EXHIBIT 10.12
CALLAWAY GOLF COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1998)
This Executive Deferred Compensation Plan ("Plan") has been adopted by the
Board of Directors of Callaway Golf Company, a California corporation
("Company"), effective August 1, 1994, as amended effective January 1, 1996 and
November 1, 1997 and restated effective January 1, 1998.
1. PURPOSE
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The primary purpose of the Plan is to provide deferred compensation to
a select group of management or highly compensated employees through an unfunded
"top hat" arrangement exempt from the fiduciary, funding, vesting, and plan
termination insurance provisions of Title I and Title IV of the Employee
Retirement Income Security Act ("ERISA"). More specifically, the Company has
adopted this Plan to provide Employees with the opportunity to defer part or all
of that portion of their Compensation including amounts they are unable to
defer, receive or take into account under any tax qualified deferred
compensation (i.e., 401(k), pension, profit sharing or stock bonus) plan which
the Company may now or hereafter maintain, as a result of the limits imposed by
Sections 401(a)(4), 401(a)(17), 401(k)(3), 401(m), 402(g) and 415 of the
Internal Revenue Code ("Code") on plans to which those sections of the Code
apply. To the extent that a separable part of the Plan is maintained for the
purpose of providing benefits in excess of those permitted by Section 415 of the
Code, that part of the Plan may be treated as an excess benefit plan within the
meaning of Section 3(36) of ERISA. The purposes of this Plan include the
deferral of payment of fees to be earned by outside directors, i.e. members of
the Board who are not officers or common-law employees of Callaway Golf, within
the meaning of Section 3121 of the Code.
2. DEFINITIONS AND CAPITALIZED TERMS
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When used in this Plan document, the capitalized terms set forth in
alphabetical order herein have the definitions specified below unless the
context in which the term appears clearly requires a different meaning.
a. "Account" refers to the bookkeeping entries established and
maintained by the Company or the Committee for the purpose of recording (i) the
amounts of Compensation deferred by an Employee under this Plan, (ii) any
hypothetical investment earnings, losses, interest accruals or administrative
expenses with respect to those amounts, and (iii) any distributions to an
Employee or Beneficiary.
b. "Beneficiary" refers to the person or entity selected to receive any
portion of an Employee's Account that has not been distributed from the Plan at
the time of the Employee's death. Such designation shall be on a form provided
or approved by the Plan Administrator. If an Employee fails to designate a
Beneficiary or no designated Beneficiary survives the Employee, the Plan
Administrator may direct payment of benefits to the following person or persons
in the order given below: the Employee's
(i) spouse,
(ii) descendants, per stirpes,
(iii) parents,
(iv) brothers and sisters, or
(v) estate of the Participant.
c. "Board" or "Board of Directors" refers to the Board of Directors of the
Company.
d. "Code" refers to the Internal Revenue Code of 1986, as amended from
time to time.
e. "Committee" or "Administrative Committee" refers to the officers of the
Company who act on behalf of the Company in discharging the Company's duties as
the Plan Administrator. Notwithstanding any other provision of the Plan
document, any member of the Committee or any other officer or employee of the
Company who exercises discretion or authority on behalf of the Company shall not
be a fiduciary of the Plan merely by virtue of his or her exercise of such
discretion or authority. The Board shall identify the Company officers who
shall serve as members of the Committee. Because this Plan is a "top hat"
arrangement, neither the Company nor the Committee shall be subject to the
duties imposed by the provisions of Part 4 of Title I of ERISA.
f. "Company," "Corporation" or "Employer" refers to Callaway Golf Company,
a California corporation.
g. "Company 401(k) Plan" refers to the Callaway Golf Company defined
contribution plan intended to satisfy the requirements of Sections 401(a),
401(k), 401(m) and 414(i) of the Code. References to the Company 401(k) Plan or
to the Company Matching Contributions, below, are for purposes of measurement
only. Nothing in this Plan contemplates a transfer of contributions or assets
from the Company 401(k) Plan to this Plan or conditions participation in this
Plan upon an Employee's participation or nonparticipation in the Company 401(k)
Plan.
h. "Company Matching Contributions" refers to contributions, if any, made
by the Company or any Subsidiary pursuant to Section 5.6 of this Plan. Said
contributions may be measured with reference to matching contributions under the
Company 401(k) Plan.
i. "Compensation" refers to an Employee's gross salary, including any
commissions, bonuses or awards, payable by the Company or any Subsidiary after
an Employee first becomes eligible to participate in this Plan and during the
period through which such participation continues. For the 1994 Plan Year, the
Compensation an Employee may defer under the Plan is limited to bonuses earned
in 1994 and determined after July 31, 1994. For outside directors, Compensation
refers to directors fees payable by the Company after the outside director first
becomes eligible to participate in this Plan and during the period through which
such participation continues. For the 1998 Plan Year, the Compensation an
outside director may defer under the Plan is limited to fees first payable by
Callaway Golf after December 31, 1997, for services to be rendered after that
date.
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j. "Disabled" or "Disability" refers to a physical or mental condition of
an Employee which (i) occurs after an Employee first defers Compensation under
this Plan, (ii) results from an injury, disease or disorder, and (iii) renders
the Employee totally and permanently incapable of continuing in his or her
customary employment with the Company or any Subsidiary. In determining whether
an Employee is disabled, the Committee may rely upon the conclusions of any
insurance carrier that has issued a policy of insurance covering the Employee or
upon the conclusions of any physician acceptable to the Committee. An Employee
will automatically satisfy the requirements under this Plan, with respect to
submission of evidence of disability, throughout the period that he or she
remains qualified for Social Security disability benefits. Any Employee who
believes that he or she is entitled to any advantage, benefit or other
consideration under the Plan as a result of being Disabled shall apply to the
Committee for such consideration and shall provide any evidence of Disability
which the Committee in its discretion may request in a manner consistent with
the Americans with Disabilities Act of 1990 and other relevant laws.
k. "Effective Date" refers to August 1, 1994 (with respect to
Compensation first earned, determined or payable after that date) contingent
upon approval of the Plan by the Board of Directors of the Company.
l. "Employee" refers to any employee, within the meaning of Section
3121(d) of the Code, who is highly compensated or is a member of management
selected by the Board to participate in this Plan or in any other executive
deferred compensation arrangement maintained by the Company or any Subsidiary.
