EXHIBIT 10.5.2
SECURITY AGREEMENT
AGREEMENT made this 10th day of April, 1997, between Cross-Continent
Auto Retailers, Inc., a Delaware corporation, as debtor (hereinafter
collectively referred to as "Debtor") and RDS. INC., a Delaware corporation
("Lender"), as secured party.
RECITALS
This Security Agreement and pledge of collateral is given in
conjunction with that certain sale of real property from Lender to Debtor.
Now therefore, in recognition of the exchange of good and valuable
consideration, Debtor hereby agrees for the benefit of Lender as follows:
1. Debtor hereby grants the Lender a security interest (collectively
referred to as the "Security Interests") in the property described below, as
security for the payment and performance of the terms and conditions of that
certain Promissory Note of even date herewith in the principal amount of
$2,000,000 (the "Obligation"). The Security Interests shall attach to the
following property of Debtor (the "Collateral"), and all proceeds thereof:
PERSONAL PROPERTY: All equipment, furniture and fixtures, owned by
Debtor and located on or used exclusively in conjunction with the
property described in Exhibit A attached hereto (the "Property"), and
all licenses and permits related thereto;
together with all substitutions and replacements for and products of any of the
foregoing property and together with proceeds of any and all of the foregoing
property and, in the case of all tangible Collateral, together with all
accessions and together with all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any
such goods.
2. Debtor represents, warrants and agrees that:
a. Debtor has (or will have at the time it acquires rights in
Collateral hereafter arising) and will maintain so long as the Security
Interests may remain outstanding, absolute title to each item of Collateral and
all proceeds thereof, free and clear of all interests, liens, attachments,
encumbrances and security interests except the Security Interests and except as
provided herein or in the Deed of Trust of even date herewith between the Debtor
and the Lender or as the Lender may otherwise agree in writing. Debtor will
defend the Collateral against all claims or demands of all persons (other than
the Lender or the holder of any security interest permitted by this subsection)
claiming the Collateral or any interest therein. Debtor will not sell or
otherwise dispose of the Collateral or any interest therein, except the sale of
inventory in the ordinary course of Debtor's business, without the Lender's
prior written consent.
b. Each right to payment and each instrument, document, chattel
paper and other agreement constituting or evidencing Collateral is (or, in the
case of all future Collateral, will be when arising or issued) the valid,
genuine and legally enforceable obligation, subject to no defense, set-off or
counterclaim, of the account debtor or other obligor named therein or in
Debtor's records pertaining thereto as being obligated to pay such obligation.
Debtor will not modify, amend, subordinate, cancel or terminate the obligation
of any such account debtor or other obligor without the Lender's prior written
consent.
c. Debtor will keep all tangible 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.
d. Debtor will 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 Interests.
e. Debtor will keep all Collateral free and clear of all security
interests, liens and encumbrances except the Security Interests and other
security interests permitted hereby or otherwise approved in writing by the
Lender.
f. Debtor will at all reasonable times permit the Lender or its
representatives to examine or inspect any Collateral, or any evidence of
Collateral, wherever located, and Debtor will at any time and from time to time
send requests for verification of accounts or notices of assignment to account
debtors and other obligors.
g. Debtor will keep accurate and complete records pertaining to the
Collateral and pertaining to Debtor's business and financial condition, prepared
on the basis of generally accepted accounting principles consistently
maintained; will submit to the lender such monthly and other periodic reports
concerning the Collateral and Debtor's business and financial condition as the
Lender may from time to time reasonably request; and will permit the Lender, or
its employees, accountants, attorneys or agents, to examine and copy any or all
of its records at any time during Debtor's business hours. Lender agrees to use
reasonable efforts to maintain the confidentiality of information concerning the
Debtor or its business indicated by the Debtor to be confidential but nothing
contained herein shall prevent the use by Lender of any such information
(including the disclosure of such information by Lender if deemed necessary by
Lender in the exercise of its reasonable judgment) in the administration or
collection by Lender of the Obligation or shall constitute a defense by Debtor
to repayment of such Obligation in full.
h. Debtor will promptly notify the Lender of any loss of or
material damage to any Collateral or of any substantial adverse change, known to
Debtor, in any Collateral or the prospect of payment thereof.
i. Upon request by the Lender, whether such request is made before
or after the occurrence of an Event of Default, Debtor will promptly deliver to
the Lender in pledge all instruments, documents and chattel papers constituting
Collateral, duly endorsed or assigned by Debtor.
j. Debtor will at all times keep all tangible Collateral insured
against risks of fire (including so-called extended coverage), theft and such
other risks and in such amounts as the Lender may reasonably request, with any
loss payable to the lender to the extent of its interest.
k. Debtor will pay or reimburse the Lender on demand for all costs
of collection of any of the Obligation and all other out-of-pocket expenses
(including in each case all reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interests or the
creation, continuance or enforcement of this Agreement or any or all of the
Obligation.
