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
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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.
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
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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
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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
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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.
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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
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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.
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7. Quality. The subject sports grips supplied by ARC shall be of good
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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.
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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.
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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
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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.
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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
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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.
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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
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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
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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
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according to the internal laws of Arizona.
15. Titles. The numbering of sections and titles of sections are
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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
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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
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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
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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
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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
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under this Agreement shall be sufficient if given personally by hand-delivery or
mailed to either party at
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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.
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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
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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
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Jim Jennett, President
GRIP TECHNOLOGIES, INCORPORATED,
a California corporation
By: /s/ Samuel G. Lindsay
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Its: PRESIDENT
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