AGREEMENT
Agreement entered into this 30th day of June, 1998 by and among Xxxxxxxx
Controls, Inc., a Delaware corporation ("Xxxxxxxx"), Ajay Sports, Inc., a
Delaware corporation ("ASI"), Ajay Leisure Products, Inc., a Delaware
corporation ("ALP"), Leisure Life, Inc., a Tennessee corporation ("LLI"), and
Palm Springs Golf, Inc., a Colorado corporation ("PSG"). Hereinafter, ASI, ALP,
LLI and PSG are collectively referred to as "Ajay."
RECITALS
WHEREAS, Xxxxxxxx and its subsidiaries and Ajay are all borrowers under a
credit agreement dated July 11, 1997 (the "Credit Agreement") with Xxxxx Fargo
Bank, National Association ("Bank"), under which Credit Agreement all borrowers
are jointly and severally liable for all amounts owed thereunder to Bank.
WHEREAS, Xxxxxxxx and Ajay have had discussions with the Bank and are in
the process of separating their respective loans with the Bank (the "New Xxxxx
Fargo Loans").
WHEREAS, Ajay currently owes Xxxxxxxx approximately $4,564,000 (the
"Advances") and in accordance with this Agreement, and as hereinafter provided,
the parties anticipate that Xxxxxxxx will make additional advances to Ajay of up
to $4,088,000 (the "Additional Advances"), resulting in a total of up to
$8,652,000. Together, the Advances and the Additional Advances are referred to
collectively as the "Ajay/Xxxxxxxx Debt."
WHEREAS, Xxxxxxxx has agreed to convert $5,000,000 of the Ajay/Xxxxxxxx
Debt into preferred stock of Ajay (the "Debt Conversion") to assist Ajay in
obtaining its separate loan from the Bank.
WHEREAS, the parties desire to enter into this agreement to provide the
terms for the Additional Advances, the Debt Conversion and repayment of the
remaining Ajay/Xxxxxxxx Debt.
AGREEMENT
1. Xxxxxxxx has assumed Ajay's obligations under two promissory notes of
which Ajay is maker and which are owed to Enercorp, Inc. ($200,000) and First
Equity Corporation ($748,000), pursuant to assumption agreements attached as
Schedule 1. The $948,000 is included in the Additional Advances.
2. Ajay is the primary obligor under that certain Promissory Note dated
July14, 1997 in the principal amount of $2,340,000 owed to United States
National Bank of Oregon (the "US Bank Note"). Xxxxxxxx and its subsidiaries are
guarantors of obligations of Ajay under the US Bank Note. Xxxxxxxx has made
certain payments on the US Bank Note, the amounts of which are included in the
Advances. In addition, Xxxxxxxx may make additional payments under the US Bank
Note of up to $2,140,000, which amount is included in the Additional Advances.
At such time as the US Bank Note has been fully repaid, the Additional Advances
amount shall be adjusted to reflect the actual additional amounts advanced by
Xxxxxxxx in payment of the US Bank Note.
3. Xxxxxxxx has agreed to make an additional final loan of $1,000,000 to
Ajay, the full amount of which is included in the Additional Advances. This
final loan will be made in a combination of Xxxxxxxx common stock and cash.
3.1 Xxxxxxxx Common Stock. On the date of the closing of the New
Xxxxx Fargo Loans (the "Issue Date"), Xxxxxxxx will issue to Ajay shares of
Xxxxxxxx common stock valued at $500,000 (the "Xxxxxxxx Stock"). The number of
shares to be issued will be calculated by multiplying the per share closing
price of the Xxxxxxxx common stock as reported by the Nasdaq National Market on
the business day immediately preceding the closing date of the New Xxxxx Fargo
Loans by 90% and dividing the product of that equation into $500,000 with any
fraction being rounded to the nearest full share. (For example if the closing
price is $3.00 per share, the calculation would be as follows: $3.00 X 90% =
$2.70; $500,000/$2.70 =185,185 shares.) The stock certificate evidencing the
Xxxxxxxx Stock shall be delivered to Ajay within 30 days after the Issue Date.
The Xxxxxxxx Stock will be included in a selling shareholder registration
statement on Form S-3 to be filed by Xxxxxxxx within 90 days after the closing
of the New Xxxxx Fargo Loans. Xxxxxxxx makes no guaranty regarding the amount of
proceeds that Ajay may receive from its sale of the Xxxxxxxx Stock.
