Exhibit 10.6
SECURITY AGREEMENT
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THIS SECURITY AGREEMENT, is made as of the 29th day of January, 2007, by IMAR
Group, LLC and Challenger Powerboats, Inc., a Nevada corporation (collectively,
the "Borrower"), on one hand, and Xxxx Xxxxxxx and Gekko Sports Corporation, a
Florida corporation (collectively, the "Secured Party"), on the other hand.
In order to secure the payment of the indebtedness evidenced by the Asset and
Technology Acquisition Agreement ("Agreement") dated January 29, 2007 (the
"Agreement") issued by the Borrower to the Secured Party in the original
principal amount of $670,000 and each and every other debt, liability and
obligation of every type and description which the Borrower may now or at any
time hereafter owe to Secured Party pursuant to such Agreement (whether such
debt, liability or obligation now exists or is hereafter created or incurred,
and whether it is or may be direct or indirect, due or to become due, absolute
or contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several) (all such debts, liabilities and obligations of
the Borrower to Secured Party herein collectively referred to as the "Secured
Obligations"), Borrower hereby agrees as follows:
1. SECURITY INTEREST AND COLLATERAL. In order to secure the payment and
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performance of the Secured Obligations, Borrower hereby grants to Secured Party
a security interest (herein called the "Security Interest"), subject to security
interests held by other lenders to Challenger and its subsidiaries, in and to
the following property (hereinafter collectively referred to as the
"Collateral")--
(i) the assets, trademarks and domain names described on Exhibit A; (ii)
any adaptation, modification, improvement, or enhancement of the foregoing; and
(iii) all of the pending and issued patents and patent applications described on
Exhibit A as well as any continuations, continuations-in-part, divisional
applications, and any Letters Patent issued there from including reissues,
together with all non-U.S. counterparts;
together with all substitutions and replacements for and products and proceeds
of any of the foregoing property.
The Secured Party understands and acknowledges that lenders to Challenger (and
its subsidiaries) maintain security interests in certain assets of the Borrower
which may include the Collateral and that the lenders' security interests take
priority over the Security Interest maintained by the Secured Party. Borrower
has not made any representations to the Secured Party about what if any interest
would remain in the event that any lender exercised its rights with respect to
the Collateral. Nothing in this section shall be read to limit the rights of
Challenger to refinance, renegotiate or seek loans from additional lenders by
using the Collateral described in this agreement to secure its obligations.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Borrower hereby represents
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and warrants to, and covenants and agrees with, Secured Party as follows:
(a) The Collateral will be used primarily for business purposes.
Borrower's office is located at 000 Xxxxxxxx Xxxxx, Xxxxxxxxxx, XX
00000, and it keeps and will keep all of its books and records with
respect to all of its accounts at such address.
(b) Borrower shall promptly notify Secured Party of any change in
name or if it operates or conducts business under any trade name or
"d/b/a" which is different from such name.
(c) Borrower has (or will have at the time Borrower acquires rights
in Collateral hereafter acquired or arising) and will maintain
absolute title to each item of Collateral free and clear of all
security interests, liens and encumbrances, and will defend the
Collateral against all claims or demands of all persons other than
Secured Party. Borrower will not sell or otherwise dispose of the
Collateral or any interest therein except that until an Event of
Default (as defined in the Agreement) has occurred, the Borrower may
sell inventory in the ordinary course of its business.
(d) Borrower will not permit any Collateral to be located in any
state (and, if county filing is required, in any county) in which a
financing statement covering such Collateral is required to be, but
has not in fact been, filed. Borrower will not change the state under
which it is organized or merge with or into any other entity.
(e) All rights to payment and all instruments, documents, chattel
paper and other agreements constituting or evidencing Collateral are
(or will be when arising or issued) the valid, genuine and legally
enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of each
account debtor or other obligor named therein or in Borrower's records
pertaining thereto as being obligated to pay such obligation. Borrower
will not agree to any modification, amendment or cancellation of any
such obligation without Secured Party's prior written consent, and
will not subordinate any such right to payment to claims of other
creditors of such account debtor or other obligor, except as is
otherwise set forth herein.
