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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal year ended July 31, 1996 or
[_] Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
to
Commission file number 0-8485
Grip Technologies, Inc.
(formerly Harvest Recreation Vehicles, Inc.)
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(Exact name of Registrant as specified in its charter)
California 95-1980894
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(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)
10 Corporate Park, Suite 130
Irvine, California 92714-5140
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(Address of principal executive offices) (Zip Code)
(714) 252-8500
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Without Par Value
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(Title of Class)
Indicate by check mark whether 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 Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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State the aggregate market value of the voting stock held by non-
affiliates of Registrant: $3,773,808. The aggregate market value was calculated
on the basis of $1 7/16 per share, the last trading price of such Common Stock
prior to October 28, 1996.
Indicate the number of shares outstanding of Registrant's Common
Stock, as of October 28, 1996: 5,581,925
Documents incorporated by reference: Not applicable.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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PART I.
ITEM 1. BUSINESS
Forward-Looking Statements
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From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to republish revised forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events. Readers are also urged to
carefully review and consider the various disclosures made by the Company in
this Report, as well as the Company's other periodic reports on Forms 10-K, 10-Q
and 8-K filed with the Securities and Exchange Commission. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include, but are not limited to, those factors set forth under the captions
"Certain Factors Affecting the Golf Industry" and "Liquidity and Capital
Resources" appearing in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of this Report.
Company
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The Company designs and markets golf grips for sale to original
equipment manufacturers ("OEMs"), mail order houses, golf pro shops and
specialty golf retailers. Prior to the commencement of fiscal 1996, the Company
decided to outsource all manufacturing and, subsequently during fiscal 1996
ceased all in-house manufacturing operations. The Company is currently
utilizing three outside contractors to manufacture its golf grips, using the
Company's tooling and proprietary manufacturing techniques.
Management believes that the Company's grips are superior to natural
and other synthetic rubber grips based on their feel, high surface friction,
material consistency and controlled weight tolerances. The Company utilizes a
combination of premium materials, custom designs, proprietary tooling and
manufacturing techniques, and a proprietary painting process, which allows
GRIPTEC(TM) to offer distinctive grips in a wide variety of sizes, pattern
designs, weights, softness and textures.
The Company's objective is to lead in the design, development and
merchandising of premium sport grips with superior quality and performance.
The Company commenced initial operations on August 1, 1993 utilizing
certain specified tangible and intangible assets it acquired from Poulin
Progrip, Inc. The Company became a "public company" as a result of its
acquisition on January 15, 1994 by a pre-existing public company,
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Harvest Recreation Vehicles, Inc. ("Harvest"), that for several years prior to
such date had no business, assets or operations - a so-called shell company. For
financial statement purposes, as well as most other relevant purposes, the
transaction was characterized as an acquisition of the shell company by the
operating entity. As of July 31, 1994, the Company merged with and into Harvest.
In September 1995, the Company completed the acquisition of USGRIPS(TM),
Inc. ("USG") of Vista, California. USG was engaged in the business of designing
and producing golf grips made from EPDM, a synthetic rubber compound that has
wide acceptance by OEMs. The acquisition has added a full line of quality EPDM
grips to the Company's product line which has helped the Company penetrate the
OEM market. See "USGRIPS Merger."
During fiscal 1996, the Company entered into a joint venture agreement
with Talaurian Technologies, Inc. pursuant to which the Company agreed to
license or sublicense, as the case may be, to Talaurian, its proprietary
technology for industrial applications, and Talaurian agreed to cross-license
its proprietary technology for sport grip applications to the Company. See
"Talaurian Joint Venture."
USGRIPS Merger
--------------
On September 22, 1995, the Company acquired USG, a closely-held
Florida corporation. The transaction was structured as a merger of USG into
USG Acquisition Corporation, a California corporation ("GTI Sub"), a newly-
formed wholly-owned subsidiary of the Company. In connection with the
merger, the Company issued 600,000 shares of its Common Stock to the two
shareholders of USG and agreed to issue up to an additional 400,000 shares
over a three year period pursuant to an earn-out formula based on the gross
margins to be achieved by the acquired USG business. All shares of the
Company issued or to be issued in connection with the merger are
"restricted securities" under federal securities laws. The merger was
consistent with the Company's strategy to expand its product line to
include quality EPDM grips to gain a greater foothold in the OEM market.
The assets acquired included property and equipment consisting of
machinery and equipment, molds, furniture and fixtures and leasehold
improvements, and accounts receivable, inventories and prepaid expenses.
The Company intends to continue to use the assets in a manner consistent
with the business conducted by USG prior to the merger.
Concurrent with the USG acquisition, the Company entered into a
contract with USG's former supplier, ARC Equipment, Inc. of Chandler,
Arizona for the manufacture and supply of golf grips made from EPDM, a
synthetic rubber material which has become the material of choice for
premium grips of many OEMs.
USG and its two shareholders were not affiliated, nor did they have
any material relationship with the Company prior to the merger. Subsequent
to the merger, J. Barrie Ogilvie, USG's former majority shareholder, was
appointed a director of the Company and Paul J. Herber, USG's former
president, was appointed Vice President of OEM Sales of the Company.
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Talaurian Joint Venture
-----------------------
During fiscal 1996, the Company entered into a joint venture
agreement (the "Talaurian Agreement") with Talaurian Technologies, Inc.
("Talaurian"), pursuant to which the Company agreed to license or
sublicense, as the case may be, to Talaurian, its proprietary technology
for industrial applications, and Talaurian agreed to cross-license its
proprietary technology for sport grip applications to the Company. The term
of the Talaurian Agreement is five years, and may be extended another five
years should certain conditions be met. The Talaurian Agreement gives the
Company the right to purchase 50% of the Common Stock of Talaurian for
$1,000, and grants the Company a royalty of 5% of all revenues of
Talaurian, whether derived from use of the Company's technology or not. The
Company did not accrue or receive any amounts under the Talaurian Agreement
during the year ended July 31, 1996.
Products
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Current Lines. The Company produces premium golf grips made from each
of the materials that currently have wide use in the golf grip market:
Ethylene Propylene Diene Monomer ("EPDM"), Thermoplastic Rubber ("TPR"),
and EPDM with strands of embedded cord fibers ("cord"). These categories
are represented by over fifty different models in various colors. Certain
of the Company's grips are painted by filling molded logos with decorative
paints. The paint used for the Company's TPR grips is based upon
proprietary formulas. The Company also produces customized EPDM grips by
using laser technology to engrave logos and names, which can then be
painted.
Each of the grip materials has characteristics which set it apart
from the other, resulting in demand for each in the marketplace.
Substantially all of the grips manufactured and sold by the Company
during fiscal 1995 were made from advanced proprietary TPR compounds.
Management believes that TPR offers many advantages over rubber and other
synthetic rubber, including EPDM. However, in dealing with major OEMs, the
Company has been told that TPR is viewed by some as an inexpensive, lower
quality material because of the positioning of the several companies who
are currently making TPR grips. Although the Company spent considerable
time and money to develop high quality TPR compounds for its grips, there
remains a TPR image problem. In addition, those OEMs that are interested in
quality TPR grips have expressed concerns regarding the lack of a quality
secondary source. As a result, by the end of fiscal 1995, the Company
changed its strategy to focus primarily on EPDM grip sales to OEMs,
although it sells, and intends to continue to sell, TPR grips to OEMs. The
acquisition of USG in September 1995 implements this new strategy. The
Company views TPR as the material of the future and is already working with
OEMs on TPR grip projects, particularly where light weight grips are
required.
EPDM is the material of choice for most manufacturers of premium golf
clubs. In addition to its inherently tacky feel, EPDM provides a
consistent finish and can be manufactured to strict tolerances, thus
meeting the quality standards of many OEMs. In addition, several producers
provide high-quality EPDM grips, enabling OEMs to qualify alternative
suppliers.
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Cord grips have woven cotton threads embedded in the grip material
much like the fiber materials embedded in belted automobile tires. Many
high caliber and professional golfers believe cord grips give the player
better control of the golf club, particularly in humid or wet weather.
Products in Development. The Company's proprietary and patented
painting processes can be used to apply various coatings to many surfaces,
including gloves. When a coated glove is worn while using a TPR grip or a
surface coated with TPR or certain other polymers, the coefficient of
friction (i.e., resistance to slipping) between these two surfaces is
substantially increased. This grip system technology has application in
many sports, including golf, racquet sports, softball, baseball, cycling,
hockey, and skiing. As an example, if the coating is applied to a golf
glove that is used in conjunction with a golf grip made of TPR, the
increased bond allows the golfer to swing the club with a minimum of hand
pressure without fear of losing his or her grip on the club. A very thin
coat of TPR can also be applied directly to wooden baseball bats by dipping
the bat handle. In the case of metal bats, a TPR grip can be slipped over
the bat handle in place of standard grips. This coating is impervious to
water, which could be an advantage in some sports. The grip system
technology is still in development and, to date, no sales have been made.
Research and Development. The Company utilizes both in-house staff
and independent consultants to conduct research and development of new
products and to refine existing products. The Company has a consulting
agreement with an independent consultant who obtained the original patent
for the painting process, to provide certain consulting services for the
Company. There can be no assurance that new products will be introduced as
a result of such efforts, or that any new products will be successful,
although the Company has been encouraged by the new compounds and painting
techniques developed to date by this consultant.
The Company continues its research and development in new compounds
and with respect to a grip system. The Company's ongoing research and
development effort is anticipated to generate new product applications
covering grips and grip systems for future products.
Adjunct Products. From time to time, the Company identifies
opportunities to develop and /or market new products which, while not
directly related to the Company's current golf grip line, represent
potential line extensions or are salable into the same or similar markets.
This is an area of potential growth that the Company is continually
exploring.
Patents, Technology and Trademarks. The Company uses and is
developing technology that is protected by three United States patents
which are very similar to each other. The Company acquired its patented
technology by licensing from the inventor certain rights in and to the
patented sport grip technology. The Company's license agreement provides
for a payment of $2,000 per month for the worldwide exclusive rights to the
patents and technology, including the exclusive rights under all issued,
pending and future domestic and foreign patents related to the methods of
coating surfaces with soft elastomeric polymers. United States patents have
been issued for both the method claims of the original patent application
made by the Company's licensor and the article claims under a divisional
patent
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application. Both patents are under the title "Soft, Elastomeric, Polymer
Coated Contact Surface and Method of Preparing Same."
A continuation-in-part application was filed with the United States
Patent Office adding additional materials and specifications to the
original application, and a new patent was issued by the United States
Patent Office in February 1994. The coating of gloves with elastomeric
polymers is included in the patent protection. An application for patent
protection of the technology has also been filed in Japan, but no foreign
patents have been issued.
The Company relies extensively on trade secrets and non-disclosure
agreements with its key employees and subcontractors to protect its
proprietary processes related to the manufacture of seamless grips, the
manufacture of tooling and the painting process. No assurances can be
given that others, including competitors, might not design or develop a
similar, non-infringing technology or be able to manufacture golf or other
sport grips and grip systems with equal or better efficacy.
The Company has also applied for United States trademark protection
of its stylized "G" logo and the name GRIPTEC(TM). A California fictitious
name application has been filed for the name "GRIPTEC(TM)." The Company's
stylized "G" logo is not available in Japan and there the Company must use
the name "Griptech" on its products.
Current Customers
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A list of the Company's OEM customers during the most recently
completed fiscal year includes: Cobra Golf, Nicklaus Golf, Pinseeker, Ray
Cook, Teardrop, Matzie, Pro Group, Mizuno, Titleist and Bullet Golf, among
others. The replacement market was served primarily through sales to
catalog resellers Golfsmith International, Dynacraft, The Golf Works and
Austad's. Sales to Cobra Golf and Golfsmith International amounted to 23%
and 13% of sales, respectively, for the year ended July 31, 1996. The
Company is presently negotiating with several additional OEMs for future
business and continues to expand its business with existing customers.
Although the Company has an exclusive distributor contract with
Yanase of America, Inc. for the sale of golf grips in Japan and certain
other Asian countries, this agreement has resulted in few sales to date.
The agreement is currently under review by the Company and Yanase.
Marketing and Sales
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Staff. The Company's marketing program relies on its sales staff,
selected distributors and independent sales representatives to achieve its
marketing objectives.
The Company's product lines have been shown (and will continue to be
shown) at the annual Professional Golf Association ("PGA") trade shows in
Orlando, Florida and Las Vegas, Nevada. Information obtained at the shows
has been used to pare the product line down to those samples that received
favorable responses from members of the golf trade. Sales orders are not
normally taken at the trade shows, but by follow-up calls on customers
contacted at the shows.
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Endorsements. The Company has endorsement agreements with Jack
Nicklaus and Phil Mickelson, well-known PGA Tour players. The Company
believes that the endorsement of players of this caliber enhances the
Company's credibility with OEMs and promotes brand awareness within the
replacement market.
Advertising and Promotion. The Company utilizes a full service
advertising and public relations firm to develop and coordinate an
integrated promotional, marketing and advertising program aimed primarily
at the replacement market. OEMs are serviced directly by the Company's
sales management and staff, who work directly with OEMs to develop new
products and qualify the Company as an approved source on existing
products.
The Company has historically focused its advertising and promotional
efforts at using celebrity endorsers to promote the GRIPTEC(TM) brand as a
credible, high-quality alternative to Golf Pride, Lamkin and Royal Grips.
Advertising placed in consumer and trade magazines has resulted in high
brand awareness within the industry, and has helped to generate demand in
the replacement market.
During fiscal 1996, the Company added as customers several major
catalog resellers and retail chains, who effectively service pro shops,
small retailers and other replacement market customers, an important market
niche. The Company has seen significant sales increases, as well as a
marked decrease in credit problems as a result of this change in strategy.
The Company has consequently shifted a portion of its advertising to co-op
advertising with the catalogs and retail chains, a strategy it plans to
continue in fiscal 1997.
The Company is also a sponsor of the developing Professional Long
Drive Golf Association tour by offering additional prize money to the top
three contestants using the Company's grips in the competition.
Pricing Policies. The Company believes that it is viewed as
moderately aggressive in terms of its pricing strategy, although some
competitors have more aggressive pricing policies. See "Business -
Products."
The Company does not intend to compete on the basis of price
sensitivity, but will concentrate its efforts on a premium quality product
emphasizing the Company's capabilities in delivering custom features,
including feel, color, weight, etc. The Company's focus is on developing
products that should command higher prices due to their superior
attributes. However, the Company's research and development department is
concurrently pursuing alternative and less expensive products for the lower
priced market.
Manufacturing
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Facilities and Equipment. Prior to the USGRIPS merger in September
1995, the Company operated a full service facility with capability to
design, manufacture and package golf and other sport grips made of TPR. In
August 1995, the Company discontinued production at its Irvine, California
facility, and in March 1996, subleased that facility, sold its injection
molding equipment, and relocated into smaller space housing its executive
offices. The Company subcontracts all manufacture and production of its
golf grips.
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The Company paints EPDM grips at its Vista, California facility and
ships from that facility. The Company has subcontracted an outside facility
to paint its TPR grips utilizing the Company's proprietary paint. The
painting process is a significant component of a grip's processing cost,
and has been the focus on management efforts to increase efficiencies.
During fiscal 1996, the Company made significant investments in equipment
and procedures to automate and otherwise further improve processing speed
and quality. The Company believes the improvements will ultimately reduce
processing costs.
As part of the USGRIPS acquisition, the Company acquired certain
equipment and software which allows it to engrave golf grips with logos and
names using laser technology. The laser technology enables the Company to
customize its grips without purchasing new tooling and adds to the
Company's product lines. The laser operation is conducted by the Company
at its Vista, California facility.
For the OEM market, the Company works with each customer to custom
design each grip with exacting specifications. Upon acceptance of a design
by a customer, the Company then develops the appropriate tooling, known as
a cavity. Costs for the tooling will vary, depending on the method used to
build the cavity. The Company attempts to match tooling purchased to the
expected sales of each grip model. Where expected sales quantities are
large, multiple cavities will be purchased, in order to take advantage of
manufacturing efficiencies. Conversely, some products will not sell enough
units to justify significant tooling expenditures. Balancing the cost of
tooling with the expected sales volume of any particular grip is one of the
major challenges of the business.
Further, the life cycle of a grip model is often shorter than the
life of the tooling. Accordingly, the Company makes periodic reviews of its
tooling, in order to identify any cavities related to discontinued
products.
Contract Manufacturing. The Company relies entirely on contract
manufacturing for production of its grips. With the September 1995,
acquisition of USG, the Company completed its transition to outsourced
production. The Company uses three contract manufacturers who use the
Company's tooling and in some cases, technology. The Company is dependent
on a single supplier for each type of grip (EPDM, TPR and cord) in its
product line.
The Company has an exclusive arrangement (the "Arrangement") with the
supplier who produces the EPDM grips which comprised the majority of sales
for fiscal 1996. The Arrangement requires the Company to purchase a
certain minimum number of grips per year, increasing each year throughout
its ten-year term. Should the Company fail to meet certain terms of the
Arrangement, including the purchase of the minimum number of grips required
under the Arrangement, the supplier will have the right to cancel the
Arrangement, and produce EPDM grips for other customers. To date, the
Company has complied with the terms of the Arrangement. However, there can
be no assurances that the Company will have sufficient demand for EPDM
grips to fulfill its obligations under the Arrangement, nor can there be
assurances that this supplier will increase capacity sufficiently to meet
anticipated sales growth. Currently, the Company is working with this
supplier to add new golf grip
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products and capacity, including a grip that will enable the Company to
enter the rapidly-growing market for large-butt shafts.
Should any significant delay, disruption or decrease in quality occur
at any of the key suppliers, it may have a material adverse effect on the
Company's business.
Sources of Raw Materials. The Company has worked with its consultants
and suppliers to develop special formulations of EPDM and TPR to produce
custom grips with desired specifications established by the Company or
demanded by its customers. Management believes that EPDM and TPR are
readily available in quantities and at acceptable prices from multiple
suppliers, although any disruption in supply or significant increase in
price may have a material adverse effect on the Company's business.
Competition
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The sports grip business is highly competitive. The Company's
principal competitors in the golf grip business are: Golf Pride (a division
of Eaton Corporation), Lamkin and Royal Grip, Inc. Golf Pride, which has
the greatest market share, and Lamkin, produce mostly rubber grips. Golf
Pride, Lamkin and Royal also produce EPDM grips. Lamkin also manufactures
seamless grips, which management believes are made from a TPR blend, but,
to date, TPR grips have not been a significant part of Lamkin's product
lines. To the best knowledge of the Company, none of its competitors can
paint TPR grips.
The market in which the Company does business is highly competitive,
and is served by a number of well-established and well-financed companies
with recognized brand names. Several companies have introduced new products
in 1996 that have generated increased market competition. Others increased
their marketing activities with respect to existing products in 1996. While
the Company believes that its products and its marketing efforts continue
to be competitive, there can be no assurance that these actions by others
will not negatively impact the Company's future sales. A manufacturer's
ability to compete is in part dependent upon its ability to satisfy various
subjective requirements of golfers, including the product's look and feel,
and the level of acceptance the product has among professional and other
golfers. The subjective preferences of golf club purchasers may also be
subject to rapid and unanticipated changes. There can be no assurance as to
how long the Company's grips will maintain market acceptance.
Government Regulations
----------------------
Prior to fiscal 1996, the Company outsourced all painting of grips.
During fiscal 1996, the Company began painting EPDM grips at its Vista
facility. The application of paint to golf grips requires compliance with
applicable federal, state and local laws relative to hazardous materials,
air pollution and health and safety. The imposition of more stringent
regulations on the use of such chemicals or the ban of their use could
increase the Company's product costs significantly.
The Company presently has a single source which formulates and
manufactures paint for the Company's TPR grips. No assurances can be given
that, if necessary, the Company
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would be able to find an acceptable outside source to provide such TPR
paint. The Company has multiple sources for the paint used on its EPDM
grips.
Governmental regulations may restrict or eventually ban the use of
various solvents and chlorinated hydrocarbons that are ingredients in the
paint and used by the Company in the painting process. Although
alternatives to the paint and painting process presently exist, certain
characteristics may or may not be as good as the current paint
formulations.
Employees
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The Company presently has 46 full-time employees: seven in Irvine,
California and 39 in Vista, California. The Vista facility was occupied by
USG prior to its acquisition by the Company. The employees currently
located at Irvine include the President and Chief Executive Officer, three
in sales management and support, and three in financial services. The staff
in Vista includes two in sales management, three in operations management,
one in administrative support and 33 in production.
ITEM 2. PROPERTIES
The Company leases 2,500 square feet of space at 10 Corporate Park, Suite
130, Irvine, California, for its corporate offices under a lease expiring in
March 2000.
During fiscal 1996, the Company ceased manufacturing in its 14,600 square
foot manufacturing facility, and subleased it for the remaining term of the
lease, which expires in October 1998.
In September 1995, in connection with the acquisition of USG, the Company
commenced occupation of approximately 6,600 square feet in a free-standing
industrial building in Vista, California, pursuant to a lease which expired in
September 1996, and was extended through September 1999.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material pending legal
proceedings. In 1988, prior to the exchange reorganization, certain then-
existing major shareholders of the Company agreed to indemnify and hold the
Company harmless from any creditor claims arising from activities prior to
September 30, 1988. To date, no claims have been asserted against the Company
which would trigger this indemnification obligation.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of fiscal 1996 to
a vote of security holders through the solicitation of proxies or otherwise.
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Executive Officers of the Company
---------------------------------
The names and ages of all executive officers of the Company, and
positions held by each for the last five years, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Sam G. Lindsay 54 President, Chief Executive Offier and Director
Greg Hopkins 41 Vice President of Sales and Marketing
Paul J. Herber 38 Vice President of OEM Sales
Michael R. Friedl 33 Treasurer/Chief Financial Office
James E. McCormick III 48 Secretary and Director
</TABLE>
SAM G. LINDSAY is, and has been, President, Chief Executive Officer
and a director of the Company since its incorporation and served as Chief
Financial Officer from January 1995 to February 1996. He is, and since
September 1995 has been, the President, Chief Executive Officer and a
director of USGRIPS, Inc., a wholly-owned subsidiary of the Company. From
February 1993 through July 1994, he was also the President, Chief Executive
Officer and a director of GTI Manufacturing, Inc., a wholly-owed subsidiary
of the Company, which was merged into the Company on July 31, 1994. In
January 1975, Mr. Lindsay co-founded The Sammis Company, a real estate
development and management firm. He initially served as Executive Vice
President of the firm and later became President, in which capacity he
remained until his departure in January 1991 to form the S. G. Lindsay
Company, a real estate investment and consulting firm. Mr. Lindsay served
as President and Chief Executive Officer of the S. G. Lindsay Company until
December 31, 1993.
GREG HOPKINS is, and has been, Vice President of Sales and Marketing
for the Company since September 15, 1993. Prior to joining the Company, Mr.
Hopkins was employed by Taylor Made Golf Company for eight years. While at
Taylor Made, Mr. Hopkins served as National Sales Manager and was an
integral part of the executive decision making team. Prior to becoming
National Sales Manager, Mr. Hopkins received numerous awards as a Sales
Representative and Regional Sales Manager at Taylor Made.
PAUL J. HERBER is, and has been, Vice President of OEM Sales for the
Company since September 22, 1995. Prior to joining the Company, from 1992
until September 1995, Mr. Herber was President and Chief Operating Officer
of USGRIPS, Inc., a designer and marketer of golf grips. He was Vice
President of Sales and Marketing of Langert Golf Company from 1988 to 1992,
and held various positions in sales and marketing for Taylor Made Golf
Company from 1981 to 1988. Mr. Herber also is the majority owner of La
Jolla Club, a company engaged in the assembly and marketing of children's
golf equipment and the sale of lower to mid-priced golf grips.
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MICHAEL R. FRIEDL is, and has been, the Treasurer/Chief Financial
Officer of the Company since February 1, 1996, and prior thereto from
October 1995 served as the Company's Director of Finance. From 1993 to
1995, Mr. Friedl served as controller for New Media Corporation, a high-
tech manufacturing company. From 1990 to 1993, he worked for Arthur
Andersen & Co. where he served as Audit Manager. He is a certified public
accountant and is a graduate of Kent State University.
JAMES E. MCCORMICK III is, and has been, the Corporate Secretary and
a director of the Company since its incorporation. He is, and since
September 1995 has been, the Corporate Secretary and a director of USGRIPS,
Inc., a wholly-owned subsidiary of the Company. From February 1993 through
July 1994, he was also the Corporate Secretary and a director of GTI
Manufacturing, Inc., a subsidiary of the Company which was merged into the
Company on July 31, 1994. Mr. McCormick has been engaged in the private
practice of law for more than 20 years, specializing in corporate,
securities and real estate matters.
The officers are elected annually by the Board of Directors at the
organizational meeting following the Annual Meeting of Shareholders. There
is no family relationship between any of the officers, directors or persons
nominated to become an officer or director.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
------------------
The Company's Common Stock is traded on the over-the-counter
electronic bulletin board. The Company believes that there is a limited
public trading market, particularly because of the small number of shares
available in the public float.
The following table sets forth the range of high and low bid prices
for each quarterly period during the two most recent fiscal years:
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal 1995
First Quarter $3 $2 1/4
Second Quarter $3 $2 3/8
Third Quarter $2 7/8 $2 1/4
Fourth Quarter $2 3/4 $2 1/4
Fiscal 1996
First Quarter $2 5/8 $1 7/8
Second Quarter $2 5/8 $1 7/8
Third Quarter $2 3/8 $1 3/8
Fourth Quarter $2 5/8 $1 1/4
</TABLE>
The above information was compiled by J. Alexander Securities, Los Angeles.
Holders
-------
As of October 28, 1996, there were approximately 1,075 shareholders
of record.
Dividends
---------
The Company has not paid any dividends of any kind on its issued and
outstanding shares of Common Stock since inception. Payment of dividends is
within the discretion of the Company's Board of Directors and will depend,
among other factors, on earnings, capital requirements and the operating
and financial condition of the Company. At the present time, the Company
has incurred losses and is unable to pay dividends. It is anticipated that
the Company will follow a policy of retaining earnings in order to finance
the development of its business.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is derived from the financial
statements of the Company. It is qualified in its entirety by, and should be
read in conjunction with, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 8, "Financial Statements
and Supplementary Data" and related notes included elsewhere herein.
<TABLE>
<CAPTION>
For the Years Ended July 31,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Statement of Operations Data
- - ----------------------------
Net sales $ 895,878 $ 1,104,049 $ 3,062,948
Cost of sales 707,553 1,267,255 2,411,017
------------ ------------ ------------
Gross profit (loss) 188,325 (163,206) 651,931
Operating expenses 1,488,011 3,145,977 2,078,425
------------ ------------ ------------
Loss from operations (1,299,686) (3,309,183) (1,426,494)
Interest expense 88,286 134,762 146,887
------------ ------------ ------------
Loss before income taxes (1,387,972) (3,443,945) (1,573,381)
Provision for income taxes 800 800 1,600
------------ ------------ ------------
Net loss ($1,388,772) ($3,444,745) ($1,574,981)
============ ============ ============
Net loss per share ($0.64) ($1.11) ($0.33)
============ ============ ============
Shares used in computing net loss per share 2,171,167 3,102,497 4,832,107
============ ============ ============
<CAPTION>
As of July 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance Sheet Data
- - ---------------------
Current assets $ 511,826 $ 702,472 $ 1,093,040
Total assets 1,989,236 973,838 3,203,702
Current liabilities 1,259,487 732,886 2,533,588
Total liabilities 1,928,008 2,570,500 2,870,660
Stockholders' equity (deficit) 61,228 (1,596,662) 333,042
</TABLE>
Grip Technologies, Inc. was incorporated in February 1993, but had no
significant activity until August 1993. The Company became a "public company"
as a result of its acquisition on January 15, 1994 by a pre-existing public
company, Harvest Recreation Vehicles, Inc., that for several years prior to such
date had no business, assets or operations - a so-called shell company. For
financial statement purposes, as well as most other relevant purposes, the
transaction was characterized as an acquisition of the shell company by the
operating company. Accordingly, no financial information or data is provided for
any period prior to August 1, 1993.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read together with
the financial statements and notes thereto elsewhere herein.
Forward-Looking Statements
- - --------------------------
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to republish revised forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events. Readers are also urged to
carefully review and consider the various disclosures made by the Company in
this Report, as well as the Company's other periodic reports on Forms 10-K, 10-Q
and 8-K filed with the Securities and Exchange Commission. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include, but are not limited to, those factors set forth under the captions
"Certain Factors Affecting the Golf Industry" and "Liquidity and Capital
Resources" appearing below.
Results of Operations
- - ---------------------
Years Ended July 31, 1996, 1995 and 1994
----------------------------------------
During fiscal 1996, the Company acquired USGRIPS, Inc., of Vista,
California, which had a full product line and exclusive relationships with
manufacturers of quality grips made of TPR, EPDM and cord. This acquisition has
enabled the Company to outsource all of its production, which eliminated many of
the production difficulties that resulted in poor gross margins in the past. It
has further enabled the Company to focus on product development and marketing.
Net sales for the year were $3,062,948, an increase of $1,958,899 or
177% over fiscal 1995. The increase was related to the acquired USGRIPS
business, which provided a fuller product line, and the development of
relationships with key OEMs and catalog resellers. Sales levels were in line
with management expectations. The net sales increase represents a 28% increase
over unaudited pro forma combined net sales of the Company and USGRIPS for the
prior year.
Net sales for fiscal 1995 were $1,104,049, an increase of $208,171 or
23% over fiscal 1994. During fiscal 1995, the Company was not able to achieve
projected sales to OEMs due to their reluctance to commit to a TPR product line,
especially with no viable second source.
16
<PAGE>
During fiscal 1996, the Company invested heavily in tooling to fill out
its product lines as it entered the EPDM and cord markets and to supply
increased OEM demand. The Company's investment in tooling was $516,405 for
fiscal 1996, plus $173,651 acquired in the USGRIPS acquisition. The Company
invested $370,640 in tooling during fiscal 1995.
During fiscal 1995, the Company entered into endorsement agreements
with two world-famous PGA Tour players, Jack Nicklaus and Phil Mickelson.
Management expects these endorsement agreements to continue to raise brand
awareness within the golf community, and, particularly, the replacement grip
market.
Cost of sales for fiscal 1996 was $2,411,017, or 79% of sales, as
compared to $1,267,255, or 115% of sales for fiscal 1995. The improvement in
gross margin was largely due to improved efficiencies arising from the
outsourcing of production. Further, improved inventory controls reduced
inventory write-offs during the year.
Cost of sales for fiscal 1995 was $1,267,255, or 115% of sales, as
compared to $707,553 or 79% of sales for fiscal 1994. The decline in gross
margin resulted primarily from production problems experienced by the Company.
Since its inception, the Company has invested significantly in new tooling and
machinery designs in order to manufacture a higher quality and more consistent
product. Simultaneously, the Company conducted research and development to
enhance the qualities of its raw materials, including new proprietary
formulations of TPR and the introduction of a new cord grip made from a
proprietary EPDM formulation. In spite of the substantial investment in the new
tooling, problems associated with the introduction of these new formulations
resulted in an abnormally high rejection rate and slower production cycles.
Selling expenses increased only 3%, from $790,888 to $818,436 during
fiscal 1996, as the Company's investment in sales and marketing began to result
in sales increases. During the year, the Company discontinued telemarketing.
Customers that responded to the telemarketing effort were typically too small
for the Company to serve efficiently, and many credit problems arose. The
Company has developed relationships with large catalog resellers, who better
serve the needs of smaller customers, while significantly reducing the number of
accounts to manage and the Company's credit risk.
The Company successfully integrated the USGRIPS sales force, product
lines and customers during fiscal 1996, while maintaining service levels and
eliminating redundant functions.
In addition, the Company continued to invest heavily in advertising and
promotion, continuing to focus on the endorsements of PGA Tour players Jack
Nicklaus and Phil Mickelson. Selling expenses, which continue to be
disproportionately high, as compared to current sales levels, decreased from 72%
of revenues in fiscal 1995 to 27% of revenues in fiscal 1996. Management
believes that these costs were necessary in order to position the Company and
its products in appropriate markets. Management believes that selling costs will
decline as a percentage of sales as sales increase.
Selling expenses for fiscal 1995 increased 40% over fiscal 1994, from $564,882
to $790,888, primarily as a result of the expansion of the Company's sales focus
to include the replacement grip market. During this period, the Company added a
telemarketing sales force, as well as additional sales support staff. However,
the type of customers that typically responded to the telemarketing
17
<PAGE>
effort were too small for the company to serve efficiently, and many credit
problems arose. As a result, the telemarketing effort was discontinued in
November 1995.
General and administrative expenses increased 15%, from $688,935 in
fiscal 1995 to $793,348 in fiscal 1996, as the Company integrated the USGRIPS'
operation. Certain duplicate functions were eliminated during the year.
General and administrative expenses for fiscal 1995 increased 39% over
fiscal 1994, from $496,304 to $688,935, as a result of the addition of support
personnel and additional legal and professional expenses.
Intangible amortization during fiscal 1996 relates to the goodwill
arising from the USGRIPS acquisition, which is being amortized over seven years.
For fiscal 1995, intangibles amortization included the $491,166 write-
off of intangible assets acquired from Poulin Progrip. Because of significant
changes in the design and manufacturing of the products, it was management's
opinion that these assets no longer had any significant value to the Company.
The Company continues its research and development efforts, which are
primarily aimed at developing new products for the golf markets. However, the
Company has also focused efforts on grips for other sport applications, and
glove-grip systems for baseball, tennis and racquetball.
As part of management's overall plan to expand sales, the Company has
investigated the possibility of marketing other golf products for vertical
integration while utilizing its existing sales and marketing network. During the
first quarter of fiscal 1995, the Company entered into an agreement with
Dynalaser, Inc. to sell and distribute the "Stabilaser", a patented, laser-
guided golf headwear training aid endorsed by PGA Tour player Nick Price. In
management's opinion, sales were far less than forecasted because of Dynalaser's
failure to provide committed advertising and marketing dollars and support
required for such a product launch. As a result, the Company terminated its
distribution of the Stabilaser in June 1995.
Certain Factors Affecting the Golf Industry
-------------------------------------------
The Company believes that the growth rate in the golf equipment
industry in the United States has been modest for the past several years, and
this trend is likely to continue through 1996. The Company also believes that
the sales of all golf clubs in Japan, the world's second largest market for golf
clubs next to the United States, have been declining during this same period,
but should stabilize during 1996 and 1997. Sales to key OEM and catalog
customers have been strong during fiscal 1996 and early fiscal 1997, but there
can be no assurances that the demand for the Company's existing products or the
introduction of new products will permit the Company to continue the revenue
growth experienced in fiscal 1996.
In the golf industry, sales to retailers are generally seasonal due to
lower demand in the retail market in the cold weather months covered by the
Company's first and second fiscal quarters. Sales to OEMs generally mirror the
seasonal trends of retailers. The Company has become a supplier to several major
golf club OEMs, and continues to seek to develop relationships with many others.
Most major OEMs demand high standards of quality and service from all suppliers,
and require
18
<PAGE>
reliable second sources for most components, including grips. The Company's
success with OEMs will be dependent upon its ability to supply high quality
grips and provide a high level of service.
Since it outsourced production, the Company is dependent on a single
supplier for each type of grip (EPDM, TPR and cord) in its product line. The
Company has an exclusive arrangement (the "Arrangement") with the supplier who
produces EPDM grips which make up the majority of its sales. The Arrangement
requires the Company to purchase a certain minimum number of grips per year,
increasing each year throughout its ten-year term. Should the Company fail to
meet certain terms of the Arrangement including the purchase of the minimum
number of grips required under the Arrangement, the supplier will have the right
to cancel the Arrangement and produce EPDM grips for other customers. To date,
the Company has complied with the terms of the Arrangement. However, there can
be no assurances that the Company will have sufficient demand for EPDM grips to
fulfill its obligations under the Arrangement.
Further, any significant delay or disruption at any of the key
suppliers may have a material adverse effect on the Company's business.
Liquidity and Capital Resources
- - -------------------------------
Equity and Other Capital Resources
----------------------------------
During fiscal 1996, the Company raised $1,919,685, net of offering
expenses, in private placements of 1,046,700 shares of Common Stock. In
addition, the Company converted $535,000 of debt due to a stockholder in
exchange for 356,667 shares of Common Stock. As of July 31, 1996, there were
1,287,500 shares of Series A Convertible Preferred Stock and 5,581,925 shares of
Common Stock issued and outstanding. The Series A Convertible Preferred Stock
entitles the holder to receive non-cumulative dividends at an annual rate of
$0.10 per share, when and as declared by the Board of Directors. There were no
accrued or unpaid dividends at July 31, 1996, 1995 or 1994. Each share of
Preferred Stock is convertible into one share of Common Stock, subject to
various anti-dilution adjustments. During the year ended July 31, 1996, 62,500
shares of Series A Convertible Preferred Stock were converted to Common Stock.
In the event the Company elects to redeem the preferred shares, or upon
liquidation of the Company, the preferred shareholders are entitled to receive
$1.00 per share plus 10% per annum from the date of original issue.
During fiscal 1995, the Company raised $1,605,630, net of expenses and
commissions, in private placements of 1,077,598 shares of Common Stock. In
addition, the Company converted $181,225 of debt in exchange for 122,402 shares
of Common Stock.
The Company raised $1,450,000 through the private sale of equity
securities during fiscal 1994.
During fiscal 1996, the Company increased its term loans from $600,000
to $780,000. The effective interest rate on these notes is 10% per annum; 4%
payable monthly to the bank, and 6% payable to the stockholder whose assets are
pledged as security for the loans. In June 1995, the bank extended the maturity
dates to December 31, 1996, at which time the notes will be due.
In September 1996, the Company entered into a revolving line of credit
agreement with a bank in the amount of $400,000, all of which has been drawn
down by the Company. The line of credit
19
<PAGE>
bears interest at the bank's prime rate plus 2.5%, is partially secured by
personal assets of a stockholder and is due on September 15, 1997.
The Company obtained short-term borrowings from a trust and a
corporation. The notes total $90,000, originally bore interest at 6% per annum,
and were due on June 30, 1996. As further consideration for these loans,
warrants to purchase 27,000 shares of Common Stock, with an exercise price of
$2.50 per share, exercisable prior to May 31, 1998, were issued. In
consideration for extending the maturities of these notes to October 31, 1996
and January 31, 1996, the interest rates were increased to 10%, and 2,250 stock
purchase warrants with the same terms described above will be issued for each
month that the balances remain unpaid after June 30, 1996.
In addition, the Company obtained short-term loans from two
partnerships. The notes total $250,000, bear interest at 8% per annum and are
due through May 31, 1997. As further consideration for these loans, warrants to
purchase 75,000 shares of Common Stock, with an exercise price of $2.50 per
share, exercisable prior to May 31, 1998, were issued.
During fiscal 1995, the Company obtained short-term borrowings through
private individuals as follows: the selling agent for a private placement and an
affiliate of the selling agent each loaned the Company $125,000. During the
first quarter of fiscal 1995 the selling agent canceled $121,255 of its $125,000
loan plus $2,379 of interest in exchange for 82,402 shares issued as part of the
pending private placement. The affiliate of the placement agent converted
$60,000 of his loan into 40,000 shares of the Company in the same private
placement.
The remaining $65,000 due the placement agent's affiliate was paid in
full during fiscal 1995. The loan from the placement agent's affiliate included
a warrant to purchase 10,000 shares of the Company's Common Stock at $1.65 per
share, exercisable between April 8, 1995 and April 8, 1997.
The majority stockholder loaned the Company $310,000 during fiscal 1994
and an additional $225,000 during fiscal 1995. Each of these loans were
represented by promissory notes, which were combined into one note in July 1995.
The note bore interest at 10% per annum, with interest due at maturity. On July
31, 1996, the principal amount of the note was converted into 356,667 shares of
Common Stock.
Beginning in fiscal 1994, an officer who is also the major stockholder
agreed to defer his salary and certain reimbursable business expenses until the
Company becomes profitable. Beginning January 1, 1996, the officer elected to
discontinue deferring his salary, but agreed to continue deferring reimbursement
of expenses. At July 31, 1996 and 1995, the Company owed the majority
stockholder $358,879 and $202,796 in salary and expenses.
As of July 31, 1996 and 1995, the Company owed a stockholder $145,604
and $86,222, respectively, for providing legal services to the Company.
In connection with the purchase of certain assets from Poulin Progrip,
Inc. ("Poulin"), the Company agreed to assume $349,230 in notes payable to a
bank. At July 31, 1996, one note, in the amount of $179,023, remained
outstanding. This note payable bears interest at 12.5% per annum, is payable in
principal and interest payments of $4,446 per month through November 2000. This
note is secured by the property and equipment purchased by the Company from
Poulin and certain assets of the principal shareholder.
20
<PAGE>
Also in connection with the purchase of certain assets from Poulin, the
Company agreed to pay to the majority shareholder of Poulin consulting fees of
$12,500 per quarter from August 1, 1995 through July 31, 1999 and to pay for a
covenant not to compete, in 26 quarterly payments of $12,500 each, commencing
August 1, 1993. The consulting fees and covenant consideration liabilities have
been recorded on the balance sheet of the Company, discounted to include
interest imputed at 10% per annum. In exchange for an early payment, the payee
has agreed to accept as full payment of the obligations $200,000 plus interest
at 8% from July 31, 1996, if payment in full is made by December 31, 1996.
In December 1993, the Company borrowed $50,000 from its landlord for
leasehold improvements at its Irvine, California manufacturing facility. This
loan is represented by a promissory note which bears interest at 7% per annum,
with principal and interest payable monthly until December 1998.
Liquidity
---------
The Company continues to struggle with liquidity issues, primarily due
to the significant operating losses it has sustained since inception. However,
many factors that impact liquidity improved during fiscal 1996, and management
anticipates this trend to continue in fiscal 1997.
In management's opinion, the most significant development in fiscal
1996 was the improvement of gross margins, from -15% in fiscal 1995 to 21%. This
improvement, together with increased revenues, is critical to achieving
profitability. Management projects both revenues and gross margins to continue
to improve in fiscal 1997, as improved inventory management procedures and
economies of scale begin to take effect. Historically, the Company's fiscal
third and fourth quarter have been the largest in terms of revenues,
corresponding with the golf industry's selling season. This seasonality strains
liquidity, as the Company is required to invest in tooling and build inventories
during its first two quarters in order to meet spring delivery schedules. The
Company must also support the corresponding increase in receivables during the
initial portion of the prime selling season.
The Company anticipates funding a portion of the cost associated with
increased inventory and receivables through trade credit, but its supply
contracts with grip manufacturers typically contain strict payment schedules,
which limit its flexibility with its largest suppliers.
The Company has implemented improved credit policies that have reduced
the number of days sales in net receivables from 100 to 45, as well as reduced
bad debt expense by 33% in fiscal 1996.
Inventory management has improved as well, with a reduction in write-
offs due to inventory obsolescence. However, due to the Company's broader
product line, inventory balances have increased in fiscal 1996 relative to
sales. Increasing inventory turns is an important component in the Company's
plan for meeting liquidity goals for fiscal 1997.
Due primarily to the broadening of the Company's product lines, and the
addition of new OEM customers, the Company invested heavily in additional
tooling. Total investment in new property and equipment amounted to $572,296 in
fiscal 1996, compared to $386,048 in fiscal 1995. In addition, property and
equipment of $315,406 was acquired in the USGRIPS acquisition. The
21
<PAGE>
Company anticipates investing an additional $300,000 in tooling for fiscal 1997,
and, to date, has expended approximately $100,000 of that amount.
The Company intends to continue research and development efforts
necessary to enter markets for other sport grips and introduce the Company's
glove/grip system.
The Company had a working capital deficit of $1,440,548 at July 31,
1996, as compared to a deficit of $30,414 at July 31, 1995. The increase in the
deficit was due primarily to the net loss and the reclassification of certain
liabilities to current. Included in current liabilities at July 31, 1996, are
$504,483 due to two shareholders who are also officers of the Company, short-
term borrowings of $90,000 that are due through January 31, 1997, and the
Company's term loans with a bank in the amount of $780,000. Repayment of the
amounts due the shareholders have historically been deferred, but further
deferral is not assured. Subsequent to July 31, 1996, $25,000 due to Poulin was
repaid, and $20,000 of the short-term borrowings were repaid. The Company has
negotiated a discount of $103,572 with regard to the remaining obligation to
Poulin if it can be repaid on or prior to December 31, 1996. The Company is not
expected to generate sufficient cash from operations necessary to repay the
remaining obligations as they come due. It will be required to either extend the
maturities, sell additional equity to generate funds to repay them, or seek
alternative financing.
The Company funded a portion of projected cash needs in September 1996,
by entering into a $400,000 revolving line of credit arrangement with a bank.
Interest is payable monthly at the bank's prime rate plus 2.5%, and is partially
secured by assets of a shareholder, who is the co-maker on this line of credit.
