EXHIBIT 99.5
EXECUTION COPY
AMENDMENT NO. 4 TO ASSET PURCHASE AGREEMENT
This Amendment No. 4 (the "Amendment"), dated as of September
30, 2003, has been entered into between the signatories hereto for the purpose
of amending the Asset Purchase Agreement, dated as of June 30, 2003, between The
Top-Flite Golf Company (f/k/a Spalding Sports Worldwide, Inc.) and Callaway Golf
Company, as amended (the "Asset Purchase Agreement"). Capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to them in the
Asset Purchase Agreement.
1. Amendments.
1.1 Pursuant to Section 1.3.2 of Amendment No. 2 to the Asset Purchase
Agreement, the Purchase Price is equal to $169,294,000.
1.2 On September 15, 2003, pursuant to Amendment No. 3 to the Asset
Purchase Agreement, (i) the Purchaser paid to the Seller an amount equal to
$120,150,000, (ii) the Purchaser paid to the Escrow Agent an amount equal to
$8,000,000, which amount is equal to the Indemnity Deposit and (iii) the
Purchase Price was adjusted as follows:
1.2.1 Pursuant to Section 1.6(a) of the Asset Purchase
Agreement, the Purchase Price was reduced by $5,455,000, which amount was equal
to the decrease in Target Inventory and the Deemed Closing Date A/R Value of the
Accounts Receivable of the Seller.
1.2.2 Pursuant to Section 1.7(a)(iv) of the Asset Purchase
Agreement, the Purchase Price was reduced by $2,671,000, which amount was equal
to the estimated increase in the A/R Reconciliation above $3,740,000.
1.3 On the date hereof, the Purchaser shall pay to the Seller, or a
party designated by the Seller, an amount equal to $30,995,000 (the "Payment"),
which amount is calculated by adjusting the Purchase Price as follows:
1.3.1 Pursuant to Section 1.6 of Amendment No. 3 to the Asset
Purchase Agreement, the Purchase Price shall be increased by $504,000, which
amount is equal to the decrease of the A/R Reconciliation below $6,411,000. The
parties agree and acknowledge that there shall be no further adjustment to the
A/R Reconciliation.
1.3.2 Pursuant to Section 1.7 of Amendment No. 3 to the Asset
Purchase Agreement, the Purchase Price shall be increased by $909,000, which
amount shall be equal to the increase of the Deemed Closing Date A/R Value of
the Accounts Receivable. The parties agree and acknowledge that there shall be
no further adjustment to the Deemed Closing Date A/R Value of the Accounts
Receivable transferred to the Purchaser on September 15, 2003.
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1.3.3 Pursuant to Section 1.6(a) of the Asset Purchase
Agreement, the Purchase Price shall be decreased by $1,423,000, which amount is
equal to the decrease in the Target Inventory of the Foreign Subsidiaries.
1.3.4 Pursuant to Section 1.6(a) to the Asset Purchase
Agreement, the Purchase Price shall be decreased by $6,148,000, which amount is
equal to the decrease in the Deemed Closing Date A/R Value of the Accounts
Receivable of the Foreign Subsidiaries.
1.3.5 The Purchase Price shall increase by $4,348,000, which
amount is equal to the aggregate purchase price paid by the Purchaser for the
accounts receivable and all trade receivables of the Foreign Subsidiaries
arising primarily in connection with the operation or conduct of the Sporting
Goods Business and the ETONIC Business (the "Sporting Goods A/R").
1.3.6 The Purchase Price shall increase by $473,000, which
amount is equal to the aggregate purchase price paid by the Purchaser for the
inventory relating to the Sporting Goods Business in Canada (the "Sporting Goods
Inventory").
1.3.7 The Purchase Price shall increase by $103,000, which
amount is equal to (x) the amount of the commissions overdrawn by the Seller's
sales force (the "Sales Force Commissions") multiplied by (y) 0.75. The parties
shall verify the Sales Force Commissions within 5 Business Days after the date
hereof. If the Sales Force Commissions is greater than $137,333, then the
Purchaser shall immediately pay to the Seller the amount of such excess
multiplied by 0.75. If the Sales Force Commissions is less than $137,333, the
Purchaser shall be reimbursed an amount equal to such deficiency multiplied by
0.75 from the Indemnity Deposit (without taking into account the Purchaser
Recovery Threshold).
1.3.8 The Purchase Price shall decrease by $225,000, which
amount is equal to the discount of Accounts Receivables of the Aussie Bob
account debtor (the "Bad Debt Accounts"). The Purchaser agrees that if, upon
verification by the Seller, the stated outstanding amount of the Bad Debt
Accounts has already been reduced on the Books and Records, the Purchaser shall
reimburse the Seller the amount of such reduction, up to a maximum reimbursement
of $225,000, as soon as practicable following the date hereof.
