Document:

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                                                                   EXHIBIT 10.11

                    SEPARATION AGREEMENT AND GENERAL RELEASE

         This Separation Agreement and General Release ("Agreement") is made as
of August 31, 2002, by and between MICHAEL W. MCCORMICK ("Employee") and
CALLAWAY GOLF COMPANY (the "Company"), a Delaware corporation, with respect to
the following:

         A.       Employee has been employed by the Company pursuant to the
First Amended Executive Officer Employment Agreement effective June 1, 2002
("Employment Agreement"). The Company has decided to terminate Employee's
employment, and has so notified Employee.

         B.       The Company and Employee desire to enter into this Agreement
to arrange for a mutually agreeable termination of Employee's employment with
the Company pursuant to the terms of the Employment Agreement, and to provide
for a smooth transition between the effective date of this Agreement and the
date on which Employee's employment actually terminates.

         NOW, THEREFORE, the parties agree as follows:

         1.       Termination of Employment. Pursuant to Section 8(a) of the
Employment Agreement, Employee's employment with the Company shall terminate,
automatically and without further action by any party, on December 31, 2002.
Upon the termination of his employment, Employee shall be entitled to receive
such severance as provided in the Employment Agreement, on the terms and
conditions as provided therein. Subject to the terms and conditions of the
Employment Agreement, these benefits include:

                  (a)      Severance as provided for in Section 8(a) of the
Employment Agreement, which is:

                  (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 termination.

                  (b)      Special Severance as provided in Section 19 of the
Employment Agreement, and subject to the provisions of Section 19, which is:

                  (i)      severance payments equal to one-half of Employee's
                  then current base salary at the same rate and on the same
                  payment schedule as in effect at the time of termination for a
                  period of twelve (12) months from the date of termination
                  (i.e., through December 31, 2003); and

                  (ii)     the payment of premiums owed for COBRA insurance
                  benefits for a period of twelve (12) months from the date of
                  termination (i.e., through December 31, 2003).

                  (c)      Incentive Payments as provided for in Section 20 of
the Employment Agreement, and subject to the provisions of Section 20, which are
equal to one-half of Employee's then current base salary at the same rate and on
the same payment schedule as in

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effect at the time of termination for a period of twelve (12) months from the
date of termination (i.e., through December 31, 2003).

         2.       Transition Period. Employee shall remain employed by the
Company pursuant to the Employment Agreement and this Agreement through December
31, 2002 (the "Transition Period"). During the Transition Period, Employee
agrees to perform such duties as may be reasonably specified by the Chief
Executive Officer, Ron Drapeau. Employee shall be entitled to participate in
employee benefits for which he is eligible during the Transition Period. Except
as specifically requested by Mr. Drapeau or his designee, Employee is directed
pursuant to Section 8(g) of the Employment Agreement to cease any and all
activities on behalf of the Company and its affiliates and remain off the
Company's premises during the Transition Period.

         3.       Additional Severance Pursuant to This Agreement. In
consideration for the release of claims as set forth in Section 5 of this
Agreement, Employee's resignation as an officer and director effective August
31, 2002, as set forth in Section 6 of this Agreement, Employee's specific
acknowledgement of Section 7 of this Agreement, and Employee's performance
pursuant to this Agreement as a whole, Employee and the Company agree to the
following:

                  (a)      Forbearance. The Company shall not otherwise exercise
its rights to terminate Employee's employment pursuant to the terms of the
Employment Agreement prior to December 31, 2002.

                  (b)      Outplacement Service. Subject to Employee's continued
compliance with the terms and provisions of the Employment Agreement and this
Agreement, the Company shall provide Employee with six (6) months of
outplacement service with a firm selected by the Company.

                  (c)      Cellular Phone. The Company agrees to give Employee
the cellular phone currently in his possession. Employee agrees to change the
telephone number of the cellular phone promptly. Employee agrees that the
cellular phone is valued at approximately $250.00.

                  (d)      Golf Clubs. The Company agrees to allow Employee to
keep the golf clubs loaned or otherwise provided to him in his past capacities
as an officer of the Company.

