FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
June 23, 1999
Date of Report
AJAY SPORTS, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 0-18204 39-1644025
---------------- ------------- --------------
(State or other (Commission (I.R.S. Employer
jurisdiction of file number) Identification Number)
incorporation or
organization)
1501 E. Wisconsin Street
Delavan, WI 53115
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (414) 728-5521
N/A
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Former name or former address, if changed from last report
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On June 23, 1999, Ajay Sports, Inc. (the "Registrant"), through a majority
owned subsidiary, completed its acquisition of all of the outstanding capital
stock of Pro Golf of America, Inc.("Pro Golf"), a Michigan corporation (the "PG
Stock"), all of the ownership interests in PGD Online, LLC ("PGD"), a Michigan
limited liability company (the "PGD Interests") and certain accounts receivable
and certain other assets of State of the Art Golf, Inc. ("SOTA"), a Michigan
corporation (the "SOTA Assets"), for a combined purchase price of $10,500,000
and assumption of SOTA's accounts payable related to the acquired accounts
receivable. The PG Stock and the PGD Interests were acquired from Robert Sage
and the Jack London Revocable Living Trust. The SOTA Assets were acquired from
SOTA and the owners of SOTA are Robert Sage and the Jack London Revocable Living
Trust. Prior to the acquisition, there were no relationships between the
Registrant's affiliates, directors or officers and any of Pro Golf, PGD. SOTA,
Robert Sage or the Jack London Revocable Living Trust, or any of their
respective affiliates, directors or officers.
The PG Stock was acquired by Pro Golf International, Inc. ("PGI"), a
Delaware corporation with more than 80% of its stock being owned by the
Registrant. The PGD Interests were acquired by Pro Golf Online, Inc. ("PGO"), a
Delaware corporation initially being wholly owned by the Registrant. The SOTA
Assets were acquired and the related liabilities were assumed by Pro Golf. The
Registrant attempted to structure the acquisition to preserve its substantial
net operating loss carryforward. The purchase price for this acquisition was
funded through an $8,500,000 short-term loan provided by Comerica Bank, with the
remaining $2,000,000 being provided by private investors in PGI, through
long-term subordinated notes and common stock. The Registrant is pursuing
opportunities for long-term financing and expects to refinance the transaction
during the third quarter of 1999.
Pro Golf is in the business of franchising discount retail golf stores
under the names Pro Golf(R) and Pro Golf Discount(R) and related trade names and
marks. Pro Golf is a franchise leader in retail "golf-only" stores, with
approximately 170 stores in its system in the United States, Canada and the
Philippines. Pro Golf receives initial franchise fees from each new franchisee
and ongoing royalties based on products sales by the franchised stores within
its system Pro Golf Discount(R) is one of the oldest and best known names in the
off-course retail golf business. The Registrant intends to continue to operate
this business as a separate entity and believes that Pro Golf has significant
franchising growth opportunities for the future and that it will continue to
generate significant cash. Further, the Registrant believes this acquisition
will position its other golf-related operating subsidiaries to become
significant suppliers of golf equipment and accessory products to the Pro Golf
franchise system.
The Registrant intends to pursue golf-related e-commerce activities
through PGD, by combining online retailing business models of Pro Golf and the
Registrant's other golf-related operating subsidiaries. Product sales resulting
from online orders ultimately are expected to be fulfilled through the
Registrant's Delavan, Wisconsin, manufacturing and distribution center. The
Registrant plans to intensify its focus on e-commerce activities as a result of
this acquisition, combining the brand name awareness of Pro Golf with the
Registrant's fulfillment capabilities existing prior to the acquisition.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired. To be filed by
amendment to this Form 8-K.
(b) Pro Forma Financial Information. The Pro Forma Balance Sheet reflects
the anticipated changes, at acquisition, of Pro Golf and the SOTA Assets
and the formation of Pro Golf International. The first column is the
Registrant's May 31 1999 Balance Sheet. The second column reflects tax loss
carryforward valuation allowance adjustments to be made on the Registrant's
financial statements for June 1999. The third and fourth columns add Pro
Golf and the SOTA Assets, respectively, to the Balance Sheet. The fifth
column is the Balance Sheet of Pro Golf International after the
acquisition. The last column adds these together to reflect the
Registrant's anticipated consolidated Balance Sheet after the acquisition.
Other pro forma information is to be filed by amendment to this Form 8-K.
<PAGE>
(c) Exhibits.
2.1 Stock Purchase Agreement and Amendments
2.1.1 Stock Purchase Agreement dated April 8, 1999 by and among
the Registrant, Pro Golf of America, Inc., Robert Sage and
The Jack London Revocable Trust. (1)
2.1.2 First Amendment, dated May 21, 1999, by and among the
Registrant, Pro Golf of America, Inc., Robert Sage and The
Jack London Revocable Living Trust, to Stock Purchase
Agreement dated April 8, 1999. Filed Herewith
2.1.3 Second Amendment, dated June 22, 1999, by and among the
Registrant, Pro Golf of America, Inc., Robert Sage and The
Jack London Revocable Living Trust, to Stock Purchase
Agreement dated April 8, 1999, as amended. Filed Herewith
2.2 Sale of Assets Agreement and Assignments
2.2.1 Sale of Assets Agreement dated June 22, 1999, between the
Registrant and State of the Art Golf, Inc. Filed Herewith
2.2.2 Assignment from the Registrant to Pro Golf International,
Inc. Filed Herewith
2.2.3 Assignment from Pro Golf International, Inc. to Pro Golf of
America, Inc. Filed Herewith
4.1 Warrants dated June 22, 1999, to purchase up to 100,000 shares of
the Registrant's common stock as issued to Robert Sage and The Jack
London Revocable Living Trust in connection with the Registrant's
acquisition of Pro Golf of America, Inc. Filed Herewith
99.1 Pro Forma Financial Information
(1) Previously filed with and incorporated by reference from the
Registrant's Form 10-Q filed for the quarterly period ended March 31, 1999.
(SEC File No. 0-18204)
<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.
Date: July 8, 1999
AJAY SPORTS, INC.
By s\Robert R. Hebard
------------------------------
Robert R. Hebard, Secretary
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement ("Amendment") is dated as
of May 21, 1999, and is between Ajay Sports, Inc., a Delaware corporation
("Ajay"), and Robert Sage and The Jack London Revocable Living Trust (the
"Trust") (collectively referred to as "Selling Shareholders") and Pro Golf of
America, Inc. a Michigan corporation ("PGA").
Whereas, the parties have executed a Stock Purchase Agreement dated April
8, 1999 (the "Agreement");
Whereas, the parties desire to amend certain provisions of the Agreement.
Now, therefore, in consideration of the premises and the representations,
warranties, covenants, and agreements herein contained and intending to be
legally bound hereby, Ajay, PGA and Selling Shareholders agree as follows:
1. The first sentence of Section 5.1 of the Agreement is deleted and
replaced with the following:
The respective obligations of each party hereto to effect the Stock
Purchase are subject to the satisfaction of the following conditions
on or before June 7, 1999 (the "Due Diligence Period"):
2. Section 6.5.2 of the Agreement is deleted.
3. 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 Amendment, agrees that such terms and provisions are fair and
reasonable as negotiated and has voluntarily entered into, signed and
delivered this Amendment 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 Amendment.
4. This Amendment 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
Amendment 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>
5. Except as specifically amended by the Amendment, the Agreement shall
remain in full force and effect.
In Witness Whereof, each of the parties has caused this Amendment to be
duly executed on its or his behalf as of the day and year first above written.
Ajay Sports, Inc.
/s/ Thomas W. Itin
---------------------------
Thomas W. Itin, President
Pro Golf of America, Inc.
/s/ Robert Sage
---------------------------
Robert Sage, President
SELLING SHAREHOLDERS:
/s/ Robert Sage
---------------------------
Robert Sage
The Jack London Revocable
Living Trust
By: /s/ Jack London
----------------------------
Jack London, Trustee
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
This Second Amendment to Stock Purchase Agreement ("Amendment") is dated
as of June 22, 1999, and is between Ajay Sports, Inc., a Delaware corporation
("Ajay"), and Robert Sage and The Jack London Revocable Living Trust (the
"Trust") (collectively referred to as "Selling Shareholders") and Pro Golf of
America, Inc. a Michigan corporation ("PGA").
Whereas, the parties have executed a Stock Purchase Agreement dated April
8, 1999 as amended by a First Amendment to Stock Purchase Agreement (the
"Agreement");
Whereas, the parties desire to amend certain provisions of the Agreement.
Now, therefore, in consideration of the premises and the representations,
warranties, covenants, and agreements herein contained and intending to be
legally bound hereby, Ajay, PGA and Selling Shareholders agree as follows:
1. The last sentence of Section 1.3 of the Agreement is deleted and
replaced with the following:
The closing date in Effective Time shall not be later than
Wednesday, June 23, 1999 (the "Closing Date").
2. 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 Amendment, agrees that such terms and provisions are fair and
reasonable as negotiated and has voluntarily entered into, signed and
delivered this Amendment 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 Amendment.
3. This Amendment 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
Amendment 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.
4. Except as specifically amended by the Amendment, the Agreement shall
remain in full force and effect.
<PAGE>
In Witness Whereof, each of the parties has caused this Amendment to be
duly executed on its or his behalf as of the day and year first above written.
Ajay Sports, Inc.
/s/ Thomas W. Itin
---------------------------
Thomas W. Itin, President
Pro Golf of America, Inc.
/s/ Robert Sage
---------------------------
Robert Sage, President
SELLING SHAREHOLDERS:
/s/ Robert Sage
---------------------------
Robert Sage
The Jack London Revocable
Living Trust
By: /s/ Jack London
----------------------------
Jack London, Trustee
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SALE OF ASSETS AGREEMENT
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AGREEMENT made June 23, 1999, between State of the Art Golf Company, Inc.,
a Michigan corporation, having its principal business office at 32751 Middlebelt
Rd., Farmington Hills, Michigan 48334 ("Seller"), and Ajay Sports, Inc., a
Delaware corporation, ("Purchaser").
Recitals
Seller is willing to sell certain assets described in Paragraph 1 below
(the "Property") to the Purchaser; and
Purchaser is willing to buy the Property in accordance with the terms of
this Agreement.
It is therefore agreed:
1. Sale of Assets.
On the Closing Date (as hereinafter defined), Seller shall sell to
Purchaser, and Purchaser shall purchase and acquire the Property, as
follows:
1.1. All equipment (as defined by the Michigan Uniform Commercial Code),
furniture and fixtures and, to the extent not otherwise constituting
equipment as defined above, all other items of tangible personal
property, in each case whether or not capitalized on Seller's books.
1.2. All inventory (as defined by the Michigan Uniform Commercial
Code).
1.3. All accounts receivable as listed on Schedule A (all as defined
in the Michigan Uniform Commercial Code) , and any security
Seller holds for the payment of these accounts and all of
Seller's general intangibles (as defined by the Michigan Uniform
Commercial Code), but excluding cash in bank, prepaid Corporate
Income Tax, and $106,824.00 owed by Pro Golf of Nevada L.L.C. to
Seller relating to Cadillac brand golf products and, to the
extent not constituting general intangibles as defined above, any
interest of Seller in any and all claims by Seller relating to
those accounts receivable being transferred to Purchaser against
any other person, whether now accrued or later to accrue,
contingent or otherwise, known or unknown, including but not
limited to, all rights under express or implied warranties from
suppliers (except as they may apply to Seller's liabilities which
were not assumed by Purchaser), claims for collection or
indemnity, claims in bankruptcy, and choses in action.
<PAGE>
1.4. All Seller's right, title, benefit and interest in and to
trademarks, tradenames, inventions, discoveries, improvements,
designs, prototypes, know how, and other intellectual property as
defined by Michigan law.
1.5. The full benefit of (a) any and all purchase orders placed with
and accepted by Seller on or before the closing date that have
not been completely performed or filled before the closing date,
covering the purchase from Seller of products to be supplied by
Seller and including all deposits, progress, payments, and
credits, (b) Leases of personal property, and (c) all policies of
insurance and rights to make claims and other rights hereunder as
listed on Schedule B ("Contracts and Commitments").
1.6. All customer lists and supplier lists.
1.7. All security deposits, prepaid expenses, and similar items in the
amount accrued as of the closing date.
1.8. All transferable local, state and federal franchises, licenses,
bonds, permits, and similar items owned or held by Seller.
1.9. The business conducted by Seller as a going concern, including any
and all goodwill, telephone and facsimile numbers and yellow page
advertisements.
2. Purchase Price.
The purchase price for the Property shall be Six Hundred Fifty Thousand
($650,000) Dollars.
3. Payment of Purchase Price.
The purchase price for the Property shall be paid to Seller in cash or by
certified check at the closing.
4. Liabilities.
<PAGE>
The Purchaser assumes no liabilities pursuant to this Agreement with
respect to the Property, whether accrued, absolute, contingent, known,
unknown or otherwise, except all of Seller's Accounts Payable and Seller's
Accounts Payable Accrual as listed on Schedule C (excluding $11,980.96
regarding possible amounts due Orlimar Golf Company which is addressed in
the Escrow Agreement referred to in Paragraph 5 hereof) and the Discounts
Available as of the Closing Date as well as any executory obligations of
Seller's continued performance arising in the ordinary course of business
under any Contracts and Commitments that become performable or payable on
or after the closing date. The Line of Credit Payable to Bank One and the
Loan Payable to Officers are not being assumed by Purchaser.
5. A. Escrow Agreement
The parties agree that the sum of $32,652.00 shall be escrowed pursuant to
an Escrow Agreement dated contemporaneously herewith to be administered
and distributed pursuant to said Escrow Agreement.
B. Cash Payment By Seller
It is the intent of Seller and Purchaser that the balance sheet of Seller
does, as of June 23, 1999, reflect approximately the same assets purchased
by Purchaser and the liabilities assumed by Purchaser as of the Closing
Date. In order to accomplish this, the parties have agreed that Seller
shall pay to Purchaser the sum of $32,652.00 at the Closing.
6. Indemnity Against Creditors' Claims.
Seller has requested Purchaser to waive the requirements of the bulk
transfer provisions of the Uniform Commercial Code, and Purchaser has
acceded to this request. Seller will indemnify Purchaser and hold it
harmless against all claims made by Seller's creditors, other than those
related to the liabilities Purchaser is assuming including, but not
limited to, reasonable attorney fees and costs of defending such claims.
Seller represents that there are no liabilities of any nature (accrued,
absolute, contingent or otherwise), liens, encumbrances, or security
interests on any of the property to be sold to Purchaser, except the
liabilities being assumed and except any of the foregoing which are to be
discharged at closing, and warrants that the title conveyed to Purchaser
will be free and clear. All of the provisions, warranties and
representations in this Paragraph shall survive the closing.
7. Representation by Purchaser.
Purchaser warrants and represents that the merchandise and inventory to be
purchased as part of the Property will be purchased for the purpose of
resale, and that it has applied, or will immediately apply, to the proper
authorities of the State of Michigan for a registration certificate under
the Michigan sales tax law. Purchaser will indemnify and hold harmless
Seller against all claims for any Michigan sales tax on such merchandise
and any claims by any creditors relating to non-payment of amounts
relating to those liabilities assumed by Purchaser, including, but not
limited to, reasonable attorney fees and costs of defending such claims.
All the provision, warranties and representations in this Paragraph shall
survive the closing.
8. Broker.
<PAGE>
Purchaser warrants and represents that no broker was involved in
negotiating this Agreement, and agrees to indemnify and hold Seller
harmless against all claims for brokerage, including any actual costs,
expenses and attorney fees incurred as a result of any claim for
brokerage.
9. Closing.
The closing is contingent upon and shall take place simultaneously with
the Closing on the Stock Purchase Agreement between Pro Golf of America,
Inc. and its shareholders, and Purchaser, and at same location (the
"Closing Date"). At the closing, Seller shall deliver to Purchaser an
appropriate bill of sale of the property specified to be sold in Paragraph
1. The parties agree that prior to the Closing Date, the parties shall
agree on the allocation of the Purchase Price.
10. No Violation or Breach.
Each party, as to such party, warrants and represents to the other party
that the performance of this agreement does not violate any federal, state
or local law, statute, ordinance, or regulation regarding controlled
substances, or otherwise, or any agreement, court or administrative order
or ruling by which such party may be bound.
11. Binding Effect.
This agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, successors and assigns, except
that this Agreement is not assignable by Purchaser without Seller's prior
written consent.
12. Authority.
The parties represent that they have full authority to bind their
respective corporations by this agreement, and that all appropriate and
necessary corporate action has been taken in order to authorize the
transaction contemplated thereby. Both parties are corporations in good
standing under the laws of the State of Michigan.
13. No Untrue Statements.
Seller represents and warrants that to their knowledge none of the
information disclosed to Purchaser in relation to the transaction
contemplated by this Agreement omits or will omit to state any material
fact necessary to make any representation or warranty herein made not
misleading.
14. Non-Waiver.
No delay or failure by either party to exercise any right hereunder, and
no partial or single exercise of any such right, shall constitute a waiver
of that or any other right, unless otherwise expressly provided herein.
<PAGE>
15. Headings.
Headings in this Agreement are for convenience only and shall not be used
to interpret or construe its provisions.
16. Governing Law.
This Agreement shall be governed by, enforced, remedied and construed in
accordance with the laws of the State of Michigan.
17. Choice of Forum.
Any dispute arising out of this Agreement shall be litigated only in the
Courts of the State of Michigan, County of Oakland. The parties consent to
the jurisdiction of Michigan Courts and to the venue of the Courts of
Oakland County, Michigan. The parties agree not to assert venue as a
defense to an action arising under this Agreement, unless the action is
brought other than in Oakland County, Michigan.
18. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one
and the same instrument.
19. Time of Essence.
Time is of the essence of this agreement.
20. Entire Agreement; Modification.
This Agreement supersedes all prior agreements and constitutes the entire
agreement between the parties with respect to the subject matter hereof.
It may be changed only by a written agreement, signed by the party against
whom enforcement of any waiver, change, modification or discharge is
sought.
21. Notices.
All notices hereunder shall be in writing and delivered personally or
mailed by certified mail, postage prepaid, addressed to the parties at
their last known addresses.
<PAGE>
22. Use of Facsimile Machine. The parties agree that for purposes of
negotiating and finalizing this Agreement, any signed documentation,
including this Agreement and any subsequent amendments, transmitted by
facsimile machine shall be treated in all manners and in all respects
as an original document and shall have the same binding legal effect as
an original contract. The signature of any party shall be considered
for these purposes as an original signature. At the request of either
party, any facsimile document shall be re-executed by both parties in
an original form; provided, that, the failure of any party to do so
will not invalidate the signature delivered by facsimile transmission.
IN WITNESS WHEREOF, the parties have executed this Agreement.
STATE OF THE ART GOLF COMPANY, INC.
By: /s/ Robert Sage
-------------------------
Robert Sage
Its: President
By: /s/ Jack London
-------------------------
Jack London
Its: Chairman of the Board
AJAY SPORTS, INC.
By: /s/ Thomas W. Itin
--------------------------
Thomas W. Itin
Its: President
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into as of
the 22nd day of June, 1999, by and between AJAY SPORTS, INC., a Delaware
corporation ("Ajay"), and PRO GOLF INTERNATIONAL, INC., a Delaware corporation
("PGI").
R E C I T A L S:
A. Ajay and PGI are parties to that certain Contribution Agreement
dated June 22, 1999 (the "Agreement").
B. Pursuant to Section 1.1 of the Agreement, Ajay has agreed to assign to
PGI, and PGI has agreed to assume, all of Ajay's right, title and interest in
and to the Stock Purchase Agreement (as defined in the Agreement).
C. Ajay also has agreed to assign and PGI has agreed to assume the
rights and obligations of Ajay under that certain Sale of Assets Agreement
between State of the Art Golf, Inc. ("SOTA") and Ajay.
AGREEMENTS
In consideration of the mutual covenants and agreements of the parties and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties do hereby agree as follows:
1. Assignment and Assumption . Ajay hereby assigns, transfers and sets
over to PGI, all of Ajay's right, title and interest in and to the
Stock Purchase Agreement and SOTA Sale Agreement. PGI hereby assumes
and agrees to pay, perform and charge when due or when required to
be performed all of Ajay's obligations under the Stock Purchase
Agreement and the SOTA Sale Agreement.
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
Agreement to be executed by their respective officers thereunto duly authorized
on the date first above set forth.
PRO GOLF INTERNATIONAL, INC.
By: /s/ Robert R. Hebard
----------------------------
Robert R. Hebard, Secretary
AJAY SPORTS, INC.
By: /s/ Thomas W. Itin
---------------------------
Thomas W. Itin, President
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into as of
the 22nd day of June, 1999, by and between PRO GOLF INTERNATIONAL, INC., a
Delaware corporation ("PGI"), and PRO GOLF OF AMERICA, INC., a Michigan
corporation ("PGOA").
R E C I T A L S:
A. By separate assignement dated of even date herewith, Ajay Sports, Inc.,
a Delaware corporation ("Ajay"), assigned to and PGI assumed all of Ajay's
rights and obligations under that certain Sale of Assets Agreement (the "SOTA
Sale Agreement") dated of even date herewith by and between Ajay and State of
the Art Golf Company, Inc. ("SOTA").
B. PGI owns all of the issued and outstanding capital stock of PGOA.
C. PGI desires to assign and PGOA desires to assume all of PGI's rights
under the SOTA Purchase Agreement.
AGREEMENTS
In consideration of the mutual covenants and agreements of the parties and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties do hereby agree as follows:
1. Assignment and Assumption . PGI hereby assigns, transfers and sets
over to PGOA, all of PGI's right, title and interest in and to the
SOTA Sale Agreement. PGOA hereby assumes and agrees to pay, perform
and charge when due or when required to be performed all of PGI's
obligations under the SOTA Sale Agreement.
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
Agreement to be executed by their respective officers thereunto duly authorized
on the date first above set forth.
PRO GOLF INTERNATIONAL, INC.
By: /s/ Robert R. Hebard
----------------------------
Robert R. Hebard, Secretary
PRO GOLF OF AMERICA, INC.
By: /s/ Thomas W. Itin
----------------------------
Thomas W. Itin, Chairman and
Chief Executive Officer
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER
SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER. THE TRANSFER OF SUCH
SECURITIES IS SUBJECT TO THE RESTRICTIONS SET FORTH HEREIN AND SUCH SECURITIES
MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS
WARRANT.
Warrant No. PGOA 1 June 22, 1999
WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
AJAY SPORTS, INC.
Void after 5:00 p.m. (Central Time) June 22, 2001 50,000 Shares of Common Stock
THIS IS TO CERTIFY that for value received, ROBERT SAGE, or his permitted
registered assigns, is entitled upon the due exercise hereof at any time during
the Exercise Period (as hereinafter defined) to purchase, in whole or in part,
from AJAY SPORTS, INC., a Delaware corporation, fifty thousand (50,000) (subject
to adjustment as provided herein) shares of common stock, par value $.01 per
share ("Common Shares"), at the exercise price of $2.00 per Common Share if this
Warrant is exercised on or before June 22, 2000, or $2.50 per Common Share if
this Warrant exercised after June 22, 2000 ("Exercise Price") (subject to
adjustment as provided herein) for each such Common Share so purchased and to
exercise the other rights, powers and privileges hereinafter provided, all on
the terms and conditions and pursuant to the provisions hereinafter set forth.
ARTICLE II
DEFINITIONS
The terms defined in this Article I, whenever used in this Warrant, shall
have the respective meanings hereinafter specified. Whenever used in this
Warrant, any noun or pronoun shall be deemed to include both the singular and
plural and to cover all genders.
<PAGE>
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER
SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER. THE TRANSFER OF SUCH
SECURITIES IS SUBJECT TO THE RESTRICTIONS SET FORTH HEREIN AND SUCH SECURITIES
MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS
WARRANT.
Warrant No. PGOA 2 June 22, 1999
WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
AJAY SPORTS, INC.
Void after 5:00 p.m. (Central Time) June 22, 2001 50,000 Shares of Common Stock
THIS IS TO CERTIFY that for value received, THE JACK LONDON REVOCABLE
LIVING TRUST or its permitted registered assigns, is entitled upon the due
exercise hereof at any time during the Exercise Period (as hereinafter defined)
to purchase, in whole or in part, from AJAY SPORTS, INC., a Delaware
corporation, fifty thousand (50,000) (subject to adjustment as provided herein)
shares of common stock, par value $.01 per share ("Common Shares"), at the
exercise price of $2.00 per Common Share if this Warrant is exercised on or
before June 22, 2000, or $2.50 per Common Share if this Warrant exercised after
June 22, 2000 ("Exercise Price") (subject to adjustment as provided herein) for
each such Common Share so purchased and to exercise the other rights, powers and
privileges hereinafter provided, all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
ARTICLE II
DEFINITIONS
The terms defined in this Article I, whenever used in this Warrant, shall
have the respective meanings hereinafter specified. Whenever used in this
Warrant, any noun or pronoun shall be deemed to include both the singular and
plural and to cover all genders.
<PAGE>
"Assignment" means the form of Assignment appearing at the end of this
Warrant.
"Closing Date" means June 22, 1999.
"Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Act.
"Common Shares" means the Company's authorized shares of common stock, par
value $.01 per share.
"Company" means Ajay Sports, Inc., a Delaware corporation, and any
successor entity.
"Current Market Price" per Common Share on any date herein specified means
the average of the daily market prices (determined as set forth in the next
sentence), if any, for five (5) consecutive business days immediately preceding
such date. The market price for each such business day shall be the average of
the last sale prices on such day on all domestic stock exchanges on which the
Common Shares may then be listed, or, if no sale takes place on such day on any
such exchange, the average of the closing bid and asked prices on such day as
officially quoted on such exchanges, or, if Common Shares are not then listed or
admitted to trading on any domestic stock exchange, the market price for each
business day shall be the last sale price on such day on the Nasdaq National
Market, or, if no sale takes place on such day on the Nasdaq National Market,
the average of the closing bid and asked prices on such day as reported by the
National Association of Securities Dealers, Inc., or if Common Shares are not
then listed or admitted for trading on the Nasdaq National Market, the market
price for each business day shall be the average of the reported bid and asked
prices on such day in the over-the-counter market, as furnished by the National
Quotation Bureau, Inc., or, if such firm at the time is not engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Company or, if there is no such firm or the
Common Shares are not then traded in the over-the-counter market, the market
price shall be such value as is reasonably determined by the Board of Directors
of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Commission (or its successor) thereunder, all as the same shall be in effect
from time to time.
"Exercise Period" means the period commencing on the Closing Date, and
terminating at 5:00 p.m., Central time, on June 22, 2001.
"Exercise Price" means the price per Common Share set forth in the first
paragraph of the first page of this Warrant, as such price may be adjusted from
time to time pursuant to Article IV.
"Holder" means the person in whose name this Warrant is registered on the
books of the Company maintained for such purpose.
<PAGE>
"Investor Representation Certificate" means a certificate as to the
accuracy, at and as of the time of exercise of this Warrant, of certain
representations and warranties of the Holder set forth in form appearing at the
end of this Warrant.
"Nasdaq" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Notice of Exercise" means the form of Notice of Exercise appearing at
the end of this Warrant.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Transfer" means any offer, sale, gift, disposition, attempted
disposition, liquidating distribution, dividend or distribution in kind,
transfer, assignment, delivery, pledge, hypothecation, of any present or future
interest, right, claim or privilege in or to this Warrant or the Common Shares
issuable upon exercise of this Warrant, as the case may be.
"Warrant" means (a) this warrant dated as of the Closing Date issued to
the person or legal entity named on the first page of this Warrant; and (b) all
warrants issued upon the partial exercise, transfer or division of or in
substitution for such warrant.
ARTICLE III
EXERCISE OF WARRANT
III.1 Right to Exercise. Subject to and upon compliance with the
conditions of this Article II, the Holder shall have the right, at its option,
at any time and from time to time during the Exercise Period, to exercise this
Warrant in whole or in part.
Notice of Exercise; Issuance of Common Shares. To exercise this Warrant,
the Holder shall deliver to the Company at its administrative office at 7001
Orchard Lake Road, Suite 424, West Bloomfield, Michigan 48322 (a) a Notice of
Exercise duly executed by the Holder and specifying the number of Common Shares
to be purchased, (b) a completed and signed Investor Representation Certificate,
(c) an amount equal to the aggregate Exercise Price for all Common Shares as to
which this Warrant is then being exercised and (d) this Warrant.
<PAGE>
Payment of the Exercise Price shall be made, at the option of the Holder,
(i) by wire transfer to an account in a bank located in the United States
designated for such purpose by the Company or (ii) by certified or official bank
check payable to the order of the Company and drawn on a member of the Chicago
or New York Clearing House. Upon receipt thereof, the Company shall, as promptly
as practicable, and in any event within five business days thereafter, provide a
letter of instructions to the Company's transfer agent authorizing and
instructing the transfer agent to cause to be issued and delivered to the Holder
a certificate or certificates representing the aggregate number of full Common
Shares issuable upon such exercise registered in the name of the Holder.
Unless otherwise requested by the Holder, this Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and the Holder shall be deemed to have become the holder of record
of such shares for all purposes as of the close of business on the date the
Notice of Exercise, together with the Investor Representation Certificate,
payment as herein provided and this Warrant, are received by the Company.
If this Warrant is exercised in part, the Company shall, at the time of
delivery of the instruction letter to the Company's transfer agent authorizing
the issuance of the certificate or certificates for Common Shares, unless this
Warrant has then expired, issue and deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the aggregate number of Common
Shares for which this Warrant shall not have been exercised, and this Warrant
shall be cancelled.
Fractional Shares. The Company shall not issue fractional Common Shares or
scrip representing fractional Common Shares upon any exercise of this Warrant.
As to any fractional Common Shares which the Holder would otherwise be entitled
to purchase from the Company upon such exercise, the Company shall purchase from
the Holder such fractional share at a price equal to an amount calculated by
multiplying such fractional share (calculated to the nearest 1/100th of a share)
by its Current Market Price on the date the Notice of Exercise is received by
the Company. Payment of such amount shall be made in cash or by check payable to
the order of the Holder at the time of delivery of any certificate or
certificates arising upon such exercise.
ARTICLE IV
REGISTRATION, TRANSFER AND EXCHANGE
The Company shall keep at its principal office referred to in Section 2.2
a register in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration, Transfer and exchange of this
Warrant. The Company will not at any time, except upon the dissolution,
liquidation or winding up of the Company, close such register so as to result in
preventing or delaying the exercise or permitted Transfer of this Warrant.
Every Warrant presented or surrendered for registration of a permitted
Transfer or exchange shall be accompanied by an Assignment duly executed by the
holder thereof or its attorney duly authorized in writing.
<PAGE>
All Warrants issued upon any registration of any permitted Transfer or
exchange of Warrants shall be the valid obligations of the Company, evidencing
the same rights, and entitled to the same benefits as the Warrants surrendered
upon such registration of permitted Transfer or exchange.
Upon receipt by the Company of evidence satisfactory to it (in the
exercise of reasonable discretion) of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and (in case of loss, theft or
destruction) the written agreement of the Holder to indemnify the Company
against any resulting loss or expense, or (in case of mutilation) upon surrender
and cancellation hereof, the Company will execute and deliver in lieu hereof a
replacement Warrant.
No service charge shall be made for any registration of any permitted
Transfer or exchange of Warrants.
The Company and any agent of the Company may treat the person in whose
name this Warrant is registered as the owner of this Warrant for all purposes
whatsoever, and neither the Company nor any agent of the Company shall be
affected by notice to the contrary.
ARTICLE V
ADJUSTMENT PROVISIONS
Splits and Combinations. In case the Company shall at any time subdivide
its outstanding Common Shares into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision shall be proportionately
reduced, and, conversely, in case the outstanding Common Shares of the Company
shall be combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.
Reorganization, Reclassification or Recapitalization of Company. In case
of any capital reorganization or reclassification or recapitalization of the
capital stock of the Company (other than a change in par value, or from par
value to no par value or from no par value to par value) or in case of the
consolidation or merger of the Company with or into another corporation or in
case of the sale or transfer of the property of the Company as an entirety or
substantially as an entirety, there shall thereafter be deliverable upon the
exercise of this Warrant or any portion thereof (in lieu of the number of Common
Shares theretofore deliverable) the number of shares of capital stock,
beneficial interest or other securities or property to which the Holder would
have been entitled upon such capital reorganization or reclassification of
capital stock, consolidation, merger or sale had it fully exercised this Warrant
immediately prior thereto, and at the same aggregate Exercise Price.
<PAGE>
Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in this Article, the Holder shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of Common Shares (calculated to the nearest 1/l00th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of Common Shares purchasable hereunder immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
ARTICLE VI
RESERVATION OF SHARES ISSUABLE ON
EXERCISE OF WARRANT; PREEMPTIVE RIGHTS
The Company will at all times reserve and keep available, solely for
issuance, sale and delivery upon the exercise of this Warrant, a number of
Common Shares equal to the number of full Common Shares issuable upon the
exercise of this Warrant. All Common Shares issuable upon the exercise of this
Warrant shall, when issued, (a) be duly and validly issued, fully paid and
nonassessable, and (b) be free from all taxes, liens and charges with respect to
the issue thereof other than any stock transfer taxes in respect of any transfer
occurring contemporaneously with such issue. No stockholder of the Company has
or shall have any preemptive rights to subscribe for such Common Shares.
ARTICLE VII
RESTRICTIONS ON TRANSFER
Reference in this Article VI to Common Shares issuable upon the exercise
of the Warrants shall include Common Shares theretofore issued upon the exercise
of any Warrants that are then evidenced by certificates required to bear the
legend set forth in Section 6.2.
VII.1 Notice of Proposed Transfer; Registration Not Required. This Warrant
may be Transferred by the Holder only (a) with the express prior written consent
of the Company, which consent may be withheld in the sole discretion of the
Company for any reason; and (b) in compliance with this Article VI in whole (as
to all Common Shares purchasable hereunder) but not in part.
<PAGE>
The Holder or the holder of any Common Shares issuable upon the exercise
hereof, by acceptance hereof or thereof, agrees to give written notice to the
Company, prior to any Transfer of this Warrant, such Common Shares or any
portion hereof or thereof, of its intention to make such transfer which notice
shall include a brief description of such proposed Transfer. If the Company
consents to the transfer and if, in the opinion of counsel to the Company, the
proposed Transfer may be effected without registration or qualification under
any federal or state law, such counsel shall, as promptly as practicable, notify
the Company and the Holder in writing of such consent and opinion and of the
terms and conditions, if any, to be observed in such Transfer, whereupon the
Holder shall be entitled to Transfer this Warrant or such Common Shares in
accordance with the terms of the notice delivered to the Company, the Company's
written consent to the Transfer and the opinion of such counsel, subject to the
restrictions on Transfer set forth in this Article VI. Any Transfer or purported
Transfer not in compliance with this Section 6.1 shall be null and void and of
no effect.
