EXHIBIT 10.36
FIFTH AMENDMENT AND LIMITED WAIVER
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED
CREDIT AGREEMENT, dated as of February 25, 2003 (this "Fifth Amendment") relates
to that certain Amended and Restated Credit Agreement dated as of February 10,
1999 (as amended by the First Amendment to Amended and Restated Credit
Agreement, dated April 28, 2000, the Second Amendment to Amended and Restated
Credit Agreement, dated as of December 29, 2000, the Third Amendment to Amended
and Restated Credit Agreement, dated as of March 19, 2001 and the Fourth
Amendment to Amended and Restated Credit Agreement, dated as of December 31,
2001, the "Credit Agreement") and is entered into among Callaway Golf Company, a
Delaware corporation (the "Borrower"), the other credit parties signatory to the
Credit Agreement, the lenders signatory hereto (the "Requisite Lenders") and
General Electric Capital Corporation, a Delaware corporation, as the agent for
the Lenders (in such capacity, the "Agent"). Capitalized terms used and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement.
W I T N E S S E T H
WHEREAS, the Borrower, the other Credit Parties, the Agent and the
Lenders have entered into the Credit Agreement.
WHEREAS, as of the Fiscal Quarter ending September 30, 2002 (the
"Third Quarter 2002") the Borrower failed to meet the minimum Fixed Charge
Coverage Ratio for such period, as required by Section 6.10 (Financial
Covenants) of the Credit Agreement (the "Financial Covenant Event of Default").
WHEREAS, the following other Events of Default exist and are
continuing under the Credit Agreement:
a. the Borrower's failure to deliver when due the Compliance
Certificates for each of the Third Quarter 2002 and the Fiscal Quarter
ending December 31, 2002 (the "Fourth Quarter 2002");
b. the Borrower's failure to report the Financial Covenant Event
of Default and the Compliance Certificate Event of Default in its
certification of the Third Quarter 2002 financial statements and monthly
financial statements for the months of August 2002 through and including
December 2003, each as required by Annex E to the Credit Agreement and the
failure to make certain certifications in connection therewith;
c. the Borrower's failure to cause the periodic reports required
under paragraphs (a)-(d) of Annex E to the Credit Agreement to be
certified by the Chief Financial Officer of the Borrower;
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
d. the Borrower's failure to deliver the reports and information
required under paragraphs (a)-(g), (n) and (o) of Annex E to the Credit
Agreement to the Lenders;
e. the Borrower's failure to provide a cash flow statement with
the monthly financial information required under paragraph (a) of Annex E
to the Credit Agreement;
f. the Borrower's failure to provide both the unaudited
consolidated statements of income and cash flows in proper comparative
form and the figures contained in the Projections, as required under
paragraph (a) of Annex E to the Credit Agreement;
g. the Borrower's failure to deliver annual operating plans as
required under paragraph (c) of Annex E to the Credit Agreement;
h. the Borrower's failure to deliver copies to the Agent and
Lenders of (i) all Financial Statements, reports, notices and proxy
statements made publicly available by any Credit Party to its security
holders, (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority and (iii) all press releases
and other statements made available by any Credit Party to the public
concerning material changes or developments in the business of any such
Person, in each case as required under paragraph (g) of Annex E to the
Credit Agreement;
i. the Borrower's failure to deliver notices of litigation as
required under paragraph (j) of Annex E to the Credit Agreement;
j. the Borrower's failure to provide with the annual Financial
Statements delivered to the Agent (i) a list of any applications for the
registration of any Patent, Trademark, or Copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency which any Credit Party thereof has filed in the
prior Fiscal Quarter and (ii) a summary of all Equipment and sales thereof
by department and type, accompanied by supporting detail and
documentation, all as required under paragraph (c) of Annex F to the
Credit Agreement;
k. the Borrower's failure to deliver the results of each physical
verification which the Borrower or any of its Subsidiaries have made of
all or any portion of their Inventory, as required under paragraph (d) of
Annex F to the Credit Agreement;
l. the Borrower's failure to deliver pursuant to paragraph (f) of
Exhibit E to the Credit Agreement the default notices specifying the
existence and nature of the Financial Covenant Event of Default, the
Events of Default described in clauses (a) through (k) above and clause
(m) below, the Investment Events of Default (as defined below), the
Restricted Payment Events of Default (as defined below), and the
Cross-Event of Default (as defined below);
m. the Borrower's failure to timely deliver any other reports and
information required under Annex E and Annex F to the Credit Agreement
prior to the date hereof
2
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
(together with the Events of Default described in paragraphs (a) through
(l), above, the "Reporting Events of Default");
n. the Borrower's investments in investment categories other than
those permitted under subsections (i)-(v) of Section 6.2(d) of the Credit
Agreement;
o. the Borrower's failure to prevent its investment in GSOT from
exceeding $87,000,000 at any time, as required under Section 6.2(f) of the
Credit Agreement (together with the Event of Default described in
paragraph (n), above, the "Investment Events of Default"); and
p. the Borrower's declaration of dividends and repurchases of
Stock after the occurrence and during the continuation of the Financial
Covenant Event of Default, the Reporting Events of Default, the Investment
Events of Default and the Cross-Event of Default, which repurchases of
stock were made without notification to Agent, each as prohibited by
Sections 6.14(d) or (e) of the Credit Agreement (the "Restricted Payment
Events of Default").