In determining whether an employee is described in the preceding sentence, an
employee shall be considered to be highly compensated if the employee's annual
Compensation exceeds $150,000 or such greater amount permitted to be considered
under Section 401(a)(17) of the Code. Where the Plan Administrator considers
appropriate in applying the provisions of this Plan, the term Employee shall
include only persons who are Participants or Inactive Participants under the
Plan. If the Board amends the Plan to allow participation by outside directors
or other independent contractors, the term Employee shall refer to such outside
director or independent contractor. Because the Board has amended the Plan to
allow participation by outside directors, effective November 1, 1997, the term
Employee shall include references to members of Callaway Golf's Board who are
not officers or common-law employees of Callaway Golf, within the meaning of
Code Section 3121. To the extent necessary for the orderly administration of the
Plan, all definitions and other provisions of the Plan shall be construed in a
manner consistent with participation by outside directors and with their
deferral of the inclusion of fees into gross income for federal and state income
tax purposes.
m. "ERISA" refers to the Employee Retirement Income Security Act of 1974,
as amended from time to time.
n. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
o. "Hardship" refers to an Employee's immediate and heavy financial need
caused by an unforeseeable emergency, as described in Treasury Regulations
Section 1.457-2(h)(4) and (5). In general, but without limitation, the Plan
Administrator shall approve a Hardship withdrawal from an Employee's Account if
the reduction does not exceed the amount needed to pay for the following
unreimbursed
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expenses: (i) medial expenses defined in Code Section 213(d) and incurred (or to
be incurred) during the calendar year by the Employee, or his or her spouse or
dependents (as described in Code Section 152) as a result of a sudden or
unexpected illness or accident; (ii) loss of a participant's property as a
result of a casualty or other extraordinary, unforeseeable circumstances
attributable to forces beyond the participant's control; and (iii) other costs
recognized by the Plan Administrator to pose an immediate and heavy financial
need on the Employee as a result of an unforeseeable emergency.
p. "Inactive Participant" refers to an Employee who deferred
Compensation under the Plan during a previous Plan Year but who does not defer
any Compensation payable during the current Plan Year.
q. "Insolvency" shall exist if Callaway Golf Company is (a) unable to
pay its debts as they come due or (b) subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
r. "Participant" refers to an eligible Employee who elects to
defer under the Plan part or all of his or her Compensation payable during the
current Plan Year.
s. "Plan" shall mean this Callaway Golf Company Executive Deferred
Compensation Plan, as amended from time to time.
t. "Plan Administrator" refers to the Company.
u. "Plan Year" refers to the calendar year; however, the first
Plan Year shall be the period beginning August 1, 1994 and ending December 31,
1994.
v. "Termination of Employment" refers to an Employee's (i) separation
from service with the Company or any Subsidiary, (ii) refusal or failure to
return to work within five working days after the date requested by the Company
or any Subsidiary or (iii) failure to return to work at the conclusion of a
leave of absence. If the Board amends the Plan to allow participation by outside
directors or other independent contractors, the phrase Termination of Employment
shall refer to the cessation of all services rendered to the Company or any
Subsidiary by the outside director or independent contractor. In the case of
outside directors, Termination of Employment or Termination refers to the
voluntary or involuntary cessation of all services as an outside director
without the commencement or recommencement of service as an officer or common-
law employee of the Company, within the meaning of Code Section 3121.
w. "Trust" shall mean any trust or other vehicle established by the
Company to meet its obligations under the Plan.
x. "Subsidiary" refers to any corporation, partnership, limited
liability company or other entity, domestic or foreign, in which the Company
directly or indirectly owns 50% or more of the total combined power to cast
votes in the election of directors, managing partners, managers or similar
officials, and which has been included within the coverage of the Plan by the
Board of Directors, in its sole discretion.
3. ELIGIBILITY
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3.1 The Board or the Committee, in its sole discretion, may designate
from time to time those Employees of the Company or any Subsidiary who are
eligible to participate in the Plan for one or more Plan Years and the date upon
which each such Employee's participation may commence. All designated Employees
shall be notified by the Board or the Committee of their eligibility to
participate. An Employee shall cease to be eligible when the Employee ceases
both (i) to be a member of a select group of management and (ii) to be highly
compensated as described in Section 2(k) above. Additionally, at the discretion
of the Board or Committee, an Employee shall not be eligible to participate in
the Plan (a) while the Employee has an unpaid loan from any tax-qualified
deferred compensation plan maintained by the Company or any Subsidiary or (b)
during the Plan Year immediately following the Plan Year in which the Employee
takes a Hardship withdrawal from the Plan. The Effective Date of any such
ineligibility shall be the first day of the Plan Year coinciding with or next
following the date on which the Board or Committee provides the Employee with
notice of revocation of eligibility. An Employee's eligibility to participate in
the Plan does not confer upon the Employee any right to any award, bonus or
remuneration of any kind.
3.2 The Committee administering the Plan or in the case of outside
directors a subcommittee on which no outside director participates, in its sole
discretion, may designate from time to time those outside directors of the
Company who are eligible to participate in the Plan for one or more Plan Years
and the date upon which each such director's participation may commence. All
designated outside directors shall be notified by the Committee of their
eligibility to participate. An outside director shall cease to be eligible to
defer Compensation under the Plan when he or she ceases to be an outside
director or when the Committee, in its sole discretion, designates the outside
director as no longer eligible to participate in the Plan. An outside director's
eligibility to participate in the Plan does not confer upon the outside director
any right to any fee, remuneration or right to continued participation, election
or appointment of any kind.
4. DEFERRAL OF COMPENSATION
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4.1 Election to Defer
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An Employee who is eligible to participate in the Plan may elect to defer
the receipt of Compensation by completing a deferral election form provided or
approved by the Company or Committee. Pursuant to the deferral election form,
an eligible Employee may elect to defer any whole percentage or fixed dollar
amount of his or her Compensation. An Employee who elects to participate in the
Plan must defer at least $2,000 in Compensation for each Plan Year in which he
or she remains eligible to participate. An outside director who is eligible to
participate in the Plan may elect to defer the receipt of Compensation by
completing a deferral election form provided or approved by the Company or
Committee. Pursuant to the deferral election form, an eligible outside director
may elect to defer any whole percentage or fixed dollar amount of his or her
Compensation. An outside director who elects to participate in the Plan must
defer at least $2,000 in Compensation for each Plan Year in which he or she
remains eligible to participate.
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4.2 Date of Deferral
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To the extent provided in Section 4.6, this Section 4.2 shall not
apply to the deferral election of an Employee or outside director made no later
than the end of the period described in Section 4.6, with respect to his or her
initial participation in the Plan (as determined under Section 3.1 or 3.2). An
eligible Employee must submit his or her deferral election form to the Committee
no later than the last day of the deferral election period. The last day of the
deferral election period shall be (a) the last day preceding the calendar year
in which the eligible Employee will render the services for which he or she will
receive any part of the Compensation (including bonus) payable to the Employee
during that year or (b) with respect to the deferral of Compensation earned
during 1994 Plan Year, not later than 30 days after the Effective Date. At the
time of the deferral election, the Employee must specify the form in which
distributions shall occur under the Plan. An eligible outside director must
submit his or her deferral election form to the Committee no later than the last
day of the deferral election period. The last day of the deferral election
period shall be December 31st, the last day preceding the calendar year in which
the eligible director will render the services for which he or she will receive
any part of the Compensation payable during that calendar year. At the time of
the deferral election, the outside director must specify, on the Plan's
enrollment form, the event or date upon the occurrence of which distributions
are to commence under the Plan and the form in which such distributions shall be
made.
