Document:

exv10w3

 

Exhibit 10.3

AMENDED & RESTATED EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is effective as of February 28, 2006 (the
“Effective Date”), and is entered into by and between Peter Holmberg (“Holmberg”) and Ashworth,
Inc., a Delaware corporation (the “Company”).

     1. Employment. As of the Effective Date, the Company hereby employs Holmberg to serve
in the capacity of Executive Vice President of Merchandising, Design and Production, (“EVP-MD&P”).
The Company’s Board of Directors (the “Board”) and/or the Company’s Chief Executive Officer (the
“CEO”) may provide such additional designations of title to Holmberg as the Board and/or CEO, in
its discretion, may deem appropriate.

     Holmberg agrees to perform the executive duties and functions customarily associated with the
offices of EVP-MD&P and as specified from time to time by the Board and/or the CEO. Except for
legal holidays, vacations and absences due to temporary illness, Holmberg shall devote his time,
attention and energies to the business of the Company on a full-time basis. Holmberg represents
and warrants to the Company that he is under no restriction, limitation or other prohibition to
perform his duties as described herein.

     2. Employment Compensation And Benefits.

     a. Base Salary. Holmberg’s initial base salary shall be at the annual rate of
three hundred thousand dollars ($225,000). This salary level shall be reviewed at least
annually by the Board’s Compensation Committee on the basis of Holmberg’s performance and
the Company’s financial success and progress.

     b. Annual Bonus and Stock Options. Holmberg will be entitled to receive an
option for a minimum of 20,000 shares fiscal year 2005 granted on the date the agreement is
signed and vesting on the first anniversary of the date of grant. Holmberg will also be
eligible to earn an annual bonus up to a maximum of 50% of Base Salary based on the Company
achieving certain financial targets. The annual bonus will be paid following the close of
final accounting records for the previous fiscal year.

     c. Automobile Allowance. The Company shall pay Holmberg an automobile expense
allowance of one thousand dollars ($1,000) per month to defray the cost of business
automobile expense.

     d. Vacation. Holmberg shall be entitled to annual vacations in a manner
commensurate with his status as a key executive and in accordance with the Company’s
vacation policies in effect during the term of this Agreement.

     e. Expense Reimbursement. The Company shall reimburse Holmberg for all
reasonable amounts actually expended by Holmberg in the course of performing his duties for
the Company and in accordance with any Company-established guidelines where Holmberg tenders
receipts or other documentation reasonably substantiating the amounts as required by the
Company.

 

 

     f. Other Benefits. Except as otherwise provided in this Agreement, Holmberg
shall be entitled to receive all of the rights, benefits and privileges of an executive
officer of the Company under any retirement, pension, profit-sharing, group medical
insurance, group dental insurance, group-term life insurance, and disability insurance, and
other employee benefit plans which may be now in effect or hereafter adopted.

     3. Non-compete. Holmberg agrees that during the term of this Agreement Holmberg will
not, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation, or control of any business which
manufactures or sells golf-inspired sportswear which is substantially the same as that of the
Company and which is distributed in the same channels of distribution as the then current channels
of distribution of the Company, provided, however, that if Holmberg’s employment is terminated for
reasons which provide for severance compensation, the non-compete term shall be extended to the
period for which he receives such severance compensation.

     4. Termination.

     a. At Will. The Company shall employ Holmberg at will, and either Holmberg or
the Company may terminate Holmberg’s employment with the Company at any time and for any
reason, with or without cause.

     b. Severance Payment and Benefits. If Holmberg’s employment is terminated
within two (2) years of the effective date of this Agreement as a result of a Qualifying
Termination, as defined below, and if Holmberg delivers a fully executed release and waiver
of all claims against the Company in the form attached hereto as Exhibit A, then, upon
expiration of any applicable revocation period contained in the Release Agreement, the
Company shall pay or provide Holmberg the following severance payment and benefits:

     i. Holmberg shall receive the equivalent of twelve (12) months of his then-current
base salary (the “Severance Payment”), which shall be payable in equal monthly
installments beginning on the first day of the first full month following Holmberg’s
Qualifying Termination and continuing on the first day of each month thereafter until
fully paid. The Severance Payment is in lieu of any severance payment benefits which
otherwise may at that time be available under the Company’s applicable policies;
provided, however, that nothing in this Agreement is intended to modify
or supercede the Agreement re: Change In Control entered into between Holmberg and the
Company as of September 16, 2005, and Holmberg shall be entitled to receive whatever
additional severance pay benefits, if any, for which he may qualify according to the
terms of his Agreement re: Change In Control with the Company.

