Callaway Golf Company has priced and increased by $15 million its previously announced private offering of preferred stock. Callaway will issue $125 million principal amount of 7.50% Series B Cumulative Perpetual Convertible Preferred Stock, 1 cent par value, with a liquidation preference of $100 per share.

The company also granted the initial purchasers a 30-day option to purchase up to an additional $15 million of the preferred stock. The preferred stock will be resold to a group of qualified institutional buyers pursuant to the Rule 144A exemption from registration under the Securities Act of 1933, as amended. The sale of the preferred stock is expected to close on June 15, 2009. The company will pay cumulative dividends on the preferred stock from the date of original issue at a rate of 7.50% per annum of the $100 liquidation preference per share, subject to adjustment in certain circumstances.

The preferred stock will be convertible, at the holder’s option, in certain circumstances, into common stock of Callaway at an initial conversion rate of 14.1844 shares of Callaway’s common stock per share of preferred stock, which is equivalent to an initial conversion price of approximately $7.05 per share, or a conversion premium of approximately 19.1% based on the last reported sale price on the New York Stock Exchange of $5.92 per share of Callaway’s common stock on June 9, 2009.

The company may also elect, on or prior to June 15, 2012, to mandatorily convert some or all of the preferred stock into shares of Callaway’s common stock if the closing price of the company’s common stock has 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. If the company elects to mandatorily convert any preferred stock, it will make an additional 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 the preferred stock.

Callaway estimates that the net proceeds from this offering will be approximately $119 million in cash, exclusive of net proceeds received if the initial purchasers exercise the over-allotment option in full, after deducting estimated discounts, commissions, and expenses. Callaway intends to use the net proceeds of this offering to pay down the company’s revolving line of credit, which the company believes will enable it to retain the credit facility’s currently favorable terms and avoid the need for an amendment of such terms.