4.3 Multiple Elections
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An election to defer Compensation shall be effective on the date an
eligible Employee delivers a completed deferral election to the Committee;
provided, however, that, if the eligible Employee delivers another properly
completed deferral election form to the Committee prior to the close of the
deferral election period described in Section 4.2, the deferral election on the
form bearing the latest date shall control. After the last day of the election
period, the controlling election made prior to the close of the period shall be
irrevocable. An election to defer Compensation shall be effective on the date an
eligible outside director delivers a completed deferral election to the
Committee; provided, however, that, if the eligible outside director delivers
another properly completed deferral election form to the Committee prior to the
close of the deferral election period described in Section 4.2, the deferral
election on the form bearing the latest date shall control. After the last day
of the election period, the controlling election made prior to the close of the
period shall be irrevocable.
4.4 Annual Elections
----------------
To the extent provided in Section 4.6, this Section 4.4 shall not
apply to a deferral election of an Employee or outside director made no later
than the end of the period described in Section 4.6, with respect to his or her
initial participation in the Plan (as determined under Section 3.1 or 3.2). In
order to defer any portion of Compensation earned in any calendar year after the
1994 calendar year, an eligible Employee must submit at least one completed
deferral election form during the 3-month period immediately preceding the start
of that calendar year. In order to defer any portion of Compensation earned in
any calendar year after the 1997 calendar year, an eligible outside director
must submit at least one completed deferral election form during the 3-month
period immediately preceding the start of that calendar year.
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4.5 No Deferral Adjustments
-----------------------
After an annual election has taken effect for any Plan Year, a
Participant may not increase or decrease the percentage or amount of
Compensation to be deferred during that Plan Year; except that a Participant
must cease deferrals under the Plan to the extent that such cessation may
relieve the Participant of one or more Hardships without any withdrawals under
this Plan. After an annual election has taken effect for any Plan Year, an
outside director may not increase or decrease the percentage or amount of
Compensation to be deferred during that Plan Year; except that an outside
director must cease deferrals under the Plan to the extent that such cessation
may relieve the outside director of one or more Hardships, as defined in Section
2 of the Plan, without any withdrawals under this Plan.
4.6 New Eligible Employees and Outside Directors
--------------------------------------------
Notwithstanding any other provision of the Plan, an individual who
first becomes eligible to participate in the Plan, pursuant to Plan Sections 3.1
or 3.2, may submit his or her deferral election form to the Committee not later
than 30 days following the date of such eligibility. The Participant's deferral
election will be effective as to Compensation payable for services rendered
after the date the form is received by the Committee. The Participant must
specify, in the manner required by the Committee, the event or date upon the
occurrence of which distributions are to commence under the Plan and the form of
such distributions. An Employee or outside director who does not submit a
deferral election by the end of the period described in this Section 4.6 may not
elect to defer any portion of his or her Compensation until the following
January 1, in accordance with Sections 4.2 and 4.4.
5. DEFERRED COMPENSATION ACCOUNTS
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5.1 Maintenance of Accounts
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The Plan Administrator shall maintain one or more bookkeeping Accounts
with respect to any Compensation deferred by an eligible Employee under Section
4 above. The Plan Administrator shall credit the Account with the full amount
of Compensation deferred in any payroll period. If the Compensation deferred is
subject to federal or state employment taxes (e.g. taxes under the Federal
Insurance Contributions Act or Federal Unemployment Tax Act), said taxes shall
be withheld and deducted from a portion of the Employee's Compensation not
deferred under this Plan. A Participant or Inactive Participant shall be fully
vested at all times in amounts deferred under Section 4 above, as adjusted for
any earnings, losses, interest accruals, administrative expenses or
distributions as described below.
5.2 Investment Elections
--------------------
In accordance with rules, procedures and options established by the
Committee, a Participant shall have the right to express preferences with
respect to the investment of his or her Account, except for any period of time
during which the Company limits Account earnings to interest accruals under
Section 5.4 below. Although the Company shall have the hypothetical obligation
to follow the Participant's investment preferences, the Company, in its sole
discretion, may satisfy its hypothetical obligation from time to time in one or
both of the following ways. First, the Company
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may invest assets hypothetically allocable to the Participant's Accounts in the
specific investments, in the specific amounts and for the specific periods
requested by the Participant; and the Company must credit or charge the
Participant's Accounts with the earnings, gains or losses resulting from such
investments. Second, the Company may invest assets hypothetically allocable to
the Participant's Accounts in any manner, in any amount and for any period of
time which the Company in its sole discretion may select; but the Company must
credit or charge the Participant's Accounts with the same earnings, gains or
losses that the Participant would have incurred if the Company had invested the
assets hypothetically allocable to the Participant's Accounts in the specific
investments, in the specific amounts and for the specific periods requested by
the Participant. In accordance with procedures established by the Plan
Administrator, a Participant may change his or her investment preferences twice
each Plan Year. Such changes may be made, if at all, during the three-week
period immediately following the quarterly distribution of individual account
statements. If this Plan is determined to be subject to the fiduciary provisions
of Part 4 of Title I of ERISA, this Plan shall be treated as a Plan described in
Section 404(c) of ERISA and Title 29 of the Code of Federal Regulations Section
2550.404c-1, in which Plan fiduciaries may be relieved of liability for any
losses which are the direct and necessary result of investment instructions
given by a Participant or Beneficiary.
5.3 Investment Earnings or Losses
-----------------------------
Except for any period of time during which the Company limits
bookkeeping Account earnings to hypothetical interest accruals under Section 5.4
below, any amounts credited to the bookkeeping Account of a Participant or
Inactive Participant as a result of the deferral of all or part of his or her
Compensation may increase or decrease as a result of the Company's investment of
such amounts during the Plan Year, as described in Section 5.2 above. A ratable
share of the Plan's hypothetical investment earnings or losses under this
Section 5.3 shall be credited to the bookkeeping Account of a Participant or
Inactive Participant, as determined in good faith by the Committee. At the sole
discretion of the Committee, for any Plan Year, the Committee may allocate to
the Participant's bookkeeping Account either (i) the full amount of the
Participant's share of the Plan's hypothetical investment earnings or losses or
(ii) the full amount of such share adjusted for any federal, state or local
income or employment tax consequences attributable to such hypothetical earnings
or losses. If the full amount of such hypothetical investment earnings or
losses are allocated to a Participant's Account, any federal, state or local
income or employment tax consequences attributable to such earnings or losses
under this Section 5.3 shall be borne by or inure to the benefit of the Company.
The Participant and his or her Beneficiary understand and agree that they assume
all risk in connection with any decrease in the value of the Compensation
deferred under the Plan and invested in accordance with these Sections 5.2 and
5.3.
