EXHIBIT 10.44
CALLAWAY GOLF COMPANY
1996 STOCK OPTION PLAN
(As Amended and Restated May 3, 2000)
SECTION 1. PURPOSE OF THE PLAN
This 1996 Stock Option Plan (the "Plan") of Callaway Golf Company, a
Delaware corporation (the "Company"), is intended as a means whereby the Company
may provide for grants of stock options to employees (including officers),
consultants and advisors of the Company and its subsidiaries and affiliates,
thereby helping to retain and motivate such individuals, and to encourage the
judgment, initiative and efforts of such individuals by further aligning their
interests with those of the shareholders of the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
2.1 Administration. The Plan shall be administered by the Board of
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Directors of the Company (the "Board") or, in the discretion of the Board, a
committee appointed thereby (the "Committee"). All expenses and liabilities
incurred by the Board or the Committee in the administration of the Plan shall
be borne by the Company. The Board or the Committee may employ attorneys,
consultants, accountants, agents, brokers or other persons. If no persons are
designated by the Board to serve on the Committee, the Plan shall be
administered by the Board and all references herein to the Committee shall refer
to the Board. Unless otherwise provided by the Board: (a) with respect to any
Options (as defined in Section 5.1 below) for which the Committee determines
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that it is necessary or desirable for the grant thereof to be exempt under Rule
16b-3 of the Securities Exchange Act of 1934 (the "Exchange Act"), membership of
the Committee shall conform to the requirements of that Rule to make grants or
awards that are exempt from the operation of Exchange Act Section 16(6), and (b)
with respect to any Options that are intended to qualify as "performance based
compensation" under Section 162(m) of the Internal Revenue Code (the "Code"),
membership of the Committee shall conform to the requirements of Code Section
162(m) and the Treasury regulations thereunder.
2.2 Determinations. The Committee shall have full and exclusive power to
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construe and interpret the Plan, to determine and designate the class or classes
of Eligible Persons (as defined in Section 4 below) of the Company and of its
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subsidiaries or affiliates who are eligible to participate in the Plan and any
other criteria that must be satisfied in order for an Eligible Person to
participate in the Plan, to determine the terms of Options, subject to the
requirements and provisions of the Plan, and generally to determine answers to
any and all questions arising under the Plan. All decisions, determinations and
interpretations by the Committee regarding the Plan shall be final and binding
on all Eligible Persons and Participants (as defined in Section 4 below). The
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Committee shall consider such factors as it deems relevant, in its sole and
absolute discretion, to making such decisions, determinations and
interpretations, including, without limitation, the recommendations or advice of
any
officer of the Company or Eligible Person and such attorneys, consultants and
accountants as it may select.
2.3 Powers. Subject to the express provisions of the Plan, the Committee
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shall be authorized and empowered to do all things necessary or desirable in
connection with the administration of the Plan with respect to the Options over
which the Committee has authority, including, without limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating to
the Plan and to define terms not otherwise defined herein;
(b) to determine which persons are Eligible Persons, to which Eligible
Persons, if any, Options shall be granted hereunder and the timing of any
such Options;
(c) to determine the number of Shares (as defined in Section 3.1
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below) that will be subject to any Option and the exercise price of such
Shares;
(d) to prescribe and amend the terms of the Option Agreements (as
defined in Section 5.1 below), which need not be identical;
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(e) to determine whether, and the extent to which, adjustments are
required pursuant to Section 7.2;
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(f) to interpret and construe the Plan, any rules and regulations
under the Plan and the terms and conditions of any Option granted
hereunder, and to make exceptions to any such provisions in good faith and
for the benefit of the Company; and
(g) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
SECTION 3. STOCK SUBJECT TO THE PLAN
3.1 Aggregate Limits. Subject to adjustment as provided in Section 7.2, at
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any time, the aggregate number of shares of the Company's Common Stock
("Shares") issued and issuable pursuant to all Options (including all ISOs (as
defined in Section 5.3 below)) granted under the Plan shall not exceed
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9,000,000. The Shares subject to the Plan may be either Shares reacquired by the
Company (including Shares repurchased in the open market or otherwise) or
authorized but unissued Shares.
