Callaway 2013 Annual Report Download - page 100

F-30
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 product
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 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 standby letters of credit of $1,297,000 as of December 31, 2013.
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 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 year ended December 31, 2013 was not material to the Company’s financial
position, results of operations or cash flows.
Employment Contracts
In addition, the Company has made contractual commitments to each of its officers and certain other employees
providing for severance payments, including salary continuation, upon the termination of employment by the Company
for convenience or by the officer for substantial cause. In addition, in order to assure that the officers would continue to
provide independent leadership consistent with the Company’s best interest, the contracts also generally provide for
certain protections in the event of a change in control of the Company. These protections include the payment of certain
severance benefits, such as salary continuation, upon the termination of employment following a change in control.
Note 14. Capital Stock
Common Stock and Preferred Stock
As of December 31, 2013, the Company has an authorized capital of 243,000,000 shares, $0.01 par value, of which
240,000,000 shares are designated common stock, and 3,000,000 shares are designated preferred stock. Of the preferred
stock, 240,000 shares are designated Series A Junior Participating Preferred Stock and the remaining shares of preferred
stock are undesignated as to series, rights, preferences, privileges or restrictions.
The holders of common stock are entitled to one vote for each share of common stock on all matters submitted to
a vote of the Company’s shareholders. Although to date no shares of Series A Junior Participating preferred stock have
been issued, if such shares were issued, each share of Series A Junior Participating Preferred Stock would entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the shareholders of the Company. The holders of Series
A Junior Participating Preferred Stock and the holders of common stock shall generally vote together as one class on all
matters submitted to a vote of the Company’s shareholders. Shareholders entitled to vote for the election of directors are
entitled to vote cumulatively for one or more nominees.
Treasury Stock and Stock Repurchases
In November 2007, the Company’s Board of Directors authorized a share repurchase program with a maximum
cost to the Company of $100,000,000 (the “November 2007 repurchase program”). Under this program, the Company
was authorized to repurchase shares of its common stock in the open market or in private transactions, subject to the
Company’s assessment of market conditions and buying opportunities.
During 2013, the Company repurchased approximately 56,000 shares of its common stock at an average cost per
share of $6.50, for a total cost of $364,000. The Company acquired these shares to satisfy the Company's tax withholding
obligations in connection with the vesting and settlement of employee restricted stock unit awards. The Company’s