EXHIBIT 10.3
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EXECUTIVE OFFICER EMPLOYMENT AGREEMENT
This Executive Officer Employment Agreement ("Agreement") is entered into
as of January 1, 2000, by and between Callaway Golf Company, a Delaware
corporation (the "Company"), and Xxxxxxx X. Yash ("Mr. Yash").
1. TERM.
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(a) The Company hereby employs Mr. Yash and Mr. Yash hereby accepts
employment pursuant to the terms and provisions of this Agreement for the period
commencing January 1, 2000 and terminating December 31, 2002 (the "Initial
Term"), unless this Agreement is earlier terminated as hereinafter provided.
(b) On January 1, 2002, and on each January 1 thereafter (the
"Extension Dates"), the expiration date of this Agreement shall be automatically
extended one year, through December 31 of the following year, so long as (a)
this Agreement is otherwise still in full force and effect, (b) Mr. Yash is
still employed by the Company pursuant to this Agreement, (c) Mr. Yash is not
otherwise in breach of this Agreement, and (d) neither the Company nor Mr. Yash
has given notice as provided in Section 1(c) of this Agreement.
(c) At any time prior to an Extension Date, either Mr. Yash or the
Company may give written notice to the other ("Notice") that the automatic
extension of the expiration date of this Agreement pursuant to Section 1(b)
shall end with the next extension, which shall be the final such automatic
extension of the expiration date of this Agreement. Thus, if either Mr. Yash or
the Company gives Notice on or before January 1, 2002, and all other conditions
for automatic extension of the expiration date of this Agreement pursuant to
Section 1(b) exist, then on January 1, 2002 the expiration date of this
Agreement shall be extended pursuant to Section 1(b) from December 31, 2002 to
December 31, 2003, with this Agreement expiring on that date (if not earlier
terminated pursuant to its terms) without any further automatic extensions.
(d) Upon expiration of this Agreement, Mr. Yash's status shall be one
of at will employment.
2. SERVICES.
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(a) Mr. Yash shall serve as President of Callaway Golf Company and
President and Chief Executive Officer of Callaway Golf Ball Company. Upon the
retirement of Xxx Xxxxxxxx as Chief Executive Officer of Callaway Golf Company,
which is expected to occur on or before January 1, 2001, Mr. Yash shall become
Chief Executive Officer of Callaway Golf Company. Mr. Yash's duties shall be
the usual and customary duties of the offices in which he serves. Mr. Yash
shall report to Xx. Xxxxxxxx until the time of Xx. Xxxxxxxx'x retirement;
thereafter, Mr. Yash shall report to the Board of Directors of Callaway Golf
Company.
(b) Mr. Yash shall be required to comply with all policies and
procedures of the Company, as such shall be adopted, modified or otherwise
established by the Company from time to time.
3. SERVICES TO BE EXCLUSIVE. During the term hereof, Mr. Yash agrees
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to devote his full productive time and best efforts to the performance of Mr.
Yash's duties hereunder pursuant to the supervision and direction of the
Company's Board of Directors and, as applicable, its Chief Executive Officer.
Mr. Yash further agrees, as a condition to the performance by the Company of
each and all of its obligations hereunder, that so long as Mr. Yash is employed
by the Company or otherwise receiving compensation or other consideration from
the Company, Mr. Yash will not directly or indirectly render services of any
nature to, otherwise become employed by, or otherwise participate or engage in
any other business without the Company's prior written consent. Mr. Yash
further agrees to execute such secrecy, non-disclosure, patent, trademark,
copyright and other proprietary rights agreements, if any, as the Company may
from time to time reasonably require. Nothing herein contained shall be deemed
to preclude Mr. Yash from having outside personal investments and involvement
with appropriate community activities, and from devoting a reasonable amount of
time to such matters, provided that this shall in no manner interfere with or
derogate from Mr. Yash's work for the Company.
4. COMPENSATION.
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(a) The Company agrees to pay Mr. Yash a base salary at the rate of
$700,000.00 per year. On the date Mr. Yash assumes the additional duties of
Chief Executive Officer of Callaway Golf Company, his base salary will increase
to a rate of $800,000.00 per year.
(b) The Company shall provide Mr. Yash an opportunity to earn an
annual bonus based upon participation in the Company's officer bonus plan, as it
may or may not exist from time to time. Mr. Yash acknowledges that currently
all bonuses are discretionary, that the current officer bonus plan does not
include any nondiscretionary bonus plan, and that the Company does not currently
contemplate establishing any nondiscretionary bonus plan applicable to Mr. Yash.
5. EXPENSES AND BENEFITS.
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(a) Reasonable and Necessary Expenses. In addition to the
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compensation provided for in Section 4 hereof, the Company shall reimburse Mr.
Yash for all reasonable, customary, and necessary expenses incurred in the
performance of Mr. Yash's duties hereunder. Mr. Yash shall first account for
such expenses by submitting a signed statement itemizing such expenses prepared
in accordance with the policy set by the Company for reimbursement of such
expenses. The amount, nature, and extent of such expenses shall always be
subject to the control, supervision, and direction of the Company.
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(b) Vacation. Mr. Yash shall receive five (5) weeks paid vacation for
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each twelve (12) month period of employment with the Company. The vacation may
be taken any time during the year subject to prior approval by the Company, such
approval not to be unreasonably withheld. Any unused vacation will be carried
forward from year to year. The maximum vacation time Mr. Yash may accrue shall
be three times Mr. Yash's annual vacation benefit. The Company reserves the
right to pay Mr. Yash for unused, accrued vacation benefits in lieu of providing
time off.
