)
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| 6,041
|
| $
| 92,425
|
|
| —
|
|
| —
|
| |||||||||||
Richard H. Arnett | 2/9/2018(4) | — | — | — | — | — | 8,642 | $ | 132,223 | 8,642 | $ | 132,223 | ||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 14,171 | $ | 216,822 | — | — | ||||||||||||||||||||||||||||||
2/6/2017(6) | — | — | — | — | — | 17,522 | $ | 268,087 | 4,381 | $ | 67,029 | |||||||||||||||||||||||||||||
2/6/2017(5) | — | — | — | — | — | 12,009 | $ | 183,735 | — | — | ||||||||||||||||||||||||||||||
9/1/2016(9) | — | — | — | — | — | 87,492 | $ | 1,338,625 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(7) | — | — | — | — | — | 43,900 | $ | 671,670 | — | — | ||||||||||||||||||||||||||||||
| 2/8/2016(5)
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| 6,041
|
| $
| 92,425
|
|
| —
|
|
| —
|
| |||||||||||
Mark F Lenosky. | 2/9/2018(4) | — | — | — | — | — | 6,722 | $ | 102,847 | 6,721 | $ | 102,831 | ||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 11,023 | $ | 168,646 | — | — | ||||||||||||||||||||||||||||||
2/6/2017(6) | — | — | — | — | — | 13,628 | $ | 208,508 | 3,407 | $ | 52,127 | |||||||||||||||||||||||||||||
2/6/2017(5) | — | — | — | — | — | 9,341 | $ | 142,915 | — | — | ||||||||||||||||||||||||||||||
2/6/2017(10) | — | — | — | — | — | 44,481 | $ | 680,554 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(7) | — | — | — | — | — | 43,900 | $ | 671,670 | — | — | ||||||||||||||||||||||||||||||
| 2/8/2016(5)
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| —
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| —
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| —
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| 6,041
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| $
| 92,425
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Alan Hocknell | 2/9/2018(4) | — | — | — | — | — | 6,722 | $ | 102,847 | 6,721 | $ | 102,831 | ||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 11,023 | $ | 168,646 | — | — | ||||||||||||||||||||||||||||||
2/6/2017(6) | — | — | — | — | — | 13,628 | $ | 208,508 | 3,407 | $ | 52,127 | |||||||||||||||||||||||||||||
2/6/2017(5) | — | — | — | — | — | 9,341 | $ | 142,915 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(7) | — | — | — | — | — | 43,900 | $ | 671,670 | — | — | ||||||||||||||||||||||||||||||
2/8/2016(5) | — | — | — | — | — | 6,041 | $ | 92,425 | — | — |
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexcercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date(2) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||
Oliver G. (Chip) Brewer III | 2/12/2020(4) | — | — | — | — | — | — | $ | — | 114,372 | $ | 2,746,072 | ||||||||||||||||||||||||||||
2/12/2020(5) | — | — | — | — | — | 93,692 | $ | 2,249,545 | — | — | ||||||||||||||||||||||||||||||
2/8/2019(6) | — | — | — | — | — | 33,743 | $ | 810,169 | 101,226 | $ | 2,430,436 | |||||||||||||||||||||||||||||
2/8/2019(5) | — | — | — | — | — | 73,878 | $ | 1,773,811 | — | — | ||||||||||||||||||||||||||||||
2/9/2018(7) | — | — | — | — | — | 268,854 | $ | 6,455,185 | — | $ | — | |||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 36,870 | $ | 885,249 | — | — | ||||||||||||||||||||||||||||||
| 2/1/2013 | 497,537 | — | — | $ | 6.52 | 2/1/2023 |
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Brian P. Lynch | 2/12/2020(4) | — | — | — | — | — | — | $ | — | 19,062 | $ | 457,679 | ||||||||||||||||||||||||||||
2/12/2020(5) | — | — | — | — | — | 15,615 | $ | 374,916 | — | — | ||||||||||||||||||||||||||||||
2/8/2019(6) | — | — | — | — | — | 5,062 | $ | 121,539 | 15,183 | $ | 364,543 | |||||||||||||||||||||||||||||
2/8/2019(5) | — | — | — | — | — | 11,081 | $ | 266,055 | — | — | ||||||||||||||||||||||||||||||
2/9/2018(7) | — | — | — | — | — | 34,568 | $ | 829,978 | — | $ | — | |||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 4,740 | $ | 113,807 | — | — | ||||||||||||||||||||||||||||||
8/1/2017(8) | — | — | — | — | — | 39,372 | $ | 945,322 | — | — | ||||||||||||||||||||||||||||||
Joseph B. Flannery | 2/21/2020(4) | — | — | — | — | — | — | $ | — | 12,708 | $ | 305,119 | ||||||||||||||||||||||||||||
| 2/21/2020(5) | — | — | — | — | — | 10,403 | $ | 249,776 | — | — | |||||||||||||||||||||||||||||
Glenn F. Hickey | 2/12/2020(4) | — | — | — | — | — | — | $ | — | 12,708 | $ | 305,119 | ||||||||||||||||||||||||||||
2/12/2020(5) | — | — | — | — | — | 10,410 | $ | 249,944 | — | — | ||||||||||||||||||||||||||||||
2/8/2019(6) | — | — | — | — | — | 3,796 | $ | 91,142 | 11,388 | $ | 273,426 | |||||||||||||||||||||||||||||
2/8/2019(5) | — | — | — | — | — | 8,311 | $ | 199,547 | — | — | ||||||||||||||||||||||||||||||
2/9/2018(7) | — | — | — | — | — | 26,886 | $ | 645,533 | — | $ | — | |||||||||||||||||||||||||||||
| 2/9/2018(5) | — | — | — | — | — | 3,687 | $ | 88,525 | — | — | |||||||||||||||||||||||||||||
Mark F. Leposky | 2/12/2020(4) | — | — | — | — | — | — | $ | — | 12,708 | $ | 305,119 | ||||||||||||||||||||||||||||
2/12/2020(5) | — | — | — | — | — | 10,410 | $ | 249,944 | — | — | ||||||||||||||||||||||||||||||
2/8/2019(6) | — | — | — | — | — | 3,796 | $ | 91,142 | 11,388 | $ | 273,426 | |||||||||||||||||||||||||||||
2/8/2019(5) | — | — | — | — | — | 8,311 | $ | 199,547 | — | — | ||||||||||||||||||||||||||||||
2/9/2018(7) | — | — | — | — | — | 26,886 | $ | 645,533 | — | $ | — | |||||||||||||||||||||||||||||
2/9/2018(5) | — | — | — | — | — | 3,687 | $ | 88,525 | — | — | ||||||||||||||||||||||||||||||
| 2/6/2017(9) | — | — | — | — | — | 22,318 | $ | 535,855 | — | — | |||||||||||||||||||||||||||||
Melody Harris-Jensbach | 2/8/2019(10) | — | — | — | — | — | — | $ | — | 30,675 | $ | 736,507 | ||||||||||||||||||||||||||||
2/8/2019(11) | — | — | — | — | — | 24,626 | $ | 591,276 | — | — |
(1) | Stock options generally have aten-year term from the date of |
(2) | Upon termination of employment, the NEO generally has until the earlier of one year from the date of termination or the option expiration date to exercise his vested options. However, the options may be cancelled and rescinded and proceeds may be forfeited if the NEO improperly discloses or misuses the Company’s confidential information or trade secrets. See “Governance and Other Considerations—Clawbacks,” above. |
(3) | Market value based on |
(4) | Amounts represent PRSU awards granted in |
(5) | Amounts represent RSU awards that generally vest ratably over a three-year period (with one-third of the underlying units vesting on each of the first three anniversaries of the grant date, subject to continued employment through the vesting date), including additional shares that may be issued pursuant to accrued dividend equivalent rights. Each RSU represents the right to receive one share of Common Stock upon vesting, subject to accelerated vesting as described under “Executive Officer Compensation—Compensation Discussion and Analysis—Severance Arrangements” and “—Change-in-Control Arrangements.” |
(6) | Amounts represent PRSU awards granted in 2019 that generally vest in full on the third anniversary of the grant date. Each PRSU represents the right to receive one share of Common Stock upon vesting. The number of PRSUs that are eligible to vest will be determined based on the measurement of two equally weighted metrics, currency neutral adjusted EPS and the Company’s calculated rTSR ranked on a percentile basis against the calculated TSR for the companies listed in the LTIP Reference Group over a three-year performance period beginning January 1, 2019 and ending December 31, 2021, with the opportunity to bank the PRSU awards vesting based upon interim year performance relative to the currency neutral adjusted EPS objective. A NEO may be eligible to vest in up to 200% of the “target” PRSUs subject to these awards. On January |
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(7) | Amounts represent PRSU awards granted in |
(8) |
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(9) |
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(10) | Amounts represent PRSU awards granted in 2019 that generally vest in full on the fifth anniversary of the grant date. Each PRSU represents the right to receive one share of Common Stock upon vesting. The number of PRSUs that will be eligible to vest is determined using Jack Wolfskin Adjusted EBITDAS over a cumulative five-year performance period beginning January 1, 2019 and ending December 31, 2023. The number of PRSUs in which Ms. Harris-Jensbach remains eligible to vest is reported in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column assuming performance at the “target” level. Ms. Harris-Jensbach forfeited all of these awards in connection with her termination of employment on December 31, 2020. |
