UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
Amendment No. 1
MARK ONE:
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 No.)
1501 E. Wisconsin Street,
Delavan, Wisconsin 53115 (414) 728-5521
- --------------------------------------- ------------------------
(Address of principal executive offices (Registrant's Telephone
Number, including Zip Code) 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 March 31, 1999 is 3,956,815.
Transitional Small Business Disclosure Format
Yes No x
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<PAGE>
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: Duly Authorized Officer
By: /s/Barb Wargolet
----------------------
Its: Corporate Controller
Date: May 14, 1999
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11
27
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of April 8,
1999, is by and among Ajay Sports, Inc., a Delaware corporation ("Ajay" or
"Purchaser"), as purchaser, and Pro Golf of America, Inc., a Michigan
corporation ("PGA") and the shareholders of PGA, Robert Sage and The Jack London
Revocable Living Trust (the "Trust"). Hereinafter, Robert Sage and the Trust are
referred to collectively as the "Selling Shareholders."
Whereas, the Selling Shareholders own all of the outstanding shares of
capital stock of PGA and all of the membership interests in PGD Online, LLC, a
Michigan Limited Liability Company ("PGD").
Whereas, PGA is engaged in the business of franchising others to utilize
the trademarks, trade names and service marks of PGA in the operation of a
retail business engaged in purchasing and selling golf and golf-related
equipment and products including equipment and products which are designed
totally or in part by PGA and/or manufactured exclusively for and distributed by
franchisees of PGA.
Whereas, PGD is a limited liability company recently formed primarily for
the purpose of commencing sales of golf and golf-related equipment and products
through the Internet, telemarketing and catalog (electronic and physical)
channels.
Whereas, Ajay desires to acquire the businesses of PGA and PGD, and, to
this end, desires to acquire the shares of capital stock of PGA and the LLC
membership interests of PGD from the Selling Shareholders on the terms and
conditions set forth in this Agreement.
Now, therefore, in consideration of the premises, representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
Article 1
The Stock Purchase
Section 1.1. The Stock Purchase. At the Effective Time (as defined below)
and upon the terms and conditions of this Agreement, the Selling Shareholders
shall sell to Purchaser, and Purchaser shall purchase from Selling Shareholders,
all of Selling Shareholders' Class "A" common shares, par value $1.00 per share,
of PGA (the "PGA Shares") and all of Selling Shareholders' LLC membership
interests in PGD (the "PGD LLC Interests"). Hereinafter, the purchase by
Purchaser of the PGA Shares and the PGD LLC Interests from the Selling
Shareholders is referred to as the "Stock Purchase."
Section 1.2. Effective Time. The Stock Purchase shall become effective at
such time as the Selling Shareholders deliver to Purchaser the certificates and
other items required under Section 1.6 and Section 1.8 (the "Selling Shareholder
Deliveries") and Purchaser delivers to Selling Shareholders the cash and other
consideration required under Section 1.7 and Section 1.8 (the "Purchaser
Deliveries"). The Selling Shareholder Deliveries and the Purchaser Deliveries
shall be deemed to have been made simultaneously and, when completed, the Stock
Purchase shall become effective (the "Effective Time").
Section 1.3. Closing of the Stock Purchase. The closing of the Stock
Purchase (the "Closing") will take place at the offices of Alan R. Miller, 370
E. Maple Rd., 4th Floor, Birmingham, Michigan, on a date and at a time to be
specified by the parties. The closing date and Effective Time shall not be later
than 15 days after the end of the Due Diligence Period (as defined in Section
5.1) (the "Closing Date").
<PAGE>
Section 1.4. Effects of the Stock Purchase. At the Effective Time, except
to the extent otherwise provided by this Agreement, through the transfer of
stock and membership ownership, PGA and PGD each will become a wholly-owned
subsidiary of Purchaser.
Section 1.5. Board of Directors Changes. The Selling Shareholders shall
deliver written resignations of all members of the board of directors of PGA,
effective as of the Effective Time. Purchaser shall cause to be elected new
boards of directors of PGA effective immediately following the Effective Time.
Section 1.6. Transfer of Shares/Non-Compete Agreements. At the Closing,
the Selling Shareholders shall deliver to Purchaser the following:
1.6.1 Certificates representing all of the PGA Shares, together with
stock powers in form and properly executed to convey to Purchaser all right,
title and interest in and to the PGA Shares (the "PGA Stock Certificates") free
and clear of any and all pledges, liens, security interests, encumbrances,
mortgages, adverse claims, charges, options, equity interests, proxies, voting
agreements or trusts or other interests ("Encumbrances").
1.6.2 Certificates representing all of the membership interests in
PGD Online, LLC, a Michigan Limited Liability Company ("PGD"), properly endorsed
to convey all right, title and interest in and to the membership interests, free
and clear of any and all Encumbrances (the "PGD Certificates").
1.6.3 Non-compete agreements from the Selling Shareholders for the
benefit of Ajay, PGA and PGD, agreeing to refrain from Competition (as defined
below) in the businesses of franchising and/or other distribution means through
the Internet, telemarketing, or catalog methods of marketing and/or selling golf
related products (collectively, the "Competing Activities") on a world-wide
basis for a period of three years following the Effective Time. Except to the
extent expressly provided in the exceptions contained in the following sentence,
"Competition" shall mean the following activities: (i) ownership, management,
operation, control, engagement in or participation in the ownership, management,
operation or control of, or employment by, or connection as an officer,
employer, stockholder, partner, consultant or otherwise with (a) any business
using the name Pro Golf or any variation thereof, (b) business engaged in the
Competing Activities, and/or (c) any supplier to PGA or PGD. The following shall
be expressly excluded from the definition of "Competition" provided in the
foregoing sentence: (1) each Selling Shareholder's ownership and operation of a
golf driving range, golf course or not more than three retail golf stores
(provided that the retail shops shall not be a chain of stores or franchised
unless franchised through PGA); (2) Selling Shareholders ownership interest in
Pro Golf Nevada LLC ("PG Nevada") to the extent of the present business
activities of the retail business of PG Nevada; provided, that, the business of
PG Nevada (or any other permitted retail store) shall not be permitted to expand
to include any of the Competing Activities; and/or (3) ownership of not more
than five percent of the outstanding stock of any publicly-traded company and
any pension plan investments. The total consideration to be allocated to the
non-compete agreements from the Selling Shareholders shall be $50,000 for each
Selling Shareholder.
Section 1.7 Purchase Price.
1.7.1 Cash Purchase Price. In exchange for the PGA Stock
Certificates and the agreements delivered by the Selling Shareholders pursuant
to , Purchaser has agreed to pay aggregate cash consideration of $9,850,000,
(the "Purchase Price"). The Purchase Price shall be allocated and delivered as
provided in this Section below.
1.7.2 Deposit Escrow. Within five business days after the execution
and delivery of this Agreement, Ajay shall cause to be deposited into escrow One
Hundred Thousand Dollars ($100,000) which shall be held in the Alan R. Miller,
P.C. Trust Account pursuant to the Deposit Escrow Agreement, the form of which
is incorporated into this Agreement as EXHIBIT 1.7.2 (the "Deposit Escrow"). The
Deposit Escrow funds shall be applied toward the Purchase Price at the Closing.
If no Closing is held under this Agreement, the Deposit Escrow funds shall be
disposed of in accordance with Section 6.3. In the event Ajay should fail to
make the Deposit Escrow in a timely fashion, the Selling Shareholders shall have
the right to terminate this Agreement.
<PAGE>
1.7.3 Payment of the Purchase Price. At the Closing, Purchaser shall
pay to each of Robert Sage and the Trust, by wire transfer or other means
mutually acceptable to the payee and payer, one-half of the Purchase Price less
the Deposit Escrow amount.
1.7.4 Additional Consideration. As additional consideration to the
Selling Shareholders, at the Closing Ajay will issue non-transferable warrants
(the "Warrants") to each Selling Shareholder to purchase up to 50,000 shares of
common stock, par value $.01 per share, of Ajay (the "Ajay Common Stock"),
exercisable commencing at the Effective Time and continuing for two full years
thereafter, at an exercise price of $2.00 if exercised during the first year and
an exercise price of $2.50 per share if exercised during the second year;
provided, that, as a condition to the exercise of the warrants, the holder will
agree not to sell the shares of common stock received upon exercise of the
warrants for at least three years after the warrant exercise date.