(f) Borrower will (i) keep all Collateral in good repair, working
order and condition, normal wear and tear excepted, and will, from
time to time, replace any worn, broken or defective parts thereof;
provided, however, that nothing in this Section 2 (f) shall prevent
the Borrower from discontinuing the operation and maintenance of any
of its properties if such discontinuance is, in the Borrower's
reasonable business judgment, desirable in the conduct of the
Borrower's business and not disadvantageous in any material respect to
the Secured Party; (ii) other than taxes and other governmental
charges contested in good faith and by appropriate proceedings,
promptly pay all taxes and other governmental charges levied or
assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interest; (iii)
keep all Collateral free and clear of all security interests, except
as is otherwise set forth herein, liens and encumbrances; (iv) at all
reasonable times, permit Secured Party or its representatives to
examine or inspect any Collateral, wherever located, and to examine,
inspect and copy Borrower's books and records pertaining to the
Collateral and its business and financial condition and to discuss
with account debtors and other obligors requests for verifications of
amounts owed to Borrower; (v) keep accurate and complete records
pertaining to the Collateral and pertaining to Borrower's business and
financial condition and will submit to Secured Party such periodic
reports concerning the Collateral and Borrower's business and
financial condition as Secured Party may from time to time reasonably
request; (vi) promptly notify Secured Party of any loss or material
damage to any Collateral in excess of $10,000 or of any material
adverse change, known to Borrower, in the prospect of payment of any
sums due on or under any instrument, chattel paper or account
constituting Collateral; (vii) if Secured Party at any time reasonably
requests promptly deliver to Secured Party any instrument, document or
chattel paper constituting Collateral, duly endorsed or assigned by
Borrower to Secured Party; (viii) at all times keep all Collateral
insured against risks of fire (including so called extended coverage),
theft, collision (in case of collateral consisting of motor vehicles)
and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the
extent of its interest and notify the Secured Party in writing of any
loss or damage to the Collateral or any part; (ix) from time to time
execute such financing statements as Secured Party may reasonably deem
required to be filed in order to perfect the Security Interest and, if
any Collateral is covered by a certificate of title, execute such
documents as may be required to have the Security Interest properly
noted on a certificate of title; (x) pay when due or reimburse Secured
Party on demand for all costs of collection of any of the Secured
Obligations and, subject to any limitations set forth in the
Agreement, all other out-of-pocket expenses (including in each case
all attorneys' fees) incurred by Secured Party in connection with the
creation, perfection, satisfaction or enforcement of the Security
Interest or the execution or creation, continuance or enforcement of
this Agreement or any or all of the Secured Obligations including
expenses incurred in any litigation or bankruptcy or insolvency
proceedings; (xi) execute, deliver or endorse any and all instruments,
documents, assignments, security agreements and other agreements and
writings which Secured Party may at any time reasonably request in
order to secure, protect, perfect or enforce the Security Interest and
Secured Party's rights under this Agreement including, without
limitation, an assignment of claim with respect to any account which
is a government receivable; (xii) not use or keep any Collateral, or
permit it to be used or kept, for any unlawful purpose or in violation
of any federal, state or local law, statute or ordinance; (xiii)
permit Secured Party at any time and from time to time to send
requests (after the occurrence and during the continuance of an Event
of Default under the Agreement) to account debtors or other obligors
for verification of amounts owed to Borrower; and (xiv) not permit any
Collateral to become part of or to be affixed to any real property
without first assuring to the reasonable satisfaction of Secured Party
that the Security Interest will be prior and senior to any interest or
lien then held or thereafter acquired by any mortgagee of such real
property or the owner or purchaser of any interest therein. If
Borrower at any time fails to perform or observe any agreement
contained in this Section 2(f), and if such failure shall continue for
a period of thirty (30) calendar days after Secured Party gives
Borrower written notice thereof (or, in the case of the agreements
contained in clauses (viii) and (ix) of this Section 2(f), immediately
upon the occurrence of such failure, without notice or lapse of time),
Secured Party may (but need not) perform or observe such agreement on
behalf and in the name, place and stead of Borrower (or, at Secured
Party's option, in Secured Party's own name) and may (but need not)
take any and all other actions which Secured Party may reasonably deem
necessary to cure or correct such failure (including, without
limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances, the performance of obligations under
contracts or agreements with account debtors or other obligors, the
procurement and maintenance of insurance, the execution of financing
statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that
the effect of such payment would be to render any loan or forbearance
of money usurious or otherwise illegal under any applicable law,
Borrower shall thereupon pay Secured Party on demand the amount of all
moneys expended and all costs and expenses (including reasonable
attorneys' fees) incurred by Secured Party in connection with or as a
result of Secured Party's performing or observing such agreements or
taking such actions, together with interest thereon from the date
expended or incurred by Secured Party at the rate provided for in the
Agreement. To facilitate the performance or observance by Secured
Party of such agreements of Borrower, Borrower hereby irrevocably
appoints (which appointment is coupled with an interest) Secured
Party, or its delegate, as the attorney-in-fact of Borrower with the
right (but not the duty) from time to time to create, prepare,
complete, execute, deliver, endorse or file, in the name and on behalf
of Borrower, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required
to be obtained, executed, delivered or endorsed by Borrower under this
Section 2.
3. ASSIGNMENT OF INSURANCE. Borrower hereby assigns to Secured Party, as
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additional security for the payment of the Secured Obligations, any and all
moneys (including, but not limited to, proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of Borrower
under or with respect to, any and all policies of insurance covering the
Collateral, and Borrower hereby directs the issuer of any such policy to pay any
such moneys to the Secured Party. Upon the occurrence and during the
continuance of an Event of Default under the Agreement, Secured Party may (but
need not) in its own name or in Borrower's name, execute and deliver proofs of
claim, receive all such monies (subject to Borrower's rights), endorse checks
and other instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
4. COLLECTION OF ACCOUNTS. Secured Party may, or at Secured Party's
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request, Borrower shall, upon the occurrence and during the continuance of an
Event of Default under the Agreement, notify any account debtor or any obligor
on an instrument to make payment directly to a post office box specified by and
under the sole control of Secured Party, whether or not Secured Party was
theretofore making collections with respect thereto, and Secured Party shall be
entitled to take control of any proceeds thereof. If so requested by Secured
Party, Borrower shall insert appropriate language on each invoice directing its
customers to make payment to such post office box. Borrower hereby authorizes
and directs Secured Party to deposit into a special collateral account to be
established and maintained with Secured Party all checks, drafts and cash
payments, received in said lock box. All deposits in said collateral account
shall constitute proceeds of Collateral and shall not constitute payment of any
of the Secured Obligations. At its option, Secured Party may, at any time,
apply finally collected funds on deposit in said collateral account to the
payment of the Secured Obligations in such order of application as Secured Party
may determine, or permit Borrower to withdraw all or any part of the balance on
deposit in said collateral account. If a collateral account is so established
Borrower agrees that it will promptly deliver to Secured Party for deposit into
said collateral account, all payments on accounts and chattel paper received by
it. All such payments shall be delivered to secured Party in the form received
(except for Borrower's endorsement where necessary). Until so deposited, all
payments on accounts and chattel paper received by the Borrower shall be held in
trust by Borrower for and as the property of Secured Party and shall not be
commingled with any funds or property of Borrower.
5. REMEDIES. Upon the occurrence of an Event of Default under the
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Agreement, and at any time thereafter, Secured Party may exercise any one or
more of the following rights or remedies if any or all of the Secured
Obligations are not paid when due: (i) exercise and enforce any or all rights
and remedies available after default to a secured party under the Uniform
Commercial Code, including but not limited to the right to take possession of
any Collateral, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which Borrower hereby expressly
waives), and the right to sell, lease or otherwise dispose of or use any or all
of the Collateral; (ii) Secured Party may require Borrower to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties; (iii) exercise its
rights under any lessors' agreements regardless of whether or not the Borrower
is in default under such leases; and (iv) exercise or enforce any or all other
rights or remedies available to Secured Party by law or agreement against the
Collateral, against Borrower or against any other person or property. Secured
Party is hereby granted a non-exclusive, worldwide and royalty-free license to
use or otherwise exploit all trademarks, franchises, copyrights and patents of
Borrower that Secured Party deems necessary or appropriate to the disposition of
any Collateral. If notice to Borrower of any intended disposition of Collateral
or any other intended action is required by law in a particular instance, such
notice shall be deemed commercially reasonable if given (in the manner specified
in Section 6 hereof) at least ten (10) calendar days prior to the date of
intended disposition or other action.