(11) | Amount represents RSU award that vests in full on the fifth anniversary of the grant date and includes additional shares that may be issued pursuant to accrued dividend equivalent rights. Each RSU represents the right to receive one share of Common Stock upon vesting. Ms. Harris-Jensbach forfeited all but of these awards in connection with her termination of employment on December 31, 2021. |
Option Exercises and Stock Vested in Fiscal Year 20182020
The following table sets forth information regarding options and stock appreciation rights exercised and stock awards vested during fiscal year 20182020 for the NEOs:
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | Number of shares acquired on vesting (#)(3) | Value Realized on Vesting ($)(4) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of shares acquired on vesting (#)(1) | Value Realized on Vesting ($)(2) | ||||||||||||||||||||||||
Oliver G. (Chip) Brewer III | — | — | 303,966 | 4,431.612 | — | — | 405,876 | $ | 8,507,651 | |||||||||||||||||||||||
Brian P. Lynch | — | — | 39,046 | 570,073 | — | — | 49,019 | $ | 1,026,254 | |||||||||||||||||||||||
Richard H. Arnett | — | — | 51,721 | 753,860 | ||||||||||||||||||||||||||||
Joseph B. Flannery | — | — | — | $ | — | |||||||||||||||||||||||||||
Glenn F. Hickey | — | — | 46,583 | $ | 977,031 | |||||||||||||||||||||||||||
Mark F. Leposky | 87,069 | 1,178,913 | 50,389 | 734,425 | — | — | 68,874 | $ | 1,448,042 | |||||||||||||||||||||||
Alan Hocknell | — | — | 50,389 | 734,425 | ||||||||||||||||||||||||||||
Melody Harris-Jensbach | — | — | 6,156 | $ | 147,819 |
(1) The number of shares reported in this column reflects the gross number ofnon-qualified stock options that were exercised.
(2) The value realized on exercise is computed by determining the difference between the closing market price of the Common Stock on the dates of exercise and the exercise price per share of the award exercised.
(3) The number of shares reported in this column reflects the gross number of RSUs/PRSUs that vested prior to tax withholding. The RSUs/PRSUs were settled in shares of Common Stock.
(4)(2) The value realized on vesting is based upon the gross shares underlying the RSUs/PRSUs that vested multiplied by the closing price of the Common Stock on the vesting date.
Nonqualified Deferred Compensation
The following table sets forth information for our NEOs with respect to RSUs that vested but for which the underlying shares had not yet been delivered to the executive due to deferral elections made by the executives under the DCP prior to its termination. A description of the DCP and the distribution provisions thereunder is included above under “Executive Officer Compensation—Compensation Discussion and Analysis—Deferred Compensation Plan.”
Name | Executive Contributions in Fiscal Year 2018 ($) | Registrant Contributions in Fiscal Year 2018 ($) | Aggregate Earnings (Losses) in Fiscal Year 2018 ($) (2) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at 2018 Fiscal Year End ($) | |||||||||||||||
Oliver G. (Chip) Brewer III | $ | 582,821 | (1) | — | $ | 28,362 | — | $ | 611,183 | (3) | ||||||||||
Brian P. Lynch | — | — | — | — | — | |||||||||||||||
Richard H. Arnett | — | — | — | — | — | |||||||||||||||
Mark F. Leposky | — | — | — | — | — | |||||||||||||||
Alan Hocknell | — | — | — | — | — |
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Potential Payments upon Termination orChange-in-Control
Each of the NEOs has an employment agreement with the Company that provides for potential payments to such executive officer or other benefits (e.g., acceleration of vesting of long-term incentive awards) under certain circumstances following termination of employment or upon achange-in-control of the Company. The types and amounts of these potential payments vary depending on the following circumstances: (i) voluntary resignation by the executive officer or termination by the Company for substantial cause or good cause, (ii) termination by the Company without substantial cause or good cause, termination by the executive officer for good reason or the Company failing to renew the employment agreement, (iii) a termination event within one year following achange-in-control, (iv) permanent disability of the executive officer, or (v) death of the executive officer. In addition, the terms governing the long-term incentive awards granted to each of the NEOs provide that the Compensation Committee may accelerate the vesting of the awards in connection with a
change-in-control (or upon an involuntary termination following achange-in-control) in certain circumstances. The potential payments to be made under these varying circumstances, including the conditions and schedules for such payments, are described in this Proxy Statement under “Executive Officer Compensation—Compensation Discussion and Analysis—Employment Agreements.” That description also provides the relevant definitions of “substantial cause,”“change-in-control,” and “termination event.” Ms. Harris-Jensbach’s employment terminated effective December 31, 2020 upon the expiration of the term of her Managing Director Agreement. Under the terms of that agreement, Ms. Harris-Jensbach was not eligible for any termination benefits. We entered into a consulting agreement with Ms. Harris-Jensbach following her termination of employment, which is described in this Proxy Statement under “Executive Officer Compensation—Compensation Discussion and Analysis—Employment Agreements.”
Payments Made Upon Any Termination
Regardless of the manner in which a NEO’s employment terminates, hehe/she is entitled to receive amounts earned during hishis/her term of employment. These amounts include accrued but unpaid base salary and accrued but unused paid time off.
Quantification of Payments upon Termination orChange-in-Control
The table below quantifies the potential payments and benefits that would be provided to each NEO currently employed by the Company under the termination orchange-in-control circumstance listed, and the amounts shown are based upon a theoretical triggering event and assume, for illustrative purposes, that: (i) the triggering event took place on December 31, 20182020 and are based on the $15.30$24.01 per share closing market price of the Common Stock on December 31, 2018,2020, which was the last business day of 2018;2020; and (ii) the triggering event resulted in the immediate vesting of all unvested long-term incentives, as applicable. Whether the outstanding awards would actually vest or not in connection with a change in controlchange-in-control will be determined by the nature of the transaction and the determination by the Compensation Committee. For purposes of this table, it is assumed that the awards are not assumed, continued or substituted for in connection with achange-in-control transaction and that, as a result, the Compensation Committee determines that such awards shall vest in full. The actual amounts to be paid to any NEO in the event of his termination or achange-in-control, and the timing of such payments, and the value of any equity award acceleration benefits can only be determined at the time of, and under the circumstances of, an actual triggering event and in accordance with applicable law then in effect and reasonable interpretations thereof. The table does not include the value of any benefits to the extent they do not discriminate in scope, terms or operation, in favor of the NEOs and that are available generally to all salaried employees. Ms. Harris-Jensbach is not included in the table below as her employment terminated on December 31, 2020 as a result of the expiration of her Managing Director Agreement, and she was not entitled to any payments or benefits as a result of such termination and would not have received any benefits in the event of the occurrence of any of the triggering events described in the table below had they occurred on such date.
Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement | Termination event within 1-year following change-in- control(7) | Change-in- Control (no termination of employment)(7) | Permanent Disability | Death | ||||||||||||||||
Oliver G. (Chip) Brewer III | ||||||||||||||||||||
Pro-rated short term incentive award(1) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
RSUs and/or PRSUs(2) | $ | 13,854,535 | $ | 17,350,455 | $ | 17,350,455 | $ | 13,854,535 | $ | 12,173,935 | ||||||||||
Portion of salary and target incentive(3) | $ | 1,687,500 | $ | 2,250,000 | $ | — | $ | 500,000 | $ | — | ||||||||||
COBRA & CalCOBRA premiums(4)(5) | $ | 48,801 | $ | 64,739 | $ | — | $ | 48,801 | $ | 48,801 | ||||||||||
Tax & financial planning services(5) | $ | 15,285 | $ | 30,570 | $ | — | $ | — | $ | — | ||||||||||
Outplacement services(5) | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | ||||||||||
Incentive Payments(5)(6) | $ | 1,687,500 | $ | 2,250,000 | $ | — | $ | — | $ | — | ||||||||||
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Total | $ | 17,306,121 | $ | 21,958,264 | $ | 17,350,455 | $ | 14,403,336 | $ | 12,222,736 |
Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement | Termination event within 1-year following change in control(7) | Change-in- Control (no termination of employment) (7) | Permanent Disability | Death | Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement | Termination event within 1-year following change-in- control(7) | Change-in- Control (no termination of employment)(7) | Permanent Disability | Death | |||||||||||||||||||||||||||||||
Oliver G. (Chip) Brewer III | ||||||||||||||||||||||||||||||||||||||||
Brian P. Lynch | ||||||||||||||||||||||||||||||||||||||||
Pro-rated short term incentive award(1) | $ | 1,275,000 | $ | 1,275,000 | $ | 1,275,000 | $ | 1,275,000 | $ | 1,275,000 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
RSUs and/or PRSUs(2) | $ | 10,431,131 | $ | 12,659,997 | $ | 12,659,997 | $ | 10,041,131 | $ | 11,184,816 | $ | 1,201,777 | $ | 3,473,821 | $ | 3,473,821 | $ | 1,201,777 | $ | 2,651,586 | ||||||||||||||||||||
Portion of salary and target bonus(3) | $ | 1,275,000 | $ | 1,700,000 | $ | — | $ | 425,000 | $ | — | ||||||||||||||||||||||||||||||
Portion of salary and target incentive(3) | $ | 403,750 | $ | 807,500 | $ | — | $ | 237,500 | $ | — | ||||||||||||||||||||||||||||||
COBRA & CalCOBRA premiums(4)(5) | $ | 45,235 | $ | 59,898 | $ | — | $ | 45,235 | $ | 45,235 | $ | 30,796 | $ | 61,194 | $ | — | $ | 30,796 | $ | 30,796 | ||||||||||||||||||||
Tax & financial planning | $ | 14,915 | $ | 29,830 | $ | — | $ | — | $ | — | $ | 15,285 | $ | 30,570 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Outplacement services(5) | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Incentive Payments(5)(6) | $ | 1,275,000 | $ | 1,700,000 | $ | — | $ | — | $ | — | $ | 403,750 | $ | 807,500 | $ | — | $ | — | $ | — | ||||||||||||||||||||
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Total | $ | 13,938,781 | $ | 17,437,225 | $ | 13,934,997 | $ | 11,786,366 | $ | 12,505,051 | $ | 2,067,858 | $ | 5,193,085 | $ | 3,473,821 | $ | 1,470,073 | $ | 2,682,382 | ||||||||||||||||||||
Brian P. Lynch | ||||||||||||||||||||||||||||||||||||||||
Joseph B. Flannery | ||||||||||||||||||||||||||||||||||||||||
Pro-rated short term incentive award(1) | $ | 438,750 | $ | 438,750 | $ | 438,750 | $ | 438,750 | $ | 438,750 | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | ||||||||||||||||||||
RSUs and/or PRSUs(2) | $ | 907,827 | $ | 2,249,189 | $ | 2,249,189 | $ | 907,827 | $ | 2,064,839 | $ | 83,260 | $ | 554,898 | $ | 554,898 | $ | 83,260 | $ | 249,779 | ||||||||||||||||||||
Portion of salary and target bonus(3) | $ | 371,250 | $ | 742,500 | $ | — | $ | 225,000 | $ | — | ||||||||||||||||||||||||||||||
Portion of salary and target incentive(3) | $ | 352,000 | $ | 704,000 | $ | — | $ | 220,000 | $ | — | ||||||||||||||||||||||||||||||
COBRA & CalCOBRA premiums(4)(5) | $ | 30,157 | $ | 59,898 | $ | — | $ | 30,157 | $ | 30,157 | $ | 32,534 | $ | 64,739 | $ | — | $ | 32,534 | $ | 32,534 | ||||||||||||||||||||
Tax & financial planning | $ | 14,915 | $ | 29,830 | $ | — | $ | — | $ | — | $ | 15,285 | $ | 30,570 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Outplacement services(5) | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Incentive Payments(5)(6) | $ | 371,250 | $ | 742,500 | $ | — | $ | — | $ | — | $ | 352,000 | $ | 704,000 | $ | — | $ | — | $ | — | ||||||||||||||||||||
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Total | $ | 2,146,649 | $ | 4,275,167 | $ | 2,687,939 | $ | 1,601,734 | $ | 2,533,746 | $ | 997,579 | $ | 2,220,707 | $ | 704,898 | $ | 485,794 | $ | 432,313 | ||||||||||||||||||||
Richard H. Arnett | ||||||||||||||||||||||||||||||||||||||||
Glenn F. Hickey | ||||||||||||||||||||||||||||||||||||||||
Pro-rated short term incentive award(1) | $ | 338,250 | $ | 338,250 | $ | 338,250 | $ | 338,250 | $ | 338,250 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
RSUs and/or PRSUs(2) | $ | 855,962 | $ | 3,102,837 | $ | 3,102,837 | $ | 855,962 | $ | 2,903,592 | $ | 917,140 | $ | 1,853,228 | $ | 1,853,228 | $ | 917,140 | $ | 1,274,683 | ||||||||||||||||||||
Portion of salary and target bonus(3) | $ | 317,750 | $ | 635,500 | $ | — | $ | 205,000 | $ | — | ||||||||||||||||||||||||||||||
Portion of salary and target incentive(3) | $ | 369,000 | $ | 738,000 | $ | — | $ | 230,625 | $ | — | ||||||||||||||||||||||||||||||
COBRA & CalCOBRA premiums(4)(5) | $ | 30,157 | $ | 59,898 | $ | — | $ | 30,157 | $ | 30,157 | $ | 32,534 | $ | 64,739 | $ | — | $ | 32,534 | $ | 32,534 | ||||||||||||||||||||
Tax & financial planning services(5) | $ | 14,915 | $ | 29,830 | $ | — | $ | — | $ | — | $ | 15,285 | $ | 30,570 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Outplacement services(5) | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Incentive Payments(5)(6) | $ | 317,750 | $ | 635,500 | $ | — | $ | — | $ | — | $ | 369,000 | $ | 738,000 | $ | — | $ | — | $ | — | ||||||||||||||||||||
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Total | $ | 1,887,284 | $ | 4,814,315 | $ | 3,441,087 | $ | 1,429,369 | $ | 3,271,999 | $ | 1,715,459 | $ | 3,437,037 | $ | 1,853,228 | $ | 1,180,299 | $ | 1,307,217 |
Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement | Termination event within 1-year following change in control(7) | Change-in- Control (no termination of employment) (7) | Permanent Disability | Death | Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement | Termination event within 1-year following change-in- control(7) | Change-in- Control (no termination of employment)(7) | Permanent Disability | Death | |||||||||||||||||||||||||||||||
Mark F. Leposky | ||||||||||||||||||||||||||||||||||||||||
Pro-rated short term incentive award(1) | $ | 358,953 | $ | 358,953 | $ | 358,953 | $ | 358,953 | $ | 358,953 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
RSUs and/or PRSUs(2) | $ | 891,768 | $ | 2,222,524 | $ | 2,222,524 | $ | 891,768 | $ | 2,067,558 | $ | 1,477,017 | $ | 2,413,104 | $ | 2,413,104 | $ | 1,477,017 | $ | 1,834,559 | ||||||||||||||||||||
Portion of salary and target bonus(3) | $ | 337,199 | $ | 674,397 | $ | — | $ | 217,548 | $ | — | ||||||||||||||||||||||||||||||
Portion of salary and target incentive(3) | $ | 369,000 | $ | 738,000 | $ | — | $ | 230,625 | $ | — | ||||||||||||||||||||||||||||||
COBRA & CalCOBRA premiums(4)(5) | $ | 22,804 | $ | 45,596 | $ | — | $ | 22,804 | $ | 22,804 | $ | 18,027 | $ | 36,106 | $ | — | $ | 18,027 | $ | 18,027 | ||||||||||||||||||||
Tax & financial planning services(5) | $ | 14,915 | $ | 29,830 | $ | — | $ | — | $ | — | $ | 15,285 | $ | 30,570 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Outplacement services(5) | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Incentive Payments(5)(6) | $ | 337,199 | $ | 674,397 | $ | — | $ | — | $ | — | $ | 369,000 | $ | 738,000 | $ | — | $ | — | $ | — | ||||||||||||||||||||
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Total | $ | 1,975,338 | $ | 4,018,197 | $ | 2,581,477 | $ | 1,491,073 | $ | 2,449,315 | $ | 2,260,829 | $ | 3,968,280 | $ | 2,413,104 | $ | 1,725,669 | $ | 1,852,586 | ||||||||||||||||||||
Alan Hocknell | ||||||||||||||||||||||||||||||||||||||||
Pro-rated short term incentive award(1) | $ | 314,577 | $ | 314,577 | $ | 314,577 | $ | 314,577 | $ | 314,577 | ||||||||||||||||||||||||||||||
RSUs and/or PRSUs(2) | $ | 835,553 | $ | 1,541,970 | $ | 1,541,970 | $ | 835,553 | $ | 1,387,004 | ||||||||||||||||||||||||||||||
Portion of salary and target bonus(3) | $ | 295,512 | $ | 591,024 | $ | — | $ | 190,653 | $ | — | ||||||||||||||||||||||||||||||
COBRA & CalCOBRA premiums(4)(5) | $ | 30,157 | $ | 59,898 | $ | — | $ | 30,157 | $ | 30,157 | ||||||||||||||||||||||||||||||
