PLEDGE AND SECURITY AGREEMENT
PLEDGE
AND SECURITY AGREEMENT (this “Agreement”)
dated
as of May 8, 2007, made by Leisurecorp LLC, a Dubai limited liability company
(“Pledgor”),
in
favor of GPS Industries, Inc., a Nevada corporation (“Pledgee”).
W
I T N E
S S E T H:
WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of May 8,
2007
(the “Securities
Purchase Agreement”),
concurrently with the execution of this Agreement Pledgee is selling and issuing
to Pledgor (i) 1,000,000 shares (the “Pledged
Shares”)
of
Series B Convertible Preferred Stock of Pledgee and (ii) warrants to purchase
40,983,607 shares of the Pledgee’s common stock (the “Common
Stock”)
at an
exercise price per share of $.122 (the “Pledged
Warrants”),
all
in consideration of Pledgor’s promissory note in favor of Pledgee dated the date
hereof in the principal amount of $10,000,000 (the “Promissory
Note”);
and
WHEREAS,
in order to secure Pledgor’s obligations to Pledgee under the Promissory Note,
Pledgor has agreed to pledge to Pledgee the Pledged Shares and the Pledged
Warrants in accordance with the terms of this Agreement;
NOW,
THEREFORE, in consideration of the premises and the agreements herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1.
Definitions.
All
terms used in this Agreement which are defined in Article 9 of the Uniform
Commercial Code as currently in effect in the State of New York (the
“Code”)
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth in the Code. The term “Default”
shall
mean the occurrence of an “Event of Default” under the Promissory Note or any
material breach of any of Pledgor's representations, warranties or covenants
in
this Agreement. All other terms used but not defined herein shall have the
meanings ascribed to such terms in the Promissory Note.
2.
Pledge
and Grant of Security Interest in Pledged Collateral.
(a)
As
collateral security for all of the Obligations (as defined in Section 3 hereof),
Pledgor hereby pledges and assigns to Pledgee, and grants to Pledgee a
continuing security interest in, the following:
(i)
the
Pledged Shares, any certificates representing the Pledged Shares, and all shares
of Common Stock issuable upon the conversion of the Pledged Shares;
(ii)
the
Pledged Warrants and all shares of Common Stock issuable upon the exercise
of
the Pledged Warrants, and
(iii)
all
proceeds of any and all of the foregoing;
in
each
case, as Pledgor’s interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise). The foregoing collateral is herein
referred to as the “Pledged
Collateral,”
provided, however, that to the extent that any of the foregoing assets are,
from
time to time, released pursuant to Section 11 below, such released assets shall
cease being “Pledged Collateral” and shall after such release no longer be
subject to this Agreement, and shares of Series B Convertible Preferred Stock
and warrants that are, from time to time, released pursuant to Section 11 shall
cease being “Pledged Shares” and “Pledged Warrants.”
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3.
Security
for Obligations.
The
security interest created hereby in the Pledged Collateral constitutes
continuing collateral security for the following (collectively, the
“Obligations”):
(i)
The prompt payment and satisfaction by Pledgor of all of its liabilities and
obligations under the Promissory Note; (ii) the performance by Pledgor of all
of
its obligations arising under, or contemplated by, this Agreement; and (iii)
the
payment of all amounts from time to time owing to Pledgee by the Pledgor under
this Agreement, including payment of any and all costs and expenses (including,
without limitation, reasonable attorneys’ fees and expenses) incurred by Pledgee
in the collection of the Promissory Note and in the enforcement of its rights
under this Agreement.
4.
Delivery
of the Pledged Collateral.
All
certificates and instruments currently representing the Pledged Shares and
Pledged Warrants are being delivered to Pledgee concurrently with the execution
and delivery of this Agreement, to be held by it hereunder. The certificates
and
instruments being delivered hereunder consist of three stock certificates (two
for 400,000 shares of the Pledged Shares each, and one for 200,000 shares of
the
Pledged Shares), and three separate warrants (two evidencing the right to
purchase 16,393,442 shares of Common Stock each, and one evidencing the right
to
purchase 8,196,723 shares of Common Stock). All other certificates and other
instruments constituting Pledged Collateral from time to time shall be delivered
to Pledgee promptly upon the receipt thereof by or on behalf of the Pledgor.
All
such certificates and instruments shall be held by Pledgee pursuant hereto
and
shall be delivered in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank,
all
in form and substance satisfactory to Pledgee. Any new, additional or different
securities or other property (other than regular cash dividends) which may
now
or hereafter become distributable with respect to the Pledged Collateral by
reason of (i) any stock split, stock dividend, recapitalization, combination
of
shares, exchange of shares or other change affecting the Common Stock as a
class
or (ii) any merger, consolidation or other reorganization affecting the capital
structure of Pledgee shall, upon receipt by Pledgor, be promptly delivered
to
and deposited with Pledgee as part of the Pledged Collateral hereunder. To
the
extent Pledgee reasonably deems it necessary or advisable to perfect its
security interest hereunder in addition to its possession of the Pledged
Collateral, Pledgor hereby authorizes Pledgee, concurrently with its execution
and delivery of this Agreement or at any time that Pledgee may thereafter
determine, to prepare and file UCC-1 financing statements naming Pledgor as
the
debtor and Pledgee as secured party and describing the collateral pledged
hereunder in reasonable detail.
5.
Representations
and Warranties.
Pledgor
represents and warrants to Pledgee as follows:
(a)
Pledgor
is and will be at all times the record and beneficial owner of the Pledged
Collateral, free and clear of any lien, security interest, option or other
charge or encumbrance, except for the security interest created by this
Agreement or any other general security interest granted by the Pledgor or
Pledgor’s affiliates.
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(b)
This
Agreement creates a valid security interest in favor of Pledgee in the Pledged
Collateral, as security for the Obligations. Such security interest is, or
in
the case of Pledged Collateral in which Pledgor obtains rights after the date
hereof, will be, a perfected, first priority security interest upon the
Pledgor’s delivery of the Pledged Collateral to Pledgee as described in Section
4 above.
6.
Covenants.
So long
as any of the Obligations shall remain outstanding, Pledgor shall, unless
Pledgee shall otherwise consent in writing:
(a)
at
its
expense, defend the Pledgor’s right, title and interest in and to the Pledged
Collateral and Pledgee’s security interest therein against the claims of any
other person;
(b)
not
sell,
assign (by operation of law or otherwise), exchange or otherwise dispose of
any
Pledged Collateral or any interest therein, other than as contemplated
hereunder;
(c)
shall
not
convert, or attempt to convert, any of the Pledged Shares or exercise, or
attempt to exercise, the Pledged Warrants;
(d)
not
create or suffer to exist any lien, security interest or other charge or
encumbrance upon or with respect to any Pledged Collateral except for the
security interest created hereby and any general security interest granted
by
the Pledgor or Pledgor’s affiliates; and
(e)
not
make
or consent to any amendment or other modification with respect to any Pledged
Collateral or enter into any agreement or permit to exist any restriction with
respect to any Pledged Collateral other than pursuant hereto and other than
those imposed by U.S. federal and state securities laws.
7.
Voting
Rights, Dividends, Etc. in Respect of the Pledged Collateral.
(a)
So
long
as no Default shall have occurred and be continuing:
(i) Pledgor
may exercise any and all voting and other consensual rights pertaining to the
Pledged Shares for any purpose not inconsistent with the terms of this
Agreement;
(ii) Pledgor
may receive and retain any and all dividends paid in cash in respect of the
Pledged Collateral; and
(iii) Pledgee
will execute and deliver (or cause to be executed and delivered) to Pledgor
all
such proxies and other instruments as Pledgor may reasonably request for the
purpose of enabling Pledgor to exercise the voting and other rights which it
is
entitled to exercise pursuant to paragraph (i) of this Section 7(a) and to
receive the dividends which it is authorized to receive and retain pursuant
to
paragraph (ii) of this Section 7(a).
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(b)
Upon
the
occurrence and during the continuance of a Default;
(i)
all
rights of Pledgor to exercise the voting and other consensual rights which
it
would otherwise be entitled to exercise pursuant to paragraph (i) of subsection
(a) of this Section 7, and to receive the dividends which it would otherwise
be
authorized to receive and retain pursuant to paragraph (ii) of subsection (a)
of
this Section 7, shall cease with respect to Pledged Shares having an aggregate
Value equal to any unpaid principal and interest amounts then due and owing
under the Promissory Note (the “Relevant Collateral”), and all such rights shall
thereupon become vested in Pledgee or any person to whom the Relevant Collateral
is transferred pursuant to Section 9, who shall thereupon have the sole right
to
exercise such voting and other consensual rights and to receive and hold as
Pledged Collateral such dividends. “Value” shall mean, for every $10 due and
owing, one share of Preferred Stock and warrants to purchase 40.983 shares
of
Common Stock;
(ii)
without
limiting the generality of the foregoing, Pledgee may, at its option, exercise
any and all rights of conversion, exchange, or any other rights, privileges
or
options pertaining to any of the Relevant Collateral as if it were the absolute
owner thereof, including, without limitation, the right to exchange, in its
discretion, any and all of the Relevant Collateral upon the merger,
consolidation, reorganization, recapitalization or other adjustment of Pledgee,
or upon the exercise by Pledgee of any right, privilege or option pertaining
to
any Relevant Collateral, and, in connection therewith, to deposit and deliver
any and all of the Relevant Collateral with any committee, depository, transfer
agent, registrar or other designated agent upon such terms and conditions as
it
may determine; and
(iii)
all
dividends which are received by the Pledgor contrary to the provisions of
paragraph (i) of this Section 7(b) shall be received in trust for the benefit
of
Pledgee, shall be segregated from other funds of Pledgor, and shall be forthwith
paid over to Pledgee as Pledged Collateral in the exact form received with
any
necessary endorsement and/or appropriate stock powers duly executed in blank,
to
be held by Pledgee as Pledged Collateral and as further collateral security
for
the Obligations.
8.
Additional
Provisions Concerning the Pledged Collateral.
If
Pledgor fails to perform any agreement or obligation contained herein, Pledgee
itself may perform, or cause performance of, such agreement or obligation,
and
the expenses of Pledgee incurred in connection therewith shall be payable by
Pledgor.
9.
Remedies
Upon Default.
If a
Default shall have occurred and be continuing, and subject to the limitations
imposed by the U.S. Securities Act of 1933, as amended (the “Securities
Act”),
and
any applicable state “blue sky” laws and regulations, Pledgee shall have the
following rights and remedies, and only such rights and remedies:
(a)
Pledgee
may, at its election, exercise any or all of the rights and remedies granted
to
a secured party under the provisions of the Uniform Commercial Code (as now
or
hereafter in effect), including (without limitation) the power to dispose of
any
Relevant Collateral by public or private sale, in one or more parts, at any
exchange or broker's board or elsewhere, at such price or prices and on such
other terms as are commercially reasonable. Pledgee shall give Pledgor 15 days
prior notice of any such sale, and Pledgor agrees that, to the extent notice
of
sale shall be required by law, at least 15 days prior notice to Pledgor of
the
time and place of any public sale or the time after which any private sale
is to
be made shall constitute reasonable notification. Pledgee shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having
been
given. Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
In
connection with any such public or private sale of any Relevant Collateral,
Pledgee shall have the right to exercise any rights available to a holder of
Pledged Collateral, including the right to convert Pledged Shares into shares
of
Common Stock.
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(b)
Pledgor
recognizes that Pledgee may deem it impracticable to effect a public sale of
all
or any part of the Pledged Shares or any other securities constituting Relevant
Collateral and that Pledgee may, therefore, determine to make one or more
private sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such securities
for
their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sale may be at prices
and on terms less favorable to Pledgee than the prices and other terms which
might have been obtained at a public sale and, notwithstanding the foregoing,
agrees that such private sales shall be deemed to have been made in a
commercially reasonable manner and that Pledgee shall have no obligation to
delay the sale of any such securities for the period of time necessary to permit
the issuer of such securities to register such securities for public sale under
the Securities Act.
(c)
Any
cash
held by Pledgee as Pledged Collateral and all cash proceeds received by Pledgee
in respect of any sale of, collection from, or other realization upon, all
or
any part of the Pledged Collateral shall be applied as follows:
(i)
First,
to
the payment of the reasonable costs and expenses, including reasonable
attorneys' fees and legal expenses, incurred by Pledgee in connection with
(A)
the administration of this Agreement, (B) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, and (C) the exercise or enforcement of any of the rights
of
Pledgee hereunder;
(ii)
Second,
at the option of Pledgee, to the payment or other satisfaction of any liens
and
other encumbrances upon any of the Pledged Collateral;
(iii)
Third,
to
the payment of the Obligations, first in respect of any fees not covered by
clause (i) above, and, second, in respect of amounts owing under the Promissory
Note at such time;
(iv)
Fourth,
to the payment of any other amounts required by applicable law; and
(v)
Fifth,
the surplus proceeds, if any, to Pledgor or to whomsoever shall be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.
