EXHIBIT 10.5
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made as of the 1st day of July,
1999, by and between Callaway Golf Company, a Delaware corporation (the
"Company"), and Richard L. Rosenfield ("Indemnitee"), a director of the Company.
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining liability insurance covering directors, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, although the Company currently has directors' liability
insurance, the coverage of such insurance is such that many claims which may be
brought against Indemnitee may not be covered, or may not be fully covered, and
the Company may be unable to maintain such insurance;
WHEREAS, the Company and the Indemnitee further recognize the
substantial increase in corporate litigation subjecting directors to expensive
litigation risks at the same time that liability insurance has been severely
limited;
WHEREAS, the current protection available may not be adequate given
the present circumstances, and Indemnitee may not be willing to serve as a
director without adequate protection;
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as directors of the
Company and to indemnify its directors so as to provide them with the maximum
protection permitted by law;
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. DEFINITIONS. The following terms, as used herein, have the following
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meaning:
1.1 Affiliate. "Affiliate" means, (i) with respect to any
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corporation, any officer, director or 10% or more shareholder of such
corporation, or (ii) with respect to any individual, any partner or immediate
family member of such individual or the estate of such individual, or (iii) with
respect to any partnership, trust or joint venture, any partner, co-venturer or
trustee of such partnership, trust of joint venture, or any beneficiary or owner
having 10% or more interest in the equity, property or profits of such
partnership, trust or joint venture, or (iv) with respect to any Person, any
other Person which, directly or indirectly, controls, is controlled by, or is
under common control with such Person or any Affiliate of such Person.
1.2 Agreement. "Agreement" shall mean this Indemnification
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Agreement, as the same may be amended from time to time hereafter.
1.3 DGCL. "DGCL" shall mean the Delaware General Corporation Law, as
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amended.
1.4 Person. "Person" shall mean any individual, partnership,
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corporation, joint venture, trust, estate, or other entity.
1.5 Subsidiary. "Subsidiary" shall mean any corporation of which the
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Company owns, directly or indirectly, through one or more subsidiaries,
securities having more than 50% of the voting power of such corporation.
2. INDEMNIFICATION
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2.1 Third Party Proceedings. The Company shall indemnify Indemnitee
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if Indemnitee is or was a party or witness or other participant in, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than action by or in the right of the Company) by reason of the fact that
Indemnitee is or was a director of the Company or any subsidiary of the Company,
by reason of any action or inaction on the part of Indemnitee while a director
of the Company or any Subsidiary, and/or by reason of the fact that Indemnitee
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against all expense, liability and loss (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld)
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful and provided,
further, that the Company has determined that such indemnification is otherwise
permitted by applicable law.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that Indemnitee did not act in good
faith and in a manner which Indemnitee reasonably believed to be in the best
interests of the Company or that Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.
2.2 Proceedings by or in the Right of the Company. The Company shall
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indemnify Indemnitee if Indemnitee was or is a party or a witness or other
participant in or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company or any Subsidiary to
procure a judgment in its favor by reason of the fact that Indemnitee is or was
a director of the Company or any Subsidiary, by reason of any action or inaction
on the part of Indemnitee while a director of the Company or a Subsidiary or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other
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enterprise, against all expense, liability and loss (including attorneys' fees)
and amounts paid in settlement (if such settlement is court-approved) actually
and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and its shareholders and provided, further, that the
Company has determined that such indemnification is otherwise permitted by
applicable law. No indemnification shall be made in respect of any claim, issue
or matter as to which Indemnitee shall have been adjudged to be liable to the
Company in the performance of Indemnitee's duties to the Company and its
shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine upon application that, in view of
all the circumstances of the case, Indemnitee is fairly and reasonably entitled
to indemnity for expenses and then only to the extent that the court shall
determine.
2.3 Mandatory Payment of Expenses. To the extent that Indemnitee has
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been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 2.1 or 2.2 or the defense of any claim, issue
or matter therein, Indemnitee shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by Indemnitee in connection
therewith.