(c) Benefits. During Mr. Yash's employment with the Company pursuant
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to this Agreement, the Company shall provide for Mr. Yash to:
(i) participate in the Company's health insurance and disability
insurance plans as the same may be modified from time to time;
(ii) receive, if Mr. Yash is insurable under usual underwriting
standards, term life insurance coverage on Mr. Yash's life, payable to whomever
Mr. Yash directs, in the face amount of $2,000,000.00, provided that Mr. Yash's
physical condition does not prevent Mr. Yash from qualifying for such insurance
coverage under reasonable terms and conditions;
(iii) participate in the Company's 401(k) pension plan pursuant to
the terms of the plan, as the same may be modified from time to time;
(iv) participate in the Company's Executive Deferred Compensation
Plan, as the same may be modified from time to time; and
(v) participate in any other benefit plans the Company provides
from time to time to senior executive officers. It is understood that benefit
plans within the meaning of this subsection do not include compensation or bonus
plans.
(d) Estate Planning and Other Perquisites. To the extent the Company
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provides tax and estate planning and related services, or any other perquisites
and personal benefits to other senior executive officers generally from time to
time, such services and perquisites shall be made available to Mr. Yash on the
same terms and conditions.
(e) Club Membership. The Company shall pay the reasonable cost of
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initiation associated with Mr. Yash gaining privileges at a mutually agreed upon
country club. Mr. Yash shall be responsible for all other expenses and costs
associated with such club use, including monthly member dues and charges. The
club membership itself shall belong to and be the property of the Company, not
Mr. Yash.
(f) Stock Options. Pursuant to separate written stock option
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agreements and subject to the approval of the Stock Option Committee (Employee
Plans) of the Board of Directors of the Company, beginning in January 2001, and
continuing in January of each year thereafter that this Agreement is in effect,
Mr. Yash shall be granted options to purchase at least
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200,000 shares of the Common Stock of the Company. The options shall vest as
stated in the respective stock option agreements, provided Mr. Yash is then
currently employed by the Company and not in breach of this Agreement. The
option price per share shall be the NYSE closing price of Callaway Golf Common
Stock on the date of the respective grants. The options will contain such
reasonable restrictions as determined by the Stock Option Committee (Employee
Plans), including without limitation, cancellation of options or forfeiture of
gain upon exercise if Mr. Yash discloses the Company's confidential information
or competes with the business of the Company.
6. TAX INDEMNIFICATION. Mr. Yash shall be indemnified by the Company
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for certain excise tax obligations, as more specifically set forth in Exhibit A
to this Agreement.
7. NONCOMPETITION.
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(a) Other Business. To the fullest extent permitted by law, Mr. Yash
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agrees that, while employed by the Company or otherwise receiving compensation
or other consideration from the Company (including any severance pursuant to
Section 8 of this Agreement), Mr. Yash will not, directly or indirectly (whether
as agent, consultant, holder of a beneficial interest, creditor, or in any other
capacity), engage in any business or venture which engages directly or
indirectly in competition with the business of the Company or any of its
affiliates, or have any interest in any person, firm, corporation, or venture
which engages directly or indirectly in competition with the business of the
Company or any of its affiliates. For purposes of this section, the ownership
of interests in a broadly based mutual fund shall not constitute ownership of
the stocks held by the fund.
(b) Other Employees. Except as may be required in the performance of
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his duties hereunder, Mr. Yash shall not cause or induce, or attempt to cause or
induce, any person now or hereafter employed by the Company or any of its
affiliates to terminate such employment while employed by the Company and for a
period of one (1) year thereafter.
(c) Suppliers. While employed by the Company, and for one (1) year
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thereafter, Mr. Yash shall not cause or induce, or attempt to cause or induce,
any person or firm supplying goods, services or credit to the Company or any of
its affiliates to diminish or cease furnishing such goods, services or credit.
(d) Conflict of Interest. While employed by the Company, Mr. Yash
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shall not engage in any conduct or enterprise that shall constitute an actual or
apparent conflict of interest with respect to Mr. Yash's duties and obligations
to the Company.
(e) Non-Interference. While employed by the Company, and for one (1)
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year thereafter, Mr. Yash shall not in any way undertake to harm, injure or
disparage the Company, its officers, directors, employees, agents, affiliates,
vendors, products, or customers, or their successors, or in any other way
exhibit an attitude of hostility toward them. Mr. Yash understands that it is
the policy of the Company that the Chief Executive Officer, the
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Vice President of Press, Public and Media Relations and their specific designees
may speak to the press or media about the Company or its business.
8. TERMINATION.
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(a) Termination at the Company's Convenience. Mr. Yash's employment
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under this Agreement may be terminated by the Company at its convenience at any
time. In the event of a termination by the Company for its convenience, Mr.
Yash shall be entitled to receive (i) any compensation accrued and unpaid as of
the date of termination; and (ii) the immediate vesting of all unvested stock
options held by Mr. Yash as of the date of such termination. In addition to the
foregoing, and subject to the provisions of Section 20, Mr. Yash shall be
entitled to Special Severance equal to (i) severance payments equal to Mr.