5.4 Interest Accruals
-----------------
During each Plan Year in which the Company does not invest an
Employee's deferred Compensation as described in Sections 5.2 and 5.3 above, any
amounts credited to the bookkeeping Account of a Participant or Inactive
Participant as a result of the deferral of all or part of his or her
Compensation shall accrue hypothetical interest compounded annually, as
consideration for the use or forbearance of money. The hypothetical accrual of
interest begins and the compounding of interest occurs on
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January 1 of each Plan Year or, if later, the date on which an eligible Employee
first defers Compensation under the Plan. The rate at which interest accrues
shall equal the prime rate, plus one percent, offered to borrowers by a
commercial bank in San Diego, California on December 31st of the Plan Year
during which the accrual occurs. The Committee shall select the commercial bank
before December 1 of the Plan Year during which the accrual occurs. At the sole
discretion of the Company, for any Plan Year (i) the full amount of such
hypothetical accrued interest may be allocated to a Participant's Account or
(ii) adjusted for any federal, state or local income or employment tax
consequences attributable to such interest, prior to allocating such
hypothetical interest to a Participant's Account. If the full amount of such
interest accruals are allocated to a Participant's Account, any federal, state
or local income or employment tax consequences attributable to interest accruals
under this Section 5.4 shall be borne by or inure to the benefit of the Company.
5.5 Investment of Unpaid Balances
-----------------------------
The unpaid balance of all Accounts payable under the Plan shall
continue to be credited with the hypothetical investment earnings or losses
described in Sections 5.2 and 5.3 above or hypothetical accruals of interest as
described in Section 5.4 above. The unpaid balance of all Accounts of any
outside director under the Plan shall continue to be credited with the
hypothetical investment earnings or losses described in Sections 5.2 and 5.3 of
the Plan or hypothetical accruals of interest as described in Section 5.4 of the
Plan until said Accounts have been distributed in their entirety.
5.6 Company Matching Contributions
------------------------------
a. At the end of any Plan Year for which an eligible Employee has
deferred Compensation under this Plan, the Committee may add to his or her
Accounts no more than the lesser of (1) $25,000 or (2) an amount equal to the
Company Matching Contribution which the Employee would have received if (i) the
Employee had contributed, to the Company 401(k) Plan, the amounts deferred under
this Plan and (ii) the limitations described in Section 1 above did not apply to
the Company 401(k) Plan. Nothing in the preceding sentence shall require the
Company to make Matching Contributions to the Account of any Participant in any
Plan Year or create a presumption that Matching Contributions allocated under
this Plan shall be determined with reference to Matching Contributions under the
Company 401(k) Plan. Once credited to an Employee's Accounts under this Plan,
the amounts described in the preceding sentence shall accrue the hypothetical
investment return described in Sections 5.2, 5.3, 5.4 and 5.5 above, and shall
be payable in accordance with Section 7 below.
b. Subject to the provisions of Section 5.6(c) below, an Employee
shall be fully vested in amounts allocated to his or her Account as described in
Section 5.6(a).
c. Without regard to the number of years of service an Employee
has completed with the Company or any Subsidiary and without regard to an
Employee's Disability, if an Employee separates from service with the Company or
any Subsidiary as a result of the Employee's gross misconduct, within the
meaning of Part 6 of Title I of ERISA, regarding group health continuation
coverage, or if the Employee engages in unlawful business competition with the
Company or any of its subsidiaries, the Employee shall forfeit all amounts
allocated to his or her bookkeeping Accounts
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under Section 5.6(a) above and all hypothetical earnings thereon. Such
forfeitures will be used to reduce the Company's obligation, if any, to make
Matching Contributions to other Participants or to defray the expenses of
administering the Plan.
d. References to the Company 401(k) Plan or to Company Matching
Contributions are for purposes of measurement only. Nothing in this Plan
contemplates a transfer of contributions or assets from the Company 401(k) Plan
to this Plan or conditions participation in this Plan upon an Employee's
participation or nonparticipation in the Company 401(k) Plan.
e. At the end of any Plan Year for which an eligible outside
director has deferred Compensation under this Plan, the Committee may add to his
or her Accounts no more than the lesser of (i) $25,000 or (ii) an amount equal
to the Company Matching Contribution which the outside director would have
received if (a) the outside director had been eligible to contribute and had
contributed, to the Company 401(k) Plan, the amounts deferred under this Plan
and (b) the limitations described in Section 1 of this Plan did not apply to the
Company 401(k) Plan. Nothing in the preceding sentence shall require the
Company to make Matching Contributions to the Account of any outside director in
any Plan Year or create a presumption that Matching Contributions allocated
under this Plan to outside directors shall be determined with reference to
Matching Contributions actually made under the Company 401(k) Plan or under this
Plan for Participants who are officers or common-law employees of the Company.
Once credited to an outside director's Accounts under this Plan, the amounts
described in the preceding sentences shall accrue the hypothetical investment
return described in Section 5.2, 5.3, 5.4 and 5.5 of the Plan, and shall be
payable in accordance with Section 7 of the Plan.
f. Subject to the provisions of Section 5.6(g) of the Plan, an
outside director shall be fully vested in amounts allocated to his or her
Account as described in Section 5.6(e) of the Plan.
g. Without regard to the number of years of service an outside
director has completed with the Company and without regard to an outside
director's Disability, as defined in the Plan, if an outside director resigns or
is removed from service with the Company as a result of the outside director's
gross misconduct, as determined in good faith by the Committee, or if the
outside director engages in unlawful business competition with the Company or
any of its subsidiaries, the outside director shall forfeit all amounts
allocated to his or her bookkeeping Accounts under Section 5.6(e) of the Plan
and all hypothetical earnings thereon. Such forfeitures will be used to reduce
the Company's obligation, if any, to make Matching Contributions to other
Participants or to defray the expenses of administering the Plan.
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5.7 Company's General Assets
------------------------
Participant understands and agrees that all Compensation deferred
under the Plan and all amounts credited to a Participant's Account under the
Plan (a) are the general assets of the Company, (b) may be used in the operation
of the Company's business or in any other manner permitted by law, and (c)
remain subject to the claims of the Company's creditors. Participant agrees, on
behalf of Participant and his or her Beneficiary, that (i) title to any amounts
deferred under the Plan or credited to a Participant's Account remains in the
Company and (ii) neither Participant nor his or her Beneficiary has any property
interests whatsoever in said amounts, except as general creditors of the
Company. Each outside director understands and agrees that all Compensation
deferred under this Plan and all amounts credited to his or her Accounts under
the Plan (a) are the general assets of the Company, (b) may be used in the
operation of the Company's business or in any other manner permitted by law, and
(c) remain subject to the claims of the Company's creditors. Each outside
director agrees, on his or her own behalf and on behalf of his or her
Beneficiaries and dependents, that (i) title to any amounts deferred under this
Plan or credited to an outside director's Account remains in the Company and
(ii) neither the outside director nor his or her Beneficiaries, dependents or
successors have any property interests whatsoever in said amounts, except as
general creditors of the Company.
6. EFFECT ON EMPLOYEE BENEFITS
---------------------------
Amounts deferred under this Plan or distributed pursuant to the terms
of this Plan are not taken into account in the calculation of an Employee's
benefits under any employee pension or welfare benefit program or under any
other compensation practice maintained by the Company or any Subsidiary, except
to the extent provided in such program or practice.
7. PAYMENT OF DEFERRED COMPENSATION ACCOUNTS
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7.1 Income Tax Obligations
----------------------
The Plan Administrator may make payments before they would otherwise
be due if, based on a change in the federal tax or revenue laws, a published
ruling or similar announcement issued by the Internal Revenue Service, a
regulation issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant, Inactive Participant or
Beneficiary or a closing agreement made under Section 7121 of the Internal
Revenue Code that is approved by the Internal Revenue Service and involves a
Participant, Inactive Participant or Beneficiary, the Plan Administrator
determines that the Participant, Inactive Participant or Beneficiary has or will
recognize income for federal income tax purposes with respect to amounts that
are or will be payable under the Plan before they are to be paid. If an
Employee is assessed federal, state or local income taxes by reason of, and
computed on the basis of, his or her undistributed deferred Compensation or
undistributed interest accruals, earnings or gains on his or her Account, the
Employee shall notify the Company in writing of such assessment and there shall
be distributed, within thirty (30) days following such notice, from the
Employee's bookkeeping Account deferred Compensation, accrued interest, earnings
or gains in an amount equal to such tax assessment, together with any interest
due and penalties assessed thereupon; provided however, that if the Company
determines that such assessment is improper, it may
11
request that the Employee contest the assessment, at the expense of the Company
(which expense shall include all costs of appeal and litigation, including legal
and accounting fees, and any additional interest assessed on the deficiency from
and after the date of the Employee's notice to the Company); and during the
period such contest is pending, the sums otherwise distributable pursuant to
this Section 7.1 shall not be distributed.
7.2 In-Service Withdrawals
----------------------
a. Withdrawals to Meet Hardships
-----------------------------
If at any time following the first anniversary of participation in the
Plan, an Employee incurs a Hardship, described in Section 2(o), the Employee
may, by written notice to the Committee, request that all or any specified part
of his or her Account, but not less than $1,000 per withdrawal, be paid to the
Employee; and such distribution, if approved by the Company, shall be made in a
lump sum within thirty (30) days following the Company's receipt of such notice.
The Company shall have exclusive authority to determine whether to make a
Hardship distribution from an Employee's Account but shall not unreasonably deny
a request for such a distribution. The Company's decision shall be final and
binding on all parties. Any Hardship withdrawals from an Account shall reduce
the amount available for subsequent distributions from the Account, as the
Company in good faith may determine.
b. Other Withdrawals
-----------------
Prior to the termination of his or her employment, a Participant may
not withdraw any funds from his or her Account, except as provided in Section
7.2.a. above. Notwithstanding the foregoing, the Plan Administrator may make
in-service distributions upon the termination of the Plan.
7.3 Termination of Employment
-------------------------
Upon termination of the employment of a Participant or Inactive
Participant, the Company shall distribute his or her Account under the Plan, as
elected by the Participant or Inactive Participant, in a lump sum or in five,
ten or fifteen substantially equal annual installments. The payment from the
Account shall occur or commence within 30 days after the first day of the
calendar year immediately following the calendar year in which the termination
of employment occurs.
7.4 Disability
----------
Upon the Disability of a Participant or Inactive Participant prior to
termination of employment, the Company shall distribute his or her Account under
the Plan, as elected by the Participant or Inactive Participant, in a lump sum
or in five or more (but not more than 15) substantially equal annual
installments. The payment from the Account shall occur or commence within 30
days after the first day of the calendar year immediately following the calendar
year in which the Disability results in the Employee's termination of
employment. Prior to the death of the Participant or Inactive Participant,
during any period in which a Participant or Inactive Participant remains
Disabled, he or she (or his or her legal representative) may request Hardship
withdrawals from any undistributed portion of his or her Account. Any such
Hardship
12
withdrawals shall reduce the amount available for subsequent distributions from
the Account, as the Company in good faith may determine.
7.5 Death Prior to Commencement of Distributions
--------------------------------------------
Upon the death of a Participant or Inactive Participant prior to the
commencement of any distribution under Sections 7.3. or 7.4 above, the Account
of such Participant or Inactive Participant shall be distributed to his or her
Beneficiary, in a lump sum or in five or more (but not more than 15)
substantially equal annual installments, as elected at the time of the deferral
of Compensation under the Plan. The payment from the Account shall occur or
commence within 30 days after the first day of the calendar year immediately
following the calendar year in which the death of the Participant or Inactive
Participant occurs. During the period between the death of the Participant or
Inactive Participant and the commencement of distributions to the Beneficiary,
the Beneficiary may request Hardship withdrawals from any undistributed portion
of his or her Account. Any such Hardship withdrawals shall reduce the amount
available for subsequent distributions from the Plan, as the Company in good
faith may determine.
7.6 Death After Commencement of Distributions
-----------------------------------------
Upon the death of a Participant or Inactive Participant after the
commencement of any distribution in accordance with Sections 7.3 or 7.4 above,
the balance remaining in the Account of such Participant or Inactive Participant
shall be distributed to his or her Beneficiary in accordance with the terms
elected by the Participant or Inactive Participant under Sections 7.3 or 7.4.
7.7 Default Distribution
--------------------
The Company or any Subsidiary shall accelerate the payment of Accounts
under the Plan as a lump sum payment (i) if an Employee terminates employment
with the Company or any Subsidiary at a time when the value of his or her
Account is less than $10,000 or (ii) if an Employee who has elected installment
distributions, terminates employment with the Company or any of its subsidiaries
and works for a competitor of the Company. Additionally, if a Participant or
Inactive Participant fails to make an election offered under Section 7.3 or 7.4
above, the Committee shall distribute the Account in a lump sum within 30 days
after the Account first becomes payable under the Plan.
7.8 Withholding and Other Tax Consequences
--------------------------------------
From any payments made under this Plan, the Company shall withhold any
taxes or other amounts which federal, state or local law requires the Company to
deduct, withhold and deposit. The Company's determination of the type and
amount of taxes to be withheld from any payment shall be final and binding on
all persons having or claiming to have an interest in this Plan or in any
Account under this Plan. Any adverse consequences incurred by a Participant or
Inactive Participant with respect to his or her participation in the Plan or in
connection with a distribution from or vesting under the Plan shall be the sole
responsibility of the Participant or Inactive Participant.
13
7.9 Payments to Outside Directors
-----------------------------
a. Pre-Termination Withdrawals
---------------------------
Prior to Termination, as defined in Section 2 above, an active or
inactive Participant who is or was an outside director may make withdrawals from
his or her Account only in the event of (i) Hardship as defined in Section 2 of
the Plan, (ii) unanticipated income tax obligations with respect to the
Compensation deferred under this Plan or (iii) the Company's liquidation of the
Plan as permitted or required under Section 7 of the Plan.
b. Post-Termination Distributions
------------------------------
On or after Termination as a result of death, disability or other
cessation of services as a director, an active or inactive Participant who was
an outside director (or his or her Beneficiaries) shall receive distributions at
the time and in the manner (lump sum or installments) as permitted or required
under Section 7 of the Plan.
c. Income and Self-Employment Taxes
--------------------------------
Because outside directors are not common-law employees of the Company,
the Company has no responsibility to deduct, withhold or deposit any federal,
state or local income or employment taxes. Outside directors are responsible
for the determination, computation and satisfaction of any income, employment,
estate, excise or other tax obligation with respect to the deferral of income,
the allocation of hypothetical investment return, or the vesting in or
distribution of Accounts under this Plan.
