<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
MARK ONE:
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-18204
AJAY SPORTS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 39-1644025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1501 E. Wisconsin Street, Delavan, Wisconsin 53115
(Address of principal executive offices)
(Zip Code)
(414) 728-5521
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
Number of shares of common stock outstanding at November 10, 1995: 22,286,873.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AJAY SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited)
------------------ -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 153 $ 105
Trade accounts receivable, net 3,623 1,700
Inventories 5,256 5,786
Prepaid expenses and other current assets 373 211
-------- --------
Total current assets 9,405 7,802
Fixed assets, net 1,307 1,357
Other Investments 74 ---
Other assets 196 206
-------- --------
Total assets $10,982 $ 9,365
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to affiliate $ --- $ 5,378
Note payable to bank 1,238 12
Accounts payable 1,141 1,337
Accrued expenses 491 490
-------- --------
Total current liabilities 2,870 7,209
Note payable - long term 3,600 121
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized
Series B, 12,500 shares outstanding at liquidation value 1.250 1,250
Series C, 315,290 shares outstanding, at liquidation value 3,153
Common stock, $.01 par value, 100,000,000 shares authorized,
22,686,873 and 22,533,637 shares outstanding, respectively 227 225
Additional paid-in capital 8,517 8,961
Accumulated deficit (8,635) (8,401)
-------- --------
Total stockholders' equity 4,512 2,035
-------- --------
Total liabilities and stockholders' equity $ 10,982 $ 9,365
======== ========
</TABLE>
2
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 3,437 $ 2,877 $ 13,376 $ 10,630
Cost of sales 2,926 2,896 10,858 9,587
-------- -------- -------- --------
Gross profit 511 (19) 2,518 1,043
Selling, general and
Administrative expenses 670 688 2,118 1,966
-------- -------- -------- --------
Operating income (loss) (159) (707) 400 (923)
Non-operating (income) expense:
Interest expense, net 167 149 564 462
Other, net 14 8 12 306
-------- -------- -------- --------
Total non-operating expense 181 157 576 768
-------- -------- -------- --------
Income (loss) before income taxes (340) (864) (176) (1,691)
Income taxes -- -- -- --
Net income (loss) $ (340) $ (864) $ (176) $ (1,691)
======== ======== ======== ========
Primary earnings per share $ (.01) $ (.10) $ (.01) $ (.21)
======== ======== ======== ========
Fully diluted earnings per share$ (.01) $ (.10) $ (.01) $ (.21)
======== ======== ======== ========
</TABLE>
3
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (176) $(1,691)
Adjustments to reconcile to net cash
provided by operating activities:
Loss on sale of assets 1 162
Depreciation and amortization 142 102
Change in assets [(increase)/decrease] and
liabilities [increase/(decrease)]:
Trade accounts receivable, net (1,923) (104)
Inventories 530 1,680
Prepaid expenses and other current assets (162) (70)
Investments (74)
Other assets (10) 147
Accounts payable (196) (996)
Accrued expenses 1 (81)
Due to affiliates -- (228)
------- -------
Net cash provided by (used in) operating activities (1,867) (1,079)
------- -------
Cash flows from investing activities:
Purchase of property plant and equipment (99) (81)
Disposition of fixed assets 6 4
Proceeds from sale of investment -- 86
------- -------
Net cash provided by (used in) investing activities (93) 9
------- -------
Cash flows from financing activities:
Net change in bank loan 4,705 (5,022)
Net change in note payable to affiliate (5,370) 6,699
Issuance of preferred shares 2,731 --
Cash acquired in acquisition via non-cash financing -- 2
Preferred dividends (58)
------- -------
Net cash provided by (used in)
financing activities 2,008 1,679
------- -------
Net increase in cash and cash equivalents 48 609
Cash and cash equivalents at beginning of period 105 2
------- -------
Cash and cash equivalents at end of period $ 153 $ 611
======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 570 $ 442
======= =======
Cash paid for income taxes -- --
======= =======
Non-cash financing transaction:
Purchase of Company by issuing stock $ -- $ 700
======= =======
</TABLE>
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The condensed consolidated financial statements included herein have been
prepared by Ajay Sports, Inc. (the "Company") without audit and pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of the Company, the financial statements reflect all adjustments, which consist
only of normal recurring adjustments, necessary to present fairly the financial