Tax & financial planning services(5) | $ | 14,915 | $ | 29,830 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
Outplacement services(5) | $ | 12,500 | $ | 12,500 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
Incentive Payments(5)(6) | $ | 295,512 | $ | 591,024 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
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Total | $ | 1,798,726 | $ | 3,140,823 | $ | 1,856,547 | $ | 1,370,940 | $ | 1,731,738 |
(1) Amounts shown represent the amount of annual bonusincentive the NEO would have received had the NEO continued to perform services through the completion of the relevant performance period under the bonusincentive plan and the evaluation of whether, and the degree to which, the performance criteria have been met (with any individual objectives deemed to be achieved at “target”), pro-rated over the portion of the year actually employed. Mr. Flannery is eligible to receive a guaranteed 2020 annual incentive of $150,000 pursuant to his approved compensation package during his recruitment.
(2) The values for RSUs and PRSUs reflect the aggregate market value of the number of shares underlying the units for which vesting would have accelerated and restrictions would have lapsed upon the triggering event based on the closing market price of the Common Stock on December 31, 20182020 (which was the last business day of 2018)2020). Such values assume, for the purposes of this table, that Company performance goals are met at the “target” level with respect to PSRUs.PRSUs. The number and market value of each NEO’s PRSUs that remain subject to achievement of Company performance goals are reported, assuming Company performance at the “target” level, in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” and the “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested” columns, respectively, of the “Outstanding Equity Awards at FiscalYear-End 2018”2020” table. The values of dividend equivalent rights accrued as of December 31, 2018,2020, including fractional shares, are included in the values shown for RSU awards.
(3) Amounts shown represent the following based on the termination event:
a. Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement: The total amount equal to 0.5 times (0.75 times for Mr. Brewer) the sum of the NEO’s most recent annual base salary and annual target bonus.incentive.
b. Termination event within 1-year following a change in control:change-in-control: The total amount equal to 1.00 times the sum of the NEO’s most recent annual base salary and annual target bonus.incentive.
c. Permanent Disability: The total amount equal to six (6) months of NEO’s then current base salary at the same rate as in effect on the date that the NEO is declared permanently disabled.
(4) Amounts shown for COBRA and CalCOBRA insurance benefits are calculated through the applicable severance period and are based on premiums for COBRA coverage for health, dental, vision and prescription for up to 18 months following termination and thereafter the premiums for CalCOBRA coverage for health and prescription. Such COBRA and CalCOBRA premiums are calculated based on the coverage selected by the executive officers as of December 31, 20182020 and are based on premium rates in effect at that time, which coverage and rates may vary during a severance period.
(5) Amounts shown assume continuous compliance with the conditions for payment set forth in the applicable employment agreement. These payments may be delayed for six months following a termination event pursuant to Section 409A of the Code and the rules and regulations promulgated thereunder, and such amounts if delayed will be paid promptly after six months with interest calculated at the applicableone-year Treasury Bill rate.
(6) Amounts shown represent the following based on the termination event:
a. Termination by the Company without substantial cause, termination by employee for good reason, or failure by the Company to renew expired employment agreement: The total amount equal to 0.5 times (0.75 times for Mr. Brewer) the sum of the NEO’s most recent annual base salary and target bonus.incentive.
b. Termination event within 1-year following a change in control:change-in-control: The total amount equal to 1.00 times the sum of the NEO’s most recent annual base salary and annual target bonus.incentive.
(7) Amounts shown assume the NEO’s RSUs and PRSUs are not continued, assumed or replaced with equivalent awards by the successor or acquiring corporation (if any). Amounts payable to NEOs are subject to reduction in accordance with the executive’s employment agreement to avoid imposition of excise tax for “parachute payments” within the meaning of Section 280G of the Code. See “Executive Officer Compensation—Compensation Discussion and Analysis—Governance and Other Considerations—Excise Taxes,” above.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of SEC RegulationS-K, we arethe Company is providing the following information about the relationship of the annual total compensation of our employees (excluding our CEO), and the annual total compensation of Mr. Oliver G. (Chip) Brewer III, our Chief Executive Officer (our “CEO”). The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) ofRegulation S-K.
Our population was initially evaluated as of December 31, 2017, to determine the median employee. As of December 31, 2018, we reevaluated the status of our median employee determined as of December 31, 2017. Based on the Company’s belief that there have not been any changes as of December 31, 2018 to either our workforce or the median employee’s circumstances that would result in significant change to the pay ratio, we have used the same median employee used for our 2017 pay ratio calculation for our 2018 pay ratio calculation below as is permitted by Item 402(u).
For 2018,2020, our last completed fiscal year:
The annual total compensation of the median employee of our company (excluding our CEO) calculated using the Summary Compensation Table methodology was $66,278;$48,317.92; and
The annual total compensation of our CEO, as reported in the Summary Compensation Table, presented elsewhere in this Proxy Statement, was $6,229,555.$4,929,381.00.
Based on this information, for |
The median employee used in this calculation was determined from a direct determination of our total global employee population (excluding the CEO) as of December 31, 2020, using a consistently applied compensation measure of base salary plus target short-term incentives for 2020. We ranked our employees from the highest paid to lowest paid, and selected our median employee at the midpoint. Where allowed under SEC rules, we annualized compensation through December 31, 2020 for employees newly hired in 2020. Non-US employee compensation was converted to US dollars based on the 2020 average of daily exchange rates.
Our employee population for 2020 included the employees of Jack Wolfskin and its subsidiaries as of December 31, 2020, whose average compensation is generally less than that of similarly-situated employees in the US, which contributed to the increase in the CEO pay ratio from 2020 to 2019 despite the fact that Mr. Brewer’s annual total compensation for 2020 was substantially less than his annual total compensation for 2019.
PROPOSAL NO. 3 - ADVISORY VOTE TO APPROVE THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE
OFFICERS
Pursuant to Section 14A of the Exchange Act, shareholders of the Company are entitled to cast an advisory vote at the Annual Meeting to approve the compensation of the Company’s NEOs, as disclosed in this Proxy Statement. Under applicable law, the shareholder vote is an advisory vote only and is not binding on the Company, the Board or the Compensation Committee. Although the vote isnon-binding, the Compensation Committee and the Board value your opinions and will consider the outcome of the vote in analyzing its compensation philosophy and making future compensation decisions. The Company currently seeks advisory votes on the approval of the compensation of the Company’s NEOs on an annual basis.
As described more fully in the “Executive Officer Compensation—Compensation Discussion and Analysis” section and in the compensation tables in the “2018“2020 Compensation Tables” section, the Company’s NEOs are compensated in a manner consistent with its business strategy, competitive practice, guiding principles for executive compensation, and shareholder interests and concerns. The Company’s executive compensation program is designed to attract, retain, motivate and appropriately reward its executive officers and to align the interests of the executive officers with those of the Company’s shareholders by incentivizing the executive officers to operate the Company in a manner that creates shareholder value.
