Callaway 2009 Annual Report Download - page 60

exceeded 150% of the conversion price for at least 20 of the 30 consecutive trading days ending the day
before the Company sends the notice of mandatory conversion. Given these factors, if the Company elects
to mandatorily convert any preferred stock, it will make a payment on the preferred stock equal to the
aggregate amount of dividends that would have accrued and become payable through and including June 15,
2012, less any dividends already paid on preferred stock (see Note 3 to the Consolidated Financial
Statements—“Preferred Stock Offering” in this Form 10-K). The amounts included in the table above
represent the Company’s total commitment to pay preferred dividends through June 15, 2012 should it opt
to mandatorily convert any preferred stock. However, if the preferred stock were to remain outstanding
subsequent to June 15, 2012, the Company would be required to continue to pay dividends subject to the
terms and conditions of the preferred stock. These additional dividends are not reflected in this table.
(3) The Company leases certain warehouse, distribution and office facilities, vehicles and office equipment
under operating leases. The amounts presented in this line item represent commitments for minimum lease
payments under noncancelable operating leases.
(4) Amount represents total uncertain income tax positions pursuant to the adoption of ASC Topic 740-25-6.
For further discussion see Note 15 to the Consolidated Financial Statements—“Income Taxes” in this Form
10-K.
(5) The Company has an unfunded, nonqualified deferred compensation plan that is backed by Company-owned
life insurance policies. As of October 1, 2009, the Company announced the termination of the plan. In
December 2009, a portion of the plan assets were liquidated and distributed to its participants. The
remaining plan assets will be liquidated and distributed in October, 2010. The plan had been offered to its
officers, certain other employees and directors, and allowed participants to defer all or part of their
compensation, to be paid to the participants or their designated beneficiaries upon retirement, death or
separation from the Company. At December 31, 2009, the cash surrender value of the Company-owned life
insurance related to deferred compensation was $3.6 million and was included in other current assets. The
liability for the deferred compensation at December 31, 2009 was $3.0 million and was included in accrued
employee compensation and benefits.
During its normal course of business, the Company has made certain indemnities, commitments and
guarantees under which it may be required to make payments in relation to certain transactions. These include
(i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale
and/or license of Company products or trademarks, (ii) indemnities to various lessors in connection with facility
leases for certain claims arising from such facilities or leases, (iii) indemnities to vendors and service providers
pertaining to the goods or services provided to the Company or based on the negligence or willful misconduct of
the Company and (iv) indemnities involving the accuracy of representations and warranties in certain contracts.
In addition, the Company has made contractual commitments to each of its officers and certain other employees
providing for severance payments upon the termination of employment. The Company also has consulting
agreements that provide for payment of nominal fees upon the issuance of patents and/or the commercialization
of research results. The Company has also issued guarantees in the form of two standby letters of credit as
security for contingent liabilities under certain workers’ compensation insurance policies and as collateral for a
loan issued to Golf Entertainment International Limited (see Note 4 “Investments” to the Consolidated Financial
Statements). In addition, in connection with the uPlay asset acquisition, the Company could be required to pay an
additional purchase price of up to $10.0 million based on a percentage of earnings generated from the sale of
uPlay products over a period of three years ending on December 31, 2011 (see Note 5 “Business Acquisitions” to
the Consolidated Financial Statements). The duration of these indemnities, commitments and guarantees varies,
and in certain cases may be indefinite. The majority of these indemnities, commitments and guarantees do not
provide for any limitation on the maximum amount of future payments the Company could be obligated to make.
Historically, costs incurred to settle claims related to indemnities have not been material to the Company’s
financial position, results of operations or cash flows. In addition, the Company believes the likelihood is remote
that payments under the commitments and guarantees described above will have a material effect on the
Company’s financial condition. The fair value of indemnities, commitments and guarantees that the Company
issued during the fiscal year ended December 31, 2009 was not material to the Company’s financial position,
results of operations or cash flows.
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