2.4 Enforcing the Agreement. If Indemnitee properly makes a claim
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for indemnification or an advance of expenses which is payable pursuant to the
terms of this Agreement, and that claim is not paid by the Company, or on its
behalf, within ninety days after a written claim has been received by the
Company, the Indemnitee may at any time thereafter bring suit against the
Company to recover the unpaid amount of the claim and if successful in whole or
in part, the Indemnitee shall be entitled to be paid also all expenses actually
and reasonably incurred in connection with prosecuting such claim.
2.5 Subrogation. In the event of payment under this Agreement, the
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Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
3. EXPENSES; INDEMNIFICATION PROCEDURE
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3.1 Advancement of Expenses. The Company shall advance all expenses
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incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 2.1 or 2.2 hereof. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized hereby
or that such indemnification is not otherwise permitted by applicable law. The
advances to be made
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hereunder shall be paid by the Company to Indemnitee within thirty (30) days
following delivery of a written request therefor or by Indemnitee to the
Company.
3.2 Determination of Conduct. Any indemnification (unless ordered by
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a court) shall be made by the Company only as authorized in the specified case
upon a determination that indemnification of Indemnitee is proper under the
circumstances because Indemnitee has met the applicable standard of conduct set
forth in Sections 2.1 or 2.2 of this Agreement. Such determination shall be
made by any of the following: (1) the Board of Directors (or by an executive
committee thereof) by a majority vote of directors (or committee members) who
are not parties to such action, suit or proceeding, even though less than a
quorum, (2) if there are no such disinterested directors, or if such
disinterested directors so direct, by independent legal counsel in a written
opinion, (3) by the shareholders, with the shares owned by Indemnitee not being
entitled to vote thereon, or (4) the court in which such proceeding is or was
pending upon application made by the Company or Indemnitee or the attorney or
other person rendering services in connection with the defense, whether or not
such application by Indemnitee, the attorney or the other person is opposed by
the Company.
3.3 Notice/Cooperation by Indemnitee. Indemnitee shall, as a
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condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be given in the manner set
forth in Section 10.3 hereof and to the address stated therein, or such other
address as the Company shall designate in writing to Indemnitee. In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.
3.4 Notice to Insurers. If, at the time of the receipt of a notice
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of a claim pursuant to Section 3.3 hereof, the Company has director liability
insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the respective policies. The Company shall thereafter take all necessary or
desirable actions to cause such insurers to pay, on behalf of the Indemnitee,
all amounts payable as a result of such proceeding in accordance with the terms
of such policies.
3.5 Selection of Counsel. In the event the Company shall be
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obligated under Section 3.1 hereof to pay the expenses of any proceeding against
Indemnitee, the Company shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (a) Indemnitee shall have the right to employ separate
counsel in any such proceeding at Indemnitee's expense; and (b) if (i) the
employment of counsel by Indemnitee has been previously authorized by the
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Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company (subject to the
provisions of this Agreement).
4. ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY
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4.1 Application. The provisions of this Agreement shall be deemed
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applicable to all actual or alleged actions or omissions by Indemnitee during
any and all periods of time that Indemnitee was, is, or shall be serving as a
director of the Company or a Subsidiary.
4.2 Scope. The Company hereby agrees to indemnify Indemnitee to the
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fullest extent permitted by law (except as set forth in Section 8 hereof),
notwithstanding that such indemnification is not specifically authorized by the
other provisions of this Agreement, the Company's Certificate of Incorporation,
the Company's Bylaws or by statute. In the event of any changes, after the date
of this Agreement, in any applicable law, statute, or rule which expands the
right of a Delaware corporation to indemnify a member of its board of directors,
such changes shall be, ipso facto, within the purview of Indemnitee's rights and
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the Company's obligations under this Agreement. In the event of any change in
any applicable law, statute, or rule which narrows the right of a Delaware
corporation to indemnify a member of its board of directors, such changes,
except to the extent otherwise required by such law, statute or rule to be
applied to this Agreement shall have no effect on this Agreement or the parties'
rights and obligations hereunder.
4.3 Non-Exclusivity. The indemnification provided by this Agreement
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shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the DGCL, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for an action taken or not
taken while serving in an indemnified capacity even though he may have ceased to
serve in such capacity at the time of any action, suit or other covered
proceeding.
5. PARTIAL INDEMNIFICATION
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5.1 Partial Indemnity. If Indemnitee is entitled under any provision
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of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by
Indemnitee in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceedings but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for that portion to
which Indemnitee is entitled.