     ii. For the twelve-month period following the Qualifying Termination of his
employment, Holmberg shall be entitled to continue to participate in the following
executive benefit programs which had been made available to him (including his family)
before the Qualifying Termination: group medical insurance, group dental insurance,
group-term life insurance, and disability insurance. The programs shall be continued in
the same way and at the same level as immediately prior to the Qualifying Termination.
Holmberg’s participation in each of such executive benefit programs shall be earlier
terminated or reduced, as applicable, if and to the extent

 

 

Holmberg receives benefits as a result of concurrent coverage through another
program.

     iii. Holmberg’s unvested stock options, as described in Paragraph 2(b) of this
Agreement, shall immediately become fully vested and exercisable. This provision only
applies to stock options Holmberg has been granted pursuant to this Agreement, and does
not apply to options provided from any other source or Ashworth.

     c. Qualifying Termination. Holmberg’s termination shall be considered a
“Qualifying Termination” unless:

     i. Holmberg voluntarily terminates his employment with the Company and its
affiliated companies. Holmberg, however, shall not be considered to have
voluntarily terminated his employment with the Company and its affiliated companies if
he elects to terminate his employment because his overall compensation plan is reduced
or adversely modified in any material respect or his authority or duties are materially
changed. For such purposes, Holmberg’s authority or duties shall be considered to have
been “materially changed” if, without Holmberg’s express and voluntary written consent,
there is any substantial diminution or adverse modification in his title, status,
overall position, or responsibilities.

     ii. The termination is on account of Holmberg’s death or Disability. For such
purposes, “Disability” shall mean a physical or mental incapacity as a result of which
Holmberg becomes unable to continue the performance of his responsibilities for the
Company and its affiliated companies for a period of three (3) months.

     iii. Holmberg is involuntarily terminated for “Cause.” For this purpose, “Cause”
shall mean:

     1. Holmberg’s willful and deliberate refusal to comply with a lawful,
instruction of the CEO or Board of Directors, which refusal is not remedied by
Holmberg within a reasonable period of time after his receipt of written notice from
the Company identifying the refusal, so long as the instruction is consistent with
the scope and responsibilities of Holmberg’s position;

     2. Holmberg’s act or acts of personal dishonesty;

     3. Holmberg’s conviction of a felony;

     4. Holmberg’s violation of the Company’s policies and/or code of conduct;

     5. Holmberg’s violation of any confidentiality or non-competition agreement
with the Company or any Affiliate of the Company; or

     6. The willful engaging by Holmberg in misconduct which is injurious to the
Company.

     d. Return of Materials. In the event of any termination of Holmberg’s
employment for any reason whatsoever, Holmberg shall promptly deliver to the Company all
Company property, including, but not limited to, documents, data, and other information
pertaining to Confidential Information, as defined below. Holmberg shall not take with

 

 

him any documents or other information, or any reproduction, summary or excerpt
thereof, electronic or otherwise, containing or pertaining to any Confidential Information.

     5. Nondisclosure of Confidential Information. Holmberg acknowledges that during the
term of his employment with the Company, he will have access to and become acquainted with
information of a confidential, proprietary or secret nature which is or may be either applicable
to, or related in any way to, the present or future business of the Company, the research and
development or investigation of the Company, or the business of any customer of the Company
(“Confidential Information”). For example, Confidential Information includes, but is not limited
to, devices, secret inventions, processes and compilations of information, records, specifications,
designs, plans, proposals, software, codes, marketing and sales programs, financial projections,
cost summaries, pricing formula, and all concepts or ideas, materials or information related to the
business, products or sales of the Company and its customers and vendors. Holmberg shall not
disclose any of Confidential Information, directly or indirectly, or use them in any way, either
during the term of this Agreement or at any time thereafter, except as required in the course of
employment with the Company. Holmberg also agrees to comply with the Company’s policies and
regulations, as established from time to time for the protection of its Confidential Information,
including, for example, executing the Company’s standard confidentiality agreements. This section
shall survive termination of this Agreement.

     6. Non-Solicitation. Holmberg agrees that so long as he is employed by the Company
and for a period of two (2) years after termination of his employment for any reason, he shall not
(a) directly or indirectly solicit, induce or attempt to solicit or induce any Company employee to
discontinue his or her employment with the Company; (b) usurp any opportunity of the Company of
which Holmberg became aware during his tenure at the Company or which is made available to him on
the basis of the belief that Holmberg is still employed by the Company; or (c) directly or
indirectly solicit or induce or attempt to influence any person or business that is an account,
customer or client of the Company to restrict or cancel the business of any such account, customer
or client with the Company. This section shall survive termination of this Agreement.