The Company anticipates it will require an additional $2,000,000 to fund
operating losses, as well as the expected continued sales growth and tooling
purchases and to meet certain obligations as they come due. The Company intends
to pursue all available options, including, the initiation of another private
placement of its equity securities, a secondary offering by the Company of its
Common Stock, or a private placement of a convertible or other debt instrument;
seeking loans from other sources not yet identified; or pursuing a merger,
consolidation or other similar corporate transaction. None of these sources or
alternatives may be available to the Company and, if they become available, they
may not occur within the timeframe required by the Company or they may require
terms which management finds unacceptable. The inability of the Company to
locate additional capital prior to the end of the second quarter of fiscal 1997
raises substantial doubt about the Company's ability to continue operating as a
going concern.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors of
Grip Technologies, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of GRIP
TECHNOLOGIES, INC. (a California corporation) and subsidiary as of July 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the years ended July 31, 1996, 1995 and
1994. The consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Grip
Technologies, Inc. and subsidiary as of July 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for the years ended
July 31, 1996, 1995 and 1994, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has suffered recurring
losses, and has negative working capital. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Orange County, California
October 21, 1996
23
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JULY 31, 1996 AND 1995
----------------------
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 16,975 $126,827
Accounts receivable, net of allowance for
doubtful accounts of $190,669 and $174,099
at July 31, 1996 and 1995, respectively 537,445 279,304
Inventories 506,995 226,471
Note receivable - 50,000
Prepaids and other assets 31,625 19,870
---------- --------
Total current assets 1,093,040 702,472
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $373,589 and
$123,175 as of July 31, 1996 and 1995, respectively 887,242 271,366
INTANGIBLES, net of accumulated amortization
of $924,490 and $754,260 as of July 31, 1996
and 1995, respectively 1,223,420 -
---------- --------
Total assets $3,203,702 $973,838
========== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
24
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JULY 31, 1996 AND 1995
----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 340,000 $ 3,775
Current portion of long-term obligations 976,412 139,138
Current portion of amounts due stockholder 358,879 -
Accounts payable 528,392 412,900
Accrued liabilities 329,905 166,373
Other liabilities - 10,700
----------- -----------
Total current liabilities 2,533,588 732,886
----------- -----------
LONG-TERM LIABILITIES:
Long-term obligations, net of
current portion 337,072 1,099,818
Amounts due stockholder, net of
current portion - 737,796
----------- -----------
337,072 1,837,614
----------- -----------
Total liabilities 2,870,660 2,570,500
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Series A Convertible Preferred Stock
Authorized -- 3,000,000 shares
Issued and outstanding -- 1,287,500 and
1,350,000 shares, respectively 1,287,500 1,350,000
Common Stock
Authorized -- 25,000,000 and
10,000,000 shares, respectively
Issued and outstanding -- 5,581,925 and
3,516,058 shares, respectively 5,454,040 1,886,855
Accumulated deficit (6,408,498) (4,833,517)
----------- -----------
Total stockholders' equity (deficit) 333,042 (1,596,662)
----------- -----------
$ 3,203,702 $ 973,838
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
25
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED JULY 31, 1996, 1995 AND 1994
------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $ 3,062,948 $ 1,104,049 $ 895,878
COST OF SALES 2,411,017 1,267,255 707,553
----------- ----------- -----------
Gross profit (loss) 651,931 (163,206) 188,325
----------- ----------- -----------
OPERATING EXPENSES:
Selling 818,436 790,888 564,882
General and administrative 793,348 688,935 496,304
Research and development 39,616 87,360 128,945
Depreciation 256,795 266,323 167,154
Intangible amortization and
write-off 170,230 623,534 130,726
Provision for abandonment and disposition
of property and equipment and other - 688,937 -
----------- ----------- -----------
2,078,425 3,145,977 1,488,011
----------- ----------- -----------
Loss from operations (1,426,494) (3,309,183) (1,299,686)
INTEREST EXPENSE 146,887 134,762 88,286
----------- ----------- -----------
Loss before income taxes (1,573,381) (3,443,945) (1,387,972)
PROVISION FOR INCOME TAXES 1,600 800 800
----------- ----------- -----------
Net loss $(1,574,981) $(3,444,745) $(1,388,772)
=========== =========== ===========
NET LOSS PER COMMON AND EQUIVALENT SHARE $ (0.33) $ (1.11) $ (0.64)
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,832,107 3,102,497 2,171,167
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
26
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
<TABLE>
<CAPTION>
Series A
Convertible
Preferred Stock Common Stock
--------------- --------------- Accumulated
Shares Amount Shares Amount Deficit Total
--------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 1, 1993 (inception) - $ - - $ - $ - $ -
Initial sale of Common Stock - - 2,000,000 100,000 - 100,000
Initial sale of Preferred Stock 1,350,000 1,350,000 - - - 1,350,000
Net effect of reverse acquisition - - 316,058 - - -
Net loss - - - - (1,388,772) (1,388,772)
--------- ---------- --------- ---------- ----------- -----------
BALANCE, JULY 31, 1994 1,350,000 1,350,000 2,316,058 100,000 (1,388,772) 61,228
Sale of Common Stock, net of offering
costs - - 1,077,598 1,605,630 - 1,605,630
Conversion of loans to Common Stock - - 122,402 181,225 - 181,225
Net loss - - - - (3,444,745) (3,444,745)
--------- ---------- --------- ---------- ----------- -----------
BALANCE, JULY 31, 1995 1,350,000 1,350,000 3,516,058 1,886,855 (4,833,517) (1,596,662)
Sale of Common Stock, net of offering
costs - - 1,046,700 1,919,685 - 1,919,685
Conversion of loans to Common Stock - - 356,667 535,000 - -
Conversion of Preferred Stock to
Common Stock (62,500) (62,500) 62,500 62,500 - -
Common Stock issued in acquisition of
USGRIPS, Inc. - - 600,000 1,050,000 - 1,050,000
Net loss - - - - (1,574,981) (1,574,981)
--------- ---------- --------- ---------- ----------- -----------
BALANCE, JULY 31, 1996 1,287,500 $1,287,500 5,581,925 $5,454,040 $(6,408,498) $ 333,402
========= ========== ========= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
27
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED JULY 31, 1996, 1995 AND 1994
------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,574,981) $(3,444,745) $(1,388,772)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for abandonment and disposition
of property and equipment and other - 688,937 -
Depreciation 256,795 266,323 167,154
Intangible amortization and write-off 170,230 623,534 130,726
Increase in accounts receivable (77,650) (71,813) (207,491)
(Increase) decrease in inventories (86,447) 41,956 (268,427)
Increase in prepaids and other assets (6,925) (5,534) (14,336)
Increase (decrease) in accounts payable (135,333) (45,763) 430,263
Increase in accrued liabilities 34,334 65,373 -
Increase (decrease) in other liabilities (10,700) 10,700 -
----------- ----------- -----------
Net cash used in operating activities (1,430,677) (1,871,032) (1,150,883)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (572,296) (386,048) (461,732)
Proceeds on disposal of property and
equipment 9,500 - -
Increase in note receivable - (50,000) -
Purchases of intangibles (2,900) - (250,770)
----------- ----------- -----------
Net cash used in investing activities (565,696) (436,048) (712,502)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deferred private placement costs - - (114,298)
Proceeds from (payment of) short-term
borrowings 136,225 (165,000) 350,000
Net increase in amounts due stockholder 156,083 347,617 390,179
Payments on amounts due former stockholder (400,000) - -
Net proceeds from long-term obligations 180,000 600,000 -
Principal payments on long-term obligations (105,472) (90,210) (90,924)
Proceeds from issuance of preferred stock - - 1,350,000
Net proceeds from issuance of Common Stock 1,919,685 1,719,928 -
----------- ----------- -----------
Net cash provided by financing
activities 1,886,521 2,412,335 1,884,957
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (109,852) 105,255 21,572
CASH, beginning of period 126,827 21,572 -
----------- ----------- -----------
CASH, end of period $ 16,975 $ 126,827 $ 21,572
=========== =========== ===========
</TABLE>
28
<PAGE>
<TABLE>
-2-
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $93,613 $91,101 $53,893
======= ======= =======
Cash paid for taxes $ 1,600 $ 800 $ 800
======= ======= =======
</TABLE>
On September 22, 1995, the Company completed the acquisition of USGRIPS, Inc.,
in exchange for 600,000 shares of Common Stock. The fair values of the assets
acquired and the liabilities assumed are as follows:
<TABLE>
<S>
Fair values of assets acquired: <C>
Accounts receivable $ 180,491
Inventories 194,077
Prepaids and other assets 4,830
Property and equipment 315,406
Goodwill 1,390,750
----------
2,085,554
----------
Liabilities assumed:
Short-term borrowings 200,000
Amounts due former stockholder 400,000
Accounts payable 250,825
Accrued liabilities 184,729
----------
1,035,554
----------
Fair market value of Common Stock issued $1,050,000
==========
</TABLE>
The Company converted certain notes payable into Common Stock during fiscal
1996 and 1995, with principal amounts totaling $535,000 and $181,225,
respectively.
For fiscal 1995, net proceeds from issuance of Common Stock was reduced by the
amortization of deferred private placement costs of $114,298 that were
incurred in fiscal 1994.
Effective August 1, 1993, the Company purchased certain assets of Poulin
Progrip, Inc. for $250,770. In conjunction with the acquisition, liabilities
were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $600,000
Cash paid 250,770
--------
Liabilities assumed $349,230
========
Recognition of consulting services and
covenant not-to-compete payable $370,930
========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
29
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JULY 31, 1996
-------------
1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
a. Organization
------------
The accompanying consolidated financial statements reflect the accounts of
Grip Technologies, Inc. and subsidiary (the Company). Located in Southern
California, the Company designs and markets golf grips for sale to original
equipment manufacturers ("OEMs"), mail order houses, golf pro shops and
specialty golf retailers. Prior to the commencement of fiscal 1996, the
Company decided to outsource all manufacturing and, subsequently during
fiscal 1996 ceased all in-house manufacturing operations. The Company is
currently utilizing three outside contractors to manufacture its golf
grips, using the Company's tooling and proprietary manufacturing
techniques. The Company's current product line includes grips made from
each of the materials that currently have wide use in the golf grip market;
Ethylene Propylene Diene Monomer (EPDM), Thermoplastic Rubber (TPR), and
EPDM with strands of embedded cord fibers (cord).
The Company, formerly Progrip Inc., a California corporation, commenced
business on August 1, 1993 and acquired certain tangible and intangible
assets from Poulin Progrip, Inc. (see Note 3).
Effective January 15, 1994, the Company exchanged 100 percent of its issued
and outstanding stock for 2,000,000 new shares of Common Stock and
1,350,000 new shares of Series A Convertible Preferred Stock with Harvest
Recreational Vehicles, Inc. (HRV). The Company obtained a controlling
interest in HRV and, as such, this transaction was accounted for as a
reverse acquisition. All of the outstanding stock options and stock
purchase warrants of the Company were replaced with identical securities of
HRV, with the number of shares and exercise prices appropriately adjusted.
In February 1994, HRV changed its name to Grip Technologies, Inc. Prior to
the reverse acquisition, HRV had 316,058 shares of Common Stock
outstanding.
b. Acquisition
-----------
On September 22, 1995, the Company acquired USGRIPS, Inc. (USG). In
connection therewith, the Company issued 600,000 shares of Common Stock,
valued at $1,050,000, to the two stockholders of USG, and agreed to issue
up to an additional 400,000 shares over a three-year period pursuant to an
earn-out formula based on the gross margins achieved by the acquired USG
business. The acquisition has been accounted for as a purchase, and the
results of USG have been included in the accompanying consolidated
financial statements since the date of acquisition. The cost of the
acquisition has been allocated on the basis of the estimated fair market
value of the assets acquired and the
30
<PAGE>
liabilities assumed. This allocation resulted in goodwill of $1,390,750,
which is being amortized over seven years.
Because USG was acquired near the beginning of the fiscal year, the
unaudited consolidated results of operations on a pro forma basis as though
USG had been acquired as of the beginning of fiscal 1996 would not be
materially different than the actual consolidated results of operations.
The unaudited pro forma consolidated results of operations as though USG
had been acquired as of the beginning of fiscal 1995 are as follows:
<TABLE>
<S> <C>
Net sales $ 2,392,895
Gross profit 66,363
Net loss (3,934,911)
Net loss per weighted average common share $(1.06)
</TABLE>
The unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the
operating results that would have occurred had the USG acquisition had been
consummated as of the above dates, nor are they necessarily indicative of
future operating results.
In connection with the acquisition of USG, the Company elected to outsource
production and discontinue all manufacturing in its Irvine, California,
facility. Subsequent to the outsourcing of production, the Company began
purchasing sport grips from contract manufacturers who use the Company's
tooling, and in some cases, technology. Certain grips are then processed
in the Company's Vista, California facility, where the grips are painted or
engraved with custom logos, in accordance with customer requirements.
c. Use of Estimates in Preparation of Financial Statements
-------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
d. Long-lived Assets
-----------------
The Company accounts for long-lived assets in accordance with Statement of
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This
pronouncement requires that long-lived assets and certain identifiable
intangible assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is to be recognized when the sum of
undiscounted cash flows is less than the carrying value of the asset.
Measurement of the loss for assets that the entity expects to hold and use
are to be based on the fair market value of the asset. The Company adopted
SFAS No. 121 effective August 1, 1995, and determined that the adoption of
this pronouncement had no material impact on the results of operations or
financial condition as of August 1, 1995.
31
<PAGE>
Provision for Abandonment and Disposition of Property and Equipment
-------------------------------------------------------------------
In connection with the acquisition of USG and discontinuation of
manufacturing in the Company's Irvine, California facility, the Company
identified certain production equipment, leasehold improvements and
tooling to be disposed of. These assets of $587,937 were written off as
of July 31, 1995. In addition, the Company identified all costs related
to the closing of the Irvine facility and recorded them as a one-time
charge as of July 31, 1995. Substantially all costs provided for as of
that date have been incurred as of July 31, 1996.
Intangibles
-----------
Included in Intangibles on the accompanying consolidated balance sheets
is goodwill of $1,390,750 arising from the USG acquisition, which is
being amortized over seven years.
In addition, Intangibles consist of covenants not-to-compete, consulting
service agreements and certain proprietary rights arising from the asset
sale and purchase agreement between the Company and Poulin Progrip, Inc.
As required under generally accepted accounting principles, the Company
reviewed the intangibles and determined that they hold no further value
because of the significant change in the design and manufacturing of the
Company's products, and therefore the unamortized balance of $491,167 was
written off as of July 31, 1995 (see Note 3). The amount written off has
been included in intangible amortization and write-off in the
accompanying consolidated statements of operations.
Depreciation and Amortization
-----------------------------
Depreciation and amortization on property and equipment and intangibles
are provided using the straight-line method over the following estimated
useful lives:
<TABLE>
<S> <C>
Furniture and fixtures 5 to 7 years
Leasehold improvements Life of lease
Manufacturing equipment 7 years
Tooling 3.5 years
Intangibles 2 to 6 years
</TABLE>
Maintenance, repairs and minor renewals are charged directly to expense
as incurred. Additions and betterments are capitalized. When assets are
disposed of, the applicable costs and accumulated depreciation thereon
are removed from the accounts and any resulting gain or loss is included
in operations.
e. Inventories
-----------
Inventories are valued at the lower of cost (determined by the first-in,
first-out method) or market value and during fiscal 1996, consist of
purchased products, processing labor and factory overhead. During fiscal
1995, the Company manufactured all products, and inventory accordingly
consisted of raw materials, work in process and factory overhead.
32
<PAGE>
Inventories consisted of the following components as of July 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Raw materials $ - $ 84,179
Work in process - 32,803
Finished goods 506,995 109,489
-------- --------
$506,995 $226,471
======== ========
</TABLE>
f. Income Taxes
------------
The Company accounts for income taxes under the liability method as
prescribed by SFAS No. 109, "Accounting for Income Taxes."
g. Research and Development
------------------------
Research and development costs are charged to operations as incurred.
h. Earnings Per Share
------------------
The earnings per share calculation for the year ended July 31, 1994
includes 316,058 shares of Common Stock of HRV from the date of
acquisition.
The weighted average number of shares does not include the outstanding
common stock equivalents such as preferred stock, options and warrants as
they are anti-dilutive.
i. Stock-Based Compensation
------------------------
In October, 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" The disclosure requirements
of SFAS No. 123 are effective for the Company's 1997 fiscal year. The new
pronouncement did not have an impact on the Company's consolidated results
of operations since the intrinsic value-based method prescribed by
Accounting Principles Board Opinion No. 25 and also allowed by SFAS No. 123
will continue to be used by the Company to account for its stock-based
compensation plans.
2. Going Concern
-------------
The Company has incurred net losses since its inception (August 1, 1993) in the
amounts of $1,574,981, $3,444,745 and $1,388,772 for the years ended July 31,
1996, 1995 and 1994, respectively, and used $4,452,592 of cash in operating
activities during that time. These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern. In order to
provide working capital to support its operations, the Company has raised funds
through private placements and is in the process of obtaining additional funding
through additional private placements. In addition, the Company completed a
strategic acquisition during fiscal 1996 which allowed for the outsourcing of
all production. Management believes this outsourcing is critical to its efforts
to improve the Company's gross margins.
The ability of the Company to meet its existing and ongoing obligations is
dependent upon raising additional capital from sources of funding, such as,
banks and other lenders, additional private offerings, public offerings or
through a merger.
33
<PAGE>
However, there can be no assurances that any of these transactions may be
consummated in a timely manner or on terms reasonably acceptable to the Company.
The ability of the Company to continue as a going concern is ultimately
dependent, in part, on achieving profitable operations and obtaining adequate
financing. The accompanying consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.
3. Poulin Acquisition
------------------
Effective August 1, 1993, the Company acquired various assets of Poulin Progrip,
Inc. (PPG), including certain property and equipment, patents, patent
applications, inventions, technology and trade secrets. The purchase price for
the acquisition totaled $600,000, of which $250,770 was paid in cash with the
balance consisting of the assumption of bank notes of $349,230. The Company
also entered into certain covenants not-to-compete (see Note 6). The purchase
price was allocated to assets acquired based on their estimated fair market
values at the date of acquisition as follows:
<TABLE>
<S> <C>
Property and equipment $445,000
Intangibles 155,000
--------
$600,000
========
</TABLE>
4. Property and Equipment
----------------------
Property and equipment, at cost, consisted of the following as of July 31,:
<TABLE>
<S> <C> <C>
Furniture and fixtures $ 115,979 $ 58,893
Leasehold improvements 1,758 4,265
Manufacturing equipment 138,802 17,148
Tooling 1,004,292 314,235
---------- ---------
1,260,831 394,541
Less accumulated depreciation
and amortization (373,589) (123,175)
---------- ---------
$ 887,242 $ 271,366
========== =========
</TABLE>
5. Short-Term Borrowings
----------------------
Included in the Company's short-term borrowings at July 31, 1996 and 1995, are
the following:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Notes payable to selling agent and
promoter of private placement. $ - $ 3,775
Short-term note payable to a corporation,
bearing interest at 10%, subsequently
extended through January 31, 1997. 50,000 -
Short-term note payable to an trust,
bearing interest at 10%, subsequently
extended through October 31, 1996. 40,000 -
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Short-term note payable to a general
partnership, bearing interest at 8%,
convertible to Common Stock, principal
and interest due May 31, 1997. $229,000 $ -
Short-term note payable to a limited
partnership, bearing interest at 8%,
convertible to Common Stock, principal
and interest due May 31, 1997. 21,000 -
-------- ------
$340,000 $3,775
======== ======
</TABLE>
6. Long-Term Obligations
---------------------
Long-term obligations consisted of the following as of July 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Bank Borrowings-
Note payable to bank, bearing
interest at 12.5 percent, principal
and interest payable at $4,446 per
month through November 2000.
Secured by property and equipment
and guaranteed by a stockholder. $ 179,023 $ 215,375
Term notes with a bank, bearing
effective interest of 10 percent
per annum; 4 percent payable monthly
to a bank, and 6 percent payable
quarterly to the stockholder whose
assets are securing the notes.
Principal due and payable on
December 31, 1996; Secured by
personal assets of a stockholder. 780,000 600,000
Covenant Not-to-Compete and
Consulting/Licensing Agreements-
Covenant not-to-compete and consulting
agreements originally payable
in quarterly installments of
$12,500 each, continuing through
January 2000, less interest
imputed at 10 percent. Balance
to be reduced to $200,000 if paid
by December 31, 1996. 303,572 342,604
Licensing agreement, payable in
monthly payments of $2,000
through August 1997, less
interest imputed at 10 percent. 24,545 44,967
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Other-
Note payable to lessor for leasehold
improvements, interest (7 percent
per annum) and principal payable
monthly through December 31, 1998. $ 26,344 $ 36,010
---------- ----------
1,313,484 1,238,956
Less current portion (976,412) (139,138)
---------- ----------
$ 337,072 $1,099,818
========== ==========
</TABLE>
The following schedule summarizes the future annual minimum principal payments
on long-term obligations:
<TABLE>
<S> <C>
Fiscal year ending July 31:
1997 $ 976,412
1998 138,568
1999 131,087
2000 62,340
2001 5,077
----------
$1,313,484
==========
</TABLE>
7. Amounts Due Stockholders
------------------------
As of July 31, 1995, the Company was indebted to an officer who is also a
stockholder, for loans made to the Company in the amount of $535,000. In July
1996, the principal portion of the note was converted into 356,667 shares of
Common Stock. Payment of interest at 10% has been deferred until January 1,
1997. As of July 31, 1996 and 1995, interest payable to this stockholder was
$106,520 and $45,712, respectively. In addition, in July 1995, the officer
agreed to defer his salary and certain reimbursable business expenses until
January 1, 1997. The amount payable for such expenses was $252,359 and $157,084
as of July 31, 1996 and 1995, respectively. These amounts are included in
amounts due stockholder in the accompanying consolidated balance sheets.
As of July 31, 1996 and 1995, the Company owed a stockholder $145,604 and
$86,222, respectively, for providing legal services to the Company. These
amounts are included in accrued liabilities in the accompanying consolidated
balance sheets.
36
<PAGE>
8. Income Taxes
------------
The components of the Company's deferred tax benefit as of July 31, 1996 and
1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Allowance for doubtful accounts $ 76,268 $ 69,640
Inventory - 46,705
Accrued disposition costs - 270,839
Other non-deductible accruals 201,794 115,608
Depreciation 51,372 23,372
Net operating loss carryforwards 1,936,616 1,156,926
----------- -----------
2,266,050 1,683,090
Valuation allowance (2,266,050) (1,683,090)
----------- -----------
$ - $ -
=========== ===========
</TABLE>
As of July 31, 1996, the Company had approximately $4,900,000 of net operating
loss carryforwards for federal income tax purposes, and $2,450,000 for
California franchise tax purposes. The federal and California loss
carryforwards begin to expire in 2009 and 1999, respectively, and may be subject
to utilization limits resulting from ownership changes.
9. Capital Stock, Options and Warrants
-----------------------------------
a. Series A Convertible Preferred Stock
------------------------------------
The Series A Convertible Preferred Stock entitles the holder to receive non-
cumulative dividends at an annual rate of $.10 per share, when and as declared
by the Board of Directors. There were no accrued and unpaid dividends at July
31, 1996 and 1995. Each share of preferred stock is convertible into one share
of Common Stock. The Company has the option to redeem these shares after August
31, 1995 at a price of $1.00 per share plus 10% per annum from the date of
original issuance. Upon liquidation of the Company, the preferred stockholders
are entitled to receive the same price established for redemption.
During the year ended July 31, 1996, holders of 62,500 shares of the Series A
Convertible Preferred Stock converted their shares into 62,500 shares of Common
Stock.
b. Common Stock
------------
During fiscal 1996, the Company received $1,919,685, net of commissions, fees
and offering expenses, in exchange for 1,046,700 shares of Common Stock.
In July 1996, a note payable to a stockholder in the amount of $535,000 was
converted to 356,667 shares of Common Stock.
In addition, 600,000 shares were issued in connection with the USG acquisition
(see note 1).
During fiscal year 1995, the Company received $1,719,928, net of commissions,
fees and offering expenses in exchange for 1,077,598 shares of Common Stock.
These proceeds were reduced by deferred private placement costs of $114,298
which were previously capitalized during fiscal 1994. Also during the year,
$181,225 in notes payable to promoters were exchanged for 122,402 shares of
Common Stock.
37
<PAGE>
c. Stock Options and Warrants
--------------------------
In January 1994, the Board of Directors approved the 1994 Stock Option Plan (the
Plan) which sets aside 600,000 shares of Common Stock for grant to key
employees, officers, directors and consultants. The Plan will terminate in 2004
unless terminated sooner by the Board of Directors. At July 31, 1996 and 1995,
options to purchase 435,000 and 395,000 shares of Common Stock have been granted
under the Plan. The exercise price varies from $1.00 to $1.50 per share with
various vesting periods. At July 31, 1996, options to purchase 225,000 shares
were vested, and 4,000 shares had been issued under the Plan.
In addition, the Company granted options to purchase 450,000 shares of Common
Stock to certain celebrity endorsers. The exercise price of these options is
$1.50 and they expire at various dates through 2001. As of July 31, 1996, none
of the options had been exercised.
In February 1996, the Company issued 400,000 shares of Common Stock as a result
of the exercise of warrants by existing stockholders. Proceeds totaled
$576,167, net of fees and expenses. The warrants originally had exercise prices
of $2.50 to $3.00 per share. As an inducement to encourage the early exercise
of these warrants, the Company lowered the exercise price to $1.50 per share.
During the year ended July 31, 1996, 120,000 stock purchase warrants expired
unexercised.
As of July 31, 1996, 985,240 stock purchase warrants were outstanding. The
exercise prices of these warrants range from $1.00 to $5.00 and they expire at
various dates through 2000. Management estimated that the fair value of these
warrants was immaterial and therefore no amount was assigned to these warrants.
10. Operating Leases
----------------
The Company leases its facilities and certain equipment under various
noncancellable operating leases, with terms extending through June 2000. Rent
expense amounted to $128,612, less sublease income of $39,200 for the year ended
July 31, 1996. Rent expense for the years ended July 31, 1995 and 1994 amounted
to $76,342 and $65,248, respectively.
The future annual minimum payments under operating leases, as well as minimum
sublease income, are as follows for the fiscal years ending July 31:
<TABLE>
<CAPTION>
Less:
Payments Sublease Net
-------- -------- --------
<S> <C> <C> <C>
1997 $138,079 $ 90,000 $ 48,079
1998 133,402 90,000 43,402
1999 68,041 22,500 45,541
2000 28,405 - 28,405
-------- -------- --------
$367,927 $202,500 $165,427
======== ======== ========
</TABLE>
38
<PAGE>
11. Major Customers and Suppliers
-----------------------------
For the year ended July 31, 1996, the Company made sales to two customers which
comprised 23% and 13% of sales, respectively. No customer comprised more than
10% of net sales during fiscal 1995. During fiscal 1994, sales to one customer
comprised approximately 11% of net sales.
Subsequent to the outsourcing of production, the Company began purchasing sport
grips from three contract manufacturers who use the Company's tooling and in
some cases, technology. Together the three contract manufacturers supply 100%
of the Company's sport grips. The Company is dependent on a single supplier for
each type of grip (EPDM, TPR and cord) in its product line.
The Company has an exclusive arrangement (the Arrangement) with the supplier who
produces EPDM grips which make up the majority of the Company's sales. The
Arrangement requires the Company to purchase a certain minimum number of grips
per year, increasing each year throughout its ten-year term. Should the Company
fail to meet certain terms of the Arrangement, including the purchase of the
minimum number of grips required under the Arrangement, the supplier will have
the right to cancel the Arrangement, and produce EPDM grips for other customers.
To date, the Company has complied with the terms of the Arrangement. However,
there can be no assurances that the Company will have sufficient demand for EPDM
grips to fulfill its obligations under the Arrangement.
Further, should any significant delay or disruption occur at any of the key
suppliers, it may have a material adverse effect on the Company's business.
12. Talaurian Technologies
----------------------
During the year ended July 31, 1996, the Company entered into a joint venture
agreement (the Agreement) with Talaurian Technologies, Inc. (Talaurian),
pursuant to which the Company agreed to license or sublicense, as the case may
be, to Talaurian, its proprietary technology for industrial applications, and
Talaurian agreed to cross-license its proprietary technology for sport grip
applications to the Company. The term of the Agreement is five years, and may be
extended another five years should certain conditions be met. The Agreement
gives the Company the right to purchase 50% of the Common Stock of Talaurian for
$1,000, and grants the Company a royalty of 5% of all revenues of Talaurian,
whether derived from use of the Company's technology or not. The Company did
not accrue or receive any amounts under the Agreement during the year ended July
31, 1996.
13. Subsequent Events
-----------------
In August, 1996, the Company extended the maturity of its $40,000 short-term
note payable to a trust until October 31, 1996. The terms of the extension
provide for issuance of 1,000 stock purchase warrants for each month that the
balance is outstanding past June 30, 1996.
In September 1996, the Company entered into a revolving line of credit agreement
with a bank in the amount of $400,000. The line of credit bears interest at the
bank's prime rate plus 2.5%, is partially secured by personal assets of a
stockholder and matures on September 15, 1997.
In October, 1996, the Company extended the maturity of its $50,000 short-term
note payable to a corporation until January 31, 1997. The terms of the
extension provide for issuance of 1,250 stock purchase warrants for each month
that the balance is outstanding past June 30, 1996.
39
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission ("Commission") on or prior
to November 18, 1996 pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Company's definitive proxy statement to
be filed with the Commission on or prior to November 18, 1996 pursuant to
Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Company's definitive proxy statement to
be filed with the Commission on or prior to November 18, 1996 pursuant to
Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Company's definitive proxy statement to
be filed with the Commission on or prior to November 18, 1996 pursuant to
Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements.
---------------------
Report of Independent Certified Public Accountants (See Item 8 to
this Form 10-K)
Consolidated Balance Sheets as of July 31, 1996 and 1995 (See Item 8
to this Form 10-K)
Consolidated Statements of Operations for the years ended July 31,
1996, 1995 and 1994 (See Item 8 to this Form 10-K)
40
<PAGE>
Consolidated Statements of Stockholders' Equity (Deficit) for the
years ended July 31, 1996, 1995 and 1994 (See Item 8 to this Form
10-K)
Consolidated Statements of Cash Flows for the years ended July 31,
1996, 1995 and 1994 (See Item 8 to this Form 10-K)
Notes to Consolidated Financial Statements (See Item 8 to this Form
10-K)
(b) Reports on Form 8-K.
--------------------
None.
(c). Exhibits.
---------
2.1 Agreement and Plan of Reorganization, dated September 20,
1995, by and among Registrant, USG Acquisition Corporation
and USGRIPS, Inc., as amended
3.1(i) Restated Articles of Incorporation of Registrant
3.1(ii) Amended and Restated Bylaws of Registrant
4.1 Promissory Note, dated December 10, 1993, made payable by
Registrant to Kwang Soo Kim and In Ho Kim in the original
principal sum of $50,000
4.2 Fixed Rate Note, dated January 24, 1995, made payable by
Registrant to First Interstate Bank in the original
principal sum of $300,000, as amended by Modification of
Note Agreement, dated February 8, 1995 (increasing principal
amount of note to $400,000), Modification of Note Agreement,
dated February 22, 1995 (increasing principal amount of note
to $500,000), Modification of Note Agreement, dated March
22, 1995 (increasing principal amount of note to $600,000
and extending maturity date to December 31, 1995), and
Change in Terms Agreement, dated July 31, 1995 (extending
maturity date to December 31, 1996)
4.3 Promissory Note, dated January 11, 1996, made payable by
Registrant to First Interstate Bank in the original
principal sum of $100,000, as amended in Change in Terms
Agreement, dated May 20, 1996 (increasing principal amount
of note to $180,000 and extending maturity date to July 8,
1996) and Letter Agreement, dated July 17, 1996 (extending
maturity date to December 31, 1996)
4.4 Revolving Line of Credit Note, dated September 23, 1996,
made payable by Registrant to Wells Fargo Bank N.A. in the
original principal sum of $400,000
41
<PAGE>
4.5 The attached form of Convertible Note was issued by
Registrant in May 1996 to the following lenders in the
following amounts:
$ 21,000 Z-Fund, a Maryland limited partnership
229,000 Third Century II, a Colorado general partnership
10.1 1994 Stock Option Plan
10.2 Employment Agreement, dated as of September 22, 1995,
between Registrant and Paul Herber
10.3 Noncompetition Agreement, dated September 22, 1995, between
Registrant and J. Barrie Ogilvie
10.4 Security Agreement, dated July 31, 1995, between Registrant
and Sam G. Lindsay
10.5 Letter Agreement, dated August 1, 1995, between Registrant
and Sam G. Lindsay re: deferral of compensation
10.6 Request to Convert and Investment Letter, dated July 31,
1996, between Registrant and Sam G. Lindsay
10.7 Agreement, dated September 22, 1995, between Registrant and
ARC Equipment, Inc.
21.1 Subsidiaries of Registrant
27 Financial Data Schedule
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Grip Technologies, Inc.
(Registrant)
Date: November 8, 1996 /s/ Sam G. Lindsay
-----------------------
Sam G. Lindsay
President and
Chief Executive Officer
Date: November 8, 1996 /s/ Michael R. Friedl
--------------------------------
Michael R. Friedl
Chief Financial Officer
and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
Date: November 8, 1996 /s/ Sam G. Lindsay
----------------------
Sam G. Lindsay
Director and President
Date: November 8, 1996 /s/ James E. McCormick III
--------------------------
James E. McCormick III
Director and Secretary
Date: November 8, 1996 /s/ David W. Hardee
-------------------
David W. Hardee
Director
Date: November 8, 1996 /s/ J. Barrie Ogilvie
---------------------
J. Barrie Ogilvie
Director
43
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered
into as of September 20, 1995, by and between GRIP TECHNOLOGIES, INC., a
California corporation ("Griptec"), USG ACQUISITION CORPORATION, a California
corporation ("GTI Sub"), USGRIPS, INC., a Florida corporation ("USG"), J. BARRIE
OGILVIE, an individual ("Ogilvie"), PAUL J. HERBER, an individual ("Herber")
(Ogilvie and Herber are sometimes hereafter individually referred to as a "USG
Shareholder" or collectively as the "USG Shareholders").
RECITALS
A. Griptec desires USG to merge with and into GTI Sub, and USG desires to
merge with and into GTI Sub, upon the terms and subject to the conditions set
forth in this Agreement (hereafter referred to as the "Merger").
B. In connection with the Merger, the parties hereto desire to adopt a
plan of reorganization in accordance with the provisions of Section 354 and
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. Neither Griptec
nor GTI Sub makes any representation or warranty regarding the tax treatment of
the transactions contemplated by this Agreement, including, without limitation,
the potential tax-deferred treatment of the Merger.
C. The USG Shareholders own all of the issued and outstanding shares of
one dollar ($1.00) par value common stock of USG, as set forth on Schedule 1
attached hereto and incorporated herein by this reference.
TERMS AND CONDITIONS
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Adoption of the Plan. Griptec, GTI Sub and USG hereby adopt this plan
--------------------
of reorganization.
<PAGE>
2. Merger Transaction.
------------------
2.1 Agreement to Merge. As of the Closing Date (as that term is
------------------
defined in Section 3.1 below), USG shall merge with and into GTI Sub and
thereupon the separate existence of USG shall cease and GTI Sub shall succeed,
without other transfer, to all the rights and property of USG and shall be
subject to all the debts and liabilities thereof in the same manner as if GTI
Sub had itself incurred them. All rights of creditors and all liens upon the
property of each corporation shall be preserved unimpaired, provided that such
liens upon property of USG shall be limited to the property affected thereby
immediately prior to the time the Merger is effective.
2.2 Conversion of USG Shares and Issuance of New Griptec Shares. At
-----------------------------------------------------------
the Closing (as that term is defined in Section 3.2 below), each share of one
dollar ($1.00) par value common stock of USG shall be converted into an
aggregate of 1,200 shares of Common Stock of Griptec. The conversion of USG
shares shall occur automatically upon the Closing without action by the USG
Shareholders. Each USG Shareholder shall surrender to Griptec his stock
certificate or certificates representing his shares of USG and shall be entitled
to receive in exchange therefor a new stock certificate or certificates
representing the number of newly issued Griptec shares into which his USG shares
so surrendered shall have been converted.
2.3 Procedure to Convert Shares. At or prior to the Closing Date,
---------------------------
each USG Shareholder shall deliver to Griptec his stock certificate or
certificates representing his shares of USG, together with a stock assignment
separate from certificate, duly endorsed but undated. The form of stock
assignment attached hereto as Exhibit "A" and is incorporated herein by this
reference. In addition, each USG shareholder shall concurrently deliver to
Griptec an Investment Letter in the form of Exhibit "B" attached hereto and
incorporated herein by this reference
2.4 Earn-Out Shares. In addition to the shares described in Section
---------------
2.2 above, the USG Shareholders shall be entitled to earn up to an additional
400,000 shares of Common Stock of Griptec as provided in this Section 2.4:
(a) For every $10,000 of Annual Net Revenues above the Annual
Minimum Net Revenue, the USG Shareholders shall be issued 6,000 additional
shares of Common Stock of Griptec up to a maximum of 400,000 additional shares.
Should 85% of the Annual Minimum Net Revenue for the fiscal year ending July 31,
1996 not be achieved, the total maximum shares remaining to be earned shall be
reduced by 30 1/3%. Should 85% of the Annual Minimum Net Revenue, as may be
adjusted as provided
2
<PAGE>
below, for the fiscal year ending July 31, 1997 not be achieved, the total
maximum shares remaining to be earned shall be reduced by 50%. Should 85% of
the Annual Minimum Net Revenue for both fiscal years 1996 and 1997 not be
achieved, the total maximum shares remaining to be earned shall be reduced by
60 2/3%.
(b) Should the Annual Net Revenue equal at least 85% of the required
minimum for the fiscal year ending July 31, 1996, there shall be no reduction in
the maximum number of shares that may be earned, except the Annual Minimum Net
Revenue for fiscal year 1997 shall be increased by the amount of the shortfall.
Should the Annual Net Revenue, as may be adjusted in accordance with the
foregoing, equal at least 85% of the required minimum for the fiscal year ending
July 31, 1997, there shall be no reduction in the total maximum number of shares
that may be earned, except the Annual Minimum Net Revenue for fiscal year 1998
shall be increased by the amount of the total shortfall for both years. Should
85% of the required minimum not be earned in either fiscal year 1996 or 1997,
the maximum shares that may be earned shall be reduced as provided above.
Should the Annual Minimum Net Revenue, as may be adjusted as provided herein,
not be exceeded in fiscal year 1998, the earn-out provision shall be terminated
and the USG Shareholders shall forfeit any rights to any remaining unearned
shares.
(c) For purposes hereof, the Annual Minimum Net Revenue for the
three applicable fiscal years is as follows:
<TABLE>
<CAPTION>
Annual Minimum Net Revenue
--------------------------
<S> <C>
Fiscal Year Ending July 31, 1996 $1,000,000
Fiscal Year Ending July 31, 1997 $1,400,000
Fiscal Year Ending July 31, 1998 $1,800,000
</TABLE>
(d) For purposes hereof, Annual Net Revenue shall be equal to the
total amount of Annual Gross Sales for Griptec's fiscal years ending July 31,
1996, 1997 and 1998 less discounts, returns, allowances and freight), and
further reduced by the cost of raw materials, grips (including shipping and
handling), processing costs (including labor for painting, lasering, wiping,
supervision and shipping), and consumables. Only Annual Net Revenue that equals
or exceeds 38% of Annual Gross Sales for any fiscal year shall be included in
the calculations for determining earn-out shares; provided, however, with
respect to any customer with annual purchases (which are included in the
definition of Annual Gross Sales below) from Griptec or GTI Sub in excess of
$500,000 in any fiscal year of Griptec, those purchases will be included in
determining the Annual Net Revenue if they equal or exceed 35% of Annual Gross
Sales. Annual Gross Sales for any fiscal year shall be included in the
calculations for
3
<PAGE>
determining earn-out shares. Annual Gross Sales include only the following grip
sales: (1) all EPDM grips; and (2) any split cavity TPR grips sold, other than
split cavity grips being sold to existing OEM customers of Griptec, such as
Matzie Golf.
(e) Earn-out shares shall be issued as soon as the Annual Net
Revenue has been determined.
(f) Earn-out shares shall be allocated and issued eighty percent
(80%) to Ogilvie and twenty percent (20%) to Herber.
2.5 "Restricted Securities". All shares of Griptec to be issued in
-----------------------
connection with the Merger will be "restricted securities" as that term is
defined in Rule 144(a)(3) promulgated under the U.S. Securities Act of 1933, as
amended ("Securities Act"), and, as such, will not be freely tradeable except in
accordance with the requirements of the Securities Act and all applicable Blue
Sky laws. Griptec has not covenanted or undertaken to register any of such
shares, or to pay any costs associated therewith, except as provided in Section
7 below. Griptec is issuing its shares in the Merger in reliance upon the
accuracy of the representations and warranties set forth in this Agreement and
in the Investment Letter attached hereto as Exhibit "B" and in Section 7 below.
2.6 Status of Outstanding Shares of GTI Sub. Upon the effectiveness
---------------------------------------
of the Merger, each outstanding share of Common Stock of GTI Sub shall remain
outstanding and shall not be affected by the Merger.
2.7 No Fractional Shares or Cash in Lieu of Fractional Shares.
---------------------------------------------------------
Fractional shares shall not be issued and fractions of one-half or more shall be
rounded to a whole number and fractions of less than one-half will be
disregarded. No cash will be paid in lieu of fractional shares.
2.8 Execution and Delivery of Assignments. After the Merger becomes
-------------------------------------
effective, USG, through the persons who were its officers immediately prior to
the Merger, shall execute or cause to be executed such further assignments,
assurances or other documents as may be necessary or desirable to confirm title
to USG's properties, assets and rights in GTI Sub.
2.9 Agreement of Merger. The execution of this Agreement shall
-------------------
constitute the approval of the USG Shareholders of the principal terms of the
Merger. Griptec, GTI Sub and USG shall execute and deliver a short-form
Agreement of Merger and Certificates of Approval of Agreement of Merger
substantially in the form of Exhibit "C" attached hereto and incorporated herein
by this reference, signed on behalf
4
<PAGE>
of both Griptec, GTI Sub and USG, which shall be filed with the California
Secretary of State. The parties hereto intend that this Agreement and the
Agreement of Merger are to be construed as one and the same instrument in order
to effectuate their purposes. The parties shall also take whatever action is
necessary for USG, as a Florida corporation, to consummate the Merger, including
the timely filing of appropriate documents with the Secretary of State of the
State of Florida.
2.10 Assumption of Corporate Tax Liability. In order to file the
-------------------------------------
Agreement of Merger with the California Secretary of State, Griptec agrees to
execute and deliver to the California Franchise Tax Board an assumption of the
tax liability of USG and an agreement to prepare and file all tax returns
required to be filed by USG in order to obtain a tax clearance certificate prior
to the Closing Date. Notwithstanding the execution and delivery by Griptec of
the corporate assumption of tax liability, the USG Shareholders shall remain
jointly and severally liable for the accuracy of all representations and
warranties made by or on behalf of USG.
3. Closing; Closing Date.
---------------------
3.1 Closing Date. For purposes of this Agreement, the term Closing
------------
Date shall mean September 22, 1995; provided, however, Griptec has the right to
extend the Closing Date for up to an additional thirty (30) days if it is
diligently pursuing financing for the Merger.
3.2 Closing. For purposes of this Agreement, the term Closing shall
-------
mean the closing of the Merger which is scheduled to take place at the offices
of Griptec at 10:00 a.m. on the Closing Date and shall be effective upon the
filing with the California Secretary of State of the Agreement of Merger and the
Certificates of Approval of Agreement of Merger.
3.3 Appointment of Attorney-in-Fact to Date Stock Assignments
---------------------------------------------------------
Separate from Certificate. Each USG Shareholder hereby designates and appoints
- - -------------------------
any officer of Griptec as his attorney-in-fact to date his stock assignment
separate from certificate with the Closing Date.
4. Representations and Warranties of Griptec. Griptec represents and
-----------------------------------------
warrants to USG and the USG Shareholders that the following are true and correct
as of the date hereof and will be true and correct on the Closing Date:
5
<PAGE>
4.1 Organization and Good Standing; Qualification. Griptec is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to own its properties and to carry on its business as now owned and operated by
it.
4.2 Authorization and Validity. The execution, delivery and
--------------------------
performance by Griptec of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Griptec, and, no other action is necessary
on the part of Griptec to consummate the transactions contemplated hereby. This
Agreement and each other agreement contemplated hereby constitute or will
constitute legal, valid and binding obligations of Griptec, enforceable against
Griptec in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
4.3 Capitalization. The capitalization of Griptec consists of
--------------
10,000,000 shares of Common Stock and 3,000,000 shares of Preferred Stock of
which 4,086,655 shares of Common Stock are presently issued and outstanding
(including 570,600 shares issued in recent and/or pending private placements)
and 1,350,000 shares of Series A Convertible Preferred Stock. Except as set
forth on Schedule 4.3, there are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible securities or
other agreements or arrangements of any character or nature whatever under which
Griptec is or may become obligated to issue, assign or transfer any shares or
other securities of Griptec.
4.4 Valid Issuance of Shares. The shares to be issued to the USG
------------------------
Shareholders in connection with the Merger, including the earn-out shares, when
issued, will be validly issued and outstanding, fully paid and nonassessable.