The Company has several compensation governance programs in place to manage compensation risk and align the Company’s executive compensation with long-term shareholder interests. These programs include:
a substantial majority of executive compensation that is variable in nature;
a substantial majority of variable compensation that is tied to performance-based annual and long-term incentive programs;
equity awards granted under a policy that has strict controls on grant processes and timing;
stock ownership guidelines that require material holdings;
a compensation committeeCompensation Committee comprised entirely of independent directors and an independent compensation consultant; and
clawback provisions contained in the employment agreements of the Company’s NEOs who are U.S. citizens.citizens; and
change-in-control benefits that require a double trigger prior to payment.
Shareholders are encouraged to read the Compensation Discussion and Analysis and other sections of this Proxy Statement, which include a detailed discussion of the Company’s compensation practices. The Compensation Committee and the Board believe that the Company’s compensation policies, procedures and amounts are effective in implementing its compensation philosophy and in achieving its goals. This advisory shareholder vote, commonly known as“Say-on-Pay,” gives shareholders the opportunity to approve or not approve the Company’s executive compensation program and policies by voting on the following resolution:
“RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
Vote Required. Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares of Common Stock having voting power present in person or represented by proxy at the Annual Meeting is required for approval of this proposal.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORY VOTE “FOR” THE RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
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PROPOSAL NO. 4 - APPROVAL OF THE AMENDMENT OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 240,000,000 TO 360,000,000
In February 2021, the Board approved and adopted an amendment, subject to approval and adoption by the Company’s shareholders, to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of Common Stock from 240,000,000 to 360,000,000 (the “Charter Amendment”). The Board is requesting shareholder approval of the Charter Amendment.
The additional Common Stock to be authorized by adoption of the Charter Amendment would have rights identical to the Company’s currently outstanding Common Stock. Adoption of the Charter Amendment and issuance of the Common Stock would not affect the rights of the holders of the Company’s currently outstanding Common Stock, except for effects incidental to increasing the number of shares of Common Stock outstanding, such as dilution of the voting rights of current holders of Common Stock. If the Charter Amendment is adopted, it will become effective upon filing of a Certificate of Amendment of the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which the Company currently plans to file promptly following the Annual Meeting if this proposal is approved.
In addition to the shares of Common Stock outstanding on March 23, 2021, the Board has reserved an aggregate of shares of Common Stock for issuance upon exercise of options and rights granted under the Company’s equity plans, including the equity plans assumed by the Company in the merger with Topgolf. On March 8, 2021, in connection with the completion of the merger with Topgolf, the Company issued 89,964,018 shares of its Common Stock to the former stockholders of Topgolf as merger consideration, and the Company assumed 3,168,437 options and 130,064 warrants to purchase shares of the Company’s Common Stock.
The Board believes that additional authorized shares of Common Stock would give the Company the necessary flexibility to issue shares for various corporate purposes, including, in particular, raising capital, and enable the Company to take timely advantage of market conditions and opportunities. Other corporate purposes for which the additional authorized shares could be used include, but are not limited to, potential strategic transactions, including mergers, acquisitions, and other business combinations; future grants and awards under equity compensation plans; stock splits and stock dividends; and other general corporate working capital needs. The additional shares may be used for various purposes without further shareholder approval, except as may be required in certain cases by law or the rules of the NYSE. The discretion of the Board, however, would be subject to any other applicable rules and regulations in the case of any particular issuance or reservation for issuance that might require shareholders to approve such transaction.
Vote Required. Assuming a quorum is present, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock is required for approval of this proposal. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE AMENDMENT TO THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 240,000,000 TO 360,000,000. |
BENEFICIAL OWNERSHIP OF THE COMPANY’S SECURITIES
The following table sets forth information regarding the beneficial ownership of the Common Stock as of February 28, 2019March 9, 2021 (the “Table Date”) by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding Common Stock, (ii) each director of the Company, (iii) each of the NEOs and (iv) all directors and executive officers of the Company as a group. As of the Table Date, there were 95,218,398184,671,923 shares of Common Stock issued and outstanding.
Shares Beneficially Owned | ||||||||
Name and Address of Beneficial Owner(1) | Number | Percent | ||||||
BlackRock, Inc.(2) | 13,292,414 | 13.96% | ||||||
55 East 52nd Street | ||||||||
New York, New York 10055 | ||||||||
The Vanguard Group(3) | 7,912,821 | 8.31% | ||||||
100 Vanguard Boulevard | ||||||||
Malvern, PA 19355 | ||||||||
Dimensional Fund Advisors LP(4) | 6,940,420 | 7.29% | ||||||
Building One | ||||||||
6300 Bee Cave Road | ||||||||
Austin, Texas 78746 | ||||||||
Samuel H. Armacost(5) | 84,065 | * | ||||||
Richard H. Arnett(6) | 44,413 | * | ||||||
Ronald S. Beard(7) | 81,870 | * | ||||||
Oliver G. Brewer III(6)(8) | 1,089,805 | 1.14% | ||||||
John C. Cushman, III(9) | 76,570 | * | ||||||
Laura J. Flanagan | — | * | ||||||
Russell L. Fleischer | 5,000 | * | ||||||
Alan Hocknell(6) | 107,246 | * | ||||||
Mark F. Leposky(6) | 156,594 | * | ||||||
John F. Lundgren | 57,305 | * | ||||||
Brian P. Lynch(6) | 31,967 | * | ||||||
Adebayo O. Ogunlesi | 54,931 | * | ||||||
Linda B. Segre | 22,364 | * | ||||||
Anthony S. Thornley | 43,679 | * | ||||||
All directors and executive officers as a group (16 persons)(10) | 1,888,956 | 1.97% |
Shares Beneficially Owned | ||||||||
Name and Address of Beneficial Owner(1) | Number | Percent | ||||||
PEP TG Investments LLC(2) | 28,905,290 | 15.64% | ||||||
50 Kennedy Plaza, 18th Floor | ||||||||
Providence, Rhode Island 02903 | ||||||||
WestRiver Management, LLC(3) | 21,008,016 | 11.37% | ||||||
920 5th Ave, Ste 3450 | ||||||||
Seattle, Washington 98104 | ||||||||
DDFS Management Company LLC(4) | 18,592,833 | 10.07% | ||||||
2100 Ross Ave Suite 550 | ||||||||
Dallas, Texas 75201 | ||||||||
BlackRock, Inc.(5) | 14,402,457 | 7.80% | ||||||
55 East 52nd Street | ||||||||
New York, New York 10055 | ||||||||
Erik J Anderson(6) | 0 | * | ||||||
Samuel H. Armacost(7) | 95,811 | * | ||||||
Scott H. Baxter | 2,455 | * | ||||||
Oliver G. Brewer III(8) | 1,477,980 | * | ||||||
John C. Cushman, III(9) | 88,316 | * | ||||||
Thomas G. Dundon(10) | 42,697 | * | ||||||
Laura J. Flanagan | 10,350 | * | ||||||
Joseph B. Flannery | 2,113 | * | ||||||
Russell L. Fleischer | 21,775 | * | ||||||
Melody Harris-Jensbach | 0 | * | ||||||
Glenn F. Hickey | 33,115 | * | ||||||
Mark F. Leposky | 232,800 | * | ||||||
John F. Lundgren | 69,051 | * | ||||||
Brian P. Lynch(11) | 83,781 | * | ||||||
Scott M. Marimow | 0 | |||||||
Adebayo O. Ogunlesi | 66,677 | * | ||||||
Linda B. Segre | 34,110 | * | ||||||
Anthony S. Thornley | 55,425 | * | ||||||
All directors and executive officers as a group (18 persons)(12) | 2,273,759 | 1.23% |
* | Less than one percent |
(1) | Except as otherwise indicated, the address for all persons shown in this table is c/o Callaway Golf Company, 2180 Rutherford Road, Carlsbad, California 92008. Unless otherwise indicated in the footnotes to this table, and subject to community property laws where applicable, to the knowledge of the Company each of the persons shown in this table has sole voting and investment power with respect to the shares shown as beneficially owned by that shareholder. In computing the number and percentage of shares beneficially owned by each person, the table includes any shares that could be acquired within 60 days of the Table Date through the exercise of options (irrespective of the price at which the Common Stock is trading on the NYSE) and the vesting of RSUs and PRSUs. These shares, however, are not counted in computing the percentage ownership of any other person. Consequently, included in the number and percentage of shares beneficially owned are shares issuable upon the exercise of options with exercise prices above the trading price of the Common Stock as of the Table Date. |
