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EXHIBIT 10.40
EXECUTION COPY
SECOND AMENDMENT AND LIMITED WAIVER
TO
RECEIVABLES TRANSFER AGREEMENT
AND
FIRST AMENDMENT TO ANNEX X
THIS SECOND AMENDMENT AND LIMITED WAIVER TO RECEIVABLES TRANSFER
AGREEMENT AND FIRST AMENDMENT TO ANNEX X, dated as of December 29, 2000 (this
"Second Amendment & Limited Waiver") relates to (i) that certain Receivables
Transfer Agreement dated as of February 10, 1999, as amended by the First
Amendment to Receivables Transfer Agreement, dated as of April 28, 2000 (the
"First Amendment") (as amended by the First Amendment, and as it may be further
amended, supplemented, restated or otherwise modified from time to time, the
"Transfer Agreement"), and (ii) Annex X to the Transfer Agreement and
Receivables Purchase and Servicing Agreement, and is entered into by and among
GOLF FUNDING CORPORATION, a Delaware Corporation ("GFC"), CALLAWAY GOLF SALES
COMPANY, a California corporation, as the originator (in such capacity, the "CGS
Originator") and as the servicer (in such capacity, the "Servicer"), CALLAWAY
GOLF COMPANY, a Delaware corporation, as the parent guarantor (the "Parent
Guarantor"), REDWOOD RECEIVABLES CORPORATION, as the purchaser (the
"Purchaser"), and GENERAL ELECTRIC CAPITAL CORPORATION, as the operating agent
and the collateral agent ("GECC"). Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in Annex X.
W I T N E S S E T H
WHEREAS, GFC, the CGS Originator, the Servicer and the Parent
Guarantor (collectively, the "Parties") have entered into the Transfer
Agreement;
WHEREAS, Parent Guarantor has notified the other Parties that it
intends to merge with Callaway Golf Ball Company ("Golf Ball") through a
tax-free statutory merger in which Parent Guarantor will be the surviving
corporation (the "Golf Ball Merger") and, immediately after the merger, will
transfer its assets and liabilities relating to domestic sales (the "Asset
Transfer") to the CGS Originator;
WHEREAS, Callaway Golf Sales Company desires to sell all
Receivables received by it in the Asset Transfer ("Ball Receivables") to GFC
pursuant to the Transfer Agreement;
WHEREAS, GFC desires to sell the Ball Receivables as Transferred
Receivables to the Purchaser pursuant to the Purchase Agreement;
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WHEREAS, Parent Guarantor has notified the other Parties that it
intends to form a foreign company ("CG South Pacific") to be a wholly-owned
subsidiary of Parent Guarantor (as more fully described in Exhibit A attached
hereto, the "Subsidiary Formation");
WHEREAS, Parent Guarantor has notified the other Parties that
Callaway Golf Europe Ltd. ("CG Europe") intends to acquire a Spanish
distribution company through the following steps: (a) CG Europe will purchase
100% of the stock of Green Fee, S.A. ("Green Fee"), (b) CG Europe will create a
wholly-owned subsidiary ("Spanish Co.") into which Green Fee will be merged,
with Spanish Co. as the surviving corporation, and (c) Spanish Co. will be
merged with and into CG Europe (as more fully described in Exhibit B attached
hereto, the "Spanish Acquisition" and, together with the Golf Ball Merger, the
Asset Transfer and the Subsidiary Formation, the "Parent Transactions");
WHEREAS, Parent Guarantor has requested that the Transfer
Agreement be amended to reflect the Parent Transactions (the "Amendments");
WHEREAS, the Purchaser, the Operating Agent and the Collateral
Agent have agreed to such Amendments and have requested that the Parties agree
to the amendment of Annex X to provide for a "Reserve" in an amount equal to the
Outstanding Balance of the Receivables transferred as part of the Asset Transfer
(the "Annex X Amendment");
WHEREAS, Parent Guarantor has requested that the Parties grant a
limited waiver (the "Limited Waivers") to certain provisions of the Transfer
Agreement with respect to the applicable Parent Transactions, as follows:
a. Section 4.05(c) (Mergers, Subsidiaries, Etc.) solely with
respect to the Golf Ball Merger;
b. Section 4.03(a) (Sale of Stock and Assets) solely with respect
to the Asset Transfer;
c. Sections 4.05(a) (Restricted Payments), 4.05(b) (Indebtedness)
and 4.05(c) (Mergers, Subsidiaries, Etc.) solely with respect to the
Subsidiary Formation; and
d. Sections 4.05(a) (Restricted Payments), 4.05(b) (Indebtedness)
and 4.05(c) (Mergers, Subsidiaries, Etc.) solely with respect to the
Spanish Acquisition.
WHEREAS, the Parties are willing to so effect the Amendments and
the Annex X Amendment and provide the Limited Waivers on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the above premises, the
Parties, the Purchaser, the Operating Agent, and the Collateral Agent agree as
follows:
2. Definitions and Usage. Capitalized terms used, but not defined,
herein have the meanings ascribed to such terms in Annex X. Any reference herein
to Section, Exhibit or Schedule shall, unless otherwise specified, refer to such
Section, Exhibit or Schedule hereof, in its entirety.
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3. Amendments to the Transfer Agreement. Upon the Effective Date (as
defined in Section 6 below), the Transfer Agreement is hereby amended as
follows:
a. Amendment to Annex W. Annex W is hereby amended by deleting
the definition of "CEF Lease Facility" in its entirety and substituting
the following in lieu thereof:
"`CEF Lease Facility' shall mean (i) the Master Lease Agreement
dated as of December 30, 1998 between General Electric Capital
Corporation, for itself and as agent for certain participants, as
lessor, and Callaway Golf Ball Company, as lessee, (ii) the
Corporate Guaranty dated December 30, 1998 by Callaway Golf
Company for the benefit of General Electric Capital Corporation,
for itself and as agent for certain participants, (iii) the
Interim Finance Agreement dated December 30, 1998 between General
Electric Capital Corporation, for itself and as agent for certain
participants, as lender, and Callaway Golf Ball Company, as
borrower and (iv) all documents delivered under, and relating to,
any of the agreements described in clauses (i) through (iii)
hereof (including, but not limited to, the Assumption Agreement,
dated as of December 29, 2000 by and among General Electric
Capital Corporation, for itself and as agent for certain
participants, Callaway Golf Ball Company and Parent Guarantor),
in each case as amended, modified, supplemented or restated from
time to time."
b. Amendment to Annex X. Annex X is hereby amended as follows:
i. By deleting the definition of "Credit Agreement" in its
entirety and substituting the following in lieu thereof:
"`Credit Agreement' shall mean that certain Amended and Restated
Credit Agreement dated as of February 10, 1999, among Callaway
Golf Company, as borrower, the lenders party thereto and GE
Capital, as agent for itself and the other lenders party thereto,
as amended by the First Amendment to Amended and Restated Credit
Agreement, dated April 28, 2000 and as further amended by the
Second Amendment and Limited Waiver to Amended and Restated
Credit Agreement, dated as of December 29, 2000, together with
such further amendments, restatements, supplements or
modifications thereto or any refinancings, replacements or
refundings thereof as may be agreed to by the Purchaser and the
Operating Agent.";
ii. By amending the definition of "Reserves" by inserting
the words "CGB Receivable Reserve" after the term "the Extended
Term Reserve" and prior to the words "and such other reserves . .
."; and
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iii. By adding the following defined term after the
definition of "Cash Purchase Price" and prior to the definition
of "CGS":
"CGB Receivable Reserve" shall mean the Outstanding Balance of
those Receivables that are (a) originated by Callaway Golf Ball
Company, (b) transferred by Callaway Golf Ball Company to the
Parent Guarantor in a tax-free statutory merger whereby the
Parent Guarantor is the surviving corporation and (c)
subsequently transferred by the Parent Guarantor to the CGS
Originator; provided, that the CGB Receivable Reserve may be
eliminated or decreased at any time at the sole discretion of the
Operating Agent.
c. Amendment to Schedule 4.01(h). Schedule 4.01(h) to the
Transfer Agreement is hereby amended by deleting the text thereof in its
entirety and substituting Schedule I, attached hereto, in lieu thereof.
4. Limited Waivers. Upon the Effective Date, and as limited herein, the
Parties hereby waive the following provisions of the Transfer Agreement solely
with respect to the matters expressly described below:
a. Section 4.05(c) (Mergers, Subsidiaries, Etc.) solely with
respect to the Golf Ball Merger;
b. Section 4.03(a) (Sale of Stock and Assets) solely with respect
to the Asset Transfer;
c. Sections 4.05(a) (Restricted Payments), 4.05(b) (Indebtedness)
and 4.05(c) (Mergers, Subsidiaries, Etc.) solely with respect to the
Subsidiary Formation; provided that the Limited Waiver to Section
4.05(a) permitting the Parent Guarantor and CG South Pacific, one of the
Parent Guarantor's Subsidiaries, to enter into a lending transaction
shall be limited to permit only such lending transaction that in the
aggregate does not exceed US $3,000,000 and provided further that the
Limited Waver to Section 4.05(b) permitting the incurrence or assumption
of indebtedness by CG South Pacific shall not apply to any such
incurrence or assumption of indebtedness exceeding US $3,000,000; and
d. Sections 4.05(a) (Restricted Payments), 4.05(b) (Indebtedness)
and 4.05(c) (Mergers, Subsidiaries, Etc.) solely with respect to the
Spanish Acquisition; provided that the Limited Waiver to Section 4.05(a)
permitting the Parent Guarantor and CG Europe, one of the Parent
Guarantor's Subsidiaries, to enter into a lending transaction shall be
limited to permit only such lending transaction that in the aggregate
does not exceed US $4,000,000 and provided further that the Limited
Waver to Section 4.05(b) permitting the incurrence or assumption of
indebtedness by CG Europe shall not apply to any such incurrence or
assumption of indebtedness exceeding US $4,000,000.