4.5 No Violation. Neither the execution, delivery or performance of
------------
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (i) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation or Bylaws of Griptec
or any agreement, indenture or other instrument under which Griptec is bound or
to which any of its assets or properties are subject, or result in the creation
or imposition of any security interest, lien, charge or encumbrance upon any of
its assets or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Griptec.
6
<PAGE>
4.6 Consents. No authorization, consent, approval, permit or license
--------
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of Griptec.
4.7 Financial Statements. Griptec has delivered to USG and the USG
--------------------
Shareholders a copy of its Annual Report on Form 10-K for its fiscal year ended
July 31, 1994 and a copy of its Quarterly Report on Form 10-Q for its third
quarter ended April 30, 1995 (the financial statements and notes thereto
included in the Form 10-K and Form 10-Q are collectively referred to as the
"Griptec Financial Statements"). The Griptec Financial Statements are true,
correct and complete, are in accordance with the books and records of Griptec,
fairly present the financial condition and results of operations of Griptec as
of the dates and for the periods indicated and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis with
prior periods.
4.8 Absence of Certain Changes. Except as set forth on Schedule 4.8
--------------------------
attached hereto, since April 30, 1995, there has not been any:
(a) Transaction by Griptec except in the ordinary course of
business as conducted on that date;
(b) Capital expenditure by Griptec exceeding $10,000;
(c) Material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Griptec,
whether or not caused by any deliberate act or omission of Griptec;
(d) Mortgage or pledge of the assets or properties of Griptec or
the creation of or subjection to any security interest, lien, lease or other
charge or encumbrance thereon or therein;
(e) Destruction, damage to or loss of any of the assets or
properties (whether or not covered by insurance) that materially and adversely
affect, or could materially and adversely affect, the financial condition,
business or prospects of Griptec;
(f) Acquisition or disposal of any of the assets or properties,
except in the ordinary course of business;
7
<PAGE>
(g) Revaluation by Griptec of any of its assets or properties;
(h) Declaration, setting aside or payment of a dividend or other
distribution in respect of the shares of Griptec, or any direct or indirect
redemption, purchase or other acquisition by Griptec of any of its shares;
(i) Increase in the salary or other compensation payable or to
become payable by Griptec to any of its officers, directors or employees, or the
declaration, payment or commitment or obligation of any kind for the payment by
Griptec of a bonus or other additional salary or compensation to any such
person;
(j) Amendment or termination of any contract, agreement or
license to which Griptec is a party or by which it is bound, except in the
ordinary course of business;
(k) Loan by Griptec to any person or entity, or guaranty by
Griptec of any loan or obligation;
(l) Waiver or release of any right or claim by Griptec, except in
the ordinary course of business;
(m) Commencement or notice or threat of commencement of any
governmental proceeding against or investigation of Griptec or the affairs of
Griptec;
(n) Other event or condition of any character that has or might
reasonably have a material and adverse effect on the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Griptec,
whether or not caused by any deliberate act or omission of Griptec;
(o) Issuance or sale by Griptec of any of its shares or of any
other securities except as noted in the Griptec Financial Statements; or
(p) Agreement by Griptec to do any of the things described in the
preceding clauses (a) through (o).
4.9 Taxes. All income, excise, corporate, franchise, property,
-----
sales, use, payroll, withholding and other taxes related to taxable periods or
portions thereof ending on or prior to the Closing Date, including without
limitations governmental charges, assessments and required contributions of
Griptec with respect to its business
8
<PAGE>
that may result in the filing of a lien on the assets or properties of Griptec,
have been accurately recorded and duly paid, collected or withheld and remitted
to the appropriate governmental agency, except for current taxes not due and
payable on or prior to the Closing Date (such taxes to be paid when due by
Griptec).
4.10 Title to Assets. Griptec has good, valid and marketable
---------------
title to all of its assets and properties, free and clear of mortgages, liens,
pledges, security interests, leases, charges, encumbrances, equities, claims or
conditional sale or other title retention agreement, except as set forth on
Schedule 4.10.
4.11 Condition of Assets. Except as set forth on Schedule 4.11 all
-------------------
equipment and fixed assets owned by Griptec are in working condition and repair,
capable of utilization for their intended use in the ordinary course of business
and, to the best knowledge of Griptec, conform in all material respects with all
applicable ordinances, regulations and other laws and there are no known or
latent defects therein.
4.12 Compliance with Laws. To the best knowledge of Griptec, Griptec
--------------------
has complied in all material respects with all laws, regulations and licensing
requirements relating to the its business and has filed with the proper
authorities all necessary statements and reports.
4.13 Finder's Fee. Griptec has not incurred any obligation for any
------------
finder's, broker's or agent's fee in connection with the Merger or any
transactions contemplated hereby.
4.14 Litigation. Except as set forth in Schedule 4.14, there are no
----------
legal actions or administrative proceedings or investigations instituted, or to
the best knowledge of Griptec threatened, against or affecting, or that could
affect, Griptec, any of its assets, or its business. Griptec is not (i) subject
to any continuing court or administrative order, writ, injunction or decree
affecting or relating to its assets or property or its business or (ii) in
default with respect to any such order, writ, injunction or decree. Griptec does
not know of any basis for any such action, proceeding or investigation.
4.15 Full Disclosure. None of the representations and warranties
---------------
made by Griptec, or made in any certificate or other writing furnished or
required to be furnished by any of them, or on their behalf, contains or will
contain any untrue statement of a material fact, or omit any material fact the
omission of which would be misleading.
9
<PAGE>
5. Representations and Warranties of GTI Sub. GTI Sub represents and
-----------------------------------------
warrants to USG and the USG Shareholders that the following are true and correct
as of the date hereof and will be true and correct through the Closing Date:
5.1 Organization and Good Standing; Qualification. GTI Sub is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to own its properties and to carry on its business as now owned and operated by
it.
5.2 Authorization and Validity. The execution, delivery and
--------------------------
performance by GTI Sub of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by GTI Sub, and, no other action is necessary
on the part of GTI Sub to consummate the transactions contemplated hereby except
the approval of the outstanding shares of GTI Sub. This Agreement and each
other agreement contemplated hereby constitute or will constitute legal, valid
and binding obligations of GTI Sub, enforceable against GTI Sub in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
5.3 No Violation. Neither the execution, delivery or performance of
------------
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (i) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation or Bylaws of GTI Sub
or any agreement, indenture or other instrument under which GTI Sub is bound or
to which any of its assets or properties are subject, or result in the creation
or imposition of any security interest, lien, charge or encumbrance upon any of
its assets or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over GTI Sub.
5.4 Consents. No authorization, consent, approval, permit or license
--------
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of GTI Sub.
5.5 Finder's Fee. GTI Sub has not incurred any obligation for any
------------
finder's, broker's or agent's fee in connection with the Merger or any
transactions contemplated hereby.
10
<PAGE>
6. Representations and Warranties of USG and the USG Shareholders. USG
--------------------------------------------------------------
and the USG Shareholders, jointly and severally, represent and warrant to
Griptec and GTI Sub that the following are true and correct as of the date
hereof and will be true and correct through the Closing Date:
6.1 Organization and Good Standing; Qualification. USG is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has all requisite corporate power and authority to
own its properties and to carry on its business as now owned and operated by it.
USG is duly qualified and licensed to transact intrastate business in the State
of California and in each other jurisdiction in which the operation of its
business, the residence of its employees and/or agents or the character of the
properties owned, leased or operated by it make such qualification or licensing
necessary. USG has delivered to Griptec complete and correct copies of its
certificate of incorporation and by-laws and other organizational documents, as
amended and in effect on the date hereof.
6.2 Capitalization. The capitalization of USG consists of 500 shares
--------------
of one dollar ($1.00) par value common stock, of which all 500 shares are
presently authorized, issued and outstanding shares. The names and addresses of
all of the USG Shareholders are set forth on Schedule 1. There are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever under which USG or any USG Shareholder is or may
become obligated to issue, assign or transfer any shares or other securities of
USG.
6.3 Ownership of USG Shares. Each of the USG Shareholders is the
-----------------------
lawful record and beneficial owner of the number of shares of USG capital stock
set forth opposite his name on Schedule 1 annexed hereto, free and clear of any
liens, pledges, claims, encumbrances or restrictions of any kind, and all of
such shares are validly issued and outstanding, fully paid and nonassessable.
6.4 No Subsidiaries, Etc. USG has no subsidiaries. USG has no
---------------------
interest, direct or indirect, and has no commitment to purchase any interest,
direct or indirect, in any other corporation or in any partnership, limited
liability company, joint venture or other business enterprise or entity. The
business carried on by USG has not been conducted through any subsidiary or
affiliate of USG.
6.5 Authorization and Validity. The execution, delivery and
--------------------------
performance by USG and the USG Shareholders of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by USG, and, no other
action is necessary
11
<PAGE>
on the part of USG to consummate the Merger and the other transactions
contemplated hereby. This Agreement and each other agreement contemplated
hereby constitute or will constitute legal, valid and binding obligations of USG
and the USG Shareholders, enforceable against USG and the USG Shareholders in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
6.6 No Violation. Neither the execution, delivery or performance of
------------
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (i) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, any certificate of incorporation or by-laws of USG
or any agreement, indenture or other instrument under which USG is bound or to
which any of its assets or properties are subject, or result in the creation or
imposition of any security interest, lien, charge or encumbrance upon any of its
assets or (ii) violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over USG.
6.7 Consents. No authorization, consent, approval, permit or license
--------
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of USG except for the approval of
Scripps Bank ("Bank") regarding the transfer of a bank loan in the unpaid
principal balance of approximately $180,000 ("Bank Loan").
6.8 Financial Statements. Set forth on Schedule 6.8 attached hereto
--------------------
are copies of USG's audited balance sheet ("USG Balance Sheet") as at August 31,
1995 ("USG Balance Sheet Date"), audited statements of income and retained
earnings for the ten-month period ended August 31, 1995, and audited statement
of cash flow for the ten-month period ended August 31, 1995, and notes thereto;
audited balance sheet as at October 31, 1994, audited statements of income and
retained earnings for the year ended October 31, 1994, and audited statement of
cash flow for the year ended October 31, 1994, and notes thereto; and compiled
balance sheet as at October 31, 1993 and compiled statements of income and
retained earnings for the year ended October 31, 1993 (collectively the "USG
Financial Statements"). The USG Financial Statements are true, correct and
complete, are in accordance with the books and records of USG, fairly present
the financial condition and results of operations of USG as of the dates and for
the periods indicated and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis with prior periods.
The audited financial statements of USG for the ten-month period ended August
31, 1995 and the year
12
<PAGE>
ended October 31, 1994 which are included in the USG Financial Statements have
been audited by independent certified public accountants and are unqualified
except for going concern qualification.
6.9 Absence of Certain Changes. Since the USG Balance Sheet Date,
--------------------------
there has not been any:
(a) Transaction by USG except in the ordinary course of business
as conducted on that date;
(b) Capital expenditure by USG exceeding $10,000;
(c) Material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of USG,
whether or not caused by any deliberate act or omission of USG;
(d) Mortgage or pledge of the assets or properties of USG or the
creation of or subjection to any security interest, lien, lease or other charge
or encumbrance thereon or therein;
(e) Destruction, damage to or loss of any of the assets or
properties (whether or not covered by insurance) that materially and adversely
affect, or could materially and adversely affect, the financial condition,
business or prospects of USG;
(f) Acquisition or disposal of any of the assets or properties,
except in the ordinary course of business or with the consent of USG;
(g) Revaluation by USG of any of its assets or properties;
(h) Declaration, setting aside or payment of a dividend or other
distribution in respect of the shares of USG, or any direct or indirect
redemption, purchase or other acquisition by USG of any of its shares;
(i) Increase in the salary or other compensation payable or to
become payable by USG to any of its officers, directors or employees, or the
declaration, payment or commitment or obligation of any kind for the payment by
USG of a bonus or other additional salary or compensation to any such person;
(j) Amendment or termination of any contract, agreement or
license to which USG is a party or by which it is bound;
13
<PAGE>
(k) Loan by USG to any person or entity, or guaranty by USG of
any loan or obligation;
(l) Waiver or release of any right or claim by USG, except in the
ordinary course of business;
(m) Commencement or notice or threat of commencement of any
governmental proceeding against or investigation of USG or the affairs of USG;
(n) Other event or condition of any character that has or might
reasonably have a material and adverse effect on the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of USG,
whether or not caused by any deliberate act or omission of USG;
(o) Issuance or sale by USG of any of its shares or of any other
securities; or
(p) Agreement by USG to do any of the things described in the
preceding clauses (a) through (o).
6.10 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
reflected or reserved against on the face of the USG Balance Sheet (excluding
the notes thereto), as of the USG Balance Sheet Date USG had no debts,
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature whatever, including, without limitation, any foreign or domestic
tax liabilities or deferred tax liabilities incurred in respect of or measured
by USG's income, for any period prior to the close of business on the USG
Balance Sheet Date, or any other debts, liabilities or obligation relating to or
arising out of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed on or
before the USG Balance Sheet Date, whether or not then known, due or payable.
None of USG's employees is now or, will by the passage of time hereafter become,
entitled to receive any vacation time, vacation pay or severance pay
attributable to services rendered prior to the USG Balance Sheet Date except as
disclosed on the face of the USG Balance Sheet (excluding the notes thereto).
6.11 Taxes. All income, excise, corporate, franchise, property,
-----
sales, use, payroll, withholding and other taxes related to taxable periods or
portions thereof ending on or prior to the Closing Date, including without
limitations governmental charges, assessments and required contributions of USG
with respect to its business that
14
<PAGE>
may result in the filing of a lien on the assets or properties of USG, have been
accurately recorded and duly paid, collected or withheld and remitted to the
appropriate governmental agency, except for current taxes not due and payable on
or prior to the Closing Date (such taxes to be paid when due by USG).
6.12 Schedules.
---------
(a) Attached hereto as Schedule 6.12 is a separate schedule
containing an accurate and complete list and description of:
(1) All machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than inventories and
supplies), owned, leased or used by USG except for items having a value of less
than $1,000 which do not, in the aggregate, have a total value of more than
$5,000, setting forth with respect to all such listed property a summary
description of all leases, liens, claims, encumbrances, charges, restrictions,
covenants and conditions relating thereto, identifying the parties thereto, the
rental or other payment terms, expiration date and cancellation and renewal
terms thereof.
(2) All real property owned by USG or in which USG has a
leasehold interest or which is used by USG in connection with the operation of
its business, together with a description of each lease, sublease, or other
instrument under which USG claims or holds such leasehold or other interest or
right to use thereof or pursuant to which USG has assigned, sublet or granted
any rights therein, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.
(3) All of USG's receivables (which shall include all
accounts receivable, loans receivable and any advances), together with detailed
information as to each such listed receivable which has been outstanding for
more than thirty (30) days.
(4) All fire, theft, casualty, liability and other insurance
policies insuring USG, specifying with respect to each such policy the name of
the insurer, the risk insured against, the limits of coverage, the deductible
amount (if any), the premium rate and the date through which coverage will
continue by virtue of premiums already paid.
(5) All agency, sales, distribution or other similar
franchises or agreements providing for the services of an independent contractor
to which USG is a party or by which it is bound.
15
<PAGE>
(6) All contracts, agreements, commitments or licenses
relating to patents, trademarks, trade names, copyrights, inventions, processes,
know-how, formulae or trade secrets to which Seller is a party or by which it is
bound.
(7) All loan agreements, mortgages, conditional sale or title
retention agreements, security agreements, equipment obligations, guaranties,
leases or lease purchase agreements to which USG is a party or by which it is
bound.
(8) All contracts, agreements, commitments or other
understandings or arrangements to which USG is a party or by which it or any of
its property is bound or affected but excluding (A) purchase and sales orders
and commitments made in the ordinary course of business involving payments or
receipts by USG of less than $500 in any single case but not more than $1,000 in
the aggregate, (B) contracts entered into in the ordinary course of business
involving payments or receipts by USG of less than $500 in the case of any
single contract but not more than $1,000 in the aggregate, (C) contracts entered
into in the ordinary course of business which are terminable by USG on less than
thirty (30) days notice without penalty or consideration and involving payments
or receipts by USG of less than $500 in the case of any single contract but not
more than $1,000 in the aggregate.
(9) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans, deferred
compensation agreements, employee pension plans or retirement plans, employee
stock option or stock purchase plans, group life, health and accident insurance
plans, and any other employee benefit plans, agreements, arrangements or
commitments, whether or not legally binding, and whether or not written or
verbal, including, without limitation, holiday, vacation, Christmas and other
bonus practices, to which USG is a party or by which it is bound or which relate
to the operation of its business.
(10) The names and current annual salary rates of all persons
(including independent commission agents), and showing separately for each such
person the amount paid or payable as salary, bonus payments and any indirect
compensation.
(11) The names of all of USG's directors and officers.
(12) The name of each bank in which USG has an account or
safe deposit box and the names of all persons authorized to draw thereon or have
access thereto.
(13) The names of all person, if any, holding tax or other
powers of attorney from USG and a summary of the terms thereof.
16
<PAGE>
(b) All of the contracts, agreements, leases, licenses and
commitments required to be listed on Schedule 6.12 (other than those which have
been fully performed) are valid and binding, enforceable in accordance with
their respective terms, in full force and effect and, except as otherwise
specified in Schedule 6.12, do not require notice to or the consent of any other
party in connection with the Merger so that after the effectiveness of the
Merger GTI Sub will be entitled to the full benefits thereof. Except as
disclosed on Schedule 6.12, none of the payments required to be made under any
contract, agreement, lease, license or commitment has been prepaid by more than
thirty (30) days prior to the due date of such payment thereunder, and there is
not thereunder any existing default, or event which, after notice or the lapse
of time, or both, would constitute a default or result in a right to accelerate
or loss or rights, and none of such contracts, agreements, leases, licenses or
commitments is, either when considered singly or in the aggregate with others,
unduly burdensome, onerous or materially adverse to USG's business, properties,
assets, earnings or prospects or the like, either before or after the Closing,
to result in any material loss or liability. True and complete copies of all
such contracts, agreements, leases, licenses and other documents listed or
described on Schedule 6.12 (together with any an all amendments thereto) have
been delivered to Griptec and initialed by Griptec's Secretary and identified
with a reference to this section of the Agreement.
6.13 Title to Assets. USG has good, valid and marketable title to all
---------------
of its assets and properties, including, without limitation, those reflected in
its books and records and in the USG Balance Sheet (except inventory sold after
the Balance Sheet Date in the ordinary course of business), free and clear of
mortgages, liens, pledges, security interests, leases, charges, encumbrances,
equities, claims or conditional sale or other title retention agreement, except
as set forth on Schedule 6.12 and except for the lien of Scripps Bank thereon.
6.14 Condition of Assets. All equipment and fixed assets owned by
-------------------
USG are in good condition and repair, capable of utilization for their intended
use in the ordinary course of business and, to the best knowledge of USG,
conform in all material respects with all applicable ordinances, regulations and
other laws and there are no known or latent defects therein.
6.15 Inventory. All items of USG's inventory and related supplies
---------
(including raw materials, work-in-process and finished goods) reflected on the
USG Balance Sheet or thereafter acquired (and not subsequently disposed of in
the ordinary course of business) are merchantable, or suitable and usable for
the production and completion of merchantable products, for sale in the ordinary
course of business as first quality goods at normal mark-ups, none of such items
is obsolete or below standard quality and each item of such inventory reflected
in the USG Balance Sheet and the books
17
<PAGE>
and records of USG is so reflected on the basis of a complete physical count and
is valued at the lower of cost (on a first-in, first-out basis) or market in
accordance with generally accepted accounting principles consistently applied.
6.16 Receivables. All receivables of USG (including accounts
-----------
receivable, loans receivable and advances) which were reflected in the USG
Balance Sheet, and all such receivables which will have arisen since the date
thereof, shall have arise from bona fide transactions in the ordinary course of
USG's business and shall be (or have been) fully collected when due, or in the
case of each account receivable within ninety (90) days after it arose, without
resort to litigation and without offset or counterclaim, in the aggregate face
amounts thereof.
6.17 Patents, Etc. Schedule 6.17 sets forth copyrights, trademarks,
------------
service marks, service names, trade names, patents, trade secrets and other
proprietary rights necessary to conduct its business as it is presently
operated, including, without limitation, the software used to operate the laser
cutting machines (collectively the "Intangible Property"). USG owns or possesses
the royalty-free license or other rights to use the Intangible Property. USG is
not infringing upon or otherwise acting adversely to any copyrights, trademarks,
trademark rights, service marks, service names, trade names, patents, patent
rights, licenses, trade secrets or other proprietary rights owned by any other
person or persons, and there is not claim or action by any such person pending,
or to the knowledge of USG or any of the USG Shareholders threatened, with
respect thereto.
6.18 Customers. Schedule 6.18 sets forth the names and addresses of
---------
all customers of USG, together with a summary of sales over the past twelve (12)
months. Neither USG nor any of the USG Shareholders has received any notice or
has any reason to believe that any significant customer of USG has ceased, or
will cease, to purchase grips from USG, has substantially reduced or will
substantially reduce its purchases, or has sought, or is seeking, to reduce
prices it will pay for grips or any services provided by USG.
6.19 Suppliers and Vendors. Schedule 6.19 sets forth the names and
---------------------
addresses of all major suppliers and vendors to USG, together with a summary of
all purchases over the past twelve (12) months. Neither USG nor any of the USG
Shareholders has received any notice or has any reason to believe that any such
supplier or vendor has ceased, or will cease, to deal with USG, has
substantially reduced or will substantially reduce its sales to USG, or has
sought, or is seeking, to increase prices it will charge for any goods or
services provided to USG.
18
<PAGE>
6.20 Product Warranties. There are no warranties, express or
------------------
implied, written or oral, with respect to any of the products or services of USG
except as set forth on Schedule 6.20. There are no claims pending or, to the
best knowledge of USG or the USG Shareholders threatened with respect to any
products of USG, or any product warranties.
6.21 Environmental Matters. USG has obtained all permits, licenses
---------------------
and other authorizations which are required in connection with the conduct of
its business, and is in compliance with all laws, statutes, regulations,
permits, licenses and authorizations, relating to Hazardous Substances or
protection of the environment, including, without limitation, regulations
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous waste into
the environment (including, without limitation, ambient air, surface water,
groundwater or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous wastes or
Hazardous Substances. Neither USG nor any of the USG Shareholders is aware of or
has received notice of any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent compliance or continued compliance with those laws or
any regulation, code, plan order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, or which may give
rise to any common law or legal liability, or otherwise form the basis for any
claim, action, demand, suit, proceeding, hearing, study or investigation, based
on or related to the manufacture, processing, distribution, use, treatment,
storage, transport or handling, or the emission, discharge, release or
threatened release in the environment, of any pollutant, contaminant, chemical,
or industrial, toxic or hazardous waste or Hazardous Substance. For purposes
hereof, the term "Hazardous Substance" means and refers to any product,
substance, chemical, material or waste whose presence, nature, quantity and/or
intensity of existence, use, manufacture, disposal, transportation, spill,
release or effect, either by itself or in combination with other materials, is
either: (i) potentially injurious to the public health, safety or welfare and/or
the environment and/or the Property; (ii) regulated or monitored by any
governmental authority; (iii) defined under any Environmental Laws as "hazardous
materials," "hazardous substances" or any similar terminology; or (iv) a basis
for liability to any governmental agency or third party under any applicable
statute or common law theory. Hazardous Substance shall include, but not be
limited to, hydrocarbons, petroleum, gasoline, crude oil or any products, by-
products or fractions thereof.
19
<PAGE>
6.22 Records. The books of account, minute books, stock certificate
-------
books and stock transfer ledgers of USG are complete and correct in all material
respects, and there have been no transactions involving the business of USG
which properly should have been set forth therein and which have not been
accurately so set forth.
6.23 No Guaranties. Except for the Bank Loan, none of the obligations
-------------
or liabilities of USG is guaranteed by any person, firm or corporation, nor has
USG guaranteed the obligations or liabilities of any other person, firm or
corporation.
6.24 Compliance with Laws. To the best knowledge of USG, USG has
--------------------
complied in all material respects with all laws, regulations and licensing
requirements relating to the its business and has filed with the proper
authorities all necessary statements and reports.
6.25 Finder's Fee. Neither USG nor any of the USG Shareholders
------------
has incurred any obligation for any finder's, broker's or agent's fee in
connection with the Merger or any of the other transactions contemplated hereby.
6.26 Litigation. There are no legal actions or administrative
----------
proceedings or investigations instituted, or to the best knowledge of USG and
the USG Shareholders threatened, against or affecting, or that could affect,
USG, any of its assets, or its business. USG is not (i) subject to any
continuing court or administrative order, writ, injunction or decree affecting
or relating to its assets or property or its business or (ii) in default with
respect to any such order, writ, injunction or decree. Neither USG nor any of
the USG Shareholders knows of any basis for any such action, proceeding or
investigation.
6.27 Full Disclosure. None of the representations and warranties
---------------
made by USG, or made in any certificate or other writing furnished or required
to be furnished by any of them, or on their behalf, contains or will contain any
untrue statement of a material fact, or omit any material fact the omission of
which would be misleading.
7. Matters Relating to the Issuance of Shares of Griptec.
-----------------------------------------------------
7.1 Exemption Under Securities Act. In connection with the Merger
------------------------------
transaction, Griptec is relying upon the exemptions set forth in Section 4(2) of
Regulation D (to the extent applicable) and Rule 145 promulgated under the
Securities Act of 1933, as amended.
7.2 Exemption Under California Corporate Securities Law. Griptec is
---------------------------------------------------
relying upon the exemptions set forth in Sections 25103(e) and 25103(h) of the
California Corporate Securities Law so as not to have to qualify the exchange of
shares
20
<PAGE>
incident to the Merger, including the issuance of the earn-out shares. The
representations and warranties of the USG Shareholders set forth in the
Investment Letters to be delivered at the Closing and in Section 7.3 below are
incorporated herein. In addition, each of the USG Shareholders covenants,
represents and warrants as follows:
(a) USG has twenty (20) or fewer shareholders, each of whom
is an equity security holders, including all equity security holders who are not
residents of the State of California;
(b) He hereby consents in writing to the Merger;
(c) The offer and sale of Griptec's shares in the Merger has
not been accomplished by the publication of any advertisement; and
(d) The USG Shareholders will receive, as a result of the
Merger, only one-class voting Common Stock of Griptec, cash, or a combination
thereof.
7.3 Representations and Warranties of the USG Shareholders. Each USG
------------------------------------------------------
Shareholder, jointly and severally, covenants, represents and warrants to
Griptec and GTI Sub that the following are true and correct as of the date
hereof and will be true and correct on the Closing Date and on each date that
any of the earn-out shares may be issued:
(a) He has either: (i) a preexisting personal or business
relationship with Griptec or any of its officers, directors or controlling
persons, or (ii) by reason of his business or financial experience, or the
business or financial experience of his professional advisor who is unaffiliated
with and who is not compensated by Griptec or any affiliate or selling agent of
Griptec, directly or indirectly, could be reasonably assumed to have the
capacity to protect his own interest in connection with the Merger.
(b) He is acquiring the shares of Griptec to be issued in
connection with the Merger for his own account (or a trust account if the equity
security holder is a trustee) and not with a view to or for sale in connection
with any distribution.
7.4 Representations and Warranties of Ogilvie. Ogilvie represents
-----------------------------------------
and warrants to Griptec and GTI Sub that he owns more than seventy-five percent
(75%) of the issued and outstanding shares of USG and that his residence address
is 140 Gravel Pit Road, R.R. #3, Dundas, Ontario, Canada.
7.5 Piggy-Back Registration Rights. For a period of two (2) years
------------------------------
from the Closing Date, Griptec shall offer to the USG Shareholders "piggy-back"
21
<PAGE>
registration rights upon the terms and subject to the conditions set forth on
Exhibit D attached hereto and incorporated herein by this reference.
8. Conduct of Business Prior to Closing. Prior to the Closing, USG shall
------------------------------------
conduct, and since the USG Balance Sheet Date USG has conducted, its business
and affairs only in the ordinary course and consistent with its prior practice
and shall maintain, keep and preserve its assets and properties in good
condition and repair and maintain insurance thereon in accordance with present
practices. USG and the USG Shareholders shall use their best efforts to: (i)
preserve the business and organization of USG intact; (ii) to keep available to
GTI Sub the services of USG's present officers, employees, agents and
independent contractors; (iii) to preserve for the benefit of GTI Sub the
goodwill of USG's suppliers, customers, landlords and others having business
relations with it; and (iv) to cooperate with Griptec and use reasonable efforts
to assist Griptec in obtaining the consent of the Bank or any landlord or other
party to any lease or contract with USG where the consent of such landlord or
other party may be required by reason of the transactions contemplated hereby.
9. Access to Information and Documents. Upon reasonable notice and
-----------------------------------
during regular business hours, USG and the USG Shareholders will give Griptec
and Griptec's attorneys, accountants and other representatives full access to
USG's personnel and all properties, documents, contracts, books and records of
USG and will furnish Griptec with copies of such documents (certified by USG's
officers if so requested) and such information with respect to the affairs of
USG as Griptec may from time to time request, and Griptec will not improperly
disclose the same prior to the Closing. Any such furnishing of such information
to Griptec or any investigation by Griptec shall not affect Griptec's right to
rely on any representations and warranties made in this Agreement or in
connection herewith or pursuant hereto.
10. Contracts with Ogilvie and Herber.
---------------------------------
10.1 Noncompetition Agreement with Ogilvie. Effective as of the
-------------------------------------
Closing, Griptec and Ogilvie will execute and deliver a Noncompetition
Agreement, substantially in the form of Exhibit E attached hereto and
incorporated herein by this reference.
10.2 Employment Agreement with Herber. Effective as of the Closing,
--------------------------------
Griptec and Herber will execute and deliver an Employment Agreement,
substantially in the form of Exhibit F attached hereto and incorporated herein
by this reference.
11. Additional Covenants and Obligations of Griptec.
-----------------------------------------------
22
<PAGE>
11.1 Best Efforts to Raise Additional Funding. Griptec shall use
----------------------------------------
its best efforts to attempt to raise at least $1,290,000 of additional
equity prior to the Closing, which may include funds received by Griptec from
any private placement concluded on or after August 1, 1995, and an additional $1
million within ninety (90) days following the Closing Date. The failure of
Griptec to raise $1,290,000 by the Closing Date shall not be a breach by Griptec
of this Agreement, but shall only be the failure of a condition precedent to the
obligations of USG and the USG Shareholders hereunder.
11.2 Obligations Regarding Bank Loan. Griptec shall use its best
-------------------------------
efforts to negotiate an assumption or transfer of the Bank Loan, or, in
Griptec's sole discretion, the pay-off of the Bank Loan. In connection
therewith, if Griptec elects to assume or transfer the Bank Loan instead of
paying if off, Griptec agrees to deposit up to $200,000 with the Bank as
additional security in order to seek the release of the personal guaranty given
to the Bank by Ogilvie. If Griptec offers to deposit $200,000 with the Bank on
or prior to the Closing Date and the Bank fails or refuses to release the
personal guaranty of Ogilvie, then the failure to obtain the Bank's consent
shall not be a breach by Griptec of this Agreement, but shall only be the
failure of a condition precedent to the obligations of USG and the USG
Shareholders hereunder.
11.3 Appointment of Ogilvie as a Director. As of the Closing Date,
------------------------------------
and conditioned upon the effectiveness of the Merger, Griptec shall appoint
Ogilvie as a director. Griptec agrees to reimburse Ogilvie for his reasonable
and necessary travel and business expenses which he incurs after the Closing
Date to attend Board of Directors meetings of Griptec and other business
meetings and trade conferences at the request of Griptec and for telephone,
facsimile and courier communications to Griptec.
12. Additional Covenants and Obligations of USG and the USG Shareholders.
--------------------------------------------------------------------
12.1 Transfer of Name. At the Closing, USG and the USG Shareholders
----------------
shall convey, transfer and assign to Griptec all of their rights, title and
interest in and to the name "U.S. Grips", including all registrations and
pending registrations related thereto.
12.2 Guaranteed Minimum Current Ratio.
--------------------------------
(a) USG and the USG Shareholders covenant and agree that at
all times from the date hereof through the Closing Date, USG shall maintain a
Current Ratio of at least 1.15 to 1 ("Minimum Current Ratio"). Should the
Adjusted Minimum Current Ratio fall below the Minimum Current Ratio, Griptec may
reduce the Payables
23
<PAGE>
by an amount necessary to achieve the Minimum Current Ratio, and any sums paid
by Griptec in connection therewith shall be deducted from or setoff against any
monies or other consideration payable to the USG Shareholders, including without
limitation the Balance of the Remaining Ogilvie Debt (as that term is defined in
Section 12.3 below) and/or the earn-out shares, or shall be immediately payable
upon demand.
(b) For purposes hereof, the following terms shall have the
following definitions:
(1) "Current Ratio" means the ratio of (A) all cash,
Collectible Receivables, Inventories, and prepaid expenses approved in writing
by Griptec to (B) all Payables, as of the relevant time.
(2) "Collectible Receivables" means accounts receivables
of USG generated in the ordinary course of business in connection with the valid
sale of products or services which are owed to USG by creditworthy purchasers.
No receivables older than ninety (90) days shall be included in Collectible
Receivables unless otherwise agreed to in writing by Griptec.
(3) "Inventories" means all useable and saleable
inventory of USG values at the less of cost (determined on a first-in, first-out
basis) or market.
(4) "Payables" means all liabilities of USG, whether
accrued, fixed, contingent or otherwise, with respect to any matter, as of the
relevant time, including a loan payable to Griptec for $50,000, approximately
$45,000 severance pay due Gary Garland and the approximate $22,000 note payable
to Mr. Garland's parents, but excluding the unpaid principal balance of the Bank
Loan. Payables shall be determined in accordance with generally accepted
accounting principles. For a period of ninety (90) days after the Closing, any
Payables that were incurred prior to the Closing but were not included in the
calculations of the Current Ratio at the Closing shall be determined and a new
Current Ratio shall be calculated ("Adjusted Current Ratio") as of the Closing
Date.
12.3 Conversion of Ogilvie Debt. Prior to the Closing Date, Ogilvie
--------------------------
shall contribute to the capital of USG, in a manner which will not cause USG to
realize any income or to be subject to any taxation, all but $500,000 of the
Ogilvie Debt (hereafter referred to as the "Remaining Ogilvie Debt"). No
additional shares of USG shall be issued or delivered to Ogilvie in connection
with such contribution to capital. For purposes hereof, the term Ogilvie Debt
means and includes all indebtedness of any kind or nature whatever, owed to him
by USG, including, without limitation, all loans, advances, unpaid salary and
unreimbursed business expenses thereon. USG has not
24
<PAGE>
repaid, and at any time prior to the Closing Date shall not repay, any principal
or interest on or with respect to any of the Ogilvie Debt. Of the Remaining
Ogilvie Debt, $400,000 shall be repaid by GTI Sub at the Closing and the balance
of $100,000 (hereafter referred to as the "Balance of the Remaining Ogilvie
Debt") shall be repaid by GTI Sub within one hundred fifty (150) days following
the Closing Date and shall bear interest at the rate of five percent (5%) per
annum from the Closing Date until paid in full. GTI Sub may credit, against
payment of the Remaining Ogilvie Debt on the Closing Date, cancellation of the
$60,000 loan made by Griptec to Ogilvie, which loan shall be deemed repaid when
such credit has been taken.
12.4 Twelve Cavity Machine. Griptec is hereby granted the right and
---------------------
option to purchase from U.S. Grips, Inc. Canada the twelve (12) cavity transfer
mold and trim machine, subject to agreement between the parties regarding price
and terms.
12.5 Transactions with the Garlands. Prior to the Closing, Ogilvie
------------------------------
shall have purchased all of the shares of USG held by Gary Garland ("Garland")
and in connection therewith, Ogilvie shall have obtained from Garland a general
release of all claims which Garland has or may claim to have against USG,
whether suspected or unsuspected (in form and substance acceptable to Griptec
and GTI Sub), and a disclosure letter signed by Garland acknowledging his
knowledge and awareness of the terms of this Agreement and the Merger, and his
willingness to conclude the sale of his shares of USG to Ogilvie. In addition,
Ogilvie shall deliver to USG a general release from Garland's parents of all
claims which they have or may claim to have against USG, whether suspected or
unsuspected (in form and substance acceptable to Griptec and GTI Sub), upon
payment of their notes payable as recorded on the books of USG. Ogilvie agrees
to indemnify, defend, protect and hold Griptec and GTI Sub, and their respective
officers, directors, shareholders, employees, agents, representatives,
successors and assigns, harmless from and against any claim by Garland or
Garland's parents.
13. Conditions Precedent to Closing.
-------------------------------
13.1 Conditions Precedent to Obligations of Griptec and GTI Sub.
----------------------------------------------------------
The obligations of Griptec and GTI Sub are subject to the fulfillment or
satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) The representations and warranties of USG and each of the
USG Shareholders shall be true and correct in all material respects as of the
Closing Date; and USG and the USG Shareholders shall have delivered to Griptec
and GTI Sub a certificate of an executive officer, dated as of the Closing Date,
to the foregoing effect.
25
<PAGE>
(b) USG and the USG Shareholders shall have performed and
complied with all covenants or conditions required of them by this Agreement to
be performed and complied with by it prior to the Closing Date; and USG and the
USG Shareholders shall have delivered to Griptec and GTI Sub a certificate of an
executive officer, dated as of the Closing Date, to the foregoing effect.
(c) No material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of the
business of USG shall have occurred, whether or not such change shall have been
caused by the deliberate act or omission of USG and/or any of the USG
Shareholders, and USG and the USG Shareholders shall have delivered to Griptec
and GTI Sub a certificate of an executive officer, dated as of the Closing Date,
to the foregoing effect.
(d) The Bank shall have consented to the transfer of the Bank
Loan on terms acceptable to Griptec or shall have agreed to terminate its
security interest in the assets of USG upon payment in full of the Bank Loan.
(e) Griptec shall have approved, in its sole and absolute
discretion, the terms of all contracts to which USG is a party, including those
with ARC Industries, Chandler, Arizona; Medway Plastics, Long Beach, California;
and World-Line Inc., Red Springs, North Carolina; and the open purchase order
from Cobra Golf, Vista, California.
(f) Griptec shall have approved, in its sole and absolute
discretion, the suitability of each of the USG Shareholders.
(g) Each director and officer of USG, and each USG
Shareholder, shall deliver to Griptec at or prior to the Closing a general
release in form reasonably acceptable to Griptec and the general release from
each director and officer shall also include a resignation.
13.2 Conditions Precedent to Obligations of USG and the USG
------------------------------------------------------
Shareholders. The obligations of USG and the USG Shareholders are subject to
- - ------------
the fulfillment or satisfaction at or prior to the Closing Date of each of the
following conditions:
26
<PAGE>
(a) The representations and warranties of Griptec and GTI Sub
shall be true and correct in all material respects as of the Closing Date; and
Griptec and GTI Sub shall have delivered to USG and the USG Shareholders a
certificate of an executive officer, dated as of the Closing Date, to the
foregoing effect.
(b) Griptec and GTI Sub shall have performed and complied
with all covenants or conditions required of them by this Agreement to be
performed and complied with by it prior to the Closing Date; and Griptec and GTI
Sub shall have delivered to USG and the USG Shareholders a certificate of an
executive officer, dated as of the Closing Date, to the foregoing effect.
(c) No material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of the
business of Griptec shall have occurred, whether or not such change shall have
been caused by the deliberate act or omission of Griptec, and Griptec and GTI
Sub shall have delivered to USG and the USG Shareholders a certificate of an
executive officer, dated as of the Closing Date, to the foregoing effect.
(d) On or prior to the Closing Date, Griptec shall have
raised $1,290,000 of additional equity, which may include funds received by
Griptec from any private placement concluded on or after August 1, 1995.
14. Closing Deliveries. The Closing of the Merger is conditioned upon all
------------------
of the following:
14.1 Deliveries by Griptec. At the Closing, Griptec shall deliver to
---------------------
USG and the USG Shareholders the following, which, where applicable, shall be in
a form satisfactory to counsel to USG:
(a) A certified copy of the resolutions of the Board of
Directors of Griptec authorizing the execution, delivery and performance of this
Agreement and all related documents and agreements;
(b) Certificates required by Sections 13.2(a) through (c) and
evidence of compliance with Section 13.2(d) hereof;
(c) A certificate, dated within ten (10) days of the Closing
Date, of the Secretary of State of California, establishing that Griptec is in
existence, has paid all franchise taxes and otherwise is in good standing to
transact business in the State of California;
27
<PAGE>
(d) The certificates representing the shares of Griptec to be
delivered to the USG Shareholders as required by Section 2.2 hereof; and
(e) The repayment of $400,000 of the Balance of the Ogilvie
Debt as required by Section 12.3 hereof.
14.2 Deliveries by USG and the USG Shareholders. At the Closing,
------------------------------------------
USG and the USG Shareholders shall deliver to Griptec the following, which,
where applicable, shall be in form satisfactory to Griptec:
(a) A certified copy of the resolutions of the Board of
Directors of USG authorizing the execution, delivery and performance of this
Agreement and all related documents and agreements;
(b) Certificates required by Sections 13.1(a) through (c)
hereof;
(c) Certificates, dated within ten (10) days of the Closing
Date, from the Secretary of the States of California and Florida, establishing
that USG is in existence, has paid all franchise taxes and otherwise is in good
standing to transact business in such States;
(d) The general releases and resignations required by Section
13.1(g) hereof;
(e) The certificates representing the shares of USG to be
surrendered in the Merger, together with the duly executed Stock Assignments
Separate from Certificate and the Investment Letters signed by all of the USG
Shareholders, as required by Section 2.3 hereof;
(f) The Noncompetition Agreement, duly signed by Ogilvie;
(g) The Employment Agreement, duly signed by Herber;
(h) Any assignments with respect to the name "U.S. Grips" as
required by Section 12.1 hereof;
(i) Calculation of the Adjusted Current Ratio, if available,
as required by Section 12.2(b)(4) hereof; and
(j) Evidence of the contribution of the Ogilvie Debt to
capital, as required by Section 12.3 hereof.
28
<PAGE>
15. Indemnification.
---------------
15.1 Indemnification by the USG Shareholders. Each of the USG
---------------------------------------
Shareholders, jointly and severally, hereby indemnify and agree to hold Griptec
and GTI Sub harmless from, against and in respect of, and on demand shall
reimburse Griptec and GTI Sub for: (i) any and all loss, liability or damage
suffered or incurred by Griptec or GTI Sub by reason of any untrue
representation, breach of warranty or nonfulfillment of any covenant by USG or
any USG Shareholder contained herein or in any certificate, document or
instrument delivered to Griptec or GTI Sub pursuant hereto or in connection
herewith; (ii) any debts, liabilities or obligations of USG, direct or indirect,
fixed, contingent or otherwise, which exist as at or as of the USG Balance Sheet
Date or which arise after the USG Balance Sheet Date but which are based upon or
arise from any act, omission, transaction, circumstance, sale of goods or
service, state of facts or other condition which occurred or existed on or
before the USG Balance Sheet Date, whether or not then known, due or payable,
except to the extent reflected or reserved against o the face of the USG Balance
Sheet (excluding the notes thereto); (iii) any and all loss, liability or damage
suffered or incurred by Griptec and/or GTI Sub by reason of or in connection
with any claim for finder's fee or brokerage or other commission arising by
reason of the Merger and incurred or alleged to have been incurred at the
instance of USG or any USG Shareholder; (iv) any and all loss, liability or
damage suffered or incurred by Griptec and/or GTI Sub by reason of any claim for
severance, holiday or vacation pay accruing or incurred at any time prior to the
Closing Date; and (v) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation, legal
fees costs and expenses, incident to any of the foregoing or incurred in
investigation or attempting to avoid same or to oppose imposition thereof or in
enforcing this indemnity. Neither USG Shareholder shall be entitled to seek or
obtain indemnity or contribution from USG or GTI Sub in the event Griptec or GTI
Sub seeks and/or obtains indemnity from either or both of the USG Shareholders.
In the event of any breach of this Agreement by USG or the USG Shareholders, or
if there is any misrepresentation, inaccuracy or omission in any representation
or warranty made by USG or the USG Shareholders in this Agreement or in any
agreement or certificate required to be delivered by them pursuant to this
Agreement, then, in such event, in addition to all other rights and remedies
which Griptec and/or GTI Sub may have, they shall also be entitled to setoff
against the Balance of the Remaining Ogilvie Debt and the earn-out shares
deliverable to the USG Shareholders pursuant to this Agreement.
15.2 Indemnification by Griptec Griptec hereby agrees to indemnify
--------------------------
and hold USG and each USG Shareholder harmless from, against and in respect of:
(i) any and all loss, liability or damage suffered or incurred by Griptec or GTI
Sub by reason of any untrue representation, breach of warranty or nonfulfillment
of any covenant by Griptec or GTI Sub contained herein or in any certificate,
document or instrument delivered to USG or
29
<PAGE>
the USG Shareholders pursuant hereto or in connection herewith; and (ii) any and
all actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses, including without limitation, legal fees costs and expenses,
incident to any of the foregoing or incurred in investigation or attempting to
avoid same or to oppose imposition thereof or in enforcing this indemnity.