WHEREAS, two Borrower Accounts (account #4126918259 at Wells Fargo
Bank, N.A. and account #890114096 at UBS PaineWebber, collectively the
"Non-blocked Accounts") were opened, and are being held, by the Borrower in
violation of Section 1.18 of the Credit Agreement (the "Cash Management Events
of Default").
WHEREAS, one or more Termination Events and an Event of Servicer
Termination (each as defined in the Receivables Purchase Agreement) have
occurred under the Receivables Purchase Agreement and Section 8.1(m) of the
Credit Agreement provides that an Event of Default shall occur should any
Termination Event or Event of Servicer Termination occur and be continuing (the
"Cross-Event of Default" and, together with the Financial Covenant Event of
Default, the Reporting Events of Default, the Investment Events of Default, the
Restricted Payment Events of Default and the Cash Management Events of Default,
the "Events of Default").
WHEREAS, in August 2002 the Borrower voluntarily prepaid in full the
CEF Lease Facility in an amount of $50,798,049.00 (the "Prepayment").
WHEREAS, the Borrower has requested that the Agent and the Requisite
Lenders grant a limited waiver (the "Limited Waivers") to certain provisions of
the Credit Agreement, as follows and as provided in Section 3 below:
a. Section 1.8 (Cash Management Systems), solely with respect to
the Cash Management Events of Default.
b. Section 4.1(a) (Reports and Notices), solely with respect to
the Reporting Events of Default;
c. Sections 6.2 (Investments; Loans and Advances), solely with
respect to the Investment Events of Default;
3
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
d. Section 6.10 (Financial Covenants), solely with respect to the
Financial Covenant Event of Default;
e. Section 6.14 (Restricted Payments), solely with respect to the
Restricted Payment Events of Default; and
f. Section 8.1(m) (Events of Default), solely with respect to the
Cross-Event of Default.
WHEREAS, in connection with the termination of the Receivables
Facility, the Borrower has requested that Section 1.3(e) of the Credit Agreement
be amended to clarify the application of payments formerly received from the
Receivables Facility and Disclosure Schedule 3.19 shall be updated to reflect
the bank accounts held as of the Effective Date (as defined below) by the
Borrower, any other Credit Party and any of their respective Domestic
Subsidiaries (collectively, the "RPA Termination Amendments");
WHEREAS, the Borrower has requested that the Credit Agreement be
amended to exclude the Prepayment from the calculation of the Fixed Charge
Coverage Ratio (the "Coverage Ratio Amendment").
WHEREAS, the Borrower has requested that the Credit Agreement be
amended to permit the merger of Special Purpose Corporation with and into
Callaway Golf Sales Company, a California corporation ("CGSC") as soon as
commercially practicable after the termination of the Receivables Facility, with
CGSC as the surviving corporation (such amendment, the "Merger Amendments").
WHEREAS, the Borrower has requested that the investment restriction
contained in Section 6.2(f) be amended to prohibit the Borrower from increasing
its equity interest participation in GSOT (together with the RPA Termination
Amendments, the Merger Amendments and the Coverage Ratio Amendment, the
"Amendments").
WHEREAS, Section 11.2 of the Credit Agreement requires that the
Requisite Lenders consent to the Limited Waivers and the Amendments.