         4.       Stock Options. The parties acknowledge that Employee holds
certain options to purchase the Common Stock of the Company, and that those
options are subject to the conditions and restrictions set forth in their
respective stock option agreements, provided that, upon the approval of the
Stock Option Committee (Employee Plans) of the Board of Directors of the
Company, said stock option agreements for the following options shall be amended
to provide that said options shall expire on May 30, 2004 in lieu of expiring
one year after the termination of Employee's employment.

<TABLE>
<CAPTION>
STOCK OPTION #         NUMBER OF SHARES         PRICE              NEW EXP.
<S>                    <C>                    <C>                  <C>
     2191                   200,000           $ 16.6875            5/30/04
     2602                   100,000           $   13.25            5/30/04
     2674                    50,000           $ 19.6875            5/30/04
     3309                    75,000           $   16.56            5/30/04
</TABLE>

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The termination of Employee's employment shall not change such new expiration
dates. No other extensions or other amendments have been made to any stock
options granted to Employee by the Company.

         5.       Settlement and Release of Claims - General Release.

                  (a)      In consideration for the additional severance set
forth in Section 3 above, Employee hereby irrevocably and unconditionally
releases and forever discharges the Company, its predecessors, successors,
subsidiaries, affiliates and benefit plans, and each and every past, present and
future officer, director, employee, representative and attorney of the Company,
its predecessors, successors, subsidiaries, affiliates and benefit plans, and
their successors and assigns (collectively referred to herein as the
"Releasees"), from any, every, and all charges, complaints, claims, causes of
action, and lawsuits of any kind whatsoever, including, to the extent permitted
under the law, all claims which Employee has against the Releasees, or any of
them, arising from or in any way related to circumstances or events arising out
of Employee's employment by the Company, including, but not limited to,
harassment, discrimination, retaliation, failure to progressively discipline
Employee, termination of employment, violation of state and/or federal wage and
hour laws, violations of any notice requirement, violations of the California
Labor Code (including any law or regulation on timing of vacation payout), or
breach of any employment agreement, together with any and all other claims
Employee now has (as of the date this Agreement is signed by Employee) or may
have against the Releasees through and including the Separation Date. EMPLOYEE
ALSO SPECIFICALLY AGREES AND ACKNOWLEDGES THAT EMPLOYEE IS WAIVING ANY RIGHT TO
RECOVERY AGAINST RELEASEES BASED ON STATE OR FEDERAL SEX, PREGNANCY, RACE,
COLOR, NATIONAL ORIGIN, MARITAL STATUS, RELIGION, VETERAN STATUS, DISABILITY,
SEXUAL ORIENTATION, MEDICAL CONDITION OR OTHER ANTI-DISCRIMINATION LAWS,
INCLUDING, WITHOUT LIMITATION, TITLE VII, THE AMERICANS WITH DISABILITIES ACT,
THE CALIFORNIA FAIR HOUSING AND EMPLOYMENT ACT, THE FAMILY MEDICAL LEAVE ACT,
THE CALIFORNIA FAMILY RIGHTS ACT OR BASED ON THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OR THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT, ALL AS
AMENDED, WHETHER SUCH CLAIM BE BASED UPON AN ACTION FILED BY EMPLOYEE OR A
GOVERNMENTAL AGENCY. Provided, however that this Release shall not operate to
waive any claim for indemnity that Employee may be permitted to assert under
Delaware law or the by-laws of the Company.

                  (b)      Employee also waives all rights under section 1542 of
the Civil Code of the State of California. Section 1542 provides as follows:

                  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.

         6.       Resignation as an Officer and Director; Relinquishment of
Corporate Golf Club Membership.

                  (a)      Effective August 31, 2002, Employee hereby agrees
that he resigns as an officer and/or director of the Company, and any and all
subsidiaries and affiliates of the Company, including the following:

                  Callaway Golf Company
                  Callaway Golf Sales Company

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                  Callaway Golf Shell Company
                  Callaway Golf Company Foundation
                  Callaway Golf Canada Ltd.
                  Callaway Golf Europe Ltd.
                  Callaway Golf South Pacific

Employee hereby authorizes the above entities to take whatever actions may be
necessary and appropriate to implement his resignation, and agrees to cooperate
in the preparation, execution and filing of appropriate paperwork and
documentation.