16. Post-Closing Obligations of Ogilvie. As soon after the Closing Date
-----------------------------------
as is reasonably practicable, but in no event later than sixty (60) days
thereafter, Ogilvie shall cause Mark E. Hayes, or any other independent
certified public accountant reasonably acceptable to Griptec, to cause the
compiled financial statements for USG for its fiscal year-ended October 31,
1993, to be fully audited and to include all appropriate disclosures, footnotes
and schedules required by generally accepted accounting principles, and to issue
the audited financial statements for such fiscal year and to deliver copies
thereof to Griptec. In addition, during the same period of time, Ogilvie shall
cause Coopers & Lybrand and Mark E. Hayes (or such other independent certified
public accountant used to prepare the audited financial statements for fiscal
1993) to execute and deliver to Griptec appropriate consents to allow their
reports on the audited financial statements of USG to be included in any Form 8-
K, Form 10-K or any other filings by GTI with the Securities and Exchange
Commission. All costs associated with the matters described in this Section 16
are subject to the provisions of Section 18 below.
17. Commissioner's Legend. The parties hereto acknowledge that Section
---------------------
25102(a) of the California Corporations Code requires (i) that no part of the
purchase price is paid or received and none of the securities is issued until
the sale of such securities is qualified under the California Corporate
Securities Law of 1968, as amended, unless the sale of securities is exempt from
qualification as provided thereunder, and (ii) that the following provision be
included herein:
"THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT."
18. Costs and Fees. All legal, accounting and other costs and fees which
--------------
USG incurs in connection with the Merger and the preparation of audited
financial statements in
30
<PAGE>
excess of $12,000 shall be included as Payables and subject to the Minimum Ratio
as described in Section 12.2 above. Any costs above the maximum shall may be
offset against any monies or other consideration payable to the USG
Shareholders, including without limitation, the Balance of the Remaining Ogilvie
Debt or the earn-out shares, or is immediately payable upon demand. All legal,
accounting and other costs and fees incurred by Griptec in connection with the
transactions contemplated by this Agreement shall be paid by Griptec.
19. Survival of Representations and Warranties. Each statement,
------------------------------------------
representation, warranty, indemnity, covenant and agreement made by USG and any
USG Shareholder in this Agreement or in any document, certificate or other
instrument delivered by or on behalf of USG or any USG Shareholder pursuant to
this Agreement or in connection herewith shall be deemed the joint and several
statement, representation, warranty, indemnity, covenant and agreement of USG
and each such USG Shareholder. All statements, representations, warranties,
indemnities, covenants and agreements made by each of the parties hereto shall
survive the Closing.
20. Notices. All notices, requests, demands and other communications
-------
required or contemplated hereunder shall be in writing, shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, to the person to receive the notice, at the addresses
indicated below:
Griptec or GTI Sub: Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
Attn: Sam G. Lindsay, President
USG: U.S. Grips, Inc.
2440 La Mirada Drive, Suite A
Vista, California 92803
Attn: Barrie Ogilvie, CEO
USG Shareholders: At the addresses set forth on Schedule 1
Notice of change of address shall be given by written notice but shall not be
deemed effective until it has been given in the manner detailed in this Section.
21. Applicable Law. This Agreement shall be governed by, interpreted
--------------
under, and construed and enforced in accordance with the internal laws, and not
the laws pertaining to conflicts or choice of laws, of the State of California
applicable to agreements made and to be performed wholly within the State of
California.
31
<PAGE>
22. Attorneys' Fees and Litigation Costs. If any suit, legal proceeding
------------------------------------
or other action is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover its or his reasonable attorneys' fees and other costs
incurred in such proceeding or action, in addition to any other relief to which
it or he may be entitled.
23. Captions. The captions of the sections and subsections of this
--------
Agreement are included for reference purposes only and are not intended to be a
part of this Agreement or in any way to define, limit or describe the scope or
intent of the particular provision to which they refer.
24. Gender; Singular and Plural Number. The neuter gender includes the
----------------------------------
feminine and masculine, the masculine includes the feminine and neuter, and the
feminine includes the masculine and neuter, and each includes a corporation,
partnership or other legal entity when the context so requires. Also, the
singular shall include the plural number where the context so requires and visa
versa.
25. Waivers. No waiver of any breach or default hereunder, or of any
-------
condition precedent to the performance of any obligation hereunder, shall be
considered valid unless in writing and signed by the parties giving such waiver
or against whom such waive is to be enforced, and no such waiver shall be deemed
a waiver of any subsequent breach or default of the same or similar nature.
26. Partial Invalidity and Severability. If any provision of this
-----------------------------------
Agreement shall be held or deemed to be, or shall, in fact, be inoperative or
unenforceable as applied in any particular case because if conflicts with any
other provision or provisions hereof or any constitution or statute or rule of
public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
sections or subsections of this Agreement shall not affect the remaining
portions thereof.
27. Interpretation. The parties hereto acknowledge and agree that each
--------------
has been given the opportunity to independently review this Agreement with legal
counsel, and has the requisite experience and sophistication to understand,
interpret and agree to the particular language of the provisions hereof. In the
event of any ambiguity in or dispute regarding the interpretation of this
Agreement, or any provision hereof, the interpretation of this
32
<PAGE>
Agreement shall not be resolved by any rule providing for interpretation against
the party who causes the uncertainty to exist or against the party who is the
draftsman of this Agreement.
28. 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.
29. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous written or oral
negotiations or agreements between them regarding the subject matter hereof. In
addition, modification or amendment of or to any term or provision of this
Agreement, or to this Agreement as a whole, shall not be effective unless set
forth in a writing and signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above mentioned.
GRIP TECHNOLOGIES, INC., a USGRIPS, INC., a Florida
California corporation corporation
<TABLE>
<S> <C>
By: By:
------------------------ ---------------------------
Sam G. Lindsay Paul J. Herber
President President
By: By:
------------------------ ---------------------------
James E. McCormick III J. Barrie Ogilvie
Secretary Secretary
USG ACQUISITION CORPORATION, ---------------------------
a California corporation J. BARRIE OGILVIE
By:
------------------------ ----------------------------
Sam G. Lindsay PAUL J. HERBER
President
By:
------------------------
James E. McCormick III
Secretary
</TABLE>
33
<PAGE>
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Stock Assignment Separate From Certificate
Exhibit B Form of Investment Letter
Exhibit C Agreement of Merger
Exhibit D "Piggy Back" Registration Rights
Exhibit E Noncompetition Agreement with Barrie Ogilvie
Exhibit F Employment Agreement with Paul Herber
Schedule 1 Schedule of USG Shareholders
Schedule 4.3 Schedule of Subscriptions, Options, Warrants, Etc. (Griptec)
Schedule 4.8 Schedule of Certain Changes (Griptec)
Schedule 4.10 Title to Assets (Griptec)
Schedule 4.11 Condition of Assets (Griptec)
Schedule 4.14 Schedule of Litigation (Griptec)
Schedule 6.8 USG Financial Statements
Schedule 6.12 Schedules (USG)
(1) Machinery, tools, equipment, etc.
(2) Real property and real property leases
(3) Receivables
(4) Insurance
(5) Independent contractor agreements
(6) Agreements re trademarks, patents, etc.
(7) Loan agreements
(8) Other agreements
(9) Employment related agreements
(10) Salaries and benefits, etc.
(11) List of officers and directors
34
<PAGE>
(12) Bank accounts, etc.
(13) Powers of attorney, etc.
Schedule 6.17 Schedule of Intangible Property
Schedule 6.18 Schedule of Customers
Schedule 6.19 Schedule of Vendors and Suppliers
Schedule 6.20 Schedule of Product Warranty Information
35
<PAGE>
EXHIBIT A
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
____________________________________ hereby transfers, assigns, conveys
and delivers to Grip Technologies, Inc., a California corporation ("Company")
___________________________________________________ (________________) shares of
Common Stock of U.S. Grips, Inc., a Florida corporation ("Company"), represented
by Certificate Nos. __________________, and hereby appoints JAMES E. McCORMICK
III, as ________________ attorney-in-fact to transfer said shares on the books
and records of the Company.
Dated: ___________, 1995
______________________________________
______________________________________
A-1
<PAGE>
EXHIBIT B
---------
INVESTMENT LETTER
Mr. Sam G. Lindsay
Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
Ladies and Gentlemen:
The undersigned has received and reviewed that certain Agreement and Plan
of Reorganization, dated June 16, 1995 ("Agreement"), by and between Grip
Technologies, Inc., a California corporation ("Griptec"), and U.S. Grips, Inc.
("USG"). Pursuant to the Agreement, it is contemplated that USG shall be merge
with and into Griptec and, in connection therewith, each outstanding share of
Common Stock of USG will be converted into and exchanged for _____________
shares of Common Stock of Griptec (hereafter referred to as the "Merger").
The undersigned owns ___________ shares of Common Stock of USG (the "USG
Shares"). Pursuant to the Merger, the undersigned will receive _________ shares
of Common Stock of Griptec ("Griptec Shares") (see Schedule 1 to the Agreement).
In contemplation of receipt of the Griptec Shares in the Merger, the
undersigned hereby represents and warrants to Griptec as follows:
(a) He has the power and authority to execute and deliver this
Investment Letter.
(b) The USG Shares owned by him are validly issued, fully paid and
non-assessable.
(c) He owns the USG Shares free and clear of any liens, encumbrances,
pledges, security interests or rights of any third parties.
(d) No consent of any third party or governmental authority is
required in connection with the Merger, save the issuance of a permit by the
California Commissioner of Corporations.
B-1
<PAGE>
(e) He is acquiring the Griptec Shares in the Merger for investment
only and not with a view toward the sale or other distribution of any shares or
other securities of Griptec.
(f) He is an existing shareholder of Griptec and either has a
preexisting personal or business relationship with the officers, directors or
controlling persons of Griptec, or by reason of his business or financial
experience or the business or financial experience of his professional advisor
who is not affiliated with and who is not compensated by Griptec or any
affiliate or selling agent of Griptec, directly or indirectly, has the capacity
to protect his own interest in connection with the Merger.
(g) He has a net worth, or joint net worth with his spouse, as of the
date of this Investment Letter in excess of $1,000,000, or had income in excess
of $200,000 in each of the two most recent years or joint income with his spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year.
The undersigned hereby :acknowledges and agrees that the Griptec Shares
which he will receive in exchange for his USG Shares will be "restricted
securities" and may not be transferred except in compliance with the U.S.
Securities Act of 1933, as amended, and all applicable Blue Sky laws, and that
the certificate representing the Griptec Shares shall bear a legend which reads
substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("SECURITIES ACT"), AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (B) IN COMPLIANCE WITH RULE 145 UNDER
THE SECURITIES ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BY SUCH TRANSFER."
Dated: ____________, 1995
--------------------------------------
[signature of the Shareholder]
--------------------------------------
[print name of the Shareholder]
B-2
<PAGE>
EXHIBIT C
SHORT-FORM AGREEMENT OF MERGER
AND CERTIFICATES OF APPROVAL OF AGREEMENT OF MERGER
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement") is made and entered into as of
September _____, 1995, by and between GRIP TECHNOLOGIES, INC., a California
corporation ("Griptec"), USG ACQUISITION CORPORATION, a California corporation
("GTI Sub") and USGRIPS, INC., a Florida corporation ("USG").
RECITALS
A. Concurrently, the parties have entered in that certain Agreement and
Plan of Reorganization ("Reorganization Agreement").
B. Griptec was incorporated on January 4, 1957 and currently has
outstanding 4,086,655 shares of its Common Stock and 1,350,000 shares of its
Series A Convertible Preferred Stock.
C. GTI Sub was incorporated on September 14, 1995 and currently has
outstanding 100 shares of its Common Stock, all of which are owned by Griptec.
D. USG was incorporated on March _____, 1992 and currently has outstanding
500 shares of one dollar ($1.00) par value common stock.
E. The parties desire to have USG merge with and into GTI Sub and, in
connection therewith, the shareholders of USG shall receive shares of Common
Stock of Griptec, all upon the terms and subject to the conditions set forth in
this Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, the parties hereto agree as follows:
C-1
<PAGE>
1. Merger. USG shall be merged with and into GTI Sub. Upon such merger,
------
the separate existence of USG ceases and GTI Sub will succeed, without other
transfer, to the rights and property of USG and shall be subject to all of the
debts and liabilities thereof in the same manner as if GTI Sub had itself
incurred them. All rights of creditors and all liens upon the property of each
corporation shall be preserved unimpaired, provided that such liens upon
property of USG shall be limited to the property affected thereby immediately
prior to the time the merger is effected.
2. Effect of Merger; Conversion Ratio.
----------------------------------
2.1 Conversion of Shares. Upon such merger, each outstanding share
--------------------
of one dollar ($1.00) par value common stock of USG (hereafter referred to as
the "USG Shares"), other than shares held by shareholders who perfect their
rights as dissenting shareholders under applicable law, shall be converted to
1,200 shares of Common Stock of Griptec. The conversion of the USG Shares as
provided in this Section 2.1 shall occur automatically upon the effective date
without action by the holders thereof. Each holder of the USG Shares thereupon
shall surrender his share certificate or certificates to Griptec and shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of Common Stock of Griptec into which his USG
Shares, theretofore represented by a certificate or certificates so surrendered,
shall have been converted as provided in this Agreement.
2.2 Earn-Out Shares. In addition to the shares described in Section
---------------
2.1 hereof, Griptec agrees to issue, over a three (3) year period ending on July
31, 1998, up to 400,000 additional shares of its Common Stock to the USG
shareholders pursuant to the earn-out provisions set forth in Section 2.4 of the
Reorganization Agreement. Each USG shareholder shall be entitled to receive that
percentage of the earn-out shares, when issued, as is described on Schedule 1
attached to the Reorganization Agreement. The USG shareholders will not have to
convert or surrender any shares of either USG or Griptec in order to receive his
proportionate percentage of the earn-out shares.
3. Affect on Surviving Corporations. Upon the merger, the outstanding
--------------------------------
shares of Common Stock of Griptec and GTI Sub shall remain outstanding and are
not affected by the merger.
4. Articles of Incorporation. Upon the effectiveness of the merger,
-------------------------
Article 1 of the Articles of Incorporation of GTI Sub will be amended in its
entirety to read as follows:
"1. Name. The name of this corporation is USGRIPS, INC."
----
C-2
<PAGE>
5. Fractional Shares. Fractional shares shall not be issued and fractions
-----------------
of one-half or more shall be rounded to a whole share and fractions of less than
one-half shall be disregarded. No cash will be paid in lieu of fractional
shares.
6. Further Assurances. After the merger becomes effective, USG, through
------------------
the persons who were its officers immediately prior to the merger, shall execute
or cause to be executed such further assignments, assurances or other documents
as may be necessary or desirable to confirm title to properties, assets and
rights in Griptec.
7. Plan of Reorganization. This Agreement is intended as a plan of
----------------------
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended. This Agreement and the Reorganization Agreement are intended
to be construed together in order to effectuate their purposes.
8. Termination; Abandonment. This Agreement may be terminated and the
------------------------
proposed merger abandoned at any time prior to the effective date of the merger
and whether before or after approval of this Agreement by the Board of Directors
or shareholders of either corporation as follows:
(a) By mutual consent of the Board of Directors of Griptec and USG; or
(b) Upon termination of the Reorganization Agreement.
9. Effective Date. The effective date of the merger is the date upon
--------------
which a copy of this Agreement is filed with the Secretary of State of
California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above mentioned.
GRIP TECHNOLOGIES, INC., a
California corporation USGRIPS, INC, a Florida Corporation
By By
-------------------------- -------------------------
Sam G. Lindsay Paul J. Herber
President President
C-3
<PAGE>
By By
-------------------------- --------------------------
James E. McCormick III J. Barrie Ogilvie
Secretary Secretary
USG ACQUISITION CORPORATION,
a California corporation
By
--------------------------
Sam G. Lindsay
President
By
--------------------------
James E. McCormick III
Secretary
C-4
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
SAM G. LINDSAY and JAMES E. McCORMICK III certify that:
1. They are the President and Secretary, respectively of USG
Acquisition Corporation, a California corporation ("GTI Sub").
2. The Agreement of Merger in the form attached was duly approved by
the Board of Directors of GTI Sub.
3. The shareholder approval was by holders of 100% of the outstanding
shares of GTI Sub.
4. There is only one class of shares, Common Stock, no par value, and
the number of shares outstanding is 100.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Dated: September _____, 1995
USG ACQUISITION CORPORATION,
a California corporation
By:
---------------------------------
Sam G. Lindsay, President
By:
----------------------------------
James E. McCormick III, Secretary
C-5
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
SAM G. LINDSAY and JAMES E. McCORMICK III certify that:
1. They are the President and Secretary, respectively of Grip
Technologies, Inc., a California corporation ("Griptec").
2. The Agreement of Merger in the form attached was duly approved by
the Board of Directors of Griptec.
3. The only classes of shares of Griptec which are outstanding are
Common Stock and Series A Convertible Preferred Stock. There are 4,086,655
shares of Common Stock and 1,350,000 shares of Series A Convertible Preferred
Stock which are presently issued and outstanding.
4. Pursuant to California Corporations Code Section 1201(b), no
shareholder approval was required of the outstanding shares of Common Stock of
Griptec.
5. Pursuant to Paragraph (d)(5) of the Certificate of Determination
of Griptec filed with the Secretary of State on April 25, 1994, no vote of the
Series A Convertible Preferred Stock is required.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Dated: September _____, 1995
GRIP TECHNOLOGIES, INC.,
a California corporation
By:
----------------------------------
Sam G. Lindsay, President
By:
----------------------------------
James E. McCormick III, Secretary
C-6
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
PAUL J. HERBER and J. BARRIE OGILVIE certify that:
1. They are the President and Secretary, respectively of USGRIPS, Inc., a
Florida corporation ("USG").
2. The Agreement of Merger in the form attached was duly approved by the
Board of Directors of USG.
3. The shareholder approval was by holders of 100% of the outstanding
shares of USG.
4. There is only one class of shares, one dollar ($1.00) par value common
stock, and the number of shares outstanding is 500.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Dated: September _____, 1995
U.S. Grips, Inc., a Florida
corporation
By:
-----------------------------------
Paul J. Herber, President
By:
-----------------------------------
J. Barrie Ogilvie, Secretary
C-7
<PAGE>
EXHIBIT D
"PIGGY BACK" REGISTRATION RIGHTS
1. Certain Definitions. As used in this Section 1 and elsewhere herein,
-------------------
the following terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Company" or "Griptec" means Grip Technologies, Inc., a California
corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Merger Agreement" means that certain Agreement and Plan of
Reorganization, dated September 20, 1995, as amended, by and among the Company,
USG Acquisition Corporation, USGRIPS, Inc. and Stockholders.
"Registration Rights Period" means the two (2) year period commencing
on September 22, 1995 and ending on September 21, 1997.
"Registration Statement" means a registration statement filed with by
the Company with the Commission for a public offering and sale of securities of
the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 1.
"Registrable Shares" means the shares of Common Stock issued or
issuable by the Company to Stockholder pursuant to the Merger Agreement;
provided, however, that shares of Common Stock that are Registrable Shares shall
cease to be Registrable Shares (i) upon any sale pursuant to a Registration
Statement, or (ii) at such time as they are eligible for sale pursuant to Rule
144 under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
D-1
<PAGE>
"Stockholders" means J. Barrie Ogilvie and Paul J. Herber.
2. Incidental Registration.
-----------------------
(a) Whenever the Company proposes to file a Registration Statement at
any time and from time to time during the Registration Rights Period, it will,
prior to such filing, give written notice to all Stockholders of its intention
to do so and, upon the written request of a Stockholder or Stockholders given
within twenty (20) days after the Company provides such notice (which request
shall state the intended method of disposition of such Registrable Shares), the
Company shall use its best efforts to cause all Registrable Shares that the
Company has been requested by such Stockholder or Stockholders to register to be
registered under the Securities Act to the extent necessary to permit their sale
or other disposition in accordance with the intended methods of distribution
specified in the request of such Stockholder or Stockholders; provided that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Section 2 without obligation to any Stockholder.
(b) In connection with any offering under this Section 2 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such offering unless the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (provided that such terms must be consistent with this Agreement), and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If in the opinion of the
managing underwriter the registration of all, or part of, the Registrable Shares
that the holders have requested to be included would materially and adversely
affect such public offering, then the Company shall be required to include in
the underwriting only that number of Registrable Shares, if any, that the
managing underwriter believes may be sold without causing such adverse effect.
If the number of Registrable Shares to be included in the underwriting in
accordance with the foregoing is less than the total number of shares that the
holders of Registrable Shares have requested to be included, then the holders of
Registrable Shares who have requested registration and other holders of shares
of Common Stock entitled to include shares of Common Stock in such registration
shall participate in the underwriting pro rata based upon their total ownership
of shares of Common Stock of the Company which they requested to be registered.
3. Registration Procedures. If and whenever the Company is required
-----------------------
by the provisions of this Addendum to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
D-2
<PAGE>
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or one hundred
twenty (120) days after the effective date thereof;
(c) as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service or process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
4. Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses of all registrations hereunder. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying herewith, including, without limitation, all registration and filing
fees, exchange listing fees, printing expenses,
D-3
<PAGE>
fees, and expenses of counsel for the Company, state Blue Sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts, selling commissions, and the
fees and expenses of selling Stockholders' own counsel.
5. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages, or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws, or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus, or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
underwriter, and each such controlling person for any legal or any other
expenses reasonably incurred by such seller, underwriter or controlling person
in connection with the investigating or defending any such loss, claim, damage,
liability, or action; provided, however, the Company will not be liable in any
such case to the extent that any such loss, claim, damage, or liability arises
out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus, or final prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter, or controlling person specifically for use in the preparation
thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Company, such directors
and officers, underwriter, or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
D-4
<PAGE>
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment, or
supplement; provided, however, that the obligations of such Stockholders
hereunder shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such registration.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and provided further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 5. The Indemnified Party may participate in such
defense at such party's expense; provided however, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to the
actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the
D-5
<PAGE>
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling Stockholder or any such controlling person in circumstances for which
indemnification is provided under this Section 5; then, in each such case, the
Company and such Stockholder will contribute to the aggregate losses, claims,
damages, or liabilities to which they may be subject (after contribution from
others) in such proportions so that such holder is responsible for the portion
represented by the percentage that the public offering price of its Registrable
Shares offered by the Registration Statement bears to the public offering price
of all securities offered by such Registration Statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such case
(A) no such holder will be required to contribute any amount in excess of the
proceeds to it of all Registrable Shares sold by it pursuant to such
Registration Statement, and (B) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation.
6. Information by Holder. Each holder of the Registrable Shares
---------------------
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Addendum.
7. "Stand-Off" Agreement. Each Stockholder, if requested by the
---------------------
Company and an underwriter of Common Stock or other securities of the Company,
shall agree not to sell or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Stockholder for a
specified period of time (not to exceed 120 days) following the effective date
of a Registration Statement; provided, that:
(a) such agreement shall only apply to the first such Registration
Statement covering Common Stock of the Company to be sold on its behalf to the
public in an underwritten offering; and
(b) all Stockholders holding not less than the number of shares of
Common Stock held by such Stockholder and all officers and directors of the
Company enter into similar agreements.
D-6
<PAGE>
Such agreement shall be in writing in a form satisfactory to the Company and
such underwriter. The Company may impose stop-transfer instructions with
respect to the Registrable Shares or other securities subject to the foregoing
restriction until the end of the standoff period.
D-7
<PAGE>
EXHIBIT E
NONCOMPETITION AGREEMENT WITH
BARRIE OGILVIE
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT ("Agreement") is made and entered into
as of September _____, 1995, by and among GRIP TECHNOLOGIES, INC., a California
corporation ("Griptec"), USG ACQUISITION CORPORATION, a California corporation
("GTI Sub"), and J. BARRIE OGILVIE, an individual ("Ogilvie").
RECITALS
--------
A. Griptec, GTI Sub, Ogilvie and others are parties to that certain
Agreement and Plan of Reorganization, dated as of September _____, 1995 ("Merger
Agreement"), pursuant to which USGRIPS, Inc., a Florida corporation ("USG") was
merged with and into GTI Sub, and in connection therewith, shares of Common
Stock of Griptec, the parent of GTI Sub, were issued to all of the shareholders
of USG. Ogilvie was the controlling shareholder of USG and was its Chief
Executive Officer and a director.
B. As a material inducement to Griptec and GTI Sub (Griptec and GTI
Sub are sometimes hereafter collectively referred to as the "Company") to enter
into the Merger Agreement, Ogilvie agrees not to compete with the Company upon
the terms and subject to the conditions set forth herein. This Agreement is
delivered pursuant to Section 10.1 of the Merger Agreement.
TERMS AND CONDITIONS
--------------------
NOW, THEREFORE, in consideration of the foregoing recitals and
premises, and the mutual promises, agreements, representations and warranties
herein contained, the parties hereto agree as follows:
1. Noncompetition Covenant. Ogilvie hereby agrees that he will not,
-----------------------
at any time from and after the date hereof until September _____, 2000
("Noncompetition Period"), directly or indirectly, engage in any business, trade
or activity, or have any interest in any person, firm, corporation, entity,
business or venture (whether as an
E-1
<PAGE>
employee, independent contractor, officer, director, agent, partner, joint
venturer, shareholder, creditor, lender or otherwise) or advise or consult with
any person or entity, that engages in any business, trade or activity in the
Territory (as that term is defined in Section 2 hereof) which business, trade or
activity is the same as, similar to or competitive with the Company's Business
(as that term is defined in Section 3 hereof).
2. Definition of Territory. For purposes hereof, the term "Territory"
-----------------------
means and refers to all of the following: (i) any county or counties in any
state in the United States; (ii) each of the 58 counties of the State of
California; (iii) each of the counties of each of the other states of the United
States of America; and (iv) worldwide, including without limitation, the
following foreign countries: all countries of European Community and Japan; in
which USG has done business. For purposes hereof, the terms "doing business,"
"done business" and "does business" means and refers to any aspect of the
Company's Business, including, without limitation, sales, marketing,
distribution, receiving or taking orders, advertising, promoting, designing or
manufacturing.
3. Definition of Company's Business. For purposes hereof, the term
--------------------------------
Company's Business means the design, manufacture, marketing, sales and
distribution of sports grips, including grips for golf clubs.
4. Covenant Consideration. The parties hereto acknowledge and agree
----------------------
that no portion of the consideration payable to Ogilvie pursuant to the
Merger Agreement has been separately allocated to the covenants and
obligations of Ogilvie set forth in this Agreement.
5. Specific Performance; Injunctive Relief. If Ogilvie breaches, or
---------------------------------------
threatens to breach, the noncompetition covenant described in Section 1 hereof,
the Company shall have the right, in addition to any other rights or remedies
which it may have, to seek and obtain specific performance thereof and to enjoin
such breach or threatened breach. The parties hereto acknowledge and agree that
any such breach or threatened breach will cause irreparable injury to the
Company, and that the Company could not be reasonably or adequately compensated
in damages at law. The equitable remedies provided herein are not exclusive of
any other remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
6. Interpretation and Enforceability.
---------------------------------
6.1 Severability of Covenants. The parties hereto intend that the
-------------------------
noncompetition covenant described in Section 1 hereof shall be deemed to be a
series of separate noncompetition covenants, one for each county and/or
governmental jurisdiction
E-2
<PAGE>
in which USG has done business. Except as provided in the immediately preceding
sentence, each such separate noncompetition covenant shall be deemed identical
in terms to each other noncompetition covenant contained in Section 1 hereof.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate noncompetition covenants deemed included in Section 1, then such
unenforceable noncompetition covenant(s) shall be deemed eliminated from the
provisions thereof for the purpose of such proceedings to the extent necessary
to permit the remaining separate noncompetition covenant(s) to be enforced in
such proceedings.
6.2 Blue-Pencilling. If any court determines that any noncompetition
---------------
covenant included in Section 1 hereof, or any part thereof, is unenforceable
because of the duration of such provision or the area covered thereby, such
court shall have the power to reduce the duration or area of such provision and,
in its reduced form, such provision shall then be enforceable and shall be
enforced.
6.3 Application of Other Law. Notwithstanding the provisions of
------------------------
Section 9 hereof, if the noncompetition covenant included in Section 1 hereof,
as it relates to any Territory exclusive of the State of California (or any
county thereof), would not be enforceable under California law but would be
enforceable under the internal laws of that other jurisdiction, then such
noncompetition covenant, solely as it relates to such other jurisdiction, shall
be governed by, interpreted under and construed and enforced in accordance with
the internal laws of such local jurisdiction.
7. Cross Default Provision. Any breach or default under the terms of
-----------------------
this Agreement shall be deemed to be a breach and default under the Merger
Agreement and any breach or default under the Merger Agreement shall be deemed
to be a breach and default hereunder.
8. Notices. All notices, requests, demands and other communications
-------
required or contemplated hereunder shall be in writing, shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed to have been given upon the earlier of
(a) the date of personal delivery to the person to receive such notice at the
address indicated below or (b) if mailed to the person to receive such notice at
the address indicated below, four (4) business days after the date of posting by
the United States Post Office as evidenced by the execution of the return
receipt. The parties addresses, for all purposes hereof, are as follows:
Griptec or GTI Sub: Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
Attn: Mr. Sam G. Lindsay, President
E-3
<PAGE>
Ogilvie: Mr. J. Barrie Ogilvie
140 Gravel Pit Road
R.R. #3
Dundas, Ontario, Canada L9H 5E3
Notice of change of address shall be given by written notice but shall not be
deemed effective until it has been given in the manner detailed in this Section.
9. Applicable Law. Except as provided in Section 6.3 hereof, this
--------------
Agreement shall be governed by, interpreted under, and construed and enforced in
accordance with the internal laws, and not the laws pertaining to conflicts or
choice of laws, of the State of California applicable to agreements made and to
be performed wholly within the State of California.
10. Attorneys' Fees and Litigation Costs. If any suit, legal
------------------------------------
proceeding or other action is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs incurred in such proceeding or action, in addition to any other
relief to which it may be entitled.
11. Waivers. No waiver of any breach or default hereunder, or of any
-------
condition precedent to the performance of any obligation hereunder, shall be
considered valid unless in writing and signed by the parties giving such waiver
or against whom such waiver is to be enforced, and no such waiver shall be
deemed a waiver of any subsequent breach or default of the same or similar
nature.
12. Interpretation. The parties hereto acknowledge and agree that
--------------
each has been given the opportunity to independently review this Agreement with
legal counsel, and has the requisite experience and sophistication to
understand, interpret and agree to the particular language of the provisions
hereof. In the event of any ambiguity in or dispute regarding the interpretation
of this Agreement, or any provision hereof, the interpretation of this
Agreement shall not be resolved by any rule providing for interpretation against
the party who causes the uncertainty to exist or against the party who is the
draftsman of this Agreement.
13. Section Headings. The section headings in this Agreement are
----------------
included for convenience only, are not a part of this Agreement and shall not be
used in construing it.
E-4
<PAGE>
14. Reference to Sections. All references to sections are deemed to
---------------------
include references to the sections subsidiary to the section referred to when
the context so requires. The term "this Section" refers to the Section of the
Agreement in which the reference is made and all other Sections subsidiary to
the Section referred.
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of each corporate party hereto, their respective successors
and permitted assigns, and each individual party hereto and his heirs, personal
representatives, estates, successors and permitted assigns.
16. 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.
17. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any and all prior or contemporaneous written or oral negotiations
and agreements between them regarding the subject matter hereof. No addition,
modification or amendment of or to any term or provision of this Agreement, or
to this Agreement as a whole, shall be effective unless set forth in writing and
signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above mentioned.
GRIP TECHNOLOGIES, INC.,
a California corporation
By By
------------------------ -------------------------
Sam G. Lindsay J. BARRIE OGILVIE
President
By
------------------------
James E. McCormick III
Secretary
E-5
<PAGE>
USG ACQUISITION CORPORATION, a
California corporation
By
------------------------
Sam G. Lindsay
President
By
------------------------
James E. McCormick III
Secretary
E-6
<PAGE>
EXHIBIT F
EMPLOYMENT AGREEMENT WITH
PAUL HERBER
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
September _____, 1995, by and between USG ACQUISITION CORPORATION, a California
corporation ("Company"), and PAUL HERBER, an individual ("Employee").
RECITALS
--------
A. The Company desires to employ Employee upon the terms and subject to
the conditions contained in this Agreement.
B. Employee desires to be hired and employed by the Company upon the
terms and subject to the conditions contained in this Agreement.
TERMS AND CONDITIONS
--------------------
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
----------
agrees to be employed by the Company, as the Vice President-Sales and Marketing
on the terms and subject to the conditions set forth herein. Employee shall
perform such duties for the Company as may be assigned to him from time to time
by the executive officers or Board of Directors of the Company. Employee agrees
to devote all of his working time and effort to the performance of his duties
hereunder during normal business hours. Employee further agrees to perform his
duties hereunder in an efficient, faithful, loyal and business like manner and
to conduct himself at all times during the term of this Agreement in a manner
which does not damage or otherwise adversely reflect upon the business
reputation or integrity of the Company.
2. Term and Termination.
--------------------
F-1
<PAGE>
2.1 Term. The term of this Agreement shall commence as of the date
----
hereof and, subject to the earlier termination as provided in Section 2.2
hereof, shall expire at the close of business on September _____, 2000
("Expiration Date").
2.2 Termination. Notwithstanding the Expiration Date set forth in
-----------
Section 2.1 hereof, the employment of Employee shall terminated upon the
occurrence of any of the following events, to be effective as of the date
hereinafter specified, and term of this Agreement shall thereupon terminate,
subject to the executory duties and obligations contained herein:
(a) The Company may, at any time, immediately terminate Employee for
"just cause". For purposes hereof, "just cause" includes, but is not limited to,
misconduct, dishonesty, extended absences, violation of Company policies and
procedures, violation of any laws regarding or related to sexual harassment or
discrimination in connection with his work or another employee of the Company,
improper disclosure of Confidential Information (as that term is defined in
Section 8 below), or any material and continuing failure of Employee to perform
his duties under this Agreement (except as a result of death or Total
Disability). Any termination for "just cause" shall become effective immediately
upon written notice from the Company to Employee describing, in reasonable
detail, the events or circumstances allegedly constituting "just cause".
(b) The death of Employee shall immediately terminate his employment
with the Company and this Agreement.
(c) The "Total Disability" of Employee shall terminate his
employment with the Company. For purposes of this Agreement, a condition of
"Total Disability" shall exist if Employee is unable or unwilling to perform his
duties hereunder, or it is determined by a medical doctor retained by the
Company that he would be unable to perform his duties hereunder, for a period of
at least three (3) consecutive months by reason of any medically determinable
physical or mental impairment. The termination shall be effective as of the date
it is first determined that Employee has suffered a total disability.
2.3 Terminable At Will Employment at Expiration of Term. The parties
---------------------------------------------------
hereto agree that if this Agreement is not extended or superceded, in either
case by another written instrument, and Employee continues his employment with
the Company beyond the Expiration Date, then, from and after the Expiration Date
the employment of Employee shall be terminable at will at any time, with or
without reason or cause, irrespective of Employee's longevity, upon the giving
of sixty (60) days prior written notice to the other party.
F-2
<PAGE>
2.4 No Additional Rights Conferred. Except as expressly provided
------------------------------
in this Agreement, nothing contained herein or in any other agreement
concurrently or subsequently entered into between the Company and Employee, such
as Stock Option Agreement(s), shall confer upon Employee any right with respect
to the continuation of his employment by the Company or interfere in any way
with the right of the Company to terminate his employment at any time or to
increase or decrease the compensation or other perquisites payable to Employee.
The inclusion of this Section 2.4 in this Agreement is not a promise,
inducement, covenant or representation by the Company that it has agreed or will
agree at any time in the future to enter into any other or additional agreements
with Employee with respect to any matter.
3. Compensation.
------------
3.1 Base Salary. As compensation for his employment hereunder,
-----------
Employee shall receive from the Company a base salary of $85,000 per annum. The
base salary shall be paid semi-monthly in accordance with the Company's usual
payroll practices. The amount actually paid to Employee shall be the base
salary less all applicable federal and state withholding taxes, F.I.C.A.,
unemployment and disability premiums or payment and all other applicable payroll
taxes.
3.2 Discretionary Bonuses. Employee will be eligible to receive
---------------------
discretionary bonuses, if and when determined and declared by the Company. The
inclusion of this provision in this Agreement shall not be deemed to be, nor be
construed as being, a commitment by the Company to pay Employee any bonus, or a
bonus of any specified amount, nor does it preclude the Company from paying
bonuses to some executive, management or other employees and not to others or to
Employee, as the Company, in its sole and absolute discretion, determines.
4. Additional Employment Benefits.
------------------------------
4.1 Major Medical Health Program. Employee shall be entitled to
----------------------------
participate in any major medical-health program or other group medical insurance
program in which the Company is enrolled at any time, or from time to time,
subject to the terms of the program or plan and any applicable waiting
probationary period and any pre-existing conditions.
4.2 Other Employment Benefits. Employee shall be entitled to such
-------------------------
other and further employment benefits and prerequisites as may be made available
from time to time by the Company to other employees of the Company with similar
jobs and responsibilities.
F-3
<PAGE>
5. Reimbursement for Expenses. The Company shall reimburse Employee for
--------------------------
his ordinary and necessary business expenses incurred with respect to the
business of the Company in accordance with policies and procedures adopted by
the Company from time to time. Under no circumstance will Employee be entitled
to reimbursement of any expense unless and until he submits complete and
accurate substantiation of that expense, together with a detailed explanation of
the nature and purpose of the expense and the person or persons involved.
6. Employees Manual. To the extent the Company has or at any time
----------------
hereafter adopts an Employees Manual, or modifies its Employees Manual from time
to time, the provisions of the Employees Manual, as so modified, are
incorporated herein and made a part of this Agreement and Employee hereby agrees
to be bound by and to comply with all of the terms, conditions, rules and
regulations set forth therein.
7. Tax Compliance Matters. The parties hereto agree that it shall be
----------------------
the responsibility of Employee to keep all appropriate records with respect to
any business related expenses incurred by Employee in connection with the
performance of his duties hereunder including the automobile allowance. It
shall be further understood and agreed that the Company, to the extent required
by applicable law, will report the payment or providing of any benefits or
perquisites to Employee in accordance with applicable laws and regulations and,
if required, will make appropriate payroll deductions with respect thereto. It
will be Employee's sole responsibility to report such benefits and perquisites,
to the extent applicable, as income. To the extent that Employee has not
accounted to the Company for any benefits or perquisites to enable the Company
to determine whether or not reporting or payroll deductions are appropriate, and
the Company later determines that reporting or deduction was appropriate, then
Employee agrees to indemnify and hold the Company harmless from and with respect
to any liability which the Company incurs in connection therewith, including,
without limitation, the tax-affected amount of the deduction and all penalties
and interest with respect thereto.
8. Covenant of Nondisclosure and Non-use. Employee understands and
-------------------------------------
acknowledges that he will be advised by the Company from time to time of certain
matters, and will be provided access to certain documents and information, which
are trade secrets or which the Company deems to be proprietary and confidential
("Confidential Information"), whether heretofore or hereafter obtained by
Employee while providing services to the Company, and whether or not Employee
assists the Company in the development of any such Confidential Information.
Employee agrees to maintain the confidentiality of any Confidential Information
provided to him in connection with the performance of his duties under this
Agreement; provided, however, such obligation shall terminate upon the
occurrence of any of the following: (a) where such information now or hereafter
becomes part of the public domain, and Employee has not
F-4
<PAGE>
obtained or learned such information as a result of "misappropriation" or
"improper means", as those terms are defined in California Civil Code Section
3426.1; (b) such information is already in the possession of Employee at the
time of the disclosure so long as it was acquired otherwise than by
"misappropriation" or "improper means"; (c) such information hereafter comes
into the possession of Employee from a third party without breach of this
covenant; or (d) such information is independently developed by Employee without
otherwise violating this Agreement. Notwithstanding any of the foregoing, under
no circumstance will Employee use or disclose any ideas, concepts, themes,
inventions, designs, improvements and discoveries conceived, developed or
written by him pursuant to this Agreement or in connection with this Agreement;
all rights to which shall belong to the Company.
8.1 Return of Materials. Employee further agrees that at the
-------------------
termination of this Agreement, he will not take, without the prior written
consent of the Company, tangible manifestations of the Confidential Information
on any memoranda, notes (whether or not prepared by Employee during the course
of his engagement by the Company), extracts, summaries, plats, sketches, plans,
data, lists, manuals, schedules, forms, programs, tapes, disks or other
documents, papers, media or records of any kind relating to or used in the
Company's business, or any reproductions thereof.
8.2 Unfair Competition. Any violation of this Section 8 shall be
------------------
deemed to be unfair competition, in addition to any other rights or remedies
which the Company may have against Employee.
9. Nonsolicitation of Customers, Etc. Employee will not influence or
---------------------------------
attempt to influence any of Company's customers, suppliers, vendors, lessees or
any others having business with the Company, either directly or indirectly, to
divert their business to any other person, firm or business similar to or in
competition with the Company.
10. Organizing Competitive Business. Employee agrees that during the
-------------------------------
term of this Agreement, Employee will not undertake the planning or organization
of any business activity similar to or competitive with the business of the
Company. Employee further agrees that he will not, for a period of two (2)
years following the termination of this Agreement, either directly or
indirectly, solicit any of the Company's employees to work for or with Employee,
or its affiliates, or any other corporation, entity or individual, in a business
similar to or competitive with the Company or to work for a competitor of the
Company.
11. Notices. All notices, requests, demands and other communications
-------
required or contemplated hereunder shall be in writing, shall be personally
delivered or
F-5
<PAGE>
sent by registered or certified mail, postage prepaid, return receipt requested,
and shall be deemed to have been given upon the earlier of (a) the date of
personal delivery to the person to receive such notice at the address indicated
below or (b) if mailed to the person to receive such notice at the address
indicated below, four (4) business days after the date of posting by the United
States Post Office as evidenced by the execution of the return receipt. The
parties addresses, for all purposes hereof, are as follows:
Company: USG Acquisition Corporation
1681 McGaw
Irvine, California 92714
Employee: Paul Herber
------------------------------------------------
, California
------------------ -----------------
Notice of change of address shall be given by written notice but shall not be
deemed effective until it has been given in the manner detailed in this Section.
12. Applicable Law; Venue. This Agreement shall be governed by,
---------------------
interpreted under, and construed and enforced in accordance with the internal
laws, and not the laws pertaining to conflicts or choice of laws, of the State
of California applicable to agreements made and to be performed wholly within
the State of California. The sole forum for resolving disputes arising under or
relating to this Agreement shall be the Municipal and Superior Courts for the
County of Orange, California, or the Federal District Court for the Central
District of California and all related appellate courts, and the parties hereby
consent to the jurisdiction of such courts and agree that venue shall be in
Orange County, California.
13. Attorneys' Fees and Litigation Costs. If any suit, legal proceeding
------------------------------------
or other action is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover its or his reasonable attorneys' fees and other costs
incurred in such proceeding or action, in addition to any other relief to which
it or he may be entitled.
14. Waivers. No waiver of any breach or default hereunder, or of any
-------
condition precedent to the performance of any obligation hereunder, shall be
considered valid unless in writing and signed by the parties giving such waiver
or against whom such waive is to be enforced, and no such waiver shall be deemed
a waiver of any subsequent breach or default of the same or similar nature.
F-6
<PAGE>
15. Partial Invalidity and Severability. If any provision of this
-----------------------------------
Agreement shall be held or deemed to be, or shall, in fact, be inoperative or
unenforceable as applied in any particular case because if conflicts with any
other provision or provisions hereof or any constitution or statute or rule of
public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
sections or subsections of this Agreement shall not affect the remaining
portions thereof.
16. Interpretation. The parties hereto acknowledge and agree that each
--------------
has been given the opportunity to independently review this Agreement with
legal counsel, and has the requisite experience and sophistication to
understand, interpret and agree to the particular language of the provisions
hereof. In the event of any ambiguity in or dispute regarding the interpretation
of this Agreement, or any provision hereof, the interpretation of this Agreement
shall not be resolved by any rule providing for interpretation against the party
who causes the uncertainty to exist or against the party who is the draftsman of
this Agreement.
17. 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.
18. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous written or oral
negotiations or agreements between them regarding the subject matter hereof. No
addition, modification or amendment of or to any term or provision of this
Agreement, or to this Agreement as a whole, shall be effective unless set forth
in writing and signed by all the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above mentioned.
F-7
<PAGE>
USG ACQUISITION CORPORATION,
a California corporation
By:
----------------------- --------------------------------------
Sam G. Lindsay PAUL HERBER
President
F-8
<PAGE>
SCHEDULE 1
SCHEDULE OF USG SHAREHOLDERS
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NO. OF % OF EARN-OUT
SHARES SHARES TO BE
OF USG RECEIVED
- - ----------------------------------------------------------
<S> <C> <C>
James Barrie Ogilvie 400* 80%
140 Gravel Pit Road
R.R. #3
Dundas, Ontario
Canada L9H 5E3
- - ----------------------------------------------------------
Paul Joseph Herber 100 20%
20668 White Birch Drive
Vista, California 92803
- - ----------------------------------------------------------
</TABLE>
- - ------------------
*As of the date of this Schedule, Ogilvie actually owns 375 shares and
he has a right to acquire 25 shares from Gary Garland. Ogilvie will acquire
those shares prior to the closing and shall be solely responsible for all costs,
expenses and liabilities associated therewith.
<PAGE>
SCHEDULE 4.3
SCHEDULE OF OUTSTANDING SHARES,
OPTIONS AND WARRANTS
(ALL INFORMATION IS AS OF SEPTEMBER 15, 1995)
Number of shares of Common Stock outstanding: 4,086,655/(1)/
Number of shares of Series A Convertible Preferred Stock outstanding: 1,350,000
1994 Grip Technologies, Inc. Stock Option Plan (covering 600,000 shares):
<TABLE>
<CAPTION>
<S> <C>
Outstanding options 245,000
Shares issued upon exercise of options 4,000
Options cancelled 10,000
Stock options issued to PGA tour endorsers:
Outstanding options 450,000
Outstanding stock purchase warrants:
Mimides/McGarvey 120,000
Affiliate of Schneider Securities, Inc. 10,000
Placement Agent's warrants
(re 11/94 offering) 80,000
Kennedy #1 warrants 360,000
Placement Agent's warrants
(re Kennedy #1-6/95) 72,000/(2)/
Placement Agent warrants
(Re 8/8/95 offering) 25,220/(3)/
Kennedy #2 warrants 444,500
Placement Agents warrants
(re Kennedy #2-9/95) 88,900/(4)/
</TABLE>
- - -----------------
<PAGE>
/(1)/ This number is subject to variation as the original Harvest Recreation
Vehicles, Inc. shareholders exchange their shares, but should not increase
by more than 945 shares.
/(2)/ Schneider Securities, Inc. holds warrants to purchase 36,000 Units. Each
Unit consists of one share of Common Stock and one three-year warrant to
purchase one share of Common Stock.
/(3)/ Schneider Securities, Inc. holds a warrant to purchase 12,610 Units. Each
Unit consists of one share of Common Stock and one five-year warrant to
purchase one share of Common Stock.
/(4)/ Schneider Securities, Inc. holds a warrant to purchase 44,450 Units. Each
Unit consists of one share of Common Stock and one three-year warrant to
purchase one share of Common Stock.
<PAGE>
SCHEDULE 4.8
SCHEDULE OF CERTAIN CHANGES
(a) Griptec has decided to contract out substantially all of its
manufacturing.
(b) From time to time Griptec will purchase tooling (including cavities)
which in the aggregate exceeds $10,000.
(c) Griptec continued to incur operating losses during the fourth quarter
and fiscal year ended July 31, 1995.
(d) Griptec has granted a security interest in all of its technology to
Sam Lindsay as security for the loans made by Mr. Lindsay to Griptec
and as consideration for his guaranty of the $600,000 loaned Griptec
by First Interstate Bank (which is secured by a certificate of deposit
from Mr. Lindsay in a like amount) and of other corporate obligations.
(f) In connection with its decision to contract out all of its
manufacturing, GTI intends to sell its injection molding machines.
(h) In connection with the exercise of a stock option granted to John
Boykin, Griptec exchanged the option for 4,000 fully paid for shares
of its Common Stock.
(l) Griptec has agreed to enter into a Settlement Agreement with John
Svenson, a former Vice President-Marketing and Promotions and, in
connection therewith, to pay him $8,194 as severance pay and to
reimburse him for $1,306 in expenses.
(o) Since April 30, 1995, Griptec has issued and sold: (i) 360,000 Units,
each Unit consisting of one share of Common Stock and one three-year
warrant to purchase one share of Common Stock at $3.00 per shares,
(ii) 126,100 Units, each Unit consisting of one share of Common Stock
and one five-year warrant to purchase one share of Common Stock at
$5.00 per share, (iii) 444,500 Units, each Unit consisting of one
share of Common Stock and one three-year warrant to purchase one share
of Common Stock at $2.50 per share, and (iv) 4,000 shares upon the
exercise of a stock option. Griptec is continuing to sell Units
similar to those described in clause (ii) above.
<PAGE>
Note: Although certain changes are described in response to certain
- - ----
subparagraphs of Section 4.8, these disclosures are intended to be
applicable to any and all appropriate items.
<PAGE>
SCHEDULE 4.10
SCHEDULE OF EXCEPTIONS
TO TITLE TO ASSETS
1. Griptec is a party to that certain Standard Industrial/Commercial
Single-Tenant Lease-Gross, dated September 21, 1993, with Soo Kwang
Kim and In Ho Kim, regarding its offices and manufacturing facilities
located at 1681 McGaw, Irvine, California.
2. Certain technology used by Griptec in its business is the subject of a
License Agreement, dated as of July 31, 1993, with Elbert Davis and
Laguna Industries, Inc. In addition, Griptec is party to a Consulting
Services and Research and Development Agreement, dated as of July 31,
1993, with Elbert Davis which provides that any Inventions (as that
term is defined) conceived, developed or written by Mr. Davis during
the term of the agreement shall belong to and be the sole property of
Griptec.
3. Certain office equipment is subject to leases.
4. All of the technology of Griptec has been assigned to Sam G. Lindsay
as collateral for the loans he has made to Griptec and to secure any
repayment liability of any default which may occur under the loans
made by First Interstate Bank to Griptec, which is secured by a
certificate of deposit of Mr. Lindsay, or under any other corporate
liability guaranteed by Mr. Lindsay.
5. Griptec has tentatively agreed to a joint venture regarding the
industrial applications of its technology, although neither party to
the joint venture has signed any agreement.
6. Griptec has tentatively agreed to a joint venture regarding the
development of a commercially marketable glove product for the golf
industry, although neither party to the joint venture has signed any
agreement.
7. The equipment of the Company is subject to a security interest in
favor of a bank to secure a loan taken subject to by the Company in
connection with the purchase of certain assets from Poulin Progrip,
Inc. ("PPG"). Also, the
<PAGE>
equipment purchased from PPG is also subject to a security interest in
favor of PPG and Don Poulin to secure payment of the consideration for
the purchase of that equipment.
<PAGE>
SCHEDULE 4.11
SCHEDULE OF CONDITION
OF ASSETS
1. Griptec believes there is a greater than usual amount of down-time and
repairs required with respect to its injection molding equipment.
<PAGE>
SCHEDULE 4.14
SCHEDULE OF LITIGATION
1. Don Poulin, the owner of Poulin Progrip, Inc. ("PPG"), now known as
Don & Olivine Associates, Inc., has demanded Griptec reimburse him for
the costs of certain life insurance he claims he was required to
maintain for a period of approximately 23 months subsequent to the
acquisition of certain assets by Griptec from PPG. Pursuant to the
acquisition agreement, Griptec agreed to assume certain bank loans and
to cause certain guarantees given by Mr. Poulin to be released. In
June 1995, Griptec substituted a new guarantor for Mr. Poulin. The
range of Mr. Poulin's claim is between $5,000 and $8,000.
2. Griptec is in the process of documenting a settlement with John
Svenson (see item (l) on Schedule 4.8).
<PAGE>
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION ("Amendment")
is made and entered into as of September 21, 1995, by and between GRIP
TECHNOLOGIES, INC., a California corporation ("Griptec"), USG ACQUISITION
CORPORATION, a California corporation ("GTI Sub"), USGRIPS, INC., a Florida
corporation ("USG"), J. BARRIE OGILVIE, an individual ("Ogilvie"), PAUL J.
HERBER, an individual ("Herber") (Ogilvie and Herber are sometimes hereafter
individually referred to as a "USG Shareholder" or collectively as the "USG
Shareholders").
RECITALS
A. The parties entered in that certain Agreement and Plan of
Reorganization dated September 20, 1995 ("Agreement").
B. The parties desire to amend the Agreement on the terms and subject to
the conditions set forth herein.
TERMS AND CONDITIONS
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Transactions with Garland. On September 20, 1995, Griptec loaned
-------------------------
Ogilvie $50,000 which is represented by a Promissory Note due and payable on
September 22, 1995. Ogilvie used the proceeds of this loan to acquire twenty-
five (25) shares of USG from Gary F. Garland ("Garland"). On September 20,
1995, Griptec loaned USG $56,000, which is represented by a Promissory Note due
and payable on September 22, 1995. USG used the proceeds of this loan to pay
Garland severance pay of $40,000 and to repay loans to Bud F. and Dolores
Garland and the Bud F. Garland Grandchildrens Trust in the amount of $16,000.
2. Determination of Current Ratio. Notwithstanding the fact that the
------------------------------
severance pay obligation to Garland and the notes payable to Garland's parents
and a family trust have been paid, for purposes of determining the Current Ratio
the amount
<PAGE>
of severance pay obligation shall be $45,000 and the amount of the notes payable
shall be $21,869. In addition, all costs associated with reinstating USG shall
be included in Payables for purposes of determining the Current Ratio.
3. Articles of Merger. The Articles of Merger, the form attached hereto
------------------
as Exhibit A, are hereby approved. The parties are authorized to file the
Articles of Merger with the Division of Corporations of the State of Florida.
4. No Other Changes. Except for the amendments set forth herein, there
----------------
are no other changes or modifications to the Agreement and the Agreement, as
amended by this Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the
date first above mentioned.
GRIP TECHNOLOGIES, INC., a USGRIPS, INC., a Florida
California corporation corporation
By: By:
--------------------------- ---------------------------
Sam G. Lindsay Paul J. Herber
President President
By: By:
--------------------------- ---------------------------
James E. McCormick III J. Barrie Ogilvie
Secretary Secretary
USG ACQUISITION CORPORATION, ---------------------------
a California corporation J. BARRIE OGILVIE
By:
--------------------------- ---------------------------
Sam G. Lindsay PAUL J. HERBER
President
By:
---------------------------
James E. McCormick III
Secretary
2
<PAGE>
EXHIBIT A
Articles of Merger
A-1
<PAGE>
EXHIBIT 3.1(i)
RESTATED
ARTICLES OF INCORPORATION
OF
GRIP TECHNOLOGIES, INC.
Sam G. Lindsay and James E. McCormick III certify that:
1. They are the President and Secretary, respectively, of Grip
Technologies, Inc., a California corporation (the "Company").
2. The Articles of Incorporation of the Company are restated in their
entirety to read as follows:
First: The name of this corporation is Grip Technologies, Inc.
Second: The purpose of this corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
Third: The number and class of shares the corporation is authorized to
issue is as follows:
<TABLE>
<CAPTION>
Number of
Authorized Shares Class
----------------- -----
<S> <C>
25,000,000 Common (without par value)
3,000,000 Preferred (without par value)
</TABLE>
The Preferred Stock may be divided into such number of series as the
Board of Directors may determine. The Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock,
and to fix the number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The Board of Directors,
within the limits and restrictions stated in any resolution or resolutions
of the Board of Directors originally fixing the number of shares
constituting any series, may increase or decrease (but not below the number
of shares of such series then outstanding) the number of shares of any
series subsequent to the issue of that series.
<PAGE>
Fourth: The Board of Directors does hereby establish a series of
Preferred Stock as follows:
(a) Designation and Number. The designation of such series of
----------------------
Preferred Stock is Series A Convertible Preferred Stock. The number of
shares of such series is 1,350,000. The Board of Directors is authorized to
change the number of shares of such series not only before, but also after
any shares of such series have been issued, but it may not reduce the
authorized number of shares of such series below the number of shares of
such series already issued and still outstanding.
(b) Dividends. The Series A Convertible Preferred Stock is entitled
---------
to receive, out of funds legally available therefor, dividends at the
annual rate of $0.10 per share, when and as declared by the Board of
Directors. No dividends or other distributions shall be made with respect
to the Common Stock and no Common Stock shall be purchased during any
fiscal year of the corporation until dividends in the total amount of $0.10
per share on the Series A Convertible Preferred Stock shall have been
declared and paid or set apart during that fiscal year. Dividends on the
Series A Convertible Preferred Stock shall not be cumulative and no right
shall accrue to the Series A Convertible Preferred Stock by reason of the
fact that the corporation may fail to declare or pay dividends on the
Series A Convertible Preferred Stock in the amount of $0.10 per share or in
any amount in any previous fiscal year of the corporation, whether or not
the earnings of the corporation in that previous fiscal year were
sufficient to pay such dividends in whole or in part. After dividends in
the total amount of $0.10 per share on the Series A Convertible Preferred
Stock shall have been declared and paid or set apart in any one fiscal year
of the corporation, if the Board of Directors shall elect to declare
additional dividends in that fiscal year, out of funds legally available
therefor, such additional dividends shall be declared solely on the Common
Stock.
(c) Liquidation.
-----------
(1) Upon the voluntary or involuntary liquidation, winding up or
dissolution of the corporation, out of the assets available for
distribution to shareholders the Series A Convertible Preferred Stock shall
be entitled to receive, in preference to any payment on the Common Stock,
an amount equal to $1.00 per share plus (i) any dividends previously
declared and unpaid, and (ii) a premium of $0.10 per share per annum from
the date of the original issuance of the Series A Convertible Preferred
Stock to the date of the notice of liquidation, and no more. After the
full preferential liquidation
2
<PAGE>
amount has been paid to, or determined and set apart for, the Series A
Convertible Preferred Stock, the remaining assets shall be paid to the
Common Stock. In the event the assets of the corporation are insufficient
to pay the full preferential liquidation amount required to be paid to the
Series A Convertible Preferred Stock, the entire remaining assets shall be
paid to the Series A Convertible Preferred Stock and the Common Stock shall
receive nothing. Any "reorganization," as that term is defined in Section
181 of the California General Corporation Law, shall not be considered to
be a liquidation, winding up or dissolution within the meaning of this
subdivision (c) and, in such event, the holders of the Series A Convertible
Preferred Stock shall be entitled only to the rights provided in the
agreement and plan of reorganization and Chapters 12 and 13 of the
California General Corporation Law.
(2) Sections 502 and 503 of the Corporations Code do not apply
to the corporation's purchase of shares of Common Stock from an employee or
consultant of the corporation pursuant to any right of purchase granted to
the corporation under a contract for the services of the employee or
consultant or pursuant to the terms of the corporation's Stock Option Plan
or any stock option agreements issued pursuant thereto.
(d) Voting Rights. Without the approval of at least a majority of
-------------
the outstanding shares of Series A Convertible Preferred Stock, the
corporation shall not
(1) Amend its Articles of Incorporation to alter or change any
rights, preferences or privileges of the Preferred Stock so as materially
and adversely affect the Series A Preferred Stock;
(2) Increase the authorized number of shares of Preferred Stock;
(3) Authorize another class of shares senior to the Series A
Convertible Preferred Stock with respect to dividends or distributions of
assets on liquidation;
(4) Purchase any Common Stock except as described on
subparagraph (c)(2) above;
(5) Enter into a "reorganization," as that term is defined in
Section 181 of the California General Corporation Law, or sell all or
substantially all of its assets to any other corporation, if, and only to
the extent that, a vote of the outstanding shares is required by the
California General Corporation Law;
3
<PAGE>
(6) Restrict the transfer or hypothecation of shares of Series A
Convertible Preferred Stock other than as required by federal or state
securities laws or regulations or as otherwise provided in the Subscription
Agreement to be executed by persons acquiring any Series A Convertible
Preferred Stock; or
(7) Voluntarily elect to wind up and dissolve.
(e) Conversion.
----------
(1) The Series A Convertible Preferred Stock shall be
convertible into Common Stock at any time not later than the close of
business on the fifth day prior to the date fixed for redemption in any
notice of redemption at the option of the respective holders of the Series
A Convertible Preferred Stock. Each share of Series A Convertible Preferred
Stock shall be converted into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $1.00 by the conversion
price in effect at the date of conversion. The conversion price per share
shall be $1.00 (the "basic conversion price"), which shall be subject to
adjustment from time to time as provided in paragraphs (3), (4) and (5) of
this subdivision (e). In effecting the conversion, accrued unpaid dividends
on the Series A Convertible Preferred Stock shall be disregarded. Upon
conversion, no fractional shares shall be issued and the corporation shall
in lieu thereof pay in cash the fair value of the fraction. The corporation
shall reserve and keep reserved out of its authorized but unissued shares
of Common Stock sufficient shares to effect the conversion of all shares of
Series A Convertible Preferred Stock outstanding from time to time.
(2) A holder of Series A Convertible Preferred Stock desiring to
convert shall deliver the share certificate to the corporation at its
principal executive office, accompanied by a written request to convert,
specifying the number of shares to be converted. The indorsement of the
share certificate and the request to convert shall be in form satisfactory
to the corporation. Upon the date of such delivery the conversion is deemed
to have occurred and the person entitled to receive share certificates for
Common Stock shall be regarded for all corporate purposes from and after
such date as the holder of the number of shares of Common Stock to which he
is entitled upon the conversion.
(3) In case, at any time or from time to time after the issuance
of the first share of Series A Convertible Preferred Stock, the corporation
shall issue and sell any shares of Common Stock for a consideration per
share less than the conversion price in effect immediately
4
<PAGE>
prior to such issue or sale, then forthwith upon such issue or sale the
conversion price shall be reduced to a price (calculated to the nearest
cent) determined by dividing (A) an amount equal to the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing conversion price, and (ii)
the consideration, if any, received by the corporation upon such issuance
and sale, by (B) the total number of shares of Common Stock outstanding
immediately after such issue or sale. No adjustment of the conversion
price, however, shall be made in an amount less than five cents per share,
but any lesser adjustment shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to ten cents per
share or more.
(4) For purposes of paragraph (3) above, the following
subparagraphs (A) to (D), inclusive, shall also be applicable:
(A) In case at any time the corporation shall grant any
rights to subscribe for, or any rights or options to purchase, Common Stock
or any stock or other securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities being
herein called "Convertible Securities"), whether or not such rights or
options or the right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon conversion
or exchange of such Convertible Securities (determined by dividing (aa) the
total amount, if any, received or receivable by the corporation as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration payable to the corporation
upon the exercise of such rights or options, plus, in the case of any such
rights or options which relate to such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (bb) the total maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than the conversion price
in effect immediately prior to the time of the granting of such rights or
options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon conversion or exchange
of the total maximum number of shares of such Convertible Securities
issuable upon the exercise of such rights or options shall
5
<PAGE>
(as of the date of granting of such rights or options) be deemed to be
outstanding and to have been issued for such price per share. No further
adjustments of the conversion price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of such
rights or option or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) In case at any time the corporation shall issue or sell
any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined
by dividing (aa) the total amount received or receivable by the corporation
as consideration for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable
to the corporation upon the conversion or exchange thereof, by (bb) the
total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
conversion price in effect immediately prior to the time of such issue or
sale, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of the
date of the issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price per share, provided that
(i) no further adjustments of the conversion price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (ii) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible Securities
for which adjustments of the conversion price have been or are to be made
pursuant to other provisions of this paragraph (4), no further adjustment
of the conversion price shall be made by reason of such issue or sale.
(C) In case at any time the corporation shall declare a
dividend or make any other distribution upon any stock of the corporation
payable in Common Stock or Convertible Securities, any Common Stock or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration.
(D) In case at any time any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the
6
<PAGE>
amount received by the corporation therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the corporation in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights or
options to purchase any such Common Stock or Convertible Securities shall
be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the corporation shall be deemed
to be the fair value of such consideration as determined by the Board of
Directors, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the
corporation in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued in connection with any
merger of another corporation into the corporation, the amount of
consideration therefor shall be deemed to be the fair value of the assets
of such merged corporation as determined by the Board of Directors after
deducting therefrom all cash and other consideration (if any) paid by the
corporation in connection with such merger.
(5) For the purpose of paragraph (3) above, none of the
following issuances shall be considered the issuance or sale of Common
Stock:
(A) The issuance of Common Stock upon conversion of any
Series A Convertible Preferred Stock; or
(B) The issuance of not more than 600,000 shares of Common
Stock (subject to antidilution adjustments) to officers, directors,
employees or consultants of the corporation pursuant to stock option or
stock purchase plans approved by the Board of Directors of the corporation
(including the reissuance of shares purchased by the corporation from
officers, directors, employees or consultants of the corporation as
specified in paragraph (2) of subdivision (c)).
(6) In case at any time the corporation shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the
conversion price in effect immediately prior to such subdivision shall be
proportionately reduced and conversely, in case the outstanding shares of
Common Stock of the corporation shall be combined into a smaller number of
shares, the conversion price in effect immediately prior to such
combination shall be proportionately increased.
(7) Promptly after any change in the conversion price, the
corporation shall cause to be prepared a written
7
<PAGE>
statement setting forth in detail the facts and the revised conversion
ratio. The statement shall be signed by the president or a vice-president
and by the chief financial officer, the treasurer or an assistant treasurer
and filed with the secretary. A copy of the statement shall be mailed to
each holder of Series A Convertible Preferred Stock.
(f) Redemption.
----------
(1) The Series A Convertible Preferred Stock is subject to
redemption at any time on or after August 31, 1995, out of funds legally
available therefor, in whole, or from time to time in part, at the option
of the Board of Directors of the corporation. If only a part of the Series
A Convertible Preferred Stock is to be redeemed, the redemption shall be
carried out prorata. The redemption price shall be $1.00 per share plus
(i) any dividends previously declared and unpaid, and (ii) $0.10 per share
per annum from the date of original issuance to the date of the notice of
redemption (herein called the "Redemption Price").
(2) The corporation shall mail a notice of redemption to each
holder of record of shares to be redeemed addressed to the holder at the
address of such holder appearing on the books of the corporation or given
by the holder to the corporation for the purpose of notice, or if no such
address appears or is given at the place where the principal executive
office of the corporation is located, not earlier than 60 nor later than 20
days before the date fixed for redemption. The notice of redemption shall
include (i) the class of shares or the part of a class of shares to be
redeemed, (ii) the date fixed for redemption, (iii) the redemption price,
(iv) the place at which the shareholders may obtain payment of the
redemption price upon surrender of their share certificates, (v) the last
date prior to the date of redemption that the right of conversion may be
exercised. If funds are available on the date fixed for the redemption,
then whether or not the share certificates are surrendered for payment of
the redemption price, the shares shall no longer be outstanding and the
holders thereof shall cease to be shareholders of the corporation with
respect to the shares redeemed on and after the date fixed for redemption
and shall be entitled only to receive the redemption price without interest
upon surrender of the share certificate. If less than all the shares
represented by one share certificate are to be redeemed, the corporation
shall issue a new share certificate for the shares not redeemed.
(3) If, on or prior to any date fixed for redemption, the
corporation deposits with any bank or trust
8
<PAGE>
company in this state as a trust fund a sum sufficient to redeem, on the
date fixed for redemption thereof, the shares called for redemption, with
irrevocable instructions and authority to the bank or trust company to
publish the notice of redemption thereof (or to complete such publication
if theretofore commenced) and to pay, on and after the date fixed for
redemption or prior thereto, the redemption price of the shares to their
respective holders upon the surrender of their share certificates, then
from and after the date of the deposit (although prior to the date fixed
for redemption) the shares so called shall be redeemed and dividends on
those shares shall cease to accrue after the date fixed for redemption.
The deposit shall constitute full payment of the shares to their holders
and from and after the date of the deposit the shares shall no longer be
outstanding and the holders thereof shall cease to be shareholders with
respect to such shares and shall have no rights with respect thereto except
the right to receive from the bank or trust company payment of the
redemption price of the shares without interest, upon surrender of their
certificates therefor and the right to convert the shares in accordance
with subdivision (e) of this Article. The bank or trust company forthwith
shall return to the corporation funds deposited for shares converted.
After two years, the bank or trust company shall return to the corporation
funds deposited and not claimed and thereafter the holder of a share
certificate for share redeemed shall look to the corporation for payment.
Fifth: This corporation hereby elects to be governed by all of the
provisions of the General Corporation Law effective January 1, 1977, not
otherwise applicable to it under Chapter 23 thereof.
Sixth: The authorized number of directors of this corporation shall be
not less than four (4) nor more than seven (7). The exact number of
directors within these limits shall be fixed and may be changed from time
to time by a resolution adopted by the Board of Directors.
Seventh: (a) Elimination of Directors' Liability. The liability of
-----------------------------------
the directors of this corporation for monetary damages shall be eliminated
to the fullest extent permissible under California law.
(b) Indemnification of Corporate Agents. This corporation is
-----------------------------------
authorized to provide indemnification of agents (as defined in Section 317
of the California General Corporation Law) through bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section
317 of the California General
9
<PAGE>
Corporation Law, subject only to the applicable limits set forth in Section
204 of the California General Corporation Law with respect to actions for
breach of duty to the corporation and its shareholders.
(c) Repeal or Modification. Any repeal or modification of the
----------------------
foregoing provisions of this Article by the shareholders of this
corporation shall not adversely affect any right or protection of an agent
of this corporation existing at the time of that repeal or modification.
3. The foregoing restatement of Articles of Incorporation have been duly
approved by the Board of Directors of the Company.
4. The foregoing restatement of Articles of Incorporation does not alter
or amend the Articles of Incorporation except for alterations and amendments
permitted by Sections 902(d) and 2302 of the California General Corporations
Code to be adopted by the Board of Directors alone. Accordingly, pursuant to
Section 910(b) of the California Corporations Code, no approval of the
outstanding shares was required.
We further declare under penalty under the laws of the State of California
that the matters set forth in this certificate are true and correct of our own
knowledge.
Executed at Irvine, California on July ____, 1996.
--------------------------------------
Sam G. Lindsay
President
--------------------------------------
James E. McCormick III
Secretary
10
<PAGE>
EXHIBIT 3.1(ii)
GRIP TECHNOLOGIES, INC.
AMENDED AND RESTATED
BYLAWS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES................................. 1
1.1 PRINCIPAL OFFICES................................... 1
1.2 OTHER OFFICES....................................... 1
ARTICLE II - MEETINGS OF SHAREHOLDERS......................... 1
2.1 PLACE OF MEETINGS................................... 1
2.2 ANNUAL MEETING...................................... 2
2.3 SPECIAL MEETINGS.................................... 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS.................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE........ 3
2.6 QUORUM.............................................. 4
2.7 ADJOURNED MEETING; NOTICE........................... 4
2.8 VOTING.............................................. 4
2.9 WAIVER OF NOTICE OR CONSENT BY ABSENT
SHAREHOLDERS........................................ 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING............................................. 6
2.11 RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND
GIVING CONSENTS..................................... 7
2.12 PROXIES............................................. 8
2.13 INSPECTORS OF ELECTION.............................. 8
ARTICLE III - DIRECTORS....................................... 9
3.1 POWERS.............................................. 9
3.2 NUMBER AND QUALIFICATION............................ 9
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS............ 10
3.4 REMOVAL OF DIRECTOR FOR CAUSE....................... 10
3.5 REMOVAL OF DIRECTOR WITHOUT CAUSE................... 10
3.6 REMOVAL OF DIRECTOR BY SHAREHOLDERS' SUIT........... 11
RESIGNATIONS AND VACANCIES.......................... 11
3.8 PLACE OF MEETINGS................................... 12
3.9 MEETINGS BY CONFERENCE TELEPHONE, ETC............... 12
3.10 REGULAR MEETINGS.................................... 13
SPECIAL MEETINGS.................................... 13
3.12 QUORUM.............................................. 13
3.13 WAIVER OF NOTICE.................................... 14
</TABLE>
i
<PAGE>
TABLE OF CONTENTS (Cont')
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.14 ADJOURNMENT.......................................... 14
3.15 NOTICE OF ADJOURNMENT................................ 14
3.16 BOARD ACTION BY WRITTEN CONSENT WITHOUT
A MEETING............................................ 14
3.17 FEES AND COMPENSATION OF DIRECTORS................... 15
ARTICLE IV - COMMITTEES........................................ 15
4.1 COMMITTEES OF DIRECTORS.............................. 15
4.2 MEETINGS AND ACTION OF COMMITTEES.................... 16
ARTICLE V - OFFICERS........................................... 16
5.1 OFFICERS............................................. 16
5.2 ELECTION OF OFFICERS................................. 17
5.3 SUBORDINATE OFFICERS................................. 17
5.4 REMOVAL AND RESIGNATION OF OFFICERS.................. 17
5.5 VACANCIES IN OFFICES................................. 17
5.6 CHAIRMAN OF THE BOARD................................ 18
5.7 PRESIDENT............................................ 18
5.8 VICE PRESIDENTS...................................... 18
5.9 SECRETARY............................................ 18
5.10 CHIEF FINANCIAL OFFICER.............................. 19
ARTICLE VI - INDEMNIFICATION OF OFFICERS AND DIRECTORS......... 20
ARTICLE VII - RECORDS AND REPORTS.............................. 22
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER......... 22
7.2 MAINTENANCE AND INSPECTION OF BYLAWS................. 23
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS.............................................. 23
7.4 INSPECTION BY DIRECTORS.............................. 23
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER................ 24
7.6 FINANCIAL STATEMENTS................................. 24
7.7 ANNUAL STATEMENT OF GENERAL INFORMATION.............. 25
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS (Cont')
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - GENERAL CORPORATE MATTERS....................... 25
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING............................................... 25
8.2 CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS............ 26
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED............................................. 26
8.4 CERTIFICATES FOR SHARES.............................. 26
8.5 LOST CERTIFICATES.................................... 26
8.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....... 27
8.7 CONSTRUCTION AND DEFINITIONS......................... 27
ARTICLE IX - AMENDMENTS........................................ 27
9.1 AMENDMENT BY SHAREHOLDERS............................ 27
9.2 AMENDMENT BY DIRECTORS............................... 28
</TABLE>
iii
<PAGE>
BYLAWS
------
Bylaws for the regulation, except as
otherwise provided by statute or its
Articles of Incorporation, of
Grip Technologies, Inc.,
a California corporation
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICES
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside the State of
California and the corporation has one or more business offices in that state,
the board of directors shall fix and designate a principal business office in
the State of California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to transact
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California which may be designated either by the board of directors
or by the written consent of all persons entitled to vote thereat given either
before or after the meeting and filed with the secretary. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
1
<PAGE>
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held not more than five
(5) months after the end of the fiscal year of the corporation nor more than
within fifteen (15) months after the last annual meeting. At each annual
meeting, directors shall be elected and any other proper business may be
transacted.
2.3 SPECIAL MEETINGS
Special meetings of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or the
holders of shares entitled to cast not less than 10% of the votes at that
meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, any
vice president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws,
that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing or affecting the time when a meeting
of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
Written notice of each annual or special meeting of shareholders shall
be sent or otherwise given in accordance with Section 2.5 of these bylaws not
less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of
these bylaws, thirty (30)) nor more than sixty (60) days before the date of the
meeting to each shareholder entitled to vote thereat. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the general nature of the business to be transacted (no business other
than that specified in the notice may be transacted), or (ii) in the case of the
annual meeting, those matters which the board of directors, at the time of
giving the notice, intends to present for action by the shareholders (but
subject
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to the provisions of the next paragraph of this Section 2.4 any proper matter
may be presented at the meeting for such action). The notice of any meeting at
which directors are to be elected shall include the name of any nominee or
nominees who, at the time of the notice, the board intends to present for
election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either
(i) personally or (ii) by mail or (iii) by third-class mail but only if the
corporation has outstanding shares held of record by five hundred (500) or more
persons (determined as provided in Section 605 of the Code) on the record date
for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
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An affidavit of the mailing or other means of giving any notice of any
meeting of shareholders shall be executed by the secretary, assistant secretary
or any transfer agent of the corporation giving the notice, and shall be prima
facie evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any meeting of shareholders, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at that meeting, either in person or by
proxy. In the absence of a quorum, no other business may be transacted at that
meeting, except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than forty-five (45) days from the
date set for the original meeting, then notice of the adjourned meeting shall be
given. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting
the corporation may transact any business which might have been transacted at
the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Section 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation, or in joint
ownership).
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The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting begins.
Except as provided in the last paragraph of Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholders entitled to vote on any matter may
vote part of his shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares that the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act the shareholders, unless the vote of a greater number or voting by
classes is required by the Code or by the articles of incorporation.
At a meeting of shareholders at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
---
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled, or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit.
The candidates receiving the highest number of affirmative votes, up to the
number of directors to be elected, shall be elected; votes against any candidate
and votes withheld shall have no legal effect.
2.9 WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either
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in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof. The waiver of notice or consent or approval need not specify
either the business to be transacted or the purpose of any annual or special
meeting of shareholders, except that if action is taken or proposed to be taken
for approval of any of those matters specified in the second paragraph of
Section 2.4 of these bylaws, the waiver of notice or consent or approval shall
state the general nature of the proposal. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at any
time to fill a vacancy on the board of directors, provided that it was not
created by removal of a director and that it has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holder, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
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If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders has not have been received, the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. This
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) contracts or transactions in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
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The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the shareholder or the shareholder's attorney-in-
fact. A validly executed proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) the person who executed the
proxy revokes it prior to the time of voting by delivering a writing delivered
to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting, or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of
the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or any adjournment
thereof. If no inspector of election is so appointed, the chairman of the
meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint an inspector or inspectors of election to act at the meeting.
The number of inspectors shall be either one (1) or three (3). If inspectors
are appointed at a meeting pursuant to the request of one (1) or more
shareholders or proxies, then the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the meeting may, and upon the
request of any shareholder or a shareholder's proxy shall, appoint a person to
fill that vacancy.
The duties of the inspectors shall be as prescribed by Section 707(b)
of the Code and shall include:
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(a) determining the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
authenticity, validity, and effect of proxies;
(b) receiving votes, ballots, or consents;
(c) hearing and determining all challenges and questions in any way
arising in connection with the right to vote;
(d) counting and tabulating all votes or consents;
(e) determining when the polls shall close;
(f) determining the result; and
(g) doing any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
If there are three (3) inspectors of election, the decision, act, or
certificate of a majority is effective in all respects as the decision, act, or
certificate of all.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER AND QUALIFICATION
The minimum and maximum number of directors is stated in the articles
of incorporation and may be changed only by an amendment of the articles of
incorporation. The exact number of directors within the range stated in the
articles of incorporation shall be fixed and may from time to time be changed by
a resolution adopted by the board of directors.
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3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each Director, including a Director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 REMOVAL OF DIRECTOR FOR CAUSE
The board of directors may declare vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a felony.
3.5 REMOVAL OF DIRECTOR WITHOUT CAUSE
(a) Any or all of the directors may be removed without cause if the
removal is approved by the outstanding shares (as that term is defined in
Section 152 of the Code), subject to the following:
(1) Except as provided in subparagraph (3) below, no director may be
removed (unless the entire board is removed) when the votes cast against
removal, or not consenting in writing to the removal, would be sufficient to
elect that director if voted cumulatively at an election at which the same total
number of votes were cast (or, if the action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of the director's most recent election were then being
elected.
(2) When by the provisions of the articles of incorporation the
holders of the shares of any class or series, voting as a class or series, are
entitled to elect one or more directors, any director so elected may be removed
only by the applicable vote of the holders of the shares of that class or
series.
(3) A director of a corporation whose board of directors is classified
pursuant to Section 301.5 of the Code may not be removed if the votes cast
against removal of the director, or not consenting in writing to the removal,
would be sufficient to elect the director if voted cumulatively (without regard
to whether shares may otherwise be voted cumulatively) at an election at which
the same total number of votes were cast (or, if the action is taken by written
consent, all shares entitled to vote were voted) and either the number of
directors elected at the most recent annual meeting of shareholders, or if
greater, the number of directors for who removal is being sought, were then
being elected.
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(b) Any reduction of the authorized number of directors or amendment
reducing the number of classes of directors does not remove any director prior
to the expiration of the director's term of office.
(c) Except as provided in this Section and Sections 3.4 and 3.6 of
these bylaws, a director may not be removed prior to the expiration of the
director's term of office.
3.6 REMOVAL OF DIRECTOR BY SHAREHOLDERS' SUIT
The superior court of the proper county may, at the suit of
shareholders holding at least ten percent (10%) of the number of outstanding
shares of any class, remove from office any director in case of fraudulent or
dishonest acts or gross abuse of authority or discretion with reference to the
corporation any may bar from reelection any director so removed for a period
prescribed by the court. The corporation shall be made a party to such action.
3.7 RESIGNATIONS AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary, or the board of directors,
unless the notice specifies a later time for the resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required
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quorum), or by the unanimous written consent of holders of all shares entitled
to vote thereon. Each director so elected shall hold office until the next
annual meeting of the shareholders and until a successor has been duly elected
and qualified.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.8 PLACE OF MEETINGS
Regular or special meetings of the board of directors shall be held at
any place within or outside the State of California which has been designated
from time to time by resolution of the board. In the absence of such a
designation, regular or special meetings shall be held at the principal
executive office of the corporation. Special meetings of the board may be held
at any place within or outside the State of California that has been designated
in the notice of the meeting or, if not stated in the notice or if there is no
notice, at the principal executive office of the corporation.
3.9 MEETINGS BY CONFERENCE TELEPHONE, ETC.
Any meeting, regular or special, may be held by conference telephone,
electronic video screen communication, or other communications equipment.
Participation in a meeting pursuant to this Section constitutes presence in
person at that meeting if all of the following apply:
(a) Each member participating in the meeting can communicate with all
of the other members concurrently;
(b) Each member is provided the means of participating in all matters
before the board, including the capacity to propose or to interpose an objection
to a specific action to be taken by the corporation; and
(c) The corporation adopts and implements some means of verifying both
of the following:
(1) A person communicating by telephone, electronic video screen,
or other communications equipment is a director entitled to participate in the
board meeting; and
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(2) All statements, questions, actions or voices were made by
that director and not by another person not permitted to participate as a
director.
3.10 REGULAR MEETINGS
Regular meetings of the board of directors may be held at such time as
shall from time to time be fixed in the bylaws or by the board of directors. In
addition, immediately following each annual meeting of shareholders, the board
of directors shall hold a regular meeting for the purpose of organization,
election of election of officers, and the transaction or other business. Call
and notice of all regular meetings shall not be required.
3.11 SPECIAL MEETINGS
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board or the president or any
vice president or the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be given by
mail or personally or by telephone, including a voice messaging system or other
system or technology designed to record and communicate messages, telegraph,
facsimile, electronic mail or other electronic means (hereafter collectively
referred to as "telephonic or electronic means") to each director. If notice is
given by mail, it shall be sent by first-class mail, charges prepaid, addressed
to each director at that director's address as it is shown on the records of the
corporation and such notice shall be deposited in the United States mail at
least four (4) days before the time of the holding of the meeting. If the
notice is delivered personally or by telephonic or electronic means, it shall be
delivered personally or given by telephone or transmitted electronically at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting nor the place of the meeting,
if the meeting is to be held at the principal executive office of the
corporation.
3.12 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn a meeting of the board
of directors as provided in Section 3.15 of these bylaws. Every act or decision
done or made by a majority of the directors present at a duly held meeting at
which a quorum is present shall
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be regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), and Section 317(e) of the Code (as
to the indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.13 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents, and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
A waiver of notice need not specify the purpose of any regular or special
meeting of the board of directors.
3.14 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board of directors to another time and
place.
3.15 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given to absent directors if the time and place be fixed at the meeting
adjourned. If the meeting is adjourned for more than twenty-four (24) hours,
notice of any adjournment to another time or place shall be given prior to the
time of the adjourned meeting, in the manner specified in Section 3.11 of these
bylaws, to the directors who were not present at the time of the adjournment.
3.16 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the Board of directors
may be taken without a meeting, provided that all members of the board shall
individually or collectively consent in writing to that action. Such action by
written consent shall have
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the same force and effect as a unanimous vote of the board of directors. Such
written consent and any counterparts thereof shall be filed with the minutes of
the proceedings of the board.
3.17 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section shall not be
construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation for those services.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two (2) or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
Board or on any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
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(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and action of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.8 (place of meetings), 3.9 (meetings by telephone, electronic video screen
communication or other communications equipment), 3.10 (regular meetings), 3.11
(special meetings and notice), 3.12 (quorum), 3.13 (waiver of notice), 3.14
(adjournment), 3.15 (notice of adjournment), and 3.16 (action without meeting),
with such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the Board of directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee, special meetings of committees may also be called by resolution
of the board of directors, and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committees. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
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5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, and each shall serve at
the pleasure of the board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, and may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in these bylaws or as the board of directors or the
president, as the case may be, may from time to time determine. If an assistant
officer to any officer shall be appointed, such assistant officer may exercise
any of the powers of his superior officer, as provided in these bylaws or as
authorized by the board of directors, and shall perform such other duties as are
imposed upon him by these bylaws or the board of directors or the president, as
the case may be.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors, at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
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5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may be from time to time assigned to him by the
board of directors or prescribed by the bylaws. If there is no president, or if
so designated by the board of directors, the chairman of the board shall be the
chief executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory and/or other powers, if any, as may be
given by the board of directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors (unless
the board of directors has bestowed that authority on the chairman of the board,
in which event he shall be the chief operating officer of the corporation,
unless otherwise provided, with such duties and authorities as may be granted by
the board of directors from time to time), have general supervision, direction
and control of the business and the officers of the corporation. He shall
preside at all meetings of the shareholders and, in the absence of the chairman
of the board, or if there be none, at all meetings of the board of directors.
Except as otherwise provided, he shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents,
if any, in order of their rank as fixed by the board of directors or, if not
ranked a vice president designated by the board of directors, shall perform all
the duties of the president, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors or these
bylaws, and the president or the chair of the board. The board of directors may
designate certain general or specific areas of responsibility for each vice
president, as it, in its sole discretion determines.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of
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minutes of all meetings and actions of directors, committees of directors and
shareholders. The minutes shall show the time and place of each meeting,
whether regular or special (and, if special, how authorized and the notice
given), the names of those present at directors' meetings or committee meetings,
the number of shares present or represented at shareholders' meetings, and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer, unless he delegates this task to another
officer or employee, shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
chief financial officer and of the financial condition of the corporation, and
shall have such other duties as may be prescribed by the board of directors or
these bylaws.
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ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
(a) The Company shall indemnify any person who was or is a party, or
is threatened with being made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including all appeals (other than an action, suit or proceeding
by or in the right of the Company) by reason of the fact that he is or was a
director, officer or employee of the Company, or is or was serving at the
request of the Company as a director, officer or employee of another company,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, decrees, fines, penalties and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the person did not act in good faith or in a manner which he
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal action, suit or proceeding, that he has
reasonable cause to believe that his conduct was unlawful.
(b) The Company shall indemnify any person who was or is a party or is
threatened with being made a party to any threatened, pending, or completed
action, suit or proceeding, including all appeals, by or the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was a director, officer or employee of the Company, or is or was serving at the
request of the Company as a director, officer or employee of another company,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action, suit or proceeding.
The Company shall also indemnify any such person against amounts paid in
settlement of such action, suit or proceeding up to the amount that would
reasonably have been expended in his defense (determined in the manner provided
for in subsection (d), if such action, suit or proceeding had been prosecuted to
a conclusion. However, indemnification under this subsection shall be made only
if the person to be indemnified acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and no such indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been finally adjudged to be liable for
negligence or misconduct in the performance of his duty to the Company, unless,
and only to the extent that, the court or body in or before, which such action,
suit or proceeding was finally determined, or any court of competent
jurisdiction,
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shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses or other amounts paid as such
court shall deem proper.
(c) Without limiting the right of any director, officer, or employee
of the Company to indemnification under any other subsection hereof, if such
person has been substantially and finally successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in subsections (a) and
(b), he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Except in a situation governed by subsection (c), any
indemnification under subsections (a) and (b) (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer or employee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b). Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who are not or were not parties to or threatened with such action,
suit or proceeding, or any other action, suit or proceeding arising from the
same or similar operative facts, or (2) if such a quorum is not obtainable, if a
majority of such quorum or disinterested directors so directs, by independent
legal counsel (compensated by the Company) in a written opinion, or (3) if there
be no interested directors, or if a majority of the disinterested directors,
whether or not quorum, so directs, by vote in person or by proxy of the holders
of a majority of the shares entitled to vote in the election of directors.
(e) Expenses of such person indemnified hereunder incurred in
defending a civil, criminal, administrative or investigative action, suit or
proceeding (including all appeals), or threat thereof, may be paid by the
Company in advance of the final disposition of such action, suit or proceeding
as authorized by the board of directors, whether a disinterested quorum exists
or not, upon receipt of an undertaking by or on behalf of the director, officer
or employee to repay such expenses unless it shall ultimately be determined that
he is entitled to be indemnified by the Company.
(f) The indemnification provided by this Article shall not be deemed
exclusive of or in any way to limit any other rights to which any person
indemnified may be or may become entitled as a matter of law, by the articles,
regulations, agreements, insurance, vote of shareholders, or otherwise, with
respect to action in his official capacity and with respect to action in another
capacity while holding such office and shall continue as to a person who has
ceased to be a director, officer or employee and shall inure to the benefit of
the heirs, executors and administrators of such person.
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(g) Subsections (a) through (f) of this Article shall apply to such
agents of the Company as are designated at any time by the board of directors.
(h) If any part of this Article shall be found, in any action, suit or
proceeding, to be invalid or ineffective, the validity and the effect of the
remaining parts shall not be affected.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office
or at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its
shareholders, listing the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least 5%
in the aggregate of the outstanding voting shares of the corporation or who
holds at least 1% of such voting shares and has filed a Schedule 14B with the
Securities and Exchange Commission relating to the election of directors, may
(i) inspect and copy the records of shareholders' names, addresses and
shareholdings during usual business hours on five (5) days' prior written demand
on the corporation, and (ii) obtain from the transfer agent of the corporation,
on written demand and on the tender of such transfer agent's usual charges for
such list, a list of the names and addresses of the shareholders who are
entitled to vote for the election of directors, and their shareholdings, as of
the most recent record date for which that list has been compiled or as of a
date specified by the shareholder after the date of demand. Such list shall be
made available to any such shareholder by the transfer agent on or before the
later of five (5) days after the demand is received or five (5) days after the
date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
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Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office, or if
its principal executive office is not in the State of California, at its
principal business office in California, the original or a copy of these bylaws
as amended to date, which bylaws shall be open to inspection by the shareholders
at all reasonable times during office hours. If the principal executive office
of the corporation is outside the State of California and the corporation has no
principal business office in California, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and make extracts.
Such rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
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7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified by Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is not such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation. The annual report shall comply with
the requirements of Section 1501 of the Code or the Securities Exchange Act of
1934, as amended, whichever is applicable.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least 5% of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
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The quarterly income statements and balance sheets referred to in this
Section shall be accompanied by the report, if any, or any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 ANNUAL STATEMENT OF GENERAL INFORMATION
The corporation shall file annually (and more frequently if there is
any change in the information), with the Secretary of State of California, on
the prescribed form, a statement setting forth the authorized number of
directors, the names and complete business or residence addresses of all
incumbent directors, the names and complete business or residence addresses of
the chief executive officer, secretary, and chief financial officer, the street
address of its principal executive office or principal business office in this
state, and the general type of business constituting the principal business
activity of the corporation, together with a designation of the agent of the
corporation for the purpose of service of process, all in compliance with
Section 1502 of the Code.
ARTICLE VIII
GENERAL CORPORATE MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action (other
than action by shareholders by written consent with a meeting), the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days before any such action. In that case, only shareholders of record on
the date so fixed are entitled to receive the dividend, distribution or
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
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8.2 CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation. Such authorization may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of any officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the amount of the consideration to
be paid for them and the amount actually paid. All certificates shall be signed
in the name of the corporation by the chair of the board or vice chair of the
board or the president or a vice president and by the chief financial officer or
an assistant treasurer or the secretary or any assistant secretary, certifying
the number of shares and the class or series of shares owned by the shareholder.
Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace an old certificate unless the latter is surrendered
to the corporation
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and canceled at the same time. The board of directors may, in case any share
certificate or certificate for any other security is lost, stolen or destroyed,
authorize the issuance of a replacement certificate on such terms and conditions
as the board may require; the board may require indemnification of the
corporation secured by a bond or other adequate security sufficient to protect
the corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft or destruction of
the certificate or the issuance of the replacement certificate.
8.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chair of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of the corporation, or
any other person authorized by resolution of the board of directors or the
president or vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations, foreign or domestic, standing in the name of
this corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
8.7 CONSTRUCTION AND DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Code shall govern the construction of
these bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular, the
masculine gender includes the feminine and neuter, and the term "person"
includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that if the articles of
incorporation of the corporation set forth the number of authorized directors of
the corporation, the authorized number of directors may be changed only by an
amendment of the articles of incorporation.
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9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1
of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors), may
be adopted, amended or repealed by the board of directors.
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CERTIFICATE OF SECRETARY
------------------------
The undersigned hereby certifies:
(a) That I am the duly elected and acting Secretary of Grip
Technologies, Inc., a California corporation; and
(b) That the foregoing Amended and Restated Bylaws, comprising 28
pages, were duly adopted by the Unanimous Written Consent of the Board of
Directors, dated July 31, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation this 31st day of July, 1996.
--------------------------------------
James E. McCormick III
Secretary
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EXHIBIT 4.1
INSTALLMENT NOTE - INTEREST INCLUDED
$50,000 Irvine, California December 10, 1993
------ -----------
For value received, the undersigned promises to pay in lawful money of the
United States of America to the order of KWANG SOO KIM and IN HO KIM, at their
office in this City, the principal sum of Fifty Thousand Dollars ($50,000)
-------------- ------
together with interest from 12/10/93, on unpaid principal at the rate of Seven
--------
Percent (7%) per annum, principal and interest payable in equal installments of
Nine Hundred Ninety and 06/100s Dollars ($990.06) on the 10th day of each month,
- - ------------------------------- ------ ----
beginning 1/10/94 and continuing on the same day of each month thereafter until
-------
the 10th day of December, 1998, on which day the balance of principal and
---- -------- ----
interest then unpaid shall become due and payable.
Should default be made in the payment of any installment of principal or
interest when due, then the entire sum of principal and interest, at the option
of the holder of this note, shall immediately become due and payable without
demand or notice.
In case this note shall not be paid when due according to its terms, the
undersigned promises to pay in addition, all costs of collection and reasonable
attorneys' fees, whether or not suit is filed herein.
This note is secured by a Guaranty executed by Sam G. Lindsay on December
10, 1993.
- - --
PRO GRIP, INC. now known as Grip Technologies, Inc.
A California Corporation
By:
--------------------------------
President SAM G. LINDSAY
BY:
--------------------------------
Secretary JAMES E. MCCORMICK III
<PAGE>
EXHIBIT 4.2
[LOGO OF
FIRST INTERSTATE FIXED RATE NOTE
BANK]
$300,000.00 NEWPORT BEACH, California
---------- -------------------------
Date JANUARY 24, 1995
--------------------
On JULY 31, 1995 for value received, the undersigned ("Borrower") promises
-------------
to pay to the order of FIRST INTERSTATE BANK OF CALIFORNIA ("Bank") at its
ORANGE COUNTY CORPORATE BNKG Office, at 5000 BIRCH ST., STE 10000, NEWPORT
- - ---------------------------- ----------------------------------
BEACH, CA 92660 the principal sum of THREE HUNDRED THOUSAND AND NO/100 Dollars
- - --------------- ---------------------------------
($300,000.00), with interest on the unpaid principal balance payable monthly
---------- -------
from the date of this Note until maturity, breach, acceleration or demand, at a
rate per annum of 4.00 percent (4.00%), and thereafter, payable on demand, at
---- ----
the rate, calculated daily, which is the higher of (a) 2% per annum above the
contractual rate set forth above or (b) 3% per annum above Bank's Prime Rate,
until paid in full. Prime Rate is an index rate which Bank establishes from time
to time in connection with pricing certain of its loans. Bank may make loans at,
above or below its stated index rate. Information on the current index rate can
be obtained by contacting Bank. Any change in such floating rate in (b) above
shall be effective the day Prime Rate changes.
Interest shall be calculated on the basis of a 360-day year for actual days
elapsed. If interest is not paid when due, it shall thereafter bear like
interest as principal.
Borrower may prepay this Note, without premium or penalty, in whole or in
part, with accrued interest to the date of such prepayment on the amount
prepaid. Borrower shall pay any loss resulting from such prepayment incurred by
Bank in liquidating or redeploying deposits from which such loan funds were
obtained.
Any of the following shall constitute an event of default under this Note
whether committed by or against Borrower, any endorser or any guarantor:
(a) The nonpayment when due of principal of or interest on this Note or any
other obligation of any nature or description to Bank;
(b) The death, dissolution or termination of business of any of them;
(c) Any petition in bankruptcy being filed by or against any of them or any
proceedings in bankruptcy, insolvency or under any other laws relating to the
relief of debtors, being commenced for the relief or readjustment of any
indebtedness of any of them, either through reorganization, composition,
extension or otherwise;
(d) The making by any of them of an assignment for the benefit of creditors;
(e) The appointment of a receiver of any property of any of them;
(f) Any seizure, vesting of rights of or intervention by or under any authority
of any government;
(g) The entry of a judgement against any of them which, in Bank's opinion,
materially impairs the ability of any of them to meet their obligations to Bank;
(h) The failure to furnish any financial information upon the reasonable
request of Bank; or
(i) Any misrepresentation to Bank in obtaining credit by any of them.
At any time after the occurrence of any such event of default, this Note and any
other obligations to Bank or Borrower may, at Bank's discretion, become
immediately due and payable.
Both principal and interest on this Note are payable in lawful currency of
the United States of America without deduction for or on account of any present
or future taxes, duties or other charges levied or imposed on this Note.
If this Note is placed in the hands of an attorney for collection,
Borrower, each endorser and each guarantor agree to pay all costs and expenses
of Bank, including reasonable attorneys' fees, whether or not a suit is brought.
"Reasonable attorneys' fees" shall include reasonable attorneys' fees and
allocated costs of in-house counsel incurred in any and all judicial, bankruptcy
and other proceedings (including appellate level proceedings) whether such
proceedings arise before or after entry of a final judgment.
All extensions of time for payment, whether by operation of law, judicial
proceedings, or otherwise, shall be included in the computation of interest.
Payments received by us Monday through Friday before 2:00 p.m. on a day the
Bank is open for business ("Banking Day") at the address specified above will be
credited as of the date received. Payments received later, or on a Saturday,
Sunday or holiday will be credited as of the next Banking Day.
All obligations under this Note shall be the individual obligation of
Borrower unless requisite corporate action has been taken to make this Note an
enforceable corporate obligation, and all such obligations shall be the joint
and several obligations of each Borrower where there is more than one.
Borrower, each endorser and each guarantor waive diligence, demand,
presentment, protest and any type of notice.
This Note shall be governed and construed in accordance with the laws of
the State of California.
Bank may sell, assign, transfer or participate to other parties all or part
of the obligations arising under this Note. This Note shall be binding upon and
inure to the benefit of the undersigned. Bank and their respective successors
and assigns. The undersigned shall not assign its rights hereunder or any
interest herein without the prior written consent of Bank.
GTI MANUFACTURING, INC.
- - ----------------------------
Name of Borrower
1681 MCGAW, IRVINE, CA 92714
- - ----------------------------
Address
/s/ SAMUEL G. LINDSAY
- - ----------------------------
Samuel G. Lindsay, President
<PAGE>
MODIFICATION OF NOTE AGREEMENT
Obligor No. 3691216559, Obligation No. 34 NEWPORT BEACH, CALIFORNIA
---------- -- -------------
FEBRUARY 8, 1995
- - ----------------
(Date)
TO: FIRST INTERSTATE BANK OF CALIFORNIA
This Modification of Note Agreement is made this 8TH day of FEBRUARY, 1995,
--- --------------
between FIRST INTERSTATE BANK OF CALIFORNIA, a California corporation
(hereinafter called "Lender") and GTI MANUFACTURING, INC. (hereinafter called
----------------------
"Borrower").
RECITALS
A. Borrower has executed a note (hereinafter called "Note") payable to Lender in
the original principal amount of $300,000.00 dated January 24, 1995, upon
----------- ----------------
which there remains a unpaid balance of $300,000.00 with interest paid to
-----------
January 24, 1995.
----------------
B. The Note is secured by a deed of trust (hereinafter called "Deed of Trust")
recorded on ------ in ---N/A--- of Official Records of ---N/A --- County,
------- --------- -----------
California.
C. The parties herein desire to amend the payment terms set forth in the Note.
TERMS
For valuable consideration, the parties hereto agree that the terms for
payment of the unpaid balance owing on said Note and interest thereon are
modified herein as follows:
1. TO INCREASE THE ORIGINAL LOAN AMOUNT FROM $300,000.00 to
$400,000.00.
2. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME.
In any event, the entire amount of principal and interest unpaid shall be due
and payable on JULY 31, 1995.
<PAGE>
MODIFICATION OF NOTE AGREEMENT
Obligor No. 3691216559, Obligation No. 34 NEWPORT BEACH, California FEBRUARY 24,
---------- ---------------- -----------
(Date)
1995
- - ----
TO: FIRST INTERSTATE BANK OF CALIFORNIA
This Modification of Note Agreement is made this 24TH day of FEBRUARY, 1995,
---- --------------
between FIRST INTERSTATE BANK OF CALIFORNIA, a California corporation
(hereinafter called "Lender") and GTI MANUFACTURING, INC.
---------------------------------------------
- - -------------------------------------------------------------------------------
- - ------------------------------------------------(hereinafter called "Borrower").
RECITALS
A. Borrower has executed a note (hereinafter called "Note") payable to Lender
in the original principal amount of $300,000.00 dated JANUARY 21, 1995, upon
----------- ----------------
which there remains an unpaid balance of $400,000.00 with interest paid to
-----------
FEBRUARY 1, 1995.
----------------
B. The Note is secured by a deed of trust (hereinafter called "Deed of Trust")
recorded on in N/A of Official Records of N/A County,
---------------- --- ---
California.
C. The parties herein desire to amend the payment terms set forth in the Note.
TERMS
For valuable consideration, the parties hereto agree that the terms for
payment of the unpaid balance owing on said Note and interest thereon are
modified herein as follows:
1. TO INCREASE THE ORIGINAL NOTE/LOAN AMOUNT FROM $300,000.00 TO
$500,000.00.
2. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME.
In any event, the entire amount of principal and interest unpaid shall be
due and payable on JULY 31, 1995.
-------------
<PAGE>
MODIFICATION OF NOTE AGREEMENT
Obligor No. 3691216559, Obligation No. 34 NEWPORT BEACH, California MARCH 22,
---------- -- ------------- ---------
(Date)
1995
- - ----
TO: FIRST INTERSTATE BANK OF CALIFORNIA
This Modification of Note Agreement is made this 22ND day of MARCH, 1995,
---- -----------
between FIRST INTERSTATE BANK OF CALIFORNIA, a California corporation
(hereinafter called "Lender") and GTI MANUFACTURING, INC.
-------------------------------------------
- - -----------------------------------------------------------------------------
- - ---------------------------------------------(hereinafter called "Borrower").
RECITALS
A. Borrower has executed a note (hereinafter called "Note") payable to Lender
in the original principal amount of
$300,000.00 dated JANUARY 21, 1995, upon which there remains an unpaid
----------- ----------------
balance of
$500,000.00 with interest paid to FEBRUARY 2, 1995.
----------- ----------------
B. The Note is secured by a deed of trust (hereinafter called "Deed of Trust")
recorded on in N/A of Official Records of N/A County,
----------------- --- ---
California.
C. The parties herein desire to amend the payment terms set forth in the Note.
TERMS
For valuable consideration, the parties hereto agree that the terms for
payment of the unpaid balance owing on said Note and interest thereon are
modified herein as follows:
1. TO EXTEND THE MATURITY DATE TO DECEMBER 31, 1995.
2. TO INCREASE NOTE AMOUNT TO $600,000.00.
3. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME.
In any event, the entire amount of principal and interest unpaid shall be
due and payable on DECEMBER 31, 1995.
-----------------
<PAGE>
[LOGO OF FIRST INTERSTATE BANK]
CHANGE IN TERMS AGREEMENT
================================================================================
Borrower: GTI Manufacturing, Inc. Lender: First Interstate Bank
1681 McGaw Avenue of California
Irvine, CA 92714 Orange County Corporate
Banking
5000 Birch Suite 10000
Newport Beach, CA 92660
================================================================================
Principal Amount: $600,000.00 Date of Agreement: July 31, 1995
DESCRIPTION OF EXISTING INDEBTEDNESS. A fixed rate note in the original amount
of $300,000.00 dated January 24, 1995, at an original interest rate of 4,000%,
maturing on July 31, 1995.
DESCRIPTION OF CHANGE IN TERMS. The maturity date of the existing indebtedness
described above is hereby extended to December 31, 1996, when the entire unpaid
principal balance, all accrued and unpaid interest, and all other amounts
payable thereunder shall be due and payable.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the non-
signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
GTI Manufacturing, Inc.
By: /s/ Samuel G. Lindsay
------------------------------------
Samuel G. Lindsay, President
================================================================================
<PAGE>
EXHIBIT 4.3
[LOGO OF FIRST INTERSTATE BANK]
PROMISSORY NOTE
================================================================================
Borrower: GTI MANUFACTURING, INC. Lender: First Interstate Bank
1681 McGaw Avenue of California
Irvine, CA 92714 Orange County Corporate
Banking
5000 Birch Suite 10000
Newport Beach, CA 92660
================================================================================
Principal Amount: $100,000.00 Interest Rate: 4.000% Date of Note: January 11,
1996
PROMISE TO PAY. GTI MANUFACTURING, INC. ("Borrower") promises to pay to First
Interstate Bank of California ("Lender"), or order, in lawful money of the
United States of America, the principal amount of One Hundred Thousand & 00/100
Dollars ($100,000.00), together with interest at the rate of 4.000% per annum on
the unpaid principal balance from January 11, 1996, until paid in full.
PAYMENT. Borrower will pay this loan in one principal payment of $100,000.00
plus interest on April 9, 1996. This payment due April 9, 1996, will be for all
principal and accrued interest not yet paid. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning February 1, 1996, with all subsequent interest payments to be
due on the same day of each month after that. Interest on this Note is computed
on a 365/360 simple interest basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied in any order at Lender's
sole discretion.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to make
payments under the payment schedule.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension or credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (g) Any of the events described in this default section occurs with
respect to any guarantor of this Note. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the interest rate on this Note 3.000 percentage points. Lender
may hire or pay someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by Lender
in the State of California. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Los Angeles
County, the State of California. Subject to the provisions on arbitration, this
Note shall be governed by and construed in accordance with the laws of the State
of California.
DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts.
ARBITRATION.
Binding Arbitration. Upon the demand of any party ("Party/Parties"), to a
Document (as defined below), whether made before the institution of any
judicial proceeding or not more than 60 days after service of a complaint,
third party complaint, cross-claim or counterclaim or any answer thereto or
any amendment to any of the above, any Dispute (as defined below) shall be
resolved by binding arbitration in accordance with the terms of this
arbitration program ("Arbitration Program"). A "Dispute" shall include any
action, dispute, claim or controversy of any kind, whether founded in
contract, tort, statutory or common law, equity, or otherwise, now existing
or hereafter arising between any of the Parties arising out of, pertaining
to or in connection with any agreement, document or instrument to which
this Arbitration Program is attached or in which it appears or is
referenced or any related agreements, documents, or instruments
("Documents"). Any Party who fails to submit to binding arbitration
following a lawful demand by another Party shall bear all costs and
expenses, including reasonable attorneys' fees (including those incurred in
any trial, bankruptcy proceeding or on appeal), incurred by the other Party
in obtaining a stay of any pending judicial proceeding and compelling
arbitration of any Dispute. The Parties agree that any agreement, document
or instrument which includes, attaches to or incorporates this Arbitration
Program represents a transaction involving commerce as that term is used in
the Federal Arbitration Act, Title 9 United States Code ("FAA"). THE
PARTIES UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED THAT THEIR
DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION RATHER THAN IN COURT, AND
ONCE DECIDED BY ARBITRATION NO DISPUTE CAN LATER BE BROUGHT, FILED OR
PURSUED IN COURT.
Governing Rules. Arbitrations conducted pursuant to this Arbitration
Program shall be administered by the American Arbitration Association
("AAA"), or other mutually agreeable administrator ("Administrator") in
accordance with the terms of this Arbitration Program and the Commerical
Arbitration Rules of the AAA. Proceedings hereunder shall be governed by
the provisions of the FAA. The arbitrator(s) shall resolve all Disputes in
accordance with the applicable substantive law designated in the Documents.
Judgment upon any award rendered hereunder may be entered in any court
having jurisdiction; provided, however, that nothing herein shall be
construed to be a waiver by any Party that is a bank of the protections
afforded pursuant to 12 U.S.C. 91 or any similar applicable state law.
<PAGE>
01-11-1996 PROMISSORY NOTE Page 2
(Continued)
================================================================================
Arbitrator Powers and Qualifications; Awards. The Parties agree to select a
neutral qualified arbitrator or a panel of three qualified arbitrators to
resolve any Dispute hereunder. "Qualified" means a retired judge or
practicing attorney, with not less than 10 years practice in commercial law,
licensed to practice in the state of the applicable substantive law
designated in the Documents. A Dispute in which the claims or amounts in
controversy do not exceed $1,000,000, shall be decided by a single
arbitrator. A single arbitrator shall have authority to render an award up to
but not to exceed $1,000,000.00 including all damages of any kind whatsoever,
costs, fees, attorneys' fees and expenses. Submission to a single arbitrator
shall be a waiver of all Parties' claims to recover more than $1,000,000.00.
A Dispute involving claims or amounts in controversy exceeding $1,000,000.00
shall be decided by a majority vote of a panel of three qualified
arbitrators. All three arbitrators on the arbitration panel must actively
participate in all hearings and deliberations. The arbitrator(s) shall be
empowered to, at the written request of any Party in any Dispute, (a) to
consolidate in a single proceeding any multiple party claims that are
substantially identical or based upon the same underlying transaction; (b) to
consolidate any claims and Disputes between other Parties which arise out of
or relate to the subject matter hereof, including all claims by or against
borrowers, guarantors, sureties and/or owners of collateral; and (c) to
administer multiple arbitration claims as class actions in accordance with
Rule 23 of the Federal Rules of Civil Procedure. In any consolidated
proceeding the first arbitrator(s) selected in any proceeding shall conduct
the consolidated proceeding unless disqualified due to conflict of interest.
The arbitrator(s) shall be empowered to resolve any dispute regarding the
terms of this arbitration clause, including questions about the arbitrability
of any Dispute, but shall have no power to change or alter the terms of the
Arbitration Program. The prevailing Party in any Dispute shall be entitled to
recover its reasonable attorneys' fees in any arbitration, and the
arbitrator(s) shall have the power to award such fees. The award of the
arbitrator(s) shall be in writing and shall set forth the factual and legal
basis for the award.
Real Property Collateral. Notwithstanding the provisions of the preceding
paragraphs concerning arbitration, no Dispute shall be submitted to
arbitration without the consent of all Parties if, at the time of the
proposed submission, such Dispute arises from or relates to an obligation
which is secured directly or indirectly and in whole or in part by real
property collateral. If all Parties do not consent to submission of such a
Dispute to arbitration, the Dispute shall be determined as provided in the
paragraph below entitled "Judicial Reference".
Judicial Reference. At the request of any Party, a Dispute which is not
submitted to arbitration as provided and limited in the preceding paragraphs
concerning arbitration shall be determined by a reference in accordance with
California Code of Civil Procedure Section 638 et seq. If such an election is
made, the Parties shall designate to the court a referee or referees selected
under the auspices of the AAA, unless otherwise agreed to in writing by all
parties. With respect to a Dispute in which the amounts in controversy do not
exceed $1,000,000, a single referee shall be chosen and shall resolve the
Dispute. The referee shall have authority to render an award up to but not to
exceed $1,000,000, including all damages of any kind whatsoever, including
costs, fees and expenses. A Dispute involving amounts in controversy
exceeding $1,000,000 shall be decided by a majority vote of a panel of three
referees (a "Referee Panel"), provided, however, that all three referees on
the Referee Panel must actively participate in all hearings and
deliberations. Referees, including any Referee Panel, may grant any remedy of
relief deemed just and equitable and within the scope of this Arbitration
Program and may also grant such ancillary relief as is necessary to make
effective any award. The presiding referee of the Referee Panel, or the
referee if there is a single referee, shall be a retired judge. Judgment upon
the award rendered by such referee(s) shall be entered in the court in which
such proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645. Determinations and awards by a referee or
Referee Panel shall be binding on all Parties and shall not be subject to
further review or appeal except as allowed by applicable law.
Preservation of Remedies. No provision of, nor the excise of any rights
under, this Arbitration Program shall limit the right of any Party to: (a)
foreclose against and/or sale of any real or personal property collateral or
other security, or obtain a personal or deficiency award; (b) exercise self-
help remedies (including repossession and setoff rights); or (c) obtain
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver from a
court having jurisdiction. Such rights can be exercised at any time except to
the extent such action is contrary to a final award or decision in any
arbitration proceeding. The institution and maintenance of an action as
described above shall not constitute a waiver of the right of any Party to
submit the Dispute to arbitration, nor render inapplicable the compulsory
exercise of any self-help, auxiliary or other rights under this paragraph
shall be a Dispute hereunder.
Miscellaneous. All statutes of limitation applicable to any Dispute shall
apply to any proceeding in accordance with this Arbitration Program. The
Parties agree, to the maximum extent practicable, to take any action
necessary to conclude an arbitration hereunder within 180 days of the filing
of a Dispute with the Administrator. The arbitrator(s) shall be empowered
to impose sanctions for any Party's failure to proceed within the times
established herein. Arbitrations shall be conducted in the state of the
applicable substantive law designated in the Documents. The provisions of
this Arbitration Program shall survive a termination, amendment, or
expiration hereof or of the Documents unless the Parties otherwise expressly
agree in writing. Each Party agrees to keep all Disputes and arbitration
proceedings strictly confidential, except for disclosures of information
required in the ordinary course of business of the Parties or as required by
applicable law or regulation. If any provision of this Arbitration Program is
declared invalid by any court, the remaining provisions shall not be affected
thereby and shall remain fully enforceable.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
any applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
that the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
GTI MANUFACTURING, INC.
By:/s/ Samuel G. Lindsay
----------------------------
Samuel G. Lindsay, President
================================================================================
<PAGE>
[LOGO OF FIRST INTERSTATE BANK]
CHANGE IN TERMS AGREEMENT
================================================================================
Borrower: GTI MANUFACTURING, INC.
1681 McGaw Avenue
Irvine, CA 92714
Lender: First Interstate Bank of California
Orange County Corporate Banking
5000 Birch Suite 10000
Newport Beach, CA 92660
================================================================================
Principal Amount: $180,000.00
Date of Agreement: May 20, 1996
DESCRIPTION OF EXISTING INDEBTEDNESS. That certain promissory note executed by
Borrower on January 11, 1996 in the original amount of $100,000.00, as it may
have been amended or renewed from time to time (the "Note").
DESCRIPTION OF CHANGE IN TERMS. The maturity date of the existing indebtedness
described above is hereby extended to July 8, 1996, when the entire unpaid
principal balance, all accrued and unpaid interest, and all other amounts
payable thereunder shall be due and payable. Effective May 20, 1996, the face
amount of the existing indebtedness described above is hereby increased to
$180,000.00.
ARBITRATION.
BINDING ARBITRATION. Upon the demand of any party ("Party/Parties"), to a
Document (as defined below), whether made before the institution of any judicial
proceeding or not more than 60 days after service of a complaint, third party
complaint, cross-claim or counterclaim or any answer thereto or any amendment to
any of the above, any Dispute (as defined below) shall be resolved by binding
arbitration in accordance with the terms of this arbitration program
("Arbitration Program"). A "Dispute" shall include any action, dispute, claim or
controversy of any kind, whether founded in contract, tort, statutory or common
law, equity, or otherwise, now existing or hereafter arising between any of the
Parties arising out of, pertaining to or in connection with any agreement,
document or instrument to which this Arbitration Program is attached or in which
it appears or is referenced or any related agreements, documents, or instruments
("Documents"). Any Party who fails to submit to binding arbitration following a
lawful demand by another Party shall bear all costs and expenses, including
reasonable attorneys' fees (including those incurred in any trial, bankruptcy
proceeding or on appeal), incurred by the other Party in obtaining a stay of any
pending judicial proceeding and compelling arbitration of any Dispute. The
Parties agree that any agreement, document or instrument which includes,
attaches to or incorporates this Arbitration Program represents a transaction
involving commerce as that term is used in the Federal Arbitration Act, Title 9
United States Code ("FAA"). THE PARTIES UNDERSTAND THAT BY THIS AGREEMENT THEY
HAVE DECIDED THAT THEIR DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION RATHER
THAN IN COURT, AND ONCE DECIDED BY ARBITRATION NO DISPUTE CAN LATER BE BROUGHT,
FILED OR PURSUED IN COURT.
GOVERNING RULES. Arbitrations conducted pursuant to this Arbitration Program
shall be administered by the American Arbitration Association ("AAA"), or other
mutually agreeable administrator ("Administrator") in accordance with the terms
of this Arbitration Program and the Commercial Arbitration Rules of the AAA.
Proceedings hereunder shall be governed by the provisions of the FAA. The
arbitrator(s) shall resolve all Disputes in accordance with the applicable
substantive law designated in the Documents. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction; provided, however,
that nothing herein shall be construed to be a waiver by any Party that is a
bank of the protections afforded pursuant to 12 U.S.C. 91 or any similar
applicable state law.
ARBITRATOR POWERS AND QUALIFICATIONS; AWARDS. The Parties agree to select a
neutral qualified arbitrator or a panel of three qualified arbitrators to
resolve any Dispute hereunder. "Qualified" means a retired judge or practicing
attorney, with not less than 10 years practice in commercial law, licensed to
practice in the state of the applicable substantive law designated in the
Documents. A Dispute in which the claims or amounts in controversy do not exceed
$1,000,000.00, shall be decided by a single arbitrator. A single arbitrator
shall have authority to render an award up to but not to exceed $1,000,000.00
including all damages of any kind whatsoever, costs, fees, attorneys' fees and
expenses. Submission to a single arbitrator shall be a waiver of all Parties'
claims to recover more than $1,000,000.00. A Dispute involving claims or amounts
in controversy exceeding $1,000,000.00 shall be decided by a majority vote of a
panel of three qualified arbitrators. All three arbitrators on the arbitration
panel must actively participate in all hearings and deliberations. The
arbitrator(s) shall be empowered to, at the written request of any Party in any
Dispute, (a) to consolidate in a single proceeding any multiple party claims
that are substantially identical or based upon the same underlying transaction;
(b) to consolidate any claims and Disputes between other Parties which arise out
of or relate to the subject matter hereof, including all claims by or against
borrowers, guarantors, sureties and/or owners of collateral; and (c) to
administer multiple arbitration claims as class actions in accordance with Rule
23 of the Federal Rules of Civil Procedure. In any consolidated proceeding the
first arbitrator(s) selected in any proceeding shall conduct the consolidated
proceeding unless disqualified due to conflict of interest. The arbitrator(s)
shall be empowered to resolve any dispute regarding the terms of this
arbitration clause, including questions about the arbitrability of any Dispute,
but shall have no power to change or alter the terms of the Arbitration Program.
The prevailing Party in any Dispute shall be entitled to recover its reasonable
attorneys' fees in any arbitration, and the arbitrator(s) shall have the power
to award such fees. The award of the arbitrator(s) shall be in writing and shall
set forth the factual and legal basis for the award.
REAL PROPERTY COLLATERAL. Notwithstanding the provisions of the preceding
paragraphs concerning arbitration, no Dispute shall be submitted to arbitration
without the consent of all Parties if, at the time of the proposed submission,
such Dispute arises from or relates to an obligation which is secured directly
or indirectly and in whole or in part by real property collateral. If all
Parties do not consent to submission of such a Dispute to arbitration, the
Dispute shall be determined as provided in the paragraph below entitled
"Judicial Reference".
JUDICIAL REFERENCE. At the request of any Party, a Dispute which is not
submitted to arbitration as provided and limited in the preceding paragraphs
concerning arbitration shall be determined by a reference in accordance with
California Code of Civil Procedure Section 638 et seq. If such an election is
made, the Parties shall designate to the court a referee or referees selected
under the auspices of the AAA, unless otherwise agreed to in writing by all
parties. With respect to a Dispute in which the amounts in controversy do not
exceed $1,000,000, a single referee shall be chosen and shall resolve the
Dispute. The referee shall have authority to render an award up to but not to
exceed $1,000,000, including all damages of any kind whatsoever, including
costs, fees and expenses. A Dispute involving amounts in controversy exceeding
$1,000,000 shall be decided by a majority vote of a panel of three referees (a
"Referee Panel"), PROVIDED, HOWEVER, that all three referees on the Referee
Panel must actively participate in all hearings and deliberations. Referees,
including any Referee Panel, may grant any remedy of relief deemed just and
equitable and within the scope of this Arbitration Program and may also grant
such ancillary relief as is necessary to make effective any award. The presiding
referee of the Referee Panel, or the referee if there is a single referee, shall
be a retired judge. Judgment upon the award rendered by such referee(s) shall be
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645. Determinations and
awards by a referee or Referee Panel shall be binding on all Parties and shall
not be subject to further
<PAGE>
05-20-1996 CHANGE IN TERMS AGREEMENT PAGE 2
(CONTINUED)
================================================================================
review or appeal except as allowed by applicable law.
PRESERVATION OF REMEDIES. No provision of, nor the excise of any rights
under, this Arbitration Program shall limit the right of any Party to: (a)
foreclose against and/or sale of any real or personal property collateral
or other security, or obtain a personal or deficiency award; (b) exercise
self-help remedies (including repossession and setoff rights); or (c)
obtain provisional or ancillary remedies such as injunctive relief,
sequestration, attachment, replevin, garnishment, or the appointment of a
receiver from a court having jurisdiction. Such rights can be exercised at
any time except to the extent such action is contrary to a final award or
decision in any arbitration proceeding. The institution and maintenance of
an action as described above shall not constitute a waiver of the right of
any Party to submit the Dispute to arbitration, nor render inapplicable the
compulsory exercise of any self-help, auxiliary or other rights under this
paragraph shall be a Dispute hereunder.
MISCELLANEOUS. All statutes of limitation applicable to any Dispute shall
apply to any proceeding in accordance with this Arbitration Program. The
Parties agree, to the maximum extent practicable, to take any action
necessary to conclude an arbitration hereunder within 180 days of the
filing of a Dispute with the Administrator. The arbitrator(s) shall be
empowered to impose sanctions for any Party's failure to proceed within the
times established herein. Arbitrations shall be conducted in the state of
the applicable substantive law designated in the Documents. The provisions
of this Arbitration Program shall survive a termination, amendment, or
expiration hereof or of the Documents unless the Parties otherwise
expressly agree in writing. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or
as required by applicable law or regulation. If any provision of this
Arbitration Program is declared invalid by any court, the remaining
provisions shall not be affected thereby and shall remain fully
enforceable.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the non-
signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
GTI MANUFACTURING, INC.
BY: /s/ Samuel G. Lindsay
----------------------------
Samuel G. Lindsay, President
================================================================================
<PAGE>
[LETTERHEAD OF WELLS FARGO BANK]
July 17, 1996
GTI Manufacturing, Inc.
1681 McGaw Ave.
Irvine, CA 92714
Dear Sir:
This letter is to confirm that Wells Fargo Bank, National Association
("Bank") has agreed to extend the maturity date of that certain credit
accommodation granted by Bank to GTI Manufacturing, Inc. ("Borrower") in the
original principal amount of One Hundred Thousand Dollars ($100,000.00), as
evidenced by that certain promissory note dated as of January 11, 1996, executed
by Borrower and payable to the order of Bank (the "Note"), a copy of which is
attached hereto as Exhibit A, and as modified to increase the maximum principal
amount available to One Hundred Eighty Thousand Dollars (S180,000.00), as
evidenced by that certain change in terms agreement dated May 20, 1996, ("Change
in Terms Agreement") a copy of which is attached as Exhibit B.
The maturity date of said credit accommodation is hereby extended until
December 31, 1996. The Note shall be deemed modified as of the date this letter
is acknowledged by Borrower to reflect said new maturity date. All other terms
and conditions of the Note remain in full force and effect, without waiver or
modification.
Borrower acknowledges that Bank has not committed to make any renewal or
further extension of the maturity date of the above-described credit
accommodation beyond the new maturity date specified herein, and that any such
renewal or further extension remains in the sole discretion of Bank. This letter
constitutes the entire agreement between Bank and Borrower with respect to the
maturity date extension for the above-described credit accommodation, and
supersedes all prior negotiations, discussions and correspondence concerning
said extension.
<PAGE>
GTI Manufacturing, Inc.
July 17, 1996
Page 2
Please acknowledge your acceptance of the terms and conditions contained
herein by dating and signing one copy below and returning it to my attention at
the above address on or before August 2, 1996.
Very truly yours,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Elliot Ichinose
------------------------------------
Elliot Ichinose
Vice President
Acknowledged and accepted as of 7/29/96:
-------
GTI MANUFACTURING, INC.
By: /s/ Samuel G. Lindsay
--------------------------
Samuel G. Lindsay
President
<PAGE>
EXHIBIT 4.4
WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
- - --------------------------------------------------------------------------------
$400,000.00 Irvine, California
September 23, 1996
FOR VALUE RECEIVED, the undersigned GRIP TECHNOLOGIES, INC. ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at ORANGE COAST RCBO, 2030 MAIN STREET SUITE 900, IRVINE, CA
92714, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of $400,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
--------
interest (computed on the basis of a 360-day year, actual days elapsed) at a
rate per annum 2.50000% above the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is announced
within Bank.
(b) Payment of Interest. Interest accrued on this Note shall be payable on
-------------------
the 15TH day of each MONTH, commencing OCTOBER 15, 1996.
(c) Default Interest. From and after the maturity date of this Note, or such
----------------
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.
(d) Collection of Payments. Borrower authorizes Bank to collect all
----------------------
interest due hereunder by charging Borrower's demand deposit account number
4159-318914 with Bank, or any other demand deposit account maintained by any
Borrower with Bank, for the full amount thereof. Should there be insufficient
funds in any such demand deposit account to pay all such sums when due, the full
amount of such deficiency shall be immediately due and payable by Borrower.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
-----------------------
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. The outstanding principal balance of this Note shall be due and
payable in full on SEPTEMBER 15, 1997.
(b) Advances. Advances hereunder, to the total amount of the principal sum
--------
available hereunder, may be made by the holder at the oral or written request of
(i) SAMUEL G. LINDSAY, any one acting alone, who are authorized to request
advances and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited to the credit of
any account of any Borrower with the holder, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of each
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an advance
is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this Note shall be
-----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
The occurrence of any of the followinq shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges when
due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor of
this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver,
Revolving Line of Credit Note (08/96), Page 1
<PAGE>
trustee, custodian or liquidator of or for any part of the assets or property of
any Borrower or Third Party Obligor; any Borrower or Third Party Obligor becomes
insolvent, makes a general assignment for the benefit of creditors or is
generally not paying its debts as they become due; or any attachment or like
levy on any property of any Borrower or Third Party Obligor.
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the holder.
(e) Any financial statement provided by any Borrower or Third Party Obllgor
to Bank proves to be incorrect, false or misleading in any material respect.
(f) Any sale or transfer of all or a substantial or material part of the
assets of any Borrower or Third Party Obligor other than in the ordinary course
of its business.
(g) Any violation or breach of any provision of, or any defined event of
default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, deed of trust, mortgage or other document executed in
connection with or securing this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of
--------
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), expended
or incurred by the holder in connection with the enforcement of the holder's
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in any way related to
this Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or entity
-----------------------------
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the state of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
GRIP TECHNOLOGIES, INC.
By: /s/ Samuel G. Lindsay
--------------------------
SAMUEL G. LINDSAY
PRESIDENT
Revolving Line of Credit Note (08/96), Page 2
<PAGE>
ADDENDUM TO PROMISSORY NOTE
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by GRIP TECHNOLOGIES, INC. ("Borrower") and payable to WELLS FARGO
BANK, NATIONAL ASSOCIATION, or order, dated as of September 23, 1996, in the
principal amount of Four Hundred Thousand Dollars ($400,000.00) (the "Note").
The following arbitration provision is hereby incorporated into the Note:
ARBITRATION:
(A) ARBITRATION. Upon the demand of any party, any Dispute shall be
-----------
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Note. A "Dispute" shall mean any action, dispute, claim
or controversy of any kind, whether in contract or tort, statutory or common
law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this Note and each other document,
contract and instrument required hereby or now or hereafter delivered to Bank in
connection herewith (collectively, the "Documents"), or any past, present or
future extensions of credit and other activities, transactions or obligations of
any kind related directly or indirectly to any of the Documents, including
without limitation, any of the foregoing arising in connection with the exercise
of any self-help, ancillary or other remedies pursuant to any of the Documents.
Any party may by summary proceedings bring an action in court to compel
arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
---------------
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Documents.
The arbitration shall be conducted at a location in California selected by the
AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters
<PAGE>
directly relevant to the Dispute being arbitrated. Judgment upon any aware
rendered in an arbitration may be entered in any court having jurisdiction;
provided however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
(S)91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
----------------------------------------------------------
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
--------------------------------------------
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
---------------
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be
-2-
<PAGE>
required to make specific, written findings of fact and conclusions of law. In
such arbitrations (A) the arbitrators shall not have the power to make any award
which is not supported by substantial evidence or which is based on legal error,
(B) an award shall not be binding upon the parties unless the findings of fact
are supported by substantial evidence and the conclusions of law are not
erroneous under the substantive law of the state of California, and (C) the
parties shall have in addition to the grounds referred to in the Federal
Arbitration Act for vacating, modifying or correcting an award the right to
judicial review of (1) whether the findings of fact rendered by the arbitrators
are supported by substantial evidence, and (2) whether the conclusions of law
are erroneous under the substantive law of the state of California. Judgment
confirming an award in such a proceeding may be entered only if a court
determines the award is supported by substantial evidence and not based on legal
error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
--------------------------------------------
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
-------------
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in
-3-
<PAGE>
the ordinary course of its business, by applicable law or regulation, or to the
extent necessary to exercise any judicial review rights set forth herein. If
more than one agreement for arbitration by or between the parties potentially
applies to a Dispute, the arbitration provision most directly related to the
Documents or the subject matter of the Dispute shall control. This Note may be
amended or modified only in writing signed by Bank and Borrower. If any
provision of this Note shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or any remaining provisions of this Note. This arbitration provision shall
survive termination, amendment or expiration of any of the Documents or any
relationship between the parties.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date as
the Note .
GRIP TECHNOLOGIES, INC.
By: /s/ Samuel G. Lindsay
-------------------------
Samuel G. Lindsay
President
<PAGE>
EXHIBIT 4.5
CONVERTIBLE NOTE
$ Irvine, California
FOR VALUE RECEIVED, on or before May 31, 1997, the undersigned, Grip
Technologies, Inc., a California corporation ("Borrower"), promises to pay to
the order of , a , or its successors or assigns ("Holder"),
at the principal sum of
------------------------------------------------
dollars ($ ) together with simple interest at eight percent (8%) per annum.
The entire outstanding principal and interest amount shall be due and payable
May 31, 1997. Borrower may prepay any or all amounts due under this Note at any
time without penalty; provided, however, that Borrower, as a condition to
prepayment of some or all of balance hereof, shall deliver written notice of its
intention to prepay at least 14 calendar days prior to the date of such
prepayment ("Prepayment Date") and cooperate with Holder in Holder's exercise of
Holder's convertibility rights, as set forth below, if Holder elects to exercise
such rights. Said payments shall first be applied to accrued interest and then
to principal. All payments shall be made in lawful money of the United States.
This Note is executed pursuant to a Subscription Agreement dated ,
--------
1996, executed by Borrower and Holder.
The principal and accrued interest on this Note are convertible, at the
option and in the discretion of the Holder, wholly or in part for shares of
Borrower's common stock at a conversion price of $1.75 per share until May 31,
1997 ("Expiration Date"). To exercise Holder's conversion rights, Holder shall
deliver written notice to Borrower no later than 10:00 a.m. Pacific time on the
Expiration Date or the Prepayment Date, whichever is earlier, indicating the
amount of principal and accrued interest to be converted to shares of common
stock. Such shares shall be "restricted securities," as defined in Rule 144
under the Securities Act of 1933, and shall bear a legend indicating their
restricted nature. However, Holder shall have "piggyback" registration rights
with respect to said shares in any registration statement filed by Holder on or
prior to May 31, 1997, unless such registration statement is not suitable for
the sale of such shares, for example, and not by limitation, the registration of
transactions in connection with Borrower's benefit plans. Borrower shall give
Holder written notice of the opportunity to exercise such registration rights at
least ten (10) days prior to the effective date of such registration statement.
The undersigned and each endorser, surety, and guarantor, if any, to the
extent permitted by law, hereby jointly and severally waive presentment for
payment, demand, notice of nonpayment, notice of dishonor, protest of any
dishonor, notice of protest, and protest of this Note and all other notices in
connection with the delivery, assignment, acceptance, performance, default, or
enforcement of the payment of this Note; and they agree that the liability of
the undersigned shall not in any manner be affected by any indulgence, extension
of time, renewal, waiver, or modification granted or consented to by the Holder
hereof; and they agree that additional makers, guarantors, sureties, or
endorsers may become parties hereto without affecting the liability of any of
them hereunder.
<PAGE>
The Holder hereof shall not, by any act of omission or commission, be
deemed to waive any of the Holder's rights, remedies, or powers hereunder or
otherwise unless such waiver is in writing and signed by the Holder hereof, and
then only to the extent specifically set forth therein. A waiver of one event of
default shall not be construed as continuing or as a bar to or waiver of such
right, remedy, or power on a subsequent event of default.
If the Borrower fails to pay the full amount of unpaid principal and
interest when due and payable, Borrower shall pay default interest at the rate
of ten percent (10%) plus all expenses of collection with or without suit,
including reasonable attorney's fees as may be permitted by law. The Holder may
pursue any remedies singly, successively, or together against the undersigned,
such remedies being cumulative and concurrent.
The validity and interpretation of this Note shall be governed by the laws
of the State of California.
Executed this day of May, 1996.
------
GRIP TECHNOLOGIES, INC.
By:
----------------------------
Sam G. Lindsay, President
ATTEST:
By:
---------------------------------
James E. McCormick III, Secretary
2
<PAGE>
EXHIBIT 10.1
GRIP TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
1. Definitions. As used herein, the following terms shall have the
-----------
meanings hereinafter set forth unless the context clearly indicates to the
contrary:
1.1 Agreement. The agreement between the Company and the Optionee
---------
under which the Optionee may purchase Stock pursuant to the Plan.
1.2 Board. The Board of Directors of the Company.
-----
1.3 Committee. A committee of two (2) or more members of the
---------
Board appointed by the Board to administer the Plan.
1.4 Company. Grip Technologies, Inc., a California corporation.
-------
1.5 Code. The United States Internal Revenue Code of 1986, as
----
amended.
1.6 Eligible Person. With respect to the granting of ISOs,
---------------
any person who is a key. employee of the Company, a Parent or a Subsidiary,
including executive officers thereof, as determined by the Board of the
Committee, as the case may be. With respect to the granting of Non-ISOs, any
person defined by the preceding sentence or otherwise any person who is a Board
member, a member of the Board of Directors of a Parent or a Subsidiary or a key
consultant or contractor to the Company, a Parent or a Subsidiary. As used
herein, "full-time" shall mean employment on a regular and continuing basis.
1.7 Fair Market Value. The per share fair market value of the
-----------------
Stock of the Company with respect to which Options may be granted pursuant to
the Plan, determined without regard to any restriction upon the Stock other than
a restriction which, by its terms, will never lapse. For purposes of determining
whether a restriction upon the Stock will never lapse, limitations imposed by
applicable registration requirements of state or federal securities or similar
laws imposed with respect to resales or other dispositions of securities shall
be disregarded. If the Stock of the Company is publicly traded on a national
securities exchange or in the over-the-counter market, such per share fair
market value shall be equal to the per share composite closing price for such
Stock on such national securities exchange or the average of the per share
closing bid and asked prices for such Stock in the over-the-counter market, as
the case may be, on the date an Option is granted under the Plan or, in the
absence of any reported sales
<PAGE>
on such date, the first preceding date on which there were such sales. If the
Stock of the Company is not publicly traded, such fair market value shall be
determined by and in accordance with such valuation procedures and methods as
are established from time to time by the Committee or the Board, as the case may
be, in good faith and in accordance with the provisions of the Code and any
regulations promulgated thereunder.
1.8 ISO. An option to purchase Stock of the Company pursuant to
---
the provisions of the Plan, which option at the time of grant is defined by, and
intended to qualify as an incentive stock option pursuant to, Section 422 of the
Code.
1.9 Non-ISO. An option to purchase Stock of the Company pursuant
-------
to the provisions of the Plan, which option by its terms at the time of grant
provides that it shall not be treated as an ISO.
1.10 Option. An ISO or a Non-ISO granted pursuant to the
------
provisions of the Plan.
1.11 Optionee. The Eligible Person to whom an Option has been
--------
granted pursuant to the provisions of the Plan.
1.12 Option Price. The per share exercise price of the Stock with
------------
respect to which an option has been granted under the Plan.
1.13 Parent. Any corporation (other than the Company) in an
------
unbroken chain of corporations ending with the Company if, at the time of the
granting of an Option, each of the corporations other than the Company owns
securities possessing fifty percent (50%) or more of the total combined voting
power of all classes of securities in one of the other corporations in such
chain.
1.14 Plan. The Company's 1994 Stock Option Plan, the terms of
----
which are set forth herein.
1.15 Stock. The common stock, without par value, of the Company.
-----
1.16 Subsidiary. Any corporation (other than the Company) in an
----------
unbroken chain of corporations beginning with the Company if, at the time of the
granting of an Option, each of the corporations other than the last corporation
in the unbroken chain owns securities possessing fifty percent (50%) or more of
the total combined voting power of all classes of securities in one of the other
corporations in such chain.
2
<PAGE>
2. Establishment and Purpose of Plan.
---------------------------------
2.1 Establishment of Plan. The Company hereby establishes the
---------------------
Plan for the benefit of those Eligible Persons who are primarily responsible for
the future growth, development and financial success of the Company. In order to
maintain flexibility in the granting of Options, the Plan provides for Eligible
Persons to receive ISOs, Non-ISOs or both. The grant of one type of Option shall
not be construed to preclude or prohibit the grant of the other type of Option
to the same Eligible Person or entitle such Eligible Person to the grant of the
other type of Option by reason of the grant of one type of Option.
2.2 Purpose of Plan. The purpose of the Plan is to advance the
---------------
interests of the Company and its shareholders by affording to Eligible Persons
an opportunity to acquire or increase their proprietary interests in the Company
by the grant to such Eligible Persons of Options to purchase Stock in the
Company pursuant to the terms of the Plan. By encouraging such Eligible Persons
to become owners of shares of Stock in the Company, the Company seeks to
motivate, retain and attract those highly competent individuals upon whose
judgment, initiative, leadership and continued efforts the success of the
Company in large measure depends.
2.3 Effective Date of Plan. The effective date of the Plan shall
----------------------
be January 1, 1994; provided, however, that no Option shall be granted pursuant
to the Plan until the Plan shall have been: (i) adopted (or corporate action
taken) by the Board; and (ii) approved by shareholders holding a majority of all
outstanding voting securities of the Company. Such shareholder approval shall be
obtained within twelve (12) months before or after the date on which the Plan is
so adopted by the Board. Such shareholder approval shall comply with all
applicable provisions of the California state law prescribing the method and
degree of shareholder approval required for the Plan.
2.4 Expiration of Plan. The Plan shall terminate ten (10) years
------------------
from its effective date as provided by Section 2.3 of the Plan, or such earlier
date as the Board may determine pursuant to Section 7 of the Plan, and no Option
shall be granted after such date.
2.5 Controlling Provisions. Except as otherwise provided in the
----------------------
Plan, each provision thereof shall apply to the grant, administration and
exercise of all Options subject thereto, including ISOs and Non-ISOs. No such
provisions shall be interpreted or applied in a manner inconsistent or otherwise
at variance with the requirements of
3
<PAGE>
Section 422 of the Code with respect to qualification of ISOs as incentive stock
options, or the treatment of Non-ISOs not as incentive stock options, as the
case may be. No inference to such qualification or treatment shall be drawn for
any purpose under the Plan be reason of the grant of ISOs and Non-ISOs under the
Plan.
3. Stock Subject to Plan.
---------------------
3.1 Limitations. Subject to adjustment pursuant to the provisions
-----------
of Section 3.2 hereof, the aggregate number of shares of Stock of the Company
which may be issued and sold under the Plan shall not exceed 600,000 shares.
During the term of the Plan, the Company shall reserve and keep available or
otherwise have authorized a sufficient number of shares to comply with the
requirements of the Plan.
3.2 Adjustments. In the event that the outstanding shares of
-----------
Stock of the Company are hereafter changed into or exchanged for a different
number or kind of shares or other securities of the Company or of another
corporation by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock dividend, stock
split or reverse stock split, the following adjustments shall be made:
(a) Number and Kind of Shares. The aggregate number and kind of
-------------------------
shares with respect to which Options may be granted hereunder shall be
appropriately adjusted.
(b) Outstanding Options. The rights of an Optionee holding
-------------------
outstanding Options granted under the Plan both as to the number of shares and
the Option Price shall be appropriately adjusted.
(c) Nonsurvival of Company. Where dissolution or liquidation of
----------------------
the Company or any merger or combination in which the Company is not a surviving
corporation is involved, each Option granted hereunder shall terminate as of the
effective date of such liquidation, dissolution, merger or combination to the
extent that such outstanding Options are not assumed by the surviving
corporation; provided, however, subject to the further exception below, the
Optionee shall have the right, for a period of thirty (30) days immediately
prior to the consummation of such liquidation, dissolution merger or
combination, to exercise his Option, in whole or in part, to the extent that
such Option shall not have been previously exercised, without regard to any
vesting provisions; provided further such Option is not assumed by, or replaced
by equivalent options granted by, the surviving corporation in such liquidation,
dissolution, merger or combination.
3.3 Effect of Exercise or Termination of Option. Shares of Stock
-------------------------------------------
with respect to which an Option granted under the Plan shall have been exercised
shall
4
<PAGE>
not again be available for grant under the Plan. If Options granted under the
Plan shall terminate for any reason without being wholly exercised, new Options
may be granted under the Plan covering that number of shares of Stock with
respect to which such termination relates.
4. Administration of the Plan.
--------------------------
4.1 Administration by Board or Committee. Subject to the provisions
------------------------------------
of the Plan, the Plan shall be administered by the Board. At any time during the
existence of the Plan, the Board may appoint a Committee to administer the Plan,
in which even the Plan shall be administered by the Committee until such time as
the Committee is disbanded or its authority eliminated by the Board.
4.2 Powers and Duties. Subject to the provisions of the Plan,
-----------------
the Board or Committee, as the case may be, shall have sole discretion and
authority to determine the Eligible Persons to whom Options shall be granted,
the number of shares of Stock to be covered by any such Option, the type of
Option to be granted and the time or times at which any Option may be granted or
exercised. The Board or Committee, as the case may be, shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the details and provisions of
each Agreement executed pursuant to the Plan and to make all other
determinations necessary or advisable in the administration of the Plan.
4.3 Quorum and Majority Rule. The majority of the then members
------------------------
of the Board or Committee, as the case may be, shall constitute a quorum and any
action taken by a majority present at a meeting at which a quorum is present or
any action taken without a meeting evidenced by a writing executed by all of the
members of the Board or Committee, as the case may be, shall constitute the
action of the Board or Committee.
4.4 Participation by Members of Board or Committee. Any member of
----------------------------------------------
the Board or Committee, as the case may be, shall not be disqualified from
receiving an Option by virtue of the fact that he is a member of the Board or
Committee; provided, however, that no grant of an Option to a member of the
Board of Committee shall take place without the approval or consent of (i) a
majority of the entire Board, a majority of which and a majority of whose
members acting in the matter are disinterested persons, (ii) a majority of the
Committee, all of the members of which are disinterested persons or (iii) a
majority of the entire Board and a majority of the outstanding shares of the
Company. For purposes of this Section 4.4, a "disinterested person" shall mean
an administrator of the Plan who is not at the time he exercises discretion in
administering the Plan an Eligible Person and has not at any time within one (1)
year prior thereto been
5
<PAGE>
an Eligible Person under the Plan or any other plan of the Company or any Parent
or Subsidiary entitling the participants therein to acquire stock, stocks
options or stock appreciation rights of the Company or any Parent or Subsidiary.
4.5 Liability of Board or Committee. No member of the Board
-------------------------------
or Committee, as the case may be, shall be liable for any action, determination
or interpretation under any provision of the Plan or otherwise if such action,
determination or interpretation was done or made in good faith by such member of
the Board of Committee.
5. Options Granted Under the Plan.
------------------------------
5.1 Grant of Options. ISOs or Non-ISOs or both may be granted
----------------
to Eligible Persons under the Plan. No Option shall be granted under the Plan on
a date more than ten (10) years from the earlier of the date the Plan is: (i)
adopted by the Board; or (ii) approved by the shareholders of the Company as
provided by Section 2.3 of the Plan. An Eligible Person may be granted one or
more Options. Each Option granted under the Plan shall be evidenced by an
Agreement dated as of the date such Option is granted by the Board of Committee,
as the case may be. The Agreement shall contain such terms and conditions as
shall be determined by the Board of Committee, as the case may be, consistent
with the Plan. Each Option granted under the Plan shall be clearly identified by
its terms as either an ISO or a Non-ISO. Each Agreement providing for ISOs or
Non-ISOs shall be set forth in separate documents. Each ISO granted under the
Plan shall designate, at the time of grant, that such Option shall be subject
to, and treated as an incentive stock option pursuant to, Section 422 of the
Code. Each Non-ISO granted under the Plan shall provide as of the time such
Option is granted that it shall not be treated as an ISO. No Option shall be
granted whose exercise shall affect, or be affected by, the exercise of any
other Option, whether the granting of such Options shall occur concurrently or
otherwise. As a further condition to the grant of an Option, but without
limitation of any Optionee's rights as a shareholder, the Board or Committee, as
the case may be, may require that the Agreement provide that the Company shall
have an option to repurchase and redeem the Stock acquired by the Optionee as a
result of the Optionee's exercise of the Option if the Optionee's employment
with the Company or a Parent or Subsidiary is subsequently terminated for any
reason or if the Optionee subsequently seeks to sell the Stock to another
person.
5.2 Option Price. The Option Price shall be determined by the
------------
Board or committee, as the case may be; provided, however, that the per share
Option Price of an ISO shall not be less than one hundred percent (100%) of the
Fair Market Value of the Stock on the date the ISO is granted; and provided
further, however, that if the Optionee owns securities possessing more than ten
percent (10%) of the total combined
6
<PAGE>
voting power of all classes of securities of the Company, a Parent or a
Subsidiary, including indirect ownership of securities as determined by Section
424(d) of the Code, at the time an ISO is granted to him, the Option Price of
such ISO shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Stock on the date the ISO is granted to him.
5.3 Option Term. The term during which any Option granted under
-----------
the Plan may be exercised shall be determined by the Board of Committee, as the
case may be; provided, however, that in no instance shall the term during which
any Option may exercised exceed ten (10) years from the date of grant of the
Option; and provided further, however, that no ISO granted to an Optionee who
then owns securities possessing more than ten percent (10%) of the total
combined voting power of all classes of securities of the Company, a Parent of a
Subsidiary, including indirect ownership of securities as determined by Section
424(d) of the Code, at the date the ISO is granted, may be exercisable after the
expiration of five (5) years from the date such ISO is granted.
5.4 Option Exercise. An Option granted pursuant to the Plan
---------------
may be exercised at any time or times prior to the termination of said Option,
as provided by Section 5.8 of the Plan, by delivery by the Optionee of written
notice to the Company specifying the number of shares of Stock to be purchased,
accompanied by full payment for such shares of Stock. The Board or Committee, as
the case may be, may provide the Optionee with a form of such written notice
upon execution of the Agreement. Payment upon exercise shall be made by means of
a cash payment, by delivery of shares of Stock then owned by the Optionee or by
a combination of the foregoing. No Option shall be exercisable for a fraction of
a shares of Stock. No such payment shall be made in full or in part with shares
of Stock acquired by an Optionee through the prior exercise of an ISO where such
shares shall not have been held by such Optionee within the requirements of
Section 422(a)(1) of the Code.
5.5 Option Exercisability. The exercisability of any Option
---------------------
granted under the Plan shall be determined by the Board or Committee, as the
case may be.
5.6 Option Exercise Limitation Upon Qualification. The extent to
---------------------------------------------
which any Option granted under the Plan shall be exercisable shall generally be
determined by the Board of Committee, as the case may be. As a limitation upon
the foregoing, and in accordance with Section 422(d) of the Code, to the extent
the aggregate Fair Market Value of the Stock with respect to which: (i) ISOs
granted under the Plan; and (ii) incentive stock options granted under all other
plans of the Company, a Parent or a Subsidiary (determined without regard to
Section 422(d) of the Code), are exercisable for the first time by any
individual during any calendar year of all such plans
7
<PAGE>
(inclusive of the Plan) shall exceed one hundred thousand dollars ($100,000),
then all such options (inclusive of the ISOs granted under the Plan) shall be
treated as options for Stock which are not ISOs. The limitations of the
preceding sentence shall be applied by taking all such options (inclusive of the
ISOs granted under the Plan) in order in which such options shall have been
granted. The aggregate Fair Market Value of the Stock covered by any such
option (inclusive of Stock covered by ISOs granted under the Plan) shall be
determined in accordance with Section 1.7 of the Plan, or under a similar method
with respect to any such option, as the product of the per share Fair Market
Value of the Stock covered thereby times the number of shares of Stock covered
thereby, determined as of the time such option is granted.
5.7 Nontransferability of ISOs. No ISO granted pursuant to the
--------------------------
Plan may be transferred to an Optionee otherwise than by will or by the laws of
descent and distribution. During the lifetime of an Optionee, an ISO shall be
exercisable only by him.
5.8 Termination of Option.
---------------------
(a) Expiration or Termination of Employment. Except as
---------------------------------------
specifically in Sections 58(b) and 58(c) of the Plan, each Option granted under
the Plan, and all rights thereunder, shall terminate as of the close of business
on the earlier of the date of the expiration of the term of the Option stated in
the Agreement or the expiration of no more than ninety (90) days after the date
that the Optionee's employment with the Company, a Parent or a Subsidiary
terminates for any reason. For this purpose, the employment relationship of such
Optionee shall be deemed as continuing while the Optionee is on military, sick
leave or other bona fide leave of absence, such as temporary employment by the
government, if the period of such leave does not exceed three (3) months, or, if
longer, so long as the right of such Optionee to re-employment by the Company, a
Parent or a Subsidiary is guaranteed either by law or by an employment contract.
Such Option may be so exercised by the Optionee only to the extent that it was
exercisable but not exercised as of the date his termination of employment with
the Company, a Parent or a Subsidiary, but in no event may the Option be
exercised at any time after the expiration of the term of the Option stated in
the Agreement.
(b) Death of an Optionee. In the event that an Optionee dies, his
--------------------
Option may be exercised by the Optionee's executors, administrators, heirs or
legatees within no more than one (1) year after the Optionee's death provided
such death shall have occurred during the Optionee's employment with the
Company, a Parent or a Subsidiary or within no more than ninety (90) days
following the termination of Optionee's employment with the Company, a Parent or
a Subsidiary. Such Option may
8
<PAGE>
be so exercised by the Optionee's executors, administrators, heirs and legatees
only to the extent that it was exercisable but not exercised as of the date of
the death of the Optionee or the date of his termination of employment,
whichever occurred first, but in no event may the Option be exercised at any
time after the expiration of the term of the Option stated in the Agreement.
Such exercise shall be made pursuant to the terms of the Option,and any change
in the terms of an ISO shall be subject to the rules of Section 424(h) of the
Code. If so exercised, any such ISO shall be treated as an incentive stock
option under Section 422 of the Code, notwithstanding whether such executor,
administrator, heir, or legatee is then employed by the Company, provided the
Optionee shall have met the foregoing employment requirement at the Optionee's
death.
(c) Permanent and Total Disability. In the event that the
------------------------------
employment of an Optionee shall have terminated by reason of such Optionee
becoming permanently and totally disabled within the meaning of Section 22(e)(3)
of the Code, the Optionee shall have the right, during the period ending no more
than one hundred eighty (180) days after the date of such termination of
employment, to exercise his Option. Such Option may be so exercised by the
Optionee or by the conservator of the Optionee's estate only to the extent that
it was exercisable but not exercised as of the date he became permanently and
totally disabled or the date of his termination of employment, whichever
occurred first, and in no event shall such Option be exercised at any time after
the expiration of the term of the Option stated in the Agreement.
5.9 Rights as Shareholder. An Optionee or permitted transferee
---------------------
of an Option shall have no rights as a shareholder of the Company with respect
to any shares of Stock covered thereby prior to his purchase of such shares of
Stock by exercise of such Option as provided in the Plan. Such Optionee or
permitted transferee shall thereafter be deemed to have substantially all of the
rights of ownership to the shares of Stock in respect of which such exercise
shall be made.
5.10 Right of Company to Terminate Employment. Nothing
----------------------------------------
contained in the Plan (including the provisions of the succeeding sentence) or
any Option granted under the Plan shall confer on an Optionee any right to be
continued in the employ of the Company, a Parent or a Subsidiary or interfere in
any way with the right of the Company, a Parent or a Subsidiary to terminate an
Optionee's employment with it at any time for any reason. If requested by the
Board or the Committee, as the case may be, an Optionee shall agree in writing
as a condition of the granting of an Option to remain in the employ of the
Company following the date of grant of an Option for a period specified by the
Board or Committee.
9
<PAGE>
5.11 Delivery of Financial Statements to Optionee. Within three
--------------------------------------------
(3) months after the end of each fiscal year of the Company, the Company shall
deliver to each Optionee a complete set of the Company's financial statements as
of the end of such fiscal year. Said financial statements shall include a
balance sheet and the related statements of income and cash flow for the fiscal
year in question.
6. Delivery of Stock Certificates. The Company shall not be required to
------------------------------
issue or deliver any certificate for shares of Stock purchased upon the exercise
of all or any portion of any Option granted under the Plan prior to the
fulfillment of all of the following conditions:
6.1 Listing of Shares. If applicable, the admission of such shares
-----------------
of Stock to listing on all stock exchanges on which the Stock of the Company is
then listed.
6.2 Registration and/or Qualification of Shares. If applicable,
-------------------------------------------
the completion of any registration or other qualification of such shares of
Stock under any federal or state securities laws or under the regulations
promulgated by the Securities and Exchange Commission or any other federal or
state governmental regulatory body, which the Board or Committee, as the case
may be, shall deem necessary or advisable.
6.3 Approval of Clearance. The obtaining of any approval or
---------------------
clearance from any federal or state governmental agency which the Board or
Committee, as the case may be, shall determine to be necessary or advisable.
6.4 Reasonable Lapse of Time. The lapse of such reasonable period
------------------------
of time following the exercise of the Option as the Board or Committee, as the
case may be, may establish from time to time for reasons of administrative
convenience. The issuance of such certificate shall be evidenced on the books of
the Company with such reasonable period of time.
7. Termination, Amendment and Modification of Plan. The Board may, upon
-----------------------------------------------
recommendation of the Committee, if any, appointed by it to administer the Plan,
terminate the Plan at any time or amend or modify the Plan at any time or from
time to time; provided, however, that no such action of the Board shall do any
of the following:
7.1 Increase Number of Shares. Except as contemplated in Section
-------------------------
3.2 of the Plan, increase the total number of shares of Stock subject to the
Plan without the approval of shareholders then holding a majority of the
outstanding voting securities of the Company.
10
<PAGE>
7.2 Change of Class of Eligible Persons. Change the class of
-----------------------------------
Eligible Persons to whom Options may be granted under the Plan without the
approval of shareholders then holding a majority of the outstanding voting
securities of the Company.
7.3 Change Terms of Outstanding Options. Change the Option Price
-----------------------------------
or otherwise alter or impair any Option previously granted to an Optionee under
the Plan without the consent of the Optionee.
8. Miscellaneous.
-------------
8.1 Plan Binding on the Successors. The Plan shall be binding
------------------------------
upon the successors and assigns of the Company.
8.2 Section Headings. The headings of the sections of the Plan
----------------
have been inserted for convenience only and shall not be used in construing the
Plan.
8.3 Gender and Number. Whenever used herein, nouns in the
-----------------
singular shall include the plural and a masculine pronoun shall include the
feminine gender.
8.4 Other Compensation Plans. The adoption of the Plan shall not
------------------------
affect any other stock option plan, incentive plan or any other compensation
plan in effect for the employees of the Company, not shall the Plan preclude the
Company from establishing any other form of stock option plan, incentive plan or
any other compensation plan for employees of the Company.
8.5 Tax Information Statements. Upon the exercise of any ISO
--------------------------
during any calendar year in which a transfer of Stock to an Optionee shall
occur, the Company shall furnish to the Optionee an information statement
pursuant to Section 6039 of the Code, and the regulations promulgated
thereunder, on or before January 31 of the following calendar.
[END OF PLAN]
11
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
September 22, 1995, by and between GRIP TECHNOLOGIES, INC., a California
corporation ("Company"), and PAUL J. HERBER, an individual ("Employee").
RECITALS
--------
A. The Company desires to employ Employee upon the terms and subject to
the conditions contained in this Agreement.
B. Employee desires to be hired and employed by the Company upon the terms
and subject to the conditions contained in this Agreement.
TERMS AND CONDITIONS
--------------------
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
----------
agrees to be employed by the Company, as the Vice President-OEM Sales on the
terms and subject to the conditions set forth herein. Employee shall perform
such duties for the Company as may be assigned to him from time to time by the
executive officers or Board of Directors of the Company. Employee agrees to
devote all of his working time and effort to the performance of his duties
hereunder during normal business hours, except for that portion of Employee's
time and effort that may be reasonably required by his contracts with Star Grip
and La Jolla Clubs, but in no event more than five (5) hours per work week and
in the event of any conflict regarding time demands, the Company shall have
first priority. Employee further agrees to perform his duties hereunder in an
efficient, faithful, loyal and business like manner and to conduct himself at
all times during the term of this Agreement in a manner which does not damage or
otherwise adversely reflect upon the business reputation or integrity of the
Company.
2. Term and Termination.
--------------------
2.1 Term. The term of this Agreement shall commence as of the date
----
hereof and, subject to the earlier termination as provided in Section 2.2
hereof, shall expire at the close of business on September 22, 2000 ("Expiration
Date").
<PAGE>
2.2 Termination. Notwithstanding the Expiration Date set forth in
-----------
Section 2.1 hereof, the employment of Employee shall terminated upon the
occurrence of any of the following events, to be effective as of the date
hereinafter specified, and term of this Agreement shall thereupon terminate,
subject to the executory duties and obligations contained herein but in no event
shall the Company be obligated to pay or provide Employee any compensation or
other benefits beyond the date of termination:
(a) The Company may, at any time, immediately terminate Employee for
"just cause". For purposes hereof, "just cause" includes, but is not limited
to, misconduct, dishonesty, extended absences, violation of Company policies and
procedures, violation of any laws regarding or related to sexual harassment or
discrimination in connection with his work or another employee of the Company,
improper disclosure of Confidential Information (as that term is defined in
Section 8 below), or any material and continuing failure of Employee to perform
his duties under this Agreement (except as a result of death or Total
Disability). Any termination for "just cause" shall become effective
immediately upon written notice from the Company to Employee describing, in
reasonable detail, the events or circumstances allegedly constituting "just
cause".
(b) The death of Employee shall immediately terminate his employment
with the Company and this Agreement.
(c) The "Total Disability" of Employee shall terminate his employment
with the Company. For purposes of this Agreement, a condition of "Total
Disability" shall exist if Employee is unable or unwilling to perform his duties
hereunder, or it is determined by a medical doctor retained by the Company that
he would be unable to perform his duties hereunder, for a period of at least
three (3) consecutive months by reason of any medically determinable physical or
mental impairment. The termination shall be effective as of the date it is first
determined that Employee has suffered a total disability.
2.3 Severance Pay. Notwithstanding the term of this Agreement
-------------
described in Section 2.1 above, in the event Employee's employment is terminated
by the Company prior to the Expiration Date for any reason other than for those
reasons described in Section 2.2 above, then the Company shall pay Employee
severance pay of $21,250 if the termination is within the first three (3) years
of the term, $28,333 if the termination is during the fourth year of the term,
and $35,417 if the termination is during the fifth year of the term, and all
rights of Employee under this Agreement, including any rights to additional
compensation or benefit, shall immediately terminate.
2.4 Terminable At Will Employment at Expiration of Term. The parties
---------------------------------------------------
hereto agree that if this Agreement is not extended or superceded, in either
case by another written instrument, and Employee continues his employment with
the Company beyond the Expiration Date, then, from and after the Expiration Date
the employment of
2
<PAGE>
Employee shall be terminable at will at any time, with or without reason or
cause, irrespective of Employee's longevity, upon the giving of sixty (60) days
prior written notice to the other party.
2.5 No Additional Rights Conferred. Except as expressly provided in
------------------------------
this Agreement, nothing contained herein or in any other agreement concurrently
or subsequently entered into between the Company and Employee, such as Stock
Option Agreement(s), shall confer upon Employee any right with respect to the
continuation of his employment by the Company or interfere in any way with the
right of the Company to terminate his employment at any time or to increase or
decrease the compensation or other perquisites payable to Employee. The
inclusion of this Section 2.5 in this Agreement is not a promise, inducement,
covenant or representation by the Company that it has agreed or will agree at
any time in the future to enter into any other or additional agreements with
Employee with respect to any matter.
3. Compensation.
------------
3.1 Base Salary. As compensation for his employment hereunder,
-----------
Employee shall receive from the Company a base salary of $85,000 per annum. The
base salary shall be paid semi-monthly in accordance with the Company's usual
payroll practices. The amount actually paid to Employee shall be the base salary
less all applicable federal and state withholding taxes, F.I.C.A., unemployment
and disability premiums or payment and all other applicable payroll taxes.
3.2 Discretionary Bonuses. Employee will be eligible to receive
---------------------
discretionary bonuses, if and when determined and declared by the Company. The
inclusion of this provision in this Agreement shall not be deemed to be, nor be
construed as being, a commitment by the Company to pay Employee any bonus, or a
bonus of any specified amount, nor does it preclude the Company from paying
bonuses to some executive, management or other employees and not to others or to
Employee, as the Company, in its sole and absolute discretion, determines.
4. Additional Employment Benefits.
------------------------------
4.1 Major Medical Health Program. Employee shall be entitled to
----------------------------
participate in any major medical-health program or other group medical insurance
program in which the Company is enrolled at any time, or from time to time,
subject to the terms of the program or plan and any applicable waiting
probationary period and any pre-existing conditions.
3
<PAGE>
4.2 Other Employment Benefits. Employee shall be entitled to such
-------------------------
other and further employment benefits and prerequisites as may be made available
from time to time by the Company to other employees of the Company with similar
jobs and responsibilities.
5. Reimbursement for Expenses. The Company shall reimburse Employee for
--------------------------
his ordinary and necessary business expenses incurred with respect to the
business of the Company in accordance with policies and procedures adopted by
the Company from time to time. Under no circumstance will Employee be entitled
to reimbursement of any expense unless and until he submits complete and
accurate substantiation of that expense, together with a detailed explanation of
the nature and purpose of the expense and the person or persons involved.
6. Employees Manual. To the extent the Company has or at any time
----------------
hereafter adopts an Employees Manual, or modifies its Employees Manual from time
to time, the provisions of the Employees Manual, as so modified, are
incorporated herein and made a part of this Agreement and Employee hereby agrees
to be bound by and to comply with all of the terms, conditions, rules and
regulations set forth therein.
7. Tax Compliance Matters. The parties hereto agree that it shall be the
----------------------
responsibility of Employee to keep all appropriate records with respect to any
business related expenses incurred by Employee in connection with the
performance of his duties hereunder including the automobile allowance. It shall
be further understood and agreed that the Company, to the extent required by
applicable law, will report the payment or providing of any benefits or
perquisites to Employee in accordance with applicable laws and regulations and,
if required, will make appropriate payroll deductions with respect thereto. It
will be Employee's sole responsibility to report such benefits and perquisites,
to the extent applicable, as income. To the extent that Employee has not
accounted to the Company for any benefits or perquisites to enable the Company
to determine whether or not reporting or payroll deductions are appropriate, and
the Company later determines that reporting or deduction was appropriate, then
Employee agrees to indemnify and hold the Company harmless from and with respect
to any liability which the Company incurs in connection therewith, including,
without limitation, the tax-affected amount of the deduction and all penalties
and interest with respect thereto.
8. Covenant of Nondisclosure and Non-use. Employee understands and
-------------------------------------
acknowledges that he will be advised by the Company from time to time of certain
matters, and will be provided access to certain documents and information, which
are trade secrets or which the Company deems to be proprietary and confidential
("Confidential Information"), whether heretofore or hereafter obtained by
Employee while providing services to the Company, and whether or not Employee
assists the Company in the development of any such Confidential Information.
Employee agrees to maintain the
4
<PAGE>
confidentiality of any Confidential Information provided to him in connection
with the performance of his duties under this Agreement; provided, however, such
obligation shall terminate upon the occurrence of any of the following: (a)
where such information now or hereafter becomes part of the public domain, and
Employee has not obtained or learned such information as a result of
"misappropriation" or "improper means", as those terms are defined in California
Civil Code Section 3426.1; (b) such information is already in the possession of
Employee at the time of the disclosure so long as it was acquired otherwise than
by "misappropriation" or "improper means"; (c) such information hereafter comes
into the possession of Employee from a third party without breach of this
covenant; or (d) such information is independently developed by Employee without
otherwise violating this Agreement. Notwithstanding any of the foregoing, under
no circumstance will Employee use or disclose any ideas, concepts, themes,
inventions, designs, improvements and discoveries conceived, developed or
written by him pursuant to this Agreement or in connection with this Agreement;
all rights to which shall belong to the Company.
8.1 Return of Materials. Employee further agrees that at the
-------------------
termination of this Agreement, he will not take, without the prior written
consent of the Company, tangible manifestations of the Confidential Information
on any memoranda, notes (whether or not prepared by Employee during the course
of his engagement by the Company), extracts, summaries, plats, sketches, plans,
data, lists, manuals, schedules, forms, programs, tapes, disks or other
documents, papers, media or records of any kind relating to or used in the
Company's business, or any reproductions thereof.
8.2 Unfair Competition. Any violation of this Section 8 shall be
------------------
deemed to be unfair competition, in addition to any other rights or remedies
which the Company may have against Employee.
9. Nonsolicitation of Customers, Etc. The Company recognizes that
---------------------------------
Employee may sell Star Grips to the customers listed on Exhibit A. Nonetheless,
Employee will not influence or attempt to influence any of Company's customers,
suppliers, vendors, lessees or any others having business with the Company,
either directly or indirectly, to divert their business to any other person,
firm or business similar to or in competition with the Company.
10. Organizing Competitive Business. Employee agrees that during the term
-------------------------------
of this Agreement, Employee will not undertake the planning or organization of
any business activity similar to or competitive with the business of the
Company. Employee further agrees that he will not, for a period of two (2)
years following the termination of this Agreement, either directly or
indirectly, solicit any of the Company's employees to work for or with Employee,
or its affiliates, or any other corporation, entity or individual, in a business
similar to or competitive with the Company or to work for a competitor of the
Company.
5
<PAGE>
11. Notices. All notices, requests, demands and other communications
-------
required or contemplated hereunder shall be in writing, shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed to have been given upon the earlier of
(a) the date of personal delivery to the person to receive such notice at the
address indicated below or (b) if mailed to the person to receive such notice at
the address indicated below, four (4) business days after the date of posting by
the United States Post Office as evidenced by the execution of the return
receipt. The parties addresses, for all purposes hereof, are as follows:
Company: Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
Employee: Paul J. Herber
20668 White Birch Drive
Vista, California 92803
Notice of change of address shall be given by written notice but shall not be
deemed effective until it has been given in the manner detailed in this Section.
12. Applicable Law; Venue. This Agreement shall be governed by,
---------------------
interpreted under, and construed and enforced in accordance with the internal
laws, and not the laws pertaining to conflicts or choice of laws, of the State
of California applicable to agreements made and to be performed wholly within
the State of California. The sole forum for resolving disputes arising under or
relating to this Agreement shall be the Municipal and Superior Courts for the
County of Orange, California, or the Federal District Court for the Central
District of California and all related appellate courts, and the parties hereby
consent to the jurisdiction of such courts and agree that venue shall be in
Orange County, California.
13. Attorneys' Fees and Litigation Costs. If any suit, legal proceeding
------------------------------------
or other action is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover its or his reasonable attorneys' fees and other costs
incurred in such proceeding or action, in addition to any other relief to which
it or he may be entitled.
14. Waivers. No waiver of any breach or default hereunder, or of any
-------
condition precedent to the performance of any obligation hereunder, shall be
considered valid unless in writing and signed by the parties giving such waiver
or against whom such waive is to be enforced, and no such waiver shall be deemed
a waiver of any subsequent breach or default of the same or similar nature.
6
<PAGE>
15. Partial Invalidity and Severability. If any provision of this
-----------------------------------
Agreement shall be held or deemed to be, or shall, in fact, be inoperative or
unenforceable as applied in any particular case because if conflicts with any
other provision or provisions hereof or any constitution or statute or rule of
public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
sections or subsections of this Agreement shall not affect the remaining
portions thereof.
16. Interpretation. The parties hereto acknowledge and agree that each
--------------
has been given the opportunity to independently review this Agreement with legal
counsel, and has the requisite experience and sophistication to understand,
interpret and agree to the particular language of the provisions hereof. In the
event of any ambiguity in or dispute regarding the interpretation of this
Agreement, or any provision hereof, the interpretation of this Agreement shall
not be resolved by any rule providing for interpretation against the party who
causes the uncertainty to exist or against the party who is the draftsman of
this Agreement.
17. 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.
18. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous written or oral
negotiations or agreements between them regarding the subject matter hereof. No
addition, modification or amendment of or to any term or provision of this
Agreement, or to this Agreement as a whole, shall be effective unless set forth
in writing and signed by all the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above mentioned.
GRIP TECHNOLOGIES, INC., a
California corporation
By:
------------------------------ -------------------------------
Sam G. Lindsay PAUL J. HERBER
President
7
<PAGE>
EXHIBIT 10.3
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT ("Agreement") is made and entered into as of
September 22, 1995, by and among GRIP TECHNOLOGIES, INC., a California
corporation ("Griptec"), USG ACQUISITION CORPORATION, a California corporation
("GTI Sub"), and J. BARRIE OGILVIE, an individual ("Ogilvie").
RECITALS
--------
A. Griptec, GTI Sub, Ogilvie and others are parties to that certain Agreement
and Plan of Reorganization, dated as of September 20, 1995 ("Merger Agreement"),
pursuant to which USGRIPS, Inc., a Florida corporation ("USG") was merged with
and into GTI Sub, and in connection therewith, shares of Common Stock of
Griptec, the parent of GTI Sub, were issued to all of the shareholders of USG.
Ogilvie was the controlling shareholder of USG and was its Chief Executive
Officer and a director.
B. As a material inducement to Griptec and GTI Sub (Griptec and GTI Sub are
sometimes hereafter collectively referred to as the "Company") to enter into the
Merger Agreement, Ogilvie agrees not to compete with the Company upon the terms
and subject to the conditions set forth herein. This Agreement is delivered
pursuant to Section 10.1 of the Merger Agreement.
TERMS AND CONDITIONS
--------------------
NOW, THEREFORE, in consideration of the foregoing recitals and premises,
and the mutual promises, agreements, representations and warranties herein
contained, the parties hereto agree as follows:
1. Noncompetition Covenant. Ogilvie hereby agrees that he will not, at
-----------------------
any time from and after the date hereof until September 22, 2000
("Noncompetition Period"), directly or indirectly, engage in any business, trade
or activity, or have any interest in any person, firm, corporation, entity,
business or venture (whether as an employee, independent contractor, officer,
director, agent, partner, joint venturer, shareholder, creditor, lender or
otherwise) or advise or consult with any person or entity, that engages in any
business, trade or activity in the Territory (as that term is defined in Section
hereof) which business, trade or activity is the same as, similar to or
competitive with the Company's Business (as that term is defined in Section
hereof).
<PAGE>
2. Definition of Territory. For purposes hereof, the term "Territory"
-----------------------
means and refers to all of the following: (i) any county or counties in any
state in the United States; (ii) each of the 58 counties of the State of
California; (iii) each of the counties of each of the other states of the United
States of America; and (iv) worldwide, including without limitation, the
following foreign countries: all countries of European Community and Japan; in
which USG has done business. For purposes hereof, the terms "doing business,"
"done business" and "does business" means and refers to any aspect of the
Company's Business, including, without limitation, sales, marketing,
distribution, receiving or taking orders, advertising, promoting, designing or
manufacturing.
3. Definition of Company's Business. For purposes hereof, the term
--------------------------------
Company's Business means the design, manufacture, marketing, sales and
distribution of sports grips, including grips for golf clubs.
4. Covenant Consideration. The parties hereto acknowledge and agree that
----------------------
no portion of the consideration payable to Ogilvie pursuant to the Merger
Agreement has been separately allocated to the covenants and obligations of
Ogilvie set forth in this Agreement.
5. Specific Performance; Injunctive Relief. If Ogilvie breaches, or
---------------------------------------
threatens to breach, the noncompetition covenant described in Section 1 hereof,
the Company shall have the right, in addition to any other rights or remedies
which it may have, to seek and obtain specific performance thereof and to enjoin
such breach or threatened breach. The parties hereto acknowledge and agree that
any such breach or threatened breach will cause irreparable injury to the
Company, and that the Company could not be reasonably or adequately compensated
in damages at law. The equitable remedies provided herein are not exclusive of
any other remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
6. Interpretation and Enforceability.
---------------------------------
6.1 Severability of Covenants. The parties hereto intend that
-------------------------
the noncompetition covenant described in Section 1 hereof shall be deemed to be
a series of separate noncompetition covenants, one for each county and/or
governmental jurisdiction in which USG has done business. Except as provided in
the immediately preceding sentence, each such separate noncompetition covenant
shall be deemed identical in terms to each other noncompetition covenant
contained in Section 1 hereof. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate noncompetition covenants deemed included
in Section 1, then such unenforceable noncompetition covenant(s) shall be
2
<PAGE>
deemed eliminated from the provisions thereof for the purpose of such
proceedings to the extent necessary to permit the remaining separate
noncompetition covenant(s) to be enforced in such proceedings.
6.2 Blue-Pencilling. If any court determines that any noncompetition
---------------
covenant included in Section 1 hereof, or any part thereof, is unenforceable
because of the duration of such provision or the area covered thereby, such
court shall have the power to reduce the duration or area of such provision and,
in its reduced form, such provision shall then be enforceable and shall be
enforced.
6.3 Application of Other Law. Notwithstanding the provisions of
------------------------
Section 1 hereof, if the noncompetition covenant included in Section 1 hereof,
as it relates to any Territory exclusive of the State of California (or any
county thereof), would not be enforceable under California law but would be
enforceable under the internal laws of that other jurisdiction, then such
noncompetition covenant, solely as it relates to such other jurisdiction, shall
be governed by, interpreted under and construed and enforced in accordance with
the internal laws of such local jurisdiction.
7. Cross Default Provision. Any breach or default under the terms of this
-----------------------
Agreement shall be deemed to be a breach and default under the Merger Agreement
and any breach or default under the Merger Agreement shall be deemed to be a
breach and default hereunder.
8. Notices. All notices, requests, demands and other communications
-------
required or contemplated hereunder shall be in writing, shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed to have been given upon the earlier of
(a) the date of personal delivery to the person to receive such notice at the
address indicated below or (b) if mailed to the person to receive such notice at
the address indicated below, four (4) business days after the date of posting by
the United States Post Office as evidenced by the execution of the return
receipt. The parties addresses, for all purposes hereof, are as follows:
Griptec or GTI Sub: Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
Attn: Mr. Sam G. Lindsay, President
Ogilvie: Mr. J. Barrie Ogilvie
140 Gravel Pit Road
R.R. #3
Dundas, Ontario, Canada L9H 5E3
3
<PAGE>
Notice of change of address shall be given by written notice but shall not be
deemed effective until it has been given in the manner detailed in this Section.
9. Applicable Law. Except as provided in Section hereof, this Agreement
--------------
shall be governed by, interpreted under, and construed and enforced in
accordance with the internal laws, and not the laws pertaining to conflicts or
choice of laws, of the State of California applicable to agreements made and to
be performed wholly within the State of California.
10. Attorneys' Fees and Litigation Costs. If any suit, legal proceeding
------------------------------------
or other action is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover its reasonable attorneys' fees and other costs incurred in
such proceeding or action, in addition to any other relief to which it may be
entitled.
11. Waivers. No waiver of any breach or default hereunder, or of any
-------
condition precedent to the performance of any obligation hereunder, shall be
considered valid unless in writing and signed by the parties giving such waiver
or against whom such waiver is to be enforced, and no such waiver shall be
deemed a waiver of any subsequent breach or default of the same or similar
nature.
12. Interpretation. The parties hereto acknowledge and agree that each
--------------
has been given the opportunity to independently review this Agreement with legal
counsel, and has the requisite experience and sophistication to understand,
interpret and agree to the particular language of the provisions hereof. In the
event of any ambiguity in or dispute regarding the interpretation of this
Agreement, or any provision hereof, the interpretation of this Agreement shall
not be resolved by any rule providing for interpretation against the party who
causes the uncertainty to exist or against the party who is the draftsman of
this Agreement.
13. Section Headings. The section headings in this Agreement are included
----------------
for convenience only, are not a part of this Agreement and shall not be used in
construing it.
14. Reference to Sections. All references to sections are deemed to
---------------------
include references to the sections subsidiary to the section referred to when
the context so requires. The term "this Section" refers to the Section of the
Agreement in which the reference is made and all other Sections subsidiary to
the Section referred.
4
<PAGE>
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of each corporate party hereto, their respective successors
and permitted assigns, and each individual party hereto and his heirs, personal
representatives, estates, successors and permitted assigns.
16. 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.
17. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any and all prior or contemporaneous written or oral negotiations
and agreements between them regarding the subject matter hereof. No addition,
modification or amendment of or to any term or provision of this Agreement, or
to this Agreement as a whole, shall be effective unless set forth in writing and
signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above mentioned.
GRIP TECHNOLOGIES, INC., a
California corporation
<TABLE>
<CAPTION>
<S> <C>
By
----------------------------- -----------------------------
Sam G. Lindsay J. BARRIE OGILVIE
President
By
-----------------------------
James E. McCormick III
Secretary
USG ACQUISITION CORPORATION, a
California corporation
By
------------------------------
Sam G. Lindsay
President
By
-------------------------------
James E. McCormick III
Secretary
</TABLE>
5
<PAGE>
EXHIBIT 10.4
SECURITY AGREEMENT
(Intangible Assets)
THIS SECURITY AGREEMENT ("Agreement") is made and entered into as of July
31, 1995, by and between SAM G. LINDSAY, an individual ("Secured Party"), and
GRIP TECHNOLOGIES, INC., a California corporation ("Debtor").
