EXHIBIT 10.2
CALLAWAY GOLF COMPANY
1998 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
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ARTICLE I PURPOSE OF PLAN.................................... 1
ARTICLE II EFFECTIVE DATE AND TERM OF PLAN................... 1
2.1 Term of Plan............................................. 1
2.2 Effect on Awards......................................... 1
2.3 Stockholder Approval..................................... 1
ARTICLE III SHARES SUBJECT TO PLAN........................... 1
3.1 Number of Shares......................................... 1
3.2 Source of Shares......................................... 1
3.3 Availability of Unused Shares............................ 1
3.4 Adjustment Provisions.................................... 2
3.5 Reservation of Shares.................................... 2
ARTICLE IV ADMINISTRATION OF PLAN............................ 2
4.1 Administering Body....................................... 2
4.2 Authority of Administering Body.......................... 3
4.3 No Liability............................................. 3
4.4 Amendments............................................... 4
4.5 Other Compensation Plans................................. 4
4.6 Plan Binding on Successors............................... 4
4.7 References to Successor Statutes, Regulations and Rules.. 4
4.8 Issuances for Compensation Purposes Only................. 4
4.9 Invalid Provisions....................................... 4
4.10 Governing Law........................................... 5
ARTICLE V GENERAL AWARD PROVISIONS........................... 5
5.1 Participation in the Plan................................ 5
5.2 Award Documents.......................................... 5
5.3 Exercise of Stock Options................................ 5
5.4 Payment For Awards....................................... 6
5.5 No Employment Rights..................................... 6
5.6 Restrictions Under Applicable Laws and Regulations....... 7
5.7 Additional Conditions.................................... 7
5.8 No Privileges of Stock Ownership......................... 8
5.9 Nonassignability......................................... 8
5.10 Information to Recipients............................... 8
5.11 Withholding Taxes....................................... 9
5.12 Legends on Awards and Stock Certificates................ 9
5.13 Effect of Termination of Employment on Awards........... 9
(a) Termination of Vesting................................. 9
(b) Alteration of Vesting and Exercise Periods............. 9
(c) Leave of Absence....................................... 9
5.14 Limits on Awards to Certain Eligible Persons............ 9
ARTICLE VI AWARDS............................................ 10
6.1 Stock Options............................................ 10
(a) Nature of Stock Options................................ 10
(b) Option Exercise Price.................................. 10
(c) Option Period and Vesting.............................. 10
(d) Termination............................................ 10
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(e) Special Provisions Regarding Incentive Stock Options..... 11
6.2 Performance Awards......................................... 11
(a) Grant of Performance Awards.............................. 11
(b) Payment of Performance Awards............................ 11
6.3 Restricted Stock........................................... 11
(a) Award of Restricted Stock................................ 11
(b) Requirements of Restricted Stock......................... 11
(i) No Transfer...................................... 12
(ii) Certificates..................................... 12
(iii) Restrictive Legends.............................. 12
(iv) Other Restrictions............................... 12
(c) Lapse of Restrictions.................................... 12
(d) Rights of Recipient...................................... 12
(e) Termination of Employment................................ 12
6.4 Stock Appreciation Rights.................................. 12
(a) Granting of Stock Appreciation Rights.................... 12
(b) Stock Appreciation Rights Related to Options............. 12
(c) Stock Appreciation Rights Unrelated to Options........... 13
(d) Limits................................................... 13
(e) Payments................................................. 13
6.5 Stock Payments............................................. 13
6.6 Dividend Equivalents....................................... 14
6.7 Stock Bonuses.............................................. 14
6.8 Stock Sales................................................ 14
6.9 Phantom Stock.............................................. 14
6.10 Other Stock-Based Benefits................................ 14
6.11 Termination of Employment................................. 14
ARTICLE VII REORGANIZATIONS.................................... 14
7.1 Corporate Transactions Not Involving a Change in Control... 14
7.2 Corporate Transactions Involving a Change in Control....... 15
ARTICLE VIII DEFINITIONS....................................... 15
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CALLAWAY GOLF COMPANY
1998 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE OF PLAN
The Company has adopted this Plan to promote the interests of the Company
and its shareholders by using investment interests in the Company to attract,
retain and motivate employees and other persons, to encourage and reward their
contributions to the performance of the Company, and to align their interests
with the interests of the Company's shareholders. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in Article
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VIII.
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ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN
2.1 TERM OF PLAN. This Plan became effective as of the Effective Date
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and shall continue in effect until the Expiration Date, at which time this Plan
shall automatically terminate.
2.2 EFFECT ON AWARDS. Awards may be granted only during the Plan Term,
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but each Award granted during the Plan Term shall remain in effect after the
Expiration Date until such Award has been exercised, terminated or expired in
accordance with its terms and the terms of this Plan.
2.3 SHAREHOLDER APPROVAL. This Plan shall be approved by the Company's
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shareholders within 12 months after the Effective Date. The effectiveness of
any Awards granted prior to such shareholder approval shall be subject to such
shareholder approval.
ARTICLE III
SHARES SUBJECT TO PLAN
3.1 NUMBER OF SHARES. The maximum number of shares of Common Stock that
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may be issued pursuant to Awards shall be 500,000, subject to adjustment as set
forth in Section 3.4.
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3.2 SOURCE OF SHARES. The Common Stock to be issued under this Plan
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will be made available, at the discretion of the Board, either from authorized
but unissued shares of Common Stock or from previously issued shares of Common
Stock reacquired by the Company.
3.3 AVAILABILITY OF UNUSED SHARES. Shares of Common Stock subject to
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unexercised portions of any Award that expire, terminate or are canceled, and
shares of Common Stock issued pursuant to an Award that are reacquired by the
Company pursuant to the terms of the Award under which such shares were issued,
will again become available for the grant of further Awards under this Plan.
3.4 ADJUSTMENT PROVISIONS.
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(a) If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
in respect of such shares of Common Stock (or any stock or securities received
with respect to such Common Stock), including without limitation through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or spin-off, an appropriate and proportionate
adjustment may be made in (1) the maximum number and kind of shares subject to
this Plan as provided in Section 3.1, (2) the number and kind of shares or other
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securities subject to then outstanding Awards, and/or (3) the price for each
share or other unit of any other securities subject to, or measurement criteria
applicable to, then outstanding Awards.
(b) No fractional interests will be issued under this Plan resulting from
any adjustments.
(c) To the extent any adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Administering Body, whose
determination in that respect shall be final, binding and conclusive.
