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
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of reorganization.
2. Merger Transaction.
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2.1 Agreement to Merge. As of the Closing Date (as that term is
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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
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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,
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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
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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
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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:
Annual Minimum Net Revenue
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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
(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
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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
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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
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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.
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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
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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
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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
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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
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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.
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3.1 Closing Date. For purposes of this Agreement, the term Closing
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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
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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
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Separate from Certificate. Each USG Shareholder hereby designates and appoints
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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
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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:
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4.1 Organization and Good Standing; Qualification. Griptec is a
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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
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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
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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
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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
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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.
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4.6 Consents. No authorization, consent, approval, permit or license
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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
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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
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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;
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(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,
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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
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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
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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
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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
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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
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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
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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
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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.
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5. Representations and Warranties of GTI Sub. GTI Sub represents and
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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
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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
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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
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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
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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
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finder's, broker's or agent's fee in connection with the Merger or any
transactions contemplated hereby.
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6. Representations and Warranties of USG and the USG Shareholders. USG
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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,
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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;
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(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
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
(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
(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
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
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
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
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
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
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
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
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
(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
(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
(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
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
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
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
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
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
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
33
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
(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
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
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
(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
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
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
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
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
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
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
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
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
"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
(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
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
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
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
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
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
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
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
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
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
USG ACQUISITION CORPORATION, a
California corporation
By
------------------------
Sam G. Lindsay
President
By
------------------------
James E. McCormick III
Secretary
E-6
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
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
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
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
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
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
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
USG ACQUISITION CORPORATION,
a California corporation
By:
----------------------- --------------------------------------
Sam G. Lindsay PAUL HERBER
President
F-8
SCHEDULE 1
SCHEDULE OF USG SHAREHOLDERS
NAME OF SHAREHOLDER NO. OF % OF EARN-OUT
SHARES SHARES TO BE
OF USG RECEIVED
- - ----------------------------------------------------------
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
- - ----------------------------------------------------------
- - ------------------
*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.
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):
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)/
- - -----------------
/(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.
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.
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.
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
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.
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.
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).
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
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
EXHIBIT A
Articles of Merger
A-1