RECITALS
A. Secured Party has: (1) made loans and advances to Debtor in the
aggregate principal amount of $535,000, which amounts have been consolidated
into a single promissory note, dated July 31, 1995, bearing interest at the rate
of 10% per annum (collectively, the "Loans"); (2) provided certificates of
deposit or other collateral to First Interstate Bank of California ("FIB") in
connection with, and as security for, a $600,000 term loan obtained by Debtor
from FIB; (3) guaranteed Debtor's obligation to American Pacific States Bank
("APSB") in the original principal sum of $322,000 and, in connection therewith,
and as security therefor, pledged to APSB 50,234 shares of Common Stock of
Cosmetic Group USA, Inc.; and (4) guaranteed Debtor's promissory note, dated
December 10, 1993, made payable by Debtor to Kwang Soo Kim and In Ho Kim in the
original principal sum of $50,000 delivered by Debtor in connection with the
financing of the tenant improvements at the facilities occupied by Debtor
located at 1681 McGaw, Irvine, California (collectively the "Obligations").
B. Secured Party and Debtor desire to enter into this Agreement to grant
Secured Party a security interest in the Collateral (as that term is hereafter
defined in Section 1 below) to secure the repayment of the Loans or advances
made by Secured Party and all monies paid or losses incurred or sustained by
Secured Party as a result of, or in any way connected with, the Obligations.
TERMS AND CONDITIONS
NOW, THEREFORE, the parties hereto agree as follows:
1. Definition of Collateral. For purposes of this Agreement, the term
------------------------
"Collateral" means and includes all of the following: (a) all trademarks, trade
names, service marks, logos and/or trade dress owned or used by Debtor, whether
registered, unregistered or subject of pending application for registration,
including without limitation, those trademarks, trade names, service marks,
logos and/or trade dress listed
<PAGE>
on Schedule A attached hereto and incorporated herein by this reference
(collectively the "Trademarks"); (b) all copyrights owned or used by Debtor,
whether registered, unregistered or subject of pending application for
registration, including without limitation, those copyrights listed on Schedule
A attached hereto and incorporated herein by this reference (collectively the
"Copyrights"); (c) all patents, patent applications and any other similar rights
owned by Debtor or in which Debtor has any rights, including without limitation,
those patents Listed on Schedule A attached hereto and incorporated herein by
this reference (collectively the "Patents"); (d) all trade secrets owned by
Debtor or in which Debtor has any rights, including without limitation, any
formula, pattern, device or compilation of information which is used in Debtor's
business and which gives it an opportunity to obtain an advantage over
competitors who do not know or use it, including without limitation, all
unpatented technology and know-how (collectively the "Trade Secrets"); (e) all
contract rights, general intangibles and any other intangible or intellectual
right, asset or property owned by Debtor, or in which Debtor has any right,
including, without limitation, any license agreements (whether as licensor or as
licensee); (f) any proceeds from the sale, license, lease, hypothecation,
mortgage, encumbrance or other disposition of any of the foregoing; (g) any
documentation or writings which memorialize, embody, describe, incorporate or
otherwise refer to any of the foregoing; and (h) any of the foregoing which is
hereafter acquired by Debtor.
2. Attachment of Security Interest. Debtor hereby grants and assigns to
-------------------------------
Secured Party a security interest in and to the Collateral to secure repayment
of the Loan and all monies paid or losses incurred or sustained by Secured Party
as a result of, or in any way connected with, the Obligations. In addition, the
security interest thereby created shall attach immediately upon execution of
this Agreement by Debtor and shall secure (a) any and all amendments,
extensions, renewals of any documents which memorialize, embody, describe,
incorporate or otherwise refer to any of the Obligations; (b) strict performance
and observance of all agreements, warranties and covenants contained in this
Agreement; (c) the repayment of all monies expended by Secured Party under the
provisions hereof, including attorneys' fees, with interest thereon from the
date of expenditure at the highest lawful rate; and (d) any and all other
liabilities of Debtor to Secured Party, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising.
3. Security Interest in Proceeds. Debtor also hereby grants and transfers
-----------------------------
to Secured Party a security interest in any and all proceeds as that term is
defined in Section 9306 of the California Commercial Code, of the Collateral or
any part of the Collateral. Nothing in this Section 3 shall constitute, or be
deemed to constitute, a grant of authority to Debtor to sell or otherwise
dispose of or encumber the Collateral or any part of the Collateral without the
prior written consent of Secured Party or as otherwise permitted under Section 4
hereof.
2
<PAGE>
4. Disposition of Collateral. The Collateral shall not be sold,
-------------------------
transferred, licensed or leased, or otherwise encumbered, mortgaged or disposed
of, nor be subjected to any unpaid charge or levy, including taxes, or to any
subsequent interest of a third party created or suffered by debt, voluntarily or
involuntarily, unless Secured Party gives prior written consent to such
transfer, disposition, charge or subsequent interest.
5. Affirmative Covenants of Debtor. Debtor hereby covenants and agrees as
-------------------------------
follows:
5.1 Financial Statements. Debtor shall furnish Secured Party
--------------------
from time to time with financial statements reasonably requested by Secured
Party; provided, however, unless Debtor prepares financial statements for any
major institutional lender on a more frequent basis, Debtor need not deliver to
Secured Party financial statements more frequently than annually, within 90 days
after Debtor's fiscal year end.
5.2 Inspection. Debtor shall permit representatives of
----------
Secured Party to inspect Debtor's books and records and to make extracts at any
reasonable time and arrange for verification of accounts, under reasonable
procedures.
5.3 Notice of Attachment, Etc. Debtor shall immediately notify
-------------------------
Secured Party of any attachment or other legal process levies against the
Collateral.
5.4 Location of Collateral and Records. Debtor shall notify
----------------------------------
Secured Party of each office or location where Debtor keeps any of the
Collateral and its books and records concerning the Collateral and shall not
transfer, relocate or move the Collateral, or any portion of the Collateral,
without the prior written approval of Secured Party.
5.5 Insurance. Debtor shall keep the Collateral insured, to the
---------
extent of its reasonable replacement value, based upon Debtor's usual business
practices.
6. Representations and Warranties of Debtor. Debtor hereby represents,
----------------------------------------
warrants, covenants, and agrees as follows:
6.1 Title to Trademarks. Debtor believes it has the sole, full
-------------------
and clear title to the Trademarks in the United States for the goods and
services with which the Trademarks are used, and believes that any registration
thereof are valid and subsisting and in full force and effect. Debtor has used
and will continue to use for the duration of this Agreement standards of quality
in the manufacture of products sold under the Trademarks that are at least equal
to those standards in effect as of the date of this Agreement.
3
<PAGE>
6.2 Use of the Trademarks. Debtor (either itself or through
---------------------
its licensees) will continue to use the Trademarks on each and every trademark
class of goods applicable to its current lines of goods as reflected in its
current catalogs, brochures and price lists in order to maintain the Trademarks
in full force and effect free from any claim of abandonment for nonuse and
Debtor will not (and will not permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become invalidated;
provided, however, that Debtor may choose to abandon any Trademark if, in
Debtor's reasonable business judgment, to do so is in the best business
interests of Debtor. Prior to the intentional abandonment of any Trademark,
Debtor agrees to notify Secured Party in writing of its intention.
6.3 Title to Patents. Debtor believes it has the sole, full
----------------
and clear title to each of the Patents and believes that the issued patents are
valid and subsisting and in full force and effect and have not been claimed or
adjudged invalid or unenforceable in whole or in part. Debtor shall diligently
prosecute any patent application now pending or acquired or made by it during
the term of this Agreement, shall make application on unpatented but patentable
inventions, and shall preserve and maintain all rights of any kind in the
Patents. Debtor believes that none of the Patents has been abandoned or
dedicated, and Debtor will not do any act, or omit to do any act, nor permit any
licensee thereof to do any act, whereby any issued patent or patent application
may become abandoned or dedicated and shall notify Secured Party immediately if
it knows of any reason or has reason to know that any application or issued
patent may become abandoned or dedicated; provided, however, that Debtor may
chose to abandon or dedicate any issued patent or patent application, if, in
Debtor's reasonable business judgment, to do so is in the best interest of
Debtor. Prior to the intentional abandonment or dedication of any Patent, Debtor
agrees to notify Secured Party in writing of its intention.
6.4 Title to Copyrights. Debtor believes it has the sole, full
-------------------
and clear title to each of the Copyrights and believes that the registrations
thereof are valid and subsisting and in full force and effect. Debtor (either
itself or through the licensees) has placed and will continue to place
appropriate notice of copyright on all copies embodying such copyrighted works
which are publicly distributed and Debtor will not (and will not permit any
licensee thereof to) do any act or knowingly omit to do any act whereby any
Copyright may become invalidated or dedicated to the public domain; provided,
however, that Debtor may choose to abandon or dedicate any Copyright if, in
Debtor's reasonable business judgment, to do so is in the best business interest
of Debtor. Prior to the intentional abandonment or dedication of any Copyright,
Debtor agrees to notify the Secured Party in writing of its intention.
4
<PAGE>
6.5 Perfection of Secured Party's Interest. Debtor will promptly
--------------------------------------
perform all acts and execute all documents, including, without limitation,
grants of security in forms suitable for recording with the United States Patent
and Trademark Office and United States Register of Copyrights, when requested by
Secured Party at any time to evidence, perfect, maintain, record or enforce
Secured Party's interest in the Collateral or otherwise in furtherance of the
provisions of this Agreement, and Debtor hereby authorizes Secured Party to
execute and file one or more financing statements (and any similar documents) or
copies thereof or of this Agreement with respect to the Collateral signed only
by Secured Party.
6.6 Reimbursement of Expenses. Debtor will promptly pay Secured
-------------------------
Party for any and all sums, costs, and expenses which Secured Party may pay or
incur pursuant to the provisions of this Agreement or in enforcing the
Obligations, the Collateral or the security interest granted hereunder,
including, but not limited to, all filing and/or recording fees, court costs,
collection charges, travel and reasonable attorneys' fees, all of which together
with interest at the highest rate then payable on the Obligations shall be part
of the Obligations and be payable on demand.
6.7 Covenant to Inform Secured Party. In the event that Debtor,
--------------------------------
either itself or through any subsidiary, affiliate, agent, employee, licensee or
assignee, shall file an application for the issuance of any Patent or
registration of any Trademark with the United States Patent and Trademark
Office, or for the registration of any Copyright with the United States Register
of Copyrights, or shall obtain issuance of any Patent or registration of any
Trademark or Copyright previously applied for, or shall adopt, acquire or obtain
rights to any new trademark, patent application or work for which a copyright
application has been or is expected to be filed, or become entitled to the
benefit of any patent application or patent or any part thereof for reissue, re-
examination, continuation, continuation-in-part, division, improvement or
extension, Debtor shall promptly inform Secured Party, and, upon request of
Secured Party, execute and deliver any and all assignments, agreements,
instruments, documents and papers as Secured Party may request to evidence
Secured Party's interest in such Trademark, Patent or Copyright and the goodwill
and general intangibles of Debtor relating thereto or represented thereby.
Debtor hereby constitutes Secured Party its attorney-in-fact to execute and file
such writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power being coupled with an interest is irrevocable
until the Obligations are paid in full. Debtor authorizes the amendment of the
schedules hereto to include any future Trademark, Patent or Copyright
registrations or applications which may be acquired or made by Debtor.
6.8 Authority. Debtor has the authority, right and power to enter
---------
into this Agreement and to perform its terms and to grant the security interest
herein granted,
5
<PAGE>
and has not entered and will not enter into any oral or written agreements which
would prevent Debtor from complying with the terms hereof; and the Collateral is
not now, and at all times will not be, subject to any liens, charges, mortgages,
assignments, security interests, licensees, claims, shop rights, covenants not
to sue third persons, or encumbrances of any nature whatsoever, except in favor
of Secured Party, and to the best knowledge of Debtor none of the Collateral is
subject to any claims of any other party.
6.9 Covenant Not to Assign, Etc. Except to the extent that Secured
---------------------------
Party, upon prior written notice from Debtor, shall consent, Debtor will not
assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security
interest in or lien upon, encumber, grant any exclusive license, or otherwise
dispose of any of the Collateral, and noting in this Agreement shall be deemed a
consent by Secured Party to any such action except as expressly permitted
herein.
6.10 No Other Trademarks, Patents or Copyrights. As of the
------------------------------------------
date hereof neither Debtor nor any affiliate or subsidiary thereof has any
Trademarks, Patents or Copyrights registered, or the subject of any application,
in the United State Patent and Trademark Office or the United State Register of
Copyrights other than those described in Schedule A.
6.11 Maintenance of Registration. Debtor will take all necessary
---------------------------
steps in any proceeding before the United States Patent and Trademark Office,
United States Register of Copyrights or similar office or agency of the United
States of any office of the Secretary of State (or equivalent) of any state
thereof, to maintain each application and registration of the Collateral,
including, without limitation, filing of renewals, extensions, affidavits of use
and incontestability, and opposition, interference and cancellation proceedings.
Debtor shall notify Secured Party promptly in writing if nay application or
registration relating to any Collateral may become abandoned or dedicated or
subject to an adverse final determination in any proceeding in the United States
Patent and Trademark Office or United States Register of Copyrights or any court
regarding Debtor's ownership of such Patent or Trademark, its right to register
same, or to keep or maintain the validity of same.
6.12 Notice of Infringement. In the event that any Trademark, Patent
----------------------
or Copyright is infringed, misappropriated or diluted by a third party, Debtor
shall promptly notify Secured Party and shall, unless Debtor shall determine in
its reasonable business judgment that such Trademark, Patent or Copyright is of
negligible economic value to the business of Debtor, promptly sue for
infringement, misappropriation and/or dilution and to obtain injunctive relief
and recover damages therefor, and shall take such other actions to protect such
Trademark, Patent or Copyright as Debtor shall deem appropriate in its
reasonable business judgment under the circumstances. Secured Party
6
<PAGE>
shall have the right, but in no way shall be obligated, to bring suit in its own
name to enforce the Trademarks, Patents and Copyrights and any licensees
thereunder, in which event Debtor shall, at the request of Secured Party, do any
and all lawful acts requested by Secured Party and execute any and all documents
required by Secured Party to aid such enforcement, and Debtor shall, upon
demand, promptly reimburse and indemnify Secured Party for all costs and
expenses incurred in such enforcement.
7. Events of Default. Each of the following shall be deemed to be an
-----------------
"Events of Default" for the purposes of this Agreement: (a) failure by Debtor to
pay the Loan in accordance with its terms; or (b) failure to perform any
obligation or any breach or event of default under any documents which
memorialize, embody, describe, incorporate or otherwise refer to any of the
Obligations; or (c) failure by Debtor to pay any loan to any other lender or the
breach by Debtor of any material provision of any other security agreement; or
(d) failure by Debtor to pay its debts as they become due; or (e) making a
general assignment for the benefit of creditors of Debtor or if any third party
shall commence any case, proceedings or other action seeking to have an order
for relief entered on its behalf against Debtor or to adjudicate Debtor a
bankrupt or insolvent or seeking a reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Debtor or its debts under any law
relating to bankruptcy, insolvency, reorganization, or relief of debtors or
seeking appointment of a receiver, trustee, custodian or other similar official
for Debtor or for all or any substantial part of its properties. In such case or
proceeding or other action (i) results in the entry of an order for relief
against it which is not fully stayed within seven business after the entry
thereof or (ii) shall remain undismissed for a period of forty-five days; or (f)
any breach by Debtor of any provision of this Agreement.
8. Remedies in Favor of Secured Party. Upon the occurrence an Event of
----------------------------------
Default, Secured Party shall have the following rights and remedies:
8.1 All Rights Reserved. Secured Party shall have all rights and
-------------------
remedies afforded the Secured Party by the chapter on "Default" of Division 9 of
the California Commercial Code, in addition to the rights and remedies provided
in this Agreement or any instrument or by any executed by Debtor, or otherwise
permitted by law.
8.2 Acceleration of the Loan. The Loan shall be accelerated,
------------------------
and shall become immediately due and payable, notwithstanding the date of
maturity thereof.
7
<PAGE>
9. Financing Statement. Debtor shall sign and execute alone or with
-------------------
Secured Party any financing statements, notices or other document or procure any
document reasonably requested by Secured Party in order to perfect the security
interest created by this Agreement.
10. Notices. All notices or other written communications required or
-------
permitted to be given by Agreement shall be deemed given if personally delivered
or five (5) days after it has been sent (the date of posting shall be considered
as the first day and there shall be excluded any Sundays, legal holidays or
other days upon which the United States mail generally is not delivered) by
United States registered or certified mail, postage prepaid, property addressed
to the party to receive the notice at the following address or any other address
given to the other party in the manner provided by this Section 10:
If to Secured Party: Mr. Sam G. Lindsay
c/o Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
If to the Debtor: Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
11. Severability. If any provision of this Agreement is determined to be
------------
invalid or unenforceable, the provision shall be deemed to be severable from the
remainder of this Agreement and shall not cause the invalidity or
unenforceability of the remainder of this Agreement.
12. Attorneys' Fees and Litigation Costs. If any legal action or other
------------------------------------
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
13. Governing Law; Venue. This Agreement shall be governed by,
--------------------
interpreted under, and construed and enforced in accordance with the internal
laws, and not the laws pertaining to conflicts or choice of laws, of the State
of California applicable to agreements made and to be performed wholly within
the State of California. The sole forum for resolving disputes arising under or
relating to this Agreement shall be the
8
<PAGE>
Municipal and Superior Courts for the County of Orange, California, or the
Federal District Court for the Central District of California and all related
appellate courts, and the parties hereby consent to the jurisdiction of such
courts and agree that venue shall be in Orange County, California.
14. 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.
15. Captions. The captions of the sections and subsections of this
--------
Agreement are included for reference purposes only and are not intended to be a
part of the Agreement or in any way to define, limit or describe the scope or
intent of the particular provision to which they refer.
16. Interpretation. The parties hereto acknowledge and agree that each
--------------
has been given the opportunity to independently review this Agreement with legal
counsel, and has the requisite experience and sophistication to understand,
interpret, and agree to the particular language of the provisions hereof. In
the event of any ambiguity in or dispute regarding the interpretation of this
Agreement, or any provision hereof, the interpretation of this Agreement shall
not be resolved by any rule providing for the interpretation against the party
who causes the uncertainty to exist or against the party who is draftsman of
this Agreement.
17. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the parties with respect to the subject matter hereof and
supersedes any and all prior and contemporaneous written or oral negotiations
and agreements between them regarding the subject matter hereof. This Agreement
may be amended only in a writing signed by both of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above mentioned.
GRIP TECHNOLOGIES, INC., a
California corporation
By:
- - -------------------------------- ---------------------------------
Sam G. Lindsay James E. McCormick III
Secretary
9
<PAGE>
EXHIBIT 10.5
REQUEST TO CONVERT AND INVESTMENT LETTER
Grip Technologies, Inc.
10 Corporate Park
Irvine, California 92714
Ladies and Gentlemen:
The undersigned ("Investor") hereby offers to convert $535,000 of the
principal amount of the indebtedness (the "Debt") owed to him by Grip
Technologies, Inc., a California corporation (the "Company"), into 356,667
shares ("Shares") of Common Stock of the Company at approximately $1.50 per
share.
In order to induce the Company to convert the Debt and to issue the Shares
to him, Investor hereby represents, warrants and covenants as follows:
1. Investor is acquiring the Shares for his own account (or a trust
account if the Investor is a trustee) and not with a view to or for sale in
connection with any distribution of shares or other securities of the Company.
2. Investor acknowledges his understanding that the offering and sale of
the Shares is intended to be exempt from registration under Federal and
California securities laws as a transaction not involving a public offering and
that the Shares he will receive will be "restricted securities" as that term is
defined in Rule 144(a)(3) promulgated under the Securities Act of 1933, as
amended (the "Act").
3. Investor has the financial ability to bear the economic risk of his
investment in the Company (including its possible loss), has adequate means of
providing for his current needs and personal contingencies and has no need for
liquidity with respect to his investment in the Company.
4. Investor has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Shares and has obtained, in his judgment, sufficient information from the
Company to evaluate the merits and risks of an investment in the Shares,
including a review of all the Company's books and records.
5. Investor has been given the opportunity to ask questions of, and
receive answers from, the officers and directors of the Company concerning the
terms and
<PAGE>
conditions of this offering and other matters pertaining to the Company, and has
been given the opportunity to obtain such additional information necessary to
verify the information provided in order for him to evaluate the merits and
risks of an investment in the Company.
6. Investor is not aware of any publication of any advertisement
concerning the offer and sale of the Shares.
7. Investor is an "accredited investor" as that term is defined in Rule
501(a) promulgated under the Act, in that he is; (i) an officer and director of
the Issuer; (ii) he is a natural person whose individual net worth, or joint net
worth with his spouse, exceeds $1 million; and (iii) 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 his spouse in excess of $300,000 in each of those
years, and has a reasonable expectation of reaching the same income level in the
current year.
8. It is hereby acknowledged and agreed by Investor that a restrictive
legend, in form and substance acceptable to the Company and its legal counsel,
shall be imprinted on the certificate representing the Shares.
9. Investor covenants and agrees that, in addition to any other
contractual restriction or limitation on transferability of the Shares, prior to
any proposed sale, pledge, hypothecation, gift or other transfer, for value or
otherwise, of any or all of the Shares or any interest or interest therein
(hereinafter a "Transfer"), Investor shall give written notice to the Company.
10. Any Transfer must comply with all applicable registration,
qualification and notification requirements of the Securities Act of 1933, as
amended, and all applicable state securities laws, or otherwise be eligible or
available for specific exemptions thereunder. If, in the opinion of the
Company's legal counsel, the Transfer may not be effected without registration,
qualification or notification, the Company shall promptly notify Investor in
writing, and the Transfer shall not be made unless such compliance is then
effected. The Company has not agreed to pay any of the costs or expenses
required of either Investor or the Company in connection with a Transfer in
order to comply with applicable securities laws. Investor understands that he
shall be responsible for payment of all costs and fees associated therewith and,
on demand, shall reimburse the Company for all costs and fees it incurs in
connection therewith.
11. The parties hereto acknowledge that Section 25102(a) of the
California Corporations Code requires (i) that no part of the purchase price is
paid or received and none of the securities is issued until the sale of such
securities is qualified under the
2
<PAGE>
California Corporate Securities Law of 1968, as amended, unless the sale of
securities is exempt from qualification as provided thereunder, and (ii) that
the following provision be included herein:
"THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102 or 25105 OF THE CALIFORNIA CORPORATIONS CODE.
THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT."
Dated: July 31, 1996
--------------------------------------
SAM G. LINDSAY
3
<PAGE>
EXHIBIT 10.6
SAM G. LINDSAY
211 Evening Canyon Road
Corona del Mar, California 92625
August 1, 1995
Grip Technologies, Inc.
1681 McGaw
Irvine, California 92714
Gentlemen:
This letter will confirm my agreement to defer until January 1, 1997, all of the
following: (1) any salary I earned from Grip Technologies, Inc. (the Company)
through July 31, 1995, and (2) reimbursement of all business expenses I incurred
through July 31, 1995.
This letter modifies my prior agreement to defer all salary and expense
reimbursement from prior periods, to extend that deferral through January 1,
1997.
Very truly yours,
/s/ Samuel G. Lindsay
Samuel G. Lindsay
<PAGE>
EXHIBIT 10.7
AGREEMENT
This Agreement made and entered into this 21st day of September, 1995, by
and between GRIP TECHNOLOGIES, INCORPORATED, a California corporation
(hereinafter referred to as "GRIPTEC") and ARC EQUIPMENT, INC., an Arizona
corporation (hereinafter referred to as "ARC").
RECITALS:
A. ARC is engaged in the manufacture, production and sale of rubber
sports grips for sports equipment applications, including the manufacture,
production and sale of vulcanized rubber sports grips.
B. GRIPTEC maintains an in-house sales and marketing staff, including
telemarketers and sales representatives for the United States, and utilizes
various international distributors in Japan, Great Britain, Europe and Australia
to market its sports grips (including vulcanized rubber sports grips).
C. ARC and GRIPTEC have met and agreed upon the terms and conditions upon
which ARC will sell certain of its products to GRIPTEC for world-wide
distribution.
NOW THEREFORE in consideration of the mutual promises set forth below, it
is agreed by and between GRIPTEC and ARC as follows:
COVENANTS:
1. Agreements to Buy and Sell. Subject to the terms and conditions of
--------------------------
this Agreement and excepting specifically sales to those companies identified in
Subsection 1.a. below, ARC hereby agrees to exclusively manufacture and sell to
GRIPTEC and GRIPTEC hereby agrees to purchase, on an exclusive basis, GRIPTEC's
total requirement of vulcanized rubber sports grips from ARC ("the subject
sports grips"). GRIPTEC's commitment to purchase on an exclusive basis is
conditioned on ARC being able to produce sports grips of comparable quality to
the samples provided, at prices set forth on Exhibit "A" (with any
modifications) and in sufficient quantities as may be reasonably requested by
GRIPTEC.
a. Excepting only sales to those companies listed on Exhibit "B" to
which ARC sells its own proprietary vulcanized rubber sports grips ("ARC's
proprietary sports grips") and provided GRIPTEC complies fully with all
provisions of this Agreement, ARC will not sell or distribute, directly or
indirectly, any of the subject sports grips to any other person or entity in the
world other than GRIPTEC.
b. Provided ARC complies fully with all provisions of this
Agreement, and this Agreement is in full force and effect, GRIPTEC will not
acquire, distribute or purchase, directly or indirectly, any of the subject
sports grips from any other source in the world other than ARC.
<PAGE>
c. The provisions of Subsections 1.a. and 1.b. above shall apply to
GRIPTEC and ARC as well as to their respective subsidiaries, affiliates,
partners and other entities in which GRIPTEC or ARC has an ownership interest
(direct or indirect through officers and/or directors) in excess of five percent
(5%) or entities which own a controlling interest in either GRIPTEC or ARC.
d. The parties acknowledge and agree that this Agreement does not
pertain to the purchase or sale of cord or TPR grips by GRIPTEC.
e. ARC shall initially appoint Paul Herber of Vista, California as
its sales representative for its proprietary sports grips to be sold only to
those companies listed on Exhibit "B." GRIPTEC consents to Mr. Herber's
retention in that capacity. GRIPTEC and ARC agree that sales of ARC's
proprietary vulcanized rubber sports grips may not exceed 2,000,000 units in any
consecutive twelve (12) month period. Furthermore, if ARC is unable to timely
produce orders for GRIPTEC due to a lack of production capacity, ARC agrees to
process GRIPTEC's orders ahead of orders for ARC's proprietary sports grips.
2. Conditions Precedent. This Agreement is expressly conditioned upon the
--------------------
proposed acquisition of all of the stock or assets of U.S. Grips, Inc. ("U.S.
Grips") by GRIPTEC. Should such acquisition fail to take place on or before
October 1, 1995, it is agreed by the parties that this Agreement shall be null
and void and of no effect whatsoever, and ARC shall be free to pursue any
customers and sell any products which it wishes to sell without any constraint
arising from this Agreement or its negotiation. Likewise, GRIPTEC shall be free
to purchase grips from any manufacturer and sell any products which it wishes to
sell without any constraint arising from this Agreement or its negotiation. This
Agreement is further conditional upon the receipt by ARC of an inducement letter
from U.S. Grips in which U.S. Grips (i) consents to GRIPTEC and ARC negotiating
and entering into this Agreement, (ii) acknowledges that none of the terms of
this Agreement and/or its negotiation create any implied contractual rights or
obligations between ARC and U.S. Grips, and (iii) that, as of the date of the
inducement letter, U.S. Grips, its officers, directors and shareholders release
all claims of any nature whatsoever against ARC, its officers, directors and/or
shareholders.
3. Term. Subject to the provisions of Section 2, and those other
----
provisions herein pertaining to early termination, the term of this Agreement
shall be ten (10) years commencing on the date upon which the acquisition of
U.S. Grips by GRIPTEC shall be deemed to have taken place. The commencement date
shall be confirmed in writing by the parties or, in the absence of such
confirmation, shall be deemed to be October 1, 1995. Any renewal or extension of
this Agreement shall be based upon mutually agreeable terms and conditions set
forth in writing and signed by the parties.
4. Inclusion of Additional Products. From time to time, as GRIPTEC and
--------------------------------
ARC may mutually agree in writing, additional products may become subject to the
terms and provisions of this Agreement; provided, however, that nothing herein
shall be construed to obligate GRIPTEC or ARC to agree to add additional
products to be included hereunder.
-2-
<PAGE>
5. Production Responsibilities.
a. ARC shall provide the required labor, raw materials, injection
presses, molding tools (consistent with and meeting designs current as of the
date of this Agreement), and associated equipment to produce the subject sports
grips at its production facility or facilities.
b. For all standard types of sports grips included within the
subject sports grips, GRIPTEC shall supply a minimum of 21 cavities and 11 end
caps for shuttle molds and 11 cavities and 11 end caps for non-shuttle molds;
for putters, GRIPTEC shall supply a minimum of 11 cavities and 11 end caps. All
mold cavities and end caps provided to ARC by GRIPTEC shall comply with the
specifications provided by ARC to assure proper production of the subject sports
grips as contemplated herein. All end cap sidewalls shall be a minimum of .110
inches high and subgated. It is specifically acknowledged by GRIPTEC that
improperly manufactured cavities (such as occurred in the past with respect to
cavities for ladies grips and Daiwa grips by U.S. Grips) will produce damage for
which ARC shall not be responsible.
Notwithstanding the foregoing, GRIPTEC shall supply enough end
caps and cavities to enable ARC to meet the monthly minimum units of the subject
sports grips set forth in Section 8 based on a production capacity of 60,000
units of the subject sports grips per month, per machine. This provisions
relates only to assuring that ARC is capable of producing the monthly minimums
set forth in Section 8 and that ARC's failure to do so will not be a breach of
ARC's requirement in Section 1 to produce "sufficient quantities" if caused by
GRIPTEC's failure to provide necessary end caps and cavities.
c. GRIPTEC shall maintain and, when necessary, replace or repair at
its expense, cavities and end caps rendered unserviceable during normal
production use (e.g., parting line repair, re-chrome, etc.).
d. Any cavities and end caps damaged in production as a result of
acts or omissions of ARC, other than normal production procedures and other than
normal wear and tear, shall be replaced at ARC's expense.
e. A $150 set up charge shall be paid by GRIPTEC if GRIPTEC requests
any production runs of the subject sports grips under 8,000 units. A $250 set up
charge shall be paid by GRIPTEC for any color changes requested by GRIPTEC.
6. Pricing. Prices for the subject sports grips and related set up of
-------
ARC's production equipment shall be as set forth on Exhibit "A." The prices set
forth on Exhibit "A" may be adjusted up or down, but not more frequently than
once every year, to reflect changes in the costs of ARC. Specifically, such
changed prices shall be determined by: (i) taking the total percentage of any
increases or decreases in ARC's cost of direct labor and raw materials,
including, but not limited to, factory labor and other allocated items, and
multiplying the percentage of the increase or decrease for each item by the
individual cost percentage of that particular item as a component of the price
set forth on Exhibit "A," and (ii) adding or subtracting the product of (i)
above to the prices for the subject sports grips set forth therein.
-3-
<PAGE>
7. Quality. The subject sports grips supplied by ARC shall be of good
-------
and merchantable quality consistent with the samples provided to and approved by
GRIPTEC. GRIPTEC acknowledges and agrees that the sports grip products currently
provided to U.S. Grips meets its quality standards: Should any of the subject
sports grips sold by ARC to GRIPTEC be defective, or fail to meet the
specifications previously provided by GRIPTEC to ARC, or are not of a quality
consistent with the samples provided, ARC agrees, at ARC's election to: (i)
accept the return of the defective goods and refund GRIPTEC the full price paid,
including shipping costs associated with the return, or (ii) replace the
defective goods at ARC's expense, including all shipping costs, with goods
complying with the previously agreed upon specifications.
8. Quantities.
----------
a. During the term of this Agreement, GRIPTEC shall place orders
for not less than the individual units of the subject sports grips per calendar
month set out in Subsection 8.b. GRIPTEC shall place all orders in writing far
enough in advance as is reasonably practicable, but in no event less than two
(2) weeks in advance. Orders may be modified subject to the requirements of
Section 5.e.
b. This Agreement is entered into with the express understanding and
agreement that GRIPTEC will purchase and accept delivery of a minimum of 100,000
individual units of the subject sports grips per month for the first twelve
months of this Agreement and a minimum of 120,000 individual units of the
subject sports grips per month for the remaining term of this Agreement.
Notwithstanding the monthly minimums above, GRIPTEC shall purchase and take
delivery of at least 1,500,000 units of the subject sports grips in the first
year; 2,000,000 the second year; 2,500,000 the third year; 3,000,000 the fourth
year; and 3,500,000 the fifth year; 4,000,000 the sixth year, 4,500,000 the
seventh year; 5,000,000 the eighth year; 5,500,000 the ninth year; and 6,000,000
the tenth year.
c. Each time GRIPTEC fails to meet any of the minimum requirements
set out in this Section 8, it shall be deemed an event of default hereunder.
9. Payment Terms.
-------------
a. GRIPTEC shall pay ARC's invoices for the subject sports grips
within thirty (30) days of ARC's shipment thereof. Invoices for goods and
services other than the subject sports grips shall be due and payable within ten
(10) days of ARC's shipment of such goods or providing of services. A non-cash
discount of two percent (2%) shall be offered for any GRIPTEC payment made
within ten (10) days of ARC's shipment of the subject sports grips. There shall
be no discount for goods and services other than the subject sports grips. The
discount shall be a quantity of subject sports grips without charge but equal to
the amount of the discount determined at the prices then in effect on ARC's next
subsequent shipment. Freight shall be F.O.B. Chandler, Arizona.
b. ARC shall supply a weekly accounts receivable listing via
facsimile transmission. A confirmation journal evidencing receipt of a facsimile
transmission shall be
-4-
<PAGE>
conclusive proof that the transmission was received by GRIPTEC. Should GRIPTEC
fail to pay within thirty days of shipment, ARC shall notify GRIPTEC via
facsimile transmission or overnight delivery that an invoice has not been paid
as required herein ("a five-day notice"). GRIPTEC shall have five (5) business
days after receipt of the notification of the unpaid invoice from ARC within
which to pay. If GRIPTEC fails to make the payment within five (5) business days
thereafter, it shall be deemed an event of default hereunder. Whether paid
within five (5) business days or not, GRIPTEC shall pay a late charge of $50.00
for each invoice for which ARC has properly sent a five-day notice.
10. Termination.
------------
a. Except as provided in Subsection 10.b. below with respect to
specified events of default, if either party fails to perform any of its
obligations under this Agreement, the non-breaching party may give notice to the
breaching party of its intent to terminate this Agreement. The notice shall
contain particulars of the alleged breach, shall indicate the remedy sought by
the notifying party, and shall be effective at the end of thirty (30) days
unless the party in breach shall remedy the breach during said period. If the
failure is ARC's, then ARC shall (at GRIPTEC's election) continue to supply the
subject sports grips to GRIPTEC thereafter throughout the remaining term of the
Agreement on the terms and at the prices set forth on Exhibit "A." If the
failure is GRIPTEC's, then ARC (at ARC's election) may continue to supply the
subject sports grips. If the failure arises from GRIPTEC's failure to make
payments pursuant to Subsection 9.b. and ARC terminates this Agreement in
accordance with Subsection 10.b., then ARC shall not be obligated to further
provide the subject sports grips to GRIPTEC and shall be free from any
constraints set forth in this Agreement.
b. With respect to those matters identified as events of default in
Sections 8 and 9, the occurrence of three (3) events of default during any
twelve (12) month period shall be sufficient grounds for ARC to terminate this
Agreement and ARC may thereafter so terminate by providing written notice to
GRIPTEC.
11. Force Majeure. ARC shall be excused for failure to perform any part
-------------
of this Agreement due to events beyond its control. These events shall include
but not be limited to fire, storm, flood, earthquake, explosion, accidents,
enemy action, sabotage, strikes, labor disputes, labor shortages, work
stoppages, or transportation embargoes. Similar events shall excuse GRIPTEC for
failure (i) to take items as ordered, except those already in transit or
specially manufactured which are not readily saleable without loss to ARC, and
(ii) to purchase the minimums set forth in Section 8. When the events operating
to excuse the performance of either ARC or GRIPTEC cease, this Agreement shall
continue in full force for the remainder of its term, provided that ARC shall
not be obligated to ship, and GRIPTEC shall not be obligated to purchase or
accept, items the shipment of which was excused.
12. Confidentiality.
---------------
a. Each party agrees to keep confidential and not disclose, directly
or indirectly, any information concerning the other party's business (except to
the extent such
-5-
<PAGE>
information is available to the general public) or any other information which
the other party designates as confidential, except to the extent required by
applicable law.
b. GRIPTEC acknowledges and agrees: (i) that the technology utilized
by ARC in producing the subject sports grips (including ARC's production
equipment, the processes, the production methods and the designs pertaining to
the foregoing which are not generally known to the public), are the exclusive
and proprietary property of ARC and that GRIPTEC has no right, title or interest
therein; (ii) that any exclusive and proprietary information which ARC has
disclosed or discloses to GRIPTEC during the term of this Agreement has been
disclosed to enable it to provide mold cavities and end caps during the term of
this Agreement and GRIPTEC will not use the exclusive and proprietary
information in any other business or capacity; and (iii) that it will adopt and
implement reasonable procedures to prevent unauthorized use or disclosure of
such exclusive and proprietary information.
13. Multiple Counterparts. This Agreement is being executed in multiple
---------------------
counterparts, each of which shall be deemed an original without the necessity of
producing any of the other counterparts.
14. Applicable Law. The provisions of this Agreement shall be interpreted
---------------
according to the internal laws of Arizona.
15. Titles. The numbering of sections and titles of sections are
------
intended for identification and ease of reference only and do not limit,
define, or otherwise describe legal content.
16. Remedy for Breach. In the event any party brings a proceeding to
-----------------
enforce any provision hereof, or to collect damages for any breach of this
Agreement, the prevailing party shall be entitled to all costs, all expenses
arising out of or incurred by reason of the proceeding and any reasonable
attorneys' fees expended or incurred in any such proceeding, and all such costs
and expenses shall be included in the final award.
17. Consent to Arbitration. All disputes, issues or declarations arising
----------------------
from, or related to, this Agreement, shall be decided by binding arbitration in
Phoenix, Arizona according to the then prevailing commercial arbitration rules
of the American Arbitration Association. Any award in such arbitration shall be
enforceable by any court having jurisdiction.
18. Non-Assignment. This Agreement and the interests of the parties
--------------
hereunder shall not be assigned or transferred to any other person or entity,
other than a related party. For purposes hereof, a related party shall be an
entity which is at least fifty percent (50%) owned by one of the parties to this
Agreement.
19. Entire Agreement. This Agreement is the entire agreement of the
----------------
parties and all prior oral or written agreements are merged herein. This
Agreement may be amended only by a written document signed by both parties
referencing this Agreement.
20. Notices. Except as provided in Section 9, service of all notices
-------
under this Agreement shall be sufficient if given personally by hand-delivery or
mailed to either party at
-6-
<PAGE>
such party's principal place of business or such other address as may be
provided in writing from time to time by one party to the other. Any mailed
notice shall be effective three (3) days after depositing it in the U.S. Mail,
duly addressed with postage prepaid. Hand-delivered notices shall be effective
upon receipt.
21. Right to Purchase.
-----------------
a. During the term of this Agreement or any extension hereof, ARC
agrees not to sell: (i) all of its stock, (ii) any portion of its stock which
would effectuate a change of controlling ownership in ARC from Jim Jennett (iii)
any instruments or securities constituting ownership interests in ARC or
convertible to stock in ARC which, when sold, would effectuate a change of
controlling ownership in ARC from Jim Jennett ("ownership interests"), or (iv)
substantially all of its assets (items i, ii, iii and iv being collectively
referred to as the "restricted sales"), to a person or entity in direct
competition in the sports grip field with GRIPTEC, including, but not limited
to, Golf Price (Eaton), Lamkin, Royal Grips, Kel-Mac, Avon, TackiMac, Mint or
Percise (AMI).
b. Should ARC, during the term of this Agreement or any extension
hereof, wish to make one of the restricted sales to a person or entity not in
competition with GRIPTEC in the sports grip field, it shall first give GRIPTEC
the first opportunity to purchase such stock, assets or ownership interests. ARC
shall give GRIPTEC thirty (30) days prior written notice of the terms under
which ARC would sell and the parties shall have within said thirty (30) day
period to enter into a binding purchase and sale agreement. Should such an
agreement not be entered into within said thirty (30) day period, ARC shall be
free to offer the stock, assets or ownership interests to any third party not in
competition with GRIPTEC in the sports grip field upon substantially the terms
and conditions. Should ARC materially change the purchase price or payment terms
or if the transaction with the third party is not closed within one hundred
twenty (120) days following the last notification to GRIPTEC, ARC must provide
GRIPTEC with the first opportunity again; however, GRIPTEC shall thereafter only
have a period of fifteen (15) days to enter into a binding purchase and sale
agreement with ARC. The first opportunity provided herein shall also arise if
the sale to the third party is not closed.
c. For a period of three years from the date hereof, ARC hereby
grants to GRIPTEC a right of first refusal to purchase its stock, assets or
ownership interests in the event of one of the restricted sales. On each
occasion ARC receives an offer to purchase any of its stock, assets or ownership
interests which would constitute a restricted sale, and ARC elects to sell under
the terms and conditions contained in the offer, ARC must notify GRIPTEC of the
terms of the offer and GRIPTEC shall have fifteen (15) days within which to
agree to all of the terms and provisions of the offer in a binding purchase and
sale agreement. Should GRIPTEC fail to enter into such an agreement with ARC
within the specified time period, ARC shall be free to sell to the third party
making the offer under the same terms and conditions contained in the offer.
d. Should ARC receive an offer to sell its stock, assets or
ownership interests which would constitute one of the a restricted sales, at any
time after the third anniversary of this Agreement, to a third party not in
competition with GRIPTEC in the sports grip field, then
-7-
<PAGE>
ARC shall provide GRIPTEC with notice that it has received such an offer within
seven (7) days of ARC's receipt of same. The notice shall state whether the
offer is for stock, assets or ownership interests. The terms of the offer need
not be disclosed. GRIPTEC shall have the right during the next succeeding thirty
(30) day period to make an offer to purchase the stock, assets or ownership
interests in ARC that has been identified in the offer. ARC shall be free to
accept or reject any offer from GRIPTEC or the third party. GRIPTEC shall be
promptly advised of ARC's decision.
e. No sale by ARC of its stock, assets or ownership interests may be
made hereunder unless the purchaser agrees in writing to be bound by the terms
and conditions of this Agreement.
f. This provision shall not apply to transfers other than the
restricted sales, sales of assets in the ordinary course of business, transfers
between existing shareholders of ARC (but shall apply to any such transfer which
would effectuate a change of controlling ownership in ARC from Jim Jennett), or
to any transfer to a family member, partnership or trust for estate planning
purposes.
IN WITNESS WHEREOF the parties hereto have entered into this Agreement as
of the day and year first above written.
ARC EQUIPMENT, INC.,
an Arizona corporation
By: /s/ Jim A. Jennett, President
------------------------------------
Jim Jennett, President
GRIP TECHNOLOGIES, INCORPORATED,
a California corporation
By: /s/ Samuel G. Lindsay
------------------------------------
Its: PRESIDENT
-----------------------------------
-8-
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Name of Subsidiary State of Incorporation Percent Ownership
------------------ ---------------------- -----------------
USGRIPS, Inc.* California 100%
* doing business as USGRIPS and Griptec
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JULY 31,
1996 AUDITED FINANCIAL STATEMENTS AND IS QUALILFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUL-31-1996 JUL-31-1995
<PERIOD-START> AUG-01-1995 AUG-01-1994
<PERIOD-END> JUL-31-1996 JUL-31-1995
<CASH> $16,975 $126,827
<SECURITIES> 0 0
<RECEIVABLES> 728,114 453,403
<ALLOWANCES> 190,669 174,099
<INVENTORY> 506,995 226,471
<CURRENT-ASSETS> 1,093,040 702,472
<PP&E> 1,260,831 394,541
<DEPRECIATION> 373,589 123,175
<TOTAL-ASSETS> 3,203,702 973,838
<CURRENT-LIABILITIES> 2,533,588 732,886
<BONDS> 0 0
0 0
1,287,500 1,350,000
<COMMON> 5,454,040 1,886,855
<OTHER-SE> (6,408,498) (4,833,517)
<TOTAL-LIABILITY-AND-EQUITY> 3,203,702 973,838
<SALES> 3,062,948 1,104,049
<TOTAL-REVENUES> 3,062,948 1,104,049
<CGS> 2,411,017 1,267,255
<TOTAL-COSTS> 2,411,017 1,267,255
<OTHER-EXPENSES> 2,078,425 3,145,977
<LOSS-PROVISION> (1,426,494) (3,309,183)
<INTEREST-EXPENSE> 146,887 134,762
<INCOME-PRETAX> (1,573,381) (3,443,945)
<INCOME-TAX> 1,600 800
<INCOME-CONTINUING> (1,574,981) (3,444,745)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,574,981) (3,444,745)
<EPS-PRIMARY> (0.33) (1.11)
<EPS-DILUTED> 0 0
</TABLE>
