AGREEMENT
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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
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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
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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