(2) | Includes (i) 28,775,226 shares of Common Stock held by PEP TG Investments LP; and (ii) 130,064 shares of Common Stock underlying warrants held by PEP TG Investments LP that are exercisable at any time at the option of the holder. As a result of its relationship with PEP TG Investments LP, PEP TG Investments GP LLC may be deemed to beneficially own such shares. Michael Dominguez has shared voting and investment control with respect to the securities held by PEP TG Investments GP LLC, and may be deemed to indirectly beneficially own the securities directly held by PEP TG Investments LP. |
(3) | Includes (i) 208,192 shares of Common Stock held by TGP Advisors, LLC (of which 170,787 are subject to options exercisable within 60 days of the Table Date); (ii) 14,748,485 shares of Common Stock held by TGP Investors, LLC; and (iii) 6,051,339 shares of Common Stock held by TGP Investors II, LLC. As a result of its relationship with the foregoing entities, WestRiver Management, LLC may be deemed to beneficially own such shares. Erik J Anderson is the sole member and manager of WestRiver Management, LLC. |
(4) | Directly held by DDFS Partnership LP. As a result of its relationship with DDFS Partnership LP, DDFS Management Company LLC may be deemed to beneficially own such shares. Thomas G. Dundon is the sole member of DDFS Management Company LLC. |
(5) | Based on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on |
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Mr. Armacost’s shares are held in a family trust with his |
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# of Shares Subject to(a) | ||||
Name | RSUs | PRSUs (target) | ||
Mr. Brewer | 110,429 | 134,969 | ||
Mr. Lynch | 16,564 | 20,245 | ||
Messrs. Arnett and Leposky | 12,423 | 15,184 | ||
Mr. Hocknell | 9,663 | 11,810 |
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(8) | Includes 497,537 shares issuable upon exercise of |
(9) | 12,200 of Mr. Cushman’s shares are held in a family trust with his |
(10) | Excludes the 18,592,833 shares held by DDFS Partnership LP referenced in footnote 4 above, with respect to which Mr. Dundon disclaims beneficial ownership. Includes 42,697 shares of Common Stock directly held by Mr. Dundon. |
(11) | 6,575 of Mr. Lynch’s shares are held in a family trust with his spouse and they share voting and investment power with respect to such shares. |
(12) | Excludes (i) the 21,008,016 shares held by TGP Advisors, LLC, TGP Investors, LLC and TGP Investors II, LLC referenced in footnote 6 above and (ii) the 18,592,833 shares held by DDFS Partnership LP referenced in footnote 10 above. Includes 497,537 shares issuable upon exercise of options within 60 days of the Table Date held, in the aggregate, by individual directors and executive officers. |
TRANSACTIONS WITH RELATED PERSONS
It is the written policy of the Board that Company transactions in which any executive officer or director of the Company, or their immediate family members, have a material interest must be on terms which are just and reasonable to the Company. To ensure the terms are just and reasonable, all transactions in excess of $120,000 must be reviewed and approved by the Nominating and Corporate Governance Committee, except that if the transaction is less than $1.0 million, the Chair of the Nominating and Corporate Governance Committee may approve such transaction. In determining whether to approve such a transaction, the Nominating and Corporate Governance Committee, or the Chair, as appropriate, considers, among other things, whether the proposed transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The Board has also determined that certain transactions arepre-approved and do not require review by the Nominating and Corporate Governance Committee. These include (i) compensation of the executive officers and Board members, which is reviewed by the Compensation Committee, (ii) a transaction with another entity in which the interested director or executive officer has an indirect interest in the transaction solely as a result of being a director or less than 10% beneficial owner of such other entity, and (iii) transactions with another corporation or charitable organization if the director’s or executive officer’s only interest is as a director or as anon-executive officer employee of the other corporation or organization and the amount involved does not exceed the greater of $1.0 million or 2% of the revenues of such other corporation or organization.
Alan Hocknell is the Senior Vice PresidentStockholders Agreement
Providence, Dundon and WestRiver, each of Research and Development and is an executive officerwhich became 5% or greater shareholders of the Company in connection with the Company’s merger with Topgolf, are parties to the Stockholders Agreement, pursuant to which each of Providence, Dundon and WestRiver have the right to designate one person (for a total of three persons) to be appointed or nominated, as the case may be, for election to the Board for so long as such shareholder maintains beneficial ownership of 50% or more of the shares of Common Stock owned by them on the closing date of the merger with Topgolf, which occurred on March 8, 2021.
The Stockholders Agreement further provides that each of Providence, Dundon and WestRiver will be entitled to the same reimbursement for travel and other expenses paid to other non-employee directors of the Company and the same indemnification rights provided to other non-employee directors of the Company. One
Registration Rights Agreement
Each of Providence, Dundon and WestRiver are parties to a Registration Rights Agreement with the Company, dated as of October 27, 2020, pursuant to which each such shareholder is entitled to certain registration rights with respect to the resale of shares of the Common Stock received by such shareholder in connection with the merger with Topgolf, subject to certain conditions set forth therein. The Registration Rights Agreement provides such shareholders with demand, “piggy-back” and shelf registration rights, subject to certain minimum threshold requirements and other customary conditions.
Merger Consideration
At the closing of the Company’s other employeesmerger with Topgolf, each of Providence, Dundon and WestRiver received as merger consideration a number of shares of Common Stock, as shown in its Research and Development department became Mr. Hocknell’sbrother-in-law subsequentthe table below:
Shareholder | Number of Shares Received | |||
Providence | 28,775,226 | |||
WestRiver | 20,837,229 | |||
Dundon | 18,756,915 |
In addition to joining the Company. His compensation is monitored byabove, TGP Advisors (an affiliate of WestRiver) received 295,287 stock options to purchase shares of Common Stock upon conversion of outstanding Topgolf stock options.
Warrant Assumption Agreement
Upon the closing of the Company’s Human Resources departmentmerger with Topgolf and is set based upon market rates.pursuant to the terms of a warrant assumption agreement, dated as of October 27, 2020, the Company assumed a warrant to purchase shares of preferred stock of Topgolf held by Providence, which was converted into a warrant to purchase 130,064 shares of Common Stock at an exercise price of $25.98 per share.
Employer Direct Healthcare
Topgolf has engaged Employer Direct Healthcare, LLC (“Employer Direct”) to provide certain supplemental healthcare benefits to eligible participants enrolled in the self-funded health benefit plan. Certain investment funds controlled by Mr. Hocknell’sbrother-in-law is not an officerDundon own a majority ownership interest in Employer Direct. Topgolf paid approximately $0.2 million during fiscal year 2020 in connection with such engagement.
Director Affiliations With Our Principal Shareholders
Following the merger with Topgolf and pursuant to the terms of the Company. His total compensation in 2018, while not material toStockholders Agreement, the Company, exceeded the threshold for disclosure under Item 404(a) of RegulationS-K but is less than $275,000following newly appointed directors were designated by, and are affiliated with, our principal shareholders as indicated in the aggregate.table below:
Director | Affiliation | |
Erik J Anderson | WestRiver | |
Thomas G. Dundon | Dundon | |
Scott M. Marimow | Providence |
In the Company’s filings with the SEC, information is sometimes “incorporated by reference.” This means that the Company is referring you to information that has previously been filed with the SEC and the information should be considered as part of the particular filing. As provided under SEC regulations, the “Audit Committee Report” and the “Compensation Committee Report” contained in this Proxy Statement are not incorporated by reference into any other filings with the SEC, except to the extent they are specifically incorporated by reference into a filing. In addition, this Proxy Statement includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not part of this Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors, Section 16 officers, and greater than 10% beneficial owners to file initial reports of ownership (on Form 3) and periodic reports of changes in ownership (on Forms 4 and 5) of Company securities with the SEC. Based solely on its review of copies of such forms (and any amendments to such forms) and such written representations regarding compliance with such filing requirements as were received from its directors, executive officers and greater than 10% beneficial owners (if any), the Company believes that all such Section 16(a) reports were filed on a timely basis during 2018.
A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM10-K FOR THE YEAR ENDED DECEMBER 31, 2018,2020, AS FILED WITH THE SEC, WITHOUT EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER OF THE COMPANY UPON WRITTEN REQUEST TO THE COMPANY AT CALLAWAY GOLF COMPANY, ATTENTION: INVESTOR RELATIONS, 2180 RUTHERFORD ROAD, CARLSBAD, CALIFORNIA 92008. THE COMPANY MAKES AVAILABLE FREE OF CHARGE ON ITS WEBSITE ALL OF ITS FILINGS THAT ARE MADE ELECTRONICALLY WITH THE SEC, INCLUDING FORMS10-K,10-Q10-K, 10-Q AND8-K. THESE MATERIALS CAN BE FOUND AT WWW.CALLAWAYGOLF.COM IN THE “INVESTOR RELATIONS” SECTION.
SHAREHOLDER NOMINATIONS AND PROPOSALS
Requirements for Shareholder Proposals to be Brought Before an Annual Meeting. If a shareholder desires to nominate someone for election to the Board at, or to bring any other business before, the 20202022 annual meeting of shareholders, then such shareholder must comply with the procedures set forth in Article II of the Company’s Bylaws in addition to any other applicable requirements and must give timely written notice of the matter to the Company’s Corporate Secretary. To be timely, written notice must be delivered to the Company’s Corporate Secretary at the Company’s principal executive offices not less than 90 days nor more than 120 days prior to the firstone-year anniversary of this year’s Annual Meeting (i.e., the 20192021 Annual Meeting of Shareholders), provided, however, that in the event that the date of the 20202022 annual meeting is more than 30 days before or more than 60 days after such anniversary date, then such notice to be timely must be delivered to the Company’s Corporate Secretary not morelater than 120 days prior to the 2020 annual meeting and not less than the later of (i) 90 days prior to such annual meeting or, (ii)if later, 10 days following the date of the first public announcement of the scheduled date of the 20202022 annual meeting. As a result, in the event the 20202022 annual meeting is not held more than 30 days before nor more than 60 days after the firstone-year anniversary of this year’s Annual Meeting, notice of nominations or other business properly submitted pursuant to the Company’s Bylaws must be received by the Company’s Corporate Secretary no later than the close of business on February 7, 202018, 2022 and no earlier than January 8, 2020.19, 2022. Any such notice must include all of the information specified in the Company’s Bylaws.
Requirements for Shareholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials.If a shareholder desires to have a proposal included in the Company’s proxy statement and proxy card for the 20202022 annual meeting of shareholders pursuant to Rule14a-8 promulgated under the Exchange Act, then the Company must receive notice of such proposal in writing at the Company’s principal executive offices in Carlsbad, California no later than November 26, 2019., 2021. However, if the date of the 20202022 annual meeting of shareholders is more than 30 days before or after the firstone-year anniversary of this year’s Annual Meeting, then such notice must be received by the Company’s Corporate Secretary a reasonable time before the Company begins to print and mail its proxy materials for the 20202022 annual meeting.
In accordance with the Company’s Bylaws, any shareholder (or group of up to 20 shareholders) meeting the Company’s continuous ownership requirements (as set forth in the Company’s Bylaws) who wishes to nominate a candidate for election to the Board for inclusion in the Company’s proxy materials for its 2022 annual meeting must provide written notice to the Company’s Corporate Secretary at its principal executive offices in Carlsbad, California no earlier than 150 calendar days and no later than 120 calendar days before the date proxy materials were released to shareholders in connection with this year’s Annual Meeting, subject to other specific requirements regarding the foregoing proxy access right, including the required content of the notice and certain other eligibility, procedural and disclosure requirements as provided in the Company’s Bylaws. As a result, such notice must be received by the Company’s Corporate Secretary no later than , 2021 and no earlier
than �� , 2021. Such proposals must comply with the other applicable requirements promulgated by the SEC in Rule14a-8 of the Exchange Act.
Other than the proposals described in this Proxy Statement, the Company knows of no other matters to be submitted to the shareholders at the Annual Meeting. If any other matter properly comes before the shareholders at the Annual Meeting, it is the intention of the persons named on the proxy to vote upon such matters in accordance with the Board’s recommendation.
Each shareholder is urged to vote via the Internet, by telephone or return a proxy as soon as possible. Any questions should be addressed to Callaway Golf Company, Attention: Investor Relations, at 2180 Rutherford Road, Carlsbad, California 92008, telephone(760) 931-1771.
By Order of the Board of Directors, | ||
Carlsbad, California | Sarah E. Kim | |
| Corporate Secretary |
APPENDIX A –NON-GAAP INFORMATION AND RECONCILIATION
CALLAWAY GOLF COMPANY
Supplemental Financial Information andNon-GAAP Reconciliation
(Unaudited)
(In thousands, except per share data)thousands)
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||||||||||||||||||||||
Total As Reported | Acquisition Costs(1) | Non-GAAP | Total As Reported | Acquisition Costs(2) | Non-Cash Tax Adjustment(3) | Non-GAAP | ||||||||||||||||||||||
Net sales | $ | 1,242,834 | $ | — | $ | 1,242,834 | $ | 1,048,736 | $ | — | $ | — | $ | 1,048,736 | ||||||||||||||
Gross profit | 578,369 | — | 578,369 | 480,448 | (2,439) | — | 482,887 | |||||||||||||||||||||
% of sales | 46.5% | — | 46.5% | 45.8% | — | — | 46.0% | |||||||||||||||||||||
Operating expenses | 449,927 | 3,661 | 446,266 | 401,611 | 8,825 | — | 392,786 | |||||||||||||||||||||
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Income (loss) from operations | 128,442 | (3,661) | 132,103 | 78,837 | (11,264) | — | 90,101 | |||||||||||||||||||||
Other income (expense), net | 2,830 | 4,409 | (1,579) | (10,782) | — | — | (10,782) | |||||||||||||||||||||
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Income (loss) before income taxes | 131,272 | 748 | 130,524 | 68,055 | (11,264) | — | 79,319 | |||||||||||||||||||||
Income tax provision (benefit) | 26,018 | 172 | 25,846 | 26,388 | (4,118) | 3,394 | 27,112 | |||||||||||||||||||||
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Net income (loss) | 105,254 | 576 | 104,678 | 41,667 | (7,146) | (3,394) | 52,207 | |||||||||||||||||||||
Less: Net income attributable tonon-controlling interests | 514 | — | 514 | 861 | — | — | 861 | |||||||||||||||||||||
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Net income (loss) attributable to Callaway Golf Company | $ | 104,740 | $ | 576 | $ | 104,164 | $ | 40,806 | $ | (7,146) | $ | (3,394) | $ | 51,346 | ||||||||||||||
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Diluted earnings (loss) per share: | $ | 1.08 | $ | 0.01 | $ | 1.07 | $ | 0.42 | ($ | 0.07) | ($ | 0.04) | $ | 0.53 | ||||||||||||||
Weighted-average shares outstanding: | 97,153 | 97,153 | 97,153 | 96,577 | 96,577 | 96,577 | 96,577 |
2020 Trailing Twelve Month Adjusted EBITDAS | 2019 Trailing Twelve Month Adjusted EBITDAS | |||||||||||||||||||||||||||||||||||||||
Quarter Ended | Quarter Ended | |||||||||||||||||||||||||||||||||||||||
March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | Total(1) | March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | Total | |||||||||||||||||||||||||||||||
Net income (loss) | $ | 28,894 | $ | (167,684) | $ | 52,432 | $ | (40,576) | $ | (126,934) | $ | 48,647 | $ | 28,931 | $ | 31,048 | $ | (29,218) | $ | 79,408 | ||||||||||||||||||||
Interest expense, net | 9,115 | 12,163 | 12,727 | 12,927 | 46,932 | 9,639 | 10,260 | 9,545 | 9,049 | 38,493 | ||||||||||||||||||||||||||||||
Income tax provision (benefit) | 9,151 | (7,931) | 5,360 | (7,124) | (544) | 9,556 | 7,208 | 2,128 | (2,352) | 16,540 | ||||||||||||||||||||||||||||||
Depreciation and amortization expense | 8,997 | 9,360 | 10,311 | 10,840 | 39,508 | 7,977 | 9,022 | 8,472 | 9,480 | 34,951 | ||||||||||||||||||||||||||||||
JW goodwill and trade name impairment | — | 174,269 | — | — | 174,269 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Non-cash stock compensation expense | 1,861 | 2,942 | 3,263 | 2,861 | 10,927 | 3,435 | 3,530 | 2,513 | 3,418 | 12,896 | ||||||||||||||||||||||||||||||
Acquisitions & other non-recurring costs, before taxes(2) | 1,516 | 5,856 | 2,858 | 8,607 | 20,381 | 13,986 | 6,939 | 3,009 | 4,090 | 28,024 | ||||||||||||||||||||||||||||||
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Adjusted EBITDAS | $ | 59,534 | $ | 28,975 | $ | 86,951 | $ | (12,465) | $ | 164,539 | $ | 93,240 | $ | 65,890 | $ | 56,715 | $ | (5,533) | $ | 210,312 | ||||||||||||||||||||
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2018 Trailing Twelve Month Adjusted EBITDA | 2017 Trailing Twelve Month Adjusted EBITDA | |||||||||||||||||||||||||||||||||||||||
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March 31, 2018 | June 30, 2018 | September 30, 2018 | December 31, 2018 | Total | March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | Total | |||||||||||||||||||||||||||||||
Net income (loss) | $ | 62,855 | $ | 60,867 | $ | 9,517 | $ | (28,499 | ) | $ | 104,740 | $ | 25,689 | $ | 31,443 | $ | 3,060 | $ | (19,386 | ) | $ | 40,806 | ||||||||||||||||||
Interest expense, net | 1,528 | 1,661 | 1,056 | 704 | 4,949 | 715 | 550 | 642 | 2,004 | 3,911 | ||||||||||||||||||||||||||||||
Income tax provision (benefit) | 17,219 | 17,247 | 1,335 | (9,783 | ) | 26,018 | 13,206 | 16,050 | 1,486 | (4,354 | ) | 26,388 | ||||||||||||||||||||||||||||
Depreciation and amortization expense | 4,737 | 5,029 | 4,996 | 5,186 | 19,948 | 4,319 | 4,178 | 4,309 | 4,799 | 17,605 | ||||||||||||||||||||||||||||||
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EBITDA | $ | 86,339 | $ | 84,804 | $ | 16,904 | $ | (32,392 | ) | $ | 155,655 | $ | 43,929 | $ | 52,221 | $ | 9,497 | $ | (16,937 | ) | $ | 88,710 | ||||||||||||||||||
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Jack Wolfskin net acquisition costs/(gains) | — | — | 1,521 | (2,269 | ) | (748) | — | — | — | — | — | |||||||||||||||||||||||||||||
OGIO and TravisMathew acquisition costs | — | — | — | — | — | 3,956 | 2,254 | 3,377 | 1,677 | 11,264 | ||||||||||||||||||||||||||||||
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Adjusted EBITDA | $ | 86,339 | $ | 84,804 | $ | 18,425 | $ | (34,661 | ) | $ | 154,907 | $ | 47,885 | $ | 54,475 | $ | 12,874 | $ | (15,260 | ) | $ | 99,974 | ||||||||||||||||||
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For the year ended December 31, 2019, costs include (i) $4.7 million of transaction costs associated with the acquisition of Jack Wolfskin, including banker’s fees, legal fees, consulting and travel expenses; (ii) $5.5 million of costs associated with transitioning and reporting on the Jack Wolfskin business, including consulting fees, audit fees for SEC reporting requirements and valuation services associated with preparing Jack Wolfskin’s opening balance sheet; (iii) the recognition of a $3.9 million foreign currency exchange loss primarily related to the re-measurement of a foreign currency contract established to mitigate the risk of foreign currency fluctuations on the purchase price of Jack Wolfskin, which was denominated in Euros; and (iv) consulting fees to address an activist investor. These amounts exclude any depreciation or amortization, which has been presented in a separate line above.
Your vote matters – here’s- heres how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 1:00 a.m., Pacific Time, on May 7, 2019. Online Before the Meeting - Go to www.investorvote.com/ELY or scan the QR code - login details are located in the shaded bar below. During the Meeting - Go to www.meetingcenter.io/210865261. You may attend the meeting via the Internet and vote during the meeting. Have your proxy card in hand and follow the instructions. Phone Call toll free1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Using a black ink pen, mark your votes with an X as shown in this example. Sign up for electronic delivery at Please do not write outside the designated areas. www.investorvote.com/ELY 20192021 Annual Meeting Proxy Card qIFIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qA Proposals - THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. YOUR BOARD OF DIRECTORS A RECOMMENDS A VOTE “FOR”"FOR" ALL OF THE NOMINEES LISTED BELOW AND “FOR”"FOR" PROPOSALS 2, 3 AND 3.4. 1. Election of Directors: +For Against Abstain For Against Abstain For Against Abstain 01 - Oliver G. (Chip) Brewer III 02 - Ronald S. BeardErik J Anderson 03 - Samuel H. Armacost 04 - John C. Cushman, IIIScott H. Baxter 05 - Thomas G. Dundon 06 - Laura J. Flanagan 0607 - Russell B.L. Fleischer 0708 - John F. Lundgren 0809 - Scott M. Marimow 10 - Adebayo O. Ogunlesi 0911 - Linda B. Segre 1012 - Anthony S. Thornley Mark here to vote Mark here to WITHHOLD For All EXCEPT - To withhold authority to vote for any nominee(s), FOR all nominees vote from all nominees write the name(s) of such nominee(s) below. Unless otherwise specified below, this proxy authorizes the proxies named on the reverse side of this card to cumulate votes that the undersigned is entitled to cast at the Annual Meeting in connection with the election of directors. To specify different instructions with regard to cumulative voting, write your instructions on the line below. For Against Abstain For Against Abstain 2. Ratify,To ratify, on an advisory basis, the appointment of Deloitte & 3. Approve, on an advisory basis, the compensation of the Touche LLP as the Company’sCompanys independent registered public Company’s named executive officers. accounting firm for the fiscal year ending December 31, 2019.2021 3. To approve, on an advisory basis, the compensation of the Companys named executive officers 4. To approve an amendment to the Companys Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 240,000,000 to 360,000,000 In their discretion, Brian P. Lynch and Sarah E. Kim, or either of them, are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. B Authorized Signatures - This section must be completed for your vote to count. Please date and sign below. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) - Please print date below. Signature 1 - Please keep signature within the box. Signature 2 - Please keep signature within the box. 1UPX + 02ZX9C1 U P X 03F42B
The 2021 Annual Meeting of Shareholders of Callaway Golf Company will be held on Wednesday, May 19, 2021, at 8:00 A.M. Pacific Time, virtually via the internet at www.meetingcenter.io/210865261. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. The password for this meeting is - ELY2021. Important notice regarding the Internet availability of proxy materials for the Shareholder Meeting To Be Held on May 7, 2019:19, 2021: The Annual Report and Proxy Statement are available on the Internet at: http:https://www.allianceproxy.com/callawaygolf/20192021 Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/ELY qIFIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Proxy - CALLAWAY GOLF COMPANY The undersigned shareholder of CALLAWAY GOLF COMPANY hereby appoints BRIAN P. LYNCH and SARAH E. KIM, or either of them, proxies of the undersigned, each with full power to act without the other and with the power of substitution, to represent the undersigned at the Annual Meeting of Shareholders of Callaway Golf Company to be held at Callaway Golf Company, 2180 Rutherford Road, Carlsbad, California 92008,via remote communication, on May 7, 2019,19, 2021, at 8:00 A.M. (Pacific Time), and at any adjournments or postponements thereof, and to vote all shares of stock of the Company standing in the name of the undersigned with all the powers the undersigned would possess if personally present, in accordance with the instructions below and on the reverse hereof, and in their discretion upon such other business as may properly come before the meeting; provided, however, that such proxies, or either of them, shall have the power to cumulate votes and cast such votes in favor of the election of some or all of the applicable director nominees in their sole discretion.meeting. THIS PROXY CARD WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED BUT NO DIRECTION IS MADE, THIS PROXY CARD WILL BE VOTED “FOR”"FOR" THE NOMINEES LISTED ON THE REVERSE HEREOF AND “FOR”"FOR" ALL OTHER PROPOSALS IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. (Items to be voted appear on reverse side) CNon-Voting Items Change of Address - Please print new address below. Comments - Please print your comments below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. +