Document:

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                                                                    EXHIBIT 10.6
                                                                    ------------

                     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 Ronald A. Drapeau ("Employee").

     1.  TERM.  The Company hereby employs Employee and Employee hereby accepts
         ----
employment pursuant to the terms and provisions of this Agreement for the period
commencing January 1, 2000 and terminating December 31, 2000 unless this
Agreement is earlier terminated as hereinafter provided.  Unless such employment
is earlier terminated, upon the expiration of the term of this Agreement,
Employee's status shall be one of at will employment.

     2.  SERVICES.
         --------

         (a) Employee shall serve as Senior Executive Vice President,
Manufacturing, of the Company. Employee's duties shall be the usual and
customary duties of the offices in which he or she serves. Employee shall report
to such person as the Chief Executive Officer shall designate. The Board of
Directors and/or the Chief Executive Officer of the Company may change
employee's title, position and/or duties at any time.

         (b) Employee 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, Employee agrees to
         ------------------------
devote his or her full productive time and best efforts to the performance of
Employee's duties hereunder pursuant to the supervision and direction of the
Company's Board of Directors and its Chief Executive Officer.  Employee further
agrees, as a condition to the performance by the Company of each and all of its
obligations hereunder, that so long as Employee is employed by the Company or
otherwise receiving compensation or other consideration from the Company,
Employee 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.  Employee 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
Employee 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 Employee's work for the Company.

     4.  COMPENSATION.
         ------------

     (a) The Company agrees to pay Employee a base salary at the rate of
$500,000.00 per year.
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     (b) The Company shall provide Employee an opportunity to earn an annual
bonus based upon participation in the Company's Executive Bonus Plan as it may
or may not exist from time to time.  Employee acknowledges that all bonuses are
discretionary, that the current Executive Bonus Plan does not include any
nondiscretionary bonus plan, and that the Company does not contemplate
establishing any nondiscretionary bonus plan applicable to Employee.

  5. EXPENSES AND BENEFITS.
     ---------------------

     (a) Reasonable and Necessary Expenses.  In addition to the compensation
         ---------------------------------
provided for in Section 4 hereof, the Company shall reimburse Employee for all
reasonable, customary, and necessary expenses incurred in the performance of
Employee's duties hereunder.  Employee 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 and its Chief Executive
Officer.

          (b) Vacation.  Employee shall receive four (4) 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 Employee may accrue shall
be three times Employee's annual vacation benefit.  The Company reserves the
right to pay Employee for unused, accrued vacation benefits in lieu of providing
time off.

          (c) Benefits.  During Employee's employment with the Company pursuant
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this Agreement, the Company shall provide for Employee 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 Employee is insurable under usual underwriting
standards, term life insurance coverage on Employee's life, payable to whomever
the Employee directs, in the face amount of $1,000,000.00, provided that
Employee's physical condition does not prevent Employee 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.

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           (d) Estate Planning and Other Perquisites.  To the extent the Company
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provides 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 Employee on the
same terms and conditions.

           (e) Club Membership.  The Company shall pay the reasonable cost of
               ---------------
initiation associated with Employee gaining privileges at a mutually agreed upon
country club.  Employee 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
Employee.

     6.    TAX INDEMNIFICATION. Employee shall be indemnified by the Company for
           -------------------
certain excise tax obligations, as more specifically set forth in Exhibit A to
this Agreement.

     7.    NONCOMPETITION.
           --------------

           (a) Other Business.  To the fullest extent permitted by law, Employee
               --------------
agrees that, while employed by the Company or otherwise receiving compensation
or other consideration from the Company, Employee 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 or her duties hereunder, Employee 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, nor shall Employee directly or
indirectly employ any person who is now or hereafter employed by the Company or
any of its affiliates for a period of one (1) year from the date Employee ceases
to be employed by the Company.

           (c) Suppliers.  While employed by the Company, and for one (1) year
               ---------
thereafter, Employee 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, Employee
               --------------------
shall not engage in any conduct or enterprise that shall constitute an actual or
apparent conflict of interest with respect to Employee's duties and obligations
to the Company.

           (e) Non-Interference. While employed by the Company, and for one (1)
               ----------------
year thereafter, Employee 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. Employee understands that it is
the policy of the Company that only the Chief Executive Officer, the Vice
President of Press, Public and Media Relations and their specific designees

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may speak to the press or media about the Company or its business, and agrees
not to interfere with the Company's press and public relations by violating this
policy.

