EXHIBIT 4.2
ADAMS GOLF, INC.
INCENTIVE STOCK OPTION AGREEMENT
UNDER
1998 STOCK INCENTIVE PLAN
NONTRANSFERABLE INCENTIVE STOCK OPTION AGREEMENT (this
"Agreement") entered into this ____ day of ___________, ____,
between ADAMS GOLF, INC., a Delaware corporation (the
"Corporation"), and ________________________________ (the
"Optionee," which term as used herein shall be deemed to include
any successor to the Optionee by will or by the laws of descent
and distribution, unless the context shall otherwise require).
Pursuant to the Corporation's 1998 Stock Incentive Plan
(the "Plan"), the Corporation, acting through its
Compensation/Plan Committee of the Board of Directors (the
"Committee"), approved the issuance to the Optionee, effective as
of the date set forth above, of an incentive stock option to
purchase up to an aggregate of ____________ shares of common
stock, par value $.001, of the Corporation (the "Common Stock"),
at the price of $____ per share (the "Option Price") which
represents not less than 100% of the fair market value of a share
of Common Stock determined in accordance with the Plan or 110% of
the fair market value of a share of Common Stock determined in
accordance with the Plan in the case of any stockholder of the
Corporation who on the date of this Agreement owns stock
representing more than 10% of the total combined voting powers of
all classes of the stock of the Corporation or its parent or its
Subsidiary (a "10% Stockholder") upon the terms and conditions
hereinafter set forth. (Capitalized terms used herein but not
defined herein shall have the meaning ascribed to them in the
Plan.)
NOW, THEREFORE, in consideration of the mutual premises
and undertakings hereinafter set forth, the parties hereto agree
as follows:
1. OPTION; OPTION PRICE. On behalf of the
Corporation, the Committee hereby grants as of the date of this
Agreement to the Optionee the option (the "Option") to purchase,
subject to the terms and conditions of this Agreement and the
provisions of the Plan (which is incorporated by reference herein
and which in all cases shall control in the event of any conflict
with the terms, definitions and provisions of this Agreement),
_______________ shares of Common Stock of the Corporation at an
exercise price per share equal to the Option Price, which Option
is intended to qualify for federal income tax purposes as an
"incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). A copy
of the Plan as in effect on the date hereof has been supplied to
the Optionee, and the Optionee by executing this Agreement hereby
acknowledges receipt thereof.
2. TERM. The term (the "Option Term") of the Option
shall commence on the date of this Agreement and shall terminate
on the fifth anniversary of the date of this Agreement, unless
such Option shall theretofore have been terminated in accordance
with the terms hereof or the provisions of the Plan.
3. VESTING; CHANGE OF CONTROL; RESTRICTIONS ON
EXERCISE.
(a) Subject to the provisions of Sections 5 and 8
hereof, and unless accelerated, as set forth in the Plan or as
provided herein, the Option granted hereunder shall vest and
become exercisable for the number of shares set forth opposite
the dates noted below (the "Option Vesting Schedule").
Cumulative
Date(s) Number of Vested Shares
------- -----------------------
(b) Notwithstanding the provisions of Paragraph 3(a)
above, upon a Change in Control (as hereinafter defined):
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(i) the Option shall become fully vested and
shall become immediately exercisable with respect to all
shares subject to the Option; and
(ii) upon exercise of the Option during the 60-day
period from and after the date of a Change of Control, the
Optionee may in lieu of the receipt of Common Stock upon the
exercise of the Option, elect by written notice to the
Corporation to receive an amount in cash equal to the excess
of the aggregate Value (as defined below) of the shares of
Common Stock covered by the Option or portion thereof
surrendered determined on the date the Option is exercised,
over the aggregate exercise price of the Option (such excess
is referred to herein as the "Aggregate Spread"); provided,
however, if the end of such 60-day period from and after the
date of a Change of Control is within six months of the date
of grant of the Option and the Optionee is an officer or
director of the Corporation subject to the reporting
requirements of Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Option shall be
cancelled in exchange for a cash payment to the Optionee
equal to the Aggregate Spread on the day which is six months
and one day after the date of grant of such Option. As used
in this Section 3(b)(ii), the term "Value" means the higher
of (1) the highest Fair Market Value (as defined below)
during the 60-day period from and after the date of a Change
of Control and (2) if the Change of Control is the result of
a transaction or series of transactions described in
paragraphs (i) or (iii) of the definition of Change of
Control, the highest price per share of the Common Stock
paid in such transaction or series of transactions (which in
the case of paragraph (i) shall be the highest price per
share of the Common Stock as reflected in a Schedule 13D
filed by the person having made the acquisition) and the
term "Fair Market Value" means the "Fair Market Value" of
the Common Stock on any date of reference shall be the
closing price on the business day immediately preceding such
date. For this purpose, the closing price of the Common
Stock on any business day shall be (i) if the Common Stock
is listed or admitted for trading on any United States
national securities exchange, the last reported sale price
of the Common Stock on such exchange, as reported in any
newspaper of general circulation, (ii) if actual
transactions in the Common Stock are included in the Nasdaq
National Market or are reported on a consolidated
transaction reporting system, the closing sales price of the
Common Stock on such system, (iii) if the Common Stock is
otherwise quoted on the Nasdaq system, or any similar system
of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid
and low asked quotations for such day of the Common Stock on
such system, (iv) if none of clause (i), (ii) or (iii) is
applicable, the mean between the high bid and low asked
quotations for the Common Stock as reported by the National
Daily Quotation Service if at least two securities dealers
have inserted both bid and asked quotations for the Common
Stock on at least five (5) of the ten (10) preceding days
and (v) if none of clause (i), (ii), (iii) or (iv) is
applicable, the most recent valuation price for the Common
Stock as adjusted by the Board in the exercise of its good
faith discretion.