position of the Company at September 30, 1995 and the results of operations for
the three-month and nine-month periods ended September 30, 1995 and 1994 and the
cash flows for the same nine-month periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the SEC rules and regulations dealing
with interim financial statements. However, the Company believes that the
disclosures made in the condensed financial statements included herein are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1994 Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
Note 2. Inventories
The major classes of inventories (rounded to thousands) are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ----------
<S> <C> <C>
Raw Materials $3,077 $2,902
Work in Process 663 943
Finished Goods 1,516 1,941
------ ------
$5,256 $5,786
====== ======
</TABLE>
5
<PAGE>
Note 3. NOTES PAYABLE
On July 25, 1995 the Company entered into a Revolving Loan Agreement with United
States National Bank of Oregon ("U. S. Bank") for a credit facility of up to
$8,500,000, replacing a Loan Agreement with Williams Controls, Inc. All of the
Company's subsidiaries and Williams have guaranteed payment of this credit
facility and the Company and its subsidiaries have pledged their inventory and
receivables as collateral. The Revolving Loan is evidenced by demand notes,
requires monthly interest only payments at the prime rate of U. S. Bank
(currently 8.75%) and will be reviewed on May 31, 1996. On October 2, 1995 the
Company and U. S. Bank agreed to modifications to the Revolving Loan Agreement
increasing the credit facility from $8,500,000 to $13,500,000. The Company may
now borrow up to $8,500,000 against 80% of eligible accounts receivable and 50%
of eligible inventory and up to an additional $5,000,000 through its 2-year
bulge loan facility. The increased facility provided the Company the funds
necessary to acquire certain assets of both Korex Corporation and Palm Springs
Golf Company, Inc. in early October 1995. The Company is required to maintain a
minimum tangible net worth of $2,000,000 and a ratio of debt to tangible net
worth of not greater than 4.5 to 1. The Company has agreed to pay Williams 0.5%
per annum of the outstanding Revolving Loan balance on a quarterly basis in
consideration for providing its guarantee of the Revolving Loan. From May 5,
1994 through July 25, 1995 Ajay had operated within a $7,000,000 Loan Agreement
and Joint Venture Implementation Agreement with Williams Controls, Inc.
("Williams"). The loan with Williams was paid off on July 25, 1995 with funds
made available from the present Loan Agreement with U. S. Bank. Prior to paying
off the loan with Williams, the Company and Williams agreed on April 5, 1995 to
modifications of the terms of the Loan Agreement and the Joint Venture
Implementation Agreement.
Thomas W. Itin, the Chairman, Treasurer and a Director of the Company, is also
Chairman, Director and principal stockholder of Williams.
Note 4. STOCKHOLDERS' EQUITY
At the annual meeting held May 24, 1995, the Shareholders voted to increase the
number of authorized common shares to 100,000,000 from 50,000,000.
On July 26, 1995 the Company's Registration Statement filed in connection with
an offering of 325,000 shares of Series C 10% Cumulative Convertible Preferred
Stock and 325,000 Warrants was declared effective. The Series C Preferred Stock
is convertible into shares of the Company's Common Stock at a conversion price
of $.6875. Cumulative dividends are payable on the Series C Preferred Stock.
Each Warrant entitles the holder to purchase one share of Common Stock at any
time through December 31, 1996 at a price of $1.00. The Warrants are redeemable
by the Company at $.05 per Warrant under certain conditions. The terms of these
Warrants are identical to the Company's publicly-held Warrants to purchase
Common Stock. The Company intends to use the estimated net proceeds of this $3.3
million offering for inventory and accounts receivable financing, to
6
<PAGE>
Note 4. STOCKHOLDERS' EQUITY (Cont'd)
improve and enhance its manufacturing capabilities, and to provide working
capital which may be used to expand product lines, develop new markets and
acquire companies or product lines compatible with or complementary to its
present products in order to expand its leisure and recreational business.
In 1994 the Company issued 400,000 shares of stock as part of the acquisition of
Leisure Life that were contingent on certain performance requirements. Those
requirements have not been met and as such those shares will not be released
from escrow to the former owners of Leisure Life and will be returned to
authorized but unissued shares in November, 1995. During the quarter 9,710
shares of Series C convertible preferred stock were converted to 141,236 common
shares.
Note 5. BUSINESS SEGMENT REPORTING
The relative contributions to net sales, operating income and identifiable
assets of the Company's two industry segments for the nine months and quarter
ended September 30, 1995 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
Golf and
Furniture Billiards Consolidated
---------- --------- ------------
<S> <C> <C> <C>
Net sales $ 947 $12,429 $13,376
Operating income/loss) (417) 817 400
Total assets 1,825 9,157 10,982
Depreciation 82 60 142
Capital expenditures 59 40 99
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1995
Golf and
Furniture Billiards Consolidated
--------- --------- ------------
<S> <C> <C> <C>
Net sales $ 164 $3,273 $ 3,437
Operating income(loss) (200) 41 (159)
Total assets 1,825 9,157 10,982
Depreciation 30 20 50
Capital expenditures 8 11 19
</TABLE>
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION - At September 30, 1995 the Company had working capital of
$6,535,000, as compared with $593,000 at December 31, 1994. The $5.9 million
increase in working capital reflects the terms of the new loan agreement with U.
S. Bank, which includes a $3.5 million long-term bulge loan facility (see Note 3
of Notes to Consolidated Financial Statements). Other factors affecting the
increase in working capital were an increase of $1.9 million in Accounts
Receivable due to the $2.7 million increase in sales and a decrease of $0.7
million in external borrowing. The ratio of current assets to current
liabilities at September 30, 1995 was 3.3 compared to 1.1 for December 31, 1994.
LIQUIDITY - On July 25, 1995 Ajay improved its liquidity through obtaining a new
$8.5 million credit facility with U. S. Bank on July 25, 1995. The facility was
increased to $13.5 million on October 2, 1995, in order to accommodate the
acquisitions of certain assets of 2 corporations in early October. The new
credit facility interest rate is at prime, replacing the old credit facility
rate which was at prime plus 3%. Further liquidity improvement resulted from
receiving proceeds from a $3.3 million preferred stock and warrants offering
which went effective on July 26, 1995. These two important events position Ajay
for future growth.
On October 2, 1995 the Company acquired certain assets of Korex Corporation of
Naperville, Illinois. Korex designs, manufactures and distributes a line of golf
bags, carts and accessories. The Company acquired the inventory, machinery and
equipment of Korex in exchange for $1,719,000 and 240,625 shares of Ajay common
stock.
On October 6, 1995 the Company acquired certain assets of Palm Springs Golf
Company, Inc. Of Palm Desert, California. Palm Springs Golf designs,
manufactures and markets a full line of golf clubs along with a line of golf
bags and gloves. In the transaction, the Company acquired substantially all of
the operating assets in exchange for 1,300,000 shares of Ajay common stock,
633,333 of which are contingent upon future financial performance and/or other
conditions. In addition, the Company will issue 800,000 common stock options and
assumed $3,700,000 of payables and bank debt.
The Company's Board of Directors, on September 25, 1995, declared a quarterly
dividend of $.185 per share on the Company's 10% cumulative convertible
preferred stock, payable October 25, 1995 to shareholders of record October 3,
1995. This was the first calendar quarter end since the preferred stock went
effective on July 26, 1995 and the $58,000 dividend represents a pro-rata amount
calculated from the effective date through the end of the third quarter.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd.)
RESULTS OF OPERATIONS - During the quarter ended September 30, 1995 the Company
had net sales of $3,437,000, compared to $2,877,000 for the same period in 1994.
For the nine months ended September 30, 1995 the Company had net sales of
$13,376,000 compared to $10,630,000 for the same period in 1994. The 9-month
sales increase of 26% has occurred throughout all product lines and with respect
to several major customers, along with increases in secondary customers and
sales to new customers. The furniture line acquired August 1, 1994 contributed
34% of the nine month sales increase of $2.7 million.
Gross profit for the three months ended September 30, 1995 expressed as a
percentage of net sales, increased to 14.9%, compared to (0.7)% for the same
period in 1994. Gross profit for the nine months ended September 30, 1995
expressed as a percentage of net sales, increased to 18.8%, compared to 9.8% for
the same period in 1994. Golf margins in 1995 improved as a result of increased
sales volume and product mix resulting in efficiencies and cost reductions in
materials and manufacturing costs. This improvement was diminished by the
unfavorable results of the furniture business, where material costs and labor
were higher than planned. Through extensive redesign, costs for the 1996
furniture line are being reduced and management expects this to result in
improved margins in 1996. The furniture product line was targeted to smaller
customers during 1994-95. The 1996 furniture products have been designed to
target the mass market as well as the current customer base of independent
dealers. This broadens the available market and supports plans for growth.
Management expects furniture products to be profitable in 1996.
Selling, general and administrative expenses were 19.5% of sales for the third
quarter of 1995, versus 23.9% for 1994. The nine months results were 15.8% and
18.5%, respectively for 1995 and 1994. Selling expenses for the start-up
furniture business have been relatively high per sales dollar due to the higher
cost inherent in the present effort to develop the sales base of new customers
which will benefit future periods. This included such expenses as trade shows,
travel and advertising to reach potential customers. Overall expenses as a
percent of sales were favorable due to the 26% sales increase for the first nine
months.
Operating loss for the third quarter of 1995 was $159,000, an improvement of
$548,000, compared to an operating loss of $707,000 for the third quarter of
1994. This was due primarily to a decrease in the cost of sales which was 85.1%
for the third quarter of 1995 and 100.7% for the third quarter of 1994 plus the
positive effect of a 19.5% sales increase. The core golf business improved
during the year with a $817,000 operating profit for the first nine months
compared to a $864,000 operating loss for the same period in 1994. This profit
was partially offset by a $417,000 operating loss in the furniture business year
to date.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd.)
As a result of the above, the net loss for the nine months ended September 30,
1995 was $176,000, compared to a net loss of $1,691,000 for the same period last
year. This is an improvement of $1,515,000. For the three months ended September
30, 1995 the net loss was $340,000 compared to a net loss of $864,000 for the
same period last year. This is an improvement of $524,000.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits:
Regulation
S-K Number Exhibit
---------- -------
10.1 First Amendment to the July 25, 1995 Revolving
Loan Agreement dated October 2, 1995, including
amendment to Bulge Loan Note, Supplement to
Guarantee and Amendment to Revolving Loan Note.
27 Financial Data Schedule
B) Forms 8-K: (Incorporated by reference)
1. The Company filed a Form 8-K, dated August 30, 1995 reporting
the Letters of Intent signed with Korex Corporation and Palm
Springs Golf Company, Inc. Forms 8-K were filed, dated October
2 and October 6 which reported the acquisitions of certain
assets of Korex Corporation and certain assets of Palm Springs
Golf Company, Inc.
11
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AJAY SPORTS, INC.
By: /s/Robert R. Hebard
---------------------
Its: Corporate Secretary
By: /s/Duane R. Stiverson
-------------------------
Its: Chief Financial Officer
Date:___________________________
12
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT
Dated as of: October 2, 1995
Between: UNITED STATES NATIONAL BANK OF OREGON, a national
banking association,
And: AJAY SPORTS, INC., a Delaware corporation
WHEREAS United States National Bank of Oregon (the "Bank") and
Ajay Sports, Inc., (the "Borrower") entered into a revolving loan agreement
dated as of July 25, 1995, (the "Loan Agreement"); and
WHEREAS the parties thereto desire to amend certain of the
terms of the Loan Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The following defined terms in Section 1.1 of the Loan
Agreement are amended to read, in full, as follows:
"Borrowing Base" means, at any time, the amount computed on
the Borrowing Base Certificate most recently delivered to and accepted by the
Bank in accordance with this Agreement, not to exceed the lesser of:
(A) $8.5 million; or
(B) The aggregate of 80 percent of Eligible Accounts of the
Borrower, Ajay Leisure Products, Inc., Leisure Life, Inc., and Palm
Springs Golf, Inc., plus fifty percent (50%) of Qualified Inventory
of the Borrower, Ajay Leisure Products, Inc., Leisure Life, Inc., and
Palm Springs Golf, Inc., less fifty percent (50%) of the sum of any
documentary Letters of Credit Outstanding.
"Bulge Loan Commitment" means the undertaking of the Bank to
fund the Bulge Loan in accordance with the terms and conditions hereof, in a
principal amount not to exceed, at any one time outstanding, the sum of $5
million.
"Bulge Loan Note" means the promissory note executed by the
Borrower substantially in the form of Exhibit B to the Loan Agreement, as
amended by Exhibit A attached hereto.
"Eligible Accounts" means each and every Account of the
Borrower, Ajay Leisure Products, Inc., Leisure Life, Inc., and Palm Springs
Golf, Inc., except those (a) as to which payment is not received within 120 days
after date of invoice and the Bank has
13
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not granted its prior approval for payment terms in excess of 120 days from date
of invoice, (b) as to which the account debtor has asserted a right of return,
offset, deduction, credit, defense, or counterclaim of any nature whatsoever, (
c) which are owed by an account debtor who is an Affiliate, officer, director,
or employee of the Borrower, who is a government, foreign or domestic, or a
branch, department, subdivision, or agency thereof, who is a broker or dealer or
who does not meet reasonable credit standards adopted by the Borrower and
approved by the Bank, (d) which are not enforceable by judicial proceedings
within the United States unless supported by a letter of credit in form
reasonably acceptable to the Bank issued by a financial institution acceptable
to the Bank, or is otherwise acceptable, by guaranty or otherwise, to the Bank,
or (e) which are billings for retainage or so-called "progress billings." An
account debtor will not meet reasonable credit standards if more than ten
percent (10%) of that Person's account (or twenty-five percent (25%) of that
Person's account for certain account debtors approved in advance by the Bank) is
unpaid for more than 60 days past the due date or if the Bank in its reasonable
judgment determines that such debtor is not creditworthy.