     8.  TERMINATION.
         -----------

         (a) Termination at the Company's Convenience. Employee's employment
             ----------------------------------------
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, Employee
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 Employee as of the date of such termination. In addition to the
foregoing, and subject to the provisions of Section 20, Employee shall be
entitled to Special Severance equal to (i) severance payments equal to
Employee'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 twenty-four (24)
months from the date of termination; (ii) the payment of premiums owed for COBRA
insurance benefits for a period of time equal to the maximum time allowable
under COBRA (currently eighteen (18) months), but not to exceed twenty-four (24)
months under any circumstances; and (iii) no other severance.

         (b) Termination by the Company for Substantial Cause.  Employee'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, Employee 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
Employee to substantially perform his or her duties, 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 Employee for Substantial Cause. Employee's
              ---------------------------------------------
employment under this Agreement may be terminated immediately by Employee for
substantial cause at any time. In the event of a termination by Employee for
substantial cause, Employee 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 Employee as of the date of such
termination. In addition to the foregoing, and subject to the provisions of
Section 20, Employee shall be entitled to Special Severance equal to (i)
severance payments equal to Employee'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 twenty-four (24) months from the date of termination; (ii) the
payment of premiums owed for COBRA insurance benefits for a period of time equal
to the maximum time allowable under COBRA (currently eighteen (18) months), but
not to exceed twenty-four (24) months under any circumstances; and (iii) no
other severance. "Substantial cause" shall mean for purposes of this subsection
a material breach of this Agreement by the Company.

          (d)  Termination Due to Permanent Disability. Subject to all
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applicable laws, Employee's employment under this Agreement may be terminated
immediately by the Company in the event Employee becomes permanently disabled.
Permanent disability shall be defined as Employee's failure to perform or being
unable to perform all or substantially all of Employee's duties under this
Agreement for a continuous period of more than six (6) months

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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
Employee, and one of which has been selected by the two other physicians
jointly. In the event of a termination by the Company due to Employee's
permanent disability, Employee shall be entitled to (i) any compensation accrued
and unpaid as of the date of termination; (ii) severance payments equal to
Employee'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 twenty-four (24)
months from the date of termination; (iii) the immediate vesting of outstanding
but unvested stock options held by Employee as of such termination date in a
prorated amount based upon the number of days in the option vesting period that
elapsed prior to Employee's termination; (iv) the payment of premiums owed for
COBRA insurance benefits for a period of time equal to the maximum time
allowable under COBRA (currently eighteen (18) months), but not to exceed
twenty-four (24) months under any circumstances; 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 Employee pursuant to
disability or other insurance, or similar sources, provided by the Company.

     (e) Termination Due to Death.  Employee's employment under this Agreement
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shall be terminated immediately by the Company in the event of Employee's death.
In the event of a termination due to Employee's death, Employee's estate shall
be entitled to (i) any compensation accrued and unpaid as of the date of death;
(ii) severance payments equal to Employee'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 the greater of the remainder of the term of this Agreement or six (6)
months from the date of death; (iii) the immediate vesting of outstanding but
unvested stock options held by Employee 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 Employee'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, Employee 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 Employee pursuant to this Section 8 shall
not be treated as damages, but as severance compensation to which Employee 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 Employee hereunder any amounts earned by Employee in other employment
after termination of his or her employment with the Company pursuant to this
Agreement, or any amounts which might have been earned by Employee in other
employment had Employee sought such other employment.  The provisions of this
Section 8 shall not limit Employee's rights under or 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
Employee is entitled pursuant to the terms of such plan.

     (g) Termination By Mutual Agreement of the Parties.  Employee's employment
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pursuant to this Agreement may be terminated at any time upon the mutual

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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
               ----------------------
option, to require Employee to vacate his or her 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.
         -------------------------------

         (a) If a Change in Control (as defined in Exhibit B hereto) occurs
before the termination of Employee's employment hereunder, then this Agreement
shall be extended (the "Extended Employment Agreement") in the same form and
substance as in effect immediately prior to the Change in Control, except that
the termination date, as specified pursuant to Section 1 of this Agreement,
shall be three (3) years from 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), Employee shall be treated as if he or she had been terminated
for the convenience of the Company pursuant to Section 8(a), and Employee 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 Extended Employment Agreement except that, in the event of a conflict
between Section 8 and the rights of Employee 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 the Employee's permanent disability
(defined in Section 8(d)), Employee'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;

               (iii)  any material diminishment in the title, position, duties,
responsibilities or status that Employee 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 Employee under the terms of this
Agreement or any other agreement or understanding between the Company and
Employee, or pursuant to the Company's policies and past practices as of the
date immediately prior to the Change in Control; or

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           (v) any requirement that Employee relocate or any assignment to
Employee of duties that would make it unreasonably difficult for Employee to
maintain the principal residence he or she had immediately prior to the Change
in Control.