6. MISCELLANEOUS. This Agreement does not contemplate a sale of accounts or
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chattel paper, and, as provided by law, Borrower is entitled to any surplus and
shall remain liable for any deficiency. This Agreement can be waived, modified,
amended, terminated or discharged, and the Security Interest can be released,
only explicitly in a writing signed by Secured Party. A waiver signed by
Secured Party shall be effective only in the specific instance and for the
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. All notices to be given to Borrower shall be deemed
sufficiently given if given in accordance with the Agreement, to Borrower at its
address set forth herein. Secured Party's duty of care with respect to
Collateral in its possession (as imposed by law) shall be deemed fulfilled if
Secured Party exercises reasonable care in physically safe keeping such
Collateral or, in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and Secured Party need not otherwise preserve,
protect, insure or care for any Collateral. Secured Party shall not be obligated
to preserve any rights Borrower may have against any other party, to realize on
the Collateral at all or in any particular manner or order, or to apply any
cash proceeds of Collateral in any particular order of application. This
Agreement shall be binding upon and inure to the benefit of Borrower and Secured
Party and their respective heirs, representatives, successors and assigns and
shall take effect when signed by Borrower and delivered to Secured Party, and
Borrower waives notice of Secured Party's acceptance hereof. Secured Party may
execute this Agreement if appropriate for the purpose of filing, but the failure
of Secured Party to execute this Agreement shall not affect or impair the
validity or effectiveness of this Agreement. Except to the extent otherwise
required by law, this Agreement shall be governed by the laws of the State of
Missouri and, unless the context otherwise requires, all terms used herein which
are defined in the Uniform Commercial Code, as in effect in said state shall
have the meanings therein stated and all capitalized terms used herein which are
defined in the Agreement shall have the meanings therein stated. If any
provision or application of this Agreement is held unlawful or unenforceable in
any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect, and this Agreement shall
be construed as if the unlawful or unenforceable provision or application had
never been contained herein or prescribed hereby. All representations and
warranties contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Secured
Obligations.
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IN WITNESS WHEREOF, Borrower has executed and delivered to Secured Party this
Security Agreement as of the day and year first above written.
IMAR GROUP, LLC
Signed:
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By:
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Its:
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CHALLENGER POWERBOATS, INC.
Signed: /s/ Xxxxxx Xxxxxxxx
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By: Xxxxxx Xxxxxxxx
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Its: President and Cheif Executive Officer
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EXHIBIT A
DESCRIPTION OF COLLATERAL
Description of Gekko Technology
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ASSET
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BOAT MOLDS
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Revo7.1 xxxxxxxx mold, gas tank door mold, back seat mold, 2ea. Hull
molds, Deck mold
Revo 6.7 xxxxxxxx mold, Hull mold, Deck mold, 2 ea. Back seat molds
Revo 6.7 hull, deck and liner plugs
XXX 00 trunk mold, Bow ring, Hull mold
GTX 22 Deck mold, Hull mold
GTO 00 Xxx xxxx, Xxxx mold, Deck mold, Engine cover mold (used for
all in-line Gekko)
GTS 20 Hull mold, Deck mold, Deck Plug
REGISTERED TRADEMARKS
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Gekko
OTHER TRADEMARKS
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GTS 20, GTO 22, GTR 22, REVO 6.7, REVO 6.7i, REVO 7.1
COPYRIGHTS
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USPTO #DVH0066
INTERNET DOMAIN NAME AND CONTENT
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xxx.xxxxxxxxxxx.xxx
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