     7. Section 409A Compliance.

     a. Notwithstanding any provision of this Agreement to the contrary, if, at the time of
Executive’s termination of employment with the Company, he is a “specified employee” as
defined in Section 409A of the Internal Revenue Code (the “Code”), and one or more of the
payments or benefits received or to be received by Executive pursuant to this Agreement
would constitute deferred compensation subject to Section 409A, no such payment or benefit
will be provided under this Agreement until the earliest of (A) the date which is six (6)
months after his “separation from service” for any reason, other than death or “disability”
(as such terms are used in Section 409A(a)(2) of the Code), (B) the date of his death or
“disability” (as such term is used in Section 409A(a)(2)(C) of the Code) or (C) the
effective date of a “change in the ownership or effective control” of the Company (as such
term is used in Section 409A(a)(2)(A)(v) of the Code) (the “Deferred Payment”). The
provisions of this Section 7 shall only apply to the extent required to avoid Executive’s
incurrence of any penalty tax or interest under Section 409A of the Code or any regulations
or Treasury guidance promulgated thereunder. In addition, if any provision of this
Agreement would cause Executive to incur any penalty tax or interest under Section 409A of
the Code or any regulations or Treasury guidance promulgated thereunder, the Company shall
reform such provision to maintain to the maximum extent practicable the original intent of
the applicable provision without violating the provisions of Section 409A of the Code.

 

 

     b. In the event the six-month delay described in this Section 7 applies, the Company
shall make an irrevocable contribution in the amount of the Deferred Payment to a rabbi
trust which shall take the form of the model rabbi trust described in Internal Revenue
Service Revenue Procedure 92-64, which amount (along with any net income received by the
trust) shall be paid by the trust to the Executive on the six-month anniversary of his
termination of employment, and the trust shall terminate at such time. The trustee shall be
chosen by the Company in its reasonable discretion. The Company shall pay the reasonable
expenses of establishing and maintaining the trust.

     8. Successors.

     a. This Agreement is personal to Holmberg, and without the prior written consent of the
Company shall not be assignable by Holmberg other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by Holmberg’s
legal representatives.

     b. The rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the Company.

     9. Governing Law. This Agreement is made and entered into in the State of California,
and the internal laws of California shall govern its validity and interpretation in the performance
by the parties hereto of their respective duties and obligations hereunder.

     10. Modifications. This Agreement may be amended or modified only by an instrument in
writing executed by all of the parties hereto.

     11. Entire Agreement. Except as otherwise set forth herein, this Agreement, together
with the exhibits attached hereto, supersedes any and all prior written or oral agreements between
Holmberg and the Company, and contains the entire understanding of the parties hereto with respect
to the terms and conditions of Holmberg’s employment with the Company; provided,
however, that this Agreement is not intended to supercede the Agreement re: Change In
Control between Holmberg and the Company, which they entered into as of September 16, 2005, or any
agreements which Holmberg may previously have entered into regarding the protection of trade
secrets and confidential information.

     12. Dispute Resolution. Holmberg and the Company will utilize a system of binding
arbitration to resolve all disputes that may arise out of the employment context. Both the Company
and Holmberg agree that any claim, dispute, and/or controversy that either Holmberg may have
against the Company (or its owners, directors, officers, managers, employees, agents, and parties
affiliated with its employee benefit and health plans) or the Company may have against Holmberg,
arising from, related to, or having any relationship or connection whatsoever with Holmberg’s
seeking employment with, employment by, or other association with the Company, shall be submitted
to and determined exclusively by binding arbitration under the Federal Arbitration Act, in
conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec 1280 et
seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to
discovery). Included within the scope of this Agreement are all disputes, whether based on tort,
contract, statute (including, but not limited to, any claims or discrimination and harassment,
whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil
Rights Act of 1964, as amended, or any other state or federal law or regulation), equitable law, or
otherwise. However, nothing herein shall prevent Executive from filing and pursuing proceedings
before the California Department of Fair Employment and Housing, or the United States Equal
Employment Opportunity Commission (although if

 

 

