SCHEDULE 14a (Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant Filed by a Party other than the Registrant Check the
appropriate box:
__X___ Preliminary Proxy Statement _____ Confidential, For Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
______ Definitive Proxy Statement
______ Definitive Additional Materials
______ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AJAY SPORTS, INC.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
__X__ No fee required.
_____ Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(3) Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------------
(5) Total fee paid:
- ------------------------------------------------------------------------------
Fee paid previously with preliminary materials:
- ------------------------------------------------------------------------------
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- ------------------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------------------
(4) Date Filed:
- ------------------------------------------------------------------------------
<PAGE>
Ajay Sports, Inc.
1501 E. WISCONSIN STREET
DELAVAN, WISCONSIN 53115
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 29, 1998
April 29, 1998
TO THE STOCKHOLDERS OF AJAY SPORTS, INC.:
The 1998 Annual Meeting of Stockholders of Ajay Sports, Inc., a Delaware
corporation (the "Company") will be held at the Company's headquarters, 1501 E.
Wisconsin Street, Delavan, Wisconsin, on Friday, May 29, 1998 at 11:00 a.m.
Central Daylight Time, to consider and take action on:
1. A proposal to amend the fourth paragraph of its Restated Certificate of
Incorporation, as amended, to cause a 1-for-8 share reverse stock split
of the issued and outstanding shares of the common stock of the Company,
whereby every eight outstanding shares of the Company's common stock,
(the "Old Shares") will be converted into and reconstituted as one share
of common stock which shall have a par value $.01 per share (the "New
Shares"). Passage of this proposal requires the affirmative vote of a
majority of the Company's outstanding shares entitled to vote on the
proposal.
2. The election of five directors to serve until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified.
3. Such other business as may properly come before the meeting or
any adjournment(s) thereof.
The discussion of the proposals of the Board of Directors set forth above is
intended only as a summary, and is qualified in its entirety by the information
relating to the proposals set forth in the accompanying proxy statement. Only
holders of record of Common Stock at the close of business on April 29, 1998
will be entitled to notice of and to vote at this annual meeting, or any
postponements or adjournments thereof.
By Order of the Board of Directors:
Robert R. Hebard
Corporate Secretary
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
Your vote is important
<PAGE>
Ajay Sports, Inc.
1501 E. Wisconsin Street
Delavan, Wisconsin 53115
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1998
April 29, 1998
This proxy statement is being furnished to Stockholders of Ajay Sports, Inc.
(the "Company") in connection with a solicitation of proxies by the Board of
Directors of the Company for use at the 1998 Annual Meeting of Stockholders and
at any adjournments or postponements thereof. The meeting will be held at 11:00
a.m. Central Daylight Time at the Company's headquarters, 1501 E. Wisconsin
Street, Delavan, Wisconsin 53115, on Friday, May 29, 1998. The proxy and proxy
statement (the "Proxy Materials") will be first mailed to the Stockholders on or
about May 4, 1998.
REVOCABILITY OF PROXY
If the enclosed proxy is executed and returned, it will be voted on the
proposals as indicated by the Stockholder. The proxy may be revoked by the
Stockholder at any time prior to its use by notice in writing to the Secretary
of the Company, by executing a later dated proxy and delivering it to the
Company prior to the meeting, or by voting in person at the meeting.
SOLICITATION
In addition to solicitation by mail, the Company may use the services of its
directors, officers and employees to solicit proxies, either personally, by
telephone or facsimile, but at no additional salary or compensation. The Company
will pay the costs of solicitation and will reimburse reasonably incurred
out-of-pocket expenses to banks, brokers and other custodians, nominees and
fiduciaries holding shares of record for others, in forwarding copies of the
proxy materials to the beneficial owners of such shares.
VOTING SECURITIES
Holders of record of the Company's Common Stock, $.01 par value (the "Common
Stock"), at the close of business on April 29, 1998 (the "Record Date") will be
entitled to vote on all matters. On the Record Date, the Company had 24,089,872
shares of Common Stock outstanding. The holders of shares of Common Stock are
entitled to one vote per share. One-third of the issued and outstanding shares
of the Common Stock entitled to vote, represented in person or by proxy,
constitutes a quorum for the transaction of business at the meeting. The
proposal to amend the Company's Restated Certificate of Incorporation requires
the affirmative vote of a majority of the Company's outstanding Common Stock
entitled to vote on the matter. Directors are elected by a plurality of the
votes of the shares present in person or by proxy at the meeting and entitled to
vote on the election of directors.