(c) For purposes of this Agreement a Change in Control
of the Corporation shall be deemed to have occurred upon the
happening of any of the following events:
(i) the acquisition, other than from the
Corporation, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
other than Royal Holding Company, Inc. or B.H. Adams of
beneficial ownership of thirty percent (30%) or more of
either the then outstanding shares of Common Stock of the
Corporation or the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors; provided,
however, that any acquisition by the Corporation or any
corporation or other entity, whether domestic or foreign, in
which the Corporation has or obtains, directly or
indirectly, a proprietary interest of more than fifty
percent (50%) by reason of stock ownership or otherwise
("Subsidiary"), or any employee benefit plan (or related
trust) of the Corporation or its Subsidiaries, or any
corporation with respect to which, following such
acquisition, more than fifty percent (50%) of, respectively,
the then outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Common Stock and
voting securities of the Corporation immediately prior to
such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of
the then outstanding shares of Common Stock of the
Corporation or the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors, as the case may
be, shall not constitute a Change of Control;
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(ii) individuals who constitute the Board of
Directors of the Corporation as of January 1, 1998 (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation, provided that any individual becoming a
director subsequent to such date whose election, or
nomination for election by the Corporation's stockholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the directors of the Corporation
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) approval by the stockholders of the
Corporation of a reorganization, merger or consolidation of
the Corporation, in each case, with respect to which the
individuals and entities who were the respective beneficial
owners of the Common Stock and voting securities of the
Corporation immediately prior to such reorganization, merger
or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or
indirectly, more than sixty percent (60%) of, respectively,
the then outstanding shares of Common Stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Corporation or of the sale
or other disposition of all or substantially all of the
assets of the Corporation.
(d) Subject to the provisions of Sections 5 and 8
hereof, shares as to which the Option becomes exercisable
pursuant to the foregoing provisions may be purchased at any time
thereafter prior to the expiration or termination of the Option.
Anything contained in this Agreement to the contrary
notwithstanding, the Option shall not be exercisable to the
extent that the aggregate Fair Market Value on the date hereof of
all stock with respect to which incentive stock options are
exercisable for the first time by the Optionee during any
calendar year (under the Plan and all other plans of the
Corporation and its Subsidiaries, if any) exceeds $100,000. Such
prohibition on exercise shall be temporary and shall not effect
subsequent exercises if the restriction set forth herein is not
violated at such time.
4. TERMINATION OF OPTION.
(a) The unexercised portion of the Option shall
automatically terminate and shall become null and void and be of
no further force or effect upon the first to occur of the
following:
(i) The expiration of the Option Term.
(ii) The expiration of three months from the date
that the Optionee retires from the Corporation and its
Subsidiaries provided that the Optionee on the date of
termination of employment has attained the age of 62 with 10
years of continuous employment with the Corporation or its
Subsidiaries; provided, however, that if the Optionee shall
die during such three month period, the expiration of the
unexercised portion of the Option shall be determined in
accordance with subparagraph (v) below. The exercisability
of the Option shall be accelerated and the Option shall
become immediately exercisable without regard to the number
of shares for which it could otherwise have been exercised
on the date the Optionee retires.
(iii) The expiration of one year from the date
that the Optionee terminates employment with the Corporation
and its Subsidiaries as a result of the Optionee's permanent
and total disability (provided that the Optionee is eligible
for benefits under the Corporation's disability plan or
successor plan upon termination of employment); provided,
however, that if the Optionee shall die during such one year
period, the expiration of the unexercised portion of the
Option shall be determined in accordance with subparagraph
(v) below. The exercisability of the Option shall be
accelerated and the Option shall become immediately
exercisable without regard to the number of shares for which
it could otherwise have been exercised on the date of
termination of employment.
(iv) The date that the Optionee terminates
employment with the Corporation and its Subsidiaries if such
termination is for reasons other than retirement, (at age 62
or older with 10 years of continuous employment with the
Corporation or its Subsidiaries), permanent and total
disability (provided
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that the Optionee is eligible for benefits under the
Corporation's disability plan or successor plan upon
termination of employment) or death and further provided
that the Option is exercisable only for the number of shares
for which it could have been exercised at the time the
Optionee terminated employment with the Corporation and its
Subsidiaries.