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6. MUTUAL ACKNOWLEDGMENT
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6.1 Acknowledgment. Both the Company and Indemnitee acknowledge that
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in certain instances, federal law or public policy may override applicable state
law and prohibit the Company from indemnifying its directors under this
Agreement or otherwise. For example, the Company and Indemnitee acknowledge
that the Securities and Exchange Commission (the "SEC") has taken the position
that indemnification is not permissible for liabilities arising under certain
federal securities laws, and federal legislation prohibits indemnification for
certain ERISA violations. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
SEC to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee.
7. LIABILITY INSURANCE
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7.1 Obtaining Insurance. The Company shall, from time to time, make
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the good faith determination whether or not it is practicable for the Company to
obtain and maintain a policy or policies of insurance with reputable, insurance
companies providing the directors with coverage for losses from wrongful acts,
or to ensure the Company's performance of its indemnification obligations under
this Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all such policies of liability insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company's
directors. Notwithstanding the foregoing, the Company shall have no obligation,
to obtain or maintain such insurance if the Company determines in good faith
that such insurance is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a parent or Subsidiary of the Company.
8. SEVERABILITY
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8.1 Severability. Nothing in this Agreement is intended to require
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or shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8.1. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, the Company
shall nevertheless indemnify Indemnitee to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated, and
the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
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9. EXCEPTIONS
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9.1 Exceptions to Company's Obligations. Any other provision to the
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contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement for the following:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
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to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, unless said proceedings or
claims were authorized by the board of directors of the Company.
(b) Improper Personal Benefit. To indemnify Indemnitee against
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liability for any transactions from which Indemnitee, or any Affiliate of
Indemnitee, derived an improper personal benefit, including, but not limited to,
self-dealing or usurpation of a corporate opportunity.
(c) Dishonesty. To indemnify Indemnitee if a judgment or other final
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adjudication adverse to Indemnitee established that Indemnitee committed acts of
active and deliberate dishonesty, with actual dishonest purpose and intent,
which acts were material to the cause of action so adjudicated.
(d) Insured Claims; Paid Claims. To indemnify Indemnitee for expenses
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or liabilities of any type whatsoever (including but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee (i) by an insurance carrier under a policy
of liability insurance maintained by the Company, or (ii) otherwise by any other
means.
(e) Claims Under Section 16(b). To indemnify Indemnitee for an
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accounting of profits in fact realized from the purchase and sale of securities
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or any similar successor statute.
10. MISCELLANEOUS
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10.1 Construction of Certain Phrases.
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(a) For purposes of this Agreement, references to the "Company" shall
include any resulting or surviving corporation in any merger or consolidation in
which the Company (as then constituted) is not the resulting or surviving
corporation so that Indemnitee will continue to have the full benefits of this
Agreement.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which impose
duties on, or involves services
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by, such director, officer, employee or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan,
Indemnitee shall be deemed to have acted in a manner "reasonably believed to be
in the best interests of the Company and its shareholders" as referred to in
this Agreement.
10.2 Successors and Assigns. This Agreement shall be binding upon
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the Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
Notwithstanding the foregoing, the Indemnitee shall have no right or power to
voluntarily assign or transfer any rights granted to Indemnitee, or obligations
imposed upon the Company, by or pursuant to this Agreement. Further, the rights
of the Indemnitee hereunder shall in no event accrue to the benefit of, or be
enforceable by, any judgment creditor or other involuntary transferee of the
Indemnitee.
10.3 Notice. All notices, requests, demands and other communications
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under this Agreement shall be in writing and shall be deemed duly given (i) if
mailed by domestic certified or registered mail with postage prepaid, properly
addressed to the parties at the addresses set forth below, or to such other
address as may be furnished to Indemnitee by the Company or to the Company by
Indemnitee, as the case may be, on the third business day after the date
postmarked, or (ii) otherwise notice shall be deemed received when such notice
is actually received by the party to whom it is directed.
If to Indemnitee: To the address set forth below the signature
line of Indemnitee on the signature page
hereof.