Section 1.8. SOTA Closing. The consideration provided for in the Asset
Purchase Agreement between State of the Art Golf Company, Inc. ("SOTA") and Ajay
referred to in subsection 5.1.8 shall be paid and transferred. Specifically, and
without limitation, the Selling Shareholders shall have received the sum of
$650,000 and shall have executed such bills of sale and other documents
transferring the assets of SOTA to Ajay as may be required by the Asset Purchase
Agreement.
Section 1.9. Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, PGA, PGD, the Selling Shareholders or Purchaser
reasonably determines that any deeds, assignments, or instruments or
confirmations of transfer are necessary or desirable to carry out the purposes
of this Agreement or to vest Purchaser with full right, title and possession to
all assets, property, rights, privileges, powers and franchises of PGA and the
officers and directors of PGA, or PGD, as applicable, and the Selling
Shareholders are fully authorized in the name of PGA and PGD or otherwise to
take, and will take, all such lawful and necessary or desirable action.
Article 2
Representations and Warranties of Ajay
Except as set forth on the disclosure schedule to be delivered by Ajay to
the Selling Shareholders (the "Ajay Disclosure Schedule") within fifteen (15)
days after the execution and delivery of this Agreement, Ajay hereby represents
and warrants to the Selling Shareholders as follows:
Section 2.1. Organization and Qualification. Ajay is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Material Adverse
Effect (as defined below) on Ajay. Ajay is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on Ajay. When used in connection with Ajay, the
term "Material Adverse Effect" means any change or effect (i) that is or is
reasonably likely to be materially adverse to the business, results of
operations, condition (financial or otherwise) or prospects of Ajay, other than
any change or effect arising out of general economic conditions unrelated to any
business in which Ajay is engaged, or (ii) that will or is reasonably likely to
impair the ability of Ajay to perform its obligations hereunder or to consummate
the transactions contemplated hereby.
<PAGE>
Section 2.2. Consents and Approvals. No filing with or notice to, and no
permit, authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and delivery by Ajay of
this Agreement or the consummation by Ajay of the transactions contemplated
hereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not have
a Material Adverse Effect on Ajay. Section 2.2 of the Ajay Disclosure Schedule
lists each consent and approval required to be obtained by Ajay from any party
other than a Governmental Entity which is necessary for the consummation of the
Stock Purchase.
Section 2.3. Authority Relative to this Agreement. Ajay has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Ajay and constitutes a valid, legal and
binding agreement of Ajay, enforceable against Ajay in accordance with its
terms. Neither the execution, delivery and performance of this Agreement by Ajay
nor the consummation by Ajay of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of its Certificate of
Incorporation or Bylaws (or similar governing documents), (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default, or give rise to any right of termination, amendment,
cancellation or acceleration or Lien (as defined in below) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Ajay is
a party or by which any of its properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Ajay or any of its properties or assets, except in the case of
(ii) or (iii) for violations, breaches or defaults which would not have a
Material Adverse Effect on Ajay and in the case of (ii) for consents and
approvals of Ajay's current lenders as described in Section 2.2 of the Ajay
Disclosure Schedule. For purposes of this Agreement, "Lien" means, with respect
to any asset, including, without limitation, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset.
Section 2.4. SEC Reports. To the knowledge of present management of Ajay,
Ajay has filed all forms, reports and documents required to be filed with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Ajay will deliver, on or before seven
business days prior to the end of the Due Diligence Period (as defined in
Section 5.1), to Selling Shareholders copies, in the form filed with the SEC
(including any amendments thereto but excluding any exhibits), of (i) its Annual
Report on Form 10-K for the year ended December 31, 1998, (ii) its definitive
proxy statements relating to Ajay's any meetings of stockholders (whether annual
or special) held since January 1, 1998 and (iii) all other forms or reports
filed with the SEC since December 31, 1998 (all of the foregoing, collectively,
the "Ajay SEC Reports").
Section 2.5. Reservation of Shares; Issuance. Prior to the Effective Time,
the Board of Directors of Ajay will take all action necessary to reserve a
sufficient number of shares of its common stock for issuance to the Selling
Shareholders upon their exercise of the Warrants to be issued under subsection
1.7.4. (the "Warrant Shares"). The Warrant Shares, when issued in accordance
with the provisions of the Warrants, will be lawfully issued as fully paid,
nonassessable shares of Ajay.
<PAGE>
Section 2.6. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Ajay.
Section 2.7. Disclosure. No representation or warranty of Ajay in this
Agreement or any certificate, schedule, document or other instrument furnished
or to be furnished to Selling Shareholders pursuant hereto or in connection
herewith contains or, as of the date of such representation, warranty or
instrument, will contain any untrue statement of a material fact or, at the date
thereof, omits or will omit to state a material fact necessary to make any
statement herein or therein, in light of the circumstances under which such
statement is or will be made, not misleading.
Section 2.8. Investment Intent. Ajay is acquiring the PGA Shares and the
PGD LLC Interests for investment and not with a view toward, or for sale in
connection with, any distribution thereof, or any present intention of
distributing or selling the PGA Shares or the PGD LLC Interests. Ajay
acknowledges and agrees that neither the PGA Shares nor the PGD LLC Interests
have been or will be registered under the Securities Act of 1933, as amended
(the "Securities Act") or the Michigan Uniform Securities Act, and Ajay will not
resell the PGA Shares or the PGD LLC Interests unless they are so registered or
unless an exemption from registration is available. Ajay consents to the
imposition of a legend to this effect on the certificates for the PGA Shares and
the PGD LLC Interests and to a notation to this effect in the stock transfer
records of PGA and membership transfer records of PGD.
Article 3
Representations and Warranties of the Selling Shareholders
Except as set forth on the disclosure schedule to be delivered by the
Selling Shareholders to Ajay (the "Selling Shareholders Disclosure Schedule")
within fifteen (15) days after the execution and delivery of this Agreement, the
Selling Shareholders hereby jointly and severally represent and warrant to Ajay
as follows:
Section 3.1. Organization; Qualification; No Subsidiaries
3.1.1 Organization. PGA and PGD each is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Material Adverse
Effect (as defined below) on it. When used in connection with PGA and/or PGD,
the term "Material Adverse Effect" means any change or effect (i) that is or is
reasonably likely to be materially adverse to the business, results of
operations, condition (financial or otherwise) or prospects of PGA or PGD, as
applicable, other than any change or effect arising out of general economic
conditions unrelated to any business in which PGA or PGD, as applicable is
engaged, or (ii) that may impair the ability of the Selling Shareholders to
perform their obligations or to consummate the transactions contemplated hereby.
3.1.2 Qualification. PGA and PGD each is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect on PGA or PGD, as applicable.
3.1.3 No Subsidiaries. Neither PGA nor PGD has any
subsidiaries or owns, directly or indirectly, any voting securities or
interests (including membership interests) of any entity.
<PAGE>
3.1.4 Delivery of Governing Documents. Selling Shareholders have
delivered to Ajay accurate and complete copies of the (i) Certificate or
Articles of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of PGA; and (ii) Certificate or Articles of Organization
and Operating Agreement (or similar governing documents), as currently in
effect, of PGD.
Section 3.2. Capitalization.
3.2.1 The authorized capital stock of PGA consists of Fifty Thousand
(50,000) Class "A" common shares, par value $1.00 per share, of which 1,000
shares are issued and outstanding. All of the outstanding PGA Shares have been
duly authorized and validly issued, and are fully paid, nonassessable and free
of preemptive rights and are owned by the Selling Shareholders. There are no
other issued or outstanding (i) shares of capital stock or other voting
securities of PGA, (ii) securities of PGA convertible into or exchangeable for
shares of capital stock or voting securities of PGA, (iii) options or other
rights to acquire from PGA any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of PGA,
or (iv) equity equivalents, interests in the ownership or earnings of PGA, or
other similar rights (collectively, "PGA Securities"). As of the date hereof,
there are no outstanding obligations of PGA to repurchase, redeem or otherwise
acquire any PGA Securities.
3.2.2 PGD has not issued any membership interests other than the
membership interests owned by the Selling Shareholders. No person holds any
right to acquire any membership interest in PGD, either directly or indirectly.
3.2.3 The Selling Shareholders are parties to a Stockholders
Agreement dated October 11, 1988. The Selling Shareholders have agreed and
consented to the sale of the Selling Shareholders' shares pursuant to the terms
and conditions of this Agreement and at the Effective Time, the Stockholders
Agreement will be terminated and of no further force or effect.