                  (b)      Employee hereby relinquishes his right to a corporate
golf club membership pursuant to his Employment Agreement, and authorizes the
Company and its employees to take all appropriate steps to transfer or terminate
Employee's current corporate membership at Del Mar Country Club immediately.
Employee agrees to cooperate fully with the Company in the transfer of this
privilege.

         7.       Non-Disparagement and Cooperation.

                  (a)      The Company's obligations pursuant to this Agreement,
including Section 3 above, are conditioned upon Employee's continued compliance
with Sections 7(b), 7(c), 7(e), 12, 13 and 17 of the Employment Agreement
through December 31, 2003.

                  (b)      Should any issues pertaining to matters in which
Employee had knowledge or was involved during his employment arise during the
period that Employee is receiving any consideration pursuant to the Employment
Agreement or this Agreement, including the benefit arising from any stock option
extension, Employee agrees to cooperate, in a timely manner, with the Company's
reasonable requests for assistance.

         8.       Substantial Cause. Employee understands that the Company
retains its right to terminate this Agreement at any time for Substantial Cause.
"Substantial Cause" shall mean, for purposes of this Agreement, a material
breach of this Agreement or the Employment Agreement.

         9.       The Company's Proprietary Information and Inventions.

                  (a)      Employee acknowledges and understands that Sections
12 and 13 of the Employment Agreement extend beyond the terms of Employee's
employment with the Company. Employee agrees to comply with such terms. Employee
understands that his failure to adhere to Sections 12 and 13 of the Employment
Agreement shall be a material breach of this Agreement, as well as the
Employment Agreement.

                  (b)      Employee specifically understands and agrees that
Employee shall not disclose confidential information regarding the
administration of the Company's business and sales policies. Any training
received by Employee from the Company's Legal Department on Company policies is
subject to the attorney-client privilege and shall not be disclosed to anyone
without the Company's express written permission. In the event that Employee is
contacted by any person or agency with respect to the administration of any of
the Company's business or sales policies, Employee agrees to immediately contact
the Legal Department of Callaway Golf.

         10.      No Admission of Liability. This Agreement affects the
resolution and release of claims which are denied and contested, and this
Agreement shall not be construed as an admission by a party of any liability of
any kind to the other party.

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         11.      Governing Law. This Agreement shall be interpreted and
enforced in accordance with the internal laws of the State of California.

         12.      Binding Effect. This Agreement shall be binding upon and
benefit the parties hereto and their respective heirs, personal representatives,
successors and assigns.

         13.      Confidential Settlement. Except as required by law or as
otherwise disclosed by the Company, Employee agrees not to disclose the terms
and conditions of this Agreement to any third party except Employee's spouse,
attorney, accountant and financial advisor.

         14.      Return of Company Property. Except as provided in this
Agreement, Employee represents that he has returned all Company property.

         15.      Knowing and Voluntary Agreement. Employee has carefully read
and fully understands all of the provisions of this Agreement. Employee
knowingly and voluntarily agrees to all the terms in this Agreement. Employee
knowingly and voluntarily intends to be legally bound by this Agreement.

         16.      Separate Terms. Each term, condition, covenant or provision of
this Agreement shall be viewed as separate and distinct, and in the event that
any such term, covenant or provision shall be held by a court of competent
jurisdiction to be invalid, the remaining provisions shall continue in full
force and effect.

         17.      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.

                  (b)      EMPLOYEE AND THE COMPANY AGREE THAT THE ARBITRATOR
SHALL HAVE THE AUTHORITY TO ISSUE PROVISIONAL RELIEF. EMPLOYEE AND THE COMPANY
FURTHER AGREE THAT EACH HAS THE RIGHT, PURSUANT TO CALIFORNIA CODE OF CIVIL
PROCEDURE SECTION 1281.8, TO APPLY TO A COURT FOR A PROVISIONAL REMEDY IN
CONNECTION WITH AN ARBITRABLE DISPUTE SO AS TO PREVENT THE ARBITRATION FROM
BEING RENDERED INEFFECTIVE.

                  (c)      ANY DEMAND FOR ARBITRATION SHALL BE IN WRITING AND
MUST BE COMMUNICATED TO THE OTHER PARTY PRIOR TO THE EXPIRATION OF THE
APPLICABLE STATUTE OF LIMITATIONS.