If to Company: Callaway Golf Company
2285 Rutherford Road
Carlsbad, CA 92008
Attention: General Counsel
10.4 Consent to Jurisdiction. The Company and Indemnitee each hereby
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irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or related to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
10.5 Choice of Law. This Agreement shall be governed by and its
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provisions construed in accordance with the internal laws of the State of
Delaware, as applied to contracts between Delaware residents entered into and to
be performed entirely within Delaware, and without regard to choice of law
principles.
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10.6 Irrevocable Arbitration of Disputes.
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(a) Indemnitee and the Company agree that any dispute, controversy or
claim arising hereunder or in any way related to this Agreement, its
interpretation, enforceability, or applicability, that cannot be resolved by
mutual agreement of the parties shall be submitted to binding arbitration. This
includes, but is not limited to, alleged violations of federal, state and/or
local statutes, claims based on any purported breach of duty arising in contract
or tort, including breach of contract, breach of covenant of good faith and fair
dealing, violation of public policy, and violation of any statutory, contractual
or common law rights. The parties agree that arbitration is the parties' only
recourse for such claims and hereby waive the right to pursue such claims in any
other forum, unless otherwise provided by law. A proceeding to compel
arbitration under this provision shall be governed by Section 3 of Chapter 1 of
the Federal Arbitration Act such that any court action involving a dispute which
is not subject to arbitration shall be stayed pending arbitration of any
arbitrable dispute.
(b) Any demand for arbitration shall be in writing and must be made to
the Company's Chief Legal Officer within one (1) year, or within the time period
stated in the applicable statute of limitations, whichever is longer, after the
discovery of the alleged claim or cause of action by the aggrieved party.
(c) The arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") in San Diego,
California before an arbitrator who is licensed to practice law in the state of
California. The arbitration shall be conducted in San Diego by a former or
retired judge or attorney with at least 10 years experience in commercial
disputes, or a non-attorney with like experience in the area of dispute, who
shall have the power to hear motions, control discovery, conduct hearings and
otherwise do all that is necessary to resolve the matter. The parties must
mutually agree on the arbitrator. if the parties cannot agree on the arbitrator
after their best efforts, an arbitrator from the AAA will be selected pursuant
to the Commercial Arbitration Rules of the AAA.
(d) The arbitration award shall be final and binding, and may be
entered as a judgment in any court having competent jurisdiction. It is
expressly understood that the parties have chosen arbitration to avoid the
burdens, costs and publicity of a court proceeding, and the arbitrator is
expected to handle all aspects of the matter, including discovery and any
hearings, in such a way as to minimize the expense, time, burden and publicity
of the process, while assuring a fair and just result. in particular, the
parties expect that the arbitrator will limit discovery by controlling the
amount of discovery that may be taken (e.g., the number of depositions or
interrogatories) and by restricting the scope of discovery to only those matters
clearly relevant to the dispute. However, at a minimum, each party will be
entitled to one deposition.
(e) The arbitrator has no authority to award punitive damages.
(f) The prevailing party shall be entitled to an award by the
arbitrator of reasonable attorneys' fees and other costs reasonably incurred in
connection with the arbitration, including witness fees and expert witness fees,
unless the arbitrator for good cause determines otherwise.
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(g) The provisions of this section shall survive the expiration or
termination of this agreement, and shall be binding on the parties in
perpetuity.
The parties have read Section 10.6 and irrevocably agree to arbitrate any
dispute identified above.
_________ (Indemnitee's initials) ______________ (Company's initials)
10.7 Entire Agreement. The provisions of this Agreement contain
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the entire agreement between the parties and supersede all prior agreements,
oral or written, between the parties, including the Indemnification Agreement by
and between Callaway Golf Company, a California corporation, and Richard L.
Rosenfield dated as of January 25, 1995. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner except by an instrument
in writing signed by the parties.
10.8 Counterparts. This Agreement may be executed in counterparts,
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each of which shall constitute an original and all of which together shall
constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereby have executed this Agreement as
of the date first above written.
"Company" Callaway Golf Company,
a Delaware corporation
By:
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David A. Rane
Executive Vice President,
Administration and Planning, and
Chief Financial Officer
"Indemnitee" Richard L. Rosenfield
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Address: California Pizza Kitchen
6053 West Century Blvd.
Suite 1100
Los Angeles, CA. 90045
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