Section 3.3. Consents and Approvals. Except as set forth on Section 3.3 of
the Selling Shareholders Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity or any
other party is necessary for the execution and delivery by PGA, PGD or the
Selling Shareholders of this Agreement or the consummation the Selling
Shareholders of the transactions contemplated hereby, except where the failure
to obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Material Adverse Effect on PGA or
PGD. Section 3.3 of the Selling Shareholders Disclosure Schedule lists each
consent and approval required to be obtained by PGA, PGD or the Selling
Shareholders from any Governmental Entity or other party which is necessary for
the consummation of the Stock Purchase.
Section 3.4. Authority Relative to this Agreement; Recommendation.
3.4.1 PGA has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by PGA
and each of the Selling Shareholders and constitutes a valid, legal and binding
agreement of PGA and the Selling Shareholders, enforceable against PGA and the
Selling Shareholders in accordance with its terms. Neither the execution,
delivery and performance of this Agreement by any of PGA or the Selling
Shareholders, nor the consummation by PGA or the Selling Shareholders of the
transactions contemplated hereby, will (i) conflict with or result in any breach
of any provision of the Certificate or Articles of Incorporation or Certificate
or Articles of Organization, as applicable, or Bylaws or Operating Agreement, as
applicable (or similar governing documents) of PGA or PGD, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which PGA, PGD or either of the
Selling Shareholders is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to PGA, PGD or
any of their respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which would not have a Material
Adverse Effect on PGA or PGD, as applicable, and in the case of (ii) for
consents and approvals as described in Section 3.3 of the Selling Shareholders
Disclosure Schedule.
<PAGE>
Section 3.5. No Default. Neither PGA nor PGD is in breach, default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a breach, default or violation) of any term, condition or
provision of (i) its Certificate or Articles of Incorporation or Certificate or
Articles of Organization, as applicable, or Bylaws or Operating Agreement, as
applicable (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which PGA or PGD is now a party or by which any of them or any of their
respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to PGA, PGD or
any of their respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults that would not have a Material
Adverse Effect on PGA or PGD, as applicable. Each note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which PGA or PGD is now a party or by which any of them or any of their
respective properties or assets may be bound that is material to PGA or PGD, as
applicable, that has not expired is described as a material contract in Section
3.23 of the Selling Shareholders Disclosure Schedule and is in full force and
effect and is not subject to any material default thereunder known to PGA or the
Selling Shareholders by any party obligated thereunder to PGA or PGD.
<PAGE>
Section 3.6. Financial Statements. The financial statements
referred to in subsections 3.6.1 and 3.6.2 below are referred to
collectively as the "PGA Financial Statements."
3.6.1 The Selling Shareholders have provided to Ajay accurate and
complete copies of the financial statements of PGA, including balance sheets,
statements of shareholders' equity, statements of operations and statements of
cash flows, including the notes thereto for the years ended October 31, 1998,
1997 and 1996, prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied, and audited by PGA's independent
public accountants (the "Audited Financial Statements"). On the earlier of April
30, 1999 or seven business days before the end of the Due Diligence Period (as
defined in Section 5.1). Selling Shareholders shall deliver to Ajay, accurate
and complete copies of the unaudited interim financial statements of PGA,
including balance sheets, statements of shareholders' equity, statements of
operations and statements of cash flows, including the notes thereto for the
period November 1, 1998 through February 28, 1999, prepared in accordance with
GAAP, consistently applied (the "Unaudited Interim Financial Statements").
Further, within 30 business days after the Closing Date, the Selling
Shareholders shall deliver to Purchaser unaudited interim financial statements
of PGA, including balance sheets, statements of shareholders' equity, statements
of operations and statements of cash flows, including the notes thereto,
prepared in accordance with GAAP, consistently applied, for the period from
November 1, 1998 through the Closing Date (the "Closing Financial Statements).
In addition, if under SEC reporting requirements Ajay is required to include
GAAP compliant financial information related to PGA for any period other than as
specified herein, Selling Shareholders will provide additional Unaudited Interim
Financial Statements for the required period for PGA in a timely manner so as to
permit Ajay timely to file its required report; provided, however, that if the
Closing occurs within 30 days after the end of period for which Selling
Shareholders are required to provide additional Unaudited Interim Financial
Statements for PGA, then Selling Shareholders shall not be required to provide
the Closing Financial Statements. The Audited Financial Statements, the
Unaudited Interim Financial Statements and the Closing Financial Statements are
referred to collectively as the "GAAP Financial Statements."
3.6.2 Between the date hereof and the Effective Time, Selling
Shareholders will furnish to Ajay, within ten business days after the end of
each calendar month (for monthly periods commencing March 1, 1999), a balance
sheet, statement of shareholders' equity and statement of operations of PGA as
of the end of the such month, prepared on a cash basis of accounting (each a
"Monthly Modified Cash Basis Financial Statement"). The Monthly Modified Cash
Basis Financial Statements will not be prepared on an accrual basis or in
accordance with GAAP. The Monthly Cash Basis Financial Statements will be
internally generated in accordance with PGA's historical internal "modified cash
basis" method of accounting and shall fairly present PGA's financial position as
of the last day of the period then ended and shall be so certified by PGA's
internal accountant.
3.6.3 All intercompany accounts have been eliminated on the GAAP
Financial Statements.
3.6.4 The GAAP Financial Statements are, or when delivered will be,
complete and accurate, and present, or will present, fairly the financial
condition of PGA at the dates thereof and reflect all material debts and
liabilities of PGA required to be disclosed in accordance with GAAP, at the
dates thereof, and the statements of operations and cash flows contained therein
present fairly the results of the operations of PGA and the changes in its
financial positions for the periods indicated except as otherwise disclosed in
Section 3.6 of the Selling Shareholders Disclosure Schedule.
3.6.5 The Selling Shareholders shall cause PGA to make available to
Ajay and Ajay's independent public accountants its work papers and those of its
independent public accountants related to the PGA Financial Statements.
<PAGE>
Section 3.7 No Undisclosed Liabilities; Absence of Changes. Except as
disclosed in Section 3.7 of the Selling Shareholders Disclosure Schedule,
neither PGA nor PGD had any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, that were not reflected in the GAAP
Financial Statements and that would be required by GAAP to be reflected on a
balance sheet of PGA (including the notes thereto) or which would have a
Material Adverse Effect on PGA. Except as disclosed in Section 3.7 of the
Selling Shareholders Disclosure Schedule, since the date of the last PGA Audited
Financial Statement, PGA has not incurred any liabilities of any nature, whether
or not accrued, contingent or otherwise, which could reasonably be expected to
have, and there have been no events, changes or effects with respect to PGA
having or which could reasonably be expected to have, a Material Adverse Effect
on PGA. Except as disclosed in Section 3.7 of the Selling Shareholders
Disclosure Schedule, there has not been (i) any material change by PGA in its
accounting methods, principles or practices (other than as required after the
date hereof by concurrent changes in GAAP), (ii) any revaluation by PGA of any
of its assets having a Material Adverse Effect on PGA, including, without
limitation, any write-down of the value of any assets other than in the ordinary
course of business or (iii) any other action or event that would have required
the consent of any other party hereto pursuant to Section 4.1 of this Agreement
had such action or event occurred after the date of this Agreement.
Section 3.8 Litigation. Except as described in Section 3.8 of the Selling
Shareholders Disclosure Schedule there is no suit, claim, action, proceeding or
investigation pending which was either brought by or against PGA or PGD, or, to
the knowledge of Selling Shareholders, has been threatened against PGA or PGD,
or any of their respective properties or assets which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on PGA
or PGD, as applicable, or could reasonably be expected to prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
disclosed in Section 3.8 of the Selling Shareholders Disclosure Schedule,
neither PGA nor PGD is subject to any outstanding order, writ, injunction or
decree which could reasonably be expected to have a Material Adverse Effect on
PGA or PGD, as applicable, or could reasonably be expected to prevent or delay
the consummation of the transactions contemplated hereby. Copies of all material
correspondence and pleadings related to each item referenced in Section 3.8 of
the Selling Shareholders Disclosure Schedule have been delivered to Ajay or will
be delivered to Ajay together with the Selling Shareholders Disclosure Schedule.
Section 3.9 Compliance with Applicable Law. Except as disclosed in Section
3.9 of the Selling Shareholders Disclosure Schedule, PGA and PGD hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "PGA Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on PGA or PGD, as applicable. Except as disclosed in
Section 3.9 of the Selling Shareholders Disclosure Schedule, PGA and PGD are in
compliance with the terms of the PGA Permits, except where the failure so to
comply would not have a Material Adverse Effect on PGA or PGD, as applicable.