     10.  SURRENDER OF EQUIPMENT, BOOKS AND RECORDS.  Employee understands and
          -----------------------------------------
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 Employee
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 Employee 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.  Employee
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 Employee's employment with the Company.

     11.  GENERAL RELATIONSHIP.  Employee shall be considered an employee 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.
          ------------------------------------------

          (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 Employee or observed by Employee, (iii)
the designs, inventions and innovations and related plans, strategies and
applications which Employee develops during the Term of this Agreement in
connection with the work performed by Employee 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.

          (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 Employee; or (iii) information which, subsequent to disclosure or
observation, is obtained by Employee 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 Employee) and who is not required
to refrain from disclosing such information to others.

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     (c) While employed by the Company, Employee will have access to and become
familiar with various Trade Secrets and Confidential Information.  Employee
acknowledges that the Trade Secrets and Confidential Information are owned and
shall continue to be owned solely by the Company and/or its affiliates.
Employee agrees that Employee will not, at any time, whether during or
subsequent to Employee'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 Employee is compelled
to disclose it by governmental process.  In the event Employee believes that
Employee is legally required to disclose any Trade Secrets or Confidential
Information, Employee 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 Employee in perpetuity.

     13.  ASSIGNMENT OF RIGHTS.
          --------------------

          (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, Employee agrees to assign to the Company all Designs, Inventions and
Innovations developed, conceived and/or reduced to practice by Employee, alone
or with anyone else, in connection with the work performed by Employee for the
Company during Employee's employment with the Company, regardless of whether
they are suitable to be patented, trademarked and/or copyrighted.

          (c) Employee agrees to disclose in writing to the President and CEO of
the Company any Design, Invention or Innovation relating to the business of the
Company and/or its affiliates, which Employee develops, conceives and/or reduces
to practice in connection with any work performed by Employee 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. Employee shall disclose all
Designs, Inventions and Innovations to the Company, even if Employee does not
believe that he or she is required under this Agreement, or pursuant to
California Labor Code Section 2870, to assign his or her interest in such
Design, Invention or Innovation to the Company. If the Company and Employee
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 Employee to
prove that it is not included.

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           (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 Employee developed entirely on
Employee's 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 Employee for the Company
and/or its affiliates.

           (e) Employee 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 Employee, Employee 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 Employee in
perpetuity.

     14.  ASSIGNMENT.  This Agreement shall be binding upon and shall inure to
          ----------
the benefit of the parties hereto and the successors and assigns of the Company.
Employee shall 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 Employee.

     15.  ATTORNEYS' FEES AND COSTS.  If any arbitration or other 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
          --------------------
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 Employee 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 Employee and the Company
regarding employment.

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     17.  NOTICES.  Any notice, request, demand, or other communication 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:

                    Employee:  Ronald A. Drapeau
                               405 Bridoon Terrace
                               Encinitas, California 92024

                    Company:   Callaway Golf Company
                               2285 Rutherford Road
                               Carlsbad, California 92008-8815
                               Attn:  Steven C. McCracken
                               Executive Vice President, Chief Legal Officer

or to such other address as Employee or the Company may from time to time
furnish, in writing, to the other.

     18.  IRREVOCABLE ARBITRATION OF DISPUTES.
          -----------------------------------

          (a) Employee 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 Employee'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 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.

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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.

          (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.

                    ______ (Employee)      ______ (Company)

     19.  MISCELLANEOUS.
          -------------

     (a) Headings.  The headings of the several sections and paragraphs of this
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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
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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.

                                      11
<PAGE>

          (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.  Employee 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 Employee's name and/or pictures of Employee taken in the course of
Employee's provision of services to the Company and/or its affiliates, appear.
Employee hereby waives and releases any claim or right Employee 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) Employee's continued compliance with the terms and conditions of
Sections 7(a), 7(b), 7(c), 7(e), 12, 13 and 18;

          (b) Employee 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) Employee 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.  POSSIBLE TERMINATION OR CONTINUATION OF EMPLOYMENT.  It is recognized
          --------------------------------------------------
that during the term of this Agreement, Employee's employment with the Company
may be terminated by the Company pursuant to Subsection 8(a) for any reason, or
for no reason, and that there are no representations or understandings regarding
future employment, in any capacity, beyond the term of this Agreement.  The
parties recognize that this Agreement contemplates a period in which both
Employee and the Company explore the possibility of an ongoing employment
relationship, with neither obligated to offer, accept or otherwise maintain such
a future relationship.  In light of this uncertainty, and as a special
concession to Employee made in lieu of any and all other claims, demands, causes
of action, or other damages Employee might have against the Company arising out
of this Agreement, the employment relationship created by it, or the termination
of that employment relationship for whatever reason, it is agreed as follows:

                                      12
<PAGE>

          (a) If the Company has not offered to Employee a new employment
agreement in substantially the same form as this Agreement, with the exception
that the new employment agreement shall have a term of not less than three (3)
years, on or before November 15, 2000, Employee may deem this Agreement to have
been terminated by the Company pursuant to Section 8(a).