(d) The grant of an Award pursuant to this Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(e) No adjustment to the terms of an Incentive Stock Option shall be made
unless such adjustment either (i) would not cause such Option to lose its status
as an Incentive Stock Option or (ii) is agreed to in writing by the
Administering Body and the Recipient.
3.5 RESERVATION OF SHARES. The Company will at all times reserve and
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keep available shares of Common Stock equaling at least the total number of
shares of Common Stock issuable pursuant to outstanding Awards.
ARTICLE IV
ADMINISTRATION OF PLAN
4.1 ADMINISTERING BODY.
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(a) This Plan shall be administered by the Board or by a Committee of the
Board appointed pursuant to Section 4.1(b).
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(b) The Board in its sole discretion may from time to time appoint a
Committee (which may be a subcommittee of an existing committee of the Board) of
not less than two Board members to administer this Plan and, subject to
applicable law, to exercise all of the powers, authority and discretion of the
Board under this Plan. The Board may from time to time increase or decrease
(but not below two) the number of members of the Committee, remove from
membership on the Committee all or any portion of its members, and/or appoint
such person or
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persons as it desires to fill any vacancy existing on the Committee, whether
caused by removal, resignation or otherwise. The Board may disband the Committee
at any time and revest in the Board the administration of this Plan.
4.2 AUTHORITY OF ADMINISTERING BODY.
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(a) Subject to the express provisions of this Plan, the Administering Body
shall have the power to implement, (including the power to delegate such
implementation to appropriate officers of the Company), interpret and construe
this Plan and any Awards and Award Documents or other documents defining the
rights and obligations of the Company and Recipients hereunder and thereunder,
to determine all questions arising hereunder and thereunder, and to adopt and
amend such rules and regulations for the administration hereof and thereof as it
may deem desirable. The interpretation and construction by the Administering
Body of any provisions of this Plan or of any Award or Award Document shall be
conclusive and binding. Any action taken by, or inaction of, the Administering
Body relating to this Plan or any Award or Award Document shall be within the
absolute discretion of the Administering Body and shall be conclusive and
binding upon all persons. Subject only to compliance with the express
provisions hereof, the Administering Body may act in its absolute discretion in
matters related to this Plan and any and all Awards and Award Documents.
(b) Subject to the express provisions of this Plan, the Administering Body
may from time to time in its discretion select the Eligible Persons to whom, and
the time or times at which, Awards shall be granted or sold, the nature of each
Award, the number of shares of Common Stock or the number of rights that make up
or underlie each Award, the exercise price and period for the exercise of each
Award, and such other terms and conditions applicable to each individual Award
as the Administering Body shall determine. The Administering Body may grant at
any time new Awards to an Eligible Person who has previously received Awards or
other grants (including other stock options) regardless of whether such prior
Awards or such other grants are still outstanding, have previously been
exercised as a whole or in part, or are canceled in connection with the issuance
of new Awards. The Administering Body may grant Awards singly, in combination
or in tandem with other Awards, as it determines in its discretion. The
purchase price, exercise price, initial value and any and all other terms and
conditions of the Awards may be established by the Administering Body without
regard to existing Awards or other grants.
(c) Any action of the Administering Body with respect to the administration
of this Plan shall be taken pursuant to a majority vote of the authorized number
of members of the Administering Body or by the unanimous written consent of its
members; provided, however, that (i) if the Administering Body is the Committee
and consists of two members, then actions of the Administering Body must be
unanimous, and (ii) if the Administering Body is the Board, actions taken by the
Board shall be valid if approved in accordance with applicable law.
4.3 NO LIABILITY. No member of the Board or the Committee or any designee
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thereof will be liable for any action or inaction with respect to this Plan or
any Award or any transaction arising under this Plan or any Award, except in
circumstances constituting bad faith of such member.
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4.4 AMENDMENTS.
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(a) The Administering Body may, insofar as permitted by applicable law,
rule or regulation, and subject to Section 4.4(c), from time to time suspend or
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discontinue this Plan or revise or amend it in any respect whatsoever, and this
Plan as so revised or amended will govern all Awards hereunder, including those
granted before such revision or amendment. Without limiting the generality of
the foregoing, the Administering Body is authorized to amend this Plan to comply
with or take advantage of amendments to applicable laws, rules or regulations,
including the Securities Act, Exchange Act, the IRC or the rules of any exchange
or interdealer quotation system upon which the Common Stock is listed or traded.
No shareholder approval of any amendment or revision shall be required unless
(i) such approval is required by this Plan or by applicable law, rule or
regulation or (ii) an amendment or revision to this Plan would materially
increase the number of shares subject to this Plan (as adjusted under Section
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3.4).
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(b) The Administering Body may, with the written consent of a Recipient,
make such modifications in the terms and conditions of an Award as it deems
advisable. Without limiting the generality of the foregoing, the Administering
Body may, in its discretion with the written consent of the Recipient, at any
time and from time to time after the grant of any Award accelerate or extend the
vesting or exercise period of any Award as a whole or in part.
(c) Except as otherwise provided in this Plan or in the applicable Award
Document, no amendment, revision, suspension or termination of this Plan or any
outstanding Award may impair or adversely affect any rights or obligations under
any Award theretofore granted without the written consent of the Recipient to
whom such Award was granted.
4.5 OTHER COMPENSATION PLANS. The adoption of this Plan shall not affect
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any other stock option, incentive or other compensation plans in effect from
time-to-time for the Company, and this Plan shall not preclude the Company from
establishing any other forms of incentive or other compensation for employees,
directors, advisors or consultants of the Company, whether or not approved by
shareholders.
4.6 PLAN BINDING ON SUCCESSORS. This Plan shall be binding upon the
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successors and assigns of the Company.
4.7 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES. Any reference
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in this Plan to a particular statute, regulation or rule shall also refer to any
successor provision of such statute, regulation or rule.
4.8 ISSUANCES FOR COMPENSATION PURPOSES ONLY. This Plan is intended to
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constitute an "employee benefit plan," as defined in Rule 405 promulgated under
the Securities Act, and shall be administered accordingly.
4.9 INVALID PROVISIONS. In the event that any provision of this Plan is
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found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.
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4.10 GOVERNING LAW. This Agreement shall be governed by and interpreted
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in accordance with the internal laws of the State of California, without giving
effect to the principles of the conflicts of laws thereof.