Except as disclosed Section 3.9 of the Selling Shareholders Disclosure Schedule,
the businesses of PGA and PGD are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity except that no representation
or warranty is made in this Section 3.9 with respect to Environmental Laws and
except for violations or possible violations which do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material Adverse
Effect on PGA or PGD, as applicable. Except as disclosed in Section 3.9 of the
Selling Shareholders Disclosure Schedule, no investigation or review by any
Governmental Entity with respect to PGA or PGD is pending or, to the knowledge
of Selling Shareholders, threatened, nor, to the knowledge of Selling
Shareholders, has any Governmental Entity indicated an intention to conduct the
same, other than, in each case, those which are disclosed in Section 3.9 of the
Selling Shareholders Disclosure Schedule which the Selling Shareholders
reasonably believe will not have a Material Adverse Effect on PGA or PGD, as
applicable.
<PAGE>
Section 3.10 Employee Benefit Plans; Labor Matters.
3.10.1 With respect to each employee benefit plan, program, policy,
arrangement and contract (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of ERISA), maintained or contributed to at any
time by PGA, PGD or any entity required to be aggregated with PGA or PGD
pursuant to Section 414 of the Internal Revenue Code of 1986, as amended (the
"Code") (each, a "PGA Employee Plan"), no event has occurred and, to the
knowledge of Selling Shareholders, no condition or set of circumstances exists
in connection with which PGA or PGD could reasonably be expected to be subject
to any liability which would have a Material Adverse Effect on PGA or PGD, as
applicable, including, without limitation, any unfunded pension plan liability
or liability for retiree health plan coverage. Section 3.10.1 of the Selling
Shareholders Disclosure Schedule lists all PGA Employee Plans and copies of each
such plan and all amendments and modifications thereto (or if such plans are
unwritten, a complete and accurate summary thereof) have been delivered to Ajay
or will be delivered to Ajay together with the Selling Shareholders Disclosure
Schedule.
3.10.2 No PGA Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code. Each PGA Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable Internal Revenue
Service determination letter, and nothing has occurred which could reasonably be
expected to adversely affect such determination.
3.10.3 Except as disclosed in Section 3.10.3 of the Selling
Shareholders Disclosure Schedule, there shall be no payment, accrual of
additional benefits, acceleration of payments, or vesting in any benefit under
any PGA Employee Plan or any agreement or arrangement disclosed under this
Section 3.10 solely by reason of entering into this Agreement or in connection
with the consummation of the transactions contemplated by this Agreement.
3.10.4 There are no controversies pending or, to the knowledge of
Selling Shareholders threatened, between PGA or PGD and any of their respective
employees, which controversies would or could reasonably be expected to have a
Material Adverse Effect on PGA or PGD, as applicable. Neither PGA nor PGD is a
party to any collective bargaining agreement or other labor union contract
applicable to its employees or has any outstanding material liability with
respect to any terminated collective bargaining agreement or labor union
contract. None of PGA, PGD or the Selling Shareholders has knowledge of any
activities or proceedings of any labor union to organize any of PGA's or PGD's
employees. There are no ongoing strikes, slowdowns, work stoppages, lockouts
nor, to the knowledge of PGA or the Selling Shareholders, is there any threat
thereof by or with respect to the employees of PGA or PGD.
<PAGE>
Section 3.11 Environmental Laws and Regulations.
3.11.1 Except as disclosed in Section 3.11 of the Selling
Shareholders Disclosure Schedule, (i) PGA and PGD is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) (collectively, "Environmental Laws"), except for non-compliance that
would not have a Material Adverse Effect on PGA or PGD, as applicable. For
purposes of this provision, compliance includes, but is not limited to, the
possession by PGA and PGD of all material permits and other governmental
authorizations required under applicable Environmental Laws, including
compliance with the terms and conditions thereof.. (ii) Neither PGA nor PGD has
received written notice of, or, to the knowledge of PGA or Selling Shareholders,
is the subject of, any action, cause of action, claim, investigation, demand or
notice by any person or entity alleging liability under or non-compliance with
any Environmental Law (an "Environmental Claim") that could reasonably be
expected to have a Material Adverse Effect on PGA or PGD, as applicable. (iii)
To the knowledge of PGA and the Selling Shareholders, there are no circumstances
that are reasonably likely to prevent or interfere with compliance with
applicable Environmental Laws in the future.
3.11.2 Except as disclosed in Section 3.11 of the Selling
Shareholders Disclosure Schedule, there are no Environmental Claims which could
reasonably be expected to have a Material Adverse Effect on PGA or PGD, as
applicable, that are pending or, to the knowledge of Selling Shareholders,
threatened against PGA or PGD or, to the knowledge of the Selling Shareholders,
against any person or entity whose liability for any Environmental Claim that
PGA or PGD has or may have retained or assumed either contractually or by
operation of law.
Section 3.12 Tax Matters.
3.12.1 Except as set forth in Section 3.12 of the Selling
Shareholders Disclosure Schedule: (i) PGA and PGD each has filed or has had
filed on its behalf in a timely manner (within any applicable extension periods)
with the appropriate Governmental Entity all income and other material Tax
Returns (as defined in subsection 3.12.2) with respect to Taxes (as defined in
subsection 3.12.2) of PGA and PGD, as applicable, and all Tax Returns were in
all material respects true, complete and correct; (ii) all material Taxes with
respect to PGA and PGD have been paid in full; (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, local or foreign income or other Tax Returns required to
be filed by or with respect to PGA or PGD; (iv) no deficiency for any income or
other material Taxes has been assessed with respect to PGA or PGD which has not
been abated or paid in full; and (v) to the knowledge of PGA or the Selling
Shareholders, none of the Tax Returns of or with respect to PGA or PGD is
currently being audited or examined by any Governmental Entity.
3.12.2 For purposes of this Agreement, (i) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority and (ii) "Tax Return"
shall mean any report, return, documents declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to Taxes.
Section 3.13 Title to Property. PGA and PGD each has, or at the Closing
Date will have, good and defensible title to its properties and assets, free and
clear of all liens, charges and encumbrances except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, either individually or in the aggregate,
would not have a Material Adverse Effect on PGA or PGD, as applicable. All
leases pursuant to which PGA or PGD lease from others real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default and in respect
of which PGA or PGD, as applicable, has not taken adequate steps to prevent such
a default from occurring) except where the lack of such good standing, validity
and effectiveness, or the existence of such default or event of default would
not have a Material Adverse Effect on PGA or PGD, as applicable.
<PAGE>
Section 3.14 Intellectual Property.
3.14.1 Section 3.14 of the Selling Shareholders Disclosure Schedule
describes each existing United States and foreign patent, trademark, trade name,
services mark, copyright, trade secret, and applications therefor owned or
licensed by PGA and PGD, including registration numbers and expiration dates and
details of the licenses (the "PGA Intellectual Property Rights"). The PGA
Intellectual Property Rights are the only intellectual property rights that are
material to the businesses of PGA and PGD as currently conducted.
3.14.2 Except as set forth in Section 3.14 of the Selling
Shareholders Disclosure Schedule, the validity of the PGA Intellectual Property
Rights and the title thereto of PGA or PGD, as the case may be, is not being
questioned in any litigation to which PGA or PGD, as the case may be, is a party
and neither PGA nor PGD has received any notices of potential claims.
3.14.3 The businesses of PGA and PGD as now conducted does not, to
the knowledge of PGA or the Selling Shareholders, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others.
3.14.4 PGA and PGD have taken steps they believe appropriate to
protect and maintain their trade secrets as such, except in cases where they
have elected to rely on patent or copyright protection in lieu of trade secret
protection.
3.14.5 Neither PGA nor PGD has in effect any agreement, oral or
written, to indemnify any person for or against any interference, infringement,
misappropriation or other conflict with respect to intellectual property rights.
3.14.6 The consummation of the transactions contemplated hereby will
not result in the loss or impairment of any of the PGA Intellectual Property
Rights.
Section 3.15 Insurance. Section 3.15 the Selling Shareholders Disclosure
Schedule lists and briefly describes all policies of fire, liability, life and
other insurance maintained by PGA and PGD and copies of all such policies as
currently in effect have been provided to Ajay or will be provided together with
Selling Shareholders Disclosure Schedule. These policies are in amounts and
provide coverages customarily maintained by similar businesses similarly
situated and are in full force and effect on the date of this Agreement.