3.2 Cash. Xxxxxxxx will advance $500,000 cash to Ajay within 30 days
after the closing of the New Xxxxx Fargo Loans.
4. The Advances consist of loans and advances Ajay has received from
Xxxxxxxx in the amount of $4,564,000 now due and owing to Xxxxxxxx and the
Additional Advances consist of additional amounts of up to $4,088,000 which will
or may be advanced at future dates by Xxxxxxxx to Xxxx under the terms of this
Agreement. The Additional Advances include the $948,000 (referenced in paragraph
1 above), up to $2,140,000 (referenced in paragraph 2 above), and the $1,000,000
(referenced in paragraph 3 above).
5. Xxxxxxxx will convert $5,000,000 of the Ajay/Xxxxxxxx Debt into
6,000,000 shares of Series D Cumulative Convertible Non-Voting Preferred Stock
of Ajay (the "Series D Preferred Stock"). The certificate of designations of
rights and preferences for the Series D Preferred Stock in the form to be filed
by Ajay with the Delaware Secretary of State is attached as Schedule 5. A stock
certificate evidencing the Series D Preferred Stock will be issued to Xxxxxxxx
within 30 days after the Debt Conversion date.
6. Ajay will make a promissory note payable to Xxxxxxxx for the full
amount of the unconverted portion of the Ajay/Xxxxxxxx Debt (the "Promissory
Note"). The Promissory Note in the principal amount of up to $3,652,000 is
attached as Schedule 6.
7. The Promissory Note will be secured by a lien against the assets of
Ajay. Ajay hereby reconfirms the security interest in its assets granted to
Xxxxxxxx under that certain Security Agreement dated effective July 14, 1997, a
copy of which is attached as Schedule 7, and nothing contained herein shall be
deemed to modify or otherwise diminish the security interest granted to Xxxxxxxx
thereunder. This Security Agreement shall evidence the lien securing the
Promissory Note and Ajay will cause financing statements to be prepared
reflecting Ajay as debtor and of Xxxxxxxx and its subsidiaries, as creditor, and
will be filed on the earlier of (i) date the US Bank Note is fully repaid, or
(ii) receipt of approval from US Bank for filing at an earlier date. Financing
statements will be filed for Leisure Life, Inc. in Tennessee with the Tennessee
Secretary of State, and for Ajay Sports, Inc., Ajay Leisure Products, Inc. and
Palm Springs Golf, Inc. in Wisconsin with the Wisconsin Secretary of State.
8. For three years after the date of this Agreement, Ajay will pay an
administrative fee to Xxxxxxxx of $90,000 per year, payable $7,500 per month in
arrears with the first payment due on July 31, 1998.
9. While all or any part of the Ajay/Xxxxxxxx Debt is outstanding, Ajay
shall provide Xxxxxxxx with (i) internally prepared financial statements and any
other available reports regarding Ajay's financial position on a monthly basis,
(ii) copies of its quarterly reports on Form 10-Q, annual reports on Form 10-K,
current reports on Form 8-K and other periodic reports filed by Ajay with the
Securities and Exchange Commission, and (iii) copies of any materials sent to
Ajay's stockholders.
10. If any non-essential provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
11. If an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. The word
"including" shall mean including without limitation. The parties intend that
each provision contained herein shall have independent significance.
12. This Agreement, together with all of the other agreements referenced
herein and all ancillary documents related to all of such agreements constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede all prior agreements.
13. This Agreement may be amended, modified, or supplemented only by a
written instrument executed by the parties against which enforcement of the
amendment, modification or supplement is sought.
14. This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.
Executed and delivered as of the date first above written by the parties
hereto through their duly authorized officers.
AJAY SPORTS, INC.
By /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx, Chief Financial Officer
AJAY LEISURE PRODUCTS, INC.
By /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx, Chief Financial Officer
LEISURE LIFE, INC.
By /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx, Chief Financial Officer
PALM SPRINGS GOLF, INC.
By /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx, Chief Financial Officer
XXXXXXXX CONTROLS, INC.
By /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Chief Financial Officer
Consented to by the undersigned as of the date first above written, in his
capacity as guarantor of certain obligations of Ajay to Xxxxxxxx.
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Individually