8. UNFUNDED STATUS OF PLAN
-----------------------
All amounts deferred under this Plan remain or become general assets
of the Company. All payments under this Plan shall come from the general assets
of the Company. The amounts credited to an Employee's Account are not secured
by any specific assets of the Company or any Subsidiary. This Plan shall not be
construed to require the Company or any Subsidiary to fund any of the benefits
provided hereunder or to establish a trust or purchase an insurance or other
product for such purpose. The Company or any Subsidiary may make such
arrangements as it desires to provide for the payment of benefits. Neither an
Employee, Participant or Inactive Participant nor his or her Beneficiary or
estate shall have any rights against the Company with respect to any portion of
any Account under the Plan except as general unsecured creditors nor against any
Subsidiary. No Employee, Participant, Inactive Participant, Beneficiary or
estate has an interest in any Account under this Plan until the Employee,
Participant, Inactive Participant, Beneficiary or estate has a right to receive
payment from the Account.
9. SUSPENSION OF PAYMENTS IN THE EVENT OF COMPANY'S INSOLVENCY
-----------------------------------------------------------
At all times during the continuance of any trust established in
connection with this Plan ("Trust"), if the Plan Administrator determines that
the Company's financial condition is likely to result in the suspension of
benefit payments from the Trust, the
14
Plan Administrator shall advise Participants, Inactive Participants and
Beneficiaries that payments from the Trust shall be suspended during the
Company's insolvency. If the Trustee subsequently resumes such payments, the
Administrator shall advise Participants, Inactive Participants and Beneficiaries
that, if Trust assets are sufficient, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants, Inactive Participants and Beneficiaries under the terms of the
Plan for the period of such discontinuance, less the aggregate amount of any
payments made directly by the Company during any period of discontinuance. At
not time shall any insufficiency of Trust assets relieve the Company of its
obligation to make payments when due under the Plan.
10. NON-ALIENATION OF BENEFITS
--------------------------
The interest of any Employee, Participant, Inactive Participant or
Beneficiary shall not be subject to sale, assignment, transfer, conveyance,
hypothecation, encumbrance, garnishment, attachment, anticipation, pledge,
alienation or other disposition prior to actual distribution from the Plan; and
any attempt to effect such disposition shall be void. No portion of any Account
shall, prior to receipt thereof, be subject to the debts, contracts,
liabilities, or engagements of any Employee, Participant, Inactive Participant,
or Beneficiary. Nothing in the preceding sentence shall prohibit the Company
from recovering from an Employee, Participant, Inactive Participant or
Beneficiary any payments to which he or she was not entitled under the Plan.
11. LIMITATION OF RIGHTS
--------------------
Nothing in this Plan document or in any related instrument shall cause
this Plan to be treated as a contract of employment within the meaning of the
Federal Arbitration Act, 9 U.S.C. 1 et seq., or otherwise shall be construed as
evidence of any agreement or understanding, express or implied, that the Company
or any Subsidiary (a) will employ any person in any particular position or level
of Compensation, (b) will offer any person initial or continued participation or
awards in any commission, bonus or other compensation program, or (c) will
continue any person's employment with the Company or any Subsidiary.
12. NOTICE UNDER WARN
-----------------
Any amounts paid (i) to any Employee under the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN") or under any other laws regarding
termination of employment, or (ii) to any third party for the benefit of said
Employee or for the benefit of his or her dependents shall not be offset or
reduced by any amounts paid or determined to be payable by the Company to said
Employee or to his or her dependents under this Plan.
13. AMENDMENT OR TERMINATION OF PLAN
--------------------------------
a. The Board of Directors may modify, suspend or terminate the
Plan in any manner at any time. Such modification, suspension or termination
may not reduce any accrued vested benefits allocated to a Participant's Account
under this Plan, but may modify, suspend or terminate future accruals or
allocations under the Plan and may alter any other aspects of the Plan.
15
b. In modifying, suspending or terminating the Plan, or in taking
any other action with respect to the implementation, operation, maintenance or
administration of the Plan, the Board of Directors may act by a resolution of
the Board.
c. This Plan shall terminate immediately if an impartial arbitrator
or court of competent jurisdiction determines that this Plan is not exempt from
the fiduciary provisions of Part 4 of Title I of ERISA. The Plan shall terminate
as of the date it ceased to be exempt.
d. Upon termination of the Plan, the Plan Administrator shall
distribute all Accounts, as determined by the Plan Administrator (i) in a lump
sum to all Participants or (ii) in accordance with the method designated by
Participants at the time of their deferrals.
14. ADMINISTRATIVE PROCEDURES AND DISPUTE RESOLUTION
------------------------------------------------
14.1 Plan Administrator
------------------
The Plan Administrator shall be the Company. The Board of Directors
may establish an Administrative Committee composed of any persons, including
officers or employees of the Company, who act on behalf of the Company in
discharging the duties of the Company in administering the Plan. No
Administrative Committee member who is a full-time officer or employee of the
Company shall receive compensation with respect to his or her service on the
Administrative Committee. Any member of the Administrative Committee may resign
by delivering his or her written resignation to the Board of Directors of the
Company. The Board may remove any Committee member by providing him or her with
written notice of the removal.
14.2 Committee Organization and Procedures
-------------------------------------
a. The President or the Secretary of the Company may designate a
chairperson from the members of the Administrative Committee. The
Administrative Committee may appoint its own secretary, who may or may not be a
member of the Administrative Committee and may or may not be a person distinct
from the Secretary of the Company. The Committee secretary shall have the
primary responsibility for keeping a record of all meetings and acts of the
Administrative Committee and shall have custody of all documents, the
preservation of which shall be necessary or convenient to the efficient
functioning of the Administrative Committee. All reports required by law may be
signed by the Chairperson or another member of the Administrative Committee, as
designated by the Chairperson, on behalf of the Company.
b. The Administrative Committee shall act by a majority of its
members in office and may adopt such rules and regulations as it deems desirable
for the conduct of its affairs. If the Company, the Plan, any Participant or
Inactive Participant is or becomes subject to the Exchange Act, the Securities
and Exchange Commission or any national or regional securities exchange, the
Company and the members of the Administrative Committee shall take any actions
which are necessary or desirable for the maintenance, modification or operation
of the Plan in accordance with applicable rules thereunder.
16
14.3 Administrative Authority
------------------------
The Company and the Committee have discretionary authority to perform
all functions necessary or appropriate to the operation of the Plan, including
without limitation authority to (a) construe and interpret the provisions of the
Plan document and any related instrument and determine any question arising
under the Plan document or related instrument, or in connection with the
administration or operation thereof; (b) determine in its sole discretion all
facts and relevant considerations affecting the eligibility of any Employee to
be or become a Participant; (c) decide eligibility for, and the amount of,
benefits for any Participant, Inactive Participant or Beneficiary; (d) authorize
and direct all investments and disbursements under the Plan; and (e) employ and
engage such persons, counsel and agents and to obtain such administrative,
clerical, medical, legal, audit and actuarial services as it may deem necessary
in carrying out the provisions of the Plan. The Company shall be the
"administrator" as defined in Section 3(16)(A) of ERISA for purposes of the
reporting and disclosure requirements of ERISA and the Code. The President of
the Company, or in his or her absence, the Secretary of the Company shall be the
agent for service of process on the Plan.