(v) The expiration of the Option Term in the
event the Optionee dies while employed by the Corporation or
a Subsidiary or during the three month period following
retirement (at age 62 or older with 10 years of continuous
employment with the Corporation or its Subsidiaries), or
during the one year period following termination of
employment due to permanent or total disability (provided
that the Optionee is eligible for benefits under the
Corporation's disability plan or successor plan upon
termination of employment). The exercisability of all
options previously granted to a decreased Optionee shall be
accelerated and the Option shall become immediately
exercisable without regard to the number of shares for which
it otherwise could have been exercised on the date of death
of the Optionee.
(b) Anything contained herein to the contrary
notwithstanding, the Option shall not be affected by any change
of duties or position of the Optionee (including a transfer to or
from the Corporation or one of its Subsidiaries), so long as the
Optionee continues to be an officer or employee of the
Corporation or any of its Subsidiaries.
5. PROCEDURE FOR EXERCISE.
(a) Subject to the requirements of Section 8, the
Option may be exercised, from time to time, in whole or in part
(but for the purchase of a whole number of shares only), by
delivery of a written notice (the "Notice") from the Optionee to
the Secretary of the Corporation, which Notice shall:
(i) state that the Optionee elects to exercise
the Option;
(ii) state the number of shares with respect to
which the Option is being exercised (the "Optioned Shares");
(iii) state the date upon which the Optionee
desires to consummate the purchase of the Optioned Shares
(which date must be prior to the termination of such Option
and no later than thirty (30) days after the date of receipt
of such Notice);
(iv) include any representations of the Optionee
required under Section 8(c); and
(v) if the Option shall be exercised pursuant to
Section 10 by any person other than the Optionee, include
evidence to the satisfaction of the Committee of the right
of such person to exercise the Option.
(b) Payment of the Option Price for the Optioned
Shares shall be made in U.S. dollars by personal check, bank
draft or money order payable to the order of the Corporation or
by wire transfer.
(c) The Corporation shall issue a stock certificate in
the name of the Optionee (or such other person exercising the
Option in accordance with the provisions of Section 10) for the
Optioned Shares as soon as practicable after receipt of the
Notice and payment of the aggregate Option Price for such shares.
6. NO RIGHTS AS A STOCKHOLDER. The Optionee shall
have no rights as a stockholder of the Corporation with respect
to any Optioned Shares until the date the Optionee or his nominee
(which, for purposes of this Agreement, shall include any third
party agent selected by the Committee to hold such Option Shares
on behalf of the Optionee), guardian or legal representative is
the holder of record of such Optioned Shares.
7. ADJUSTMENTS. The aggregate number of shares
subject to the Option and the Option Price of the Option shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock of the Corporation
resulting from a stock split, stock dividend, combination or
exchange of shares, exchange for other
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securities, reclassification, reorganization, redesignation, spin-
off, split-off, merger, consolidation, recapitalization or other
such change.
8. ADDITIONAL PROVISIONS RELATED TO EXERCISE.
(a) The Option shall be exercisable only in accordance
with this Agreement, including the provisions regarding the
period when the Option may be exercised and the number of shares
of Common Stock that may be acquired upon exercise.
(b) The Option may not be exercised as to less than
one hundred (100) shares of Common Stock at any one time unless
less than one hundred (100) shares of Common Stock remain to be
purchased upon the exercise of the Option.
(c) To exercise the Option, the Optionee shall follow
the provisions of Section 5 hereof. Upon the exercise of the
Option at a time when there is not in effect a registration
statement under the Securities Act of 1933, as amended (the
"Securities Act") relating to the shares of Common Stock issuable
upon exercise of the Option, the Committee in its discretion may,
as a condition to the exercise of the Option, require the
Optionee (i) to represent in writing that the shares of Common
Stock received upon exercise of the Option are being acquired for
investment and not with a view to distribution and (ii) to make
such other representations and warranties as are deemed
appropriate by counsel to the Corporation. No Option may be
exercised and no shares of Common Stock shall be issued and
delivered upon the exercise of the Option unless and until the
Corporation and/or the Optionee shall have complied with all
applicable federal or state registration, listing and/or
qualification requirements and all other requirements of law or
of any regulatory agencies having jurisdiction.
(d) Stock certificates representing shares of Common
Stock acquired upon the exercise of the Option that have not been
registered under the Securities Act shall, if required by the
Committee, bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(e) The exercise of each Option and the issuance of
shares in connection with the exercise of an Option shall, in all
cases, be subject to each of the following conditions: (i) the
declaration of effectiveness by the Securities and Exchange
Commission ("SEC") of a registration statement relating to a
primary offering of the Common Stock, filed by the Corporation
with the SEC under the Securities Act, (ii) the satisfaction of
withholding tax or other withholding liabilities, (iii) the
listing, registration or qualification of any to-be-issued shares
upon any securities exchange, any NASDAQ or other trading or
quotation system or under any federal or state law, (iv) the
consent or approval of any regulatory body, (v) the execution of
a lock-up agreement with one or more prospective underwriters, or
(vi) the execution of a buy-sell or shareholders agreement with
other shareholders of the Corporation. The Committee shall in
its sole discretion determine whether one or more of these
conditions is necessary or desirable to be satisfied in
connection with the exercise of an Option and prior to the
delivery or purchase of shares pursuant to the exercise of an
Option. The exercise of an Option shall not be effective unless
and until such condition(s) shall have been satisfied or the
Committee shall have waived such conditions, in its sole
discretion.
9. NO EVIDENCE OF EMPLOYMENT OR SERVICE. Nothing
contained in the Plan or this Agreement shall confer upon the
Optionee any right to be retained in the employ of or under
contract with the Corporation or a Subsidiary or interfere in any
way with the right of the Corporation or any Subsidiary (subject
to the terms of any separate agreement to the contrary) to
terminate the Optionee's employment or engagement or to increase
or decrease the Optionee's compensation at any time.
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10. RESTRICTION ON TRANSFER. Except to the extent, if
any, as may be permitted by the Code and rules promulgated under
Section 16 of the Exchange Act, the Option may not be assigned or
transferred except by will or by the laws of descent and
distribution, and may be exercised during the lifetime of the
Optionee only by the Optionee or the Optionee's guardian or legal
representative. If the Optionee dies, the Option shall
thereafter be exercisable, during the period specified in Section
4(a)(v), by his executors or administrators or by a person who
acquired the right to exercise such option by bequest or
inheritance to the full extent to which the Option was
exercisable by the Optionee at the time of his death. The Option
shall not be subject to execution, attachment or similar process.
Any attempted assignment or transfer of the Option contrary to
the provisions hereof, and the levy of any execution, attachment
or similar process upon the Option, shall be null and void and
without effect.
11. DISQUALIFYING DISPOSITIONS. If the shares of
Common Stock acquired upon the exercise of this Option are
disposed of within two (2) years following the date of this
Agreement or one (1) year following the issuance of shares of
Common Stock upon exercise of the Option pursuant to the terms of
this Agreement to the Optionee or the Optionee otherwise makes a
disposition within the meaning of Section 424(c) of the Code and
the regulations promulgated thereunder (a "Disqualifying
Disposition"), the Optionee shall, within ten (10) days after a
Disqualifying Disposition, notify the Corporation in writing of
the date, sales price or other value ascribed to or used to
measure the amount received upon disposition of the shares and
the other terms of such Disqualifying Disposition and shall
immediately deliver to the Corporation payment for any amount of
federal income tax withholding required by law with respect to
the Disqualifying Disposition.
12. NOTICES. All notices or other communications
which are required or permitted hereunder shall be in writing and
sufficient if (i) personally delivered, (ii) sent by nationally-
recognized overnight courier or (iii) sent by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Optionee, to the address set forth on
the signature page hereto; and
if to the Corporation, to:
Adams Golf, Inc.
300 Delaware Avenue, Suite 548
Wilmington, Delaware 19801
Attention: Secretary
with a copy to:
Adams Golf Management Corp.
2801 E. Plano Parkway
Plano, Texas 75225
Attention: President
or to such other address as the party to whom notice is to be
given may have furnished to each other party in writing in
accordance herewith. Any such communication shall be deemed to
have been given (i) when delivered, if personally delivered, (ii)
on the first Business Day (as hereinafter defined) after
dispatch, if sent by nationally-recognized overnight courier and
(iii) on the third Business Day following the date on which the
piece of mail containing such communication is posted, if sent by
mail. As used herein, "Business Day" means a day that is not a
Saturday, Sunday or a day on which banking institutions in the
city to which the notice or communication is to be sent are not
required to be open.
13. NO WAIVER. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different
nature.
14. OPTIONEE UNDERTAKING. The Optionee hereby agrees
to take whatever additional actions and execute whatever
additional documents the Corporation or its counsel may in their
reasonable judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions
imposed on the Optionee pursuant to the express provisions of
this Agreement.
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15. MODIFICATION OF RIGHTS. The rights of the
Optionee are subject to modification and termination in certain
events as provided in this Agreement and the Plan.
16. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Delaware applicable to contracts made and to be wholly performed
therein.
17. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
18. ENTIRE AGREEMENT. This Agreement and the Plan
constitute the entire agreement between the parties with respect
to the subject matter hereof, and supersede all previously
written or oral negotiations, commitments, representations and
agreements with respect thereto.
[Remainder of Page Intentionally Left Blank]
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ADAMS GOLF, INC.
