INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT is entered into as of June ____, 1997 by and
among UNITED STATES NATIONAL BANK OF OREGON ("US"), WELLS FARGO BANK, NATIONAL
ASSOCIATION ("WF") and the following corporations (each individually referred to
as a "Borrower" and all collectively referred to as "Borrowers"): WILLIAMS
CONTROLS, INC. a Delaware corporation, AJAY SPORTS, INC., a Delaware
corporation, LEISURE LIFE, INC., a Tennessee corporation, PALM SPRINGS GOLF,
INC., a Colorado corporation, AJAY LEISURE PRODUCTS, INC., a Delaware
corporation, AGROTEC WILLIAMS, INC., a Delaware corporation, APTEK WILLIAMS,
INC., a Delaware corporation, GEOFOCUS, INC., a Florida corporation, HARDEE
WILLIAMS, INC., a Delaware corporation, KENCO/WILLIAMS, INC., a Delaware
corporation, NESC WILLIAMS, INC., a Delaware corporation, PREMIER PLASTIC
TECHNOLOGIES, INC., a Delaware corporation, WACCAMAW WHEEL WILLIAMS, INC., a
Delaware corporation, WILLIAMS CONTROLS INDUSTRIES, INC., a Delaware
corporation, WILLIAMS TECHNOLOGIES, INC., a Delaware corporation, WILLIAMS WORLD
TRADE, INC., a Delaware corporation, WILLIAMS AUTOMOTIVE, INC., a Delaware
corporation, TECHWOOD WILLIAMS, INC., a Delaware corporation.
RECITALS
US has advanced certain credit to Borrowers secured by substantially all
of Borrowers' personal property. WF is prepared to advance credit to Borrowers,
some of the proceeds of which will repay Borrowers' existing obligations to US,
except for the Junior Debt which will remain as an obligation of Ajay Sports,
Inc. [guaranteed by _______________________ and secured by the Kenco Assets].
[Except for a security interest in the Kenco Assets,] US will have no security
interest or other interest in the assets of any Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties contained herein, US, WF and Borrowers hereby agree as follows:
Section 1. Definitions.
The following terms shall have the meanings set forth below (with all such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Credit Agreement" means the Credit Agreement of even date herewith among
WF and Borrowers, as such Agreement may be amended or otherwise modified from
time to time.
"Default" means an "Event of Default" (as defined in the Credit Agreement)
or an event or condition which with the giving of notice or the passage of time,
or both, would constitute an Event of Default.
"Investment Account" means any account maintained by US with respect to
any investment property owned by any Borrower.
"Junior Debt" means the obligations of Ajay Sports, Inc. evidenced
by the Promissory Note attached hereto as Exhibit A [and the obligations
of all Borrowers with respect to the repayment of such indebtedness].
"Kenco Assets" means all of the assets of Kenco/Williams, Inc., a
Delaware corporation.
"Lock Box Accounts" means all accounts maintained by US into which
remittances payable to a Borrower, collections of any account receivable of a
Borrower or other payments due to a Borrower are deposited, including, without
limitation, Account Nos. _____________________ and
- ---------------------.
"Senior Debt" means all of the payment obligations of Borrowers to WF
pursuant to the Credit Agreement and any refinancing or replacement financing of
any of such obligations.
"US" means United States National Bank of Oregon and any other holder of
all or any part of the Junior Debt.
"WF" means Wells Fargo Bank, National Association and any other holder of
all or any part of the Senior Debt.
"WF Revolver" means that portion of any revolving loans included in the
Senior Debt based on the Kenco Assets.
"WF Term Loan" means that portion of any term loan included in the Senior
Debt based on the Kenco Assets.
"WF Term Loan II" means the $1,000,000 term loan defined in the Credit
Agreement as "Term Loan II."
Section 2. Priority of Interests.