          (b) If the Company elects not to offer Employee a new employment
agreement as provided in Subsection 21(a) above on or before November 15, 2000,
then Employee must give written notice to the Company of any election to
terminate employment pursuant to Subsections 21(a) and 8(a) on or before
December 1, 2000.  Failure by Employee to deliver such written notice to the
Company on or before December 1, 2000 shall constitute a full and complete
waiver of Employee's rights pursuant to this Section.

          (c) Notwithstanding anything else to the contrary, the parties may
agree in a writing, executed on behalf of both Employee and the Company, to
extend, modify, delete or otherwise change the provisions of this Section.

     22.  SUPERSEDES OLD EXECUTIVE OFFICER EMPLOYMENT AND TAX INDEMNIFICATION
          -------------------------------------------------------------------
AGREEMENTS.  Employee and the Company recognize that prior to the effective date
----------
of this Agreement they were parties to a certain Executive Officer Employment
Agreement effective August 11, 1997, as amended April 1, 1999 (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 entirely, 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.

EMPLOYEE                                   COMPANY

                                           Callaway Golf Company,
                                           a Delaware corporation

/s/ Ronald A. Drapeau                      By: /s/ Ely Callaway
------------------------------                ------------------------------
Ronald A. Drapeau                             Ely Callaway, Chairman and CEO

                                      13
<PAGE>

                                   EXHIBIT A

                              TAX INDEMNIFICATION

     Pursuant to Section 6 of Employee's Employment Agreement ("Section 6"), the
Company agrees to indemnify Employee 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 Employee 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 Employee 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 penalties imposed with respect to any such
taxes), Employee shall retain a net amount of the Gross-Up Payment equal to the
Excise Tax imposed with respect to the Payments.

                                      14
<PAGE>

     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 Employee 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 Employee 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 Employee 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 Employee 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 Employee, the Accounting Firm
shall furnish Employee with a written opinion that failure to disclose, report
or pay the Excise Tax on Employee'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 Employee in the absence of clear and indisputable
mathematical error.  Following receipt of a Gross-Up Payment as provided herein,
Employee 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 the Employee 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 the Employee, in which case the Company
shall pay the net balance of the Gross-Up Payment (after deduction of such
Excess Tax payment) to the Employee.

     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 Employee 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 Employee in which case Employee 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 behalf of Employee 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 Employee.  In the
event that the Accounting Firm determines that an Overpayment has been made, any
such Overpayment shall be repaid by Employee to the Company within ninety (90)
days after written demand to Employee by the Company, provided, however, that
Employee shall have no obligation to repay any amount of the Overpayment that
has been paid

                                      15
<PAGE>

to, and not recovered from, a tax authority, provided further, however, in such
event the Company may direct Employee to prosecute a claim for a refund of such
amount consistent with the principles set forth in Section 5.

     5.  Employee 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 Employee'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 Employee 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 Employee 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.  Employee 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
Employee 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
Employee that it does not intend to contest the Claim.  If, prior to expiration
of such period, the Company notifies Employee in writing that it desires to
contest the Claim, Employee 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 Employee;

          (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 Employee 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 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 Employee 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, Employee shall pay the same and sue for a refund or
otherwise contest the Claim in any permissible manner as directed by the
Company.  Employee 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

                                      16
<PAGE>

if the Company requests Employee to pay the Claim and sue for a refund, the
Company shall indemnify and hold Employee 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
Employee 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
Employee 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 Employee receives a refund from a tax authority of all or any
portion of an Excise Tax paid by or on behalf of Employee with amounts advanced
by the Company pursuant to Section 6 and this Exhibit A, Employee shall promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).  Employee 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 Employee 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 Employee shall not be entitled to any refund and the
Company does not notify Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then Employee 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 Employee, 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 Employee.

                                      17
<PAGE>

                                   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 reorganization or merger or
consolidation (or series of related transactions involving such a reorganization
or merger or consolidation), or

                                      18
<PAGE>

          (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.

                                      19<PAGE>

                                                                    EXHIBIT 10.7
                                                                    ------------
                     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 Steven C. McCracken ("Employee").

