SECURITY AGREEMENT dated as of June __, 2008 between GPS INDUSTRIES, INC., (the “Borrower”) and TULIP GROUP INVESTMENTS, LIMITED (“Secured Party”)
dated
as
of
June
__,
2008
between
(the
“Borrower”)
and
TULIP
GROUP INVESTMENTS,
LIMITED
(“Secured
Party”)
THIS
SECURITY AGREEMENT (this “Agreement”),
is
entered into as of June __, 2008, by and between GPS
INDUSTRIES, INC.,
a
Nevada corporation (“Maker”),
DIRECT
GOLF SERVICES INC.,
a
______________ corporation (“Direct
Golf”),
GOLF
ACADEMIES LTD. D/B/A GPSI EUROPE,
a
____________ corporation (“GPSI
Europe”),
and
GPS
IT, LLC,
a
_________ limited liability company (“GPS
IT”,
together with Direct Golf, and GPSI Europe, collectively referred to herein
as
“Subsidiaries,”
and
individually as a “Subsidiary”,
and
together with the Subsidiaries and Maker, collectively, the “Borrower")
and
TULIP
GROUP INVESTMENTS, LIMITED,
a B.V.I
company (“Secured
Party”).
RECITALS
WHEREAS,
Maker
has executed and delivered to Secured Party that certain Non-Negotiable
Convertible Promissory Note of even date herewith, in the original principal
amount of $5,500,000 (the “Note”) securing a loan (the “Loan”) to
Maker;
WHEREAS,
Direct
Golf, GPSI Europe, and GPSI IT are each wholly owned subsidiaries of Maker,
will
receive certain of the proceeds of the Loan, will otherwise be benefited by
the
transactions contemplated by the Loan, and accordingly, guarantee the
obligations of Maker under the Note;
WHEREAS,
Secured
Party has required, as a condition to making the Loan that Borrower execute
and
deliver this Security Agreement to the Secured Party;
WHEREAS,
Secured
Party has agreed that its security interest in Borrower’s personal property and
Borrower’s obligations under the Note and this Security Agreement are
subordinate to the liens listed on Exhibit
D
of the
Note (collectively, the “Senior Debt”); and
WHEREAS,
concurrently herewith, Secured Party is executing that certain Intercreditor
Agreement (the “Intercreditor Agreement”) with the Estate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, an
individual (“Wood”), ▇▇▇▇▇▇, Inc., a Pennsylvania corporation (“▇▇▇▇▇▇”), and
Great White Shark Enterprises LLC, a Florida limited liability company (“GWSE”),
wherein: (i) GWSE and Secured Party agree that the GWSE Security Interest (as
defined in the Intercreditor Agreement) and Secured Party’s security interest
will rank pari passu with each other; and (ii) the Guarantors agree that their
existing security interest is subrogated to the rights of Silicon Valley Bank
(“Bank”) to receive distributions of, or payments of proceeds from, the
Collateral in respect of the security interest owed by Maker to Bank (the
“Guarantors Security Interest”) shall rank pari passu with the GWSE Security
Interest and Secured Party’s security interest.
1
NOW,
THEREFORE,
in
consideration of the foregoing and the mutual agreements contained herein,
and
for other good and valuable consideration, the receipt of which is hereby
acknowledged by the parties hereto, the parties hereto agree as
follows:
ARTICLE
I
DEFINITIONS
AND RULES OF INTERPRETATION
Section
1.1 Definitions.
The
following terms shall have the meanings set forth in this Article l or elsewhere
in the provisions of this Agreement referred to below:
“Accounts”
means
all currently existing and hereafter arising accounts, contract rights, and
all
other forms of obligations owing to Borrower arising out of the sale or lease
of
goods or the rendition of services by Borrower, irrespective of whether earned
by performance, and any and all credit insurance, guaranties, or security
therefore.
“Account
Debtor”
means
Person who is or who may obligated under, with respect to, or on account of,
an
Account, General Intangible or Negotiable Collateral.
“Affiliate”
means,
as applied to any Person, any other Person who, directly or indirectly,
controls, is controlled by, is under common control with, or is a director
or
officer of such Person. For purposes of this definition, “control” means the
possession, directly or indirectly, of the power to vote 5% or more of the
Stock
having ordinary voting power for the election of directors (or comparable
managers) or the direct or indirect power to direct the management and policies
of a Person.