Section 3.16 Vote Required. The affirmative vote of a majority of the
members of the board of directors of PGA and the holders of at least a majority
of the outstanding PGA Shares are the only votes of the directors or
shareholders of PGA necessary to approve and adopt this Agreement and effect the
Stock Purchase. No vote is required of the Selling Shareholders to sell the PGD
LLC Interests to Ajay hereunder.
<PAGE>
Section 3.17 Tax Treatment. The Selling Shareholders understand and
acknowledge that the Stock Purchase will constitute a taxable event to them.
Section 3.18 Affiliates. Except for the directors and executive officers
of PGA and the managers of PGD, each of whom is listed in Section 3.18 of the
Selling Shareholders Disclosure Schedule, there are no persons who, to the
knowledge of Selling Shareholders, may be deemed to be affiliates of PGA or PGD
under Rule 1-02(b) of SEC Regulation S-X (the "PGA Affiliates").
Section 3.19 Certain Business Practices. Neither PGA nor PGD or any
directors, officers, managers agents or employees of PGA or PGD has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended (the "FCPA"), or (iii) made any other unlawful
payment.
Section 3.20 Insider Interests. Except as set forth in Section 3.20 of the
Selling Shareholders Disclosure Schedule, neither the Selling Shareholders nor
any officer or director of PGA or member or PGD (i) has any interest in any
material property, real or personal, tangible or intangible, including without
limitation, any computer software or PGA Intellectual Property Rights, used in
or pertaining to the businesses of PGA or PGD or (ii) is a party to any PGA
Contract (as defined in Section 3.23).
Section 3.21 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Selling Shareholders.
Section 3.22 Disclosure. No representation or warranty of Selling
Shareholders in this Agreement or any certificate, schedule, document or other
instrument furnished or to be furnished to Ajay pursuant hereto or in connection
herewith contains or, as of the date of such representation, warranty or
instrument, will contain any untrue statement of a material fact or, at the date
thereof, omits or will omit to state a material fact necessary to make any
statement herein or therein, in light of the circumstances under which such
statement is or will be made, not misleading.
Section 3.23 Material Contracts.
3.23.1 Section 3.23 of the Selling Shareholders Disclosure Schedule
lists, and Selling Shareholders have delivered to Ajay or, together with the
Selling Shareholders Disclosure Schedule will deliver, true, correct and
complete copies of all contracts and agreements, whether oral or written (and
all amendments, modifications and supplements thereto and all side letters
affecting the obligations of any party thereunder) to which PGA or PGD is a
party or by which any of their properties or assets are bound that are material
to the business, properties or assets of PGA and PGD either individually or in
the aggregate, including, without limitation, all: (i) franchise agreements and
all amendments and modifications thereto; (ii) employment, product design or
development, personal services, consulting, non-competition, severance, golden
parachute, indemnification or guaranty contracts (including, without limitation,
any contract to which PGA or PGD is a party involving employees of PGA or PGD);
(iii) licensing, publishing, merchandising or distribution agreements; (iv)
contracts granting rights of first refusal or first negotiation; (v) partnership
or joint venture agreements; (vi) agreements for the acquisition, sale or lease
of material properties or assets or stock or otherwise, (vii) contracts or
agreements with any Governmental Entity; (viii) each financial instrument
including, without limitation, any and all notes, bonds, mortgages, indentures
and loan agreements, and (ix) all commitments and agreements to enter into any
of the foregoing (collectively, together with any such contracts entered into in
accordance with Section 5.2 hereof, the "PGA Contracts"). Neither PGA nor PGD is
a party to or bound by any severance, golden parachute or other agreement with
any employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of compensation as
a result of the consummation of the transactions contemplated hereby.
<PAGE>
3.23.2 Each PGA Contract is valid and enforceable in accordance with
its terms, and there is no default under any PGA Contract so listed either by
PGA or PGD or, to the knowledge of PGA or the Selling Shareholders, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by PGA or PGD or,
to the knowledge of PGA or the Selling Shareholders, any other party (except
distributors who may be late in payment of a fee), in any such case in which
such default or event could reasonably be expected to have a Material Adverse
Effect on PGA or PGD, as applicable.
3.23.3 No party to any PGA Contract has given notice to PGA or PGD,
as applicable, of, or made a claim against PGA or PGD, as applicable, with
respect to, any breach or default thereunder, in any such case in which such
breach or default could reasonably be expected to have a Material Adverse Effect
on PGA or PGD, as applicable.
Section 3.24 Products and Warranties; Return Privileges. There are no
statements, citations or decisions by any governmental or regulatory body that
any product manufactured, marketed or distributed at any time by PGA or PGD (the
"PGA Products") is defective or fails to meet any standards promulgated by any
such governmental or regulatory body. There has been no recall ordered by any
such governmental or regulatory body with respect to any PGA Product. There is
no (i) fact relating to any PGA Product that may impose upon PGA or PGD a duty
to recall any PGA Product or a duty to warn customers of a defect in any PGA
Product, or (ii) latent or overt design, manufacturing or other material defect
in any PGA Product. Section 3.24 of the Selling Shareholders Disclosure Schedule
sets forth a description of all warranties and return privileges (written or
otherwise) which PGA or PGD gives in connection with the manufacture and/or
distribution of the PGA Products. Neither PGA nor PGD is subject to any
royalties or licensing fees in connection with the manufacture and/or
distribution of the PGA Products.
Section 3.25 Records. PGA has maintained all corporate records required to
be maintained by corporations under the MBCA. PGD has maintained all records
required to be maintained by limited liability companies under applicable
Michigan laws.
Section 3.26 Accounts and Notes Receivable. All accounts and notes
receivable of PGA are reflected in the GAAP Financial Statements and have arisen
in the ordinary course of business and to the knowledge of Selling Shareholders
and PGA represent valid obligations due to PGA in the aggregate recorded amounts
thereof.
Section 3.27 Bank Accounts/Powers of Attorney. Section 3.27 of the Selling
Shareholders Disclosure Schedule lists all bank accounts and safe deposit boxes
presently maintained by PGA and PGD, showing the names of all persons authorized
to make withdrawals or sign checks on those accounts or otherwise have access to
them, and any powers of attorney presently in effect granted by PGA or PGD.
Section 3.28 Title to PGA Shares/PGD LLC Interests. Each Selling
Shareholder has good title to the PGA Shares and PGD LLC Interests to be sold by
the Selling Shareholder, and possesses the full right, power and authority to
sell and deliver them pursuant to this Agreement.
Section 3.29 Acquisition of Warrants for Investment. The Selling
Shareholders are acquiring the Warrants for investment and not with a view
toward, or for sale in connection with, any distribution thereof, or any present
intention of distributing or selling the Warrants. Each Selling Shareholder
acknowledges and agrees that neither the Warrants nor the Warrant Shares
issuable upon exercise of the Warrants have been and will not be registered
under the Securities or the Michigan Uniform Securities Act, and the Selling
Shareholder will not resell the Warrants or the Warrant Shares unless they are
so registered or unless an exemption from registration is available. Each
Selling Shareholder consents to the imposition of a legend to this effect on the
certificates for the Warrants and the Warrant Shares and to a notation to this
effect in the stock transfer records of Ajay.
<PAGE>
Section 3.30 Operations of PGD. PGD has recently been organized to
commence sales of golf and golf-related equipment primarily through the
Internet, telemarketing and catalog (electronic and physical) channels. PGD has
no formal financial statements. To date PGD has been funded through PGA and/or
the Selling Shareholders and has no assets other than its Internet web site and
no material debts or other obligations of any nature other than as described in
Section 3.30 of the Selling Shareholders Disclosure Schedule.
Section 3.31 Place of Delivery. The Selling Shareholders Disclosure
Schedule and all documents delivered in accordance therewith shall be delivered
to the office of Ajay located at 7001 Orchard Lake Road, Suite 424, West
Bloomfield, Michigan 48322-3608.
Article 4
Covenants and Other Agreements
Section 4.1 Conduct of Business of PGA and PGD. Except as contemplated by
this Agreement, during the period from the date hereof to the Effective Time,
Selling Shareholders will cause PGA and PGD (collectively, the "Seller
Companies") to conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, prior to the
Effective Time, no Seller Company will, without the prior written consent of
Ajay:
4.1.1 Amend its Certificate or Articles of Incorporation or
Certificate or Articles of Organization, as applicable, or Bylaws or Operating
Agreement, as applicable (or other similar governing instrument);
4.1.2 Authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock or membership interests of any class or any other securities (except
bank loans) or equity equivalents (including, without limitation, any stock
options or stock appreciation rights);
4.1.3 Split, combine or reclassify any shares of its capital
stock or membership interests, or redeem or otherwise acquire any of its
securities;
4.1.4 Adopt a plan of complete or partial liquidation, dissolution,
merger consolidation, restructuring, recapitalization or other reorganization
(other than the Stock Purchase);
4.1.5 Incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business;
<PAGE>
4.1.6 Assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person;
4.1.7 Make any loans, advances or capital contributions to or
investments in, any other person;
4.1.8 Pledge or otherwise encumber shares of capital stock or
membership interests of the Seller Companies;
4.1.8 Mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon (other than
tax Liens for taxes not yet due);
4.1.10 Except as may be required by law, enter into, adopt or amend
or terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer, employee or member in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer, employee or member or
pay any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock appreciation
rights or performance units);
4.1.11 Acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions other than in the ordinary course
of business;
4.1.12 Change any of the accounting principles or practices
used by it;
4.1.13 Revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory of writing-off notes or
accounts receivable other than in the ordinary course of business;
4.1.14 Acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or division
thereof or any equity interest therein;
4.1.15 Enter into any material contract or agreement except
distributorship agreements with unaffiliated persons which are in the ordinary
course of PGA's business;
4.1.16 Authorize any new capital expenditure or expenditures which,
individually, is in excess of $10,000; provided, however that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts;
4.1.17 Make any tax election or settle or compromise any
material income tax liability;
4.1.18 Settle or compromise any pending or threatened suit, action
or claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on the
Seller Company;
4.1.19 Commence any material research and development project or
terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts;
<PAGE>
4.1.20 Make any distributions for any reason to the Selling
Shareholders. The payment of reasonable business expenses incurred in the
ordinary course of business or the payment of rents from PGA to the Selling
Shareholders shall be allowed; or
4.1.21 Take, or agree in writing or otherwise to take, any of the
actions described in subsections 4.1.1 through 4.1.20 or any action which would
make any of the representations or warranties of the Selling Shareholders
contained in this Agreement untrue, incorrect or incomplete.
Section 4.2 Other Potential Acquirers. PGA, PGD, the Selling Shareholders,
their affiliates and respective officers, directors, employees, managers,
representatives and agents immediately shall cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any,
and from the date hereof through the Closing Date, will not solicit, negotiate,
act upon or entertain in any way, an offer from any other person or entity to
purchase the securities, business or name of PGA or PGD or any of their material
assets or furnish any information to any other person in that regard (an
"Alternate Transaction"); provided, that, this does not preclude sales of
inventory and other property in the normal and ordinary course of business. The
Selling Shareholders will promptly (within 24 hours) notify Ajay upon the
receipt of an unsolicited competing offer in respect of an Alternate Transaction
and of the proposed terms of the offer.
Section 4.3 Access to Information.
4.3.1 Between the date hereof and the Effective Time, Selling
Shareholders will give Ajay and its authorized representatives, reasonable and
full access to (i) all employees, plants, offices, warehouses and other
facilities, franchisees, and (ii) all books and records of the Seller Companies,
and will permit Ajay to make such inspections as Ajay may reasonably require and
will cause the officers and members of the Seller Companies to furnish Ajay with
such financial and operating data and other information with respect to the
business and properties of the Seller Companies as Ajay may from time to time
reasonably request.
4.3.2 No review, examination or investigation by Ajay shall diminish
or obviate any of the representations, warranties, covenants or agreements of
the Selling Shareholders under this Agreement.
.
4.3.3 Each of the parties hereto will hold and will cause its
consultants and advisers to hold in confidence all documents and information
furnished to it in connection with the transactions contemplated by this
Agreement pursuant to the terms of that certain Mutual Non-disclosure Agreement
dated December 21, 1998.
Section 4.4 Additional Agreements, Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
all reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
obtaining consents of all third parties and Governmental Entities necessary,
proper or advisable for the consummation of the transactions contemplated by
this Agreement; (ii) contesting any legal proceeding relating to the Stock
Purchase; and (iii) the execution of any additional instruments necessary to
consummate the transactions contemplated hereby, including, without limitation,
any amendment or other instrument necessary to permit the Stock Purchase to be
effected by a subsidiary to be formed as contemplated in the recitals to this
Agreement. Subject to the terms and conditions of this Agreement, Selling
Shareholders, PGA and Ajay agree to use all reasonable efforts to cause the
Effective Time to occur as soon as practicable but not later than 15 days after
the end of the Due Diligence Period (as defined in Section 5.1).
<PAGE>
Section 4.5 Public Announcements. None of the Seller Companies or the
Selling Shareholders shall issue any public statement or announcement concerning
the transactions contemplated by this Agreement without the prior written
approval of Ajay. Ajay shall prepare a press release and any other disclosure as
may be required under applicable securities laws or otherwise warranted or
advised by counsel and will provide the Seller Companies and Selling
Shareholders with copies concurrently with the release of said disclosure.
Section 4.6 Notification of Certain Matters. The parties shall give prompt
notice to the other parties, of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, (iii) any notice
of, or other communication relating to a default, or event which, with notice or
lapse of time or both, would become a default, received by such party subsequent
to the date of this Agreement and prior to the Effective Time, under any
contract or agreement material to the financial condition, properties,
businesses or results of operations of such party to which such party is a party
or is subject, (iv) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, or (v) any
material adverse change in its respective financial condition, properties,
businesses, results of operations or prospects taken as a whole, other than
changes resulting from general economic conditions; provided, however, that the
delivery of any notice pursuant to this Section 4.6 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Article 5
Conditions to Consummation of the Stock Purchase
Section 5.1 Conditions to Each Party's Obligations to Effect the Stock
Purchase. The respective obligations of each party hereto to effect the Stock
Purchase are subject to the satisfaction of the following conditions on or
before 30 days after the Selling Shareholders' Disclosure Schedule as provided
for in Article 3 have been delivered together with all copies of any documents
required to be delivered thereunder as provided in Section 3.31 (the "Due
Diligence Period"):
5.1.1 This Agreement shall have been approved and adopted by the
Board of Directors of PGA.
5.1.2 This Agreement shall have been approved and adopted by the
Board of Directors of Ajay.
5.1.3 That the Deposit Escrow as provided in subsection 1.7.2 shall
be established through the Deposit Escrow Agreement and funded by Ajay within
five business days following the execution of this Agreement.
5.1.4 The Selling Shareholders shall on or before seven days prior
to the end of the Due Diligence Period have executed a release of Ajay and each
other, in form and substance satisfactory to Ajay and the Selling Shareholders,
whereby the Selling Shareholders release Ajay and each other from any claims,
demands or causes of action relating to or arising out of any action or
non-actions of Ajay in negotiating with, retaining or employing, and
compensating either of the Selling Shareholders or both of them for services to
be rendered on behalf of the Seller Companies or Ajay subsequent to the Closing
Date. It is understood and agreed by the Selling Shareholders that Ajay shall
have the unrestricted right to retain or employ the services of either of the
Selling Shareholders on behalf of the Seller Companies or Ajay following the
Closing Date or to refrain therefrom, in the sole discretion of Ajay.
<PAGE>
5.1.4 The Selling Shareholders shall have executed a mutual release
satisfactory to each of the Selling Shareholders, which shall be effective as of
the Closing Date, terminating all stockholders, joint venture and other
agreements between them and releasing any and all claims or rights each may have
against the other relating to the ownership or operation of the Seller Companies
or any facts existing up to the Closing Date, with the exception of claims based
upon any misappropriation of funds by either of the Selling Shareholders.
5.1.5 That Ajay shall have satisfactorily conducted its due
diligence examinations of the business and operations of the Seller Companies
and that Ajay shall not have, in writing, during the Due Diligence Period,
notified the Selling Shareholders that the due diligence review was
unsatisfactory for any reason, in the sole discretion of Ajay.
5.1.6 A written lease agreement shall have been entered into among
PGA and the Selling Shareholders to continue leasing the space currently
occupied by PGA in the facility located at 32751 Middlebelt, Farmington Hills,
Michigan (the "Michigan Facility"), on terms at least as favorable as provided
under the expired lease agreement (the "New Lease"). The New Lease shall
commence on April 1, 1999 and continue for three years thereafter at the same
rental amount as provided in the expired lease agreement. The New Lease shall
provide PGA with a five-year renewal option at the Fair Market Rate, not less
than the existing rental rate, for similar buildings within the same locale.
Following one year under the New Lease, PGA shall have an option to purchase the
Michigan Facility at the then-Fair Market Value. If agreement regarding the Fair
Market Rate or Fair Market Value cannot be reached, the Selling Shareholders and
PGA shall each appoint an appraiser. If the two appraisers agree on the Fair
Market Rate or Fair Market Value, that determination shall be conclusive. If the
two appraisers disagree they shall appoint a third appraiser whose determination
as to Fair Market Rate or Fair Market Value shall be conclusive and binding. In
addition, at any time during the lease period, PGA shall have the option to
lease all or any portion of the space currently not leased by PGA in the
Michigan Facility, subject to the rights of existing tenants, at the same rental
rate as then in effect for PGA.
5.1.8 Ajay and SOTA shall have negotiated and entered into an asset
purchase agreement under which Ajay shall acquire the assets of SOTA for
$650,000.
5.1.9 Each of the Selling Shareholders shall have entered into a
non-compete agreement with PGA and Purchaser as provided in subsection 1.6.3.
5.1.10 The Selling Shareholders shall cause PGA to enter into a
written agreement with Pro Golf Nevada LLC ("PG Nevada") to provide that the
royalty-free arrangement presently in effect shall continue until such time as
the Selling Shareholders in the aggregate own less than a 50% interest in PG
Nevada. A royalty of one percent shall be established for all sales of PG Nevada
upon the termination of the royalty-free arrangement if the new majority owner
elects to continue operating as a PGA franchise.
Section 5.2 Conditions to the Obligations of Ajay Following the Due
Diligence Period. The obligation of Ajay to consummate the Stock Purchase
contemplated by this Agreement after the expiration of the Due Diligence Period
shall be subject only to the satisfaction at or prior to the Effective Time of
the following conditions:
5.2.1 Each of the representations and warranties of the Selling
Shareholders contained in Article 3 shall be true and complete in all material
respects on the Closing Date.
<PAGE>
5.2.2 Each of the covenants and obligations of Selling Shareholders
to be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time.
5.2.3 There shall have been no events or changes with respect to the
business of PGA or PGD occurring subsequent to the Due Diligence Period which
would have a Material Adverse Effect on PGA or PGD, as applicable.
5.2.4 No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Stock Purchase.
5.2.5 Ajay shall have received a certificate signed by each of the
Selling Shareholders certifying compliance with subsections 5.2.1, 5.2.2 and
5.2.3 as of the Effective Time.
Section 5.3 Conditions to the Obligations of Selling Shareholders
following the Due Diligence Period. The obligations of the Selling Shareholders
to consummate the Stock Purchase contemplated by this Agreement after the
expiration of the Due Diligence Period shall be subject only to the satisfaction
at or prior to the Effective Time of the following conditions:
5.3.1 Each of the representations and warranties of Ajay contained
in Article 2 shall be true and complete in all material respects on the Closing
Date.
5.3.2 Each of the covenants and obligations of Ajay to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time.
5.3.3 No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Stock Purchase.
5.3.4 The Selling Shareholders shall have received a certificate
signed by an executive officer of Ajay certifying compliance with subsections
5.3.1 and 5.3.2 as of the Effective Time.
Article 6
Termination; Amendment; Waiver
Section 6.1 Termination. This Agreement may be terminated and the Stock
Purchase may be abandoned by written notice at any time prior to the Effective
Time, only for the following reasons:
6.1.1 By the Selling Shareholders if Ajay fails to fund the Deposit
Escrow within the time period specified in subsection 1.7.2, but only if the
termination election is made before the Deposit Escrow funds are deposited.
6.1.2 By mutual written consent of Ajay and Selling
Shareholders.
6.1.3 By either Ajay or the Selling Shareholders during the Due
Diligence Period if the conditions set forth in Section 5.1 of this Agreement
have not been satisfied.
<PAGE>
6.1.4 By Ajay following the Due Diligence Period but prior to the
Effective Time, only if the conditions set forth in Section 5.2 have not been
satisfied.
6.1.5 By the Selling Shareholders following the Due Diligence Period
but prior to the Effective Time, only if the conditions set forth in Section 5.3
have not been satisfied.
Section 6.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders,
provided that the following provisions shall survive termination of this
Agreement: subsection 4.3.3, regarding confidentiality; Section 4.5, insofar as
any public announcement being made to announce termination of the Agreement; and
Section 6.3, regarding liquidated damages and expenses. Nothing contained in
this Section 6.2 shall relieve any party from liability for any breach of this
Agreement.
Section 6.3 Liquidated Damages, Fees and Expenses.
6.3.1 Following the Due Diligence Period, if Ajay shall fail, by the
Closing Date specified in Section 1.3, to finalize or close the Stock Purchase
provided for in this Agreement by failing to perform its obligations pursuant to
Section 1.7 and Section 1.8, even though the Selling Shareholders are prepared
and fully able to effect the Stock Purchase, then the full amount of the Deposit
Escrow funds ("Liquidated Damages") shall be immediately due and deliverable to
the Selling Shareholders on an equal basis. Ajay agrees that the payment of the
Deposit Escrow funds to the Selling Shareholders as Liquidated Damages is
reasonable; that actual damages to the Selling Shareholders would be impossible
to compute and that the amount of the Liquidated Damages does not constitute a
penalty. As a condition to the disbursement of the Liquidated Damages to the
Selling Shareholders, the Selling Shareholders shall execute and deliver to Ajay
a release releasing Ajay from any further monetary obligations to the Selling
Shareholders for any reason in connection with a breach of or the termination of
this Agreement.
6.3.2 Each party to this Agreement shall bear its own costs and
expenses in connection with the negotiation of this Agreement and consummation
of the Stock Purchase contemplated hereunder. The expenses of the Selling
Shareholders in connection with this Agreement and the Stock Purchase
contemplated hereunder shall not be paid from the assets of the Seller
Companies, except that the parties agree that (i) no more than $50,000 for legal
and accounting fees directly related to the negotiation of this Agreement and
consummation of the Stock Purchase may be paid by the Seller Companies, and (ii)
such additional amounts as may be reasonable and necessary for the preparation
of any additional Unaudited Interim Financial Statements contemplated by
subsection 3.6.1 as required for SEC reports which are in addition to the
Audited Financial Statements, the Unaudited Interim Financial Statements for the
period from November 1, 1998 through February 28, 1999 and the Closing Financial
Statements (or any Unaudited Interim Financial Statements delivered which negate
the requirement for delivery of the Closing Financial Statements) may be paid by
the Seller Companies.
Section 6.4 Amendment. This Agreement may be amended by action taken by
Ajay and Selling Shareholders at any time before or after approval of the Stock
Purchase by the stockholders of Ajay and Selling Shareholders (if required by
applicable law) but, after any such approval, no amendment shall be made which
requires the approval of such stockholders under applicable law without such
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of the parties hereto.
<PAGE>
Section 6.5 Extension; Waiver.
6.5.1 At any time prior to the Effective Time, each party hereto may
(i) extend the time for the performance of any of the obligations or other acts
of any other party; (ii) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document, certificate
or writing delivered pursuant hereto; or (iii) waive compliance by any other
party with any of the agreements or conditions contained herein; provided, that,
any agreement on the part of any party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
6.5.2 It is the intention of the parties to close the Stock Purchase
within 45 days after the date of execution of this Agreement (the "Intended
Closing Date"); provided, however, that the parties agree that the Intended
Closing Date will be extended automatically, on a day-for-day basis to the
extent the Selling Shareholders deliver their disclosure schedule as required
under Article 3, or any portion thereof or document to be included therewith, to
Ajay more than 15 days after the execution and delivery of this Agreement.
Article 7
Survival of Representations and Warranties; Indemnification
Section 7.1 Survival of Representations and Warranties. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing for a period of three years after the Effective Time;
provided, however, that all representations and warranties with respect to taxes
shall survive for the period of time which is equal to the statute of
limitations period any federal or state tax statute applicable to any liability
for assessment of taxes covered thereby. Notice of any claim under this
provision must be given in writing before the expiration of the survival period
but need not be adjudicated or otherwise settled before the expiration of the
survival period.
Section 7.2 Indemnity Agreements of the Selling Shareholders. The Selling
Shareholders, jointly and severally, shall indemnify, defend, reimburse and hold
harmless PGA, PGD and Ajay from and against any and all claims, demands,
penalties, fines, liabilities, obligations, losses, settlements, damages, costs
and expenses resulting from:
7.2.1 Any substantial inaccuracy in, or breach of, any material
representation or warranty made by, or nonfulfillment of any covenant on the
part of, the Selling Shareholders contained in this Agreement;
7.2.2 Any misrepresentation in or omission from or nonfulfillment of
any covenant on the part of the Selling Shareholders contained in any other
agreement, certificate or other instrument furnished or to be furnished to Ajay
by them pursuant to this Agreement; and
7.2.3 Reasonable fees and disbursement of counsel incident to
any of the foregoing.
Section 7.3 Indemnity Agreements of Purchaser. Purchaser shall indemnify,
defend, reimburse and hold harmless the Selling Shareholders from and against
any and all claims, demands, penalties, fines, liabilities, obligations, losses,
settlements, damages, costs and expenses resulting from:
7.3.1 Any substantial inaccuracy in, or breach of, any material
representation or warranty or nonfulfillment of any covenant on the part of Ajay
contained in this Agreement;
<PAGE>
7.3.2 Any misrepresentation in or omission from or nonfulfillment of
any covenant on the part of Ajay contained in any other agreement, certificate
or other instrument furnished or to be furnished to the Selling Shareholders by
Ajay pursuant to this Agreement; and
7.3.3 Reasonable fees and disbursement of counsel incident to
any of the foregoing.
Section 7.4 Indemnification Procedure for Third Party Claims.
7.4.1 Notice of Claim and Defense. The party seeking indemnification
under this Article 7 shall give the party from whom indemnification is sought
prompt written notice of the assertion of any third party claim of which said
party has knowledge which is covered by the indemnity agreements set forth in
Section 7.2 or Section 7.3 and the party obligated to indemnify will undertake
the defense thereof by representatives chosen by the party seeking
indemnification but acceptable to the party obligated to indemnify. If the party
obligated to indemnify, within a reasonable period of time after notice of any
such claim fails to defend, the party seeking indemnification will have the
right to undertake the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the party obligated to indemnify, subject to
the right of the party seeking indemnification to assume the defense of such
claim at any time prior to settlement, compromise or final determination
thereof.
7.4.2 Payment of Sums Due. After any final judgment or award shall
have been rendered by a court, arbitration board or administrative agency of
competent jurisdiction, or a settlement shall have been consummated, or the
parties shall have arrived at a mutually binding agreement, with respect to each
separate third party claim indemnified by the party obligated to indemnify, the
party seeking indemnification shall forward to the party obligated to indemnify
notice of any sums due and owing (and the times when due) by the party seeking
indemnification with respect to such claim and the party obligated to indemnify
shall pay such sums to the party seeking indemnification in cash, within 30 days
after the date of such notice or, if any such sums are due more than 90 days
after the date of such notice, ten days prior to the date each such sum is due.
Section 7.5 Good Faith Efforts to Settle Disputes. Each of the parties
agrees that, prior to commencing any litigation against the other concerning any
matter with respect to which such party intends to claim a right of
indemnification in such proceeding, such parties shall meet in a timely manner
and attempt in good faith to negotiate a settlement of such dispute during which
time such parties shall disclose to the others all relevant information relating
to such dispute.
Section 7.6 Fees and Expenses. Notwithstanding any other provision in this
Article 7, in the event of any dispute or controversy, the prevailing party in
such dispute shall, in addition to any other remedies the prevailing party may
obtain in such dispute, be entitled to recover from the other party all of its
reasonable legal fees and out-of-pocket costs incurred by such party in
enforcing or defending its rights hereunder, excluding any costs incurred under
Section 7.5.
Section 7.7 Litigation Support. If, and for so long as, any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (a) any
transaction contemplated hereunder, or (b) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Effective Time
involving the Seller Companies, the other party will cooperate with the
contesting or defending party and its counsel in the contest or defense, make
available its personnel and provide such testimony and access to its books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending party, unless the
contesting or defending party is entitled to indemnification therefor under this
Article 7.
<PAGE>
Article 8
Miscellaneous
Section 8.1 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise without the prior
written consent of the parties, which consent shall not be unreasonably
withheld; provided, however, that Ajay shall be permitted to assign its (i)
rights under this Agreement to its lender in connection with the financing of
the Stock Purchase and any refinancing thereof at a later date, if any; and (ii)
its rights and obligations under this Agreement to a subsidiary in order to
effect the Stock Purchase through a newly formed subsidiary.
Section 8.2 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in , Section 8.1 nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 8.3 Construction. 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. Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The parties intend that each representation,
warranty and covenant contained herein have independent significance.
Section 8.4 Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 8.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested),
to each other party as follows:
If to PGA or the Selling Shareholders:
Robert Sage
Harbur Island - Cutter Sound
2444 SW Island Creek Trail
Palm City, Florida 34990
with copies to:
Alan R. Miller, Esq.
370 East Maple Road
Fourth Floor
Birmingham, Michigan 48009
(248) 644-8910 Fax (248) 644-1537
<PAGE>
And
The Jack London Revocable Trust
c/o Jack London
2343 Vallecitos
La Jolla, CA 92037
(619) 459-0241 Fax (619) 551-0716
if to Purchaser:
Thomas W. Itin, President
Ajay Sports, Inc.
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322-3608
(248) 851-5651 Fax (248) 851-9080
With copies to:
Clarence H. Yahn, Chief Operating Officer
Ajay Sports, Inc.
1501 E. Wisconsin Street
Delavan, WI 53115
(414) 728-5521 Fax (414) 728-8119
And
Mary M. Maikoetter, Esq.
609 E. Speer Blvd., Suite 300
Denver, CO 80203
(303) 744-3580 Fax (303) 744-3050
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan, without regard
to the principles of conflicts of law thereof.
Section 8.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 8.8 Certain Definitions. For the purposes of this
Agreement, the term:
8.8.1 "affiliate" means (except as otherwise provided in Section
3.18) a person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
person;
8.8.2 "business day" means any day other than a day on which
Nasdaq is closed;
<PAGE>
8.8.3 "capital stock" means common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof;
8.8.4 "knowledge" or "known" means, with respect to any matter in
question, if an executive officer of Purchaser, PGA or any PGA Subsidiary, as
the case may be, has actual knowledge of such matter;
8.8.5 "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity; and
8.8.6 "subsidiary" or "subsidiaries" of PGA, Purchaser, or any other
person, means any corporation, partnership, limited liability company,
association, trust, unincorporated association or other legal entity of which
PGA, Purchaser, or any such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the capital stock, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
Section 8.9 Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to the
consummation of the Stock Purchase, will cause irreparable injury to the other
parties for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of such party's
obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that, if the
Selling Shareholders are entitled to receive the Liquidated Damages pursuant to
subsection 6.3.1 of Section 6.3, they shall not be entitled to specific
performance to compel the consummation of the Stock Purchase.
Section 8.10 Counsel. Each party represents to the other parties that he
or it has consulted with his or its legal counsel to the extent he or it deemed
necessary or advisable and that he or it understands the terms and provisions of
this Agreement, agrees that such terms and provisions are fair and reasonable as
negotiated and has voluntarily entered into, signed and delivered this Agreement
to the other parties. The Selling Shareholders acknowledge that Alan R. Miller
and Alan R. Miller P.C. has solely represented PGA and PGD in connection with
the negotiation and consummation of the transaction contemplated by this
Agreement.
Section 8.11 Counterparts/Facsimile Delivery. This Agreement and any
subsequent amendments may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement. This Agreement and any subsequent amendments may be signed and
delivered by facsimile transmission, which delivery shall have the same binding
effect as delivery of the document containing the original signature. At the
request of any party, any document delivered by facsimile signature shall be
followed by or re-executed by all parties in an original form; provided, that,
the failure of any party to do so will not invalidate the signature delivered by
facsimile transmission.
<PAGE>
In Witness Whereof, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
AJAY SPORTS, INC.
By: /s/ Thomas W. Itin
-----------------------------
Thomas W. Itin, President
PRO GOLF OF AMERICA, INC.
By: /s/ Robert Sage
-----------------------------
Robert Sage, President
SELLING SHAREHOLDERS:
/s/ Robert Sage
-----------------------------
Robert Sage
The Jack London Revocable Trust
By: /s/ Jack London
----------------------------
By: Jack London, Trustee