Holmberg chooses to pursue a claim following the exhaustion of such administrative remedies,
that claim would be subject to the provisions of this Agreement). In addition to any other
requirements imposed by law, the arbitrator selected shall be a retired California Superior Court
Judge and shall be subject to disqualification on the same grounds as would apply to a judge of
such court. To the extent applicable in civil actions in California courts, the following shall
apply and be observed: all rules of pleading (including the right of demurrer), all rules of
evidence, and all rights to resolution of the dispute by means of motions for summary judgment,
judgment on the pleadings, and judgment under Code of Civil Procedure Section 631.8. Resolution of
the dispute shall be based solely upon the law governing the claims and defenses pleaded, and the
arbitrator may not invoke any basis (including but not limited to, notions of “just cause”) other
than such controlling law. The arbitrator shall have the immunity of a judicial officer from civil
liability when acting in the capacity of an arbitrator, which immunity supplements any other
existing immunity. Likewise, all communications during or in connection with the arbitration
proceedings are privileged in accordance with Cal. Civil Code Section 47(b). As reasonably
required to allow full use and benefit of this agreement’s modification to the Act’s procedures,
the arbitrator shall extend the times set by the Act for the giving of notices and setting of
hearings. Awards shall include the arbitrator’s written reasoned opinion. Notwithstanding the
foregoing, the parties acknowledge and agree that this provision shall not preclude either party
from requesting temporary and/or preliminary injunctive relief to enforce Paragraphs 3, 5 or 6 of
this Agreement until such time as an arbitrator can assume jurisdiction and render a decision over
any such claims or requests.

     13. Notices. Any notice or communications required or permitted to be given to the
parties hereto shall be delivered personally or be sent by United States registered or certified
mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or at
such other addresses the party addressed may have substituted by notice pursuant to this Section:

	 	 	 	 	 
	 

	 	Ashworth, Inc.
	 	Peter Holmberg
	 

	 	2765 Loker Avenue West
	 	2339 42nd Ave.
	 

	 	Carlsbad, California 92010
	 	Seattle, WA 98112
	 

	 	Attn: President	 	 

     14. Captions. The captions of this Agreement are inserted for convenience and do not
constitute a part hereof.

     15. Severability. In Holmberg any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein and there shall be deemed substituted for such invalid, illegal or
unenforceable provision such other provision as will most nearly accomplish the intent of the
parties to the extent permitted by the applicable law. In Holmberg this Agreement, or any one or
more of the provisions hereof, shall be held to be invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this Agreement or any such provision thereof
shall not as a consequence thereof be deemed to be invalid, illegal or unenforceable in any other
governmental jurisdiction or subdivision thereof.

     16. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute one in the same
Agreement.

 

 

[Remainder of page left blank intentionally, signatures on following page]

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered effective as of the day and year first written above in Carlsbad, California.

	 	 	 	 	 
	 	ASHWORTH, INC.

 	 
	 	By:  	/s/
Randall L. Herrel, Sr.
 	 
	 	 	Randall L. Herrel, Sr. 	 
	 	Title:  	Chairman, President and CEO 	 
	 
	 	PETER HOLMBERG

 	 
	 	By:  	/s/
Peter Holmberg
 	 
	 	 	Peter Holmberg 	 
	 	 	 	 
	 

 

 

EXHIBIT A — RELEASE AGREEMENT

     I, Peter Holmberg, hereby enter into this Release Agreement (this “Agreement”), pursuant to
Paragraph 4(b) of my Amended & Restated Employment Agreement with Ashworth, Inc., a Delaware
corporation (the “Company”), in consideration for which the Company shall make the Severance
Payment as described in my Amended & Restated Employment Agreement entered into effective as of February 28, 2006 (the “Employment Agreement).

     1. The date of my Qualifying Termination is
                                        
, and I have received a final
paycheck for all wages due, including all accrued vacation, through that date. Other than the
Severance Payment as described in my Employment Agreement and whatever additional severance pay
benefits, if any, for which I may qualify according to the terms of my Agreement re: Change in
Control with the Company, the foregoing payments are the only amounts which I am entitled to
receive from the Company, and I hereby waive all other payments or claims for payments.

     2. As consideration for the Severance Payment as described in my Employment Agreement, I
hereby release the Company, its successors, affiliates, directors, employees and agents from any
and all claims or lawsuits (including but not limited to any and all claims or demands relating to
salary, wages, bonuses, commissions, stock, stock options, vacation pay, fringe benefits, expense
reimbursements, any and all tort claims, contract claims (express or implied), wrongful termination
claims, public policy claims, whistleblower claims, implied covenant of good faith and fair dealing
claims, retaliation claims, personal injury claims, emotional distress claims, invasion of privacy
claims, defamation claims, fraud claims, attorneys’ fees claims, all claims arising under any
federal, state or other governmental statue, law, regulation or ordinance including, but not
limited to, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act, the Family and Medical Leave Act, the California Fair Employment & Housing Act, the California
Labor Code, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Older Workers’ Benefit
Protection Act (“OWBPA”)) which I may have based either on my employment, my termination, or any
other event occurring prior to the date of this Agreement. This Release is intended to settle any
and all claims that I may have against the Company. Accordingly, I waive any and all rights
conferred under Section 1542 of the California Civil Code, which provides: “A general release does
not extend to claims which the creditor does not know or suspect to exist in his favor at the time
of executing the release which if known by him must have materially affected his settlement with
the debtor.”