Yash's then current base salary at the same rate and on the same schedule as in
effect at the time of termination for a period of time equal to the greater of
the remainder of the Initial Term of this Agreement or eighteen (18) months from
the date of termination; (ii) the payment of premiums owed for COBRA insurance
benefits for a period of time equal to eighteen (18) months from the date of
termination for Mr. Yash and his qualified family members; (iii) the benefits
specified in Section 5(d) (Estate Planning and Other Perquisites) for a period
of time equal to eighteen (18) months from the date of termination; and (iv) no
other severance.
(b) Termination by the Company for Substantial Cause. Mr. Yash's
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employment under this Agreement may be terminated immediately by the Company for
substantial cause at any time. In the event of a termination by the Company for
substantial cause, Mr. Yash shall be entitled to receive (i) any compensation
accrued and unpaid as of the date of termination; and (ii) no other severance.
"Substantial cause" shall mean for purposes of this subsection failure by Mr.
Yash to substantially perform his duties, material breach of this Agreement, or
misconduct, including but not limited to, dishonesty, theft, use or possession
of illegal drugs during work and/or felony criminal conduct.
(c) Termination by Mr. Yash for Substantial Cause. Mr. Yash's
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employment under this Agreement may be terminated immediately by Mr. Yash for
substantial cause at any time. In the event of a termination by Mr. Yash for
substantial cause, Mr. Yash shall be entitled to receive (i) any compensation
accrued and unpaid as of the date of termination; and (ii) the immediate vesting
of all unvested stock options held by Mr. Yash as of the date of such
termination. In addition to the foregoing, and subject to the provisions of
Section 20, Mr. Yash shall be entitled to Special Severance equal to (i)
severance payments equal to Mr. Yash's former base salary at the same rate and
on the same schedule as in effect at the time of termination for a period of
time equal to the greater of the remainder of the Initial Term of this Agreement
or eighteen (18) months from the date of termination; (ii) the payment of
premiums owed for COBRA insurance benefits for a period of time equal to
eighteen (18) months from the date of termination for Mr. Yash and his qualified
family members; (iii) the benefits specified in Section 5(d) (Estate Planning
and Other Perquisites) for a period of time equal to eighteen (18) months from
the date of termination; and (iv) no other severance. "Substantial cause" shall
mean for purposes of this subsection a material breach of this Agreement.
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(d) Termination Due to Permanent Disability. Subject to all
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applicable laws, Mr. Yash's employment under this Agreement may be terminated
immediately by the Company in the event Mr. Yash becomes permanently disabled.
Permanent disability shall be defined as Mr. Yash's failure to perform or being
unable to perform all or substantially all of Mr. Yash's duties under this
Agreement for a continuous period of more than six (6) months on account of any
physical or mental disability, either as mutually agreed to by the parties or as
reflected in the opinions of three qualified physicians, one of which has been
selected by the Company, one of which has been selected by Mr. Yash, and one of
which has been selected by the two other physicians jointly. In the event of a
termination by the Company due to Mr. Yash's permanent disability, Mr. Yash
shall be entitled to (i) any compensation accrued and unpaid as of the date of
termination; (ii) severance payments equal to Mr. Yash's former base salary at
the same rate and on the same schedule as in effect at the time of termination
for a period of time equal to twelve (12) months from the date of termination;
(iii) the immediate vesting of outstanding but unvested stock options held by
Mr. Yash as of such termination date in a prorated amount based upon the number
of days in the option vesting period that elapsed prior to Mr. Yash's
termination; (iv) the payment of premiums owed for COBRA insurance benefits for
a period of time equal to twelve (12) months from the date of termination for
Mr. Yash and his qualified family members; and (v) no other severance. The
Company shall be entitled to take, as an offset against any amounts due pursuant
to subsections (i) and (ii) above, any amounts received by Mr. Yash pursuant to
disability or other insurance, or similar sources, provided by the Company.
(e) Termination Due to Death. Mr. Yash's employment under this
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Agreement shall be terminated immediately by the Company in the event of Mr.
Yash's death. In the event of a termination due to Mr. Yash's death, Mr. Yash's
estate shall be entitled to (i) any compensation accrued and unpaid as of the
date of death; (ii) severance payments equal to Mr. Yash's former base salary at
the same rate and on the same schedule as in effect at the time of death for a
period of time equal to twelve (12) months from the date of death; (iii) the
immediate vesting of outstanding but unvested stock options held by Mr. Yash as
of the date of death in a prorated amount based upon the number of days in the
option vesting period that elapsed prior to Mr. Yash's death; and (iv) no other
severance.
(f) Any severance payments shall be subject to usual and customary
employee payroll practices and all applicable withholding requirements. Except
for such severance pay and other amounts specifically provided pursuant to this
Section 8, Mr. Yash shall not be entitled to any further compensation, bonus,
damages, restitution, relocation benefits, or other severance benefits upon
termination of employment. The amounts payable to Mr. Yash pursuant to this
Section 8 shall not be treated as damages, but as severance compensation to
which Mr. Yash is entitled by reason of termination of employment under the
applicable circumstances. The Company shall not be entitled to set off against
the amounts payable to Mr. Yash hereunder any amounts earned by Mr. Yash in
other employment after termination of his employment with the Company pursuant
to this Agreement, or any amounts which might have been earned by Mr. Yash in
other employment had Mr. Yash sought such other employment. The provisions of
this Section 8 shall not limit Mr. Yash's rights under or
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pursuant to any other agreement or understanding with the Company regarding any
pension, profit sharing, insurance or other employee benefit plan of the Company
to which Mr. Yash is entitled pursuant to the terms of such plan.
(g) Termination By Mutual Agreement of the Parties. Mr. Yash's
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employment pursuant to this Agreement may be terminated at any time upon the
mutual agreement in writing of the parties. Any such termination of employment
shall have the consequences specified in such agreement.
(h) Pre-Termination Rights. The Company shall have the right, at its
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option, to require Mr. Yash to vacate his office or otherwise remain off the
Company's premises and to cease any and all activities on the Company's behalf
without such action constituting a termination of employment or a breach of this
Agreement.
9. RIGHTS UPON A CHANGE IN CONTROL.
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(a) If a Change in Control (as defined in Exhibit B hereto) occurs
before the termination of Mr. Yash's employment hereunder, then this Agreement
shall be automatically renewed (the "Renewed Employment Agreement") in the same
form and substance as in effect immediately prior to the Change in Control,
except that the Initial Term, as specified pursuant to Section 1 of this
Agreement, shall be three (3) years commencing with the effective date of the
Change in Control, and the Extension Dates shall commence with the second
anniversary of the effective date of the Change in Control.
(b) Notwithstanding anything in this Agreement to the contrary, if
upon or at any time within one (1) year following any Change in Control that
occurs during the term of this Agreement there is a Termination Event (as
defined below), Mr. Yash shall be treated as if he had been terminated for the
convenience of the Company pursuant to Section 8(a), and Mr. Yash shall be
entitled to receive the same compensation and other benefits and entitlements as
are described in Section 8(a), as appropriate, of this Agreement. Furthermore,
the provisions of Section 8 shall continue to apply during the term of the
Renewed Employment Agreement except that, in the event of a conflict between
Section 8 and the rights of Mr. Yash described in this Section 9, the provisions
of this Section 9 shall govern.
(c) A "Termination Event" shall mean the occurrence of any one or more
of the following, and in the absence of Mr. Yash's permanent disability (defined
in Section 8(d)), Mr. Yash's death, and any of the factors enumerated in Section
8(b) providing for termination by the Company for substantial cause:
(i) the termination or material breach of this Agreement by the
Company;
(ii) a failure by the Company to obtain the assumption of this
Agreement by any successor to the Company or any assignee of all or
substantially all of the Company's assets;
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(iii) any material diminishment in the title, position, duties,
responsibilities or status that Mr. Yash had with the Company, as a publicly
traded entity, immediately prior to the Change in Control;
(iv) any reduction, limitation or failure to pay or provide any
of the compensation, reimbursable expenses, stock options, incentive programs,
or other benefits or perquisites provided to Mr. Yash under the terms of this
Agreement or any other agreement or understanding between the Company and Mr.
Yash, or pursuant to the Company's policies and past practices as of the date
immediately prior to the Change in Control; or
(v) any requirement that Mr. Yash relocate or any assignment to
Mr. Yash of duties that would make it unreasonably difficult for Mr. Yash to
maintain the principal residence he had immediately prior to the Change in
Control.
10. SURRENDER OF EQUIPMENT, BOOKS AND RECORDS. Mr. Yash understands and
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agrees that all equipment, books, records, customer lists and documents
connected with the business of the Company and/or its affiliates are the
property of and belong to the Company. Under no circumstances shall Mr. Yash
remove from the Company's facilities any of the Company's and/or its affiliates'
equipment, books, records, documents, lists or any copies of the same without
the Company's permission, nor shall Mr. Yash make any copies of the Company's
and/or its affiliates' books, records, documents or lists for use outside the
Company's office except as specifically authorized by the Company. Mr. Yash
shall return to the Company and/or its affiliates all equipment, books, records,
documents and customer lists belonging to the Company and/or its affiliates upon
termination of Mr. Yash's employment with the Company.
11. GENERAL RELATIONSHIP. Mr. Yash shall be considered an employee
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of the Company within the meaning of all federal, state and local laws and
regulations, including, but not limited to, laws and regulations governing
unemployment insurance, workers' compensation, industrial accident, labor and
taxes.
12. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
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(a) As used in this Agreement, the term "Trade Secrets and
Confidential Information" means information, whether written or oral, not
generally available to the public, regardless of whether it is suitable to be
patented, copyrighted and/or trademarked, which is received from the Company
and/or its affiliates, either directly or indirectly, including but not limited
to (i) concepts, ideas, plans and strategies involved in the Company's and/or
its affiliates' products, (ii) the processes, formulae and techniques disclosed
by the Company and/or its affiliates to Mr. Yash or observed by Mr. Yash, (iii)
the designs, inventions and innovations and related plans, strategies and
applications which Mr. Yash develops during the term of this Agreement in
connection with the work performed by Mr. Yash for the Company and/or its
affiliates; and (iv) third party information which the Company and/or its
affiliates has/have agreed to keep confidential.
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(b) Notwithstanding the provisions of subsection 12(a), the term
"Trade Secrets and Confidential Information" does not include (i) information
which, at the time of disclosure or observation, had been previously published
or otherwise publicly disclosed; (ii) information which is published (or
otherwise publicly disclosed) after disclosure or observation, unless such
publication is a breach of this Agreement or is otherwise a violation of
contractual, legal or fiduciary duties owed to the Company, which violation is
known to Mr. Yash; or (iii) information which, subsequent to disclosure or
observation, is obtained by Mr. Yash from a third person who is lawfully in
possession of such information (which information is not acquired in violation
of any contractual, legal, or fiduciary obligation owed to the Company with
respect to such information, and is known by Mr. Yash) and who is not required
to refrain from disclosing such information to others.
(c) While employed by the Company, Mr. Yash will have access to and
become familiar with various Trade Secrets and Confidential Information. Mr.
Yash acknowledges that the Trade Secrets and Confidential Information are owned
and shall continue to be owned solely by the Company and/or its affiliates. Mr.
Yash agrees that he will not, at any time, whether during or subsequent to Mr.
Yash's employment by the Company and/or its affiliates, use or disclose Trade
Secrets and Confidential Information for any competitive purpose or divulge the
same to any person other than the Company or persons with respect to whom the
Company has given its written consent, unless Mr. Yash is compelled to disclose
it by governmental process. In the event Mr. Yash believes that he is legally
required to disclose any Trade Secrets or Confidential Information, Mr. Yash
shall give reasonable notice to the Company prior to disclosing such information
and shall assist the Company in taking such legally permissible steps as are
reasonable and necessary to protect the Trade Secrets or Confidential
Information, including, but not limited to, execution by the receiving party of
a non-disclosure agreement in a form acceptable to the Company.
(d) The provisions of this Section 12 shall survive the termination or
expiration of this Agreement, and shall be binding upon Mr. Yash in perpetuity.
13. ASSIGNMENT OF RIGHTS.
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(a) As used in this Agreement, "Designs, Inventions and Innovations,"
whether or not they have been patented, trademarked, or copyrighted, include,
but are not limited to designs, inventions, innovations, ideas, improvements,
processes, sources of and uses for materials, apparatus, plans, systems and
computer programs relating to the design, manufacture, use, marketing,
distribution and management of the Company's and/or its affiliates' products.
(b) As a material part of the terms and understandings of this
Agreement, Mr. Yash agrees to assign to the Company all Designs, Inventions and
Innovations developed, conceived and/or reduced to practice by Mr. Yash, alone
or with anyone else, in connection with the work performed by Mr. Yash for the
Company during his employment with the
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Company, regardless of whether they are suitable to be patented, trademarked
and/or copyrighted.
(c) Mr. Yash agrees to disclose in writing to the Board of Directors
and the Chief Legal Officer of the Company any Design, Invention or Innovation
relating to the business of the Company and/or its affiliates, which Mr. Yash
develops, conceives and/or reduces to practice in connection with any work
performed by Mr. Yash for the Company, either alone or with anyone else, while
employed by the Company and/or within twelve (12) months of the termination of
employment. Mr. Yash shall disclose all Designs, Inventions and Innovations to
the Company, even if he does not believe that he is required under this
Agreement, or pursuant to California Labor Code Section 2870, to assign his
interest in such Design, Invention or Innovation to the Company. If the Company
and Mr. Yash disagree as to whether or not a Design, Invention or Innovation is
included within the terms of this Agreement, it will be the responsibility of
Mr. Yash to prove that it is not included.
(d) Pursuant to California Labor Code Section 2870, the obligation to
assign as provided in this Agreement does not apply to any Design, Invention or
Innovation to the extent such obligation would conflict with any state or
federal law. The obligation to assign as provided in this Agreement does not
apply to any Design, Invention or Innovation that Mr. Yash developed entirely on
his own time without using the Company's equipment, supplies, facilities or
Trade Secrets and Confidential Information except those Designs, Inventions or
Innovations that either:
(i) Relate at the time of conception or reduction to practice to
the Company's and/or its affiliates' business, or actual or demonstrably
anticipated research of the Company and/or its affiliates; or
(ii) Result from any work performed by Mr. Yash for the Company
and/or its affiliates.
(e) Mr. Yash agrees that any Design, Invention and/or Innovation which
is required under the provisions of this Agreement to be assigned to the Company
shall be the sole and exclusive property of the Company. Upon the Company 's
request, at no expense to Mr. Yash, Mr. Yash shall execute any and all proper
applications for patents, copyrights and/or trademarks, assignments to the
Company, and all other applicable documents, and will give testimony when and
where requested to perfect the title and/or patents (both within and without the
United States) in all Designs, Inventions and Innovations belonging to the
Company.
(f) The provisions of this Section 13 shall survive the termination or
expiration of this Agreement, and shall be binding upon Mr. Yash in perpetuity.
14. ASSIGNMENT. This Agreement shall be binding upon and shall inure
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to the benefit of the parties hereto and the successors and assigns of the
Company. Mr. Yash shall
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have no right to assign his rights, benefits, duties, obligations or other
interests in this Agreement, it being understood that this Agreement is personal
to Mr. Yash.
15. ATTORNEYS' FEES AND COSTS. If any arbitration or other
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proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute or default in connection with any of its provisions, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees incurred in such action or proceeding as provided in Section
18(f).
16. ENTIRE UNDERSTANDING. This Agreement sets forth the entire
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understanding of the parties hereto with respect to the subject matter hereof,
and no other representations, warranties or agreements whatsoever as to that
subject matter have been made by Mr. Yash or the Company. This Agreement shall
not be modified, amended or terminated except by another instrument in writing
executed by the parties hereto. This Agreement replaces and supersedes any and
all prior understandings or agreements between Mr. Yash and the Company
regarding employment.
17. NOTICES. Any notice, request, demand, or other communication
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required or permitted hereunder, shall be deemed properly given when actually
received or within five (5) days of mailing by certified or registered mail,
postage prepaid, to:
Mr. Yash: Xxxxxxx X. Yash
Xxxx Xxxxxx Xxx 0000
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000
Company: Callaway Golf Company
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxx Xxxxxxxx
Chairman and Chief Executive Officer
or to such other address as Mr. Yash or the Company may from time to time
furnish, in writing, to the other.
18. IRREVOCABLE ARBITRATION OF DISPUTES.
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(a) Mr. Yash 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, or relating to Mr. Yash's
employment, or the termination thereof, 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 the covenant of good faith and
fair dealing, violation of public policy, violation of any statutory,
contractual or common law rights, but excluding workers' compensation,
unemployment matters, or any matter falling
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within the jurisdiction of the state Labor Commissioner. 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. Any court action involving a dispute which is not subject to arbitration
shall be stayed pending arbitration of arbitrable disputes; provided, however,
that the parties shall have the right to seek provisional relief in an ancillary
court action in connection with an arbitrable dispute.
(b) Any demand for arbitration shall be in writing and must be
communicated to the other party within one (1) year after the discovery of the
alleged claim or cause of action by the aggrieved party, or, if later, within
the time period stated in the applicable statute of limitations.
(c) The arbitration shall be conducted pursuant to the procedural
rules stated in the National Rules for Resolution of Employment Disputes of the
American Arbitration Association ("AAA"). The arbitration shall be conducted in
San Diego by a former or retired judge or attorney with at least 10 years
experience in employment-related 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 American Arbitration Association will be selected pursuant to the
American Arbitration Association National Rules for Resolution of Employment
Disputes.
(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 parties understand and agree that 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.
12
(g) The provisions of this Section shall survive the expiration or
termination of the Agreement, and shall be binding upon the parties.
THE PARTIES HAVE READ PARAGRAPH 18 AND IRREVOCABLY AGREE TO ARBITRATE ANY
DISPUTE IDENTIFIED ABOVE.
______ (Mr. Yash) ______ (Company)
19. MISCELLANEOUS.
-------------
(a) Headings. The headings of the several sections and paragraphs
--------
of this Agreement are inserted solely for the convenience of reference and are
not a part of and are not intended to govern, limit or aid in the construction
of any term or provision hereof.
(b) Waiver. Failure of either party at any time to require
------
performance by the other of any provision of this Agreement shall in no way
affect that party's rights thereafter to enforce the same, nor shall the waiver
by either party of any breach of any provision hereof be held to be a waiver of
any succeeding breach of any provision or a waiver of the provision itself.
(c) Applicable Law. This Agreement shall constitute a contract
--------------
under the internal laws of the State of California and shall be governed and
construed in accordance with the laws of said state as to both interpretation
and performance.
(d) Severability. In the event any provision or provisions of this
------------
Agreement is or are held invalid, the remaining provisions of this Agreement
shall not be affected thereby.
(e) Advertising Waiver. Mr. Yash agrees to permit the Company and/or
------------------
its affiliates, and persons or other organizations authorized by the Company
and/or its affiliates, to use, publish and distribute advertising or sales
promotional literature concerning the products of the Company and/or its
affiliates, or the machinery and equipment used in the manufacture thereof, in
which Mr. Yash's name and/or pictures of Mr. Yash taken in the course of his
provision of services to the Company and/or its affiliates, appear. Mr. Yash
hereby waives and releases any claim or right he may otherwise have arising out
of such use, publication or distribution.
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts which, when fully executed by the parties, shall be treated as one
agreement.
20. CONDITIONS ON SPECIAL SEVERANCE. Notwithstanding anything else to the
-------------------------------
contrary, it is expressly understood that any obligation of the Company to pay
Special Severance pursuant to this Agreement shall be subject to:
(a) Mr. Yash's continued compliance with the terms and conditions of
Sections 7(a), 7(b), 7(c), 7(e), 12, 13 and 18;
13
(b) Mr. Yash must not, directly or indirectly (whether as agent,
consultant, holder of a beneficial interest, creditor, or in any other
capacity), engage in any business which engages directly or indirectly in
competition with the businesses of the Company or any of its affiliates, or have
any interest, direct or indirect, in any person, firm, corporation, or venture
which directly or indirectly competes with the businesses of the Company or any
of its affiliates. For purposes of this section, the ownership of interests in
a broadly based mutual fund shall not constitute ownership of the stocks held by
the fund; and
(c) Mr. Yash must not, directly, indirectly, or in any other way,
disparage the Company, its officers or employees, vendors, customers, products
or activities, or otherwise interfere with the Company's press, public and media
relations.
21. SUPERSEDES OLD EXECUTIVE OFFICER EMPLOYMENT AND TAX INDEMNIFICATION
-------------------------------------------------------------------
AGREEMENTS. Mr. Yash and the Company recognize that prior to the effective date
----------
of this Agreement they were parties to a certain Officer Employment Agreement
effective May 10, 1996 (the "Old Officer Employment Agreement") and a certain
Tax Indemnification Agreement (the "Old Tax Agreement"). It is the intent of
the parties that as of the effective date of this Agreement, this Agreement
shall replace and supersede the Old Officer Employment Agreement and the Old Tax
Agreement, that the Old Officer Employment Agreement shall no longer be of any
force or effect except as to Sections 7, 12, 13, 15 and 18 thereof, and that to
the extent there is any conflict between the Old Officer Employment Agreement or
the Old Tax Agreement and this Agreement, this Agreement shall control and all
agreements shall be construed so as to give the maximum force and effect to the
provisions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective the date first written above.