3.2 Code Section 162(m) Limit. The maximum number of Shares with respect to
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which Options may be granted under the Plan during any calendar year to a key
employee shall not exceed 1,000,000. Notwithstanding anything to the contrary in
the Plan, the foregoing limitation (a) shall not apply if it is not required in
order for the compensation attributable to Options under the Plan to qualify as
"performance based compensation"
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described in Code Section 162(m) and the Treasury regulations thereunder, and
(b) shall be subject to adjustment under Section 7.2 only to the extent the
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Committee determines that such adjustment would not affect the status of
compensation attributable to Options hereunder as "performance based
compensation" described in Code Section 162(m) and the Treasury regulations
thereunder.
3.3 ISO Limits. The aggregate number of Shares issued and issuable pursuant
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to all ISOs (as defined in Section 5.3) granted under the Plan shall not exceed
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9,000,000. Such maximum number does not include the number of Shares subject to
the unexercised portion of any ISO granted under the Plan that expires or is
terminated. Notwithstanding anything to the contrary in the Plan, such aggregate
number of Shares shall be subject to adjustment under Section 7.2 only to the
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extent that such adjustment will not affect the status of any ISO granted under
the Plan.
3.4 Calculating Plan Limits. For purposes of Section 3.1,
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(a) The aggregate number of Shares issued under the Plan at any time
shall equal only the number of Shares actually issued upon exercise or
settlement of an Option and not returned to the Company upon cancellation,
expiration or forfeiture of an Option or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an Option;
and
(b) In the event that any outstanding Option under the Plan expires by
reason of lapse of time or is otherwise terminated without exercise for any
reason, then the Shares subject to any such Option that have not been
issued upon exercise of the Option shall again become available in the pool
of Shares for which Options may be granted under the Plan; provided,
however, that in the event that the Committee determines that it is
appropriate to condition the grant of a new Option to a Participant upon
the surrender by such Participant of a previously issued unexercised Option
having a higher exercise price than the proposed new Option, then the
Shares underlying the old Option shall not again become available in the
pool of Shares for which Options may be granted under the Plan unless and
until such new Option expires by reason of lapse of time or is otherwise
terminated without exercise for any reason other than in connection with a
similar conditional re-grant.
SECTION 4. PERSONS ELIGIBLE UNDER THE PLAN
Any person who is an employee, consultant or advisor of the Company or any
of its subsidiaries or affiliates (an "Eligible Person") may be eligible to be
considered for the grant of Options hereunder, as determined by the Committee in
its discretion; provided, however, that no director of the Company who is not
also an employee of the Company shall be eligible to receive any Option
hereunder. A "Participant" is any Eligible Person to whom an Option has been
granted and any person (including any estate) to whom an Option has been
assigned or transferred pursuant to Section 6.1.
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SECTION 5. STOCK OPTION GRANTS
5.1 Authority to Grant Options. An "Option" is a right to purchase a number
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of Shares at such exercise price, at such times, and on such other terms and
conditions as are specified in the agreement evidencing the Option (the "Option
Agreement"). The Committee, on behalf of the Company, is authorized under the
Plan to grant an Option or provide for the grant of an Option, either
automatically or in the discretion of the Committee, upon the occurrence of
specified events, including, without limitation, the achievement of Qualifying
Performance Criteria (as defined below) or the satisfaction of an event or
condition within the control of the recipient of the Option or within the
control of others.
For purposes of the Plan, the term "Qualifying Performance Criteria" shall
mean any one or more performance criteria, either individually, alternatively or
in any combination, applied to either the Company as a whole or to a business
unit or subsidiary, either individually, alternatively or in any combination,
and measured either on an absolute basis or relative to a pre-established
target, to previous years' results or to a designated comparison group, in each
case as specified by the Committee in the Option Agreement. For this purpose,
such performance criteria may include (a) cash flow, (b) earnings per share
(including earnings before interest, taxes 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 profit or net operating profit, (j) operating
margin, (k) return on operating revenue, (l) market share or circulation, and
(m) any similar performance criteria.