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l. Debtor will use and keep the Collateral, and will require that
others use and keep the Collateral, only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance.
m. Debtor from time to time will execute and deliver or endorse any
and all instruments, documents, conveyances, assignments, security agreements,
financing statements and other agreements and writings which the Lender may
reasonably request in order to secure, protect, perfect or enforce the Security
Interests or the rights of the Lender under this Agreement (but any failure to
request or assure that Debtor executes, delivers or endorses any such item shall
not affect or impair the validity, sufficiency or enforceability of this
Agreement and the Security Interests, regardless of whether any such item was or
was not executed, delivered or endorsed in a similar context or on a prior
occasion).
If Debtor at any time fails to perform or observe any of the foregoing
agreements, and if such failure shall continue for a period of ten calendar days
after the Lender gives Debtor written notice thereof (or in the case of the
agreements contained in clauses (e) and (j) above, immediately upon the
occurrence of such failure, without notice or lapse of time), the Lender may,
but need not, perform or observe such agreement on behalf and in the name, place
and stead of Debtor (or, at the Lender's option, in the lender's name) and may,
but need not, take any and all other actions which the Lender 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 Obligation owed to account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments); and Debtor shall thereupon pay to the Lender on demand the
amount of all monies expended and all costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Lender in connection with or
as a result of the performance or observance of such agreements or the taking of
such action by the Lender, together with interest thereon from the date expended
or incurred at the rate of 18%.
3. Debtor agrees to deliver to the Lender, or, at the Lender's option,
to deposit in one or more special collateral accounts maintained for the Lender
by any bank reasonably satisfactory to the lender, all cash proceeds of
Collateral, immediately upon receipt thereof, in the form received, except for
Debtor's endorsement when deemed necessary. Amounts deposited in a collateral
account shall bear interest but shall not be subject to withdrawal by Debtor,
except after full payment and discharge of all Obligation. Until delivered to
the Lender or deposited in a collateral account, all proceeds or collections of
Collateral shall be held in trust by Debtor for and as the property of the
Lender and shall not be commingled with any funds or property of Debtor. The
Lender may deposit out of any collateral account in the lender's general account
and may commingle such collections with other property of the Lender. All items
shall be delivered to the Lender or deposited in any collateral account subject
to final payment. If any such item is returned uncollected, Debtor will
immediately pay the Lender, or, for items deposited in a collateral account, the
bank maintaining such account, the amount of the items, or such bank at its
discretion may charge any uncollected item to Debtor's commercial account or
other account. The Lender from time to time at its discretion may apply funds on
deposit in any collateral account to the payment of any or all Obligation, in
any order or manner of application satisfactory to the Lender.
4. In addition to the rights of the Lender under paragraph 3 with
respect to any and all rights to payment constituting Collateral the Lender may
at any time (either before or after the occurrence of an Event of Default under
paragraph 6) notify any account debtor or other person obligated to pay the
amount due that such right to payment has been assigned or transferred to the
Lender for security and shall be paid directly to the Lender. Debtor will join
in giving such notice, if the Lender so requests. At any time after Debtor or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's
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name or in Debtor's name, demand, xxx for, collect or receive any money or
property at any time payable or receivable on account of, or securing, any such
right to payment, or grant any extension to, make any compromise or settlement
with or otherwise agree to waive, modify, amend or change the Obligation
(including collateral obligations) of any such account debtor or other obligor;
and (ii) as agent and attorney in fact of Debtor, notify the United States
Postal Service to change the address for delivery of Debtor's mail to any
address designated by the Lender, otherwise intercept Debtor's mail, and
receive, open and dispose of Debtor's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for Debtor's account or
forwarding such mail to Debtor's last known address.
5. As additional security for the payment and performance of the
Obligation, Debtor hereby assigns to the Lender any and all monies (including,
without limitation, proceeds of insurance and refunds of unearned premiums) due
or to become due under, and all other rights of Debtor with respect to, any and
all policies of insurance now or at any time hereafter covering the Collateral
or any evidence thereof or any business records or valuable papers pertaining
thereto, and Debtor hereby directs the issuer of any such policy to pay all such
monies directly to the lender. If Debtor has not settled any insurance claim
within 60 days of the occurrence resulting in such claim, or at any time after
the occurrence of any Event of Default, the Lender may (but need not), in the
Lender's name or in Debtor's name, execute and deliver proof of claim, receive
all such monies, 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.