“Bankruptcy
Code”
means
Title 11, U.S.C. Section 101, et
seq.,
as
amended from time to time or any successor statute thereto.
“Borrower’s
Books”
means
all of Borrower’s books and records including ledgers; records indicating,
summarizing, or evidencing Borrower’s properties or assets (including the
Collateral) or liabilities; all information relating to Borrower’s business
operations or financial condition; and all computer programs, disk or tape
files, printouts, runs or other computer prepared information.
“Business
Day”
means
any weekday, Monday through Friday, except a legal holiday or a day on which
banking institutions in New York, New York are authorized by law to be
closed.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Collateral”
means
all of Borrower’s right, title, and interest in and to each of the following:
(i) the Accounts, (ii) Borrower’s Books, (iii) the Equipment, (iv) the General
Intangibles, (v) the Inventory, (vi) the Negotiable Collateral, (vii) any money,
securities, investment property, or other assets of Borrower that now or
hereafter come into the possession, custody or control of Secured Party, (viii)
commercial tort claims, and (ix) the proceeds and products, whether tangible
or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrower’s Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
2
“Dollars”or
“$”
means
United States dollars.
“Equipment”
means
all of Borrower’s present and hereafter acquired machinery, machine tools,
motors, equipment, furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including, (a) any interest of
Borrower in any of the foregoing, and (b) all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any
of
the foregoing.
“Event
of Default”
has
the
meaning set forth in Section 5 of the Note.
“General
Intangibles”
means
all of Borrower’s present and future general intangibles and other personal
property (including contract rights, rights arising under common law, statutes,
or regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
“Indebtedness”
means
(a) all obligations of Borrower for borrowed money, (b) all obligations of
Borrower evidenced by bonds, debentures, notes, or other similar instruments
and
all reimbursement or other obligations of Borrower in respect of letters of
credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations of Borrower under capital leases, (d) all obligations or
liabilities of others secured by a Lien on any property or asset of Borrower,
irrespective of whether such obligation or liability is assumed, and (e) any
obligation of Borrower guaranteeing or intended to guarantee (whether
guaranteed, endorsed, co-made, discounted, or sold with recourse to Borrower)
any indebtedness, lease, dividend, letter of credit, or other obligation of
any
other Person.
“Insolvency
Proceeding”
means
any proceeding commenced by or against any Person under any provision of the
Bankruptcy Code or under any other bankruptcy or insolvency law, assignments
for
the benefit of creditors, formal or informal moratoria, compositions, extensions
generally with creditors, or proceedings seeking reorganization, arrangement,
or
other similar relief.
3
“Inventory”
means
all present and future inventory in which Borrower has any interest, including
goods held for sale or lease or to be furnished under a contract of service
and
all of Borrower’s present and future raw materials, work in process, finished
goods, and packing and shipping materials, wherever located.
“Lien”
means
any interest in property securing an obligation owed to, or a claim by, any
Person other than the owner of the property, whether such interest shall be
based on the common law, statute, or contract, whether such interest shall
be
recorded or perfected, and whether such interest shall be contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances, including the lien or security interest arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, security agreement, adverse claim or charge, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
“Loan
Documents”
means
this Agreement, the Note and all other documents, instruments or agreements
now
or hereafter executed or delivered by or on behalf of Borrower in connection
with the Loan.
“Material
Adverse Change”
means
(a) a material adverse change in the business, prospects, operations, results
of
operations, assets, liabilities or condition (financial or otherwise) of
Borrower, (b) the material impairment of Borrower’s ability to perform is
obligations under the Loan Documents to which it is a party or of Secured Party
to enforce the Obligations or realize upon the Collateral, (c) a material
adverse effect on the value of the Collateral or the amount that Secured Party
would likely receive (after giving consideration to delays in payment and costs
of enforcement) in the liquidation of such Collateral, or (d) a material
impairment of the priority of Secured Party’s Liens with respect to the
Collateral.
“Negotiable
Collateral”
means
all of a Person’s present and future letters of credit, notes, drafts,
instruments, documents, personal property leases (wherein such Person is the
lessor), chattel paper, and books relating to any of the foregoing.
