Exhibit 10.3
SECURITY AGREEMENT
This Security Agreement
(“Agreement”) is made this date by and between Lance
Ayers (“Shareholder”) and Noel Noel, Ltd.
(“Secured Party”).
Section 1
. Grant of Security Interest
. Shareholder, in consideration of the indebtedness described in
this Agreement, hereby grants, conveys, and assigns to Secured
Party a security interest in all of Shareholder’s existing
and future right, title and interest in, to and under the property
listed in Section 2 of this Agreement. This security interest
is granted to the Secured Party to (a) secure the payment of
the indebtedness evidenced by Shareholder’s promissory note
payable to Secured Party dated September 2, 2009 (the
“Note”) in the aggregate principal sum of US $10,000
with interest thereon, and all renewals, extensions, and
modifications of the Note; (b) the payment, performance and
observance of all obligations, covenants and agreements to be paid,
performed or observed by Shareholder under that certain Amendment
to Stock Purchase Agreement dated September 2, 2009, by and
between Shareholder and Secured Party (“Amended Stock
Purchase Agreement”); (c) the payment of all other sums,
with interest thereon, advanced under the terms of this Agreement;
and (d) the performance of the agreements and warranties of
Shareholder contained in this Agreement or the Amended Stock
Purchase Agreement, as the case may be.
Section 2
. Property . The property
subject to the security interest (“Collateral”)
is:
2.1 Common Stock of the
Company . The Collateral shall consist of 45,000,000 shares of
common stock, $0.00001 par value per share, of Gold Bag, Inc., a
Nevada corporation with its principal offices located in Dallas,
Texas, (“Company”) registered in the name of
Shareholder.
2.2 Proceeds . All proceeds
of the sale or other disposition of any of the Collateral described
or referred to in Sections 2.1. Sale or disposition of the
Collateral is prohibited pursuant to Section 4 of this
Agreement.
Section 3
. Covenants of Shareholder .
The Shareholder agrees and covenants as follows:
3.1 Payment of Principal and
Interest . The Shareholder shall promptly pay when due the
principal of and interest on the indebtedness evidenced by the
Note, any prepayment and late charges provided in the Note, and all
other sums secured by this Agreement.
3.2 Authority . The
execution, delivery, and performance of this Agreement, the Amended
Stock Purchase Agreement, and the execution and payment of the Note
are within Shareholder’s powers, and are not in contravention
of law or the terms of any indenture, agreement, or undertaking to
which the Shareholder is a party or by which he is
bound.
3.3 Ownership of Collateral .
The Shareholder is the sole owner of the Collateral and will defend
the Collateral against the claims and demands of all other persons
at any time claiming the same or any interest therein.
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Section 4 . Sale of Collateral Prohibited . Except
in favor of Secured Party hereunder, the Shareholder shall not
sell, encumber, pledge, mortgage, assign, grant a security interest
in, or otherwise transfer the Collateral without the written
consent of the Secured Party.
Section 5
. Intentionally Deleted
.
Section 6
. Taxes and Assessments . The
Shareholder will pay or cause to be paid promptly when due all
taxes and assessments on the Collateral, this Agreement, the
Amended Stock Purchase Agreement, and the Note. The Shareholder
may, however, withhold payment of any tax assessment or claim if a
good faith dispute exists as to the obligation to pay and,
notwithstanding anything in this Agreement, the Amended Stock
Purchase Agreement or the Note to the contrary, the Shareholder
will not have any obligation to pay taxes imposed on the income of
Secured Party as a result of the transaction contemplated herein or
therein or otherwise.
Section 7
. Application of Payments .
Unless applicable law provides otherwise, all payments received by
the Secured Party from the Shareholder under the Note and this
Agreement shall be applied by the Secured Party in the following
order of priority: (i) interest payable on the Note in the
manner provided therein; (ii) principal of the Note in the
manner provided therein; and (iii) any other sums secured by
this Agreement in such order as the Secured Party, at the Secured
Party’s option, may determine.
