SECURITY AGREEMENT
EXECUTION
VERSION
THIS
SECURITY AGREEMENT ("Agreement")
is
made and entered into as of the 29th day of December, 2006, by and between
Manchester Indiana Acceptance, Inc., a Delaware corporation, and Manchester
Inc., a Nevada corporation (together, the "Debtors")
in
favor of Xxxx Xxxxxxx, as Sellers Representative, and Xxxx Xxxxxxx, individually
(collectively, the "Secured
Party").
WHEREAS,
the Secured Party and Manchester Indiana Acceptance, Inc. are parties to a
Stock
Purchase Agreement, dated as of December 2, 2006, as amended on December 29,
2006 (the "Purchase Agreement"), by which all of the issued and outstanding
capital stock of the Secured Party is being sold and conveyed to the
Purchaser.
WHEREAS,
the Secured Party has, for value received, agreed, to accept a
Promissory Note of even date herewith
in the
principal amount of Three Million Dollars ($3,000,000.00) from Manchester
Indiana Acceptance, Inc. (the "Purchase
Note")
and
a
Subordinated Promissory Note of even date herewith
in the
principal amount of One Hundred Fifty Thousand Dollars ($150,000.00) from
Manchester Indiana Acceptance, Inc. (the "Subordinated
Note"
and
referred to herein together with the Purchase Note, collectively, as the
“Notes”) and a Guaranty of even date herewith from Manchester Inc.
WHEREAS,
as security for the payment and performance of the obligations of the Debtors
to
the Secured Party pursuant to the Notes, the Guaranty, and any other obligations
of the Debtors to the Secured Party now existing or hereafter incurred, the
Debtors enter into this Agreement providing for, among other things, a security
interest in favor of the Secured Party in certain of the Debtors'
property.
NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
and agreements herein contained, and other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:
1.
Grant
of Security Interest.
The
Debtors hereby grant to the Secured Party a security interest (the "Security
Interest")
in all
of Debtors' right, title and interest in, to or under the following described
property, and any and all proceeds and products thereof and accessions thereto
(collectively, the "Collateral")
(each
capitalized term used in this Section
1
shall
have the meaning given to it by Article 9 of the Uniform Commercial Code as
from
time to time revised or amended and in effect in Indiana, except as otherwise
defined herein, and all other capitalized terms herein shall have the meaning
set forth in the Purchase Agreement):
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(a)
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All
“Default
Receivables”
as such term is defined in the Purchase Agreement; and
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(b)
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All
“Charged-Off
Receivables”
as such term is defined in the Purchase
Agreement.
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2. Secured
Obligations.
The
indebtedness and other obligations secured hereby consist of the
following:
(a) The
Notes
of Debtors to the Secured Party and the Guaranty of Manchester to the Secured
Party, however evidenced, whether as principal or guarantor or otherwise,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, original, renewed, or extended
(the "Indebtedness");
(b) All
costs
and expenses incurred by the Secured Party to obtain, preserve, perfect and
enforce the Security Interest granted hereby and all other liens and security
interests securing payment of all or any portion of the Indebtedness, to collect
the Indebtedness and to maintain, preserve and realize on or collect the
Collateral, including, but not limited to, taxes, assessments, insurance
premiums, repairs, reasonable attorneys' fees and legal expenses, rent storage
charges, advertising costs, brokerage fees and expenses of sale;
and
(c) All
amounts owed under any modifications, renewals or extensions of any of the
foregoing obligations.
The
Indebtedness and costs and expenses mentioned in this Section
2
are
collectively referred to herein as the "Secured
Indebtedness".
3. Debtors
Representations and Warranties.
The
Debtors hereby represent and warrant to the Secured Party as
follows:
(a) Corporate
Status.
Manchester Indiana Acceptance, Inc. is a corporation duly organized and validly
existing under the laws of the State of Delaware and has the corporate power
to
own and operate its properties, to carry on its business as now conducted and
to
enter into and to perform its obligations under this Agreement. Manchester
Inc.
is a corporation organized and validly existing under the laws of the State
of
Nevada, and has the corporate power to own and operate its properties, to carry
on its business as now conducted and to enter into and to perform its
obligations under this Agreement.
(b) Validity
and Binding Effect.