     3. I acknowledge and understand my continuing obligation (a) to maintain the confidentiality
of the Company’s trade secrets, confidential and proprietary information and (b) not to solicit the
Company’s customers or employees, as set forth in Paragraphs 3, 5 and 6 of my Employment Agreement.
I also warrant and represent that I have returned all Company materials as required in Paragraph
4(d) of my Employment Agreement.

     4. I acknowledge that I fully understand my right to discuss this Agreement with an attorney,
and I have carefully read and fully understand this entire Agreement, and I am entering into this
Agreement voluntarily.

     5. I understand that I shall have twenty-one (21) days from the date of receipt of this
Agreement to consider this Agreement, I shall have seven (7) days following the signing of this
Agreement to revoke it in writing, and this Agreement shall not be effective or enforceable until
this revocation period has expired.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	PETER HOLMBERG
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	ASHWORTH, INC.
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:exv10w4

 

Exhibit 10.4

AMENDED & RESTATED AGREEMENT RE: CHANGE IN CONTROL

     This AGREEMENT RE: CHANGE IN CONTROL (this “Agreement”) is dated as of February 28, 2006 and
is entered into by and between Peter Holmberg (“Executive”) and Ashworth, Inc., a Delaware
corporation (the “Company”).

Background

     The Company believes that because of its position in the industry, financial resources and
historical operating results there is a possibility that the Company may become the subject of a
Change in Control (as defined below), either now or at some time in the future.

     The Company believes that it is in the best interest of the Company and its stockholders to
foster Executive’s objectivity in making decisions with respect to any pending or threatened Change
in Control of the Company and to assure that the Company will have the continued dedication and
availability of Executive, notwithstanding the possibility, threat or occurrence of a Change in
Control. The Company believes that these goals can best be accomplished by alleviating certain of
the risks and uncertainties with regard to Executive’s financial and professional security that
would be created by a pending or threatened Change in Control and that inevitably would distract
Executive and could impair his ability to objectively perform his duties for and on behalf of the
Company. Accordingly, the Company believes that it is appropriate and in the best interest of the
Company and its stockholders to provide to Executive compensation arrangements upon a Change in
Control that lessen Executive’s financial risks and uncertainties and that are reasonably
competitive with those of other corporations.

     With these and other considerations in mind, the Compensation Committee of the Company has
authorized the Company to enter into this Agreement with the Executive to provide the protections
set forth herein for Executive’s financial security following a Change in Control.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration the receipt of which is hereby acknowledged, it is hereby agreed as follows:

Agreement

     1. Term of Agreement. This Agreement shall be effective from the date first written
above and, subject to the provisions of Section 4, shall extend to (and thereupon automatically
terminate) one (1) day after Executive’s termination of employment with the Company for any reason.
No termination of this Agreement shall limit, alter or otherwise affect Executive’s rights
hereunder with respect to a Change in Control which has occurred prior to such termination,
including without limitation Executive’s right to receive the various benefits hereunder.

     2. Purpose of Agreement. The purpose of this Agreement is to provide that, in the
event of a “Change in Control,” Executive may become entitled to receive certain additional
benefits, as described herein, in the event of his termination under specified circumstances.

     3. Change in Control. As used in this Agreement, the phrase “Change in Control” shall
mean:

 

 

          (i) Except as provided by subparagraph (iii) hereof, the acquisition (other than from the
Company) by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (excluding, for this purpose,
the Company or its subsidiaries, or any executive benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%) or
more of either the then 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; or

          (ii) Individuals who, as of the date hereof, constitute the Board of Directors of the Company
(as of the date hereof the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors of the Company, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the Company’s
stockholders, is or was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened election contest relating to the election
of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or

          (iii) Approval by the stockholders of the Company of a reorganization, merger or consolidation
with any other person, entity or corporation, other than

          (1) a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of another entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the Company or such
other entity outstanding immediately after such merger or consolidation, or

          (2) a merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires forty percent (40%) or more of the
combined voting power of the Company’s then outstanding voting securities; or

          (iv) Approval by the stockholders of the Company of a plan of complete liquidation of the
Company or an agreement for the sale or other disposition by the Company of all or substantially
all of the Company’s assets.

     4. Effect of a Change in Control. In the event of a Change in Control, Sections 6
through 11 of this Agreement shall become applicable to Executive. These Sections shall continue to
remain applicable until the third anniversary of the date upon which the Change in Control occurs.
On such third anniversary date, and provided that the employment of Executive has not been
terminated on account of a Qualifying Termination (as defined in Section 5 below), this Agreement
shall terminate and be of no further force or effect.

     5. Qualifying Termination. If within one (1) year following, or within ninety (90)
days prior to, a Change in Control Executive’s employment with the Company and its affiliated
companies is terminated, such termination shall be conclusively considered a “Qualifying
Termination” unless:

 

 

     (a) Executive voluntarily terminates his employment with the Company and its affiliated
companies. Executive, however, shall not be considered to have voluntarily
terminated his employment with the Company and its affiliated companies if he elects to
terminate his employment because his overall compensation plan is reduced or adversely
modified in any material respect or his authority or duties are materially changed. For
such purposes, Executive’s authority or duties shall be considered to have been “materially
changed” if, without Executive’s express and voluntary written consent, there is any
substantial diminution or adverse modification in his title, status, overall position, or
responsibilities.

     (b) The termination is on account of Executive’s death or Disability. For such
purposes, “Disability” shall mean a physical or mental incapacity as a result of which
Executive becomes unable to continue the performance of his responsibilities for the Company
and its affiliated companies for a period of three (3) months.

     (c) Executive is involuntarily terminated for “Cause.” For this purpose, “Cause” shall
mean:

     1. Executive’s willful and deliberate refusal to comply with a lawful,
instruction of the CEO or Board of Directors, which refusal is not remedied by
Executive within a reasonable period of time after his receipt of written notice
from the Company identifying the refusal, so long as the instruction is consistent
with the scope and responsibilities of Executive’s position;

     2. Executive’s act or acts of personal dishonesty;

     3. Executive’s conviction of a felony;

     4. Executive’s violation of the Company’s policies and/or code of conduct;

     5. Executive’s violation of any confidentiality or non-competition agreement
with the Company or any Affiliate of the Company; or

     6. The willful engaging by Executive in misconduct which is injurious to the
Company.

     6. Severance Payment. If Executive’s employment is terminated as a result of a
Qualifying Termination, the Company shall pay Executive within thirty (30) days after the
Qualifying Termination a cash lump sum equal to one (1) times Executive’s annual base salary (the
“Severance Payment”).

     (a) For purposes of this Agreement, Executive’s “base salary” shall equal the
Executive’s highest annual salary rate with the Company within the three year period ending
on the date of Executive’s Qualifying Termination.

     (b) The Severance Payment hereunder is in lieu of any severance payment that Executive
might otherwise be entitled to from the Company in the event of a Change in Control under
the Company’s applicable severance pay policies, if any, or under any other oral or written
agreement; provided, however, that Executive shall continue to be entitled
to receive the severance pay benefits under the Company’s applicable policies, if any, or
under another written agreement if and to the extent Executive’s termination is
not a Qualifying Termination after, or within ninety (90) days prior to, a Change in
Control.

 

 

     7. Indemnification for Excise Tax. In the event that Executive becomes entitled to
receive a Severance Payment in accordance with the provisions of Section 6 above, and such
Severance Payment and any other benefits or payments (including transfers of property) that
Executive receives, or is to receive, pursuant to this Agreement or any other agreement, plan or
arrangement with the Company in connection with a Change in Control of the Company (“Other
Benefits”) shall be subject to the tax imposed pursuant to Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”)(or any successor thereto) or any comparable provision of
state law (an “Excise Tax”), the following rules shall apply:

     (a) The Company shall pay to Executive, within thirty (30) days after the Executive’s
Qualifying Termination, an additional amount (the “Gross-Up Payment”) such that the net
amount retained by Executive, after deduction of any Excise Tax with respect to the
Severance Payment or the Other Benefits and any federal, state and local income tax, FICA
tax, and Excise Tax upon such Gross-Up Payment, is equal to the amount that would have been
retained by Executive if such Excise Tax were not applicable. It is intended that Executive
shall not suffer any loss or expense resulting from the assessment of any Excise Tax or the
Company’s reimbursement of Executive for payment of any such Excise Tax.

     (b) For purposes of determining whether any of the Severance Payments or Other Benefits
will be subject to an Excise Tax and the amount of such Excise Tax, (i) any other payments
or benefits received or to be received by Executive in connection with a Change in Control
of the Company or Executive’s termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any person
whose actions result in a Change in Control or any person affiliated with the Company or
such person) shall be treated as “parachute payments” within the meaning of Section
280G(b)(2) of the Code (or any successor thereto), and all “excess parachute payments”
within the meaning of Section 280G(b)(l) of the Code (or any successor thereto) shall be
treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the
Company’s independent auditors and acceptable to Executive such other payments or benefits
(in whole or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code (or any successor thereto),
(ii) the amount of the Severance Payments and Other Benefits which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the
Severance Payments or Other Benefits or (B) the amount of excess parachute payments within
the meaning of Sections 280G(b)(l) and (4) of the Code (or any successor or successors
thereto), after applying clause (i), above, and (iii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company’s independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or any successor
or successors thereto).

     (c) For purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality of Executive’s
residence on the date of the Executive’s Qualifying
Termination, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.

 

 

     (d) In the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of the Executive’s Qualifying Termination,
the Executive shall repay to the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code (or any successor thereto) (the “Applicable Rate”). In the event
that the Excise Tax is determined to exceed the amount taken into account hereunder at the
time of such Qualifying Termination (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus interest, determined at
the Applicable Rate, payable with respect to such excess) at the time that the amount of
such excess is finally determined.

8. Section 409A Compliance.

     (a) Notwithstanding any provision of this Agreement to the contrary, if, at the time of
Executive’s termination of employment with the Company, he is a “specified employee” as
defined in Section 409A of the Internal Revenue Code (the “Code”), and one or more of the
payments or benefits received or to be received by Executive pursuant to this Agreement
would constitute deferred compensation subject to Section 409A, no such payment or benefit
will be provided under this Agreement until the earliest of (A) the date which is six (6)
months after his “separation from service” for any reason, other than death or “disability”
(as such terms are used in Section 409A(a)(2) of the Code), (B) the date of his death or
“disability” (as such term is used in Section 409A(a)(2)(C) of the Code) or (C) the
effective date of a “change in the ownership or effective control” of the Company (as such
term is used in Section 409A(a)(2)(A)(v) of the Code) (the “Deferred Payment”). The
provisions of this Section 8 shall only apply to the extent required to avoid Executive’s
incurrence of any penalty tax or interest under Section 409A of the Code or any regulations
or Treasury guidance promulgated thereunder. In addition, if any provision of this
Agreement would cause Executive to incur any penalty tax or interest under Section 409A of
the Code or any regulations or Treasury guidance promulgated thereunder, the Company shall
reform such provision to maintain to the maximum extent practicable the original intent of
the applicable provision without violating the provisions of Section 409A of the Code.

     (b) In the event the six-month delay described in this Section 8 applies, the Company
shall make an irrevocable contribution in the amount of the Deferred Payment to a rabbi
trust which shall take the form of the model rabbi trust described in Internal Revenue
Service Revenue Procedure 92-64, which amount (along with any net income received by the
trust) shall be paid by the trust to the Executive on the six-month anniversary of his
termination of employment, and the trust shall terminate at such time. The trustee shall be
chosen by the Company in its reasonable discretion. The Company shall pay the reasonable
expenses of establishing and maintaining the trust.

     9. Rights and Obligations Prior to a Change in Control. Prior to the date which is
ninety (90) days before a Change in Control, the rights and obligations of Executive with respect
to his employment by the Company shall be determined in accordance with the policies and procedures
adopted from time to time by the Company and the provisions of any written
employment contract in effect between the Company and Executive from time to time. This
Agreement deals only with certain rights and obligations of Executive subsequent, or within ninety
(90) days prior to, a Change in Control, and the existence of this Agreement shall not be

 

 

treated
as raising any inference with respect to what rights and obligations exist prior to the date which
is ninety (90) days before a Change in Control. Unless otherwise expressly set forth in a separate
written employment agreement between Executive and the Company, the employment of Executive is
expressly at-will, and Executive or the Company may terminate Executive’s employment with the
Company at any time and for any reason, with or without cause, provided that if such termination
occurs within ninety (90) days prior to or one (1) year after a Change in Control and constitutes a
Qualifying Termination (as defined in Section 5 above) the provisions of this Agreement shall
govern the payment of the Severance Payment and certain other benefits as provided herein.

     10. Non-Exclusivity of Rights. Subject to Section 6(b) hereof, nothing in this
Agreement shall prevent or limit Executive’s continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its affiliated
companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive may have under any stock option or other agreements with the Company or
any of its affiliated companies. Except as otherwise provided in Section 6(b) hereof, amounts
which are vested benefits or which Executive is otherwise entitled to receive under any plan or
program of the Company or any of its affiliated companies at or subsequent to the date of any
Qualified Termination shall be payable in accordance with such plan or program.