“Obligations”
means
all Loans, debts, principal, interest, premiums, liabilities, obligations,
fees,
charges, costs, guaranties, covenants, and duties owing by Borrower to Secured
Party of any kind and description (whether pursuant to or evidenced by a Note,
the Loan Documents or pursuant to any other agreement between Secured Party
and
Borrower, and irrespective of whether for the payment of money), whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Secured Party may have obtained by assignment or
otherwise, and further including all interest not paid when due. Any reference
in this Agreement or in the Loan Documents to the obligations shall include
all
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements thereto and thereof, as applicable.
4
“Permitted
Liens”
means
(a) Liens held by Secured Party, (b) Liens for unpaid taxes that are not
yet due and payable, (c) Liens set forth on Schedule
D
of the
Note, (d) the interests of lessors under operating leases, (e) Liens arising
by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of Borrower and not in connection with the borrowing of money, and which
Liens are for sums not yet due and payable, (f) Liens arising from deposits
made in connection with obtaining worker’s compensation or other unemployment
insurance, (g) Liens or deposits to secure performance of bids, tenders, or
leases (to the extent permitted under this Agreement), incurred in the ordinary
course of business of Borrower and not in connection with the borrowing of
money, (h) Liens arising by reason of security for surety or appeal bonds in
the
ordinary course of business of Borrower, (i) Liens of or resulting from any
judgment or award that reasonably could not be expected to result in a Material
Adverse Change and as to which the time for the appeal or petition for rehearing
of which has not yet expired, or in respect of which Borrower is in good faith
prosecuting an appeal or proceeding for a review and in respect of which a
stay
of execution pending such appeal or proceeding for review has been secured,
(j)
with respect to any Real Property, easements, rights of way, zoning and similar
covenants and restrictions, and similar encumbrances that customarily exist
on
properties of Persons engaged in similar activities and similarly situated
and
that in any event do not materially interfere with or impair the use or
operation of the Collateral by Borrower or the value of Secured Party’s Lien
thereon or therein, or materially interfere with the ordinary conduct of the
business of Borrower and (k) Liens held by third parties securing Indebtedness
incurred prior to the date hereof.
”Permitted
Protest”
means
the right of Borrower to protest any Lien other than any such Lien that secures
the Obligations, tax (other than payroll taxes or taxes that are the subject
of
a United States federal tax lien), royalties, commissions, or other amounts
due
under a licensing agreement, or rental payment, provided that (a) a reserve
with respect to such obligation is established on the books of Borrower in
an
amount that is reasonably satisfactory to Secured Party, (b) any such
protest is instituted and diligently prosecuted by Borrower in good faith,
and
(c) Secured Party is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of
any
of the Liens of Secured Party in and to the Collateral
“Person”
means
any individual, corporation, limited liability company, partnership, trust,
unincorporated association, business, or other legal entity, and any government
or any governmental agency or political subdivision thereof.
5
“Real
Property”
means
any estates or interests in real property now owned or hereafter acquired by
Borrower.
Section
1.2 Construction.
Unless
the context of this Agreement clearly requires otherwise, references to the
plural include the singular, references to the singular include the plural,
the
term “including” is not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. An Event of Default shall “continue” or be “continuing” until such
Event of Default has been waived in writing by Secured Party. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
Section
1.3 Schedules
and Exhibits.
All of
the schedules and exhibits attached to this Agreement shall be deemed
incorporated by reference herein.
Section
1.4 Incorporation
of Recitals.
The
recitals set forth above are hereby incorporated into and made a part of the
substance of this Agreement as though fully set forth herein.
ARTICLE
II
COLLATERAL
SECURITY
Section
2.1 Grant
of Security Interest.
Borrower hereby grants to Secured Party a continuing security interest in all
currently existing and hereafter acquired or arising Collateral, subordinate
only to Borrower’s existing Senior Debt, in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrower
of
each of its covenants and duties under the Loan Documents. Secured Party’s
security interests in the Collateral shall attach to all Collateral without
further act on the part of Secured Party or Borrower. Anything contained in
this
Agreement or any other Loan Document to the contrary notwithstanding, except
for
the sale of Inventory to buyers in the ordinary course of business, Borrower
has
no authority, express or
implied, to dispose of any item or portion of the Collateral.
Section
2.2 Subordination.
Notwithstanding anything contain in this Agreement to the contrary, Secured
Party hereby acknowledges and agrees that all rights and remedies granted to
Secured Party pursuant to the terms and conditions of this Agreement are
subordinate to the rights and remedies (a) granted to Bank and (b) Liens set
forth on Exhibit D of the Note.
6
Section
2.3 Negotiable
Collateral.
In the
event that any Collateral, including proceeds, is evidenced by or consists
of
Negotiable Collateral, Borrower, immediately upon the written request of Secured
Party, shall endorse and deliver physical possession of such Negotiable
Collateral to Secured Party.
Section
2.4 Collection
of Accounts, General Intangibles and Negotiable
Collateral.
At any
time an Event of Default has occurred and is continuing, Secured Party or
Secured Party’s designee may (a) notify customers of Borrower that the Accounts,
General Intangibles or Negotiable Collateral have been assigned to Secured
Party
or that Secured Party has a security interest therein, and (b) collect the
Accounts, General Intangibles and Negotiable Collateral directly and charge
Borrower the collection costs and expenses. Borrower agrees that it will hold
in
trust for Secured Party, as Secured Party’s trustee, any Collections that it
receives and immediately will deliver said Collections to Secured Party in
their
original form as received by Borrower.
Section
2.5 Delivery
of Additional Documentation Required.
At any
time upon the request of Secured Party, Borrower shall execute and deliver
to
Secured Party all financing statements, continuation of financing statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Secured Party reasonably may request, in form satisfactory to Secured Party,
to
perfect and continue perfected Secured Party’s security interests in the
Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other Loan Documents.
Section
2.6 Power
of Attorney.
Borrower hereby irrevocably makes, constitutes, and appoints Secured Party
(and
any of Secured Party’s officers, employees, or agents designated by Secured
Party) as Borrower’s true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section
2.4,
sign
the name of Borrower on any of the documents described in Section
2.4,
(b) at
any time that an Event of Default has occurred and is continuing or Secured
Party deems itself insecure, sign Borrower’s name on any invoice or ▇▇▇▇ of
lading relating to any Account, schedules and assignments of Accounts and
verifications of Accounts, (c) send requests for verification of Accounts,
(d)
endorse Borrower’s name on any Collection item that may come into Secured
Party’s possession, (e) at any time that an Event of Default has occurred and is
continuing or Secured Party deems itself insecure, notify the post office
authorities to change the address for delivery of Borrower’s mail to an address
designated by Secured Party, to receive and open all mail addressed to Borrower,
and to retain all mail relating to the Collateral and forward all other mail
to
Borrower, (f) at any time that an Event of Default has occurred and is
continuing or Secured Party deems itself insecure, make, settle, and adjust
all
claims under Borrower’s policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing or Secured Party deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with any Person obligated under such Account, for amounts and upon terms that
Secured Party determines to be reasonable, and Secured Party may cause to be
executed and delivered any documents and releases that Secured Party determines
to be necessary. The appointment of Secured Party as Borrower’s attorney, and
each and every one of Secured Party’s rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and Secured Party’s obligation to extend credit
hereunder is terminated.
7
Section
2.7 Right
to Inspect.
Secured
Party (through any of its officers, employees or agents) shall have the right,
from time to time hereafter, during normal business hours, to inspect Borrower’s
Books and to check, test, and appraise the Collateral in order to verify
Borrower’s financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
In
order
to induce Secured Party to enter into this Agreement, Borrower makes the
following representations and warranties as of the date hereof:
Section
3.1 No
Encumbrances.
Borrower has good and indefeasible title to the Collateral, free and clear
of
Liens except for Permitted Liens.
Section
3.2 Location
of Inventory and Equipment.
The
Inventory and Equipment are not stored with a bailee, warehouseman, or similar
party.
Section
3.3 Due
Authorization; No Conflict.
(a) The
execution, delivery, and performance by Borrower of this Agreement has been
duly
authorized by all necessary corporate action.