ARTICLE V
GENERAL AWARD PROVISIONS
5.1 PARTICIPATION IN THE PLAN.
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(a) A person shall be eligible to receive grants of Awards under this Plan
if, at the time of the grant of the Award, such person is an Eligible Person.
(b) Incentive Stock Options may be granted only to Eligible Persons meeting
the employment requirements of Section 422 of the IRC.
(c) Notwithstanding anything to the contrary herein, the Administering Body
may, in order to fulfill the purposes of this Plan, modify grants of Awards to
Recipients who are foreign nationals or employed outside of the United States to
recognize differences in applicable law, tax policy or local custom.
5.2 AWARD DOCUMENTS.
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(a) Each Award granted under this Plan shall be evidenced by an agreement
duly executed on behalf of the Company and by the Recipient, or by a confirming
memorandum issued by the Company to the Recipient, setting forth such terms and
conditions applicable to the Award as the Administering Body may in its
discretion determine. Awards will not be binding upon the Company, and
Recipients will have no rights thereto, until such an agreement is entered into
between the Company and the Recipient or such a memorandum is delivered by the
Company to the Recipient, but an Award may have an effective date on or after
the date of grant but prior to the date of such an agreement or memorandum.
Award Documents may but need not be identical and shall comply with and be
subject to the terms and conditions of this Plan, a copy of which shall be
provided to each Recipient and incorporated by reference into each Award
Document. Any Award Document may contain such other terms, provisions and
conditions not inconsistent with this Plan as may be determined by the
Administering Body.
(b) In case of any conflict between this Plan and any Award Document, this
Plan shall control.
5.3 EXERCISE OF STOCK OPTIONS. No Stock Option shall be exercisable
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except in respect of whole shares, and fractional share interests shall be
disregarded. A Stock Option shall be deemed to be exercised when the Secretary
or other designated official of the Company receives written notice of such
exercise from the Recipient, together with payment of the exercise price made in
accordance with Section 5.4 and any amounts required under Section 5.11.
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Notwithstanding any other provision of this Plan, the Company and/or the
Administering Body may impose, by rule and/or in Award Documents, such
conditions upon the exercise of Stock Options (including without limitation
conditions limiting the time of exercise to specified periods) as may be
required to satisfy applicable regulatory requirements.
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5.4 PAYMENT FOR AWARDS.
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(a) The exercise price or other payment for an Award shall be payable upon
the exercise of a Stock Option or upon other purchase of shares pursuant to an
Award granted hereunder by delivery of legal tender of the United States or
payment of such other consideration as the Administering Body may from time to
time deem acceptable in any particular instance.
(b) The Company may assist any person to whom an Award is granted hereunder
(including without limitation any officer or director of the Company) in the
payment of the purchase price, withholding taxes or other amounts payable in
connection with the receipt or exercise of that Award, by lending such amounts
to such person on such terms and at such rates of interest and upon such
security (if any) as shall be approved by the Administering Body.
(c) The exercise price for Awards may be paid by delivery of Common Stock
to the Company by or on behalf of the person exercising the Award and duly
endorsed in blank or accompanied by stock powers duly endorsed in blank, with
signatures guaranteed in accordance with the Exchange Act if required by the
Company, or retained by the Company from the stock otherwise issuable upon
exercise or surrender of vested and/or exercisable Awards or other equity Awards
previously granted to the Recipient and being exercised (if applicable) (in
either case valued at Fair Market Value as of the exercise date); or such other
consideration as the Administering Body may from time to time in the exercise of
its discretion deem acceptable in any particular instance; provided, however,
that (i) the Company and/or the Administering Body may allow exercise of an
Award in a broker-assisted or similar transaction in which the exercise price is
not received by the Company until promptly after exercise, and/or (ii) the
Administering Body may allow the Company to loan the exercise price to the
person entitled to exercise the Award, if the exercise will be followed by a
prompt sale of some or all of the underlying shares and a portion of the sale
proceeds is dedicated to full payment of the exercise price and amounts required
pursuant to Section 5.11.
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(d) Recipients will have no rights to the assistance described in Section
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5.4(b) or to the exercise techniques described in Section 5.4(c), and the
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Company may offer or permit such assistance or techniques on an ad hoc basis to
any Recipient without incurring any obligation to offer or permit such
assistance or techniques on other occasions or to other Recipients.
5.5 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan (or in Award
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Documents or in any other documents related to this Plan or to Awards granted
hereunder) shall confer upon any Eligible Person or Recipient any right to
continue in the employ of the Company or any Affiliated Entity or constitute any
contract or agreement of employment or engagement, or interfere in any way with
the right of the Company or any Affiliated Entity to reduce such person's
compensation or other benefits or to terminate the employment or engagement of
such Eligible Person or Recipient, with or without cause. Except as expressly
provided in this Plan or in any statement evidencing the grant of an Award
pursuant to this Plan, the Company shall have the right to deal with each
Recipient in the same manner as if this Plan and any such statement evidencing
the grant of an Award pursuant to this Plan did not exist, including without
limitation with respect to all matters related to the hiring, discharge,
compensation and conditions of the employment or engagement of the Recipient.
Any questions as to whether and when there has been a termination of a
Recipient's employment or engagement,
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the reason (if any) for such termination, and/or the consequences thereof under
the terms of this Plan or any statement evidencing the grant of an Award
pursuant to this Plan shall be determined by the Administering Body and the
Administering Body's determination thereof shall be final and binding.
5.6 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.
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(a) All Awards granted under this Plan shall be subject to the requirement
that, if at any time the Company shall determine, in its discretion, that the
listing, registration or qualification of the shares subject to Awards granted
under this Plan upon any securities exchange or interdealer quotation system or
under any federal, state or foreign law, or the consent or approval of any
government or regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such an Award or the issuance, if any, or
purchase of shares in connection therewith, such Award may not be exercised as a
whole or in part unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company. During the term of this Plan, the Company will
use its reasonable efforts to seek to obtain from the appropriate governmental
and regulatory agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this Plan. The
inability of the Company to obtain any such qualifications, consents, approvals
or authorizations shall relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such qualifications, consents,
approvals or authorizations pertain.