MR. YASH COMPANY
Callaway Golf Company,
a Delaware corporation
/s/ Xxxxxxx X. Yash By: /s/ Xxx Xxxxxxxx
____________________________ ______________________________
Xxxxxxx X. Xxxx Xxx Xxxxxxxx, Chairman and CEO
14
EXHIBIT A
TAX INDEMNIFICATION
Pursuant to Section 6 of Mr. Yash's Employment Agreement ("Section 6"), the
Company agrees to indemnify Mr. Yash with respect to certain excise tax
obligations as follows:
1. Definitions. For purposes of Section 6 and this Exhibit A, the
following terms shall have the meanings specified herein:
(a) "Claim" shall mean any written claim (whether in the form of a tax
assessment, proposed tax deficiency or similar written notification) by the
Internal Revenue Service or any state or local tax authority that, if
successful, would result in any Excise Tax or an Underpayment.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
All references herein to any section, subsection or other provision of the Code
shall be deemed to refer to any successor thereto.
(c) "Excise Tax" shall mean (i) any excise tax imposed by Section 4999
of the Code or any comparable federal, state or local tax, and (ii) any interest
and/or penalties incurred with respect to any tax described in 1(c)(i).
(d) Gross-Up Payment shall mean a cash payment as specified in Section
2.
(e) "Overpayment" and "Underpayment" shall have the meanings specified
in Section 4.
(f) "Payment" shall mean any payment, benefit or distribution
(including, without limitation, cash, the acceleration of the granting, vesting
or exercisability of stock options or other incentive awards, or the accrual or
continuation of any other payments or benefits) granted or paid to or for the
benefit of Mr. Yash by the Company or by any person or persons whose actions
result in a Taxable Event (as defined in this Section), or by any person
affiliated with the Company or such person(s), whether paid or payable pursuant
to the terms of this Agreement or otherwise. Notwithstanding the foregoing, a
Payment shall not include any Gross-Up Payment required under Section 6 and this
Exhibit A.
(g) "Taxable Event" shall mean any change in control or other event
which triggers the imposition of any Excise Tax on any Payment.
2. In the event that any Payment is determined to be subject to any Excise
Tax, then Mr. Yash shall be entitled to receive from the Company a Gross-Up
Payment in an amount such that, after the payment of all income taxes, Excise
Taxes and any other taxes imposed with respect to the Gross-Up Payment (together
with payment of all interest and
15
penalties imposed with respect to any such taxes), Mr. Yash shall retain a net
amount of the Gross-Up Payment equal to the Excise Tax imposed with respect to
the Payments.
3. All determinations required to be made under Section 6 and this Exhibit
A, including, without limitation, whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment, and the assumptions to be
utilized in arriving at such determinations, shall be made by the accounting
firm of Pricewaterhouse Coopers LLP or, if applicable, its successor as the
Company's independent auditor (the "Accounting Firm"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Taxable Event to which a possible Gross-Up Payment is
related, another nationally recognized accounting firm that is mutually
acceptable to the Company and Mr. Yash shall be appointed to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). The Accounting Firm shall provide
detailed supporting calculations to the Company and to Mr. Yash regarding the
amount of Excise Tax (if any) which is payable, and the Gross-Up Payment (if
any) required hereunder, with respect to any Payment or Payments, with such
calculations to be provided at such time as may be requested by the Company but
in no event later than fifteen (15) business days following receipt of a written
notice from Mr. Yash that there has been a Payment that may be subject to an
Excise Tax. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment as determined pursuant to Section 6 and
this Exhibit A shall be paid by the Company to Mr. Yash within five (5) business
days after receipt of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by Mr. Yash, the Accounting Firm
shall furnish Mr. Yash with a written opinion that failure to disclose, report
or pay the Excise Tax on Mr. Yash's federal or other applicable tax returns will
not result in the imposition of a negligence penalty, understatement penalty or
other similar penalty. All determinations by the Accounting Firm shall be
binding upon the Company and Mr. Yash in the absence of clear and indisputable
mathematical error. Following receipt of a Gross-Up Payment as provided herein,
Mr. Yash shall be obligated to properly and timely report his Excise Tax
liability on the applicable tax returns or reports and to pay the full amount of
Excise Tax with funds provided through such Gross-Up Payment. Notwithstanding
the foregoing, if the Company reasonably determines that Mr. Yash will be unable
or otherwise may fail to make such Excise Tax payment, the Company may elect to
pay the Excise Tax to the Internal Revenue Service and/or other applicable tax
authority on behalf of Mr. Yash, in which case the Company shall pay the net
balance of the Gross-Up Payment (after deduction of such Excess Tax payment) to
Mr. Yash.
4. As a result of uncertainty in the application of Section 4999 of the
Code, it is possible that a Gross-Up Payment will not have been made by the
Company that should have been made (an "Underpayment") or that a Gross-Up
Payment is made that should not have been made (an "Overpayment"). In the event
that Mr. Yash is required to make a payment of any Excise Tax, due to an
Underpayment, the Accounting Firm shall determine the amount of Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to Mr. Yash in which case Mr. Yash shall be obligated to make a timely
payment of the full amount of the applicable Excise Tax to the applicable tax
authority, provided, however, the Company may elect to pay the Excise Tax to the
applicable tax authority on
16
behalf of Mr. Yash consistent with the provisions of Section 3, in which case
the Company shall pay the net balance of the Underpayment (after deduction of
such Excise Tax payment) to Mr. Yash. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
repaid by Mr. Yash to the Company within ninety (90) days after written demand
to Mr. Yash by the Company, provided, however, that Mr. Yash shall have no
obligation to repay any amount of the Overpayment that has been paid to, and not
recovered from, a tax authority, provided further, however, in such event the
Company may direct Mr. Yash to prosecute a claim for a refund of such amount
consistent with the principles set forth in Section 5.