(b) The
execution, delivery, and performance by Borrower of this Agreement does not
and
will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material contractual
obligation or material lease of Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Borrower, other than Permitted Liens, or (iv) require any
approval of stockholders or any approval or consent of any Person under any
material contractual obligation of Borrower.
8
(c) Other
than the filing of appropriate financing statements, fixture filings, and
mortgages, the execution, delivery, and performance by Borrower of this
Agreement does not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any federal, state,
foreign, or other Governmental Authority or other Person.
(d) This
Agreement, when executed and delivered by Borrower will be the legally valid
and
binding obligations of Borrower, enforceable against Borrower in accordance
with
its terms, except as enforcement may be limited by equitable principles or
by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating
to
or limiting creditors’ rights generally.
(e) The
Liens
granted by Borrower to Secured Party in and to Collateral pursuant to this
Agreement and the other Loan Documents are validly created Liens, subject only
to Permitted Liens.
Section
3.4 Options
to Purchase.
None of
the Collateral is subject to any purchase option, buy-sell right, right of
first
refusal, right of first offer or other similar right to acquire any
thereof.
ARTICLE
IV
COVENANTS
OF BORROWER
Borrower
covenants and agrees that, until full and final payment of the Obligations,
and
unless Secured Party shall otherwise consent in writing, Borrower
shall:
Section
4.1 Title
to Equipment.
Upon
Secured Party’s written request, Borrower immediately shall deliver to Secured
Party, properly endorsed, any and all evidences of ownership of, certificates
of
title, or applications for title to any items of Equipment.
Section
4.2 Maintenance
of Equipment.
Maintain the Equipment in good operating condition and repair (ordinary wear
and
tear excepted), and make all necessary replacements thereto so that the value
and operating efficiency thereof shall at all times be maintained and preserved.
Other than those items of Equipment that constitute fixtures on the date hereof,
Borrower shall not permit any item of Equipment to become a fixture to real
estate or an accession to other property, and such Equipment at all times shall
remain personal property.
9
Section
4.3 Insurance.
(a) At
its
expense, maintain insurance respecting the Collateral wherever located, covering
loss or damage by fire, theft, explosion, and all other hazards and risks as
ordinarily are insured against by other Persons engaged in the same or similar
businesses. Borrower also shall maintain business interruption, public
liability, and product liability insurance, as well as insurance against
larceny, embezzlement, and criminal misappropriation. All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Secured Party. Borrower shall deliver the originals
of all such policies to Secured Party with Secured Party’s loss payable
endorsements or other satisfactory Secured Party’s loss payable endorsements,
naming Secured Party as sole loss payee or additional insured, as appropriate.
Each policy of insurance or endorsement shall contain a clause requiring the
insurer to give not less than 30 days prior written notice to Secured Party
in
the event of cancellation of the policy for any reason whatsoever. If Borrower
fails to provide and pay for such insurance, Secured Party may, at its option,
but shall not be required to, procure the same and charge Borrower
therefor.
(b) Borrower
shall give Secured Party prompt notice of any material loss covered by such
insurance and payable to Borrower. Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain, shall be paid over to Secured Party to be applied at the
option of Secured Party either to the prepayment of the Obligations without
premium, in such order or manner as Secured Party may elect, or shall be
disbursed to Borrower under staged payment terms reasonably satisfactory to
Secured Party for application to the cost of repairs, replacements, or
restorations.
ARTICLE
V
NEGATIVE
COVENANTS
Borrower
covenants and agrees that, until full and final payment of the Obligations,
Borrower will not do any of the following without Secured Party’s prior written
consent:
Section
5.1 Liens.
Create,
incur, assume, or permit to exist, directly or indirectly, any Lien on or with
respect to any of its property or assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced and so long as the replacement
Liens only encumber those assets or property that secured the original
Indebtedness). This prohibition specifically includes any “priming liens” or the
creation of any lien that is pari passu to any claims or interests of Secured
Party (other than Guarantors Security Interest and GWSE’s Security Interest),
irrespective of whether such claims or interests may be adequately
protected.
10
Section
5.2 Waste.
Commit
or suffer any waste of the Collateral or do or permit to be done thereon
anything that may in any way impair the value of the Collateral.
ARTICLE
VI
FURTHER
ASSURANCES
Section
6.1 Further
Acts, etc.