(b) The Company shall be under no obligation to register or qualify the
issuance of Awards or underlying securities under the Securities Act or
applicable state securities laws. Unless the issuance of Awards and underlying
securities have been registered under the Securities Act and qualified or
registered under applicable state securities laws, the Company shall be under no
obligation to issue any Awards or underlying securities unless the Awards and
underlying securities may be issued pursuant to applicable exemptions from such
registration or qualification requirements. In connection with any such exempt
issuance, the Company may require the Recipient to provide a written
representation and undertaking to the Company, satisfactory in form and scope to
the Company and upon which the Company may reasonably rely, that such Recipient
is acquiring such Awards and underlying shares for such Recipient's own account
as an investment and not with a view to, or for sale in connection with, the
distribution of any such securities, and that such person will make no transfer
of the same except in compliance with any rules and regulations in force at the
time of such transfer under the Securities Act and other applicable law, and
that if shares of stock are issued without such registration, a legend to this
effect (together with any other legends deemed appropriate by the Company) may
be endorsed upon the securities so issued. The Company may also order its
transfer agent to stop transfers of such securities. The Company may also
require the Recipient to provide the Company such information and other
documents as it may request in order to satisfy the Company as to the investment
sophistication and experience of the Recipient and as to any other conditions
for compliance with any such exemptions from registration or qualification.
5.7 ADDITIONAL CONDITIONS. Any Award may also be subject to such other
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provisions (whether or not applicable to any other Award or Recipient) as the
Administering Body
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determines appropriate, including without limitation provisions to assist the
Recipient in financing the purchase of Common Stock through the exercise of
Stock Options, provisions for the forfeiture of or restrictions on resale or
other disposition of shares of Common Stock acquired under any Award, provisions
giving the Company the right to repurchase shares of Common Stock acquired under
any Award in the event the Recipient elects to dispose of such shares, and
provisions to comply with federal and state securities laws and federal and
state income tax withholding requirements.
5.8 NO PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise set forth
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herein, a Recipient or a permitted transferee of an Award shall have no rights
as a shareholder with respect to any shares issuable or issued in connection
with the Award until the date of the receipt by the Company of all amounts
payable and performance by the Recipient of all obligations in connection with
the exercise of the Award. Status as an Eligible Person shall not be construed
as a commitment that any Award will be granted under this Plan to an Eligible
Person or to Eligible Persons generally. No person shall have any right, title
or interest in any fund or in any specific asset (including shares of capital
stock) of the Company by reason of any Award granted hereunder. Neither this
Plan (or any documents related hereto) nor any action taken pursuant hereto
shall be construed to create a trust of any kind or a fiduciary relationship
between the Company and any person. To the extent that any person acquires a
right to receive an Award hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.
5.9 NONASSIGNABILITY. Unless the Administering Body shall otherwise
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determine on a case-by-case basis, no Award granted under this Plan shall be
assignable or transferable except (i) by will or by the laws of descent and
distribution, or (ii) subject to the final sentence of this Section 5.9, upon
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dissolution of marriage pursuant to a qualified domestic relations order. Unless
the Administering Body shall otherwise determine on a case-by-case basis, during
the lifetime of a Recipient, an Award granted to such person shall be
exercisable only by the Recipient (or the Recipient's permitted transferee) or
such person's guardian or legal representative. Notwithstanding the foregoing,
(i) no Award owned by a Recipient subject to Section 16 of the Exchange Act may
be assigned or transferred in any manner inconsistent with Rule 16b-3, and (ii)
Incentive Stock Options (or other Awards subject to transfer restrictions under
the IRC) may not be assigned or transferred in violation of Section 422(b)(5) of
the IRC (or any comparable or successor provision) or the regulations
thereunder, and nothing herein is intended to allow such assignment or transfer.
5.10 INFORMATION TO RECIPIENTS.
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(a) The Company shall determine what, if any, financial and other
information shall be provided to Recipients and when such financial and other
information shall be provided after giving consideration to applicable federal
and state laws, rules and regulations, including without limitation applicable
federal and state securities laws, rules and regulations.
(b) The furnishing of financial and other information that is confidential
to the Company shall be subject to the Recipient's agreement that the Recipient
shall maintain the confidentiality of such financial and other information,
shall not disclose such information to third parties, and shall not use the
information for any purpose other than evaluating an
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investment in the Company's securities under this Plan. The Company may impose
other restrictions on the access to and use of such confidential information and
may require a Recipient to acknowledge the Recipient's obligations under this
Section 5.10(b) (which acknowledgment shall not be a condition to Recipient's
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obligations under this Section 5.10(b)).
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5.11 WITHHOLDING TAXES. Whenever the granting, vesting or exercise of any
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Award, or the issuance of any shares upon exercise of any Award or transfer
thereof, gives rise to tax or tax withholding liabilities or obligations, the
Company shall have the right to require the Recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements arising in connection therewith. The Company may, in the exercise
of its discretion, allow satisfaction of tax withholding requirements by
accepting delivery of stock of the Company or by withholding a portion of the
stock otherwise issuable in connection with an Award, in each case valued at
Fair Market Value as of the date of such delivery or withholding.
5.12 LEGENDS ON AWARDS AND STOCK CERTIFICATES. Each Award Document and
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each certificate representing shares acquired upon vesting or exercise of an
Award shall be endorsed with all legends, if any, required by applicable federal
and state securities and other laws to be placed on the Award Document and/or
the certificate. The determination of which legends, if any, shall be placed
upon Award Documents or the certificates shall be made by the Company and such
decision shall be final and binding.
5.13 EFFECT OF TERMINATION OF EMPLOYMENT ON AWARDS.
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(A) TERMINATION OF VESTING. Awards will be exercisable by a Recipient
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(or the Recipient's successor-in-interest) following such Recipient's
termination of employment with the Company or any Affiliated Entity only to the
extent that installments thereof had become exercisable on or prior to the date
of such termination.
(B) ALTERATION OF VESTING AND EXERCISE PERIODS. Notwithstanding
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anything to the contrary herein, (i) the Administering Body may, in its
discretion, designate shorter or longer periods for the vesting or exercise of
any Award, or the lapse of transfer or other restrictions pertaining thereto,
following a Recipient's termination of employment with the Company or any
Affiliated Entity; provided, however, that any shorter periods determined by the
Administering Body shall be effective only if provided for in the Award Document
that evidences the grant to the Recipient of such Award or if such shorter
period is agreed to in writing by the Recipient; and (ii) the Administering Body
may, in its discretion, elect to accelerate the vesting of all or any portion of
any Award that had not become exercisable on or prior to the date of such
termination or to extend the vesting period beyond the date of such termination.
(C) LEAVE OF ABSENCE. In the case of any employee on an approved leave
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of absence, the Administering Body may make such provision respecting
continuance of Awards granted to such employee as the Administering Body in its
discretion deems appropriate.