Section 8
. Protection of Secured
Party’s Security . Following the occurrence and during
the continuance of an Event of Default, if the Shareholder fails to
perform the covenants and agreements contained or incorporated in
this Agreement or the Amended Stock Purchase Agreement, as
applicable, or if any action or proceeding is commenced which
affects the Collateral or title thereto or the interest of the
Secured Party therein, including, but not limited to insolvency or
proceedings involving bankruptcy, then the Secured Party, at the
Secured Party’s option, may make such appearance, disburse
such sums, and take such action as the Secured Party deems
necessary, in its sole discretion, to protect the Secured
Party’s security interest, including but not limited to
disbursement of attorneys’ fees. Any amounts disbursed by
Secured Party pursuant to this Section following the occurrence and
during the continuance of an Event of Default, with interest
thereon, shall become additional indebtedness of the Shareholder
secured by this Agreement. Nothing contained in this Section shall
require the Secured Party to incur any expense or take any
action.
Section 9
. Shareholder and Lien Not
Released . From time to time, the Secured Party may, at the
Secured Party’s option, without giving notice to or obtaining
the consent of the Shareholder, or the Shareholder’s
successors or assigns or of any other lien holder or Shareholder,
without liability on the Secured Party’s part, and
notwithstanding the Shareholder’s breach of any covenant or
agreement of the Shareholder in this Agreement or the Amended Stock
Purchase Agreement, as applicable, extend the time for payment of
said indebtedness or any part thereof, reduce the payments thereon,
release anyone liable on any of said indebtedness, accept a renewal
Note or Note therefor, release from the lien of this Agreement any
part of the Collateral, take or release other or additional
security, reconvey any part of the Collateral, join in any
extension or subordination
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agreement, and agree in writing with the
Shareholder to modify the rate of interest or period of
amortization of the Note or change the amount of any installments
payable thereunder. Any actions taken by the Secured Party pursuant
to the terms of this Section shall not affect the obligation of the
Shareholder or the Shareholder’s successors or assigns to pay
the sums secured by this Agreement and to observe the covenants of
the Shareholder contained herein, and shall not affect the lien or
priority of lien hereof on the Collateral.
Section 10
. Forbearance by Secured Party
Not a Waiver . Any forbearance by the Secured Party in
exercising any right or remedy hereunder, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise
of any right or remedy. The acceptance by the Secured Party of
payment of any sum secured by this Agreement after the due date of
such payment shall not be a waiver of the Secured Party’s
right to either require prompt payment when due of all other sums
so secured or to declare a default for failure to make prompt
payment. The procurement of insurance or the payment of taxes,
rents or other liens or charges by the Secured Party shall not be a
waiver of the Secured Party’s right to accelerate the
maturity of the indebtedness secured by this Agreement, nor shall
the Secured Party’s receipt of any awards, proceeds or
damages as provided in this Agreement operate to cure or waive the
Shareholder’s default in payment of sums secured by this
Agreement.
Section 11
. Uniform Commercial Code
Security Agreement . This Agreement is intended to be a
security agreement pursuant to the Uniform Commercial Code for any
of the items specified above as part of the Collateral which, under
applicable law, may be subject to a security interest pursuant to
the Uniform Commercial Code, and the Shareholder hereby grants the
Secured Party a security interest in said items pursuant to
Section 1 of this Agreement. The Shareholder agrees that the
Secured Party may file any appropriate document in the appropriate
index as a financing statement for any of the items specified above
as part of the Collateral. In addition, the Shareholder agrees to
deliver to the Secured Party, upon the Secured Party’s
request, any financing statements, as well as extensions, renewals
and amendments thereof, and reproductions of this Agreement in such
form as the Secured Party may reasonably require to perfect a
security interest with respect to said items. The Shareholder shall
pay all costs of filing such financing statements and any
extensions, renewals, amendments, and releases thereof, and shall
pay all reasonable costs and expenses of any record searches for
financing statements the Secured Party may reasonably require.
Without the prior written consent of the Secu