WHEREAS, the Agent and the Requisite Lenders are willing to provide
the Limited Waivers and Amendments, in each case on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the above premises, the
Borrower, the Agent, and the Requisite Lenders agree as follows:
1. Usage. Any reference herein to Section, Exhibit or Schedule, unless
otherwise specified, shall refer to such Section, Exhibit or Schedule hereof, in
its entirety.
2. Amendments to the Credit Agreement. Upon the Effective Date (as
defined in Section 5 below), the Credit Agreement is hereby amended as follows:
a. Section 1.3(e) is hereby amended by:
4
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
i. Deleting the title of such section and substituting in
lieu thereof the title "Application of Payments from the Collection
Account"; and
ii. Deleting the phrase "Payments deposited in the Agent
Account in accordance with Section 2.04 or Article VI (or any
comparable provisions) of the Receivables Purchase Agreement shall
be applied as follows" and substituting in lieu thereof the phrase
"Payments deposited in the Agent Account from the Collection Account
in accordance with paragraph (b)(iii) of Annex C shall be applied as
follows".
b. Section 6.2(f) is hereby amended by deleting the phrase
"provided, that the aggregate amount thereof does not exceed $87,000,000
at any time" and substituting in lieu thereof the phrase "provided, that
the aggregate number of shares held by Borrower in connection with such
investment shall not exceed 9,880,028 at any time (as such number of
shares may be adjusted from time to time to take into account any
additional shares received by Borrower as a result of any stock split,
dividend, subdivision or combination effected by Borrower after February
26, 2003)"
c. Annex A (Definitions) is hereby amended by:
i. Deleting clause (a)(i) of the definition of "Fixed
Charge Coverage Ratio" in its entirety and substituting the
following in lieu thereof:
"Capital Expenditures (other than (y) Capital Expenditures
financed pursuant to clause (i) or (ii) of Section 6.3 and (z)
solely for the purpose of calculating the Fixed Charge
Coverage Ratio for the twelve (12) month periods ending on
each of the Fiscal Quarters ending September 30, 2002,
December 31, 2002, March 31, 2003 and June 30, 2003, the CEF
Lease Prepayment Amount),"
ii. Deleting the definition of "GSOT" in its entirety and
substituting the following in lieu thereof:
"`GSOT' shall mean the Callaway Golf Company Grantor Stock
Trust established pursuant to the Trust Agreement dated as of
July 14, 1995 between the Borrower and Bank of the West, as
successor to Sanwa Bank California."
iii. Adding the following definitions in their proper
alphabetic order:
"`CEF Lease Prepayment Amount' shall mean the August 2002
payment by the Borrower to General Electric Capital
Corporation, for itself and for certain participants, of an
aggregate amount of $50,798,049.00 in connection with the CEF
Lease Facility.'"
"`Collection Account' shall mean that certain segregated
deposit account held in the name of Callaway Golf Sales
Company and maintained with Wells Fargo Bank, N.A., as a
Relationship Bank,
5
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
and designated as the "Collection Account," account number
4159-274265, ABA No. 121000248, or such other collection
account established in accordance with the requirements set
forth in Annex C."
"Permitted Merger" shall mean the merger of Special Purpose
Corporation with and into Callaway Golf Sales Company, a
California corporation, with Callaway Golf Sales Company as
the surviving corporation, which merger shall be effective as
soon as commercially practicable after the termination of the
Receivables Facility and the documentation for which shall be
executed and delivered immediately upon the termination of the
Receivables Facility.
"`Relationship Bank' shall have the meaning assigned to it in
paragraph (a) of Annex C."
d. Disclosure Schedule 3.19 is hereby amended by deleting the
text thereof in its entirety and substituting Schedule I attached hereto,
in lieu thereof.
e. Section 5.1 is hereby amended by adding the following proviso
at the end thereof:
"; provided, further, that the Permitted Merger shall not be
deemed a violation of this covenant"
f. Section 6.1(a) is hereby amended by adding the following
proviso at the end thereof:
"; provided, that the Permitted Merger shall not be deemed a
violation of this covenant"
g. Section 6.4(a) is hereby amended by adding the following
proviso at the end of the first sentence thereof:
"; provided, that the Permitted Merger shall not be deemed a
violation of this covenant"
h. Section 6.5 is hereby amended by adding the following proviso
at the end of the first sentence thereof:
"; provided, that the Permitted Merger shall not be deemed a
violation of this covenant"
6
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
3. Limited Waivers. Upon the Effective Date, and as limited herein, the
Requisite Lenders hereby waive the following provisions of the Credit Agreement
solely with respect to the matters expressly described below:
a. Section 1.8, solely with respect to the Cash Management Events
of Default.
b. Section 6.2, solely with respect to the Investment Events of
Default;
c. Section 6.10, solely with respect to the Financial Covenant
Event of Default;
d. Section 6.14, solely with respect to the Restricted Payment
Events of Default; and
e. Section 8.1(m), solely with respect to the Cross-Event of
Default.
