SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into
effective as of the 31st day of December, 1997, by and between GOLF TRAINING
SYSTEMS, INC. (hereinafter referred to as "Debtor"), and XXXX X. XXXXX, XX., and
his assigns (hereinafter referred to as "Secured Party").
W I T N E S S E T H:
WHEREAS, Debtor is presently engaged in the business of developing and
marketing sports instruction materials (the "Business");
WHEREAS, Debtor has executed a Senior Note (the "Note") in favor of Secured
Party, dated of even date herewith, in the maximum face principal amount of
$1,000,000.00; and
WHEREAS, in order to secure the obligations of Debtor under the Note and
all other obligations now or hereafter owing from Debtor to Secured Party, the
Debtor desires to grant a security interest in the collateral described below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the parties hereto
agree as follows:
1. Security Interest. To provide security for the due and punctual
performance of all of the Debtor's obligations under the Note and all other
documents or instruments evidencing or securing the indebtedness of the Note
(collectively, with the Note, the Loan Agreement of even date herewith and this
Agreement, referred to herein as the "Loan Documents"), including, without
limitation, payment in full of the principal and interest on the Note, costs and
attorneys' fees, all indebtedness to be incurred by Debtor to Secured Party with
respect to the Note and further to secure any other indebtedness now or
hereafter owing by Debtor to Secured Party (hereinafter the "Obligations"), the
Debtor hereby mortgages, pledges, assigns, transfers, sets over, conveys and
delivers to Secured Party and grants to Secured Party first and best security
interests (the "Security Interests") in all of the following rights, interests
and properties (all of which are collectively hereinafter referred to as the
"Collateral"):
(a) Inventory. All of the Debtor's inventory of every description which is
held by the Debtor for sale or lease or is furnished by the Debtor under any
contract of service or is held by the Debtor as raw materials, work in process,
or materials used or consumed in a business, whether now owned or hereafter
acquired, wherever located, and as the same may now and hereafter from time to
time be constituted, together with all cash and non-cash proceeds and products
thereof (the "Inventory").
(b) Accounts. All of the Debtor's accounts (including, without limitation,
all notes, notes receivable, drafts, acceptances, and similar instruments and
documents) whether now owned or hereafter acquired, together with (i) all cash
and non- cash proceeds thereof and (ii) all returned, rejected, or repossessed
goods, the sale or lease of which shall have given or shall give rise to an
account, and all cash and non-cash proceeds and products of all such goods (the
"Accounts").
(c) General Intangibles. All of the Debtor's general intangibles
(including, without limitation, any proceeds from insurance policies), patents
and applications therefor, unpatented inventions, trade secrets, copyrights,
contract rights, goodwill, literary rights, rights to performance, rights under
licenses, choses-in-action, claims, information contained in computer media
(such as data bases, source and object codes, and information therein),
trademarks and applications therefor, trade names, including the right to make,
use, and vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of the Debtor
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash products thereof.
(d) Chattel Paper. All of the Debtor's chattel paper, whether now owned or
hereafter existing, acquired, or created, together with (i) all moneys due and
to become due thereafter, (ii) all cash and non-cash proceeds thereof, and (iii)
all returned, rejected, or repossessed goods, the sale or lease of which shall
have given or shall give rise to chattel paper, and all cash and non-cash
proceeds and products of all such goods (the "Chattel Paper").
(e) All Equipment and Fixtures. All of the Debtor's equipment (including
all motor vehicles) and fixtures, whether now owned or hereafter acquired,
together with (i) all additions, parts, fittings, accessories, special tools,
attachments, and accessions now and hereafter affixed thereto and/or used in
connection therewith, (ii) all replacements thereof and substitutions therefor,
and (iii) all cash and non-cash proceeds and products thereof (the "Equipment").
Until payment in full of all Obligations, the Secured Party's Security
Interests in the Collateral granted hereby shall continue in full force and
effect.
2. Representations and Warranties.
Debtor represents and warrants to Secured Party that:
(a) Debtor has all requisite authority to execute and deliver this
Agreement and this Agreement is enforceable in accordance with its terms;
(b) Debtor's books and records concerning the Collateral are kept at the
principal office of Debtor;
(c) No financing statement covering the Collateral, or any part thereof, is
currently on file with any filing officer except for one statement in favor of
AT&T filed in Gwinnett County, Georgia which has not been terminated
notwithstanding that the obligation secured thereby has been satisfied;
(d) No other security agreement is currently in effect and no security
interest, other than the Security Interests herein granted, has attached to or
has been perfected in the Collateral or in any part thereof except with respect
to obligations that have been satisfied;
(e) the principal place of business of Debtor is 0000 Xxxxxxxxx Xxx, Xxxxx
X, Xxxxxx, Xxxxxxx 00000;
(f) Debtor has not acquired any of the Collateral in the past twelve (12)
months from any third party outside of the ordinary course of business or as
part of a bulk sale; and
(g) All of the Collateral that has a physical location is normally located
within the State of Georgia;
3. Covenants.
(a) Debtor covenants and agrees to:
(i) comply with all covenants and agreements set forth in the Loan
Documents;
(ii) deliver to Secured Party, at such intervals as Secured Party
reasonably may require, such documents, lists, descriptions, certificates, and
other information as may be necessary or proper to keep Secured Party fully
informed with respect to the description of the Collateral;
(iii) from time to time promptly execute and deliver to Secured Party all
such other assignments (including but not limited to recordable specific
assignments of property for which collateral assignments are filed for public
record in offices other than the offices for the filing of Uniform Commercial
Code financing statements), certificates, supplemental documents, and financing
statements, and do all other acts or things, as Secured Party may reasonably
request in order to more fully evidence and perfect the Security Interests;
(iv) promptly notify Secured Party of any material and adverse change in
any fact or circumstances warranted or represented by Debtor in this Agreement
or in any other Loan Documents in connection with the Collateral;
(v) promptly notify Secured Party of any claim, action or proceeding which
could affect Debtor's title to or materially and adversely affect the value of
the Collateral, or any part thereof, or the effectiveness of the Security
Interests, and, at the request of Secured Party, appear in and defend, at
Debtor's expense, any such action or proceeding;
(vi) promptly, after being requested by Secured Party, pay to Secured Party
the amount of all expenses, including attorneys' fees and other legal expenses,
reasonably incurred by Secured Party in enforcing the Security Interests; and
(vii) do all things reasonably necessary or appropriate to enable Secured
Party fully to exercise its rights under this Agreement;
(viii) keep and maintain the Equipment in good working order and repair,
normal wear and tear excepted, and, where appropriate, replace the same with
equipment of a like kind that is in good working order and repair;
(b) Debtor covenants and agrees that without the prior written consent of
Secured Party, Debtor will not:
(i) sell, assign, lease or transfer, voluntarily or by operation of law,
any of the Collateral except in the ordinary course of operation of the
Business, or materially modify or extend the terms of sale or Accounts;
(ii) create in favor of anyone, except Secured Party, any other security
interest in any of the Collateral, or in any part thereof, or otherwise encumber
or permit the same to become subject to any lien, attachment, execution,
sequestration, or other legal or equitable process which is not removed within
sixty (60) days, provided Debtor has commenced significant curative actions
within thirty (30) days;
(iii) permit any part of the Collateral to be subjected to any unpaid
charge, including rent and taxes, or any subsequent interest of a third party,
whether such interest is created voluntarily or involuntarily, which is not
cured within sixty (60) days, provided Debtor has commenced significant curative
actions within thirty (30) days; or
(iv) remove, or permit to be removed, Debtor's records concerning the
Collateral from Debtor's offices; or
(v) remove all or any portion of the Collateral from the location specified
in sub-paragraph 2(g) above except for (i) replacement or repair of Collateral
in the ordinary course of operation of the Business and (ii) the sale of any of
the Collateral in the ordinary course of business; or
(vi) dissolve Debtor's corporate existence or liquidate or merge or
consolidate Debtor into any other corporation or form of entity.