     1.  TERM.  The Company hereby employs Employee and Employee hereby accepts
         ----
employment pursuant to the terms and provisions of this Agreement for the period
commencing January 1, 2000 and terminating December 31, 2000 unless this
Agreement is earlier terminated as hereinafter provided.  Unless such employment
is earlier terminated, upon the expiration of the term of this Agreement,
Employee's status shall be one of at will employment.

     2.  SERVICES.
         --------

         (a) Employee shall serve as Executive Vice President, Licensing, Chief
Legal Officer and Secretary, of the Company.  Employee's duties shall be the
usual and customary duties of the offices in which he or she serves.  Employee
shall report to such person as the Chief Executive Officer shall designate.  The
Board of Directors and/or the Chief Executive Officer of the Company may change
employee's title, position and/or duties at any time.

         (b) Employee 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, Employee agrees to
         ------------------------
devote his or her full productive time and best efforts to the performance of
Employee's duties hereunder pursuant to the supervision and direction of the
Company's Board of Directors and its Chief Executive Officer.  Employee further
agrees, as a condition to the performance by the Company of each and all of its
obligations hereunder, that so long as Employee is employed by the Company or
otherwise receiving compensation or other consideration from the Company,
Employee 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.  Employee 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
Employee 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 Employee's work for the Company.

     4.  COMPENSATION.
         ------------

         (a) The Company agrees to pay Employee a base salary at the rate of
$450,000.00 per year.
<PAGE>

     (b) The Company shall provide Employee an opportunity to earn an annual
bonus based upon participation in the Company's Executive Bonus Plan as it may
or may not exist from time to time.  Employee acknowledges that all bonuses are
discretionary, that the current Executive Bonus Plan does not include any
nondiscretionary bonus plan, and that the Company does not contemplate
establishing any nondiscretionary bonus plan applicable to Employee.

     5.  EXPENSES AND BENEFITS.
         ---------------------

         (a) Reasonable and Necessary Expenses.  In addition to the compensation
             ---------------------------------
provided for in Section 4 hereof, the Company shall reimburse Employee for all
reasonable, customary, and necessary expenses incurred in the performance of
Employee's duties hereunder.  Employee 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 and its Chief Executive
Officer.

         (b)  Vacation. Employee shall receive four (4) weeks paid vacation for
              --------
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 Employee may accrue shall
be three times Employee's annual vacation benefit. The Company reserves the
right to pay Employee for unused, accrued vacation benefits in lieu of providing
time off.

         (c)  Benefits. During Employee's employment with the Company pursuant
              --------
to this Agreement, the Company shall provide for Employee 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 Employee is insurable under usual underwriting
standards, term life insurance coverage on Employee's life, payable to whomever
the Employee directs, in the face amount of $1,000,000.00, provided that
Employee's physical condition does not prevent Employee 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.

                                       2
<PAGE>

     (d) Estate Planning and Other Perquisites.  To the extent the Company
         -------------------------------------
provides 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 Employee on the
same terms and conditions.

     (e) Club Membership.  The Company shall pay the reasonable cost of
         ---------------
initiation associated with Employee gaining privileges at a mutually agreed upon
country club.  Employee 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
Employee.

   6.  TAX INDEMNIFICATION.  Employee shall be indemnified by the Company for
       -------------------
certain excise tax obligations, as more specifically set forth in Exhibit A to
this Agreement.

   7.  NONCOMPETITION.
       --------------

       (a) Other Business.  To the fullest extent permitted by law, Employee
           --------------
agrees that, while employed by the Company or otherwise receiving compensation
or other consideration from the Company, Employee 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 his
           ---------------
or her duties hereunder, Employee 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, nor shall Employee directly or
indirectly employ any person who is now or hereafter employed by the Company or
any of its affiliates for a period of one (1) year from the date Employee ceases
to be employed by the Company.

       (c) Suppliers.  While employed by the Company, and for one (1) year
           ---------
thereafter, Employee 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, Employee shall
           --------------------
not engage in any conduct or enterprise that shall constitute an actual or
apparent conflict of interest with respect to Employee's duties and obligations
to the Company.

       (e) Non-Interference. While employed by the Company, and for one (1) year
           ----------------
thereafter, Employee 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. Employee understands that it is the policy of
the Company that only the Chief Executive Officer, the Vice President of Press,
Public and Media Relations and their specific designees

                                       3
<PAGE>

may speak to the press or media about the Company or its business, and agrees
not to interfere with the Company's press and public relations by violating this
policy.

