SETTLEMENT AGREEMENT
Exhibit
10.20
This Settlement Agreement is entered
into as of the 31st day of
December, 2008 (“Effective Date”), by GPS Industries, Inc., a Nevada corporation
having its principal place of business in Sarasota, Florida (“GPSI”) and Optimal
Golf Solutions, Inc. (“OGSI”), on one hand,
and Optimal I.P. Holdings, L.P., a Texas limited partnership having its
principal place of business at 000 Xxxxxx, Xxx 000, Xxxxxx, Xxxxx 00000 (“Optimal”), Xxxxxx
Xxxxxxx (“Xxxxxxx”) and Xxxxxxx
Xxxxxx (“Xxxxxx”), on the
other hand (collectively, Xxxxxx and Cornish referred to herein as
“Sellers”). All of the entities and individuals referenced above are
referred to herein collectively as “the Parties.”
RECITALS
WHEREAS, pursuant to a Stock Purchase
Agreement (as amended, the “Stock Purchase
Agreement”), Cornish and Xxxxxx the (“Sellers”) sold all of
the capital stock of OGSI to GPSI (the “Optimal Shares”) with
the consideration for the purchase (the “Purchase Price”)
being cash and the delivery of shares of the Common Stock of GPSI to be sold by
the Sellers as provided in the Stock Purchase Agreement;
WHEREAS, a dispute has arisen over the
obligations of GPSI with respect to the payment of the remaining Purchase Price
due under the Stock Purchase Agreement;
WHEREAS, on July 7, 2008, the Sellers
filed a lawsuit in the District Court of Xxxxxx County, Texas, 353 Judicial
District alleging fraud/rescission of the Stock Purchase Agreement and breach of
contract of the Stock Purchase Agreement by GPSI (the “Lawsuit”);
WHEREAS, the Sellers, Optimal, OGSI and
GPSI now wish to enter into this Settlement Agreement in order to resolve all of
the disputes between them with respect to the Stock Purchase Agreement by
amending the Stock Purchase Agreement as set forth below.
NOW, THEREFORE, in consideration of the
foregoing and the mutual promises and covenants contained herein, the Parties
agree as follows:
1. Defined
Terms
1.1 All
terms used in this Agreement but not defined shall have the meaning ascribed to
such term in the Stock Purchase Agreement.
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2.
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AMENDMENT TO Stock Purchase
Agreement
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The Stock
Purchase Agreement shall be amended by the addition of the
following
2.1 The
Parties acknowledge and agree that as of December 1, 2008 the current balance of
the Minimum Purchase Price is $1,753,972 inclusive of $1,182,817 in principal
(“Principal
Balance”) and $571,155 in accrued interest (the “Interest
Amount”). The Principal Balance shall continue to accrue
interest at the rate of 4.75% per annum per the terms of the Stock Purchase
Agreement. The Security Agreement of Nov. 19, 2004 shall remain in
full force and effect. Schedule A is attached showing the Minimum
Purchase Price as of December 1, 2008.
2.2 The
attached $270,000 Convertible Promissory Note (Exhibit A) represents the
$270,000 ‘cash payment’ applied December 1, 2008 on Schedule A. The
Parties agree that upon execution of the Convertible Promissory Note, this ‘cash
payment’ resolved any dispute concerning a cash payment shortfall relating to
the Third Cash Payment. (See, Second Amendment to Stock Purchase
Agreement).
2.3 GPSI
has previously delivered to the Sellers 30,392,082 restricted shares of the
Common Stock of GPSI (the “GPSI Tradable
Shares”) as full payment for the Second Stock Payment. (See,
Second Amendment to Stock Purchase Agreement). Promptly upon the
consummation of the settlement as described below, the Sellers shall deliver to
GPSI’s counsel any certificate(s) bearing a restrictive legend evidencing the
GPSI Shares and GPSI shall instruct the transfer agent to deliver to the Sellers
replacement certificates without any restrictive legend.
2.4 Within
ten business days from the Effective Date, GPSI shall deliver to the Sellers
12,000,000 shares of restricted Common Stock of GPSI (the “Interest Shares”) as
payment against the accrued Interest. The payment amount shall be the
net proceeds (gross sales minus selling costs and expenses) Sellers receive from
the sale of any Interest Shares shall collectively be known as the “GPSI
Shares”.
2.5 Minimum
Sales. Subject to Section 2.6 and 2.7 below, the Sellers shall sell a
minimum number of GPSI Shares between the Effective Date and the third
anniversary of the Effective Date (the “Sales Period”) as
follows:
| Year 1 | 0 shares | |
| Year 2 | 5000 shares per trading day (per day averaged over a 5 day trading period) | |
| Year 3 | 5000 shares per trading day (per day averaged over a 5 day trading period) |
2.6 Maximum
Sales. During the Sales Period the Sellers, except as provided
herein, will not directly or indirectly, without the prior written consent of
GPSI, sell, offer, contract to sell, pledge, grant any option to purchase or
otherwise dispose (collectively, a “Disposition”) the
GPSI Shares (the “Lock-Up Shares”), at
any time during the Sales Period. The foregoing restriction is
expressly agreed to preclude, among other Dispositions, the holder of the
Lock-Up Shares from engaging in any hedging or other transaction with is
designed to or reasonably expected to lead to or result in a Disposition of
Lock-Up Shares during the Sales Period, even if such Lock-Up Shares would be
disposed of by someone other than such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Lock-Up Shares or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Lock-Up Shares. Notwithstanding the foregoing,
during the Lock-Up Period, the Sellers shall be permitted to dispose of the
Lock-Up shares as follows: (i) during any three-month period not more than the
2% of the outstanding shares of GPSI’s common stock, and (ii), in any case, not
more than 8% of the daily trading volume on any one particular day using the
average of the previous three trading days. Notwithstanding the
foregoing, the Sellers my transfer the Lock-Up Shares (i) as a bona fide gift or
gifts, (ii) as a distribution to limited partners or shareholders of such
person; provided, however, that in any
such case it shall be a condition to the transferee execute an agreement stating
that the transferee is receiving and holding the Lock-Up Shares subject to the
provisions of this Settlement Agreement. Any transferor transferring
pursuant to the subsection (i) or (ii) above shall notify GPSI in writing prior
to the transfer. During the Sales Period, there shall be no further
transfer of such Lock-Up Shares except in accordance with this
Agreement.