5.2 Option Agreement. Each Option Agreement shall contain provisions
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regarding (a) the number of Shares that may be issued upon exercise of the
Option, (b) the purchase price of the Shares, (c) the term of the Option, (d)
such terms and conditions of exercise as may be determined from time to time by
the Committee, (e) restrictions on the transfer of the Option and forfeiture
provisions, and (f) such further terms and conditions, in each case not
inconsistent with the Plan, as may be determined from time to time by the
Committee.
5.3 ISOs and Nonqualified Options. Options that are intended to qualify as
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Incentive Stock Options ("ISOs") pursuant to Code Section 422 and Options that
are not intended to qualify as ISOs ("Nonqualified Options") may be granted
under this Section 5 as the Committee in its discretion shall determine. Option
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Agreements evidencing ISOs shall contain such terms and conditions as may be
necessary to comply with the applicable provisions of Section 422 of the Code.
5.4 Option Price. The exercise price per Share of each Option granted under
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the Plan shall be not less than the Fair Market Value (as defined below) on the
date the Option is granted.
Unless the Committee shall specify otherwise, for purposes of the Plan, the
"Fair Market Value" of a Share as of a particular date shall be: (a) if the
Shares are of a class listed on
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an established stock exchange or exchanges (including, for this purpose, The
Nasdaq National Market), the closing sale price of the Share quoted for such
date in the Transactions Index of each such exchange, as published in The Wall
Street Journal, or, if no sale price was quoted in any such Index for such date,
then as of the next preceding date on which such a sale price was quoted; or (b)
if the Shares are of a class not then listed on an exchange, the average of the
closing bid and asked prices per share for the Share in the over-the-counter
market as quoted on the NASDAQ system on such date; or (c) if the Shares are of
a class not then listed on an exchange or quoted in the over-the-counter market,
an amount determined in good faith by the Committee; provided, however, that
when appropriate, the Committee in determining the Fair Market Value may take
into account such other factors as it may deem appropriate under the
circumstances. Notwithstanding the foregoing, the Fair Market Value for purposes
of grants of ISOs shall be determined in compliance with applicable provisions
of the Code.
5.5 Termination of Options. Unless determined otherwise by the Committee in
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its sole discretion, Options shall expire on the earliest of (a) one (1) year
from the date on which the Participant ceases to be an Eligible Person of the
Company for any reason other than death; (b) one (1) year from the date of the
Participant's death; or (c) with respect to each installment of such Option, the
fifth anniversary of the vesting date of such installment. If a Participant who
is an employee of the Company (or of a subsidiary or affiliated entity) ceases
for any reason to be such an employee, that portion of the Option that has not
yet vested shall terminate, unless the Committee accelerates the vesting
schedule in its sole discretion (in which case, the Committee may impose
whatever conditions it considers appropriate on the accelerated portion).
Options granted to a Participant who is not such an employee may be made subject
to such other termination provisions as determined appropriate by the Committee.
5.6 Option Exercise.
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(a) Partial Exercise. Unless otherwise provided by the Committee, an
exercisable Option may be exercised in whole or in part.
(b) Manner of Exercise. All or a portion of an exercisable Option shall
be deemed exercised upon delivery to the Secretary of the Company at the
Company's principal office all of the following: (i) notice of exercise
specifying the number of Shares to be purchased and signed by the
Participant, (ii) full payment of the exercise price for such number of
Shares, (iii) such representations and documents as the Committee, in its
sole discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any
other federal, state or foreign securities laws or regulations, (iv) in the
event that the Option shall be exercised pursuant to Section 6.1 by any
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person or persons other than the Eligible Person, appropriate proof of the
right of such person or persons to exercise the Option, and (v) such
representations and documents as the Committee, in its sole discretion,
deems necessary or advisable to provide for the tax withholding pursuant to
Section 9. Shares shall be registered in the name of the Participant as
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soon as administratively practicable after exercise of any Option, subject
to reasonable
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delays and to delays beyond the reasonable control of the Company such as but
not limited to completion of registration of said Shares with the Securities and
Exchange Commission (the "SEC") or compliance with any federal or state laws,
rules or regulations.
