Document:

<PAGE>   1

                                                                   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;

<PAGE>   2
               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.

                                       2
<PAGE>   3
        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

                                       3
<PAGE>   4
                      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:

                                       4
<PAGE>   5
               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;

                                       5
<PAGE>   6
               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.

                                       6
<PAGE>   7
        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.

                                    * * * *

                                       7
<PAGE>   8
               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:
                                      -------------------------------
                                      Name:
                                      Title:

                                 Signature Page
<PAGE>   9
                                   CALLAWAY GOLF SALES COMPANY,
                                   as CGS Originator and as Servicer

                                   By:
                                      -------------------------------
                                      Name:
                                      Title:

                                 Signature Page
<PAGE>   10
                                   CALLAWAY GOLF COMPANY,
                                   as Parent Guarantor

                                   By:
                                      -------------------------------
                                      Name:
                                      Title:

                                 Signature Page
<PAGE>   11
                                   REDWOOD RECEIVABLES CORPORATION,
                                   as Purchaser

                                   By:
                                      -------------------------------
                                      Name:
                                      Title:

                                 Signature Page
<PAGE>   12
                                   GENERAL ELECTRIC CAPITAL CORPORATION,
                                   as Operating Agent and as Collateral Agent

                                   By:
                                      -------------------------------
                                      Name:
                                      Title:

                                 Signature Page
<PAGE>   13

                                   EXHIBIT A

                                       TO

     SECOND AMENDMENT AND LIMITED WAIVER TO RECEIVABLES TRANSFER AGREEMENT

                                 (SEE ATTACHED)

                                   Exhibit A
<PAGE>   14

                                   EXHIBIT B

                                       TO

     SECOND AMENDMENT AND LIMITED WAIVER TO RECEIVABLES TRANSFER AGREEMENT

                                 (SEE ATTACHED)

                                   Exhibit B
<PAGE>   15
                                   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

<PAGE>   16
               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:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                                                   INTEREST
       COMPANY                     (A)  Shareholder/Member          HELD       SHARES
-----------------------------------------------------------------------------------------
<S>                                <C>                             <C>         <C>
       Callaway Golf Company       Various (Publicly Held)          100%       74,080,622(1)
--------------------------------------------------------------------------------------------
       Callaway Golf Sales         Callaway Golf Company            100%       10,000
       Company
--------------------------------------------------------------------------------------------
</TABLE>

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."

----------
(1)  As of November 30, 2000.

                                   Schedule I<PAGE>   1
                                                                   EXHIBIT 10.42

                      ASSIGNMENT AND ASSUMPTION AGREEMENT

        This Assignment and Assumption Agreement is made effective as of April
24, 2000, by and among Callaway Golf Company, a Delaware corporation ("Callaway
Golf"), Sanwa Bank California, a California corporation ("Sanwa") and Arrowhead
Trust Incorporated, a California trust company ("Arrowhead").

                                   BACKGROUND

               A. On or about July 14, 1995, Callaway Golf and Sanwa entered
into that certain Trust Agreement (the "Trust Agreement").

               B. On or about September 13, 1995, pursuant to a Stock Purchase
Agreement dated July 14, 1995, Sanwa, as trustee under the Trust Agreement,
executed and delivered to Callaway Golf a Non-Recourse Promissory Note dated
September 13, 1995, made payable to Callaway Golf in the original principal
amount of $60,575,000 (the "First Promissory Note"), and in exchange therefor
purchased 4,000,000 shares of Callaway Golf Common Stock, as evidenced by Stock
Certificate No. NY 17202 (the "First Stock Certificate").

               C. On or about December 29, 1995, pursuant to a Stock Purchase
Agreement dated December 21, 1995, Sanwa, as trustee under the Trust Agreement,
executed and delivered to Callaway Golf a Non-Recourse Promissory Note dated
December 29, 1995, made payable to Callaway Golf in the original principal
amount of $26,262,600 (the "Second Promissory Note"), and in exchange therefor
purchased 1,300,000 shares of Callaway Golf Common Stock, as evidenced by Stock
Certificate No. NY 17213 (the "Second Stock Certificate).

               D. On or about April 21, 2000, Sanwa sold to Arrowhead a portion
of it's trust business, including its rights and obligations with respect to the
First Promissory Note and the Second Promissory Note (collectively, the
"Notes"), the shares of Callaway Golf Common Stock represented by the First
Stock Certificate and the Second Stock Certificate (collectively, the "Acquired
Shares"), the Trust Agreement and the Trust Fund.

               E. Callaway Golf is willing to consent to the transfer of the
Assigned Documents (hereafter defined) to Arrowhead only upon the following
terms and conditions:

                                   AGREEMENT

        1. Assignment. Sanwa does hereby assign, transfer and convey to
Arrowhead all of its right, title and interest in and to (i) the Trust
Agreement, (ii) the Notes, (iii) the Acquired Shares, including the First Stock
Certificate and the Second Stock Certificate, (iv) the Trust Fund (as such term
is used in the Trust Agreement), including all amounts held in the Trust Fund,
(v) all reports, documents and other records relating in any manner whatsoever
to the Trust Agreement or the Trust Fund

<PAGE>   2

and (vi) any other rights, agreements or instruments relating to any of the
items referred to in items (i) through (v) of this sentence (collectively, the
"Assigned Documents").

        2. Assumption. Arrowhead does hereby accept the assignment set forth in
Section 1 and does hereby agree as successor Trustee (as such term is used in
the Trust Agreement) to pay, perform and discharge when due all of Sanwa's
obligations under the Assigned Documents, including any obligation arising prior
to the date hereof which has not been paid, performed or discharged prior to the
effectiveness of this Assignment and Assumption Agreement.

        3. Consent. Callaway Golf does hereby consent to the assignment and
assumption of the Assigned Documents as set forth above in Section 1 and Section
2.

        4. Further Assurances. Sanwa and Arrowhead agree to execute and deliver
such other agreements, documents and instruments as Callaway Golf may reasonably
request to further effect the transfer from Sanwa to Arrowhead of all rights and
obligations being assigned and assumed hereunder and all other related rights
and obligations.

        5. Notice. The address to where notice may be given to Arrowhead under
any of the Assigned Documents, including but not limited to, any notice
provisions thereunder, shall be as follows:

                      Mable Pascasio, Trust Officer
                      Employee Benefit Department
                      Arrowhead Trust Incorporated
                      24 Executive Park, Suite 125
                      Irvine, CA 92614
                      Fax:  (949) 263-8026

        6. Settlement of Accounts. Sanwa Agrees to provide by September 30,
2000, or such later date as Sanwa and Callaway Golf shall mutually agree, the
written account statement required by Section 10.2 of the Trust Agreement.

        7. Counterparts. This Assignment and Assumption Agreement may be
executed in one or more counterparts all of which taken together shall
constitute one and the same instrument.

                                       2

<PAGE>   3

        IN WITNESS WHEREOF, the undersigned have executed this Assignment and
Assumption Agreement as of the date first set forth above.

SANWA BANK CALIFORNIA:

By:
   --------------------------------
Print Name:
Print Title:

ARROWHEAD TRUST INCORPORATED:

By:
   --------------------------------
Print Name:
Print Title:

CALLAWAY GOLF COMPANY:

By:
   --------------------------------
Print Name:
Print Title:

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