5. Representations and Warranties. The Parties hereby jointly and
severally represent and warrant to GFC that, as of the Effective Date and after
giving effect to this Second Amendment & Limited Waiver:
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a. All of the representations and warranties of the Parties
contained in this Second Amendment & Limited Waiver, the Transfer
Agreement and the other Related 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 Termination Event or Incipient Termination Event has
occurred and is continuing or will result after giving effect to this
Second Amendment & Limited Waiver.
6. Effective Date. This Second Amendment & Limited Waiver shall become
effective as of the date first written above (the "Effective Date") upon the
satisfaction of each of the following conditions:
a. GFC shall have received each of the following documents, in
each case in form and substance satisfactory to GFC:
i. counterparts hereof executed by each of the Parties;
ii. duly executed amendments to the CEF Lease Facility and
the Credit Facility effecting all modifications necessary to
permit the Parent Transactions, together with a certificate of
the Chief Financial Officer of the Parent Guarantor and the CGS
Originator certifying that all conditions to the effectiveness of
the amendments have been satisfied and that the amendments are in
full force and effect as of the Effective Date;
iii. the duly executed Pledge Amendment reflecting the
Subsidiary Formation accompanied by the share certificate
representing the outstanding CG South Pacific Stock being pledged
and a stock power for such share certificate executed in blank;
iv. a certificate of the Secretary or Assistant Secretary
of each of the Parties dated the Effective Date certifying (A)
that the bylaws of such 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 Party delivered
to GFC and remain in full force and effect as of the Effective
Date, (B) that the charter of such Party has not been amended or
otherwise modified since the date of the most recent
certification thereof by the Secretary of State of such Party's
jurisdiction of incorporation delivered to GFC and remain in full
force and effect as of the Effective Date and (C) that the
execution, delivery and performance of this Amendment have been
duly authorized by all necessary or proper corporate and
shareholder action;
v. a certified copy of the Certificate of Merger filed
with the State of California evidencing the Golf Ball Merger; and
vi. such additional documentation as GFC may reasonably
request;
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b. No law, regulation, order, judgment or decree of any
Governmental Authority shall, and GFC 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 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;
c. All of the representations and warranties of the Parties
contained in this Amendment, the Transfer Agreement and the other
Related Documents shall be 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);
d. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Amendment shall be satisfactory in all respects in
form and substance to GFC; and
e. No Termination Event or Incipient Termination Event shall have
occurred and be continuing on the Effective Date or will result after
giving effect to this Amendment.
7. Reference to and Effect on the Related Documents.
a. Upon the Effective Date, each reference in the Transfer
Agreement to "this Agreement", "hereunder", "hereof" or words of like
import, and each reference in the Loan Documents and the other Related
Documents to the Transfer Agreement, shall mean and be a reference to
the Transfer Agreement as amended and supplemented hereby.
b. Except to the extent specifically set forth herein, the
respective provisions of the Transfer Agreement and the other Related
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 Second Amendment & Limited Waiver 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 Transfer
Agreement or any other Related Document, (ii) prejudice any right or
rights which any of the Parties may now have or may have in the future
under or in connection with the Transfer Agreement or any other Related
Document, (iii) require any of the Parties 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 Second Amendment & Limited Waiver is a Related
Document. The headings herein are for convenience of reference only and shall
not alter or otherwise affect the meaning hereof.
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9. Section Titles. The Section titles in this Second Amendment & Limited
Waiver are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
10. Counterparts. This Second Amendment & Limited Waiver may be executed
in any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
11. GOVERNING LAW. THIS SECOND AMENDMENT & LIMITED WAIVER, 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 Second Amendment & Limited Waiver. In
the event an ambiguity or question of intent or interpretation arises, this
Second Amendment & Limited Waiver 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
Second Amendment & Limited Waiver.