(c) Payment of Exercise Price. The exercise price of an Option shall be
paid in the form of one of more of the following, as the Committee shall
specify, either through the terms of the Option Agreement or at the time of
exercise of an Option: (i) cash, (ii) other property deemed acceptable by
the Committee, (iii) a commitment by a brokerage firm acceptable to the
Company to pay such exercise price from the proceeds of a sale of Shares
issuable upon exercise of the Option, or (iv) any combination of (i)
through (iii). The Company may, in its sole discretion, assist any person
to whom an Option is granted hereunder in the payment of the purchase price
(including, without limitation, by loan or the acceptance of a promissory
note) payable in connection with the receipt or exercise of that Option.
SECTION 6. OTHER PROVISIONS APPLICABLE TO OPTIONS
6.1 Nonassignability. Unless the Committee shall otherwise determine on a
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case by case basis, no Option granted under the Plan shall be assignable or
transferable except (a) by will or by the laws of descent and distribution, or
(b) subject to the final sentence of this Section, upon dissolution of marriage
pursuant to a qualified domestic relations order. Unless the Committee shall
otherwise determine on a case by case basis, during the lifetime of a
Participant, an Option granted to him or her shall be exercisable only by the
Participant (or the Participant's permitted transferee) or his or her guardian
or legal representative. Notwithstanding the foregoing, (i) no Option owned by a
Participant subject to Section 16 of the Exchange Act may be assigned or
transferred in any manner inconsistent with Rule 16b-3 thereunder as interpreted
and administered by the Commission and its staff, and (ii) ISOs may not be
assigned or transferred in violation of Section 422(b)(5) of the Code or the
Treasury Regulations thereunder, and nothing herein is intended to allow such
assignment or transfer.
6.2 Dividends. Unless otherwise provided by the Committee, no adjustment
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shall be made in Shares issuable under Options on account of cash dividends that
may be paid or other rights that may be issued to the holders of Shares prior to
their issuance under any Option. Unless otherwise provided by the Committee, no
dividends or dividend equivalent amounts shall be paid to any Participant with
respect to the Shares subject to any Option that has not vested or has not been
exercised on the record date for dividends.
6.3 Consideration for Issuance of Shares. Any issuance of Shares may be
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conditioned upon payment of an amount equal to the minimum amount, if any,
required by applicable law for the issuance of such Shares. The absence of any
such condition shall be deemed to reflect a determination by the Committee that
non-cash consideration in an amount at least equal to the minimum amount, if
any, required by law has been or will be received prior to the issuance of such
Shares.
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6.4 Conditions for Issuance of Options. The Committee may, in its
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discretion and on such terms as it may specify, require as a condition to the
grant of any Option that the Eligible Person surrender for cancellation some or
all of any previously granted employee benefit arrangement (including other
Options), or any rights under any such employee benefit arrangement. Any such
Option that is conditioned upon the surrender and cancellation of another
employee benefit arrangement or of rights thereunder may contain such other
terms as the Committee deems appropriate.
6.5 Tandem Stock or Cash Rights. Either at the time an Option is granted or
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by subsequent action, the Committee may, but need not, provide that an Option
shall contain as a term thereof, a right, either in tandem with the other rights
under the Option or as an alternative thereto, of the Participant to receive,
without payment to the Company, a number of Shares, cash or a combination
thereof, the amount of which is determined by reference to the value of the
Option.
