EXHIBIT 10.3
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CALLAWAY GOLF COMPANY
1998 EXECUTIVE NON-DISCRETIONARY BONUS PLAN
(EFFECTIVE JANUARY 1, 1998)
1. PURPOSE
The 1998 Executive Non-Discretionary Plan (the "Non-Discretionary
Plan") is designed to promote the interests of Callaway Golf Company (the
"Company") and its shareholders by providing incentive to participating officers
of the Company and its subsidiaries to make significant contributions to the
performance of the Company and its subsidiaries and to reward outstanding
performance on the part of those individuals whose decisions and actions most
significantly affect the growth, profitability and efficient operation of the
Company and its subsidiaries. The Non-Discretionary Plan is intended to satisfy
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
2. ADMINISTRATION
The Non-Discretionary Plan shall be administered by a special
subcommittee of the Executive and Compensation Committee of the Board of
Directors (the "Executive Non-Discretionary Bonus Plan Subcommittee"), which
will at all times be constituted to meet the "outside director" requirements of
Section 162(m) of the Code. The Executive Non-Discretionary Bonus Plan
Subcommittee shall have the power to make rules and regulations for the
administration of the Non-Discretionary Plan. In making any determination under
the Non-Discretionary Plan, the Executive Non-Discretionary Bonus Plan
Subcommittee shall be entitled to rely on reports, opinions or statements of
officers or employees of the Company and its affiliates as well as those of
counsel, public accountants and other professional or expert persons. The
interpretations and decisions of the Executive Non-Discretionary Bonus Plan
Subcommittee with regard to the Non-Discretionary Plan shall be final and
conclusive. No member of the Executive Non-Discretionary Bonus Plan Subcommittee
shall be liable for any action or determination made in good faith with respect
to the Non-Discretionary Plan.
3. ELIGIBILITY
The Executive Non-Discretionary Bonus Plan Subcommittee will
initially designate 24 officers of the Company and its subsidiaries
("Participants") as eligible to participate in the Non-Discretionary Plan for
1998. Additional persons may be added as Participants in the discretion of the
Executive Non-Discretionary Bonus Plan Subcommittee.
4. DETERMINATION
The Executive Non-Discretionary Bonus Plan Subcommittee will
designate performance targets under the Non-Discretionary Plan within the time
period required by the Department of Treasury Regulations adopted to implement
Section 162(m) of the Code ("Regulations") for each year. The performance
targets will be based on achievement of specified levels of pre-tax earnings.
The performance targets will be set by the Executive Non-Discretionary Bonus
Plan Subcommittee based on the prior year's performance and other relevant
factors. The performance targets designated by the Executive Non-Discretionary
Bonus Plan Subcommittee may differ for each Participant in the Non-Discretionary
Plan. The maximum bonus amount payable under the Non-Discretionary Plan to any
Participant shall not exceed $2,000,000 for any year. The Executive
Non-Discretionary Bonus Plan Subcommittee may, in its sole discretion, establish
maximum bonus amounts payable to individual Participants under the
Non-Discretionary Plan of less than $2,000,000 for any year.
5. CERTIFICATION OF ACHIEVEMENT OF PERFORMANCE TARGETS
Provided that the Code and/or Regulations so require, the
Executive Non-Discretionary Bonus Plan Subcommittee shall, prior to any payment
under the Non-Discretionary Plan, certify in writing the extent, if any, of
achievement of performance targets for each Participant. For purposes of this
provision, and for so long as the Code and/or Regulations permit, the approved
minutes of the Executive Non-Discretionary Bonus Plan Subcommittee meeting in
which the certification is made may be treated as a written certification.
6. WITHHOLDING TAXES
The Company shall have the right to deduct from all awards granted
under the Non-Discretionary Plan any federal, state, local or foreign taxes
required by law to be withheld with respect to such awards.
7. OTHER BENEFITS
In addition to awards granted to Participants under the
Non-Discretionary Plan, discretionary bonuses may be awarded by the Executive
and Compensation Committee under the discretionary portion of the Company's
Executive Bonus Pool, pursuant to contract, or as otherwise determined by the
Executive and Compensation Committee. Awards granted to Participants under the
Non-Discretionary Plan shall not be considered as part of a Participant's salary
or used for the calculation of any other pay, allowance, pension or other
benefit unless otherwise permitted by the other benefit plans provided by the
Company or any of its subsidiaries, or as required by law or by contractual
obligations of the Company or any of its subsidiaries.
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8. AMENDMENT OR TERMINATION
The Executive Non-Discretionary Bonus Plan Subcommittee may from
time to time amend the Non-Discretionary Plan in any respect or terminate or
suspend the Non-Discretionary Plan at any time in whole or in part, provided
that, if shareholder approval of an amendment is required for continued
compliance with the requirements of Section 162(m) of the Code, such amendment
shall be subject to obtaining the required shareholder approval.
9. NO ASSIGNMENT
Except as expressly authorized by the Executive Non-Discretionary
Bonus Plan Subcommittee, the rights under the Non-Discretionary Plan, including
without limitation the rights to receive any payment, shall not be sold,
assigned, transferred, encumbered or hypothecated by a Participant (except by
testamentary disposition or intestate succession), and during the lifetime of
any Participant, any payment shall be payable only to such Participant.
10. NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Non-Discretionary Plan shall confer upon any
Participant any right to continue in the employ of the Company or any of its
subsidiaries or shall interfere with or restrict in any way the right of the
Company or any of its subsidiaries to discharge a Participant at any time for
any reason whatsoever, with or without cause. If any Participant ceases to be
employed by the Company or any of its subsidiaries, any unpaid bonuses shall be
paid in accordance with the Participant's termination agreement, if any, and as
otherwise determined by the Executive Non-Discretionary Bonus Plan Subcommittee.
11. COSTS AND EXPENSES
The costs and expenses of administering the Non-Discretionary Plan
shall be borne by the Company and not charged to any award nor to any
Participant receiving an award under the Non-Discretionary Plan.
12. FUNDING
The Non-Discretionary Plan shall be unfunded. Neither the Company
nor any of its subsidiaries shall be required to establish any special or
separate fund or to make any other segregation of assets to assure the payment
of any award under the Non-Discretionary Plan.
13. SEPARABILITY
If any of the terms or provisions of the Non-Discretionary Plan
conflict with
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the requirements of Section 162(m) of the Code, the Regulations or applicable
law, then such terms or provisions shall be deemed inoperative to the extent
necessary to avoid the conflict with the requirements of Section 162(m) of the
Code, the Regulations or applicable law without invalidating the remaining
provisions hereof. With respect to Section 162(m) of the Code, if the Non-
Discretionary Plan does not contain any provision required to be included herein
under Section 162(m) of the Code or the Regulations, such provisions shall be
deemed to be incorporated herein with the same force and effect as if such
provision had been set out at length herein.
14. TERM
The Non-Discretionary Plan shall be effective as of the first day
of the Company's 1998 fiscal year, subject to shareholder approval, and shall
continue for a period until the first shareholder meeting that occurs in the
fifth year following the year in which the shareholders of the Company
previously approved this Non-Discretionary Plan, unless amended or terminated by
the Company (see Amendment or Termination above), subject to any future
shareholder re-approval requirements of the Code and the Regulations.
15. GOVERNING LAW
The validity, construction and effect of the Non-Discretionary
Plan and any action taken or relating to the Non-Discretionary Plan shall be
determined in accordance with the laws of the State of California and applicable
federal law.
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