"Guarantor" means each and any of the following Persons and
such other Persons who may become guarantors of this credit facility:
Williams Controls, Inc., a Delaware corporation
Ajay Leisure Products, Inc., a Delaware corporation
Ajay Leisure de Mexico C.V. de S.A., a Mexicali, Mexico
corporation
Leisure Life, Inc., a Tennessee corporation
Palm Springs Golf, Inc., a Colorado corporation
"Guaranty Agreement" means with respect to each Guarantor, a
duly authorized and executed agreement in the form of Exhibit C to the Loan
Agreement, as amended by Exhibit B attached hereto.
"Qualified Inventory" means with respect to the Borrower, Ajay
Leisure Products, Inc., Leisure Life, Inc., and Palm Springs Golf, Inc., their
inventory of raw materials, finished goods, and work-in-process not exceeding
$8,500,000 in the aggregate, valued at the lower of cost or market value.
"Revolving Loan Commitment" means the undertaking of the Bank
to fund the Revolving Loan in accordance with the terms and conditions hereof,
in a principal amount not to exceed, at any one time outstanding, the sum of
$8.5 million.
"Revolving Loan Note" means the promissory note executed by
the Borrower substantially in the form of Exhibit A to the Loan Agreement, as
amended by Exhibit C attached hereto.
14
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"Subsidiaries" means Ajay Leisure Products, Inc., Ajay Leisure
de Mexico C.V. de S.A., Leisure Life, Inc., and Palm Springs Golf, Inc., and any
other Persons in which the Borrower owns a controlling interest.
2. In the first sentence of Section 2.4 of the Loan Agreement,
the phrase "sum of $3,500,000" is changed to "Bulge Loan Commitment."
3. The amount "$1,500,000" in Section 2.7(A) of the Loan
Agreement is changed to "$2,000,000."
4. Exhibit 5.1(A) to the Loan Agreement is replaced with
Exhibit D attached hereto and all references in the Loan Agreement to such
Exhibit 5.1(A) shall hereafter mean such Exhibit D.
5. The Borrower hereby certifies that as of the date hereof
and after giving effect to the terms of this First Amendment to Revolving Loan
Agreement, the representations and warranties of Borrower contained in Section
5.1 of the Loan Agreement are true and correct, and no Event of Default has
occurred and is continuing. The Borrower represents and warrants to the Bank
that (i) it and each of its Subsidiaries, to the extent each is a party thereto,
has the power and authority to enter into and perform this First Amendment to
Revolving Loan Agreement and any other documents to be executed in connection
herewith, including but not limited to any Guaranty or Security Agreement and
the Notes, and has taken all actions necessary to authorize the execution,
delivery, and performance thereof, and (ii) this First Amendment to Revolving
Loan Agreement and any other documents to be executed in connection herewith
are, or when delivered will be valid, binding, and enforceable in accordance
with their respective terms.
6. The obligation of the Bank to make the Loans under the Loan
Agreement as amended by this First Amendment to Revolving Loan Agreement is
subject to the satisfaction or waiver of the following conditions precedent:
(a) The Borrower shall have delivered to the Bank duly
completed and executed amendments to the Bulge Loan Note and the Revolving Loan
Note in the forms of Exhibits A and C hereto.
(b) Williams Controls, Inc., Ajay Leisure Products, Inc., Ajay
Leisure de Mexico C.V. de S.A., and Leisure Life, Inc., shall have each
delivered to the Bank a duly completed and executed Supplement to Guaranty in
the form of Exhibit B hereto.
(c ) Palm Springs Golf, Inc., shall have delivered to the Bank
a duly completed and executed Security Agreement and Guaranty Agreement and such
financing statements and other documents as the Bank may specify.
15
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(d) The Borrower and each Guarantor shall have each delivered
to the Bank a duly executed Contribution and Indemnity Agreement in the form of
Exhibit E hereto.
7. Except as herein modified, the terms and conditions of the
Loan Agreement are reaffirmed and ratified as though fully set forth herein.
Undefined terms used herein that are defined in the Loan Agreement shall have
the meaning set forth in the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this First Amendment to Revolving
Loan Agreement effective as of the date first above written.
AJAY SPORTS, INC.
By /s/Thomas W. Itin
--------------------------------------------
Name: Thomas W. Itin
Title: President and Chief Executive Officer
UNITED STATES NATIONAL BANK OF OREGON
BY /s/Diane M. Sellers
---------------------------------------------
Name: Diane M. Sellers
Title: Vice President
16
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APPROVED:
AJAY LEISURE PRODUCTS, INC.
By: /s/Thomas W. Itin
------------------------------------
Name: Thomas W. Itin
Title: Chairman of the Board
AJAY LEISURE DE MEXICO C.V. de S.A.
By: /s/Clarence H. Yahn
------------------------------------
Name: Clarence H. Yahn
Title: Sole Administrator
LEISURE LIFE, INC.
By: /s/Thomas W. Itin
------------------------------------
Name: Thomas W. Itin
Title: Chairman of the Board
PALM SPRINGS GOLF, INC.
By: /s/Thomas W. Itin
------------------------------------
Name: Thomas W. Itin
Title: Chief Executive Officer
WILLIAMS CONTROLS, INC.
By: /s/Thomas W. Itin
------------------------------------
Name: Thomas W. Itin
Title: President and Chief Executive Officer
17
<PAGE>
EXHIBIT A
AMENDMENT TO BULGE LOAN NOTE
DATE: October 2, 1995
The undersigned do hereby agree that the amount "$3,500,000"
set forth twice on the first page of that certain Bulge Loan Note dated July 25,
1995, shall be amended to be "$5,000,000."
Except as expressly modified herein, the terms and conditions
of the Bulge Loan Note are ratified and affirmed.
AJAY SPORTS, INC.
By: /s/Thomas W. Itin
-------------------------------------------
Name: Thomas W. Itin
Title: President and Chief Executive Officer
UNITED STATES NATIONAL BANK OF OREGON
By: /s/Diane M. Sellers
-------------------------------------------
Name: Diane M. Sellers
Title: Vice President
18
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EXHIBIT B
SUPPLEMENT TO GUARANTY
The undersigned agrees that the principal amount guaranteed
under its guaranty dated July 25, 1995 (the "Guaranty"), shall be increased from
$8,500,000 to $13,500,000, so as to take into account the increase in the
Revolving Loan Commitment and the Bulge Loan Commitment made pursuant to a First
Amendment to Revolving Loan Agreement of even date between Ajay Sports, Inc.,
and United States National Bank of Oregon (the "Amendment").
[Note: The Supplement to Guaranty executed by Williams
Controls, Inc., shall also contain the following:
"In addition, the following paragraph shall be added as
paragraph (i) of Section 10 of the Guaranty:
"(i) If Guarantor pays any amounts to Bank to satisfy the
Indebtedness or any portion thereof, upon payment in full of all Indebtedness,
Bank shall, at Guarantor's request, assign to Guarantor all of Bank's rights in
any security interests granted to Bank pursuant to the Loan Agreement and in any
documents filed to perfect such security interests."]
Except as herein modified, the terms and conditions of the
Guaranty are reaffirmed and ratified as though fully set forth herein. Undefined
terms used herein that are defined in the Amendment shall have the meaning set
forth in the Amendment.
Dated: October 2, 1995
GUARANTOR:
_______________________________
By:____________________________
Name:__________________________
Title:_________________________
APPROVED:
UNITED STATES NATIONAL BANK OF OREGON
By: /s/Diane M. Sellers
--------------------------
Name: Diane M. Sellers
Title: Vice President
18
<PAGE>
EXHIBIT C
AMENDMENT TO REVOLVING LOAN NOTE
Date: October 2, 1995
The undersigned do hereby agree that the amount "$5,000,000"
set forth twice on the first page of that certain Revolving Loan Note dated July
25, 1995, shall be amended to be "$8,500,000."
Except as expressly modified herein, the terms and conditions
of the Revolving Loan Note are ratified and affirmed.
AJAY SPORTS, INC.
By: /s/Thomas W. Itin
------------------------------------------
Name: Thomas W. Itin
Title: President and Chief Executive Officer
UNITED STATES NATIONAL BANK OF OREGON
By: /s/Diane M. Sellers
------------------------------------------
Name: Diane M. Sellers
Title: Vice President
20
<PAGE>
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<PERIOD-END> SEP-30-1995
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0
4,403
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