6.6 No Repricing. The Committee may not decrease the exercise price of
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Shares that may be acquired pursuant to Options granted under the Plan unless
such decrease is (a) made subject to approval by the shareholders of the Company
or (b) made pursuant to the adjustment provisions of Section 7.2.
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SECTION 7. CHANGES IN CAPITAL STRUCTURE
7.1 No Preferential Rights. The existence of outstanding Options shall not
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affect in any way the right or power of the Company or its shareholders to make
or authorize any or all adjustments, recapitalizations, reorganizations,
exchanges, or other changes in the Company's capital structure or its business,
or any merger or consolidation of the Company, or any issuance of any Shares or
other securities or subscription rights thereto, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Shares
or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
7.2 Adjustment in Shares. If the outstanding securities of the class then
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subject to the Plan are increased, decreased or exchanged for or converted into
cash, property or a different number or kind of shares or securities, or if
cash, property or shares or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend
(other than a regular, quarterly cash dividend) or other distribution, stock
split, reverse stock split, spin-off or the like, or if substantially all of the
property and assets of the Company are sold, then, unless the terms of such
transaction shall provide otherwise, the Committee shall make appropriate and
proportionate adjustments in (a) the number and type of shares or other
securities or cash or other property that may be acquired pursuant to Options
theretofore granted under the Plan and the exercise or settlement price of such
Options, provided, however, that such adjustment shall be made in such a manner
that will not affect the status of any Option intended to qualify as an ISO
under Code Section 422, and (b) the maximum
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number and type of shares or other securities that may be issued pursuant to
such Options thereafter granted under the Plan. Any adjustments made by the
Committee pursuant to this Section shall be binding upon the holders of each
then outstanding Option, without need for any consent or amendment signed by
such holder, effective at such date as is fixed by the Committee.
SECTION 8. CHANGE OF CONTROL
The Committee may, through the terms of the Option or otherwise, provide
that a Participant may have the ability to exercise any portion of the Option
not previously exercisable, upon change of control related events or termination
of the Participant's services for the Company following a change of control
related event. The Committee shall have the authority from time to time to
define change of control related events for purposes of this Section 8, which
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may include, without limitation, a merger, reorganization, sale of assets,
liquidation, acquisition of a specified percentage of the Company's outstanding
equity securities (which specified percentage may be less than 50%), or a
significant change in composition of the Board.
SECTION 9. TAXES
9.1 Withholding Requirements. The Committee may make such provisions or
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impose such conditions as it may deem appropriate for the withholding or payment
by the Participant, as appropriate, of any taxes that it determines are required
in connection with any Options granted under the Plan, and a Participant's
rights in any Option are subject to satisfaction of such conditions.
9.2 Payment of Withholding Taxes. Notwithstanding the terms of Section 9.1,
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the Committee may in its discretion, but need not, provide in the Option
Agreement or otherwise that all or any portion of the taxes required to be
withheld by the Company in connection with the exercise of a Nonqualified Option
or the disposition of Shares issued under an ISO shall be paid or, at the
election of the Participant, may be paid by the Company withholding shares of
the Company's capital stock otherwise issuable or subject to such Option having
a fair market value equal to the amount required to be withheld or paid. Any
such elections are subject to such conditions or procedures as may be
established by the Committee and may be subject to disapproval by the Committee.
SECTION 10. AMENDMENT AND TERMINATION
The Committee may, insofar as permitted by law, from time to time suspend
or discontinue the Plan or revise or amend it in any respect whatsoever, and the
Plan as so revised or amended will govern all Options thereunder, including
those granted before such revision or amendment, except that no such amendment
shall alter or impair or diminish in any material respect any rights or
obligations under any Option theretofore granted under the Plan without the
consent of the person to whom such Option was granted. In addition, if an
amendment to the Plan would materially increase the number of shares subject to
the Plan (as adjusted under Section 7.2), materially modify the requirements as
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to eligibility for participation in the Plan, extend the final
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date upon which Options may be granted under the Plan, or otherwise materially
increase the benefits accruing to recipients in a manner not specifically
contemplated herein and that affects the Plan's compliance with Rule 16b-3 under
the Exchange Act or applicable provisions of the Code or requires the approval
of the Company's shareholders so that the Options hereunder continue to qualify
as "performance based compensation" described in Code Section 162(m) and the
Treasury regulations thereunder, then the amendment shall be subject to approval
by the Company's shareholders to the extent required to comply with Rule 16b-3
under the Exchange Act or applicable provisions of or rules under the Code.