Abstentions will be treated as shares present or represented and entitled to
vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the Stockholders. As to any shares a broker indicates on its proxy that it does
not have the authority to vote on any particular matter, because it has not
received direction from the beneficial owner thereof, those shares will not be
counted as voting on the particular matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information as to certain persons known by the Company to be
the beneficial owner of more than five percent of the Common Stock, and
securities owned by the Company's directors and executive officers named in the
Summary Compensation Table below, individually, and executive officers and
directors as a group, as of March 31, 1998. These stockholders have sole voting
and investment power with respect to their holdings unless otherwise footnoted:
<PAGE>
Name and Address of Beneficial Amount and Nature of Percent
Owner Beneficial Ownership of Class(1)
- ------------------------------- ------------------------ -----------
Thomas W. Itin 16,549,169 (2)(3)(5)(6)(9) 45.6%
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
Williams Controls Industries, Inc. 15,228,520 (4) 43.3%
14100 SW 72nd Avenue
Portland, OR 97224
TICO 11,944,484 (5) 38.5%
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
Acrodyne Profit Sharing Trust 2,773,471 (6) 10.8%
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
Robert R. Hebard 35,000 (7) ***
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
Enercorp, Inc. 1,893,797 (8) 7.9%
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
LBO Capital Corp. 1,680,000 (9) 6.9%
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
Robert D. Newman 933,600 (10) 3.9%
215 4th Avenue North, P.O. Box 60
Baxter, TN 38544
Clarence H. Yahn 634,100 (11) 2.6%
1501 E. Wisconsin Street
Delavan, WI 53115
Duane R. Stiverson 92,600 (12) ***
1501 E. Wisconsin Street
Delavan, WI 53115
Anthony B. Cashen 20,000 (13) ***
Lamalie Amrop International
200 Park Avenue, Suite 3100
New York, NY 10166
All officers and directors as a 18,113,255 (2)(3)(7)(10) 54.2%
group (6 persons) (11)(12)(13)
*** Less than 1%
- -------------
(1)Where persons listed on this table have the right to obtain additional shares
of Common Stock through the exercise of outstanding options or warrants or
the conversion of convertible securities within sixty days from March 31,
1998, shares of Common Stock issuable upon the exercise of such options or
warrants or upon the conversion of the convertible securities have been
counted as outstanding for the purpose of computing the percentage of Common
Stock owned by such persons, but have not been counted as outstanding for the
purpose of computing the percentage owned by any other person.
<PAGE>
(2)Mr. Itin may be deemed to be a "control person" of the Company. Includes
Common Stock and shares of Common Stock issuable upon the exercise of
presently exercisable warrants and the conversion of presently convertible
preferred stock beneficially owned by Mr. Itin's spouse and affiliates of Mr.
Itin as follows:
Entity Shares Description
---------------- --------- ---------------
TICO 5,000,040 Common Stock
First Equity Corporation 151,214 Common Stock
Acrodyne Profit Sharing Trust 2,773,471 Common Stock and warrants
LBO Capital Corporation 1,680,000 Common Stock and warrants
---------
9,604,725
TICO (12,500 shares of Series
B preferred stock convertible
at one share for 555.56 shares Series "B" Preferred Stock
of Common Stock) 6,944,444 conversion
----------
16,549,169
==========
Mr. Itin disclaims beneficial ownership of the securities owned by LBO
Capital Corporation and First Equity Corporation in excess of his pecuniary
interest. Mr. Itin's spouse owns an 80% equity interest in First Equity
Corp., and Mr. Itin owns 56% of the outstanding common stock of LBO Capital
Corp., a company with its common stock registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act"). Mr. Itin is also
chairman of the board and president of LBO Capital.
(3)Does not include 4,117,647 common shares and 11,110,873 options owned by
Williams Controls, Inc. Mr. Itin is chairman of the board, president, chief
executive officer, chief operating officer, treasurer and 26.7% beneficial
owner of Williams Controls, Inc. Even though Mr. Itin is a director of
Williams Controls, he abstains from voting on matters pertaining to the
Company in meetings of the directors of Williams Controls.
(4) Includes 11,110,873 shares of Common Stock issuable upon the exercise of
outstanding stock options. See "Certain Relationships and Related
Transactions."
(5)Includes 6,944,444 shares of Common Stock issuable upon conversion of 12,500
shares of presently convertible Series B Preferred Stock, at a rate of 555.56
shares of Common Stock for every one share of preferred stock. TICO is a
Michigan co-partnership of which Mr. Itin is the managing partner.
(6) Includes 1,597,000 shares of Common Stock issuable upon exercise of
options. Mr. Itin is trustee and beneficiary of the Acrodyne Profit
Sharing Trust.
(7) Does not include ownership of Enercorp, Inc. Mr. Hebard is the
chairman and president of Enercorp.
(8) Includes the following Common Stock and shares of Common Stock issuable
upon the conversion of presently convertible preferred stock owned by
Enercorp, Inc., a Colorado corporation, with its common stock registered
under Section 12(g) of the Exchange Act:
Common Stock 1,864,706
2,000 shares of Series C preferred stock,
convertible at one preferred share for 14.5
shares of Common Stock 29,091
---------
1,893,797
(9)Includes 200,000 shares of Common Stock issuable upon exercise of warrants.
LBO Capital Corporation is a Colorado corporation of which Mr. Itin is a 56%
stockholder, chairman of the Board of Directors and president.
<PAGE>
(10) Includes 100,000 shares of Common Stock issuable upon the exercise of
outstanding stock options.
(11) Includes 450,000 shares of Common Stock issuable upon the exercise of
outstanding stock options.
(12) Includes 42,500 shares of Common Stock issuable upon the exercise of
outstanding stock options.
(13) Includes 10,000 shares of Common Stock issuable upon the exercise of
outstanding stock options automatically granted under the 1994 Stock Option
Plan.
No change in control of the Company has occurred since the beginning of the last
fiscal year. Securities ownership by Williams Controls Industries, Inc. is
reflected in the ownership table set forth above. In addition to this ownership
interest, the Company and Williams Controls, Inc. and its subsidiaries,
including Williams Controls Industries, Inc. (collectively "Williams"), are
parties to a joint bank credit facility under which the Company and Williams
have pledged substantially all of their assets to the bank. The Company has
appointed Williams as the borrowing agent under this credit facility but
Williams and the Company are jointly and severally liable to the bank under this
joint bank credit facility. In addition, based on other obligations owed by the
Company to another bank which have been guaranteed by Williams, the Company has
granted a security interest in substantially all of its assets. The Company does
not know of any other arrangements, the operation of which may, at a subsequent
date, result in a change in control of the Company.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, as of March 31, 1998, the names and ages of the
Company's directors and executive officers, including all positions and offices
held by each such person. These directors and officers are elected to hold
office for one-year or until their respective successors are duly elected and
qualified:
First Yr.