     11. Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counter-claim, recoupment, defense or other claim, right or action which the Company may
have against Executive or others. In no event shall Executive be obligated to seek other
employment or to take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of
Executive’s successful collection efforts to receive amounts payable hereunder, or as a result of
any contest (regardless of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by Executive about the amount of any
payment pursuant to this Section).

     12. Successors.

     (a) This Agreement is personal to Executive, and without the prior written consent of
the Company shall not be assignable by Executive other than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of and be enforceable by
Executive’s legal representatives.

     (b) The rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the Company.

     13. Governing Law. This Agreement is made and entered into in the State of
California, and the internal laws of California shall govern its validity and interpretation in the
performance by the parties hereto of their respective duties and obligations hereunder.

     14. Modifications. This Agreement may be amended or modified only by an instrument in
writing executed by all of the parties hereto.

     15. Dispute Resolution: Executive and the Company will utilize a system of binding
arbitration to resolve all disputes that may arise out of the employment context. Both the

 

 

Company
and Executive agree that any claim, dispute, and/or controversy that either Executive may have
against the Company (or its owners, directors, officers, managers, employees, agents, and parties
affiliated with its employee benefit and health plans) or the Company may have against Executive,
arising from, related to, or having any relationship or connection whatsoever with Executive’s
seeking employment with, employment by, or other association with the Company, shall be submitted
to and determined exclusively by binding arbitration under the Federal Arbitration Act, in
conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec 1280 et
seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to
discovery). Included within the scope of this Agreement are all disputes, whether based on tort,
contract, statute (including, but not limited to, any claims or discrimination and harassment,
whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil
Rights Act of 1964, as amended, or any other state or federal law or regulation), equitable law, or
otherwise. However, nothing herein shall prevent Executive from filing and pursuing proceedings
before the California Department of Fair Employment and Housing, or the United States Equal
Employment Opportunity Commission (although if Executive chooses to pursue a claim following the
exhaustion of such administrative remedies, that claim would be subject to the provisions of this
Agreement). In addition to any other requirements imposed by law, the arbitrator selected shall be
a retired California Superior Court Judge and shall be subject to disqualification on the same
grounds as would apply to a judge of such court. To the extent applicable in civil actions in
California courts, the following shall apply and be observed: all rules of pleading (including the
right of demurrer), all rules of evidence, and all rights to resolution of the dispute by means of
motions for summary judgment, judgment on the pleadings, and judgment under Code of Civil Procedure
Section 631.8. Resolution of the dispute shall be based solely upon the law governing the claims
and defenses pleaded, and the arbitrator may not invoke any basis (including but not limited to,
notions of “just cause”) other than such controlling law. The arbitrator shall have the immunity
of a judicial officer from civil liability when acting in the capacity of an arbitrator, which
immunity supplements any other existing immunity. Likewise, all communications during or in
connection with the arbitration proceedings are privileged in accordance with Cal. Civil Code
Section 47(b). As reasonably required to allow full use and benefit of this agreement’s
modification to the Act’s procedures, the arbitrator shall extend the times set by the Act for the
giving of notices and setting of hearings. Awards shall include the arbitrator’s written reasoned
opinion.

     16. Notices. Any notice or communications required or permitted to be given to the
parties hereto shall be delivered personally or be sent by United States registered or certified
mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or at
such other addresses the party addressed may have substituted by notice pursuant to this Section:

	 	 	 	 	 
	 

	 	Ashworth, Inc.
	 	Peter Holmberg
	 

	 	2765 Loker Avenue West
	 	2339 42nd Ave.
	 

	 	Carlsbad, California 92010
	 	Seattle, WA 98112
	 

	 	Attn: President	 	 

     17. Captions. The captions of this Agreement are inserted for convenience and do not
constitute a part hereof.

     18. Severability. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein and there shall be deemed substituted for such

 

 

invalid,
illegal or unenforceable provision such other provision as will most nearly accomplish the intent
of the parties to the extent permitted by the applicable law. In case this Agreement, or any one
or more of the provisions hereof, shall be held to be invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this Agreement or any such provision thereof
shall not as a consequence thereof be deemed to be invalid, illegal or unenforceable in any other
governmental jurisdiction or subdivision thereof.

     19. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute one in the same
Agreement.

[Remainder of page left blank intentionally, signatures on following page]

 

 

     IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first written above in Carlsbad, California.

	 	 	 	 	 	 	 
	 	 	ASHWORTH, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Randall L. Herrel, Sr.
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Randall L. Herrel, Sr.	 	 
	 
	 	 	 	 	 	 
	 

	 	
	 	     Title: Chairman, President and CEO
	 	 
	 
	 	 	 	 	 	 
	 	 	PETER HOLMBERG	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Peter Holmberg	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Peter Holmberg

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