Notwithstanding the foregoing, the Committee may amend the Plan to comply with
or take advantage of the rules or regulations (or interpretations thereof)
promulgated under Section 16 of the Exchange Act or under the Code, subject to
the shareholder approval requirement described above.
SECTION 11. COMPLIANCE WITH LAWS AND REGULATIONS
11.1 Applicability of Laws. The Company shall not be required to issue or
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deliver any certificates for Shares prior to the completion of any registration
or qualification of such Shares under any federal, state or foreign law or any
ruling or regulation of any government body that the Committee shall, in its
sole discretion, determine to be necessary or advisable.
11.2 Compliance with Securities Laws. The Plan, the grant and exercise of
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Options thereunder, and the obligation of the Company to sell, issue or deliver
Shares under such Options, shall be subject to all applicable federal, state and
foreign laws, rules and regulations and to such approvals by any governmental or
regulatory agency as may be applicable. The exercisability of any Option and the
sale of any Share hereunder is conditioned upon the registration of the Shares
to be offered and sold with the SEC. In no event shall any Shares be offered or
sold hereunder prior to the effective date of registration with the SEC.
SECTION 12. NO RIGHT TO COMPANY EMPLOYMENT
Neither the Plan nor the terms of any Option shall be construed to give any
Eligible Person the right to be retained in the employ of the Company or any
subsidiary or affiliate. The Company and its subsidiaries and affiliates each
retain the unqualified right to terminate the employment of any Eligible Person
at any time. Any Option Agreement may contain such provisions as the Committee
may approve with reference to the effect of approved leaves of absence.
SECTION 13. LIABILITY OF THE COMPANY
The Company and any affiliate of the Company that is in existence or
hereafter comes into existence shall not be liable to a Participant, an Eligible
Person or other persons as to the following:
13.1 The Non-Issuance of Shares. The non-issuance or sale of Shares as to
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which the Company has been unable to obtain from any regulatory body having
jurisdiction
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the authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder; and
13.2 Tax Consequences. Any tax consequence expected, but not realized, by
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any Eligible Person, Participant or other person due to the receipt, exercise or
settlement of any Option granted hereunder.
SECTION 14. EFFECTIVENESS AND EXPIRATION OF PLAN
The Plan shall be effective as of the date designated by the Board, and
shall continue (unless earlier terminated by the Board) until its expiration as
set forth below; provided that the Plan shall be submitted for the approval of
each class of capital stock eligible to vote on matters submitted to a vote of
the Company's shareholders as soon as reasonably practicable; and provided,
further, that any Options granted prior to such shareholder approval shall be
considered subject to such approval. Unless previously terminated, the authority
to grant Options under the Plan shall expire ten (10) years after the effective
date of the Plan, but such expiration shall not affect any Option previously
made or granted that is then outstanding.
SECTION 15. NON-EXCLUSIVITY OF THE PLAN
The adoption of the Plan by the Board shall not be construed as creating
any limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
SECTION 16. GOVERNING LAW
This Plan and any agreements hereunder shall be interpreted and construed
in accordance with the internal laws of the State of Delaware and applicable
federal law. The Committee may provide that any dispute as to any Option shall
be presented and determined in such forum as the Committee may specify,
including through binding arbitration. Any reference in the Plan or in an Option
Agreement to a provision of law or to a rule or regulation shall be deemed to
include any successor law, rule or regulation of similar effect or
applicability.
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