This
Agreement is the legal, valid and binding obligation of the Debtors, enforceable
in accordance with its terms, subject only to limitations imposed by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally or the application of general equitable principles.
(c) Collateral.
The
Debtors are the lawful owners and holders of the Collateral free and clear
of
any liens, charges, encumbrances or security interests whatsoever in favor
of
any other person and have the full authority to grant the Security Interest
in
the Collateral hereunder. This Agreement, together with the filing of the
applicable UCC forms covering the Collateral creates a valid and perfected
security interest in the Collateral. The Debtors have not made any further
assignment of, nor granted any further security interest in or liens on, any
of
the Collateral.
2
4. Debtors'
Covenants and Agreements.
The
Debtors covenant and agree that during the term of this Agreement:
(a) Payment
of Obligations.
The
Debtors shall pay the Secured Indebtedness and shall timely pay or perform,
as
the case may be, all of the other obligations of the Debtors to the Secured
Party, direct or contingent, however evidenced or denominated, and however
and
whenever incurred, including any present or future commitment of the Secured
Party to the Debtors, together with interest thereon, and any extensions,
modifications, consolidations and/or renewals thereof and any obligations given
in payment thereof.
(b) Insurance.
The
Debtors
shall, at their expense, keep the vehicle inventory at all times insured against
all risk of loss or damage by fire, theft, and such other casualties as the
Secured Party may reasonably require for not less than the full replacement
cost
thereof.
(c) Use
and Condition of Collateral.
The
Collateral will be held in the ordinary course of Debtors' business or will
be
used or consumed in Debtors' business. The Debtors have the risk of loss of
the
Collateral. The Secured Party may examine and inspect the Collateral at any
reasonable time or times wherever located.
(d) Transfer
of Collateral.
Other
than the sale of
the
vehicle inventory in
the
ordinary course of Debtors' business, Debtors shall not sell, assign, transfer,
license, encumber or otherwise dispose of the Collateral or any interest therein
without the prior written consent of the Secured Party, excluding any such
action within the scope of security interests of Palm Beach Multi-Strategy
Fund
L.P. and its Affiliates (“Palm Beach”). If any encumbrance is imposed on the
Collateral by operation of law, the Debtors shall give the Secured Party
immediate written notice of this fact.
(e) Preservation
of Security Interest.
The
Debtors will faithfully preserve and protect Secured Party's Security Interest
in the Collateral as a prior perfected security interest under the Indiana
Uniform Commercial Code, superior and prior to the rights of all third persons,
and will do all such other acts and things and will, upon request therefor
by
the Secured Party, execute or otherwise authenticate, deliver, file and record
all such other documents and instruments, including, without limitation,
financing statements, security agreements, assignments and documents and powers
of attorney with respect to the Collateral, as the Secured Party, in its
reasonable discretion may deem necessary or advisable from time to time in
order
to attach, continue, preserve, perfect and protect said Security Interest.
The
Debtors shall notify Secured Party if the Debtors change their legal name,
the
location of their chief executive office, their state of incorporation, or
any
other change that would necessitate action on the part of the Secured Party
to
maintain perfection of the Security Interest.
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(f) Authorization
to File Financing Statements.
The
Debtors hereby irrevocably authorize the Secured Party at any time and from
time
to time to file in any Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto that (a) indicate and include the
Collateral as set forth in Section
1
herein
or words of similar effect, regardless of whether any particular asset comprised
in the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code of the State or such jurisdiction, or, and (b) contain any other
information required by Article 9 of the Uniform Commercial Code of the State
or
any other state for the sufficiency or filing office acceptance of any financing
statement or amendment. The Debtors agree to furnish any such information to
the
Secured Party promptly upon request. The Debtors hereby irrevocably appoints
the
Secured Party, its officers, employees and agents, or any of them, as
attorneys-in-fact for Debtors to execute, deliver, file and record such items
on
behalf of Debtors and in Debtors' name, place and stead. This power of attorney,
being coupled with an interest, shall be irrevocable for the life of this
Agreement.
5. Events
of Default.
The
occurrence of any of the following shall constitute an Event of Default
hereunder:
(a) Default
in the payment of the Secured Indebtedness.
(b) Any
material misrepresentation by the Debtors as to any matter
hereunder.
(c) Failure
of Debtors to perform any of their material obligations, covenants or agreements
under this Agreement or the Note.