Borrower will, at the cost of Borrower, and without expense to Secured Party,
do, execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, pledge, assignments, notices of assignments, transfers and
assurances as Secured Party shall, from time to time, require, for the better
assuring, conveying, assigning, transferring, and confirming unto Secured Party
the Collateral and rights hereby granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so
to
be, or which Borrower may be or may hereafter become bound to convey or assign
to Secured Party, or for carrying out the intention or facilitating the
performance of the terms of this Agreement or for complying with all Applicable
Laws. Borrower, on demand, will execute and deliver and hereby authorizes
Secured Party to execute in the name of Borrower or without the signature of
Borrower to the extent Secured Party may lawfully do so, one or more financing
statements, chattel mortgages or other instruments, to evidence more effectively
the security interest of Secured Party in the Collateral. Borrower grants to
Secured Party an irrevocable power of attorney coupled with an interest for
the
purpose of exercising and perfecting any and all rights and remedies available
to Secured Party at law and in equity, including without limitation such rights
and remedies available to Secured Party pursuant to this Section
6.1.
ARTICLE
VII
RIGHTS
AND REMEDIES
Section
7.1 Remedies.
Upon
the occurrence, and during the continuation, of an Event of Default, Borrower
agrees that Secured Party may take such action, without notice or demand, as
it
deems advisable to protect and enforce its rights against Borrower and in and
to
the Collateral, including, but not limited to, the following actions, each
of
which may be pursued concurrently or otherwise, at such time and in such order
as Secured Party may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Secured Party:
(a) exercise
any and all rights and remedies granted to a secured party upon default under
the Uniform Commercial Code, including, without limiting the generality of
the
foregoing: (i) the right to take possession of the property secured thereby
or
any part thereof, and to take such other measures as Secured Party may deem
necessary for the care, protection and preservation of such property, and (ii)
request Borrower at its expense to assemble such property and make it available
to Secured Party at a convenient place acceptable to Secured Party. Any notice
of sale, disposition or other intended action by Secured Party with respect
to
such property sent to Borrower in accordance with the provisions hereof at
least
five (5) days prior to such action, shall constitute commercially reasonable
notice to Borrower;
11
(b) cause
Borrower to hold all returned Inventory in trust for Secured Party, segregate
all returned Inventory from all other property of Borrower or in Borrower’s
possession and conspicuously label said Inventory as the property of Secured
Party;
(c) without
notice to or demand upon Borrower, make such payments and do such acts as
Secured Party considers necessary or reasonable to protect its security
interests in the Collateral. Borrower agrees to assemble the Collateral if
Secured Party so requires, and to make the Collateral available to Secured
Party
as Secured Party may designate. Borrower authorizes Secured Party to enter
the
premises where the Collateral is located, to take and maintain possession of
the
Collateral, or any part of it, and to pay, purchase, contest or compromise
any
encumbrance, charge or Lien that in Secured Party’s determination appears to
conflict with its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower’s owned or leased
premises, Borrower hereby grants Secured Party a license to enter into
possession of such premises and to occupy the same, without charge, for up
to
120 days in order to exercise any of Secured Party’s rights or remedies provided
herein, at law, in equity or otherwise;
(d) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Secured
Party is hereby granted a license or other right to use, without charge,
Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or
any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower’s
rights under all licenses shall inure to Secured Party’s benefit;
(e) sell
the
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower’s premises) as Secured Party determines is
commercially reasonable;
(f) pursue
such other remedies as Secured Party may have under applicable law;
and
(g) Borrower
hereby acknowledges that the Obligations arose out of a commercial transaction,
and agrees that if an Event of Default shall occur Secured Party shall have
the
right to an immediate writ of possession without notice of a hearing; provided,
however, that notwithstanding anything to the contrary contained
herein.
12
ARTICLE
VIII
WAIVERS
Section
8.1 Secured
Party’s Liability for Collateral.