Legend on Certificates. In case any Common Shares are issued upon the
exercise in whole or in part of this Warrant or are thereafter Transferred, in
either case under such circumstances that no registration under the Securities
Act is required, each certificate representing such shares shall bear on the
face thereof the following legend:
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or the securities or blue sky laws
of any state, and any transfer thereof is subject to the conditions
specified in the Warrant dated as June 22, 1999 originally issued by Ajay
Sports, Inc. (the "Company") to Robert W. Sage to purchase Common Shares
of the Company. A copy of the form of such Warrant is on file with the
Secretary of the Company and will be furnished without charge by the
Company to the holder of this certificate upon written request to the
Secretary of the Company at such address.
In the event that (a) a registration statement covering Common Shares
represented by a certificate bearing the legend specified above becomes
effective under the Securities Act or (b) the Company receives an opinion of its
counsel that such legend is no longer necessary on such certificate to protect
the Company from a violation of the Securities Act, the Company shall, or shall
instruct its transfer agent and registrar to, issue in lieu thereof a new
certificate or certificates for such shares in the name of the holder of such
shares without such legend on the face thereof.
Supplying Information. The Company, the Holder and each holder of Common
Shares issuable upon the exercise hereof shall cooperate with each other in
supplying such information as may be necessary for any of such parties to
complete and file any information reporting forms presently or hereafter
required by the Commission or any commissioner or other authority administering
the blue sky or securities laws of any U.S. jurisdiction where Common Shares are
proposed to be sold pursuant to Article VI.
Compliance With Rule 144. For as long as the Company's Common Shares are
registered under Section 12 of the Exchange Act, at the request of Holder if
Holder proposes to sell any of the Common Shares issuable upon the exercise of
this Warrant in compliance with Rule 144 of the Commission, or any similar Rule,
assuming that at such time the provisions of such Rule are applicable to such
Holder and, in the event the Holder is or could be deemed an "affiliate" of the
Company, and the Company is then required to file reports under Section 13 or
15(d) of the Exchange Act, the Company shall make such filings of reports with
the Commission as will enable the Holder to make sales of Common Shares issued
upon exercise hereof pursuant to such Rule.
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Holder Not A Stockholder. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a stockholder of the Company including, without limitation, the right as a
stockholder to (a) vote or consent, or (b) receive (i) dividends or any other
distributions made to stockholders, (ii) notice of, or attend, any meetings of
stockholders of the Company or (iii) notice of any other proceedings of the
Company (except as provided in Articles IV and VI).
Notice Generally. Any notice, demand or delivery to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if sent by
telecopy or by registered or certified mail (return receipt requested), postage
prepaid, addressed to (a) the Holder at its last known address and telecopy
number appearing on the books of the Company maintained for such purpose or (b)
the Company at its principal office referred to in Section 2.2 (facsimile number
248-851-9080). The Holder and the Company may each designate a different address
by notice to the other pursuant to this Section 7.2
Successors and Assigns. This Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and,
subject to Article VI, the Holder and the Holder's permitted assigns.
Amendment. This Warrant may not be modified or amended except by
written agreement of the parties.
Headings. The headings of the Articles and Sections of this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
Governing Law. This Warrant shall be governed by the laws of the State
of Delaware.
Dated as of June 22, 1999
ATTEST: AJAY SPORTS, INC.
a Delaware corporation
By/s/ Robert R. Hebard By/s/ Thomas W. Itin
- ------------------------------ ----------------------------
Robert R. Hebard, Secretary Thomas W. Itin, President
<PAGE>
NOTICE OF EXERCISE FORM
(To be executed upon partial
or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant irrevocably
exercises the within Warrant for and purchases Common Shares of Ajay Sports,
Inc. and herewith tenders payment therefor in the amount of $ , all at the price
and on the terms and conditions specified in the within Warrant and requests
that a certificate (or certificates in denominations of shares) for the Common
Shares of Ajay Sports, Inc. hereby purchased be issued in the name of and
delivered to the undersigned, and if such Common Shares shall not include all
the Common Shares issuable as provided in the within Warrant, that a new Warrant
of like tenor for the number of Common Shares of Ajay Sports, Inc. not being
purchased hereunder be issued in the name of and delivered to the undersigned.
Dated: _____________________
Signature Guaranteed: By:
(Signature of Registered Holder)
Address:
By:
Title:
NOTICE: The signature to this Notice of Exercise must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
The signature to this Notice of Exercise must be medallion
guaranteed by a commercial bank or trust company in the United
States or a member firm of the New York Stock Exchange.
<PAGE>
ASSIGNMENT FORM
(To be executed upon a Permitted Transfer
of the within Warrant)
FOR VALUE RECEIVED the undersigned registered Holder of the within Warrant
hereby sells, assigns and transfers unto , whose address is all of the rights of
the undersigned under the within Warrant, with respect to all the Common Shares
issuable as provided in the Warrant, and does hereby irrevocably constitute and
appoint Attorney to register such transfer on the books of Ajay Sports, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated ______________________
Signature Guaranteed: By:
(Signature of Registered Holder)
By:
Title:
NOTICE: The signature to this Assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
The signature to this Assignment must be medallion guaranteed by a
commercial bank or trust company in the United States or a member
firm of the New York Stock Exchange.
<PAGE>
INVESTOR REPRESENTATION CERTIFICATE
In connection with the undersigned investor's exercise of that certain
Warrant to Purchase Shares of Common Stock of Ajay Sports, Inc. (the "Company"),
the undersigned investor hereby makes the following acknowledgments,
representations and warranties to the Company:
1. He understands and acknowledges that none of the shares of common stock
of the Company issuable upon exercise of the Warrant (the "Warrant Shares") have
been registered under the Securities Act of 1933 (the "Securities Act") or
registered or qualified under the securities laws of any state and none may be
offered, sold, contracted for sale, transferred, or otherwise disposed of absent
an effective registration thereof under such Securities Act or an opinion of
counsel, which opinion is reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that such registration is not required
under the Securities Act or applicable state securities laws or that such
transaction complies with the rules promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act or applicable state
securities laws. Investor understands that the Company has no obligation, and
does not intend to register the Conversion Shares under applicable federal or
state securities laws and that he must bear the economic risks of this
investment resulting from such limitations.
2. Investor is an "accredited investor" within the meaning of the
Securities Act based upon the following (check all that apply):
(a)___ he is a natural person whose individual net worth, or joint net
worth with his spouse, at the time of purchase exceeds $1,000,000, at the time
of exercise; or
(b) he is a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and reasonably expects to
reach the same income level in the current year; or
(c) it is a private business development company as defined in
section 202(a)(22) of the Investment Advisors Act of 1940; or
(d) it is either (i) a bank as defined in section 3(a)(2) of the
Securities Act of 1933 (the "Act"), or a savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; (ii) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; (iii) an insurance company as
defined in Section 2(13) of the Act; (iv) an investment company registered under
the Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; (v) a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; or (vi) an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are Accredited Investors; or
<PAGE>
(5) it is any corporation, Massachusetts or similar business trust, partnership,
or organization described in section 501(c)(3) of the Internal Revenue Code, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000; or
(6) ___ it is any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Regulation 230.506(b)(2)(ii)
promulgated under the Act;
(7) it is a trust with respect to which the grantor(s) has retained absolute
power in his or her sole discretion to amend or revoke the trust at any time and
such grantor(s) is an accredited investor as indicated in items 2(a) or 2(b)
above; or
(8) it is an entity in which all of its equity owners meet one or more of the
standards set forth in the preceding paragraphs number 2(c) through 2(f), based
upon the questionnaires delivered by such equity owners.
3. Investor has had access to all periodic reports and other documents filed
with the Securities and Exchange Commission by the Company pursuant to the
Company's obligation to file such reports imposed under Section 15 of the
Securities Exchange Act of 1934. Investor has undertaken such review of the
Company and its business and financial position as Investor deemed necessary in
order to make a decision to exercise his Warrant. Investor understands the
various risks of an investment in the Warrant Shares and he can afford to bear
the risks of an investment in the Warrant Shares, including the risk of losing
all or substantially all of the exercise price therefor.
4. Investor is acquiring its Warrant Shares for his own account, as principal,
and not with a view to the resale or distribution of all or any portion of the
Warrant Shares.
5. Investor has not relied upon the Company or any of its directors or officers
for tax, legal or investment or financial advice, but rather has relied only on
his own advisers with respect to evaluating the risks and merits of exercising
the Warrant to purchase the Warrant Shares.
6. Investor hereby agrees to indemnify, defend and hold the Company harmless
from and against any and all loss, cost, damage, liability or expense
(including, without limitation, reasonable attorneys fees, court costs and
reasonable litigation expenses) which the Company may suffer, sustain or incur
as a result from, arising under or in connection with any inaccuracy of any
representation or acknowledgment or failure of performance of any warranty by
Investor hereunder.
INVESTOR
------------------------------------
<TABLE>
AJAY SPORTS, INC
BALANCE SHEET
PRO FORMA
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
After
As of 5/31/99 Deferred Tax Adj PGA SOTA PGI Acquisition
ASSETS
CASH 34,703 95,000 35,700 1,122,000 1,287,403
MARKETABLE SECURITIES 418,126 418,126
ACCTS RECEIVABLE 4,006,832 210,000 438,000 4,654,832
RESERVE FOR BAD DEBTS (161,944) (161,944)
ACCTS RECEIVABLE - NET 3,844,888 0 210,000 438,000 0 4,492,888
INVENTORIES 5,230,449 16,000 5,246,449
PREPAID EXPENSES 451,551 57,900 288,000 797,451
DEFERRED TAX BENEFITS 362,807 362,807
DUE FROM AFFILIATES
INVESTMENT IN SUB
TOTAL CURRENT ASSETS 10,342,524 0 362,900 489,700 1,410,000 12,605,124
DEFERRED TAX BENEFITS 756,000 4,013,000 4,769,000
INVESTMENTS 0
OTHER ASSETS 140,064 28,000 650,000 9,959,000 10,777,064
FIXED ASSETS 1,681,059 95,900 10,500 1,787,459
GOODWILL 1,602,843 1,602,843
TOTAL ASSETS 14,522,490 4,013,000 486,800 1,150,200 11,369,000 31,541,490
LIABILITIES & EQUITY
ACCOUNTS PAYABLE 2,416,573 35,000 500,200 100,000 3,051,773
ACCOUNTS PAYABLE ACCRUED 483,390 483,390
NOTE PAYABLE - M&E 75,000 75,000
NOTE PAYABLE - US BANK 120,000 120,000
NOTE PAYABLE - COMERICA 650,000 7,850,000 8,500,000
DUE TO AFFILIATES 9,000 9,000
CURRENT PORTION OF CAPITAL LEASE 3,535 3,535
TOTAL CURRENT LIABILITIES 3,098,498 0 35,000 1,150,200 7,959,000 12,242,698
CAPITAL LEASE OBLIGATION 62,484 62,484
NOTES PAYABLE 187,977 187,977
NOTES PAYABLE - US BANK 1,814,538 1,814,538
NOTES PAYABLE - WILLIAMS #3 1,587,462 1,587,462
NOTES PAYABLE - REVOLVER 5,439,505 5,439,505
NOTES PAYABLE - M & E 381,250 381,250
LONG TERM SUB-DEBT 2,010,000 2,010,000
MINORITY INTEREST 1,400,000 1,400,000
TOTAL LIABILITIES 12,571,714 0 35,000 1,150,200 11,369,000 25,125,914
PREFERRED STOCK 3,951,700 3,951,700
CAPITAL STOCK 39,790 39,790
PAID IN CAPITAL 14,765,867 14,765,867
RETAINED EARNINGS (3,499,665) 4,013,000 451,800 965,135
EQUITY IN EARNINGS OF SUB (13,346,792) (13,346,792)
UNREALIZED GAIN(LOSS) ON SECURITIES 39,876 39,876
TOTAL EQUITY 1,950,776 4,013,000 451,800 0 0 6,415,576
TOTAL LIABILITIES & EQUITY 14,522,490 4,013,000 486,800 1,150,200 11,369,000 31,541,490
</TABLE>