2.1 US hereby represents to WF that it has no security interest or
mortgage interest in any of Borrowers' assets, except for its security interest
in the Kenco Assets. US hereby subordinates any interest it has in the assets of
any of the Borrowers to the interest therein of WF.
2.2 Until the Senior Debt is paid in full in cash, US shall not exercise
any of its enforcement or other rights with respect to the Kenco Assets, except
for the filing of such continuation statements as may be necessary in US's
judgment to continue UCC financing statements existing as of the date hereof
perfecting US's interest in the Kenco Assets.
2.3 Upon the prior consent of WF, Borrowers may sell or otherwise dispose
of all or any part of the Kenco Assets free and clear of the interests therein
of US and WF at any time or times until the Senior Debt is paid in full in cash.
Section 3. Repayment of Junior Debt.
3.1 Except as otherwise provided herein, (a) US shall not ask for, demand,
sue for, take or receive, and no Borrower shall make, any payment on account of
the Junior Debt, including, without limitation, any payment by way of setoff and
(b) any money or other property received by US for application on the Junior
Debt before the Senior Debt is paid in full in cash will be held by US in trust
for WF and promptly upon receipt delivered by US to WF.
3.2 So long as no Default is continuing, [describe regular interest and/or
principal payments US permitted to receive on Junior Debt].
3.3 Upon the sale or other disposition of any of the Kenco Assets, the
proceeds thereof will be applied as follows:
(i) first, to the repayment in full of the WF Term Loan;
(ii) second, to the repayment in full of the WF Revolver;
(iii) third, to the repayment in full of the WF Term Loan II;
and
(iv) finally, to the repayment in full of the Junior Debt.
3.4 Upon any distribution of the assets or readjustment of the
indebtedness of any Borrower, whether by reason of liquidation, composition,
bankruptcy, arrangement, receivership, assignment for the benefit of creditors
or any other action or proceeding involving the readjustment of all or any of
the Junior Debt, or the application of the assets of any Borrower to the payment
or liquidation of any of the Junior Debt, WF shall be entitled to receive
payment in full in cash of the Senior Debt prior to the payment of any of the
Junior Debt. Accordingly, any payment or distribution of assets of one or more
Borrowers of any kind or character, whether in cash, property or securities,
which would otherwise have been made to US but for the provisions of this
Section 3.4, shall instead be made by Borrower or Borrowers or by the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
person making payment or distribution of assets of such Borrower or Borrowers,
directly to WF for application to the payment of all Senior Debt remaining
unpaid to the extent necessary to pay all Senior Debt in full in cash after
giving effect to any concurrent payment or distribution to or for the benefit of
WF. If, notwithstanding the foregoing, US receives any payment or distribution
of assets of one or more Borrowers, before all amounts due or to become due on
or in respect of all Senior Debt has been paid in full in cash, then such
payment or distribution shall be received in trust for WF and shall be promptly
paid over or delivered by US to WF for application to the payment of all Senior
Debt remaining unpaid.
Section 4. Rights in Furtherance of Subordination.
4.1 US and each holder of the Junior Debt by its acceptance thereof agrees
not to sell, assign or transfer all or any part of the Junior Debt while any
Senior Debt remains unpaid unless such sale, assignment or transfer is made
expressly subject to the terms of this Intercreditor Agreement. US represents
that no other subordination of the Junior Debt is in existence on the date
hereof and agrees that the Junior Debt will not be subordinated to any
indebtedness owed to any person other than WF.
4.2 US and each other holder of the Junior Debt by its acceptance thereof
consents and agrees that all Senior Debt shall be deemed to have been made or
incurred in reliance upon the subordination of the Junior Debt pursuant to this
Intercreditor Agreement.
4.3 Until the Senior Debt has been paid in full in cash, US will not (i)
commence any action or proceeding against any Borrower to recover all or any
part of the Junior Debt unless WF has commenced such an action against such
Borrower or (ii) join with any creditor in bringing any proceeding against any
Borrower under Title 11 of the United States Code or any other state or federal
insolvency statute unless WF has joined in bringing such a proceeding.