Secured
Party shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other Person. All risk of loss, damage or destruction
of
the Collateral shall be borne by Borrower
ARTICLE
IX
NOTICE
Section
9.1 Notices.
All
notices or other written communications hereunder shall be deemed to have been
properly given (i) upon delivery or refusal of delivery, if delivered in person,
(ii) one (1) Business Day (defined below) after having been deposited for
overnight delivery with any reputable overnight courier service, or (iii) three
(3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
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If
to Borrower:
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▇▇▇▇-▇▇▇▇▇
▇▇▇▇▇▇ – ▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ 559
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Attention:
Chief Executive Officer
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With
a copy to:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
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▇▇▇▇
▇▇▇▇▇
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▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ – ▇▇▇▇▇ ▇▇▇▇
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▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
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If
to Secured Party:
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Tulip
Group Investments, Limited
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▇.▇.
▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇,
▇▇▇
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Atttention:
▇▇▇▇▇▇ ▇▇▇▇▇
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Facsimile
No.: 04 332 8451
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13
|
With
a copy to:
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, Esq.
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▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇, Chtd.
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▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ – ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
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or
addressed as such party may from time to time designate by written notice to
the
other parties.
Either
party by notice to the other may designate additional or different addresses
for
subsequent notices or communications.
ARTICLE
X
CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER
Section
10.1 THE
VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA. THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND
FEDERAL COURTS LOCATED IN THE COUNTY OF ▇▇▇▇▇, STATE OF NEVADA. EACH OF BORROWER
AND SECURED PARTY WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
ARTICLE
X.
BORROWER AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF BORROWER AND SECURED PARTY REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
14
ARTICLE
XI
MISCELLANEOUS
PROVISIONS
Section
11.1 Effectiveness.
This
Agreement shall be binding and deemed effective when executed by Borrower and
Secured Party.
Section
11.2 Successors
and Assigns.
This
Agreement shall bind and inure to the benefit of the respective successors
and
assigns of each of the parties; provided, however, that Borrower may not assign
this Agreement or any rights or duties hereunder without Secured Party’s prior
written consent and any prohibited assignment shall be absolutely
void.
No
consent to an assignment shall release Borrower from its Obligations. Secured
Party may assign this Agreement and its rights and duties hereunder and no
consent or approval by Borrower is required in connection with any such
assignment. Secured Party reserves the right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Secured Party’s rights and benefits hereunder. In connection with any such
assignment or participation, Secured Party may disclose all documents and
information which Secured Party now or hereafter may have relating to Borrower
or Borrower’s business. To the extent that Secured Party assigns its rights and
obligations to a third Person, Secured Party thereafter shall be released from
such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third Person.
Section
11.3 Section
Headings.
Headings and numbers have been set forth herein for convenience
only.
Unless
the contrary is compelled by the context, everything contained in each section
applies equally to this entire Agreement.
Section
11.4 Interpretation.
Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed
resolved against Secured Party or Borrower, whether under any rule of
construction or otherwise.
On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as fairly
accomplish the purposes and intentions of all parties hereto.
Section
11.5 Severability
of Provisions.
Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.
Section
11.6 Amendments
in Writing.
This
Agreement can only be amended by a writing signed by both Secured Party and
Borrower.
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Section
11.7 Counterparts;
Facsimile Execution.
This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall
be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of
an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by facsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver
an
original executed counterpart shall not affect the validity, enforceability,
and
binding effect of this Agreement.
Section
11.8 Entire
Agreement.
This
Agreement constitutes the entire understanding and agreement between Borrower
and Secured Party with respect to the transactions contemplated hereby and
supersede all prior written or oral understandings and agreements between
Borrower and Secured Party with respect thereto.
[Remainder
of Page Intentionally Left Blank, Signatures to Follow]
16
IN
WITNESS WHEREOF,
the
undersigned have duly executed this Agreement as of the date first set forth
above.
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a
Nevada corporation
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By:
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Name:
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Title:
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DIRECT
GOLF SERVICES INC.,
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a
____________corporation
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By:
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Name:
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Title:
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||
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GOLF
ACADEMIES LTD. D/B/A GPSI
EUROPE,
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a
____________corporation
|
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By:
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Name:
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Title:
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||
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GPS
IT, LLC,
|
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a
____________limited liability company
|
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By:
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Name:
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Title:
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||
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SECURED
PARTY:
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TULIP
GROUP INVESTMENTS, LIMITED,
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a
B.V.I. company
|
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By:
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Name:
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||
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Title:
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17