2.7 If
during the Sales Period GPSI’s trading volume is less than 70,000 per day
averaged over a 5 day trading period, then, during such time, Sellers are no
longer required to sell the Minimum Sales as defined in Paragraph
2.5. If during the Sales Period GPSI’s trading volume is less than
5,000 per day averaged over a 10 day trading period, then the Sellers, acting
jointly, may by written notice to GPSI accelerate the payment of the then
current balance of the Minimum Purchase Price. GPSI shall pay Sellers
the then current balance of the Minimum Purchase Price within 10 business days
of such written notice.
2.8 Within
twenty business days from the end of the Sales Period, the Sellers, acting
jointly, shall have the option by written notice to GPSI to (a) retain the then
balance, if any, f the GPSI Shares in full satisfaction of all remaining
obligations of GPSI to them with respect to the Minimum Purchase Price or, (b)
return such balance, if any, (the “Remaining Shares”) in
which case, within twenty business days from the receipt of the certificate
evidencing the Remaining Shares, GPSI shall pay to the Sellers the then current
balance of the Minimum Purchase Price, taking into account, since the Effective
Date of this Settlement Agreement, any net proceeds (as defined in the Stock
Purchase Agreement) from the sale of GPSI Shares and any cash payments made to
Sellers by GPSI. Failure of the Sellers to notify GPSI as to its
election shall be deemed to be an election to retain the GPS
Shares.
2.9 For
avoidance of doubt, GPSI shall have no obligation to register for resale any of
GPSI Shares and GPSI agrees that the GPSI Tradable Shares are now freely
tradable by Sellers.
2.10 Section
8.4 of the Stock Purchase Agreement is amended as follows:
The
phrase “Prior to Sellers receiving an aggregate cash consideration of $3,000,000
USD for their sale of the Shares,” in the first paragraph of section 8.4 shall
be replaced with “Prior to Sellers receiving an aggregate cash consideration of
$3,000,000 from either the sale of their Shares and/or from cash payments made
by Purchaser to the Sellers subsequent to the Second Cash Payment,”
3. FULL
FORCE AND EFFECT
3.1 Full Force and Effect. Except
as amended hereby, all terms and conditions of the Stock Purchase Agreement
shall remain in force and effect. In the event of a conflict between
this Settlement Agreement and the Stock Purchase Agreement (as amended) the
terms of this Settlement Agreement control.
4. CONSUMMATION
OF THE SETTLEMENT; DISMISSAL OF LAWSUIT
The
consummation of the settlement is contingent on the execution of an agreement
(the “Replacement
Patent License Agreement”) between the Parties with respect to that
certain arbitration proceeding relating to a dispute over Optimal’s rights under
a Patent License Agreement dated November 19, 2004 between GPSI and
Optimal. Upon the Effective Date the Sellers shall dismiss without
prejudice the Lawsuit.
5. MISCELLANEOUS
5.1 Governing
Law. This Settlement Agreement shall be governed by the laws
of the State of Texas.
5.2 Counterparts. This
Settlement Agreement may be executed in counterparts which, taken together,
shall constitute one and the same agreement and shall be effective as of the
Effective Date.
5.3 Severability. If
any provisions of the Settlement Agreement of the application of any such
provision shall be held to be contrary to law, the remaining provisions of this
Agreement shall continue in full force and effect.
5.4 No
Admission. This Settlement Agreement is for the sole purpose
of settling the matters involved in the Texas State Court Litigation and this
Settlement Agreement does not constitute, and is not evidence of, any admission
by any of the Parties hereto of any wrongdoing or liability.
5.5 Entire
Agreement. This Settlement Agreement together with the Patent
Settlement Agreement constitutes the entire agreement between the Parties with
respect to the subject matter hereof and supersedes all prior negotiations and
agreements, whether written or oral. This Settlement Agreement may
not be altered or amended except by an instrument in writing executed by all of
the Parties hereto.
<SIGNATURE
PAGE FOLLOWS>
IN WITNESS WHEREOF, each
of the parties hereto has executed this Settlement Agreement, or has caused this
Settlement Agreement, or has caused this Settlement Agreement to be duly
executed on its respective behalf by its respective officer(s) thereunto duly
authorized, as of the Effective Date.
| Optimal IP Holdings, LP | GPS Industries, Inc. | ||||
| By: |
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By: |
/s/
Xxxxx Xxxxxxxx
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Name:
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Name:
Xxxxx Xxxxxxxx
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Title:
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Title:
Chief Executive Officer
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| Date: | Date: | ||||
| Optimal Golf Solutions, Inc. | |||||
| By: |
/s/
Xxxxx Xxxxxxxx
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Name:
Xxxxx Xxxxxxxx
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Title:
Authorized Representative
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| Date: | |||||
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Xxxxxx
Xxxxxxx
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Xxxxxxx
Xxxxxx
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| Date: | Date: |