     8.  TERMINATION.
         -----------

         (a) Termination at the Company's Convenience. Employee's employment
             ----------------------------------------
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, Employee
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 Employee as of the date of such termination. In addition to the
foregoing, and subject to the provisions of Section 20, Employee shall be
entitled to Special Severance equal to (i) severance payments equal to
Employee'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 twenty-four (24)
months from the date of termination; (ii) the payment of premiums owed for COBRA
insurance benefits for a period of time equal to the maximum time allowable
under COBRA (currently eighteen (18) months), but not to exceed twenty-four (24)
months under any circumstances; and (iii) no other severance.

         (b) Termination by the Company for Substantial Cause. Employee's
             ------------------------------------------------
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, Employee 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
Employee to substantially perform his or her duties, 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 Employee for Substantial Cause. Employee's
             ---------------------------------------------
employment under this Agreement may be terminated immediately by Employee for
substantial cause at any time. In the event of a termination by Employee for
substantial cause, Employee 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 Employee as of the date of such
termination. In addition to the foregoing, and subject to the provisions of
Section 20, Employee shall be entitled to Special Severance equal to (i)
severance payments equal to Employee'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 twenty-four (24) months from the date of termination; (ii) the
payment of premiums owed for COBRA insurance benefits for a period of time equal
to the maximum time allowable under COBRA (currently eighteen (18) months), but
not to exceed twenty-four (24) months under any circumstances; and (iii) no
other severance. "Substantial cause" shall mean for purposes of this subsection
a material breach of this Agreement by the Company.

         (d) Termination Due to Permanent Disability. Subject to all applicable
             ---------------------------------------
laws, Employee's employment under this Agreement may be terminated immediately
by the Company in the event Employee becomes permanently disabled. Permanent
disability shall be defined as Employee's failure to perform or being unable to
perform all or substantially all of Employee's duties under this Agreement for a
continuous period of more than six (6) months

                                       4
<PAGE>

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
Employee, and one of which has been selected by the two other physicians
jointly. In the event of a termination by the Company due to Employee's
permanent disability, Employee shall be entitled to (i) any compensation accrued
and unpaid as of the date of termination; (ii) severance payments equal to
Employee'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 twenty-four (24)
months from the date of termination; (iii) the immediate vesting of outstanding
but unvested stock options held by Employee as of such termination date in a
prorated amount based upon the number of days in the option vesting period that
elapsed prior to Employee's termination; (iv) the payment of premiums owed for
COBRA insurance benefits for a period of time equal to the maximum time
allowable under COBRA (currently eighteen (18) months), but not to exceed
twenty-four (24) months under any circumstances; 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 Employee pursuant to
disability or other insurance, or similar sources, provided by the Company.

     (e) Termination Due to Death.  Employee's employment under this Agreement
         -------------------------
shall be terminated immediately by the Company in the event of Employee's death.
In the event of a termination due to Employee's death, Employee's estate shall
be entitled to (i) any compensation accrued and unpaid as of the date of death;
(ii) severance payments equal to Employee'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 the greater of the remainder of the term of this Agreement or six (6)
months from the date of death; (iii) the immediate vesting of outstanding but
unvested stock options held by Employee 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 Employee'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, Employee 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 Employee pursuant to this Section 8 shall
not be treated as damages, but as severance compensation to which Employee 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 Employee hereunder any amounts earned by Employee in other employment
after termination of his or her employment with the Company pursuant to this
Agreement, or any amounts which might have been earned by Employee in other
employment had Employee sought such other employment.  The provisions of this
Section 8 shall not limit Employee's rights under or 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
Employee is entitled pursuant to the terms of such plan.

     (g) Termination By Mutual Agreement of the Parties.  Employee's employment
         ----------------------------------------------
pursuant to this Agreement may be terminated at any time upon the mutual

                                       5
<PAGE>

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
           ----------------------
option, to require Employee to vacate his or her 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.
       -------------------------------

       (a) If a Change in Control (as defined in Exhibit B hereto) occurs before
the termination of Employee's employment hereunder, then this Agreement shall be
extended (the "Extended Employment Agreement") in the same form and substance as
in effect immediately prior to the Change in Control, except that the
termination date, as specified pursuant to Section 1 of this Agreement, shall be
three (3) years from 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), Employee shall be treated as if he or she had been terminated
for the convenience of the Company pursuant to Section 8(a), and Employee 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 Extended Employment Agreement except that, in the event of a conflict
between Section 8 and the rights of Employee 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 the Employee's permanent disability
(defined in Section 8(d)), Employee'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;

           (iii)  any material diminishment in the title, position, duties,
responsibilities or status that Employee 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 Employee under the terms of this
Agreement or any other agreement or understanding between the Company and
Employee, or pursuant to the Company's policies and past practices as of the
date immediately prior to the Change in Control; or

                                       6
<PAGE>

          (v) any requirement that Employee relocate or any assignment to
Employee of duties that would make it unreasonably difficult for Employee to
maintain the principal residence he or she had immediately prior to the Change
in Control.