The Limited Waivers shall be limited to the Cash Management Events
of Default, the Reporting Events of Default, the Investment Events of Default,
the Financial Covenant Event of Default, the Restricted Payment Events of
Default and the Cross-Event of Default and do not apply to any past, present or
future Defaults or Events of Default caused by any other violation of Sections 5
or 6, or any other provisions, of the Credit Agreement or any of the other Loan
Documents.
4. Representations and Warranties. The Credit Parties hereby jointly
and severally represent and warrant to the Agent and the Requisite Lenders that,
as of the Effective Date and after giving effect to this Fifth Amendment:
a. All of the representations and warranties of the Credit
Parties contained in this Fifth Amendment, the Credit Agreement and the
other Loan Documents are true and correct in all material respects on and
as of the Effective Date, as if then made (other than representations and
warranties which expressly speak as of a different date, which shall be
true and correct in all material respects as of that date); and
b. No Default or Event of Default has occurred and is continuing
or will result after giving effect to this Fifth Amendment.
5. Effective Date. This Fifth Amendment shall become effective as of
the date first written above (the "Effective Date") upon the satisfaction of
each of the following conditions:
a. the Agent shall have received each of the following documents,
in each case in form and substance satisfactory to the Agent:
i. the Compliance Certificates for each of the Third
Quarter 2002 and the Fourth Quarter 2002;
ii. counterparts hereof executed by each of the Credit
Parties, the Agent and the Requisite Lenders;
7
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
iii. duly executed documentation reasonably satisfactory to
the Agent evidencing the termination of the Receivables Facility;
iv. a duly executed tri-party blocked account agreement, or
an amendment to an existing blocked account agreement, for each bank
account that will be held by Callaway Golf Sales Company on or after
the Effective Date, each of which blocked account agreement or
amendment, as the case may be, shall be between the Agent, for the
benefit of itself and the Lenders, the Borrower and its
Subsidiaries, as applicable, and the applicable Relationship Bank
and in form and substance satisfactory to the Agent;
v. a certificate of the Secretary or Assistant Secretary of
each of the Credit Parties dated the Effective Date certifying (A)
that the bylaws of such Credit Party have not been amended or
otherwise modified since the date of the most recent certification
thereof by the Secretary or Assistant Secretary of such Credit Party
delivered to the Agent and remain in full force and effect as of the
Effective Date, (B) that the charter of such Credit Party has not
been amended or otherwise modified since the date of the most recent
certification thereof by the Secretary of State of such Credit
Party's jurisdiction of incorporation delivered to the Agent and
remain in full force and effect as of the Effective Date and (C)
that the execution, delivery and performance of this Fifth Amendment
have been duly authorized by all necessary or proper corporate and
shareholder action; and
vi. such additional documentation as the Agent may
reasonably request;
b. all bank accounts held by Special Purpose Corporation shall
have been transferred to Callaway Golf Sales Company or closed;
c. the Agent shall have received, on behalf of the Requisite
Lenders that deliver their executed counterparts of this Fifth Amendment
by noon Pacific Standard Time on February 26, 2003 (the "Consenting
Lenders"), the Borrower's payment of a waiver fee in an amount equal to
(i) 0.125% of the aggregate amount of the Commitments of the Consenting
Lenders minus (ii) One Hundred Percent (100%) of the aggregate amount
payable by the Borrower to the Agent on account of fees and expenses
incurred by the Agent in connection with the preparation and execution of
this Fifth Amendment and that certain letter delivered to the Borrower by
the Agent on February 7, 2003;
d. No law, regulation, order, judgment or decree of any
Governmental Authority shall, and the Agent shall not have received any
notice that litigation is pending or threatened which is likely to,
enjoin, prohibit or restrain the consummation of the transactions
contemplated by this Fifth Amendment, except for such laws, regulations,
orders or decrees, or pending or threatened litigation, that in the
aggregate could not reasonably be expected to have a Material Adverse
Effect;
8
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
e. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Fifth Amendment shall be satisfactory in all respects
in form and substance to the Agent; and
f. No Default or Event of Default shall have occurred and be
continuing on the Effective Date or will result after giving effect to
this Fifth Amendment.
6. Covenant Regarding Non-blocked Accounts. Within thirty (30) days of
the date hereof, Borrower shall have caused each of the Non-blocked Accounts to
either be (i) subject to an executed tri-party blocked account agreement between
the Agent, for the benefit of itself and the Lenders, the Borrower and the
applicable Relationship Bank and in form and substance satisfactory to the Agent
or (ii) closed, as evidenced by documentation reasonably satisfactory to the
Agent.
7. Reference to and Effect on the Loan Documents.
a. Upon the Effective Date, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like
import, and each reference in the other Loan Documents to the Credit
Agreement, shall mean and be a reference to the Credit Agreement as
amended and supplemented hereby.
b. Except to the extent specifically set forth herein, the
respective provisions of the Credit Agreement and the other Loan Documents
shall not be amended, modified, waived, impaired or otherwise affected
hereby, and such documents and the Obligations under each of them are
hereby confirmed as being in full force and effect.
c. This Fifth Amendment shall be limited solely to the matters
expressly set forth herein and shall not (i) constitute an amendment or
waiver of any other term or condition of the Credit Agreement or any other
Loan Document, (ii) prejudice any right or rights which the Agent or any
Lender may now have or may have in the future under or in connection with
the Credit Agreement or any other Loan Document, (iii) require the Agent
or any Lender to agree to a similar transaction on a future occasion or
(iv) create any right herein to another Person or other beneficiary or
otherwise, except to the extent specifically provided herein.
8. Miscellaneous. This Fifth Amendment is a Loan Document. The Section
titles in this Fifth Amendment are for convenience of reference only, shall be
without substantive meaning or content of any kind whatsoever and are not a part
of the agreement between the parties hereto.
9. Fees and Expenses. The Borrower acknowledges that all costs, fees
and expenses incurred by the Agent and its counsel with respect to this Fifth
Amendment and the documents and transactions contemplated hereby shall be the
responsibility of, and shall be paid by, the Borrower.
10. Counterparts. This Fifth Amendment may be executed in any number of
original or facsimile counterparts, each of which will be deemed an original,
and by the different parties
9
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
hereto in separate counterparts, all of which shall together constitute one and
the same instrument.
11. GOVERNING LAW. THIS FIFTH AMENDMENT, AND ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE HEREOF, SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
12. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Fifth Amendment. In the event an
ambiguity or question of intent or interpretation arises, this Fifth Amendment
shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Fifth Amendment.
10
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
IN WITNESS WHEREOF, the Credit Parties, the Agent and the Requisite
Lenders have caused this Fifth Amendment to be executed by their respective
officers thereunto duly authorized as of the date first above written.
CALLAWAY GOLF COMPANY,
as the Borrower
By:
-------------------------
Name:
Title:
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
CALLAWAY GOLF SALES COMPANY,
as a Credit Party
By:
-------------------------
Name:
Title:
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
GENERAL ELECTRIC CAPITAL CORPORATION,
as the Agent and a Lender
By: /s/ Iain Douglas
-------------------------
Name: Iain Douglas
Title: Senior Vice President
Pro Rata Share: 20.83%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
BANK ONE, NA (Main Office Chicago), as successor
to American National Bank and Trust Company of
Chicago, as a Lender
By:
-------------------------
Name:
Title:
Pro Rata Share: 17.71%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
BANK OF AMERICA, NATIONAL ASSOCIATION,
as a Lender
By:
-------------------------
Name:
Title:
Pro Rata Share: 14.17%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
CONGRESS FINANCIAL CORPORATION (WESTERN),
as a Lender
By:
-------------------------
Name:
Title:
Pro Rata Share: 14.17%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
KEY CORPORATE CAPITAL INC.,
as a Lender
By:
-------------------------
Name:
Title:
Pro Rata Share: 14.17%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
NATIONAL CITY COMMERCIAL FINANCE, INC.,
as a Lender
By:
-------------------------
Name:
Title:
Pro Rata Share: 8.33%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
ROYAL BANK OF SCOTLAND,
as a Lender
By:
-------------------------
Name:
Title:
Pro Rata Share: 10.62%
Signature Page
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
SCHEDULE I
TO
FIFTH AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT
Disclosure Schedule 3.19
(See attached.)
Schedule I
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT