Consent, Reaffirmation And Release Agreement

CONSENT, REAFFIRMATION, AND RELEASE AGREEMENT


This Consent, Reaffirmation, and Release Agreement (the "Agreement") is entered into this 14th day of July, 1997, between and among United States National Bank of Oregon ("U. S. Bank"), Agrotec Williams, Inc., Aptek Williams, Inc., Hardee Williams, Inc., Kenco Williams, Inc., NESC Williams, Inc., Premier Plastic Technologies, Inc., Techwood Williams, Inc., Waccamaw Wheel Williams, Inc., Williams Automotive, Inc., Williams Controls, Inc., Williams Controls Industries, Inc., Williams Technologies, Inc., Williams World Trade, Inc., Ajay Sports, Inc., Ajay Leisure Products, Inc., Ajay Leisure de Mexico C.V. de S.A., Leisure Life, Inc., Palm Springs Golf, Inc., and Thomas W. Itin.


RECITALS


A. U. S. Bank, First Security Bank of Idaho, N.A., and SunTrust Bank, South Florida, National Association (the "Banks") extend an operating credit facility to Williams Controls, Inc. ("Williams"), pursuant to the terms of a revolving loan agreement dated as of July 25, 1995 (as such loan agreement has been amended by the first amendment thereto dated as of June 30, 1996) (collectively, the "Williams Loan Agreement"). Williams executed a security agreement granting the Banks liens and security interests in all or substantially all of Williams' personal property to secure Williams' obligations to the Banks pursuant to the Williams Loan Agreement.


B. Agrotec Williams, Inc., Aptek Williams, Inc., Hardee Williams, Inc., Kenco Williams, Inc., NESC Williams, Inc., Premier Plastic Technologies, Inc., Techwood Williams, Inc., Waccamaw Wheel Williams, Inc., Williams Automotive, Inc., Williams Controls Industries, Inc., Williams Technologies, Inc., and Williams World Trade, Inc. (collectively, the "Williams Guarantors") executed guaranty agreements whereby they guaranteed the payment of Williams' obligations to the Banks in respect of the credit facility extended pursuant to the Williams Loan Agreement. In addition, the Williams Guarantors executed security agreements granting the Banks liens and security interests in all or substantially all of the Williams Guarantors' personal property to secure the obligations of the Williams Guarantors and Williams to the Banks.


C. U. S. Bank extends an operating credit facility and a bulge loan facility to Ajay Sports, Inc. ("Ajay"), pursuant to the terms of a revolving loan agreement dated as of July 25, 1995 (as such loan agreement has been amended by the first amendment thereto dated October 2, 1995, and the second amendment thereto dated as of February 11, 1997) (collectively, the "Ajay Loan Agreement"). Ajay executed a security agreement (and an amendment thereto) granting U. S. Bank liens and security interests in all or substantially all of Ajay's personal property to secure Ajay's obligations to U. S. Bank pursuant to the Ajay Loan Agreement.


D. Ajay Leisure Products, Inc., Ajay Leisure de Mexico C.V. de S.A., Leisure Life, Inc., Palm Springs Golf, Inc. (collectively, the "Ajay Guarantors"), and Williams have executed guaranty agreements whereby they guaranteed the payment of Ajay3s obligations to U. S. Bank in respect of the credit facilities extended pursuant to the Ajay Loan Agreement. In addition, the Ajay Guarantors and Williams executed security agreements (and amendments thereto) granting U. S. Bank liens and security interests in all or substantially all of the Ajay Guarantors' and Williams' personal property to secure their obligations under their guaranties and to secure Ajay's obligations to U. S. Bank.


E. The security agreements executed by Williams, Ajay, the Williams Guarantors, and the Ajay Guarantors in favor of U. S. Bank (and all amendments and modifications thereof) are referred to in this Agreement collectively as the "Security Agreements." The personal property of Williams, Ajay, the Williams Guarantors, and the Ajay Guarantors in which U. S. Bank has been granted liens and security interests pursuant to the Security Agreements is referred to in this Agreement collectively as the "Collateral."


F. The guaranties executed by Williams, the Williams guarantors, and the Ajay Guarantors in favor of U. S. Bank (and all amendments and modifications thereof) are referred to in this Agreement as the "Guaranties." The Guaranties, the Security Agreements, and the Aptek Mortgage (as that term is defined in paragraph 1.2(c) below) are referred to collectively in this Agreement as the "Collateral Documents."


G. The total amount owed by Williams pursuant to the Williams Loan Agreement and the promissory note executed in connection therewith is referred to below as the "Williams Obligation." The total amount owed by Ajay pursuant to the Ajay Loan Agreement and the two promissory notes executed in connection therewith is referred to below as the "Ajay Obligation." The Williams Obligation and the Ajay Obligation are referred to collectively in this Agreement as the "Obligations." The Obligations include $76,810.50 for legal fees and costs incurred by U.S. Bank, $52,500 in respect of a loan fee owed by Williams to U. S. Bank, and $20,999.98 for appraisals and other out-of-pocket expenses incurred by U. S. Bank in connection with its banking relationship with Williams and Ajay.


H. As of July 14, 1997, Williams owed U. S. Bank the principal amount of $16,895,372.81 and accrued interest of $144,251.64.


I. As of July 14, 1997, Ajay owed U. S. Bank the principal amount of $7,301,716.66 and accrued interest of $33,139.12 in respect of the operating credit facility extended by U. S. Bank to Ajay. In addition, as of that date, Ajay owes U. S. Bank the principal amount of $4,750,000 and accrued interest of $21,243.05 in respect of the bulge loan extended by U. S. Bank to Ajay.