4.4 Subject to the payment in full in cash of all Senior Debt, US shall be
subrogated, to the extent of the payments or distributions made to WF pursuant
to the provisions of this Agreement, to the rights of WF to receive payments and
distributions of property applicable to the Senior Debt until the principal of
and interest on the Junior Debt is paid in full. For purposes of such
subrogation, no payment or distribution to WF of cash or property which US would
be entitled to receive but for the provisions of this Agreement, shall, as among
the Borrowers, their creditors (other than WF) and US, be deemed to be a payment
or distribution by any Borrower to or on account of the Senior Debt.
4.5 US may file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have its claims allowed in any judicial
proceeding relative to any Borrower, its creditors or its property. If US has
not filed a proof of claim or other necessary claim in such proceeding within
ten business days before the deadline for filing such a claim, WF may file such
a claim on behalf of US. Until the Senior Debt has been paid in full in cash, US
will not discharge all or any portion of the obligations of the Borrowers in
respect of the Junior Debt, whether by forgiveness, receipt of capital stock or
otherwise, without the prior written consent of WF.
4.6 WF shall be deemed to be the "holder" of all claims in respect of the
Junior Debt in any proceeding of the type described in Section 3.4 (each a
"bankruptcy proceeding"). To the extent not deemed to be "not in good faith"
within the meaning of 11 U.S.C. ss.1126(e), US agrees to vote to accept a plan
of reorganization or dissolution in respect of one or more Borrowers which WF
has accepted or has notified US of its intent to accept. If such acceptance by
US would not be in good faith pursuant to 11 U.S.C. ss.1126(e), US agrees not to
vote against a plan of reorganization or dissolution which WF has accepted or
has notified US of its intent to accept. The foregoing shall be enforceable by
WF against US regardless of whether such plan allows a class subordinated to the
claims of the Junior Debt to retain an interest in one or more Borrowers or
whether US will receive or retain under such plan on account of its claims in
respect of the Junior Debt property having value less than the amount that US
would receive or retain if the bankruptcy proceeding were under Chapter 7 of the
Bankruptcy Code.
Section 5. Lock Boxes. On each business day, US shall transfer to WF by
wire transfer in accordance with WF's wire instructions amount equal to the
ledger balance in the Lock Box Accounts. The Lock Box Accounts will not be
subject to deduction, setoff, banker's lien or any other similar right. All
service charges and other expenses for the establishment and maintenance of the
Lock Box Accounts and for US's services in connection therewith shall be charged
by US directly to
- -----------------------.
Section 6. Indemnification. WF shall indemnify and hold US harmless from
and against and will promptly reimburse US for any liability, loss or expense
arising out of the dishonor of, or failure of US to collect, any check or other
instrument delivered to US constituting part of the collections credited by US
to Borrowers' accounts in connection with the payoff of Borrowers' obligations
(other than the Junior Debt) contemporaneously with the execution by Borrowers
of the Credit Agreement and with respect to any check or other instrument
deposited into the Lock Box Accounts and constituting any part of the amounts
wire transferred to WF pursuant to Section 5 above, provided US gives WF notice
of each such event within 30 days after the occurrence thereof.
Section 7. Investment Account. From time to time, Borrowers deposit funds
with US in the Investment Account. Borrower has granted WF a security interest
in all of Borrowers' investment property, including, without limitation, all
amounts deposited in the Investment Account. In order to perfect WF's interest
in the Investment Account, US hereby agrees that it will comply with all orders
and directions given to it by WF with respect to the Investment Account without
further consent by any Borrower.
Section 8. Continuing Subordination. This is a continuing agreement of
subordination and WF may continue, without notice to US, to extend credit or
other accommodations or benefit and lend monies to or for the account of any one
or more of the Borrowers on the faith hereof, and may at any time, in WF's sole
discretion, renew or extend the time of payment of all or any existing or future
obligations of Borrower to US or waive or release any collateral which may be
held therefor at any time without in any manner being deemed to have impaired or
affected WF's rights and US's obligations hereunder. US waives notice of
acceptance by WF of the subordination and other provisions of this Agreement and
reliance by WF upon the subordination and other agreements set forth herein.