As Director
Name Position with Company or Officer Age
- ------------------- ------------------------ ------------ ------
Anthony B. Cashen Director 1993 62
Robert R. Hebard Corporate Secretary and 1989 45
Director
Thomas W. Itin Chairman, CEO and President 1993 63
Robert D. Newman Director 1994 56
Duane R. Stiverson Chief Financial Officer 1994 56
Clarence H. Yahn Chief Operating Officer 1994 61
and Director
No arrangement exists between any of the above officers and directors pursuant
to which any one of those persons were elected to any such office or position.
Directors are elected to serve until the next meeting of Stockholders. Executive
officers of the Company serve at the pleasure of the Board of Directors.
Mr. Hebard is the son-in-law of Mr. Itin, the Company's chairman. Other than
that, there are no family relationships among the directors and executive
officers of the Company.
Directors
Anthony B. Cashen: Mr. Cashen has served as a director or the Company since
1993. For more than the past five years, Mr. Cashen has served as a managing
partner or senior partner of Lamalie Amrop International, a publicly held
management consulting and executive recruiting firm located in New York
City. He has served as secretary, treasurer and director of LBO Capital
Corporation, a publicly held Company, since its inception. He currently
serves as a director of Immucell Corp., a publicly held company. Previously,
Mr. Cashen had been an officer and principal of the investment firms A.G.
Becker, Inc. and Donaldson Lufkin and Jenrette, Inc. He received an MBA from
the Johnson Graduate School of Management at Cornell University, and a
Bachelor of Science degree from Cornell University.
Robert R. Hebard: Mr. Hebard has served as a director of the Company since 1989
and secretary of the Company since September 1990. From June 1993 to the
present, he has been chairman of the board and president of Enercorp, Inc., a
publicly traded business development company under the Investment Company Act of
1940, as amended. From June 1986 to January 1992, Mr. Hebard was first vice
president and director of product management for Comerica Bank, and from
February 1992 to October 1992 he was director of retail marketing for the merged
Comerica / Manufacturers Bank. Mr. Hebard also currently serves as vice
president of Woodward Partners Inc., a real estate development company in West
Bloomfield, Michigan. From 1993 to the present, Mr. Hebard has served as chief
executive officer of CompuSonics Video Corp., a publicly held company. He
received an MBA from Canisius College and a Bachelor of Science degree from
Cornell University. <PAGE>
Thomas W. Itin: Mr. Itin was elected chairman of the board and president of
the Company in June 1993, and is the Company's largest single stockholder.
Mr. Itin has been chairman, president, treasurer, chief executive officer and
chief operating officer of Williams Controls, Inc. a publicly held company,
from May 1993 to the present. From 1989 to May 1993, he held the titles of
Chairman, Chief Executive Officer and Treasurer of Williams Controls. He
has served as chairman of the board, chief executive officer and chief
operating officer of LBO Capital Corp. since its inception. Mr. Itin has
been chairman, president and owner of TWI International, Inc. since he
founded the firm in 1967. Mr. Itin also has been the owner and principal
officer of Acrodyne Corp. since 1962. He received a Bachelor of Science
degree from Cornell University and an MBA from New York University.
Robert D. Newman: Mr. Newman became a director of the Company in August
1994. He has served as general manager of Leisure Life, Inc., a wholly owned
subsidiary of the Company, since August 1994. Mr. Newman founded Leisure
Life, Inc. in October 1990 and served as president from its inception until
its purchase by the Company in August 1994. Mr. Newman was president and
chief executive officer of Stone Mountain Millworks from 1985 to 1989. He
served as director of product development for Gold Medal, Inc. from 1989 to
1990. Mr. Newman attended Northern Illinois University.
Clarence H. Yahn: Mr. Yahn became a director of the Company in September
1994, and has served as director of Ajay Leisure Products, Inc., a
wholly-owned subsidiary of the Company, since September 1993 and as Ajay
Leisure's president since January 1994. Mr. Yahn has served as the chief
operating officer of the Company since January 1996. From December 1996 to
the present, Mr. Yahn also serves as Executive Vice President of Williams
Controls, Inc., responsible for the Company's Consumer Durables Group. In
1988, Mr. Yahn joined Gold Medal, Inc. as its president. Prior to joining
Ajay Leisure Products, Mr. Yahn served as chief executive officer of Melnor,
Inc. a consumer durables company from 1992 to 1993. He received a Bachelor
of Science degree in mathematics and physics from the University of Wisconsin
and received a master's degree in international business from the American
Graduate School of International Management.
Non-Director Executive Officers
Duane R. Stiverson: Mr. Stiverson has been chief financial officer of Ajay
Sports, Inc. since July 1994. Prior to joining the Company, Mr. Stiverson
was the vice president of operations for VariQuest Technologies, Inc. and
held that position from 1991 until he joined the Company in July 1994. From
1987 to 1990, Mr. Stiverson was vice president of materials for the Ambrosia
Chocolate Company. From 1978 to 1987, he was the vice president of finance
for Ambrosia, and from 1976 to 1978 was its controller. Prior to 1978, Mr.
Stiverson held various controller and corporate finance positions with Bendix
Corporation. Mr. Stiverson has a Bachelor of Science degree from the
University of Nebraska and an MBA degree from Michigan State University.
Board of Directors Meetings
During the fiscal year ended December 31, 1997, the Board of Directors held four
regular meetings and took action by written consent two times.
Committees of the Board The Board of Directors maintains standing Audit,
Compensation and Nominating Committees. The Audit Committee recommends to the
board the appointment of independent auditors, reviews with the independent
auditors the scope and results of the audit engagement and any non-audit
services to be performed by the independent auditors. It monitors the Company's
system of internal accounting controls and evaluates the independence of the
independent auditors and their fees for services. The Compensation Committee
monitors the Company's compensation policies and reviews and recommends to the
board the salaries and bonuses of executive officers of the Company and the
remuneration of the directors. The Compensation Committee also administers the
1994 Stock Option Plan. The Audit Committee consists of Mr. Hebard (chairman)
and Mr. Cashen. The Compensation Committee consists of Mr. Cashen (chairman) and
Mr. Hebard. The Nominating Committee searches for and evaluates potential
candidates who would be considered as directors for the Company. The Nominating
Committee consists of Mr. Cashen (chairman) and Mr. Hebard. It was constituted
in 1997 but has not met. The Audit Committee and the Compensation Committee each
met one time in fiscal 1997.
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth information regarding compensation paid to the
Company's chief executive officer for the three years ended December 31, 1997.
Other than Mr. Yahn, the Company's chief operating officer, no other person who
is currently an executive officer of the Company earned compensation exceeding
$100,000 during any of those three years:
Long Term
Compensation
Annual Securities
Compensation Underlying
Name and Principal Position Year Salary Bonus Options (# Shs.)
- ----------------------------- ----- ------ ------ -----------------
Thomas W. Itin, CEO (1) 1997 $1 -- --
1996 $1 -- --
1995 $1 -- --
Clarence H. Yahn, COO (2) 1997 $117,502 -- --
1996 $100,000 -- 200,000
1995 $104,875 -- --
(1) On June 21, 1993 Mr. Itin was elected chairman of the board, president,
treasurer and director of the Company. Mr. Itin had an employment
arrangement with the Company that expired on December 31, 1997. Under
that arrangement, Mr. Itin received a salary of $1.00 per year for 1994,
1995, 1996 and 1997.
(2)On December 28, 1996, Mr. Yahn was granted options to purchase 200,000 shares
of the Company's Common Stock.
The Company has no restricted stock or long-term incentive plans.
Options / SAR Grants Table
During 1997, no options or SARs were granted to the executive officers named in
the Summary Compensation Table.
Aggregated Option Exercises and Fiscal Year End Option Value Table The table
below summarizes options exercised during 1997 and year-end option values of the
named executive officers listed in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexerc'd Unexercised
Optns at Fiscal Yr. In-the-Money
End (#) Options at Fiscal
Year End ($)
-------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Shs Acq'd Value
Name on Exercise ($) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------- --------------- ------------ ------------ ------------- ------------ -------------
Thomas W. Itin 0 0 0 0 -- --
CEO
Clarence H. Yahn 0 0 450,000 100,000 $0 $0
COO
</TABLE>
Compensation of Directors
Currently, directors are not paid a fee for attending regular Board of Directors
meetings. However, they are reimbursed for expenses incurred in attending such
board meetings.
Under the 1994 Stock Option Plan, which was approved by the Company's
Stockholders at the Annual Meeting in October 1994, the non-employee directors
who are members of the Compensation Committee are to receive grants of 5,000
non-statutory stock options under the plan at each Annual Meeting. During 1997,
no grants were made under the 1994 Stock Option Plan to members of the
Compensation Committee. <PAGE>
Employment Contracts
The Company had an employment arrangement with Mr. Itin under which he served as
the president and chief executive officer of the Company at a salary of $1.00
per year for the fiscal years ended December 31, 1994, 1995, 1996 and 1997. The
Company's board and its Compensation Committee are discussing a new arrangement
with Mr. Itin that would be effective January 1, 1998, the details of which, at
this time, have not been finalized or approved by the board. Board Compensation
Committee Report on Executive Compensation The Compensation Committee of the
Board of Directors is responsible for reviewing and approving the Company's
compensation policies and the compensation paid to executive officers. The
Company's compensation philosophy is designed to achieve long-term growth in
stockholder value. The Company's compensation policies are intended to attract,
retain and motivate highly qualified executives who support a
performance-oriented environment that rewards achievement based upon the
Company's performance and the individual's contribution and performance. There
are three main components in the Company's executive compensation program: base
salary, annual bonus incentive and long-term incentive.
Base Salary. The base salary of each executive officer of the Company is
measured against the median base pay level for positions with comparable
functional responsibilities at companies with sales that are comparable in size
to the Company's sales. Executive salaries are reviewed but not necessarily
increased annually. Salary adjustments may be made by the Committee to recognize
individual contribution and performance or to reflect an increased scope of
responsibilities.
Annual Incentive. Annual incentive bonuses for executive officers are intended
to reflect the Committee's belief that a significant portion of the annual
compensation of each executive officer should be contingent upon the performance
of the Company, as well as the individual contribution of each officer.
The Company has implemented an annual incentive bonus, which provides executive
officers and other key management employees the opportunity to earn annual
incentive and performance bonuses. As a pay-for-performance plan, the annual
incentive bonus is intended to motivate and reward executive officers and other
key employees by directly linking the amount of any cash bonus to two
performance components: (1) corporate and/or operating unit financial
performance (specific measurements are defined each year and threshold and
payout levels are established to reflect the Company's objectives); (2)
management's overall assessment of the executive officer/key employee
performance. These criteria are reviewed and approved by the Committee. Under
the guidelines adopted by the Committee, executive officers are eligible to
receive up to 25% of their salary as an annual bonus, depending on actual
earnings performance compared to target earnings goals.
Long-Term Incentive. The Company utilizes stock options as a long-term incentive
to reward and retain employees. The Committee believes that these programs serve
to link management and stockholder interest and to motivate executive officers
to make long-term decisions that are in the best interest of the Company and the
stockholders. The Committee also believes that executive officers and other key
employees should have significant ownership of the Company stock. As a group,
executive officers, directors and affiliates own approximately 62% of the
outstanding common stock.
The Committee believes that stock option grants provide an incentive that
focuses the executive's attention on managing the Company from the perspective
of an equity owner in the business. Stock options are granted from time-to-time,
generally on an annual basis, based upon recommendations from management and the
Committee. In general, stock options vest over five years and employees must be
employed by the Company in order to exercise the options. As the stock options
are granted at the fair market value on the date of grant, the Company's stock
options are tied to the future performance of the Company's stock and will
provide value to the recipient only when the price of the Company's stock
increases above the option grant price.
It is the opinion of the Committee that the aforementioned compensation program
provides features that appropriately align the Company's executive compensation
with corporate performance and the interest of its stockholders.
For the fiscal year ended December 31, 1997, the Company's Chief Executive
Officer was paid $1.00, the base annual salary provided for under his employment
arrangement with the Company and he did not receive a cash bonus for 1997 based
on the Company's actual earnings performance. The Company's Chief Operating
Officer was paid only the base annual salary, and he did not receive a cash
bonus for 1997 based on the Company's actual earnings performance. Neither the
Chief Executive Officer nor the Chief Operating Officer was granted any stock
options during the fiscal year ended December 31, 1997.
Anthony B. Cashen, Chairman
Robert R. Hebard
<PAGE>
Performance Graph
The graph below compares the percentage changes in the Company's cumulative
stockholder return on its Common Stock for the five-year period ended December
31, 1997, with the cumulative total return for the Nasdaq Stock Market (US
Companies) and a peer index of the Nasdaq Stocks - Dolls, Toys, Games, and
Sporting and Athletic Goods companies.
CRSP Total Returns Index
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Legend Indices 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Company Ajay Sports 100.0 61.1 77.8 86.4 64.8 36.0
- ----------------------------------------------------------------------------------------------------
Market Nasdaq Stock Market (US Companies) 100.0 114.8 112.2 158.7 195.2 239.6
- ----------------------------------------------------------------------------------------------------
Peer Nasdaq Stocks (SIC 3940-3949 100.0 126.8 102.6 98.3 61.0 54.1
Index US Companies)-Dolls/Toys/Games
/Sporting and Athletic Goods
- ----------------------------------------------------------------------------------------------------
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") requires executive officers, directors and persons who
beneficially own more than 10% of the Company's Common Stock to file, with the
SEC, initial reports of beneficial ownership on Form 3, reports of changes in
beneficial ownership on Form 4, and annual statements of changes in beneficial
ownership on Form 5. Persons filing such reports are required under the
regulations promulgated by the SEC pursuant to Section 16 to furnish the Company
with copies of such reports. Based solely upon a review of the copies of the
reports received by the Company during the fiscal year ended December 31, 1997,
the Company believes that all reports were timely filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 11, 1997, the Company refinanced its bank debt through a $34,088,000
three-year revolving credit and term loan agreement with Wells Fargo Bank
("Wells"). This loan is a joint and several obligation of the Company and
Williams, and Williams is the agent for all of the borrowers under the
agreement. The proceeds from the Company's and Williams' borrowings under the
Wells loan were used to repay the Company's and Williams' loans from the
previous lender, US Bank, except for $2,340,000 which represents a bridge loan
to the Company by US Bank. This bridge loan is guaranteed by Williams is to be
repaid from the sale of assets and/or excess cash flow of Williams and/or the
Company. This bridge loan is guaranteed up to $1,000,000 by the Company's
president, Mr. Itin.
Since 1994, Williams has made loans and provided capital to the Company to
assist the Company in meeting its financing requirements. In addition to
$560,000 borrowed prior to closing, the Company borrowed $2,268,000 from
Williams in order to close the loan with Wells. The Company granted Williams a
security interest that is subordinate to the security interests of Wells and US
Bank. The Company and Williams have agreed that this is a long-term investment.
Accordingly, the obligation is reported as a long-term liability on the books
and records of the Company. The Company's president is a guarantor of the
Company's loan to Wells.
To compensate Williams for these and other services provided on behalf of the
Company in 1997 and the prior three years, the Board of Directors of the Company
agreed, on November 11, 1997, to reset the price at which Williams' stock
options can be exercised to $.18 per share. Currently, Williams holds the
following options to purchase Common Stock of the Company:
Former Option Current Option Expiration
Number of Options Exercise Price Exercise Price Date
----------------- -------------- -------------- ----
4,717,219 $ .34 $.18 August 1, 1999
3,487,447 $ .40 $.18 August 1, 1999
2,906,207 $ .50 $.18 August 1, 1999
<PAGE>
On November 11, 1997, the Board of Directors of the Company also agreed to
modify the terms of the stock options and preferred stock held by Mr. Itin and
entities related to him. This was done in consideration of loans made and
personal guarantees given by Mr. Itin. The modifications included a reduction in
the exercise price of all stock options and warrants held by Mr. Itin and
entities related to him, including Acrodyne Profit Sharing Trust, TICO and LBO
Capital Corporation from their former levels to a revised exercise price of $.18
per share. In addition, the board also agreed to adjust the preferred stock
conversion ratio of the Series B preferred stock held by TICO. The number of
common shares into which the Series B preferred stock was convertible was
originally determined by dividing the face amount of the Series B preferred
stock, $100 per share, by the then current price of Ajay's Common Stock, or $.34
per share. This resulted in a conversion ratio of 294.12 shares of Common Stock
for every one share of Series B preferred stock. Based on the price of Ajay's
Common Stock on or about November 11, 1997, the board agreed to adjust the
conversion ratio of the Series B preferred stock from 294.12 shares of Ajay
Sports' Common Stock for every one share of Series B preferred stock to 555.56
shares of Ajay Sports' Common Stock for every one share of Series B preferred
stock, reflecting the Common Stock price of $.18 per share.
Williams had previously guaranteed the debt of the Company to the Company's
previous lender, for which it charged the Company 1/2% per annum of the
outstanding loan balance subject to the Guaranty. In connection with the July
refinancing, the previous lender provided the Company $2,340,000 of bridge
financing and Williams provided the Company with $2,268,000 at loan closing to
repay the previous loan. The sources of repayment for the bridge loan are
expected to be primarily derived from future expected financial transactions of
Williams. Therefore, it is likely that the Company will need to borrow
additional funds from Williams in the future to repay the bridge loan. Williams
has also agreed to purchase approximately $1,000,000 of notes payable from the
Company to affiliated parties which had provided loans to the Company to help it
finance operations during the financial restructuring. Such notes payable have
not yet been purchased.
The Company and Williams have structured a plan (the "Ajay Recapitalization")
whereby the Company plans to obtain permanent bank financing independent of the
joint Wells loan. Management of the Company believes this, along with an
investment by Williams, would result in adequate working capital for the Company
and eliminate any requirements for further advances or guarantees from Williams.
The Company's management informed Williams that it has signed a proposal letter
with a lender for an asset-based loan, which the Company's management, based on
expected loan advance rates, would result in an approximately $2,000,000
shortfall of its projected working capital needs. Williams has indicated that it
intends to invest up to $2,000,000 to provide the Company with adequate working
capital.
First Equity Corp., a company that is 80% owned by the spouse of the Company's
chairman, has made loans and currently holds demand notes from the Company in
the amount of $748,000, as a result of loans made to the Company in 1996 and
1997. Enercorp, Inc., which owns Common Stock and Series C preferred stock in
the Company and whose Chairman is a director of the Company, also holds a note
in the amount of $200,000, payable by the Company on demand as the result of a
loan made to the Company in a prior year.
Mr. Itin is, and at all time since 1994 has been, the chairman, president,
treasurer, chief executive officer and chief operating officer of Williams, a
publicly held corporation, and has been the chairman, chief executive officer,
president and treasurer of the Company.
PROPOSAL #1
TO CONSIDER AND VOTE ON APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT A 1-FOR-8 REVERSE STOCK SPLIT OF THE
ISSUED AND OUTSTANDING COMMON STOCK AND CHANGE IN THE PAR VALUE OF THE
POST-SPLIT SHARES TO $.01 PER SHARE
General
The Company's Board of Directors has adopted a resolution to effect a 1-for-8
reverse stock split of the Company's issued and outstanding shares of Common
Stock (the "Reverse Split"). If the Reverse Split is approved, all of the issued
and outstanding shares of Common Stock (the "Old Shares") on the effective date
of the Reverse Split (the "Effective Date") will be deemed automatically,
without any further action on the part of the stockholders, to represent 1/8 of
the number of Old Shares (the "New Shares"). The Reverse Split is expected to
result in the issuance of fractional shares to the extent the number of Old
Shares held by a stockholder is not evenly divisible by eight. When the Reverse
Split occurs, the par value of the New Shares will automatically be deemed to be
$.08 per share and the Company has adopted a resolution to change the par value
of the New Shares from $.08 per share to $.01 per share to be consistent with
the authorized but unissued shares of Common Stock. Both the provisions for the
Reverse Split and the change of the par value of the New Shares are contained in
an Amendment (the "Amendment") to the Company's Restated Certificate of
Incorporation (the "Certificate") which is included in this Proxy Statement as
Exhibit A. Stockholders are being asked to consider and vote on approval of the
Amendment to effect the Reverse Split and change in par value of the New Shares.
<PAGE>
Reasons for the Amendment
The Board of Directors believes the Reverse Split is desirable for several
reasons. In February 1998, new maintenance requirements for continued listing on
the Nasdaq SmallCap Market became effective. These new maintenance requirements
require a company to maintain, among other things, a minimum bid price of $1.00
per share. As of the date of this Proxy Statement, the Company is not in
compliance with this requirement. The Reverse Split is intended to enable the
Company to achieve a minimum bid price in excess of $1.00 per share. The Board
of Directors believes that the Reverse Split may have the effect of increasing
the market price per share of Common Stock and allowing the Common Stock to
continue to be included on the Nasdaq SmallCap Market, although there can be no
assurance that the market price of the Common Stock will rise in proportion to
the reduction in the number of outstanding shares resulting from the Reverse
Split or that the post-Reverse Split market price of at least $1.00 per share
can be achieved or maintained. If the Reverse Stock Split is not approved, it is
unlikely that the Company's Common Stock will continue to be included in the
Nasdaq SmallCap Market. The $1.00 minimum bid price is only one of a number of
new Nasdaq maintenance requirements and, even if the Company achieves a minimum
bid price of $1.00 or more, there can be no assurance that the Company will be
able to meet the other requirements for continued inclusion on the Nasdaq
SmallCap Market.
The Board of Directors has determined that continued listing of the Common Stock
on the Nasdaq SmallCap Market would be in the best interest of the stockholders.
If the Company's Common Stock were removed from the Nasdaq system, trading, if
any, thereafter would be conducted in the over-the-counter market on an
electronic bulletin board established for securities that do not meet the Nasdaq
inclusion requirements, or in the "pink sheets." Market interest in the Common
Stock most likely would decrease significantly because investors would find it
more difficult to obtain accurate quotations for the price of the Common Stock
either to purchase or dispose of the Common Stock. In addition, if the Company's
Common Stock is removed from the Nasdaq system, it would be subject to certain
"penny stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities. Consequently, removal of the Common
Stock from the Nasdaq system, if it were to occur, could affect the ability or
willingness of broker-dealers to sell the Common Stock and the ability of
stockholders to sell their Common Stock in the market.
An increased bid price for the Company's Common Stock could also have other
beneficial effects. Brokerage commissions for transactions involving low priced
stocks are often higher than they would be for the same dollar value of
securities which trade at higher stock prices. In addition, some brokers are
reluctant to or will not recommend that their clients purchase lower priced
stocks or will not make a market in such stocks. These practices may adversely
affect the liquidity of the Common Stock and the ability of the Company to raise
additional equity capital. The Board of Directors believes that additional
interest in the Common Stock by the investment community is desirable and, if it
occurs as a result of the Reverse Split, could result in a more stable trading
market for the Common Stock.
Changes Affecting Capital Stock
The number of shares of capital stock authorized by the Certificate will not be
altered by the Amendment. The Certificate authorizes the Company to issue up to
100,000,000 shares of $.01 par value Common Stock and 10,000,000 shares of $.01
par value preferred stock. As of date of this Proxy Statement, the Company had
issued and outstanding 24,089,872 shares of Common Stock and 308,170 shares of
preferred stock consisting of 12,000 shares of Series B 8% Cumulative
Convertible Preferred Stock and 296,170 shares of Series C 10% Cumulative
Convertible Preferred Stock. The Certificates of Designations of Rights and
Preferences related to these series of preferred stock each provide that the
number of shares of Common Stock issuable upon conversion of the preferred
shares shall be proportionately adjusted in the event of a stock split such as
the Reverse Split. Additionally, the operative documents relating to outstanding
warrants, options and other contractual commitments for the future issuance of
Common Stock provide for proportionate adjustment of the number of shares
issuable and exercise price in the event of a stock split such as the Reverse
Split. The number of shares of Common Stock reserved under the Company's 1994
Stock Option Plan which are not subject to outstanding options will not be
affected by the Reverse Split. It is not anticipated that the percentage
ownership of management or any other stockholder would change materially as a
result of the Reverse Split. If, and to the extent that the Company issues
additional shares of Common Stock subsequent to the Effective Date of the
Reverse Split, each stockholder's percentage ownership in the Company and
proportionate voting power will be reduced. <PAGE>
Implementation of the Reverse Split
If the Company's stockholders approve the Amendment, the Reverse Split and
change in par value of the New Shares will be formally implemented by filing the
Amendment with the Secretary of State of the State of Delaware. The Effective
Date of the Amendment and, therefore, the Reverse Split and change of par value
of the New Shares contained therein, will be the date the Amendment is accepted
for filing by the Delaware Secretary of State.
As soon as practicable after the Effective Date of the Reverse Split, the
Company will send a letter of transmittal to each holder of record of Old
Shares. Stockholders should not submit any certificates until requested to do
so. The letter of transmittal will contain instructions for the surrender of
certificate(s) representing the Old Shares to an exchange agent designated by
the Company. Upon proper completion and execution of the letter of transmittal
and return thereof to the exchange agent, together with the certificate(s)
representing Old Shares and payment of the new certificate fee established by
the exchange agent, a stockholder will be entitled to receive a certificate
representing the number of New Shares. Stockholders will not be required to
exchange their certificates representing Old Shares for new certificates
representing New Shares and, until exchanged certificates representing Old
Shares shall be deemed to represent 1/8 of the number of Old Shares.
Federal Income Tax Consequences of the Reverse Split
The Company will not seek an opinion of counsel or a ruling from the Internal
Revenue Service regarding the federal income tax consequences of the Reverse
Split. The Company believes that because the Reverse Split will have the
following federal income tax consequences:
1. A stockholder will not be required to recognize gain or loss as a result of
the Reverse Split and that, in the aggregate, the stockholder's basis in the
New Shares will equal his basis in the Old Shares.
2. A stockholder's holding period for the New Shares will be the same as the
holding period of the Old Shares exchanged therefor.
3. The Company will not recognize any gain or loss as a result of the Reverse
Split because the Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code.
Miscellaneous
The Board of Directors may abandon the proposed Amendment at any time before it
is filed with the Delaware Secretary of State. The Board of Directors may make
any and all change to the Amendment that it deems necessary to file the
Amendment with the Delaware Secretary of State and give effect to the Reverse
Split and reduction in par value of the New Shares on the material terms
described in this Proxy Statement.
The Common Stock is currently registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, as a result, the
company is subject to the periodic reporting and other requirements of the
Exchange Act. The Reverse Split will not affect the registration of the Common
Stock under the Exchange Act.
Recommendation and Vote
The Board of Directors is of the opinion that the Amendment is advisable and in
the best interests of the Company and its stockholders and recommends a vote
"FOR" the approval of the Amendment.
<PAGE>
PROPOSAL #2
ELECTION OF DIRECTORS
The following five persons have been nominated for election as directors of the
Company for a term of one year, until the election and qualification of their
successors: Anthony B. Cashen, Robert R. Hebard, Thomas W. Itin, Robert D.
Newman and Clarence H. Yahn. The directors listed constitute the entire Board of
Directors. The persons named in the proxy intend to vote for Messrs. Cashen,
Hebard, Itin, Newman and Yahn unless a Stockholder withholds authority to vote
for any or all of these nominees. If any nominee is unable to serve or, for good
cause, will not serve, the persons named in the proxy reserve the right to
substitute another person of their choice as a nominee in his place. Each of the
five nominees has agreed to serve if elected.