                  (d)      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,

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OR A NON-ATTORNEY WITH LIKE EXPERIENCE IN THE AREA OF DISPUTE, WHO SHALL HAVE
THE POWER TO HEAR MOTIONS, CONTROL DISCOVERY, CONDUCT HEARINGS AND OTHERWISE DO
ALL THAT IS NECESSARY TO RESOLVE THE MATTER. THE PARTIES MUST MUTUALLY AGREE ON
THE ARBITRATOR. IF THE PARTIES CANNOT AGREE ON THE ARBITRATOR AFTER THEIR BEST
EFFORTS, AN ARBITRATOR FROM THE AMERICAN ARBITRATION ASSOCIATION WILL BE
SELECTED PURSUANT TO THE AMERICAN ARBITRATION ASSOCIATION NATIONAL RULES FOR
RESOLUTION OF EMPLOYMENT DISPUTES. THE COMPANY SHALL PAY THE COSTS OF THE
ARBITRATOR'S FEES.

                  (e)      THE ARBITRATION WILL BE DECIDED UPON A WRITTEN
DECISION OF THE ARBITRATOR STATING THE ESSENTIAL FINDINGS AND CONCLUSIONS UPON
WHICH THE AWARD IS BASED. THE ARBITRATOR SHALL HAVE THE AUTHORITY TO AWARD
DAMAGES, IF ANY, TO THE EXTENT THAT THEY ARE AVAILABLE UNDER APPLICABLE LAW(S).
THE ARBITRATION AWARD SHALL BE FINAL AND BINDING, AND MAY BE ENTERED AS A
JUDGMENT IN ANY COURT HAVING COMPETENT JURISDICTION. EITHER PARTY MAY SEEK
REVIEW PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1286, ET SEQ.

                  (f)      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 ONLY TO THOSE MATTERS CLEARLY RELEVANT TO THE DISPUTE. HOWEVER, AT A
MINIMUM, EACH PARTY WILL BE ENTITLED TO AT LEAST ONE DEPOSITION AND SHALL HAVE
ACCESS TO ESSENTIAL DOCUMENTS AND WITNESSES AS DETERMINED BY THE ARBITRATOR.

                  (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 SECTION 17 AND IRREVOCABLY AGREE TO ARBITRATE ANY DISPUTE
IDENTIFIED ABOVE.

                  ______ (EMPLOYEE)          ______ (COMPANY)

         18.      Advice of Counsel. The Company advises Employee to discuss
this Agreement with an attorney before executing it, and Employee acknowledges
that Employee has been advised by David J. Strauss of Strauss and Asher.
Employee further acknowledges that the Company will provide Employee five (5)
days within which to review and consider this Agreement before signing it.
Should Employee decide not to use the full five (5) days, then Employee
knowingly and voluntarily waives any claims that Employee was not given that
period of time or did not use the entire five (5) days to consult an attorney or
consider this Agreement.

         19.      Entire Agreement. This Agreement and the Employment Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and may not be modified or amended, except by written agreement
signed by all parties. This Agreement and the Employment Agreement shall be
deemed to be consistent with each other, and this Agreement shall be deemed to
be "another instrument in writing executed by the parties," pursuant to Section
16 of the Employment Agreement.

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<PAGE>

         20.      Counterparts. This Agreement may be executed in one or more
counterparts which, when fully executed by the parties, shall be treated as one
agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates set forth below, to be effective as of the date first written above.

EMPLOYEE                                     COMPANY
                                             CALLAWAY GOLF COMPANY,
                                             a Delaware Corporation

/s/ Michael W. McCormick                         /s/ Steven C. McCracken
_____________________________________        By:________________________________
Michael W. McCormick                         Steven C. McCracken
                                             Senior Executive Vice President,
                                             Chief Legal Officer

                                       7<PAGE>
                                                                   EXHIBIT 10.20

                              CALLAWAY GOLF COMPANY
                       1995 EMPLOYEE STOCK INCENTIVE PLAN

                   (AS AMENDED AND RESTATED NOVEMBER 7, 2001)

1.    PURPOSES OF THE PLAN

            The purpose of this 1995 Employee Stock Incentive Plan (the "Plan")
of Callaway Golf Company, a Delaware corporation (the "Company"), is to provide
for grants of stock options and other stock-based incentive awards to broad
classes of employees of the Company and its Subsidiaries, thereby helping to
retain and motivate such employees, and to encourage the judgment, initiative
and efforts of such employees by further aligning their interests with those of
the shareholders of the Company.

2.    PLAN AWARDS

            To carry out the purposes of the Plan, the Company will from time to
time enter into various arrangements with persons eligible to participate
therein and confer various benefits upon them. The following such arrangements
or benefits are authorized under the Plan if their terms and conditions are not
inconsistent with the provisions of the Plan: Stock Options, Restricted Stock,
Sales of Securities, Stock Bonuses, Performance Shares, Performance Units, Stock
Appreciation Rights, Phantom Stock, Dividend Equivalents and Other Stock-Based
Benefits. Such arrangements and benefits pursuant to the Plan are sometimes
herein referred to as "Awards." The authorized categories of benefits for which
Awards may be granted are defined as follows:

            STOCK OPTIONS: A Stock Option is a right granted under the Plan to
purchase a specified number of shares of Common Stock at such exercise price, at
such times, and on such other terms and conditions as are specified in the
Award. A Stock Option may but need not (a) provide for the payment of some or
all of the option exercise price in cash or by promissory note or by delivery of
previously owned shares (including the technique known as "pyramiding") or other
property or by withholding some of the shares that are being purchased; (b)
include arrangements to facilitate the grantee's ability to borrow funds for
payment of the exercise price; or (c) be an Incentive Stock Option.

            RESTRICTED STOCK: Restricted Stock is Common Stock sold under the
Plan (other than through the exercise of a Stock Option) at a substantial
discount from its Fair Market Value or at its par value, but subject during
specified periods of time to such restrictions on its transferability and
repurchase rights as are expressed in the Award and as may constitute a
substantial condition of forfeiture while in effect.

            SALES OF SECURITIES: A Sale of Securities is a sale under the Plan
of unrestricted shares of Common Stock or of debt or other securities that are
convertible into shares of Common Stock upon such terms and conditions as may be
established in the terms of the Award.
<PAGE>
            STOCK BONUSES: A Stock Bonus is the issuance or delivery of
unrestricted or restricted shares of Common Stock under the Plan as a bonus for
services rendered or for any other valid consideration under applicable law.

            PERFORMANCE SHARES: A Performance Share is an Award that represents
a fixed number of shares of Common Stock that vest at a specified time or over a
period of time in accordance with performance criteria established in connection
with the granting of the Award. Such criteria may measure the performance of the
grantee, of the business unit in which the grantee is employed, or of the
Company, or a combination of any of the foregoing. The vested portion of the
Award is payable to the grantee either in the shares it represents or in cash in
an amount equal to the Fair Market Value of those shares on the date of vesting,
or a combination thereof, as specified in the Award.

            PERFORMANCE UNITS: A Performance Unit is an Award that represents a
fixed amount of cash that vests at a specified time or over a period of time in
accordance with performance criteria established in connection with the granting
of the Award. Such criteria may measure the performance of the grantee, of the
business unit in which the grantee is employed, or of the Company, or a
combination of any of the foregoing. The vested portion of the Award is payable
to the grantee either in cash or in shares valued at their Fair Market Value on
the date of vesting, or a combination thereof, as specified in the Award.

            STOCK APPRECIATION RIGHTS: A Stock Appreciation Right is a right
granted under the Plan to receive a payment that is measured with reference to
the amount by which the Fair Market Value of a specified number of shares of
Common Stock appreciates from a specified date, such as the date of grant of the
Award, to the date of exercise. Payment of a Stock Appreciation Right may be
made in cash or in shares valued at their Fair Market Value on the date of
exercise, or a combination thereof, as specified in the Award. A Stock
Appreciation Right may but need not be granted in tandem with a Stock Option and
require the surrender of that Stock Option or a portion thereof in connection
with the exercise of the Stock Appreciation Right.

            PHANTOM STOCK: Phantom Stock is a cash bonus granted under the Plan
measured by the Fair Market Value of a specified number of shares of Common
Stock on a specified date, or measured by the excess of such Fair Market Value
over a specified minimum, which may but need not include a Dividend Equivalent.

            DIVIDEND EQUIVALENTS: A Dividend Equivalent is a right granted under
the Plan to receive an amount in cash equivalent to the dividends that are paid,
if any, on a specified number of shares of Common Stock during a certain period
of time.

            OTHER STOCK-BASED BENEFITS: An Other Stock-Based Benefit is any
arrangement granted under the Plan not otherwise described above that (a) by its
terms might involve the issuance or sale of Common Stock or (b) involves a
benefit that is

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<PAGE>
measured, in whole or in part, by the value, appreciation, dividend yield or
other features attributable to a specified number of shares of Common Stock.

            An Award may consist of one such arrangement or benefit or two or
more of them in tandem or in the alternative. Subject to the provisions of the
Plan, any Award granted pursuant to the Plan may contain such additional terms
and provisions as those administering the Plan for the Company may consider
appropriate. Among other things, any such Award may but need not also provide
for (i) the satisfaction of any applicable tax withholding obligation by the
retention of shares to which the grantee would otherwise be entitled or by the
grantee's delivery of previously owned shares or other property and (ii)
acceleration of vesting, lapse of restrictions, cash settlement or other
adjustment to the terms of the Award in the event of a merger, sale of assets or
change of control of the Company.

3.    STOCK SUBJECT TO THE PLAN

            The kind and maximum number of shares of stock that may be sold or
issued under the Plan, whether upon exercise of Stock Options or in settlement
of other Awards, shall be 10,800,000 shares of Common Stock (this number
reflects all stock splits through November 7, 2001, and is subject to further
adjustments set forth hereinbelow). If the outstanding shares of stock of the
class then subject to the Plan are increased or decreased, or are changed into
or are exchanged for a different number or kind of shares or securities or other
forms of consideration, as a result of one or more recapitalizations,
restructurings, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, appropriate adjustments shall be made in the number
and/or kind of shares or securities or other forms of consideration which may
thereafter be sold or issued under the Plan and for which Awards (including
Incentive Stock Options) may thereafter be granted and for which outstanding
Awards previously granted under the Plan may thereafter be exercised or settled.

            If, on or before termination of the Plan, any shares of Common Stock
subject to an Award shall not be issued or transferred and shall cease to be
issuable or transferable for any reason, or if such shares shall have been
reacquired by the Company pursuant to restrictions imposed on such shares under
the Plan or the terms of an Award, the shares not so issued or transferred and
the shares so reacquired shall no longer be charged against the limitation
provided for in this Section 3 and may be again made the subject of Awards under
the Plan. The shares of stock sold or issued under the Plan may be obtained from
the Company's authorized but unissued shares, from reacquired or treasury
shares, or from outstanding shares acquired in the market or from private
sources.

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<PAGE>
4.    ADMINISTRATION OF THE PLAN

            (a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or, in the discretion of the Board, a committee appointed
thereby (the "Committee"). Subject to the provisions of the Plan, the Board, or
the Committee, shall have full and final authority in its discretion to select
the eligible persons to whom Awards shall be granted hereunder, to grant such
Awards, to determine the terms and provisions of such Awards and the number of
shares to be sold or issued pursuant thereto. The Board (and the Committee)
shall also be empowered with full and final authority to adopt, amend, and
rescind such rules and regulations as, in its opinion, may be advisable in the
administration of the Plan. The Board or the Committee, as the case may be, may
delegate to Company officers or others its authority with respect to any Awards
that may be granted to eligible persons under the Plan, subject to applicable
legal requirements. The interpretation and construction by the Board or the
Committee of any term or provision of the Plan or of any Award granted
thereunder shall be final and binding upon all participants in the Plan.

            (b) Pursuant to the authority described above, the Board or the
Committee may adopt such amendments to, and rules and regulations governing, the
Plan as may be considered advisable for purposes of compliance with applicable
federal or state securities laws. The Board of Directors has established the
following rules applicable to all Awards made pursuant to the Plan: No Award
granted hereunder (other than an Award expressly granting unrestricted shares)
may be transferred by the grantee except (i) by will or the laws of descent and
distribution, (ii) upon dissolution of marriage pursuant to a qualified domestic
relations order or division of community or marital property or (iii) with the
express written approval of the Board or Committee in its sole discretion. No
such permitted transfer shall, by itself, affect any vesting restrictions that
then apply to the Award.

            (c) The Company may assist any person to whom an Award is granted
hereunder in the payment of the purchase price or other amounts payable in
connection with the receipt or exercise of that Award, by lending such amounts
to such person on such terms and at such rates of interest and upon such
security (if any) as shall be approved by the Board or the Committee.

5.    PERSONS ELIGIBLE TO PARTICIPATE

            Any person who is an employee, consultant or advisor of the Company
or any of its Subsidiaries and who is not an Executive Officer or director of
the Company may be eligible to be considered for the grant of Awards under the
Plan, as determined by the Board or the Committee in its discretion.

                                       4
<PAGE>
6.    PLAN EFFECTIVENESS AND DURATION

            The Plan shall become effective as of the date designated by the
Board. Unless previously terminated by the Board, the Plan shall expire ten
years after its effective date, but such expiration shall not affect any Award
previously made or granted that is then outstanding.

7.    AMENDMENT AND TERMINATION

            The Board may amend, alter or discontinue the Plan or an agreement
evidencing an Award granted under the Plan, but no amendment or alteration shall
be made that would affect any Award previously made or granted that is then
outstanding, without the grantee's consent; provided, however, that no such
consent shall be required if the Board determines in its sole discretion that
such amendment or alteration is not reasonably likely to significantly diminish
the benefits provided under such Award or that any such diminishment has been
adequately compensated. Notwithstanding the foregoing, if an amendment to the
Plan would affect the ability of any Stock Options granted under the Plan to
comply with Section 422 or other applicable provisions of the Internal Revenue
Code (the "Code"), and if the Committee determines that it is necessary or
desirable for any Stock Options theretofore or thereafter granted that are
intended to comply with any such provision to so comply, or otherwise is
required under any applicable law, rule or regulation, the amendment shall be
approved by the Company's shareholders to the extent required for such Stock
Options to continue to comply with Section 422 of the Code, or other applicable
provisions of or rules under the Code.

8.    CERTAIN DEFINITIONS

            The authorized categories of benefits for which Awards may be
granted under the Plan are defined in Section 2 above. In addition, the
following terms used in the Plan shall have the following meanings:

            COMMON STOCK: Common Stock is the Company's common stock, as
constituted on the effective date of the Plan, and as thereafter adjusted as a
result of any one or more events requiring adjustment of outstanding Awards
under Section 3 above.

            EXECUTIVE OFFICER: An Executive Officer of the Company shall be as
defined in Rule 16a-1(f) of the Securities Exchange Act of 1934.

            FAIR MARKET VALUE: The Fair Market Value of shares of stock shall be
calculated (a) during such time as the Company is not a publicly-traded company,
by the Board based on its good faith determination, and (b) at such times as the
Company is publicly-traded, on the basis of the closing price of stock of that
class on the day in question (or, if such day is not a trading day in the U.S.
securities markets, on the nearest preceding trading day), as reported with
respect to the principal market (or the composite of the markets, if more than
one) in which such shares are then traded; or, if no such closing prices are
reported, on the basis of the mean between the high bid and low asked

                                       5
<PAGE>
prices that day on the principal market or national quotation system on which
such shares are then quoted; or, if not so quoted, as furnished by a
professional securities dealer making a market in such shares selected by the
Board or the Committee; or if no such dealer is available, then the Fair Market
Value shall be determined in good faith by the Board.

            INCENTIVE STOCK OPTION: An Incentive Stock Option is a Stock Option
that qualifies as an "incentive stock option" as defined under Section 422 (or
any applicable successor provisions) of the Code and that includes an express
provision that it is intended to be an Incentive Stock Option.

            SUBSIDIARY: A Subsidiary of the Company is any corporation,
partnership or other entity in which the Company directly or indirectly owns 50%
or more of the total combined power to cast votes in the election of directors,
trustees, managing partners or similar officials.

9.    GOVERNING LAW

            This Plan and any awards granted hereunder shall be governed by and
construed in accordance with the internal laws of the State of Delaware and
applicable federal law.

                                       6

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