     10.  SURRENDER OF EQUIPMENT, BOOKS AND RECORDS.  Employee understands and
          -----------------------------------------
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 Employee
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 Employee 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.  Employee
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 Employee's employment with the Company.

     11.  GENERAL RELATIONSHIP.  Employee shall be considered an employee 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.
          ------------------------------------------

          (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 Employee or observed by Employee, (iii)
the designs, inventions and innovations and related plans, strategies and
applications which Employee develops during the Term of this Agreement in
connection with the work performed by Employee 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.

          (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 Employee; or (iii) information which, subsequent to disclosure or
observation, is obtained by Employee 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 Employee) and who is not required
to refrain from disclosing such information to others.

                                       7
<PAGE>

          (c) While employed by the Company, Employee will have access to and
become familiar with various Trade Secrets and Confidential Information.
Employee acknowledges that the Trade Secrets and Confidential Information are
owned and shall continue to be owned solely by the Company and/or its
affiliates. Employee agrees that Employee will not, at any time, whether during
or subsequent to Employee'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 Employee is
compelled to disclose it by governmental process. In the event Employee believes
that Employee is legally required to disclose any Trade Secrets or Confidential
Information, Employee 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 Employee in perpetuity.

     13.  ASSIGNMENT OF RIGHTS.
          --------------------

          (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, Employee agrees to assign to the Company all Designs, Inventions and
Innovations developed, conceived and/or reduced to practice by Employee, alone
or with anyone else, in connection with the work performed by Employee for the
Company during Employee's employment with the Company, regardless of whether
they are suitable to be patented, trademarked and/or copyrighted.

          (c) Employee agrees to disclose in writing to the President and CEO of
the Company any Design, Invention or Innovation relating to the business of the
Company and/or its affiliates, which Employee develops, conceives and/or reduces
to practice in connection with any work performed by Employee 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. Employee shall disclose all
Designs, Inventions and Innovations to the Company, even if Employee does not
believe that he or she is required under this Agreement, or pursuant to
California Labor Code Section 2870, to assign his or her interest in such
Design, Invention or Innovation to the Company. If the Company and Employee
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 Employee to
prove that it is not included.

                                       8
<PAGE>

          (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 Employee developed entirely on
Employee's 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 Employee for the Company
and/or its affiliates.

          (e) Employee 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 Employee, Employee 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 Employee in perpetuity.

     14.  ASSIGNMENT.  This Agreement shall be binding upon and shall inure to
          ----------
the benefit of the parties hereto and the successors and assigns of the Company.
Employee shall 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 Employee.

     15.  ATTORNEYS' FEES AND COSTS.  If any arbitration or other 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
          --------------------
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 Employee 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 Employee and the Company
regarding employment.

                                       9
<PAGE>

     17.  NOTICES.  Any notice, request, demand, or other communication 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:

                    Employee:  Steven C. McCracken
                               5186 Chelterham Terrace
                               San Diego, California 92130

                    Company:   Callaway Golf Company
                               2285 Rutherford Road
                               Carlsbad, California 92008-8815
                               Attn:  Ely Callaway
                               Chairman and Chief Executive Officer

or to such other address as Employee or the Company may from time to time
furnish, in writing, to the other.

     18.  IRREVOCABLE ARBITRATION OF DISPUTES.
          -----------------------------------

          (a) Employee 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 Employee'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 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.

                                       10
<PAGE>

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.

          (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.

          ______ (Employee)      ______ (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.

                                       11
<PAGE>

          (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.  Employee 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 Employee's name and/or pictures of Employee taken in the course of
Employee's provision of services to the Company and/or its affiliates, appear.
Employee hereby waives and releases any claim or right Employee 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) Employee's continued compliance with the terms and conditions of
Sections 7(a), 7(b), 7(c), 7(e), 12, 13 and 18;

          (b) Employee 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) Employee 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.  POSSIBLE TERMINATION OR CONTINUATION OF EMPLOYMENT.  It is recognized
          --------------------------------------------------
that during the term of this Agreement, Employee's employment with the Company
may be terminated by the Company pursuant to Subsection 8(a) for any reason, or
for no reason, and that there are no representations or understandings regarding
future employment, in any capacity, beyond the term of this Agreement.  The
parties recognize that this Agreement contemplates a period in which both
Employee and the Company explore the possibility of an ongoing employment
relationship, with neither obligated to offer, accept or otherwise maintain such
a future relationship.  In light of this uncertainty, and as a special
concession to Employee made in lieu of any and all other claims, demands, causes
of action, or other damages Employee might have against the Company arising out
of this Agreement, the employment relationship created by it, or the termination
of that employment relationship for whatever reason, it is agreed as follows:

                                       12
<PAGE>

          (a) If the Company has not offered to Employee a new employment
agreement in substantially the same form as this Agreement, with the exception
that the new employment agreement shall have a term of not less than three (3)
years, on or before November 15, 2000, Employee may deem this Agreement to have
been terminated by the Company pursuant to Section 8(a).