By:___________________________
Name:_________________________
Title:________________________
OPTIONEE:
_____________________________
Name:________________________
Address:_____________________
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Ladies/Gentlemen:
I hereby exercise my Incentive Stock Option to purchase _________
shares of Common Stock of ADAMS GOLF, INC. at the option price of
$____ per share as provided in the Incentive Stock Option
Agreement dated the ___ day of ________________.
I acknowledge that I previously received a copy of the 1998 Stock
Incentive Plan and executed an Incentive Stock Option Agreement,
and I have carefully reviewed both documents.
I have considered the federal tax implications of my option. I
hereby tender my personal check, bank draft or money order
payable to ADAMS GOLF, INC. in the amount of $___________ or, I
have wire transferred $___________ to ADAMS GOLF, INC., which
transfer shall be subject to confirmation of receipt of funds by
the Corporation. [If payment is to be made by wire transfer, the
Optionee should contact the Corporation's Chief Financial Officer
or Controller in advance to obtain wiring instructions.]
______________________________
Employee
______________________________
Date
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ADAMS GOLF, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER
1998 STOCK INCENTIVE PLAN
NONTRANSFERABLE NONQUALIFIED STOCK OPTION AGREEMENT
(this "Agreement") entered into this ____ day of ___________,
____, between ADAMS GOLF, INC., a Delaware corporation (the
"Corporation"), and ________________________________ (the
"Optionee," which term as used herein shall be deemed to include
any successor to the Optionee by will or by the laws of descent
and distribution, unless the context shall otherwise require).
Pursuant to the Corporation's 1998 Stock Incentive Plan
(the "Plan"), the Corporation, acting through its
Compensation/Plan Committee of the Board of Directors (the
"Committee"), approved the issuance to the Optionee, effective as
of the date set forth above, of a nonqualified stock option to
purchase up to an aggregate of ____________ shares of common
stock, par value $.001, of the Corporation (the "Common Stock"),
at the price of $____ per share (the "Option Price") which
represents not less than 100% of the fair market value of a share
of Common Stock determined in accordance with the Plan, upon the
terms and conditions hereinafter set forth. (Capitalized terms
used herein but not defined herein shall have the meaning
ascribed to them in the Plan).
NOW, THEREFORE, in consideration of the mutual premises
and undertakings hereinafter set forth, the parties hereto agree
as follows:
1. OPTION; OPTION PRICE. On behalf of the
Corporation, the Committee hereby grants as of the date of this
Agreement to the Optionee the option (the "Option") to purchase,
subject to the terms and conditions of this Agreement and the
provisions of the Plan (which is incorporated by reference herein
and which in all cases shall control in the event of any conflict
with the terms, definitions and provisions of this Agreement),
_______________ shares of Common Stock of the Corporation at an
exercise price per share equal to the Option Price. A copy of
the Plan as in effect on the date hereof has been supplied to the
Optionee, and the Optionee by executing this Agreement hereby
acknowledges receipt thereof.
2. TERM. The term (the "Option Term") of the Option
shall commence on the date of this Agreement and shall terminate
on the fifth anniversary of the date of this Agreement, unless
such Option shall theretofore have been terminated in accordance
with the terms hereof or the provisions of the Plan.
3. VESTING; CHANGE OF CONTROL; RESTRICTIONS ON
EXERCISE.
(a) Subject to the provisions of Sections 5 and 8
hereof, and unless accelerated, as set forth in the Plan or as
provided herein, the Option granted hereunder shall vest and
become exercisable for the number of shares set forth opposite
the dates noted below (the "Option Vesting Schedule").
Cumulative
Date(s) Number of Vested Shares
------- -----------------------
(b) Notwithstanding the provisions of Paragraph 3(a)
above, upon a Change in Control (as hereinafter defined):
(i) the Option shall become fully vested and
shall become immediately exercisable with respect to all
shares subject to the Option; and
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(ii) upon exercise of the Option during the 60-day
period from and after the date of a Change of Control, the
Optionee may in lieu of the receipt of Common Stock upon the
exercise of the Option, elect by written notice to the
Corporation to receive an amount in cash equal to the excess
of the aggregate Value (as defined below) of the shares of
Common Stock covered by the Option or portion thereof
surrendered determined on the date the Option is exercised,
over the aggregate exercise price of the Option (such excess
is referred to herein as the "Aggregate Spread"); provided,
however, if the end of such 60-day period from and after the
date of a Change of Control is within six months of the date
of grant of the Option and the Optionee is an officer or
director of the Corporation subject to the reporting
requirements of Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Option shall be
cancelled in exchange for a cash payment to the Optionee
equal to the Aggregate Spread on the day which is six months
and one day after the date of grant of such Option. As used
in this Section 3(b)(ii), the term "Value" means the higher
of (1) the highest Fair Market Value (as defined below)
during the 60-day period from and after the date of a Change
of Control and (2) if the Change of Control is the result of
a transaction or series of transactions described in
paragraphs (i) or (iii) of the definition of Change of
Control, the highest price per share of the Common Stock
paid in such transaction or series of transactions (which in
the case of paragraph (i) shall be the highest price per
share of the Common Stock as reflected in a Schedule 13D
filed by the person having made the acquisition) and the
term "Fair Market Value" means the "Fair Market Value" of
the Common Stock on any date of reference shall be the
closing price on the business day immediately preceding such
date. For this purpose, the closing price of the Common
Stock on any business day shall be (i) if the Common Stock
is listed or admitted for trading on any United States
national securities exchange, the last reported sale price
of the Common Stock on such exchange, as reported in any
newspaper of general circulation, (ii) if actual
transactions in the Common Stock are included in the Nasdaq
National Market or are reported on a consolidated
transaction reporting system, the closing sales price of the
Common Stock on such system, (iii) if the Common Stock is
otherwise quoted on the Nasdaq system, or any similar system
of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid
and low asked quotations for such day of the Common Stock on
such system, (iv) if none of clause (i), (ii) or (iii) is
applicable, the mean between the high bid and low asked
quotations for the Common Stock as reported by the National
Daily Quotation Service if at least two securities dealers
have inserted both bid and asked quotations for the Common
Stock on at least five (5) of the ten (10) preceding days
and (v) if none of clause (i), (ii), (iii) or (iv) is
applicable, the most recent valuation price for the Common
Stock as adjusted by the Board in the exercise of its good
faith discretion.