5.14 LIMITS ON AWARDS TO ELIGIBLE PERSONS. Notwithstanding any other
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provision of this Plan, in order for the compensation attributable to Awards
hereunder to qualify as Performance-Based Compensation, no one Eligible Person
shall be granted any Awards with
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respect to more than 250,000 shares of Common Stock in any one calendar year.
The limitation set forth in this Section 5.14 shall be subject to adjustment as
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provided in Section 3.4 or under Article VII, but only to the extent such
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adjustment would not affect the status of compensation attributable to Awards
hereunder as Performance-Based Compensation.
ARTICLE VI
AWARDS
6.1 STOCK OPTIONS.
-------------
(A) NATURE OF STOCK OPTIONS. Stock Options may be Incentive Stock Options
-----------------------
or Nonqualified Stock Options.
(B) OPTION EXERCISE PRICE. The exercise price for each Stock Option shall
---------------------
be determined by the Administering Body as of the date such Stock Option is
granted. The exercise price shall be no less than the Fair Market Value of the
Common Stock subject to the Stock Option as of the date of grant. Subject to
approval by the shareholders, the Administering Body may, with the consent of
the Recipient and subject to compliance with statutory or administrative
requirements applicable to Incentive Stock Options, amend the terms of any Stock
Option to provide that the exercise price of the shares remaining subject to the
Stock Option shall be reestablished at a price not less than 100% of the Fair
Market Value of the Common Stock on the effective date of the amendment. No
modification of any other term or provision of any Stock Option that is amended
in accordance with the foregoing shall be required, although the Administering
Body may, in its discretion, make such further modifications of any such Stock
Option as are not inconsistent with this Plan.
(C) OPTION PERIOD AND VESTING. Stock Options granted hereunder shall vest
-------------------------
and may be exercised as determined by the Administering Body, except that
exercise of such Stock Options after termination of the Recipient's employment
shall be subject to Section 5.13. Each Stock Option granted hereunder and all
rights or obligations thereunder shall expire on such date as shall be
determined by the Administering Body, but not later than l0 years after the date
the Stock Option is granted and shall be subject to earlier termination as
provided herein or in the Award Document. The Administering Body may, in its
discretion at any time and from time to time after the grant of a Stock Option,
accelerate vesting of such Stock Option as a whole or part by increasing the
number of shares then purchasable, provided that the total number of shares
subject to such Stock Option may not be increased. Except as otherwise provided
herein, a Stock Option shall become exercisable, as a whole or in part, on the
date or dates specified by the Administering Body and thereafter shall remain
exercisable until the expiration or earlier termination of the Stock Option.
(D) TERMINATION . Unless determined otherwise by the Administering Body
-----------
in its sole discretion, Stock Options shall expire on the earliest of (i) one
year from the date on which the Recipient ceases to be an Eligible Person for
any reason other than death; (ii) one year from the date of the Recipient's
death; or (iii) with respect to each installment of such Stock Option, the fifth
anniversary of the vesting date of such installment. If a Recipient who is an
employee of the Company or any Affiliated Entity ceases for any reason to be
such an employee, that portion of the Stock Option that has not yet vested shall
terminate, unless the Administering Body
10
accelerates the vesting schedule in its sole discretion (in which case, the
Administering Body may impose whatever conditions it considers appropriate on
the accelerated portion). Stock Options granted to a Recipient who is not such
an employee may be made subject to such other termination provisions as
determined appropriate by the Administering Body.
(E) SPECIAL PROVISIONS REGARDING INCENTIVE STOCK OPTIONS.
----------------------------------------------------
(i) Notwithstanding anything in this Section 6.1 to the contrary,
-----------
the exercise price and vesting period of any Stock Option intended to qualify as
an Incentive Stock Option shall comply with the provisions of Section 422 of the
IRC and the regulations thereunder. As of the Effective Date, such provisions
require, among other matters, that (A) the exercise price must not be less than
the Fair Market Value of the underlying stock as of the date the Incentive Stock
Option is granted, and not less than 110% of the Fair Market Value as of such
date in the case of a grant to a Significant Shareholder; and (B) that the
Incentive Stock Option not be exercisable after the expiration of ten years from
the date of grant of such Incentive Stock Option, or five years from the date of
grant in the case of an Incentive Stock Option granted to a Significant
Shareholder.
(ii) The aggregate Fair Market Value (determined as of the respective
date or dates of grant) of the Common Stock for which one or more Stock Options
granted to any Recipient under this Plan (or any other option plan of the
Company or any of its subsidiaries or affiliates) may for the first time become
exercisable as Incentive Stock Options under the federal tax laws during any one
calendar year shall not exceed $100,000.
(iii) Any Options granted as Incentive Stock Options pursuant to this
Plan that for any reason fail or cease to qualify as such shall be treated as
Nonqualified Stock Options.
6.2 PERFORMANCE AWARDS.
------------------
(A) GRANT OF PERFORMANCE AWARDS. The Administering Body shall determine
---------------------------
in its discretion the performance criteria (which need not be identical and may
be established on an individual or group basis) governing Performance Awards,
the terms thereof, and the form and time of payment of Performance Awards.
(B) PAYMENT OF PERFORMANCE AWARDS. Upon satisfaction of the conditions
-----------------------------
applicable to a Performance Award, payment will be made to the Recipient in
shares of Common Stock valued at Fair Market Value.
6.3 RESTRICTED STOCK.
----------------
(A) AWARD OF RESTRICTED STOCK. The Administering Body shall determine the
-------------------------
Purchase Price (if any), the terms of payment of the Purchase Price, the
restrictions upon the Restricted Stock, and when such restrictions shall lapse.
(B) REQUIREMENTS OF RESTRICTED STOCK. All shares of Restricted Stock
--------------------------------
granted or sold pursuant to this Plan will be subject to the following
conditions:
11
(I) NO TRANSFER. The shares may not be sold, assigned,
-----------
transferred, pledged, hypothecated or otherwise disposed of, alienated or
encumbered until the restrictions are removed or expire;
(II) CERTIFICATES. The Company Administering Body may require that
------------
the certificates representing Restricted Stock granted or sold to a Recipient
pursuant to this Plan remain in the physical custody of an escrow holder or the
Company until all restrictions are removed or expire;
(III) RESTRICTIVE LEGENDS. Each certificate representing Restricted
-------------------
Stock granted or sold to a Recipient pursuant to this Plan will bear such legend
or legends making reference to the restrictions imposed upon such Restricted
Stock as the Company Administering Body in its discretion deems necessary or
appropriate to enforce such restrictions; and
(IV) OTHER RESTRICTIONS. The Administering Body may impose such
------------------
other conditions on Restricted Stock as the Administering Body may deem
advisable, including, without limitation, restrictions under the Securities Act,
under the Exchange Act, under the requirements of any stock exchange or
interdealer quotation system upon which such Restricted Stock or shares of the
same class are then listed or traded and under any blue sky or other securities
laws applicable to such shares.