14.4 Expenses
--------
Reasonable expenses which are necessary to operate and administer the
Plan, including but not limited to expenses incurred in connection with the
provisions of Section 14.3 shall be paid directly by the Company. Such expenses
may not be charged against Participant Accounts or reduce the amount of
Compensation, investment earnings or interest accruals allocated to Participant
Accounts under the Plan. All reasonable costs incurred by a Committee member in
the discharge of the Company's or his or her duties under the Plan shall be paid
or reimbursed by the Company. Such costs shall include fees or expenses arising
from the Committee's retention, with the consent of the Company, of any
attorneys, accountants, actuaries, consultants or recordkeepers required by the
Committee to discharge its duties under the Plan. Nothing in the preceding two
sentences or in any other provisions of the Plan shall require the Company to
pay or reimburse any Committee member or any other person for any cost,
liability, loss, fee or expense incurred by the Committee member or other person
in any dispute with the Company; nor may any Committee member or other person
reimburse himself, herself or itself, for any such cost, liability, loss, fee or
expense, from any Plan contributions or from the principal or income of any
investment or other vehicle established by the Company to assist it in meeting
its obligations under the Plan.
14.5 Insurance
---------
The Company may, but need not, obtain liability insurance to protect
its directors, officers, employees or representatives against liability in the
operation of the Plan. An Employee, Participant or Inactive Participant may use
his or her own funds to obtain any policy of insurance with respect to the
Company's payment of any amounts under the Plan.
17
14.6 Claims Procedure
----------------
a. A claim for benefits shall be considered filed only when
actually received by the Plan Administrator.
b. Any time a claim for benefits is wholly or partially denied,
the Participant, Inactive Participant or Beneficiary (hereinafter "Claimant")
shall be given written notice of such denial within 90 days after the claim is
filed, unless special circumstances require an extension of time for processing
the claim. If there is an extension, the Claimant shall be notified of the
extension and the reason for the extension within the initial 90 day period.
The extension shall expire within 180 days after the claim is filed. Such
notice will indicate the reason for denial, the pertinent provisions of the Plan
on which the denial is based, an explanation of the claims appeal procedure set
forth herein, and a description of any additional material or information
necessary to perfect the claim and an explanation of why such material or
information is necessary.
14.7 Appeal Procedures
-----------------
a. Any person who has had a claim for benefits denied by the Plan
Administrator, or is otherwise adversely affected by the action or inaction of
the Plan Administrator, shall have the right to request review by the Plan
Administrator. Such request must be in writing, and must be received by the
Plan Administrator within 60 days after such person receives notice of the Plan
Administrator's action. If written request for review is not made within such
60-day period, the Claimant shall forfeit his or her right to review. The
Claimant or a duly authorized representative of the Claimant may review all
pertinent documents and submit issues and comments in writing.
b. The Plan Administrator shall then review the claim. The Plan
Administrator may issue a written decision reaffirming, modifying or setting
aside its former action within 60 days after receipt of the written request for
review, or 120 days if special circumstances require an extension. The Claimant
shall be notified in writing of any such extension within 60 days following the
request for review. An original or copy of the decision shall be furnished to
the Claimant. The decision shall set forth the reasons and pertinent plan
provisions or relevant laws on which the decision rests. The decision shall be
final and binding upon the Claimant and the Plan Administrator and all other
persons having or claiming to have an interest in the Plan or in any Account
established under the Plan.
14.8 Arbitration
-----------
a. Any Participant's, Inactive Participant's or Beneficiary's
claim remaining unresolved after exhaustion of the procedures in Sections 14.6
and 14.7 (and to the extent permitted by law any dispute concerning any breach
or claimed breach of duty regarding the Plan) shall be settled solely by binding
arbitration at the Employer's principal place of business at the time of the
arbitration, in accordance with the Employment Claims Rules of the American
Arbitration Association. Judgment on any award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. Each party to any dispute
regarding the Plan shall pay the fees and costs of presenting his, her or its
case in arbitration. All other costs of arbitration, including the costs of any
18
transcript of the proceedings, administrative fees, and the arbitrator's fees
shall be borne equally by the parties.
b. Except as otherwise specifically provided in this Plan, the
provisions of this Section 14.8 shall be absolutely exclusive for any and all
purposes and fully applicable to each and every dispute regarding the Plan
including any claim which, if pursued through any state or federal court or
administrative proceeding, would arise at law, in equity or pursuant to
statutory, regulatory or common law rules, regardless of whether such claim
would arise in contract, tort or under any other legal or equitable theory or
basis. The arbitrator who hears or decides any claim under the Plan shall have
jurisdiction and authority to award only compensatory damages to make whole a
person or entity suffering foreseeable economic damages; and apart from such
foreseeable economic damages, the arbitrator shall not have any authority or
jurisdiction to make any award of any kind including, without limitation,
punitive damages, unforeseeable economic damages, damages for pain and suffering
or emotional distress, adverse tax consequences or any other kind or form of
damages. The remedy, if any, awarded by such arbitrator shall be the sole and
exclusive remedy for each and every claim which is subject to arbitration
pursuant to this Section 14.8. Any limitations on the relief that can be
awarded by the arbitrator are in no way intended (i) to create rights or claims
that can be asserted outside arbitration or (ii) in any other way to reduce the
exclusivity of arbitration as the sole dispute resolution mechanism with respect
to this Plan.
c. The Plan and the Company will be the necessary parties to any
action or proceeding involving the Plan. No person employed by the Company, no
Participant, Inactive Participant or Beneficiary or any other person having or
claiming to have an interest in the Plan will be entitled to any notice or
process, unless such person is a named party to the action or proceeding. In
any arbitration proceeding all relevant statutes of limitation shall apply. Any
final judgment or decision that may be entered in any such action or proceeding
will be binding and conclusive on all persons having or claiming to have any
interest in the Plan.