(d) An
attachment, execution or levy on any of the Collateral.
(e) The
Debtors become insolvent or generally fail to pay, or admit in writing the
Debtors' inability to pay, debts as they become due; or the Debtors apply for,
consent to or acquiesces in the appointment of a trustee, receiver or other
custodian for the Debtors or any property or assets of the Debtors, or make
a
general assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian
is
appointed for the Debtors or for a substantial part of the property or assets
of
the Debtors and is not discharged within ninety (90) days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding,
is
commenced in respect of the Debtors and if such case or proceeding is not
commenced by the Debtors it is consented to or acquiesced in by the Debtors
or
if such case or proceeding is not vacated, stayed or dismissed within ninety
(90) days of such commencement.
(f) The
Debtors shall have transferred or disposed of any Collateral (except in the
ordinary course of the Debtors' business) without the Secured Party's written
consent.
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6. Remedies.
(a) Upon
the
occurrence of any Event of Default, the Secured Party may, subject to prior
written consent of Palm Beach, without demand, presentment, notice of intention
to accelerate, notice of acceleration (all of which are fully waived by the
Debtors):
(i) exercise
any or all of its rights and remedies with respect to the Collateral under
the
Indiana Uniform Commercial Code, and such additional rights and remedies to
which a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right to exercise all powers of ownership pertaining to the
Collateral as if the Secured Party was the sole and absolute owner thereof
(and
the Debtors agree to take all such action as may be appropriate to give effect
to such right);
(ii) With
or
without taking possession of the Collateral, sell, assign or otherwise dispose
of all or any portion of the Collateral, at such place or places as the Secured
Party deems best, for cash or credit against the Secured Indebtedness, at public
or private sale, without demand or additional notice, and the Secured Party
may
be the purchaser, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale), and thereafter shall hold the same absolutely free from any
claim
or right of any kind, including any right or equity of redemption (statutory
or
otherwise) of the Debtors, any such demand, notice, right or equity being
expressly waived, disclaimed and released. The Secured Party shall have no
obligation to clean-up or otherwise prepare the Collateral for sale, the Secured
Party may sell the Collateral without giving any warranties as to the Collateral
and may specifically disclaim any warranties of title or the like;
(iii) enter
any
premises of the Debtors, with or without legal process and take possession
of
the Collateral and remove it and any records pertaining thereto. The Debtors
will upon request of the Secured Party assemble the Collateral and any records
pertaining thereto and make them available at a place designated by the Secured
Party; and/or
(iv) exercise
any other powers, rights or remedies conferred to the Secured Party under this
Agreement, or at law or in equity.
(b) No
Marshaling.
The
Secured Party shall have no obligation to marshal any assets in favor of the
Debtors or against or in payment of the Secured Indebtedness hereunder or under
any other obligation owed to the Secured Party by the Debtors.
(c) Remedies
Cumulative; No Waiver.
No
right, power or remedy conferred upon or reserved to the Secured Party by this
Agreement is intended to be exclusive of any other right, power or remedy,
but
each and every such right, power and remedy shall be cumulative and concurrent
and shall be in addition to any other right, power and remedy given hereunder
now or hereafter existing at law, in equity or by statute. No delay or omission
by the Secured Party to exercise any right, power or remedy accruing upon the
occurrence of any Event of Default shall exhaust or impair any such right,
power
or remedy or shall be construed to be a waiver of any such Event of Default
or
an acquiescence therein, and every right, power and remedy given by this
Agreement to the Secured Party may be exercised from time to time and as often
as may be deemed expedient by the Secured Party.
5
7. Miscellaneous.
(a) Successors
and Assigns Included in Parties.
Whenever in this Agreement one of the parties hereto is named or referred to,
the heirs, legal representatives, successors, successors-in-title and assigns
of
such parties shall be included, and all covenants and agreements contained
in
this Agreement by or on behalf of the Debtors or by or on behalf of Secured
Party shall bind and inure to the benefit of their respective heirs, legal
representatives, successors-in-title and assigns, whether so expressed or not,
including all persons who become bound as debtors to this
Agreement.
(b) Assignment.
This
Agreement may be endorsed, assigned and/or transferred in whole or in part
by
Secured Party without consent of the Debtors. Any such holder and/or assignee
of
the same shall succeed to and be possessed of the rights and powers of the
Secured Party under all of the same to the extent transferred and assigned.
The
Debtors shall not assign any of their rights nor delegate any of their duties
hereunder without the prior express written consent of the Secured Party.
(c) Time
of the Essence.
Time is
of the essence with respect to each and every covenant, agreement and obligation
of the Debtors hereunder.
(d) Severability.
If any
provision(s) of this Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the remainder
of
this Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
(e) Article
and Section Headings; Defined Terms.
Numbered and titled article and section headings and defined terms are for
convenience only and shall not be construed as amplifying or limiting any of
the
provisions of this Agreement.
(f) Notices.
All
notices, requests, demands and other communications under this Agreement, if
any, must be in writing and will be deemed duly given, unless otherwise
expressly indicated to the contrary in this Agreement, (i) when personally
delivered, (ii) upon receipt of a telephonic facsimile transmission with a
confirmed telephonic transmission answer back, (iii) three (3) days after having
been deposited in the United States mail, certified or registered, return
receipt requested, postage prepaid, or (iv) one (1) business day after having
been dispatched by a nationally recognized overnight courier service, addressed
to the parties or their permitted assigns at the following addresses (or at
such
other address or number as is given in writing by either party to the other)
as
follows:
6
If
to the
Debtors:
Manchester
Indiana Acceptance, Inc.
c/o
Manchester, Inc.
000
Xxxxxxxx Xxxxx, 0xx
Xxxxx
Xxxxxx,
Xxxxx, 00000
Attention:
Xxxxxxx Xxxxxx
Telecopy
Number: (000) 000-0000
With
a
copy to:
Wuersch
& Xxxxxx LLP
000
Xxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Telecopy
Number: (000) 000-0000
If
to the
Secured Party:
Xxxx
Xxxxxxx
00000
Xxxxxx Xxx
XxXxxxxxxxxx,
Xxxxxxx 00000
Telecopy
Number: (000) 000-0000
With
a
copy to:
Ice
Xxxxxx LLP
XxxXxxxxxxx
Xxxxxx
Xxxxx
0000
Xxxxxxxxxxxx,
Xxxxxxx 00000-0000
Attention:
Xxxxxx X. Xxxxx, Esq.
Telecopy
number: (000) 000-0000
(g) Entire
Agreement.
This
Agreement and the agreements referenced herein represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein; provided, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the obligations hereunder, the
provisions of this Agreement shall control.
(h) Governing
Law, Forum and Amendments.
This
Agreement shall be construed and enforced under the laws of the State of Indiana
without regard to the conflict of law principles thereof, except to the extent
that the Uniform Commercial Code provides for the application of the law of
the
state of the Debtors' incorporation. The parties each irrevocably consent to
the
jurisdiction and venue of the courts of the State of Indiana and the United
States District Court for the Southern District of Indiana with respect to
any
and all actions related to this Agreement or the enforcement of this Agreement
and each party irrevocably waives any and all objections thereto. No amendment,
modification, termination or waiver of any provision of this Agreement, nor
consent to any departure by the Debtors from this Agreement, shall in any event
be effective unless the same shall be in writing and signed by the Secured
Party.
7
(i) Waiver
of Trial by Jury.
THE
DEBTORS HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVES
TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER
IN
CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY
WAY
RELATING TO THIS AGREEMENT.
(j) Counterparts.
This
Agreement may be executed by the parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and both of which taken together shall constitute one and the same
Agreement.
[Signature
page follows]
8
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement, or have caused
this Agreement to be executed by their duly authorized officers, as of the
day
and year first above written.
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"DEBTORS"
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| Manchester Indiana Acceptance, Inc. | ||
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| By: | /s/ Xxxxxxx X. Xxxxxx | |
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Printed: Xxxxxxx X. Xxxxxx |
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| Title: President | ||
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| By: | /s/ Xxxxxxx X. Xxxxxx | |
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Printed: Xxxxxxx X. Xxxxxx |
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| Title: President | ||
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"SECURED
PARTY"
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Xxxx
Xxxxxxx, as Shareholders’ Representative
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| By: | /s/ Xxxx Xxxxxxx | |
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Printed: Xxxx Xxxxxxx |
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| Title: Shareholders’ Representative | ||
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