(d)
Pledgor
hereby waives and releases any and all rights of equity of redemption whether
before or after any sale, transfer, or other disposition or application
contemplated by this Section 9 and, except as herein expressly required, any
and
all notice to Pledgor of the foregoing action.
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10.
Deficiency.
If the
proceeds of sale, collection or other realization of or upon any Relevant
Collateral are insufficient to cover the costs and expenses of such realization
and the payment in full of the Obligations owing at such time, Pledgor shall
remain liable for any such deficiency.
11.
Release
of Pledged Collateral.
The
Pledged Collateral shall promptly be released from the pledge created by, and
provisions of this Agreement, and returned to Pledgor in accordance with the
following provisions:
(a)
A
stock
certificate representing 200,000 Pledged Shares and a Pledged Warrant evidencing
the right to purchase 8,196,723 shares of Common Stock shall be released
following the payment by Pledgor of Payment #1;
(b)
A
stock
certificate representing 400,000 Pledged Shares and a Pledged Warrant evidencing
the right to purchase 16,393,442 shares of Common Stock shall be released
following the payment by Pledgor of Payment #2; and
(c)
A
stock
certificate representing 400,000 Pledged Shares and a Pledged Warrant evidencing
the right to purchase 16,393,442 shares of Common Stock shall be released
following the payment by Pledgor of (i) Payment #3, (ii) any interest that
may
have accrued under the Promissory Note, and (iii) any other outstanding amount
owed by Pledgor to Pledgee hereunder.
Upon
the
satisfaction in full of the Obligations, this Agreement and the security
interest created hereby shall terminate and all rights to the Pledged Collateral
shall revert to Pledgor, and Pledgee will promptly (A) return to Pledgor such
of
the Pledged Collateral as shall not have been returned to Pledgor, sold or
otherwise disposed of or applied pursuant to the terms hereof, and
(B) execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination.
12.
Attorney-in-Fact.
Without
limiting any other provision of this Agreement, Pledgee is hereby appointed
the
attorney-in-fact of Pledgor for the purpose of carrying out the provisions
of
this Agreement and taking any action and executing any instruments which Pledgee
may deem reasonably necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Pledgee shall promptly notify the Pledgor of any action taken by
Pledgee pursuant to this Section 12; provided,
however,
that
the failure to provide such notice shall in no way impair the rights of Pledgee
to take any such actions hereunder. Without limiting the generality of the
foregoing, so long as Pledgee shall be entitled under this Agreement to make
collections in respect of Pledged Collateral, Pledgee shall have the right
and
power to receive, endorse and collect all checks made payable to the order
of
the Pledgor representing any dividend, payment, or other distribution in respect
of the Pledged Collateral or any part thereof and to give full discharge for
the
same.
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13.
Expenses.
Each
party to this Agreement shall pay all of its own expenses incurred in connection
with this Agreement.
14.
Notices,
Etc.
All
notices and other communications provided for hereunder shall be delivered
in
the manner set forth in Article XV of the Securities Purchase
Agreement.
15.
Miscellaneous.
(a)
No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by the parties hereto, and no waiver of any provision of
this
Agreement, and no consent to any departure by Pledgor therefrom, shall be
effective unless it is in writing and signed by Pledgee, and then such waiver
or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b)
No
failure on the part of the Pledgee or Pledgee to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall
any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies
of
Pledgee provided herein are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law.
(c)
Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d)
This
Agreement may be executed in two counterparts, each executed counterpart
constituting an original but together only one Agreement.
(e)
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
(f)
If
any
litigation or other proceeding is commenced in connection with this Agreement,
the losing party shall pay the expenses of the prevailing party, including
but
not limited to reasonable attorney's fees and expenses.
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IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
date first above written.
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PLEDGOR:
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LEISURECORP
LLC, a Dubai limited liability company
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PLEDGEE:
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By:
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Xxxxxx
X. Xxxxxx, Xx., Chief Executive
Officer
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[SIGNATURE
PAGE TO PLEDGE AND SECURITY AGREEMENT]
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