J. The credit facilities extended by U. S. Bank pursuant to the Williams Loan Agreement and this Ajay Loan Agreement expire on July 14, 1997. At that time, the Obligations become due and payable in full.


K. Williams and Ajay have negotiated a new financing arrangement with Wells Fargo Bank, National Association ("WFB"). However, the amount that WFB is willing to lend to Williams and Ajay thereunder would not result in payment in full of the Obligations.


L. Williams and Ajay have requested U. S. Bank to agree to the proposed refinancing transaction among Williams, Ajay, and WFB and to accept a promissory note from Ajay with respect to the $2,340,000 difference between the amount of the Obligations and the refinancing proceeds (which difference is referred to below as the "Residual Debt"). U. S. Bank is willing to do so, subject to the terms and conditions of this Agreement.


NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties to this Agreement agree as follows:


AGREEMENT


SECTION I


The Residual Debt


I.1 Agreement to Residual Debt. U. S. Bank hereby agrees that if it receives collected funds in the amount of $26,956,033.76 (the "Payment") on or before July 14, 1997, from Williams and Ajay with respect to the Obligations, Williams and Ajay deposit with U. S. Bank cash in the amount of $65,000 (which deposit is to ensure and secure the payment of two letters of credit in the amounts of $36,925.24 and $26,500 issued by U. S. Bank on behalf of Williams and/or Ajay) on or before July 14, 1997, and the conditions precedent specified in paragraph 1.2 below have been satisfied by that date, U. S. Bank will agree to accept payment of the Residual Debt pursuant to the terms and conditions of this Agreement and the Note (as that term is defined below).


I.2 Conditions Precedent. This Agreement shall be effective only if on or before July 11, 1997, U. S. Bank receives the following (which in the case of the documents and instruments described in items (a) through (e) below must be fully and duly executed):


(a) This Agreement;


(b) A promissory note from Ajay in the amount of
$2,340,000 in the form of attached Exhibit 1 (the "Note");


(c) A mortgage with respect to Aptek Williams, Inc.3s
real property in Broward County, Florida (the "Florida
Property"), in a form acceptable to U. S. Bank (the "Aptek
Mortgage");


(d) A guaranty from Mr. Itin in the form of attached
Exhibit 2;


(e) An intercreditor agreement among Williams, Ajay, the
Williams Guarantors, the Ajay Guarantors (collectively, the
"Obligors"), Mr. Itin, U. S. Bank, and WFB in a form acceptable
to U. S. Bank (the "Intercreditor Agreement");


(f) A copy of the fully executed loan agreement among WFB and the
Obligors, the terms of which must be consistent with the terms of the
Intercreditor Agreement;


(g) Assurances satisfactory to U. S. Bank that the Obligors have
made arrangements for payment of the documentary stamp taxes, intangible
personal property taxes, recording costs, and title insurance premium that
will be owing at the time of recording the Aptek Mortgage.


At the time this Agreement becomes effective, it will supersede the Williams Loan Agreement and the Ajay Loan Agreement as the document governing the credit facilities U. S. Bank extends to Williams and Ajay. The Williams Loan Agreement and the Ajay Loan Agreement shall remain in full force and effect until such time, if any, that all of the above-described conditions precedent have been satisfied.


I.3 Subordination of Lien Position. WFB's agreement to enter into the above-described refinancing transaction is conditioned upon its obtaining first priority liens and security interests in the personal property of the Obligors (other than the Stock, as that term is defined below) and the Florida Property. Upon receipt of the Payment and timely satisfaction of the conditions precedent specified in paragraph 1.2 of this Agreement, U. S. Bank agrees to subordinate its security interests and liens in the Collateral (other than the Stock) to WFB's liens and security interests therein.


Section II
Continuing Validity of Guaranties and Security Agreements


II.1 Consent of Guarantors. The Williams Guarantors, Williams, and the Ajay Guarantors, and Mr. Itin hereby acknowledge that they are familiar with the terms of the Note, and consent to those terms and to Ajay executing that note.


II.2 Reaffirmation of Existing Guaranties (Williams Guarantors). The Williams Guarantors hereby reaffirm their guaranties of all obligations and indebtedness of Williams to U. S. Bank (including Williams' obligations in respect of its guaranty of Ajay's obligations to U. S. Bank pursuant to the Note), and hereby reaffirm and ratify the terms and conditions of their guaranties. In that regard, the Williams Guarantors acknowledge and agree that they are obligated to immediately pay U. S. Bank all amounts owed by Ajay with respect to the Obligations, including all amounts owed under the Note, if Ajay and Williams fail to do so, and that U. S. Bank has no obligation to proceed first against Ajay, or the Collateral, to recover the amount owed. The Williams Guarantors hereby waive their right to revoke their guaranties until the Note is paid in full.


II.3 Reaffirmation of Existing Guaranties (Ajay Guarantors and Williams). The Ajay Guarantors and Williams hereby reaffirm their guaranties of all obligations and indebtedness of Ajay to U. S. Bank (including Ajay's obligations to U. S. Bank pursuant to the Note), and hereby reaffirm and ratify the terms and conditions of their guaranties. In that regard, the Ajay Guarantors and Williams acknowledge and agree that they are obligated to immediately pay U. S. Bank all amounts owed by Ajay with respect to the Note if Ajay fails to do so, and that U. S. Bank has no obligation to proceed first against Ajay, or the Collateral, to recover the amount owed. The Ajay Guarantors and Williams hereby waive their right to revoke their guaranties until the Note is paid in full.


II.4 Acknowledgment and Reaffirmation of Security Agreements. The Obligors hereby reaffirm their obligations under the Security Agreements, and hereby reaffirm and ratify the terms and conditions of the Security A ...