1.3.9 The Purchase Price shall decrease by $564,000, which
amount is equal to the amount due to the Purchaser (or its designee) from the
Foreign Subsidiaries from sale of Inventory from the Purchaser to the Foreign
Subsidiaries during the period between September 15, 2003 and September 30, 2003
(the "Intercompany Transfer"). The parties shall verify the amount of the
Intercompany Transfer within 2 Business Days of the date hereof. The Seller
agrees that if, upon verification by the parties, the amount of the Intercompany
Transfer is greater than $564,000, then the Purchaser shall be reimbursed from
the Indemnity Deposit (without taking into account the Purchaser Recovery
Threshold), the amount equal to such excess. The Purchaser agrees that if, upon
verification by the parties, the amount of the Intercompany Transfer is less
than
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$564,000, then the Purchaser shall immediately pay to the Seller an amount equal
to such deficiency. The Purchaser agrees that this Section 1.3.9 of the
Amendment shall be its sole recourse to cause the Seller and the Foreign
Subsidiaries to satisfy their obligations with regard to the Intercompany
Transfer.
1.4 The Payment shall be paid on the date hereof as follows:
1.4.1 $26,100,000 shall be paid directly to the Seller.
1.4.2 $4,895,000 shall be paid by the Purchaser to HSBC Bank
Australia Limited ("HSBC") for the benefit of Top-Flite Australia Pty Ltd. ("TF
Australia"). To the extent that the transfer made by the Purchaser to HSBC is
greater than the amount owing by TF Australia to HSBC, HSBC shall transfer an
amount equal to such excess to TF Australia. To the extent that the transfer
made by the Purchaser to HSBC is less than the amount owing by TF Australia to
HSBC, TF Australia shall transfer an amount equal to such deficiency to HSBC.
1.5 As of the date hereof, the sum of (A) the gross asset value of the
Sporting Goods A/R, excluding all reserves but otherwise determined in
accordance with the same method of valuation as that used in the books and
records of the Seller consistent with past practices, multiplied by 0.70 plus
(B) the Deemed Closing Date A/R Value of the Accounts Receivable of the Foreign
Subsidiaries (excluding the Bad Debt Accounts) is equal to $16,443,000 (clauses
(A) and (B), collectively, the "International Deemed Closing Date A/R Value"),
which shall be verified by the parties not later than October 31, 2003 based
upon the Books and Records and consistent with the past practices of the Seller.
The Purchase Price shall be adjusted as follows: (i) if the International Deemed
Closing Date A/R Value, as finally determined, is equal to $16,443,000 there
shall be no adjustment to the Purchase Price based on the amount of the
International Deemed Closing Date A/R Value; (ii) if the International Deemed
Closing Date A/R Value, as finally determined, is greater than $16,443,000, the
Purchaser shall immediately pay to the Seller the amount of such excess; and
(iii) if the International Deemed Closing Date A/R Value, as finally determined,
is less than $16,443,000, the Purchaser shall be reimbursed from the Indemnity
Deposit (without taking into account the Purchaser Recovery Threshold) the
amount of such deficiency. The Purchaser acknowledges and agrees that the
provisions of this Section 1.5 of the Amendment are the sole provisions relating
to the adjustment of the Purchase Price based on the amount of the International
Deemed Closing Date A/R Value. The parties acknowledge that this Section 1.5 of
the Amendment does not modify or amend Section 1.7 of the Agreement with regard
to the Foreign Subsidiaries.
1.6 Solely for purposes of the Bills of Sale or such other transfer
document executed by the Foreign Subsidiaries and Section 2.25 of the Asset
Purchase Agreement, the definitions of Accounts Receivable and Assigned
Receivables (or any subset thereto) shall include the Sporting Goods A/R.
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1.7 Solely for purposes of the Bills of Sale or such other transfer
document executed by the Foreign Subsidiaries and Section 2.24 of the Asset
Purchase Agreement, the definition of Inventory shall include the Sporting Goods
Inventory.
2. No Further Amendments. Except as amended herein, the Asset Purchase Agreement
will remain unchanged and in full force and effect.
3. Articles and Sections. The Article and Section headings in this Amendment are
for reference only and shall not affect the interpretation of this Amendment.
4. Counterparts. This Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
[Remainder of Page Intentionally Left Blank]
Amendment No. 4 to Asset Purchase Agreement
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
CALLAWAY GOLF COMPANY
By: /s/ Bradley J. Holiday
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Name: Bradley J. Holiday
Title: Senior Executive Vice President
and Chief Financial Officer
TFGC ESTATE INC.
(f/k/a THE TOP-FLITE GOLF COMPANY)
By: /s/ Kevin Golmont
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Name: Kevin Golmont
Title: Chief Restructuring Officer