Vote Required
The nominees with the greatest number of affirmative votes will be elected in
this election of directors.
FINANCIAL INFORMATION
A copy of the Company's 1997 Annual Report on Form 10-K, including audited
financial statements, is being sent to Stockholders with this proxy statement.
OTHER MATTERS
Management does not know of any other matters to be brought before the meeting.
However, if any other matters properly come before the meeting, it is the
intention of the appointees named in the enclosed Form of Proxy to vote in
accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Any Stockholder proposing to have any appropriate matter brought before the 1999
Annual Meeting of Stockholders, tentatively scheduled for May 30, 1999 must
submit such proposal in accordance with the proxy rules of the SEC. All such
proposals intended to be presented at the next Annual Meeting of Stockholders
must be received at the company's offices at 7001 Orchard Lake Road, Suite 424,
West Bloomfield, Michigan 48322-3608, Attention: Corporate Secretary, for
receipt no later than the January 4, 1999, to be considered for inclusion in the
proxy statement for the 1999 meeting.
By Order of the Board of Directors:
Ajay Sports, Inc.
Robert R. Hebard, Corporate Secretary
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION
OF AJAY SPORTS, INC.
Ajay Sports, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of Ajay Sports, Inc.,
resolutions were duly adopted setting forth a proposed amendment to the
Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of stockholders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Restated Certificate of Incorporation of Ajay Sports,
Inc., as amended to date, shall be amended by changing the Fouth Paragraph
thereof so that said paragraph shall be and read as follows:
4.
The authorized capital stock of the Corporation shall consist of One
Hundred Million (100,000,000) shares of One Cent ($.01) par value common
stock (hereinafter called the "Common Stock"), and Ten Million
(10,000,000) shares of One Cent ($.01) par value preferred stock
(hereinafter called the "Preferred Stock").
Pursuant to Section 151(a) of the Delaware General Corporation Law
("DGCL"), the Board of Directors is expressly authorized and empowered to
divide any or all of the shares of common stock and/or preferred stock
into series and, within the limitations set froth in the DGCL, to fix and
determine the relative rights and preferences of the shares of any series
established.
Simultaneously with the effective date of this amendment (the "Effective
Date"), shares of Common Stock issued and outstanding immediately prior to
the Effective Date (the "Old Shares") shall automatically and without any
action on the part of the holder thereof be reverse split on a 1-for-8
basis so that each Old Share issued and outstanding immediately prior to
the Effective Date shall automatically be converted into and reconstituted
as 1/8 of a share ("New Shares") of Common Stock (the "Reverse Split").
The par value of the New Shares shall be $.01 per share. Fractional shares
of Common Stock shall exist to the extent that Old Shares are not evenly
divisable by eight.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 322 of the General
Corporation Law of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the Sate of
Delaware.
IN WITNESS WHEREOF, Ajay Sports, Inc. has caused this certificate to be
signed by Thomas W. Itin, its President, this _____ day of __________, 1998.
AJAY SPORTS, INC.
BY____________________________________
Thomas W. Itin, President
<PAGE>
PROXY PROXY
AJAY SPORTS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of AJAY SPORTS, INC. (the "Company") hereby
constitutes and appoints Thomas W. Itin and Robert R. Hebard as proxies, each
with the power to appoint his substitute, to appear and vote all of the shares
of the Common Stock of the Company standing in the name of the undersigned at
the 1998 Annual Meeting of Stockholders of AJAY SPORTS, INC. to be held at the
Company's executive office, 1501 E. Wisconsin Street, Delavan, Wisconsin, on May
29, 1998, at 11:00 a.m. (CDT), and at any postponements or adjournments thereof,
upon the following matters:
1. ELECTION OF DIRECTORS:
FOR all nominees listed below, except as marked to the contrary
Anthony B. Cashen Robert R. Hebard Thomas W.Itin
Robert D. Newman Clarence H. Yahn
INSTRUCTION: To withhold authority to vote for any nominee, strike
a line through the nominee's name above
WITHHOLD AUTHORITY to vote for all nominees listed above
2.To consider and approve a proposal to amend the fourth paragraph of the
Company's Restated Certificate of Incorporation, as amended, to cause a
1-for-8 share reverse stock split of the issued and outstanding shares
of the common stock of the Company, whereby every eight outstanding
shares of the Company's common stock, (the "Old Shares") will be
converted into and reconstituted as one share of common stock which
shall have a par value $.01 per share (the "New Shares"). Passage of
this proposal requires the affirmative vote of a majority of the
Company's outstanding shares entitled to vote on the proposal.
FOR _____ AGAINST _____ ABSTAIN _____
The Proxy, when properly signed and delivered, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR the election of directors and FOR the amendment to the
Restated Certificate of Incorporation. This proxy will be voted in accordance
with the discretion of the proxies on any other business.
3. To transact other such business as may properly come before the
meeting or any adjournments thereof.
Please mark, date and sign your name exactly as it appears hereon and return the
Proxy in the enclosed envelope as promptly as possible. It is important to
return this Proxy properly signed in order to exercise your right to vote if you
do not attend the meeting and vote in person. When signing as agent, partner,
attorney, administrator, guardian, trustee, or in any other fiduciary capacity,
please indicate your title. If the stock is held jointly, each joint owner must
sign.
Date: ____________________________________, 1998
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Signature
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Signature (if jointly held)
Address if different from that on label:
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Street Address
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City, State and Zip Code
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Number of Shares
Please check if you intend to be present at the meeting ____