13. Waiver by Parent Guarantor, CGS Originator, the Servicer and GFC.
Each of the Parent Guarantor, the CGS Originator, the Servicer and GFC hereby
waives any claim, defense, demand, action or suit of any kind or nature
whatsoever against the Purchaser, the Operating Agent or the Collateral Agent
arising on or prior to the date of this Second Amendment & Limited Waiver in
connection with any of the Related Documents or the transactions contemplated
thereunder.
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IN WITNESS WHEREOF, GFC, the CGS Originator, the Servicer, the
Parent Guarantor, the Purchaser, the Operating Agent and the Collateral Agent
have caused this Second Amendment & Limited Waiver to be executed by their
respective officers thereunto duly authorized as of the date first above
written.
GOLF FUNDING CORPORATION
By:
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Name:
Title:
Signature Page
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CALLAWAY GOLF SALES COMPANY,
as CGS Originator and as Servicer
By:
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Name:
Title:
Signature Page
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CALLAWAY GOLF COMPANY,
as Parent Guarantor
By:
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Name:
Title:
Signature Page
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REDWOOD RECEIVABLES CORPORATION,
as Purchaser
By:
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Name:
Title:
Signature Page
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GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and as Collateral Agent
By:
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Name:
Title:
Signature Page
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EXHIBIT A
TO
SECOND AMENDMENT AND LIMITED WAIVER TO RECEIVABLES TRANSFER AGREEMENT
(SEE ATTACHED)
Exhibit A
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EXHIBIT B
TO
SECOND AMENDMENT AND LIMITED WAIVER TO RECEIVABLES TRANSFER AGREEMENT
(SEE ATTACHED)
Exhibit B
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SCHEDULE I
TO
SECOND AMENDMENT AND LIMITED WAIVER TO RECEIVABLES TRANSFER AGREEMENT
VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK
SCHEDULE 4.01(h)
1. (a) Subsidiaries of CGS Originator:
Golf Funding Corporation
(b) Joint Ventures/Partnerships of CGS Originator:
None
(c) CGS Originator is an Affiliate of:
Callaway Golf Company
Golf Funding Corporation
Callaway Golf Ball Company (merged into Callaway Golf Company
effective 12/29/00)
CGV, Inc.
Callaway Golf Europe Ltd.
Callaway (Barbados) Foreign Sales Corporation
Callaway Golf (Germany) GmbH
Callaway Golf Ltd. & Co. KG (a German limited partnership;
formerly Callaway Golf Trading GmbH, a German Corporation)
Callaway Golf Korea Ltd.
Callaway Golf K.K. (formerly known as ERC International Company)
Callaway Golf Canada Ltd.
All-American Golf LLC
Callaway Golf Shell Company
Callaway Golf South Pacific Pty Ltd
(d) Subsidiaries of Parent Guarantor:
Callaway Golf Sales Company
Callaway Golf Ball Company
CGV, Inc.
Callaway Golf Europe Ltd.
Callaway (Barbados) Foreign Sales Corporation
Callaway Golf (Germany) GmbH
Callaway Golf Ltd. & Co. KG
Schedule I
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Callaway Golf Korea Ltd.
Callaway Golf K.K.
Callaway Golf Canada Ltd.
All-American Golf LLC
Golf Funding Corporation
Callaway Golf Shell Company
Callaway Golf South Pacific Pty Ltd.
(e) Joint Ventures/Partnerships of Parent Guarantor:
None
(f) Parent Guarantor is an Affiliate of:
Callaway Golf Sales Company
Callaway Golf Ball Company
CGV, Inc.
Callaway Golf Europe Ltd.
Callaway (Barbados) Foreign Sales Corporation
Callaway Golf (Germany) GmbH
Callaway Golf Ltd. & Co. KG
Callaway Golf Korea Ltd.
Callaway Golf K.K.
Callaway Golf Canada Ltd.
All-American Golf LLC
Golf Funding Corporation
Callaway Golf Shell Company
Callaway Golf South Pacific Pty Ltd.
2. Issued and Outstanding Stock of CGS Originator and Parent Guarantor:
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INTEREST
COMPANY (A) Shareholder/Member HELD SHARES
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Callaway Golf Company Various (Publicly Held) 100% 74,080,622(1)
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Callaway Golf Sales Callaway Golf Company 100% 10,000
Company
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3. Outstanding Rights to Purchase, Options, Warrants or Similar Rights or
Agreements: See attached report entitled "Callaway Golf Company Stock
Options Outstanding and Exercisable as of 12/28/00."
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(1) As of November 30, 2000.
Schedule I