          (b) If the Company elects not to offer Employee a new employment
agreement as provided in Subsection 21(a) above on or before November 15, 2000,
then Employee must give written notice to the Company of any election to
terminate employment pursuant to Subsections 21(a) and 8(a) on or before
December 1, 2000.  Failure by Employee to deliver such written notice to the
Company on or before December 1, 2000 shall constitute a full and complete
waiver of Employee's rights pursuant to this Section.

          (c) Notwithstanding anything else to the contrary, the parties may
agree in a writing, executed on behalf of both Employee and the Company, to
extend, modify, delete or otherwise change the provisions of this Section.

     22.  SUPERSEDES OLD EXECUTIVE OFFICER EMPLOYMENT AND TAX INDEMNIFICATION
          -------------------------------------------------------------------
AGREEMENTS.  Employee and the Company recognize that prior to the effective date
----------
of this Agreement they were parties to a certain Executive Officer Employment
Agreement effective January 1, 1997, as amended April 1, 1999 (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 entirely, 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.

EMPLOYEE                            COMPANY

                                    Callaway Golf Company,
                                    a Delaware corporation

/s/ Steven C. McCracken          By: /s/ Ely Callaway
____________________________        ______________________________
Steven C. McCracken                 Ely Callaway, Chairman and CEO

                                       13
<PAGE>

                                   EXHIBIT A

                              TAX INDEMNIFICATION

     Pursuant to Section 6 of Employee's Employment Agreement ("Section 6"), the
Company agrees to indemnify Employee 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 Employee 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 Employee 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 penalties imposed with respect to any such
taxes), Employee shall retain a net amount of the Gross-Up Payment equal to the
Excise Tax imposed with respect to the Payments.

                                       14
<PAGE>

     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 Employee 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 Employee 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 Employee 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 Employee 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 Employee, the Accounting Firm
shall furnish Employee with a written opinion that failure to disclose, report
or pay the Excise Tax on Employee'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 Employee in the absence of clear and indisputable
mathematical error.  Following receipt of a Gross-Up Payment as provided herein,
Employee 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 the Employee 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 the Employee, in which case the Company
shall pay the net balance of the Gross-Up Payment (after deduction of such
Excess Tax payment) to the Employee.

     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 Employee 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 Employee in which case Employee 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 behalf of Employee 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 Employee.  In the
event that the Accounting Firm determines that an Overpayment has been made, any
such Overpayment shall be repaid by Employee to the Company within ninety (90)
days after written demand to Employee by the Company, provided, however, that
Employee shall have no obligation to repay any amount of the Overpayment that
has been paid

                                       15
<PAGE>

to, and not recovered from, a tax authority, provided further, however, in such
event the Company may direct Employee to prosecute a claim for a refund of such
amount consistent with the principles set forth in Section 5.

     5.  Employee 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 Employee'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 Employee 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 Employee 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.  Employee 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
Employee 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
Employee that it does not intend to contest the Claim.  If, prior to expiration
of such period, the Company notifies Employee in writing that it desires to
contest the Claim, Employee 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 Employee;

          (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 Employee 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 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 Employee 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, Employee shall pay the same and sue for a refund or
otherwise contest the Claim in any permissible manner as directed by the
Company.  Employee 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

                                       16
<PAGE>

if the Company requests Employee to pay the Claim and sue for a refund, the
Company shall indemnify and hold Employee 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
Employee 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
Employee 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 Employee receives a refund from a tax authority of all or any
portion of an Excise Tax paid by or on behalf of Employee with amounts advanced
by the Company pursuant to Section 6 and this Exhibit A, Employee shall promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).  Employee 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 Employee 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 Employee shall not be entitled to any refund and the
Company does not notify Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then Employee 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 Employee, 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 Employee.

                                       17
<PAGE>

                                   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 reorganization or merger or
consolidation (or series of related transactions involving such a reorganization
or merger or consolidation), or

                                       18
<PAGE>

          (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.

                                       19

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