(c) For purposes of this Agreement a Change in Control
of the Corporation shall be deemed to have occurred upon the
happening of any of the following events:
(i) the acquisition, other than from the
Corporation, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
other than Royal Holding Company, Inc. or B. H. Adams of
beneficial ownership of thirty percent (30%) or more of
either the then outstanding shares of Common Stock of the
Corporation or the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors; provided,
however, that any acquisition by the Corporation or any
corporation or other entity, whether domestic or foreign, in
which the Corporation has or obtains, directly or
indirectly, a proprietary interest of more than fifty
percent (50%) by reason of stock ownership or otherwise
("Subsidiary"), or any employee benefit plan (or related
trust) of the Corporation or its Subsidiaries, or any
corporation with respect to which, following such
acquisition, more than fifty percent (50%) of, respectively,
the then outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Common Stock and
voting securities of the Corporation immediately prior to
such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of
the then outstanding shares of Common Stock of the
Corporation or the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors, as the case may
be, shall not constitute a Change of Control;
(ii) individuals who constitute the Board of
Directors of the Corporation as of January 1, 1998 (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation, provided that any individual becoming a
director subsequent to such date
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whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Corporation (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act); or
(iii) approval by the stockholders of the
Corporation of a reorganization, merger or consolidation of
the Corporation, in each case, with respect to which the
individuals and entities who were the respective beneficial
owners of the Common Stock and voting securities of the
Corporation immediately prior to such reorganization, merger
or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or
indirectly, more than sixty percent (60%) of, respectively,
the then outstanding shares of Common Stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Corporation or of the sale
or other disposition of all or substantially all of the
assets of the Corporation.
(d) Subject to the provisions of Sections 5 and 8
hereof, shares as to which the Option becomes exercisable
pursuant to the foregoing provisions may be purchased at any time
thereafter prior to the expiration or termination of the Option.
4. TERMINATION OF OPTION.
(a) The unexercised portion of the Option shall
automatically terminate and shall become null and void and be of
no further force or effect upon the first to occur of the
following:
(i) The expiration of the Option Term.
(ii) The expiration of three months from the date
that the Optionee retires from the Corporation and its
Subsidiaries provided that the Optionee on the date of
termination of employment has attained the age of 62 with 10
years of continuous employment with the Corporation or its
Subsidiaries; provided, however, that if the Optionee shall
die during such three month period, the expiration of the
unexercised portion of the Option shall be determined in
accordance with subparagraph (v) below. The exercisability
of the Option shall be accelerated and the Option shall
become immediately exercisable without regard to the number
of shares for which it could otherwise have been exercised
on the date the Optionee retires.
(iii) The expiration of one year from the date
that the Optionee terminates employment with the Corporation
and its Subsidiaries as a result of the Optionee's permanent
and total disability (provided that the Optionee is eligible
for benefits under the Corporation's disability plan or
successor plan upon termination of employment); provided,
however, that if the Optionee shall die during such one year
period, the expiration of the unexercised portion of the
Option shall be determined in accordance with subparagraph
(v) below. The exercisability of the Option shall be
accelerated and the Option shall become immediately
exercisable without regard to the number of shares for which
it could otherwise have been exercised on the date of
termination of employment.
(iv) The date that the Optionee terminates
employment with the Corporation and its Subsidiaries if such
termination is for reasons other than retirement, (at age 62
or older with 10 years of continuous employment with the
Corporation or its Subsidiaries), permanent and total
disability (provided that the Optionee is eligible for
benefits under the Corporation's disability plan or
successor plan upon termination of employment) or death and
further provided that the Option is exercisable only for the
number of shares for which it could have been exercised at
the time the Optionee terminated employment with the
Corporation and its Subsidiaries.