14.9 Notices
-------
Any notice from the Company or the Committee to an Employee,
Participant, Inactive Participant or Beneficiary regarding this Plan may be
addressed to the last known residence of said person as indicated in the records
of the Company. Any notice to, or any service of process upon, the Company or
the Committee with respect to this Plan may be addressed as follows:
Chief Financial Officer
Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008
14.10 Indemnification
---------------
To the extent permitted by law, the Company shall, and hereby does,
indemnify and hold harmless any director, officer or employee of the Company or
any Subsidiary who is or may be deemed to be responsible for the operation of
the Plan, from and against any and all losses, claims, damages or liabilities
(including attorneys'
19
fees and amounts paid, with the approval of the Board, in settlement of any
claim) arising out of or resulting from a duty, act, omission or decision with
respect to the Plan, so long as such duty, act, omission or decision does not
involve gross negligence or willful misconduct on the part of such director,
officer or employee. Any individual so indemnified, shall, within 10 days after
receipt of notice of any action, suit or proceeding, notify the President of the
Company (or in the President's absence, the Chief Financial Officer of the
Company) and offer in writing to the President (or Chief Financial Officer) the
opportunity, at the Company's expense, to handle and defend such action, suit or
proceeding, and the Company shall have the right, but not the obligation, to
conduct the defense in any such action, suit or proceeding. An individual's
failure to give the President (or Chief Financial Officer) such notice and
opportunity shall relieve the Company of any liability to said individual under
this Section 14.10. The Company may satisfy its obligations under this provision
(in whole or in part) by the purchase of insurance. Any payment by an insurance
carrier to or on behalf of such individual shall, to the extent of such payment,
discharge any obligation of the Company to the individual under this
indemnification.
15. MISCELLANEOUS
-------------
15.1 Alternative Acts and Times
--------------------------
If it becomes impossible or burdensome for the Company or the
Committee to perform a specific act at a specific time required by this Plan,
the Company or Committee may perform such alternative act which most nearly
carries out the intent and purpose of this Plan and may perform such required or
alternative act at a time as close as administratively feasible to the time
specified in this Plan for such performance. Without limiting the foregoing,
neither the Company nor the Committee shall accelerate or delay distributions,
except as expressly permitted herein, such as upon termination of the Plan.
15.2 Masculine and Feminine, Singular and Plural
-------------------------------------------
Whenever used herein, pronouns shall include both genders, and the
singular shall include the plural, and the plural shall include the singular,
whenever the context shall plainly so require.
15.3 Governing Law and Severability
------------------------------
This Plan shall be construed in accordance with the laws of the State
of California (exclusive of its provisions regarding conflicts of law) to the
extent that such laws are not preempted by ERISA or other federal laws. If any
provision of this Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of this Plan which shall
be construed as if said illegal or invalid provision had never been included.
15.4 Facility of Payment
-------------------
If the Plan Administrator, in its sole discretion, determines that any
Employee, Participant, Inactive Participant or Beneficiary by reason of
infirmity, minority or other disability, is physically, mentally or legally
incapable of giving a valid receipt for any payment due him or her or is
incapable of handling his or her own affairs and if the
20
Plan Administrator is not aware of any legal representative appointed on his or
her behalf, then the Plan Administrator, in its sole discretion, may direct (a)
payment to or for the benefit of the Employee, Participant, Inactive Participant
or Beneficiary; (b) payment to any person or institution maintaining custody of
the Employee, Participant, Inactive Participant or Beneficiary; or (c) payment
to any other person selected by the Plan Administrator to receive, manage and
disburse such payment for the benefit of the Employee, Participant, Inactive
Participant or Beneficiary. The receipt by any such person of any such payment
shall be a complete acquittance therefor; and any such payment, to the extent
thereof, shall discharge the liability of the Company, the Committee, and the
Plan for any amounts owed to the Employee, Participant, Inactive Participant or
Beneficiary hereunder. In the event of any controversy or uncertainty regarding
who should receive or whom the Plan Administrator should select to receive any
payment under this Plan, the Plan Administrator may seek instruction from a
court of proper jurisdiction or may place the payment (or entire Account) into
such court with final distribution to be determined by such court.
15.5 Correction of Errors
--------------------
Any crediting of Compensation or interest accruals to the Account of
any Employee, Participant, Inactive Participant or Beneficiary under a mistake
of fact or law shall be returned to the Company. If an Employee, Participant,
Inactive Participant or Beneficiary in an application for a benefit or in
response to any request by the Company or the Plan Administrator for
information, makes any erroneous statement, omits any material fact, or fails to
correct any information previously furnished incorrectly to the Company or the
Plan Administrator, or if the Plan Administrator makes an error in determining
the amount payable to an Employee, Participant, Inactive Participant or
Beneficiary, the Company or the Plan Administrator may correct is error and
adjust any payment on the basis of correct facts. The amount of any overpayment
or underpayment may be deducted from or added to the next succeeding payments,
as directed by the Plan Administrator. The Plan Administrator and the Company
reserve the right to maintain any action, suit or proceeding to recover any
amounts improperly or incorrectly paid to any person under the Plan or in
settlement of a claim or satisfaction of a judgment involving the Plan.
15.6 Missing Persons
---------------
In the event a distribution of part or all of an Account is required
to be made from the Plan to an Employee, Participant, Inactive Participant or
Beneficiary, and such person cannot be located, the relevant portion of the
Account shall escheat in accordance with the laws of the State of California.
If the affected Employee, Participant, Inactive Participant or Beneficiary later
contacts the Company, his or her portion of the Account shall be reinstated and
distributed as soon as administratively feasible. The Company shall reinstate
the amount forfeited by reclaiming such amount from the State of California, and
allocating it to the Account of the affected Employee, Participant, Inactive
Participant or Beneficiary. Prior to forfeiting any Account, the Company shall
attempt to contact the Employee, Participant, Inactive Participant or
Beneficiary by return receipt mail (or other carrier) at his or her last known
address according to the Company's records, and, where practical, by letter-
forwarding services offered through the Internal Revenue Service, or the Social
Security Administration, or such other means as the Plan Administrator deems
appropriate.
21
15.7 Employee Acknowledgment
-----------------------
By executing this Plan document or related enrollment or election
form, the undersigned Employee hereby acknowledges that Employee has read and
understood this Plan document. Employee also acknowledges that Employee
knowingly and voluntarily agrees to be bound by the provisions of the Plan, as
amended from time to time, including those Plan provisions which require the
resolution of disputes by binding out-of-court arbitration. Employee further
acknowledges that Employee has had the opportunity to consult with counsel of
Employee's own choosing with respect to all of the financial, tax and legal
consequences of participating in this Plan, including in particular the effects
of participation on any community property or other interest which the Employee
and his or her spouse, if any, may have in the Compensation deferred and any
amounts allocated to the Employee's Account under the Plan.
15.8 Outside Director Acknowledgment
-------------------------------
By participating in this Plan, any outside director agrees to be bound by the
terms of the Plan, as it may be maintained or amended by Callaway Golf in its
sole discretion at any time and from time to time, including the dispute
resolution and mandatory arbitration procedures of Section 14 of the Plan.
Additionally, each outside director acknowledges and agrees that nothing in his
or her participation in the Plan and nothing in the documentation, maintenance,
administration, modification or termination of the Plan renders or can render
the outside director an employee for purposes of the Employee Retirement Income
Security Act or other federal, state or local laws.
IN WITNESS WHEREOF, each of the undersigned has executed this document
on the date set forth adjacent to his or her signature below.
CALLAWAY GOLF COMPANY
A California Corporation
Dated: 2/19/98 By: /s/ Donald H. Dye
-----------------
Donald H. Dye
President and Chief Executive Office
EMPLOYEE
Dated: __________ ________________________________________
Employee's Signature
________________________________________
Employee's Printed Name
22