(C) LAPSE OF RESTRICTIONS. The restrictions imposed upon Restricted Stock
---------------------
will lapse in accordance with such terms or other conditions as are determined
by the Administering Body.
(D) RIGHTS OF RECIPIENT. Subject to the provisions of Section 6.3(b) and
------------------- --------------
any restrictions imposed upon the Restricted Stock, the Recipient will have all
rights of a shareholder with respect to the Restricted Stock granted or sold to
such Recipient under this Plan, including, without limitation, the right to vote
the shares and receive all dividends and other distributions paid or made with
respect thereto.
(E) TERMINATION OF EMPLOYMENT. Unless the Administering Body in its
-------------------------
discretion determines otherwise, if a Recipient's employment with the Company or
any Affiliated Entity terminates for any reason, all of the Recipient's
Restricted Stock remaining subject to restrictions on the date of such
termination of employment shall be repurchased by the Company at the Purchase
Price (if any) paid by the Recipient to the Company, without interest or
premium, and otherwise returned to the Company without consideration.
6.4 STOCK APPRECIATION RIGHTS.
-------------------------
(A) GRANTING OF STOCK APPRECIATION RIGHTS. The Administering Body may at
-------------------------------------
any time and from time to time approve the grant to Eligible Persons of Stock
Appreciation Rights, related or unrelated to Stock Options.
(B) STOCK APPRECIATION RIGHTS RELATED TO OPTIONS.
--------------------------------------------
(i) A Stock Appreciation Right granted in connection with a Stock
Option granted under this Plan will entitle the holder of the related Stock
Option, upon exercise of the Stock Appreciation Right, to surrender such Stock
Option, or any portion thereof to the extent previously vested but unexercised,
with respect to the number of shares as to which such Stock
12
Appreciation Right is exercised, and to receive payment of an amount computed
pursuant to Section 6.2(b)(iii). Such Stock Option will, to the extent
-------------------
surrendered, then cease to be exercisable.
(ii) A Stock Appreciation Right granted in connection with a Stock
Option hereunder will be exercisable only when, and only to the extent that, the
related Stock Option is exercisable, will not be transferable except to the
extent that such related Stock Option may be transferable, will not expire later
than the underlying Stock Option, and will be exercisable only when the Fair
Market Value of the Common Stock subject to the underlying Stock Option exceeds
the exercise price of such Stock Option.
(iii) Upon the exercise of a Stock Appreciation Right related to a
Stock Option, the Recipient will be entitled to receive payment of an amount
determined by multiplying (A) the difference obtained by subtracting the
exercise price of a share of Common Stock specified in the related Stock Option
from the Fair Market Value of a share of Common Stock on the date of exercise of
such Stock Appreciation Right (or as of such other date or as of the occurrence
of such event as may have been specified in the instrument evidencing the grant
of the Stock Appreciation Right), by (B) the number of shares as to which such
Stock Appreciation Right is exercised.
(C) STOCK APPRECIATION RIGHTS UNRELATED TO OPTIONS. The Administering Body
----------------------------------------------
may grant Stock Appreciation Rights unrelated to Stock Options to Eligible
Persons. Section 6.2(b)(iii) shall be used to determine the amount payable at
-------------------
exercise under such Stock Appreciation Right, except that in lieu of the
exercise price specified in the related Stock Option, the initial base amount
specified in the Award shall be used.
(D) LIMITS. Notwithstanding the foregoing, the Administering Body, in its
------
discretion, may place a dollar limitation on the maximum amount that will be
payable upon the exercise of a Stock Appreciation Right under this Plan.
(E) PAYMENTS. Payment of the amount determined under the foregoing
--------
provisions may be made solely in whole shares of Common Stock valued at their
Fair Market Value on the date of exercise of the Stock Appreciation Right or,
alternatively, at the sole discretion of the Administering Body, in cash or in a
combination of cash and shares of Common Stock as the Administering Body deems
advisable. The Administering Body has full discretion to determine the form in
which payment of a Stock Appreciation Right will be made and to consent to or
disapprove the election of a Recipient to receive cash in full or partial
settlement of a Stock Appreciation Right. If the Administering Body decides to
make full payment in shares of Common Stock, and the amount payable results in a
fractional share, payment for the fractional share will be made in cash.
6.5 STOCK PAYMENTS. The Administering Body may approve Stock Payments of
--------------
the Company's Common Stock to any Eligible Person for all or any portion of the
compensation (other than base salary) or other payment that would otherwise
become payable by the Company to the Eligible Person in cash.
13
6.6 DIVIDEND EQUIVALENTS. The Administering Body may grant Dividend
--------------------
Equivalents to any Recipient who has received a Stock Option, Stock Appreciation
Right or other Award denominated in shares of Common Stock. Dividend
Equivalents may be paid in cash, Common Stock or other Awards; the amount of
Dividend Equivalents paid other than in cash shall be determined by the
Administering Body by application of such formula as the Administering Body may
deem appropriate to translate the cash value of dividends paid to the
alternative form of payment of the Dividend Equivalent. Dividend Equivalents
shall be computed as of each dividend record date and shall be payable to
recipients thereof at such time as the Administering Body may determine.
Notwithstanding the foregoing, the payment of a Dividend Equivalent with respect
to a Stock Option intended to constitute Performance-Based Compensation shall
not be contingent upon the exercise of such Stock Option.
6.7 STOCK BONUSES. The Administering Body may issue shares of Common
-------------
Stock to Eligible Persons as bonuses for services rendered or for any other
valid consideration on such terms and conditions as the Administering Body may
determine.
6.8 STOCK SALES. The Administering Body may sell to Eligible Persons
-----------
shares of Common Stock on such terms and conditions as the Administering Body
may determine.
6.9 PHANTOM STOCK. The Administering Body may grant Awards of Phantom
-------------
Stock. Phantom Stock is a cash bonus granted under this Plan measured by the
Fair Market Value of a specified number of shares of Common Stock on a specified
date, or measured by the excess of such Fair Market Value over a specified
minimum, which may but need not include a Dividend Equivalent.