Section 9. Miscellaneous.
9.1 All notices, requests and demands which any party is required or may
desire to give to any other party under any provision of this Agreement must be
in writing delivered to each party at the following address:
BORROWERS: Williams Controls, Inc.
14100 SW 72nd Avenue
Portland, OR 97224
Attn: Thomas W. Itin, Chairman
Telecopy No.: (248) 851-9080
US: United States National Bank of Oregon
111 S.W. Fifth Avenue
Portland, OR 97204
Attn: ____________________________
Telecopy No.: ____________________
WF: Wells Fargo Bank, National Association
Commercial Finance Division
245 S. Los Robles Ave., Ste. 600
Pasadena, CA 91101
Attn: Angelo Samperisi
Telecopy No.: (626) 884-9063
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three days after deposit in the
U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt and the sender will endeavor to send a hard copy of such telecopied
notice to the recipient by mail.
9.2 No delay, failure or discontinuance of US or WF in exercising any
right, power or remedy hereunder shall affect or operate as a waiver of such
right, power or remedy, nor shall any single or partial exercise of any such
right, power or remedy preclude, waive or otherwise affect any other further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, permit, consent or approval of any kind by either US or WF of any breach
of or default under any provision hereof must be in writing and shall be
effective only to the extent set forth in such writing.
9.3 Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the party against
whom enforcement is sought.
9.4 Except as provided in Section 3, the provisions of this Agreement are
intended solely for the purpose of defining the relative rights of US on the one
hand and WF on the other. It is the intent of the parties that this Agreement
shall constitute a present assignment by US of its rights to receive payments or
distributions of cash and other property of one or more Borrowers otherwise
payable to US in the circumstances described in Section 3 hereof. Nothing
contained in this Agreement except as set forth in Section 3 shall (i) impair or
affect, as among the Borrowers, their creditors (other than WF) and US, the
obligation of Ajay Sports, Inc., which is absolute and unconditional, to pay to
US the principal of and interest on the Junior Debt as such amounts become due
and payable in accordance with its terms or (ii) affect the relative rights
against the Borrowers of US and the creditors of the Borrowers (other than WF).
9.5 The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
9.6 This Agreement shall be governed by and construed in accordance with
the laws of the State of Oregon.
9.7 If legal action is required to enforce the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees and costs
incurred therein, whether incurred at arbitration, at trial, on appeal, in a
bankruptcy proceeding or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK, NATIONAL UNITED STATES NATIONAL BANK OF OREGON
ASSOCIATION
By:
By:
Title:
Title:
WILLIAMS CONTROLS, INC. AJAY SPORTS, INC.
By: By:
Title: Title:
LEISURE LIFE, INC. PALM SPRINGS GOLF, INC.
By: By:
Title: Title:
AJAY LEISURE PRODUCTS, INC. AGROTEC WILLIAMS, INC.
By: By:
Title: Title:
APTEK WILLIAMS, INC. GEOFOCUS, INC.
By: By:
Title: Title:
HARDEE WILLIAMS, INC. KENCO/WILLIAMS, INC.
By: By:
Title: Title:
NESC WILLIAMS, INC. PREMIER PLASTIC TECHNOLOGIES, INC.
By: By:
Title: Title:
WACCAMAW WHEEL WILLIAMS, INC. WILLIAMS CONTROLS INDUSTRIES, INC.
By: By:
Title: Title:
WILLIAMS TECHNOLOGIES, INC. WILLIAMS WORLD TRADE, INC.
By: By:
Title: Title:
WILLIAMS AUTOMOTIVE, INC. TECHWOOD WILLIAMS, INC.
By: By:
Title: Title: