Callaway 2011 Annual Report Download - page 110

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entered into many of these contractual agreements with terms ranging from one to six years. The minimum
obligation that the Company is required to pay under these agreements is $79,049,000 over the next six years. In
addition, the Company also enters into unconditional purchase obligations with various vendors and suppliers of
goods and services in the normal course of operations through purchase orders or other documentation or that are
undocumented except for an invoice. Such unconditional purchase obligations are generally outstanding for
periods less than a year and are settled by cash payments upon delivery of goods and services and are not
reflected in this total. Future purchase commitments as of December 31, 2011 are as follows (in thousands):
2012 .............................................................................. $47,447
2013 .............................................................................. 20,195
2014 .............................................................................. 10,926
2015 .............................................................................. 430
2016 .............................................................................. 26
Thereafter ......................................................................... 25
$ 79,049
Other Contingent Contractual Obligations
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, (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 and 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 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
a standby letter of credit as security for contingent liabilities under certain workers’ compensation insurance
policies.
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 material payments will
be required under the indemnities, commitments and guarantees described above. The fair value of indemnities,
commitments and guarantees that the Company issued during the year ended December 31, 2011 was not
material to the Company’s financial position, results of operations or cash flows.
Employment Contracts
The Company has entered into employment contracts with certain of the Company’s officers. These
contracts generally provide for severance benefits, including salary continuation, if employment is terminated by
the Company for convenience or by the officer for substantial cause. For the year ended December 31, 2011, the
Company recognized $16,329,000 in severance benefits in connection with the Reorganization and Reinvestment
Initiatives announced in June 2011 (see Note 3). In addition, in order to assure that the officers would continue to
provide independent leadership consistent with the Company’s best interests in the event of an actual or
threatened change in control of the Company, the contracts also generally provide for certain protections in the
event of such a change in control. These protections include the payment of certain severance benefits, including
salary continuation, upon the termination of employment following a change in control.
F-36