(v) The expiration of the Option Term in the
event the Optionee dies while employed by the Corporation or
a Subsidiary or during the three month period following
retirement (at age
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62 or older with 10 years of continuous employment with the
Corporation or its Subsidiaries), or during the one year
period following termination of employment due to permanent
or total disability (provided that the Optionee is eligible
for benefits under the Corporation's disability plan or
successor plan upon termination of employment). The
exercisability of all options previously granted to a
decreased Optionee shall be accelerated and the Option shall
become immediately exercisable without regard to the number
of shares for which it otherwise could have been exercised
on the date of death of the Optionee.
(b) Anything contained herein to the contrary
notwithstanding, the Option shall not be affected by any change
of duties or position of the Optionee (including a transfer to or
from the Corporation or one of its Subsidiaries), so long as the
Optionee continues to be an officer or employee of the
Corporation or any of its Subsidiaries.
5. PROCEDURE FOR EXERCISE.
(a) Subject to the requirements of Section 8, the
Option may be exercised, from time to time, in whole or in part
(but for the purchase of a whole number of shares only), by
delivery of a written notice (the "Notice") from the Optionee to
the Secretary of the Corporation, which Notice shall:
(i) state that the Optionee elects to exercise
the Option;
(ii) state the number of shares with respect to
which the Option is being exercised (the "Optioned Shares");
(iii) state the date upon which the Optionee
desires to consummate the purchase of the Optioned Shares
(which date must be prior to the termination of such Option
and no later than thirty (30) days after the date of receipt
of such Notice);
(iv) include any representations of the Optionee
required under Section 8(c); and
(v) if the Option shall be exercised pursuant to
Section 10 by any person other than the Optionee, include
evidence to the satisfaction of the Committee of the right
of such person to exercise the Option.
(b) Payment of the Option Price for the Optioned
Shares shall be made in U.S. dollars by personal check, bank
draft or money order payable to the order of the Corporation or
by wire transfer.
(c) The Corporation shall issue a stock certificate in
the name of the Optionee (or such other person exercising the
Option in accordance with the provisions of Section 10) for the
Optioned Shares as soon as practicable after receipt of the
Notice and payment of the aggregate Option Price for such shares.
6. NO RIGHTS AS A STOCKHOLDER. The Optionee shall
have no rights as a stockholder of the Corporation with respect
to any Optioned Shares until the date the Optionee or his nominee
(which, for purposes of this Agreement, shall include any third
party agent selected by the Committee to hold such Option Shares
on behalf of the Optionee), guardian or legal representative is
the holder of record of such Optioned Shares.
7. ADJUSTMENTS. The aggregate number of shares
subject to the Option and the Option Price of the Option shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock of the Corporation
resulting from a stock split, stock dividend, combination or
exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, spinoff, split-
off, merger, consolidation, recapitalization or other such
change.
8. ADDITIONAL PROVISIONS RELATED TO EXERCISE.
(a) The Option shall be exercisable only in accordance
with this Agreement, including the provisions regarding the
period when the Option may be exercised and the number of shares
of Common Stock that may be acquired upon exercise.
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(b) The Option may not be exercised as to less than
one hundred (100) shares of Common Stock at any one time unless
less than one hundred (100) shares of Common Stock remain to be
purchased upon the exercise of the Option.
(c) To exercise the Option, the Optionee shall follow
the provisions of Section 5 hereof. Upon the exercise of the
Option at a time when there is not in effect a registration
statement under the Securities Act of 1933, as amended (the
"Securities Act") relating to the shares of Common Stock issuable
upon exercise of the Option, the Committee in its discretion may,
as a condition to the exercise of the Option, require the
Optionee (i) to represent in writing that the shares of Common
Stock received upon exercise of the Option are being acquired for
investment and not with a view to distribution and (ii) to make
such other representations and warranties as are deemed
appropriate by counsel to the Corporation. No Option may be
exercised and no shares of Common Stock shall be issued and
delivered upon the exercise of the Option unless and until the
Corporation and/or the Optionee shall have complied with all
applicable federal or state registration, listing and/or
qualification requirements and all other requirements of law or
of any regulatory agencies having jurisdiction.
(d) Stock certificates representing shares of Common
Stock acquired upon the exercise of the Option that have not been
registered under the Securities Act shall, if required by the
Committee, bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(e) The exercise of each Option and the issuance of
shares in connection with the exercise of an Option shall, in all
cases, be subject to each of the following conditions: (i) the
declaration of effectiveness by the Securities and Exchange
Commission ("SEC") of a registration statement relating to a
primary offering of the Common Stock, filed by the Corporation
with the SEC under the Securities Act, (ii) the satisfaction of
withholding tax or other withholding liabilities, (iii) the
listing, registration or qualification of any to-be-issued shares
upon any securities exchange, any NASDAQ or other trading or
quotation system or under any federal or state law, (iv) the
consent or approval of any regulatory body, (v) the execution of
a lock-up agreement with one or more prospective underwriters, or
(vi) the execution of a buy-sell or shareholders agreement with
other shareholders of the Corporation. The Committee shall in
its sole discretion determine whether one or more of these
conditions is necessary or desirable to be satisfied in
connection with the exercise of an Option and prior to the
delivery or purchase of shares pursuant to the exercise of an
Option. The exercise of an Option shall not be effective unless
and until such condition(s) shall have been satisfied or the
Committee shall have waived such conditions, in its sole
discretion.