5. Mr. Yash shall notify the Company in writing of any Claim. Such notice
(a) shall be given as soon as practicable, but in no event later than fifteen
(15) business days, following Mr. Yash's receipt of written notice of the Claim
from the applicable tax authority, and (b) shall include a compete and accurate
copy of the tax authority's written Claim or otherwise fully inform the Company
of the nature of the Claim and the date on which any payment of the Claim must
be paid, provided that Mr. Yash shall not be required to give notice to the
Company of facts of which the Company is already aware, and provided further
that failure or delay by Mr. Yash to give such notice shall not constitute a
breach of Section 6 or this Exhibit A except to the extent that the Company is
prejudiced thereby. Mr. Yash shall not pay any portion of a Claim prior to the
earlier of (a) the expiration of thirty (30) days following the date on which
Mr. Yash gives the foregoing notice to the Company, (b) the date that any Excise
Tax payment under the Claim is due, or (c) the date the Company notifies Mr.
Yash that it does not intend to contest the Claim. If, prior to expiration of
such period, the Company notifies Mr. Yash in writing that it desires to contest
the Claim, Mr. Yash shall:
(a) give the Company any information reasonably requested by the
Company relating to the Claim;
(b) take such action in connection with contesting the Claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to the Claim by
an attorney selected and compensated by the Company who is reasonably acceptable
to Mr. Yash;
(c) cooperate with the Company in good faith in order to effectively
contest the Claim; and
(d) permit the Company to participate (at its expense) in any and all
proceedings and conferences pertaining to the Claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including, without limitation, additional interest and penalties and
attorneys' fees) incurred in connection with any such contest, and shall
indemnify and hold Mr. Yash harmless, on an after-tax basis, for any Excise Tax
or income tax (including, without limitation, interest and penalties with
respect thereto) and all costs imposed or incurred in connection with such
contests. Without limitation upon the foregoing provisions of this Section 5,
and except as
17
provided below, the Company shall control all proceedings concerning any such
contest and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with tax authorities pertaining
to the Claim. At the written request of the Company, and upon payment to Mr.
Yash of an amount at least equal to the Claim plus any additional amount
necessary to obtain the jurisdiction of the appropriate tribunal and/or court,
Mr. Yash shall pay the same and xxx for a refund or otherwise contest the Claim
in any permissible manner as directed by the Company. Mr. Yash agrees to
prosecute any contest of a Claim to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine, provided, however, that if the Company
requests Mr. Yash to pay the Claim and xxx for a refund, the Company shall
indemnify and hold Mr. Yash harmless, on an after-tax basis, from any Excise Tax
or income tax (including, without limitation, interest and penalties with
respect thereto) and costs imposed or incurred in connection with such contest
or with respect to any imputed income attributable to any advances or payments
by the Company hereunder. Any extension of the statute of limitations relating
to assessment of any Excise Tax for the taxable year of Mr. Yash which is the
subject of a Claim is to be limited solely to the Claim. Furthermore, the
Company's control of a contest as provided hereunder shall be limited to issues
for which a Gross-Up Payment would be payable hereunder, and Mr. Yash shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other tax authority.
6. If Mr. Yash receives a refund from a tax authority of all or any
portion of an Excise Tax paid by or on behalf of Mr. Yash with amounts advanced
by the Company pursuant to Section 6 and this Exhibit A, Mr. Yash shall promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). Mr. Yash shall, if so
directed by the Company, file and otherwise prosecute a claim for refund of any
Excise Tax payment made by or on behalf of Mr. Yash with amounts advanced by the
Company pursuant to Section 6 and this Exhibit A, with any such refund claim to
be effected in accordance with the principles set forth in Section 5. If a
determination is made that Mr. Yash shall not be entitled to any refund and the
Company does not notify Mr. Yash in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then Mr. Yash shall have no further obligation hereunder to contest such denial
or to repay to the Company the amount involved in such unsuccessful refund
claim. The amount of any advances which are made by the Company in connection
with any such refund claim hereunder, to the extent not refunded by the
applicable tax authority to Mr. Yash, shall offset, as appropriate consistent
with the purposes of Section 6 and this Exhibit A, the amount of any Gross-Up
Payment required hereunder to be paid by the Company to Mr. Yash.
18
EXHIBIT B
CHANGE IN CONTROL
A "Change in Control" means the following and shall be deemed to occur if
any of the following events occurs:
1. Any person, entity or group, within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") but excluding
the Company and its affiliates and any employee benefit or stock ownership plan
of the Company or its affiliates and also excluding an underwriter or
underwriting syndicate that has acquired the Company's securities solely in
connection with a public offering thereof (such person, entity or group being
referred to herein as a "Person") becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 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
2. 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, 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
3. 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
(a) 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 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 50% of the
combined voting power of the voting securities of the Company or such other
entity outstanding immediately after such
19
reorganization or merger or consolidation (or series of related transactions
involving such a reorganization or merger or consolidation), or
(b) a reorganization or merger or consolidation effected to implement
a recapitalization or reincorporation of the Company (or similar transaction)
that does not result in a material change in beneficial ownership of the voting
securities of the Company or its successor; or
4. Approval by the shareholders of the Company or an order by a court of
competent jurisdiction of a plan of liquidation of the Company.
20