4. Accounts, etc.
(a) Until such time as the Secured Party shall notify the Debtor in writing
of the revocation of such power and authority, the Debtor, as agent for the
Secured Party, will, at its own expense, diligently collect, as and when due,
all amounts owing under the Accounts, including the taking of such action with
respect to such collection as the Secured Party reasonably may request from time
to time; provided, however, that until an Event of Default shall occur or would
occur but for the passage of time, or giving of notice, or both, the Debtor may
use or consume in the ordinary course of its business any such collections on
the Accounts in any lawful manner not inconsistent with this Agreement and the
other Loan Documents. After an Event of Default shall occur, the Secured Party
shall have the authority and right (but not the obligation) to notify any
parties obligated on any of the Accounts to make payment to the Secured Party of
any amounts due or to become due thereunder, and enforce collection of
performance under any of the Accounts by suit or otherwise, and surrender,
release, or exchange all or any part thereof, or compromise or extend or renew
for any period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. After an Event of Default and upon request of
the Secured Party, the Debtor will, at its own expense, notify any parties
obligated on any of the Accounts to make payments to the Secured Party and will
hold in trust and immediately forward to the Secured Party all payments received
by the Debtor in the form received, with all necessary endorsements thereon for
collection by the Secured Party.
(b) If all or any part of the Collateral at any time consists of Inventory,
Accounts, or Chattel Paper, at any time and from time to time after the
occurrence of an Event of Default hereunder: the Debtor will, upon the request
of the Secured Party, deposit or cause to be deposited to a bank account
designated by the Secured Party and from which the Secured Party alone has power
of access and withdrawal (the "Collateral Account") all checks, drafts, cash,
and other remittances in payment or on account of payment of such Inventory,
Accounts, or Chattel Paper and the cash proceeds of any returned goods, the sale
or lease of which gave rise to an Account or Chattel Paper (all of the foregoing
herein collectively referred to as "Items of Payment"); the Debtor shall deposit
the Items of Payment for credit to the Collateral Account within two (2)
business days of the receipt thereof, and in precisely the form received, except
for the endorsement of the Debtor where necessary to permit the collection of
the Items of Payment, which endorsement the Debtor hereby agrees to make;
pending such deposit, the Debtor will not commingle any of the Items of Payment
with any of its other funds or property but will hold them separate and apart;
and the Secured Party may at any from time to time apply the whole or any part
of the collected funds credited to the Collateral Account against the Debtor's
Obligations or credit such collected funds to a banking account of the Debtor
with the Secured Party, the order and method of such application to be in the
discretion of the Secured Party.
5. Default. The occurrence of one or more of the following events shall, at
the option of Secured Party, constitute an "Event of Default" hereunder:
(a) if Debtor fails to pay any of the Obligations or any installment
thereof or interest thereon that is due within ten (10) days after demand;
(b) if any warranty or representation of Debtor contained herein or in any
other Loan Document shall prove to be materially false or misleading when given;
(c) if Debtor fails to perform or keep any of the other covenants,
agreements or warranties contained herein or in any other Loan Document and
fails to cure same within thirty (30) days following notice from Secured Party
to cure, unless a different time period is expressly specified for any
particular covenant in which case the general thirty (30) day cure period shall
not apply; or
(d) any Event of Default under the Loan Agreement.
6. Default Remedies. Upon the occurrence of an Event of Default, in
addition to any and all other rights and remedies which Secured Party may then
have hereunder, including, but not limited to, the rights set forth in Section 4
herein, or under the Uniform Commercial Code of the State of Georgia, or any
other pertinent jurisdiction (the "Code"), or otherwise, Secured Party may, at
its option:
(a) reduce its claim to judgment or foreclose or otherwise enforce the
Security Interests, in whole or in part, by any available judicial procedure;
(b) require Debtor, upon the receipt of any revenue, income, profits or
other sums in which a security interest is granted by this Agreement or of any
check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, to hold the same in trust for Secured Party in
precisely the form received, and to forthwith, endorse, transfer and deliver any
such sums or instruments, or both, to Secured Party for prompt application to
the payment of the Obligations in a manner satisfactory to Secured Party;
(c) require Debtor to assemble and make available to Secured Party, at the
expense of Debtor, the Collateral at any place mutually convenient to Debtor and
Secured Party;
(d) remove all or any part of the Collateral from any premises on which any
part may be located for the purpose of effecting a sale or any disposition
thereof (and with respect to motor vehicles, Secured Party may use Debtor's
license plates);
(e) enter upon the premises wherever the Collateral may be, freely and
without being deemed to disrupt the peace, and take possession of the
Collateral, and demand and receive such possession from any person or
organization which has possession thereof, and to take such measures as it may
deem necessary or proper for the care or protection thereof, including the right
to remove all or any portion of the Collateral, and with or without taking such
possession may sell or cause to be sold, whenever Secured Party shall decide, in
one or more sales or parcels, at such price as Secured Party may deem adequate,
and for cash or, on credit or for future delivery, without assumption of any
credit risk, all or any portion of the Collateral, at any broker's board or at
public or private sale (whether such sale is conducted by Secured Party or a
private auction company hired by Secured Party), without demand of performance
or notice of intention to sell or of time or place of sale (except ten [10]
days' prior written notice to Debtor of the time and place of any public sale or
sales or of the time after which any private sale or sales or other intended
disposition is to be made and only such other notice as may be required by
applicable statute and cannot be waived, which notice Debtor hereby
acknowledges, shall be considered commercially reasonable for all purposes), and
Secured Party or any other person may be the purchaser of all or any portion of
the Collateral so sold and thereafter hold the same absolutely, free from any
claim or right of whatsoever kind, including any equity of redemption, of
Debtor, and such demand, notice, claim, right or equity being hereby expressly
waived and released. In any action hereunder, Secured Party shall be entitled to
the appointment of a receiver without notice, to take possession of all or any
portion of the Collateral and to exercise such powers as the court shall confer
upon the receiver. Without limiting the scope or definition of commercial
reasonableness, Debtor agrees that any disposition of any Collateral pursuant
hereto shall be commercially reasonable within the meaning of Section 9-504 of
the Code as in effect in the jurisdiction or jurisdictions where such Collateral
is located.
(f) at its discretion, retain the Collateral in satisfaction of the
Obligations whenever the circumstances are such that Secured Party is entitled
to do so under the Code;
(g) exercise any and all other rights, remedies, and privileges it may have
under the Note or any other Loan Documents; and
Debtor hereby irrevocably makes, constitutes and appoints Secured Party or
any of its officers or designees its true and lawful attorney-in-fact, upon the
occurrence of an Event of Default (A) to enforce all rights of Debtor under and
pursuant to any agreements relating to the Collateral, all for the sole benefit
of Secured Party, or (B) to enter into and perform such agreements as may be
necessary in order to carry out the provisions of this Agreement, or to carry
out the terms, covenants and conditions of this Agreement which are required to
be observed or performed by Debtor, or (C) to execute such other and further
grants, mortgages, pledges and assignments of the Collateral as Secured Party
may reasonably require for the protecting or maintaining of the Security
Interests granted to Secured Party by this Agreement. Debtor hereby ratifies and
confirms all that Secured Party, as such attorney-in-fact, or its substitutes,
shall do by virtue of this power of attorney. Debtor hereby waives all rights to
marshalling of assets or sale in inverse order of alienation, including any such
rights with respect to the Collateral.
Secured Party shall not be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral, wherever
the same may be located and regardless of the cause thereof, unless the same
shall happen through the gross negligence or willful misconduct of Secured
Party. Secured Party shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delivery of any kind
incurred with respect to any instrument received in payment for the Collateral
or for any damage resulting therefrom. In no event shall Secured Party be liable
in any manner or for anything in connection with this Agreement other than to
account for moneys actually received by it in accordance with the terms hereof.
7. Application of Proceeds. If an Event of Default shall have occurred and
be continuing, all proceeds received from the sale or other disposition of any
of the Collateral shall be applied by Secured Party as follows:
First: to the payment of all costs and expenses incurred in connection with
any such sale of the Collateral, including, without limitation, all court costs
and the reasonable fees and expenses of agents and of counsel for Secured Party
in connection therewith, and to the payment of all costs and expenses reasonably
paid or incurred by Secured Party hereunder, to the extent that such advances,
costs and expenses shall not have been paid to Secured Party upon its demand
therefor;
Second: to the payment of interest on the Note then due and payable, then
the payment of all principal on the Note whether at the stated maturity thereof
or by acceleration or otherwise in such order as Secured Party elects;
Third: to the payment in full of all other Obligations; and
Fourth: the balance, if any, of such proceeds remaining after payment in
full of the foregoing items shall be remitted to Debtor or as a court of
competent jurisdiction may otherwise direct.
8. Taxes; Financing Statements; Certificates of Title. At its option,
Secured Party may discharge past due sales, use or property (but not income)
taxes, liens, or security interests and license fees, assessments or other
encumbrances at any time levied or placed on any of the Collateral and may pay
for the maintenance and preservation thereof, and Debtor agrees to reimburse
Secured Party on demand for any payment made or any expense reasonably incurred
by Secured Party pursuant to the foregoing authorization; provided, however,
that nothing in this Section 8 or its exercise may be interpreted as excusing
Debtor from performance of any covenants or other promises with respect to such
past due taxes, liens, security interests or other encumbrances unless Debtor is
contesting the same pursuant to a legal contest that suspends any right of
foreclosure, nor shall it be interpreted as an assumption by Secured Party of
such obligations.
Debtor hereby authorizes Secured Party to file financing statements and any
amendments thereto or continuations thereof.
At the closing, or at any time thereafter until all Obligations have been
satisfied in full, at Secured Party's request, Debtor shall deliver to Secured
Party all the necessary documentation reasonably requested by Secured Party for
Secured Party to record its position as a perfected lienholder.
9. Remedies Cumulative, Etc. The rights, remedies and benefits of Secured
Party herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which Secured Party may have under this Agreement,
the Note, any other Loan Document or at law, in equity, by statute or otherwise.
Without limiting the generality of the foregoing, Secured Party shall have all
rights and remedies of a secured creditor under Article 9 of the Uniform
Commercial Code in the jurisdiction or jurisdictions where any of the Collateral
is located.
10. Expenses, Etc. Debtor will pay to Secured Party all reasonable expenses
(including reasonable attorneys fees actually incurred and court costs) of, or
incidental to, the enforcement of any of the provisions of this Agreement or any
actual or attempted sale, or any exchange, enforcement, collection, compromise
or settlement of any of the Collateral or receipt of the proceeds thereof, and
the care of the Collateral and defending or asserting the rights and claims of
Secured Party in respect thereof, by litigation or otherwise, including expenses
of insurance; and all such expenses shall be secured by this Agreement.
11. No Delay, Waiver, Etc. No delay on the part of Secured Party in
exercising any power or right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any power or right hereunder preclude
other or further exercise thereof or the exercise of any other power or right.
Debtor hereby waives presentment, notice of dishonor and protest of all
instruments included in or evidencing the liability of Debtor and any and all
other notices and demands whatsoever (except notices specifically provided for
herein), whether or not relating to such instruments.
12. Modification, Successors and Assigns, Etc. No amendment hereof shall be
effective unless contained in a written instrument signed by the parties hereto.
This Agreement shall be binding upon the permitted successors and assigns of
Debtor and shall inure to the benefit of the successors and assigns of Secured
Party.
13. Notices, Etc. Any notices, requests or demands hereunder shall be
deemed to have been sufficiently given on the first business day following
delivery to a reputable overnight delivery service (e.g. FedEx) for which a
return receipt is available addressed as indicated below, with next business day
delivery properly requested and paid for:
Debtor:
Golf Training Systems, Inc.
0000 Xxxxxxxxx Xxx
Xxxxx X
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Chief Executive
Officer
With a required copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxxxxxx, Xxxxxxx & Xxxxx
1600 Xxxxxxx Building
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Secured Party:
Xxxx X. Xxxxx, Xx.
c/x Xxxxxxxxxxx Associates, Inc.
0 Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
With a required copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx, Xxxxxxxx & Xxxxxxx, P.L.L.
1800 Provident Tower
Xxx Xxxx 0xx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
14. Governing Law. This Agreement shall be deemed to be a contract made
under the laws of the State of Georgia, and shall be governed by and construed
in accordance with the laws of the State of Georgia.
15. Severability. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement.
16. Counterparts. This Agreement may be executed in a number of identical
counterparts, each of which for all purposes is to be deemed an original, and
all of which constitute collectively, one agreement; but in making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart. Any telecopy or facsimile copy of this Agreement signed by
Debtor shall be for all purposes equivalent to an original "wet ink copy" of
this Agreement signed by Debtor.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be duly executed
(by its authorized officers, where applicable), all as of the day and year first
above written.
DEBTOR:
Signed, sealed and delivered GOLF TRAINING SYSTEMS, INC., a
in the presence of: Delaware corporation
/s/Xxxxxxx X. Xxxxxx By: /s/Xxxxxx X.Xxxxxx
--------------------- -----------------------
Witness Title: Chief Executive Officer
Xxxxxx X. Xxxxx Attest: /s/Xxxxxx X. Xxxxx
--------------------- --------------------------
Notary Public Title: Assistant Secretary
My commission expires:______
(NOTARIAL SEAL)
(CORPORATE SEAL)