9. NO EVIDENCE OF EMPLOYMENT OR SERVICE. Nothing
contained in the Plan or this Agreement shall confer upon the
Optionee any right to be retained in the employ of or under
contract with the Corporation or a Subsidiary or interfere in any
way with the right of the Corporation or any Subsidiary (subject
to the terms of any separate agreement to the contrary) to
terminate the Optionee's employment or engagement or to increase
or decrease the Optionee's compensation at any time.
10. RESTRICTION ON TRANSFER. Except to the extent, if
any, as may be permitted by the Code and rules promulgated under
Section 16 of the Exchange Act, the Option may not be assigned or
transferred except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined in the Code, and may be exercised during the lifetime
of the Optionee only by the Optionee or the Optionee's guardian
or legal representative or assignee pursuant to a qualified
domestic relations order. If the Optionee dies, the Option shall
thereafter be exercisable, during the period specified in Section
4(a)(v), by his executors or administrators or by a person who
acquired the right to exercise such option by bequest or
inheritance to the full extent to which the Option was
exercisable by the Optionee at the time of his death. The Option
shall not be subject to execution, attachment or similar process.
Any attempted assignment or transfer of the Option contrary to
the provisions
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hereof, and the levy of any execution, attachment or similar
process upon the Option, shall be null and void and without
effect.
11. NOTICES. All notices or other communications
which are required or permitted hereunder shall be in writing and
sufficient if (i) personally delivered, (ii) sent by nationally-
recognized overnight courier or (iii) sent by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Optionee, to the address set forth on
the signature page hereto; and
if to the Corporation, to:
Adams Golf, Inc.
300 Delaware Avenue, Suite 548
Wilmington, Delaware 19801
Attention: Secretary
with a copy to:
Adams Golf, Ltd.
c/o Adams Golf GP Corp.
2801 E. Plano Parkway
Plano, Texas 75225
Attention: President
or to such other address as the party to whom notice is to be
given may have furnished to each other party in writing in
accordance herewith. Any such communication shall be deemed to
have been given (i) when delivered, if personally delivered, (ii)
on the first Business Day (as hereinafter defined) after
dispatch, if sent by nationally-recognized overnight courier and
(iii) on the third Business Day following the date on which the
piece of mail containing such communication is posted, if sent by
mail. As used herein, "Business Day" means a day that is not a
Saturday, Sunday or a day on which banking institutions in the
city to which the notice or communication is to be sent are not
required to be open.
12. NO WAIVER. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different
nature.
13. OPTIONEE UNDERTAKING. The Optionee hereby agrees
to take whatever additional actions and execute whatever
additional documents the Corporation or its counsel may in their
reasonable judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions
imposed on the Optionee pursuant to the express provisions of
this Agreement.
14. MODIFICATION OF RIGHTS. The rights of the
Optionee are subject to modification and termination in certain
events as provided in this Agreement and the Plan.
15. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Delaware applicable to contracts made and to be wholly performed
therein.
16. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
17. ENTIRE AGREEMENT. This Agreement and the Plan
constitute the entire agreement between the parties with respect
to the subject matter hereof, and supersede all previously
written or oral negotiations, commitments, representations and
agreements with respect thereto.
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ADAMS GOLF, INC.
By:____________________________
Name:__________________________
Title:_________________________
OPTIONEE:
_______________________________
Name:__________________________
Address:_______________________
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Ladies/Gentlemen:
I hereby exercise my Nonqualified Stock Option to purchase
_________ shares of Common Stock of ADAMS GOLF, INC. at the
option price of $____ per share as provided in the Nonqualified
Stock Option Agreement dated the ___ day of ________________.
I acknowledge that I previously received a copy of the 1998 Stock
Incentive Plan and executed a Nonqualified Stock Option
Agreement, and I have carefully reviewed both documents.
I have considered the federal tax implications of my option. I
hereby tender my personal check, bank draft or money order
payable to ADAMS GOLF, INC. in the amount of $____________ or, I
have wire transferred $_______________ to ADAMS GOLF, INC., which
transfer shall be subject to the confirmation of receipt of funds
by the Corporation. [If payment is to be made by wire transfer,
the Optionee should contact the Corporation's Chief Financial
Officer or Controller in advance to obtain wiring instructions.]
______________________________
Employee
______________________________
Date
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