6.10 OTHER STOCK-BASED BENEFITS. The Administering Body is authorized to
--------------------------
grant Other Stock-Based Benefits. Other Stock-Based Benefits are any
arrangements granted under this Plan not otherwise described above that (a) by
their terms might involve the issuance or sale of Common Stock or (b) involve a
benefit that is measured, as a whole or in part, by the value, appreciation,
dividend yield or other features attributable to a specified number of shares of
Common Stock.
6.11 TERMINATION OF EMPLOYMENT. Except as otherwise provided for in this
-------------------------
Plan or determined by the Administering Body in its discretion, all Awards
granted to a Recipient, and all of such Recipient's rights thereunder, shall
terminate upon termination for any reason of such Recipient's employment with
the Company or any Affiliated Entity.
ARTICLE VII
REORGANIZATIONS
7.1 CORPORATE TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL. If the
--------------------------------------------------------
Company shall consummate any Reorganization not involving a Change of Control in
which holders of shares of Common Stock are entitled to receive in respect of
such shares any securities, cash or other consideration (including without
limitation a different number of shares of Common Stock), each Award outstanding
under this Plan shall thereafter be exercisable, in accordance with this Plan,
only for the kind and amount of securities, cash and/or other consideration
receivable upon such Reorganization by a holder of the same number of shares of
Common
14
Stock as are subject to that Award immediately prior to such Reorganization, and
any adjustments will be made to the terms of the Award in the sole discretion of
the Administering Body as it may deem appropriate to give effect to the
Reorganization.
7.2 CORPORATE TRANSACTIONS INVOLVING A CHANGE IN CONTROL. As of the
----------------------------------------------------
effective time and date of any Change in Control, this Plan and any then
outstanding Awards (whether or not vested) shall automatically terminate unless
(a) provision is made in writing in connection with such transaction for the
continuance of this Plan and for the assumption of such Awards, or for the
substitution for such Awards of new awards covering the securities of a
successor entity or an affiliate thereof, with appropriate adjustments as to the
number and kind of securities and exercise prices, in which event this Plan and
such outstanding Awards shall continue or be replaced, as the case may be, in
the manner and under the terms so provided; or (b) the Board otherwise shall
provide in writing for such adjustments as it deems appropriate in the terms and
conditions of the then-outstanding Awards (whether or not vested), including
without limitation (i) accelerating the vesting of outstanding Awards and/or
(ii) providing for the cancellation of Awards and their automatic conversion
into the right to receive the securities, cash or other consideration that a
holder of the shares underlying such Awards would have been entitled to receive
upon consummation of such Change in Control had such shares been issued and
outstanding immediately prior to the effective date and time of the Change in
Control (net of the appropriate option exercise prices). If, pursuant to the
foregoing provisions of this Section 7.2, this Plan and the Awards shall
-----------
terminate by reason of the occurrence of a Change in Control without provision
for any of the actions described in clause (a) or (b) hereof, then any Recipient
holding outstanding Awards shall have the right, at such time immediately prior
to the consummation of the Change in Control as the Board shall designate, to
exercise the Recipient's Awards to the full extent not theretofore exercised,
including any installments which have not yet become vested.
ARTICLE VIII
DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined shall have
the meanings set forth below:
"ADMINISTERING BODY" means the Board as long as no Committee has been
appointed and is in effect and shall mean the Committee as long as the Committee
is appointed and in effect.
"AFFILIATED ENTITY" means any Parent Corporation or Subsidiary Corporation.
"APPLICABLE DIVIDEND PERIOD" means (i) the period between the date a
Dividend Equivalent is granted and the date the related Stock Option, Stock
Appreciation Right, or other Award is exercised, terminates, or is converted to
Common Stock, or (ii) such other time as the Administering Body may specify in
the written instrument evidencing the grant of the Dividend Equivalent.
"AWARD" means any Stock Option, Performance Award, Restricted Stock, Stock
Appreciation Right, Stock Payment, Stock Bonus, Stock Sale, Phantom Stock,
Dividend Equivalent, or Other Stock-Based Benefit granted or sold to an Eligible
Person under this Plan.
15
"AWARD DOCUMENT" means the agreement or confirming memorandum setting forth
the terms and conditions of an Award.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the following and shall be deemed to occur if any
of the following events occur:
(a) Any Person becomes the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of
either the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding securities entitled to vote generally in the
election of directors; or
(b) Individuals who, as of the effective date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any individual who becomes a director after the effective date
hereof whose election, or nomination for election by the Company's Shareholders,
is approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered to be a member of the Incumbent Board
unless that individual was nominated or elected by any Person having the power
to exercise, through beneficial ownership, voting agreement and/or proxy, twenty
percent (20%) or more of either the outstanding shares of Common Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors, in which case that
individual shall not be considered to be a member of the Incumbent Board unless
such individual's election or nomination for election by the Company's
Shareholders is approved by a vote of at least two-thirds of the directors then
comprising the Incumbent Board; or
(c) Consummation by the Company of the sale or other disposition by the
Company of all or substantially all of the Company's assets or a reorganization
or merger or consolidation of the Company with any other person, entity or
corporation, other than
(i) a reorganization or merger or consolidation that would result
in the voting securities of the Company outstanding immediately prior
thereto (or, in the case of a reorganization or merger or consolidation
that is preceded or accomplished by an acquisition or series of related
acquisitions by any Person, by tender or exchange offer or otherwise, of
voting securities representing five percent (5%) or more of the combined
voting power of all securities of the Company, immediately prior to such
acquisition or the first acquisition in such series of acquisitions)
continuing to represent, either by remaining outstanding or by being
converted into voting securities of another entity, more than fifty percent
(50%) of the combined voting power of the voting securities of the Company
or such other entity outstanding immediately after such reorganization or
merger or consolidation (or series of related transactions involving such a
reorganization or merger or consolidation), or
(ii) a reorganization or merger or consolidation effected to
implement a recapitalization or reincorporation of the Company (or similar
transaction) that does not
16
result in a material change in beneficial ownership of the voting
securities of the Company or its successor; or
(d) Approval by the Shareholders of the Company or any order by a court of
competent jurisdiction of a plan of liquidation of the Company.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, as constituted on the
Effective Date of this Plan, and as thereafter adjusted as a result of any one
or more events requiring adjustment of outstanding Awards under Section 3.4
-----------
above.
"COMPANY" means Callaway Golf Company, a California corporation.
"COMMITTEE" means the committee appointed by the Board to administer this
Plan pursuant to Section 4.1.
-----------
"DIVIDEND EQUIVALENT" means a right granted by the Company under Section
-------
6.6 to a holder of a Stock Option, Stock Appreciation Right or other Award
- ---
denominated in shares of Common Stock to receive from the Company during the
Applicable Dividend Period payments equivalent to the amount of dividends
payable to holders of the number of shares of Common Stock underlying such Stock
Option, Stock Appreciation Right, or other Award.
"EFFECTIVE DATE" means February 18, 1998, which is the date this Plan was
adopted by the Board.
"ELIGIBLE PERSON" shall include directors, officers, employees, consultants
and advisors of the Company or of any Affiliated Entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" means the 10th anniversary of the Effective Date.
"FAIR MARKET VALUE" of a share of the Company's capital stock as of a
particular date shall be (i) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market),
the closing price of the stock quoted for such date as reported in the
Transactions Index of each such exchange, as published in The Wall Street
Journal and determined by the Administering Body, or, if no closing price was
quoted in any such Index for such date, then as of the next preceding date on
which such a closing price was quoted; or (ii) if the stock is not then listed
on an exchange or the Nasdaq National Market, the average of the closing bid and
asked prices per share for the stock in the over-the-counter market as quoted on
The Nasdaq Small Cap Market on such date (in the case of (i) or (ii), subject to
adjustment as and if necessary and appropriate to set an exercise price not less
than 100% of the fair market value of the stock on the date an option is
granted); or (iii) if the stock is not then listed on an exchange or quoted in
the over-the-counter market, an amount determined in good faith by the
Administering Body; provided, however, that (A) when appropriate, the
17
Administering Body, in determining Fair Market Value of capital stock of the
Company, may take into account such other factors as it may deem appropriate
under the circumstances and (B) if the stock is traded on the Nasdaq Small Cap
Market and both sales prices and bid and asked prices are quoted or available,
the Administering Body may elect to determine Fair Market Value under either
clause (i) or (ii) above. Notwithstanding the foregoing, the Fair Market Value
of capital stock for purposes of grants of Incentive Stock Options shall be
determined in compliance with applicable provisions of the IRC. The Fair Market
Value of rights or property other than capital stock of the Company means the
fair market value thereof as determined by the Committee on the basis of such
factors as it may deem appropriate.
"INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC, or any successor statute
thereto.
"IRC" means the Internal Revenue Code of 1986, as amended.
"NONQUALIFIED STOCK OPTION" means a Stock Option that is not an Incentive
Stock Option.
"OTHER STOCK-BASED BENEFITS" means an Award granted under Section 6.9 of
-----------
this Plan.
"PARENT CORPORATION" means any Parent Corporation as defined in Section
424(e) of the IRC.
"PAYMENT EVENT" means the event or events giving rise to the right to
payment of a Performance Award.
"PERFORMANCE AWARD" means an Award payable in Common Stock that vests and
becomes payable over a period of time upon attainment of performance criteria
established in connection with the grant of the Award.
"PERFORMANCE-BASED COMPENSATION" means performance-based compensation as
described in Section 162(m) of the IRC. If the amount of compensation an
Eligible Person will receive under any Award is not based solely on an increase
in the value of Common Stock after the date of grant or award, the Committee, in
order to qualify an Award as performance-based compensation under Section 162(m)
of the IRC, can condition the grant, award, vesting, or exercisability of such
an Award on the attainment of a preestablished, objective performance goal. For
this purpose, a preestablished, objective performance goal may include one or
more of the following performance criteria: (a) cash flow, (b) earnings per
share (including earning before interest, taxes, depreciation and amortization),
(c) return on equity, (d) total Shareholder return, (e) return on capital, (f)
return on assets or net assets, (g) income or net income, (h) operating income
or net operating income, (i) operating margin, (j) return on operating revenue,
and (k) any other similar performance criteria.
"PERSON" means any person, entity or group, within the meaning of Section
13(d) or 14(d) of the Exchange Act, but excluding (i) the Company and its
subsidiaries, (ii) any employee stock ownership or other employee benefit plan
maintained by the Company that is qualified under ERISA and (iii) an underwriter
or underwriting syndicate that has acquired the Company's securities solely in
connection with a public offering thereof.
18
"PHANTOM STOCK" means an Award granted under Section 6.9 of this Plan.
-----------
"PLAN" means this 1998 Stock Incentive Plan of the Company.
"PLAN TERM" means the period during which this Plan remains in effect
(commencing the Effective Date and ending on the Expiration Date).
"PURCHASE PRICE" means the purchase price (if any) to be paid by a
Recipient for Restricted Stock as determined by the Committee (which price shall
be at least equal to the minimum price required under applicable laws and
regulations for the issuance of Common Stock which is nontransferable and
subject to a substantial risk of forfeiture until specific conditions are met).
"RECIPIENT" means an Eligible Person who has received an Award under this
Plan.
"REORGANIZATION" means any merger, consolidation or other reorganization.
"RESTRICTED STOCK" means Common Stock that is the subject of an Award made
under Section 6.3 and that is nontransferable and subject to a substantial risk
-----------
of forfeiture until specific conditions are met, as set forth in this Plan and
in any statement evidencing the grant of such Award.
"RULE 16B-3" means Rule 16b-3 under the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT SHAREHOLDER" is an individual who, at the time a Stock Option
is granted to such individual under this Plan, owns more than ten percent (10%)
of the combined voting power of all classes of stock of the Company or of any
Parent Corporation or Subsidiary Corporation (after application of the
attribution rules set forth in Section 424(d) of the IRC).
"STOCK APPRECIATION RIGHT" means a right granted under Section 6.4 to
-----------
receive a payment that is measured with reference to the amount by which the
Fair Market Value of a specified number of shares of Common Stock appreciates
from a specified date, such as the date of grant of the Stock Appreciation
Right, to the date of exercise.
"STOCK BONUS" means an issuance or delivery of unrestricted or restricted
shares of Common Stock under Section 6.7 of this Plan as a bonus for services
-----------
rendered or for any other valid consideration under applicable law.
"STOCK PAYMENT" means a payment in shares of the Company's Common Stock to
replace all or any portion of the compensation (other than base salary) that
would otherwise become payable to a Recipient.
"STOCK OPTION" means a right to purchase stock of the Company granted under
Section 6.1 of this Plan.
- -----------
19