6. Each of the following occurrences shall constitute an Event of
Default under this Agreement (herein called an "Event of Default"): (i) Debtor
shall fail to pay any or all of the Obligation within 10 days of the date
payment is due; or (ii) Debtor shall fail to observe or perform any covenant or
agreement binding on Debtor under this Agreement or under any other assignment,
conveyance, instrument or agreement now in effect or hereafter made between
Debtor and the Lender within 20 days of written notice from Lender of such non-
performance or default; or (iii) any representation or warranty made by Debtor
in this Agreement or in any such other assignment, conveyance, instrument or
agreement, or in any financial statements, or reports or certificates heretofore
or at any time hereafter submitted by or on behalf of Debtor to the Lender,
shall prove to have been false or materially misleading when made; or (iv)
payment of any substantial indebtedness of Debtor, other than the Obligation,
shall be demanded or the maturity of any such indebtedness shall be accelerated,
or any precondition or circumstance permitting any creditor of Debtor, acting
individually or with the consent of other creditors, to accelerate the maturity
of any such indebtedness shall have occurred (for this purpose indebtedness
shall be deemed substantial if it exceeds $5,000,000); or (v) Debtor shall
become insolvent or shall file or have filed against it, voluntarily or
involuntarily, a petition in bankruptcy or for reorganization or for the
adoption of an arrangement or plan under the United States Bankruptcy Code or
shall procure or suffer the appointment of a receiver for any substantial
portion of its properties, or shall initiate or have initiated against it,
voluntarily or involuntarily, any act, process or proceeding under any
insolvency law or other statute or law providing for the modification or
adjustment of the rights of creditors; (vi) there shall be any default under the
Note or Deed of Trust given by Debtor of even date herewith to Lender.
7. Upon the occurrence of an Event of Default under paragraph 6 and at
any time thereafter, the lender may exercise one or more of the following rights
and remedies; (i) declare all unmatured Obligation to be immediately due and
payable, and the same shall thereupon be immediately due and payable, without
presentment or other notice or demand; (ii) exercise and enforce any and all
rights and remedies available upon default to a secured party under the Uniform
Commercial Code, including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which Debtor hereby
expressly waives) and the right to sell, lease
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or otherwise dispose of any or all of the Collateral, and in connection
therewith Debtor will on demand assemble the Collateral and make it available to
the Lender as a place to be designated by the lender which is reasonably
convenient to both parties. If notice to Debtor 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 paragraph 9) at least ten calendar days prior to the date of
intended disposition or other action; (iii) without notice or demand offset any
indebtedness the Lender or any of its participants, successors or assigns then
owes to Debtor, whether or not then due, against any Obligation then owed to the
Lender or any of its participants, successors or assigns by Debtor, whether or
not then due; and (iv) exercise or enforce any and all other rights or remedies
available by law or agreement against the Collateral, against Debtor, or against
any other person or property.
8. This Agreement does not contemplate a sale of accounts, contract
rights or chattel paper, and, as provided by law, Debtor is entitled to any
surplus and shall remain liable for any deficiency. The lender's duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if it exercises reasonable care in physically 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 the Lender need not otherwise preserve, protect, insure or
care for any Collateral. The Lender shall not be obligated to preserve any
rights Debtor may have against prior parties, to realize on the Collateral at
all or in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
9. This Agreement can be waived, modified, amended, terminated or
discharged, and the Security Interests can be released, only explicitly in
writing signed by the Lender. A waiver so signed shall be effective only in the
specific instance and for the specific purpose given. Mere delay or failure to
act shall not preclude the exercise or enforcement of any rights or remedies
available to the Lender. All rights and remedies of the Lender shall be
cumulative and may be exercised singularly in any order or sequence, or
concurrently, at the Lender's option, and the exercise or enforcement of any
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 Debtor shall be deemed
sufficiently given if delivered or mailed by registered, certified or ordinary
mail, postage prepaid, to Debtor at its address set forth below or at its most
recent address shown on the Lender's records.
10. The Lender and its participants, if any, are not partners or joint
venturers, and the Lender shall not have any liability or responsibility for any
obligation, act or omission of any of its participants.
11. This Agreement, and the Security Interests granted hereby, shall
be binding upon Debtor, its successors and assigns, and shall inure to the
benefit of and be enforceable by the Lender and each and all of its
participants, successors and assigns, and shall be effective when executed by
Debtor and delivered to the lender whether or not this Agreement is executed by
the Lender. All rights and powers specifically conferred upon the Lender may be
transferred or delegated to any of the participants, successors or assigns of
the Lender. Except to the extent otherwise required by law, this Agreement and
the transaction evidenced hereby shall be governed by the substantive laws of
the State of Colorado. 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 or in any other
agreement between Debtor and the Lender shall survive the execution, delivery
and performance of this Agreement and the creation and payment of the
Obligation. Debtor waives notice of the acceptance of this Agreement by the
Lender.
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12. A carbon, photographic or other reproduction of this Security
Agreement or of any financing statements signed by the Debtor is sufficient as a
financing statement and may be filed as a financing statement in any state to
perfect the security interests granted hereby.
IN WITNESS WHEREOF, this Security Agreement has been duly executed and
delivered by the proper officers thereunto duly authorized on the day and year
first above written.
DEBTOR:
CROSS-CONTINENT AUTO RETAILERS, INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxxx, Chairman of the Board
and Chief Executive Officer
Address: 0000 X. Xxxxxx
Xxxxxxxx, Xxxxx 00000
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