Liquidation Agreement regarding Debtor’s Collateral in Satisfaction of Indebtedness
This Liquidation Agreement (Agreement) is made and entered into this the ___ day of
__________, 20___, between ______________ of ________________________________
(street address, city, county, state, zip code) , referred to herein as Debtor, and ______________ ,
a corporation organized and existing under the laws of the state of ______________, with its
principal office located at _____________________________________________________
(street address, city, county, state, zip code) , referred to herein as Lender.
Whereas, Lender and Debtor have previously entered into a Promissory Note (Note) and
Security Agreement (Security Agreement), dated ____________ (date); and
Whereas, under the Note and Security Agreement, Debtor agreed to strictly comply with
all terms of the Note and Security Agreement; and
Whereas, Debtor has defaulted under the Note and Security Agreement for failure to
make timely payments; and
Whereas, Lender has given written notice of the default; and
Whereas, under the terms of and the Security Agreement, Lender has the immediate right
to take possession of and sell any and all collateral covered by the Security Agreement
(Collateral) as a repossessing creditor, and proceed against the Debtor for any deficiency; and
Whereas, the Debtor has requested that Lender forbear from exercising its rights and
remedies and permit Debtor a short period of time to repay the debt and liquidate the Collateral;
and
Whereas, based on these undertakings, Lender has agreed to forbear for a limited time
from immediately enforcing its rights against the Collateral, on the terms stated below;
Now, therefore, for and in consideration of the mutual agreements and undertakings that
follow, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
I. Agreement
A. The term Collateral will include not only the specific property covered by the
Security Agreement , but all other property owned by Debtor, all of said property being
hereafter referred to as Property.
B. Debtor hereby acknowledges that he is in default under the Note and Security
Agreement and that as of _________ (date) , the aggregate amount due Lender from
Debtor under the Note and Security Agreement is as follows:
Principal: $_____________________
Interest: $ _____________________
Total: $ _____________________
said Total being hereafter called the Existing Debt . The Existing Debt is subject to
increase, decrease or other adjustment as a result of: (a) interest, accruing after (date) ; (b)
payments or charge back of items in the process of collection; and (c) any further
advances made by Lender. Debtor hereby waives and releases any and all claims whether
known or unknown which he may have, against Lender, including but not limited to any
setoffs, counterclaims or defenses he may have against Lender with respect to the
Existing Debt.
C. As of _______ (date) , each of the items listed on Exhibit A hereto, the purchase
of which had been financed by Lender (hereinafter the Floor Plan Collateral ), were
owned by and in Debtor's possession and control. The respective principal amount still
outstanding of the amount financed for the purchase of each items of the Floor
Plan Collateral is shown on Exhibit A. Debtor acknowledge that each such amount is
still outstanding and due and owing to Lender and that such amount is less than or equal
to the wholesale value of each such item of Floor Plan Collateral.
D. As of _______ (date) , the property listed on Exhibit B was owned by and in
Debtor's possession. Although this property was not financed by Lender, it is included
among the Collateral and is subject to Lender's security interest (the Nonfloor Plan
Collateral ).
E. From and after the date of execution of this Agreement, Debtor must comply fully
with each and every provision of the Security Agreement, including without limitation:
(a) payment when due under the Note and Security Agreement of all interest and charges
(computed as if the amounts due thereunder had not previously been accelerated); (b)
payment when due for all Floor Plan Collateral, as sold, from the proceeds of such sale;
and (c) maintenance of required insurance coverage.
F. Debtor must sell all of the Collateral on or before ______ (date) .
II. Floor Plan and Nonfloor Plan Collateral
A. All sales of Floor Plan Collateral and Nonfloor Plan Collateral will be
responsible for cash or immediately available funds, all proceeds from such sales will be
held in trust for Lender.
B. Debtor must submit daily written reports to Lender of all sales of Floor Plan
Collateral and Nonfloor Plan Collateral, in a form and manner reasonably acceptable to
Lender.
C. Immediately on receipt of the proceeds of sale of a Floor Plan or Nonfloor Plan
Collateral, Debtor must pay the amounts due Lender for each item of Floor Plan
Collateral as shown on Exhibit A, or the actual cost to Debtor of any Nonfloor Plan
Collateral. From the balance of such sale proceeds remaining, Debtor must pay first any
sales tax, commissions or other costs of sale attributable to the sale. Thereafter, Debtor
may use any remaining balance of such proceeds for use in payment of the Debtor's
reasonable and customary operating expenses.
D. If the amount of the proceeds of the sale of one of the items of Floor Plan
Collateral is less than the outstanding amount due by Lender for such item as shown on
Exhibit A, or the amount of the proceeds of the sale of any Nonfloor Plan Collateral is
less than the actual cost to Debtor, then Debtor must immediately pay Lender the amount
by which the sale price is less than the amount shown on Exhibit A, or Debtor's cost,
plus all proceeds of such sale. If the amount of the proceeds of a sale of any item of the
Floor Plan or Nonfloor Plan Collateral, exclusive of sales tax, and costs of the sale, is
greater than the outstanding amount due Lender as shown on Exhibit A, or the cost to
Debtor of any Nonfloor Plan Collateral, Debtor will be entitled to such surplus, to pay its
reasonable and customary operating expenses. In any event, Debtor must pay the amount
of all sales taxes due on any sale.
E. Lender's employees and agents must be given free access to the Property and any
location where any of the Collateral may be located, and to the Debtor's books and
records, and Lender may inspect and copy same, at any time or times. Lender's
employees and agents may remain at the Property at all times, for the purpose of
monitoring Debtor's sales, monitoring Debtor's performance of the terms and conditions
of this Agreement and to protect the Collateral. Debtor must provide Lender's agents or
employees with such information and documents as they reasonably request, including
without limitation daily reports identifying bank balances, summaries of deposits,
summaries of checks written or outstanding, and summaries of sales proceeds received,
contracts in transit, and accounts receivable (including hold back, warranty or other
accounts or general intangibles due from any manufacturers). In addition, neither Debtor
nor any of its employees or agents may open any mail directed to Debtor, except in the
presence of Lender's employees or representatives, or with their express written
permission.
F. On or before ______ (date) , the Debtor must assemble all Collateral, at the
Property, and all Collateral must remain on the Property at all times thereafter.
G. Debtor hereby grants, or ratifies and reaffirms its previous assignment to Lender
of its rights to payment of all accounts and general intangibles due or to become due to
Debtor from third parties. Debtor authorizes Lender to notify its account debtors of this
assignment immediately, and to direct that payment of all amounts due or which may
become due Debtor from any of them be paid directly to Lender.
H. Debtor must execute such further documents as reasonably requested by Lender
in order to carry out the purposes of this Agreement, including but not limited to the
direct payment to Lender of all amounts due or which may become due from third parties
to Debtor.
III. Future Advances
Lender may, in its sole discretion, make future advances under the Security Agreement,
and all such advances must be secured by the Collateral.
IV. Inventory Reports
A. On or before ______ (date) , Debtor must deliver an inventory of the Collateral,
giving the value of the Collateral at Debtor's cost (the Inventory ). The Inventory must be
as of _______ (date) , and be in a form satisfactory to Lender.
B. Debtor must provide to Lender a weekly report of the changes in the value of the
Collateral as shown in the Inventory, starting with the week ending _____ (date) . The
report of weekly changes in the value of the Inventory must be delivered to Lender no
later than _____ (day) of the week following the week covered by the report. The weekly
report must show the beginning and ending balance, at cost, of the total Inventory of
Collateral, the total sales price of all sales made during the week, and the cost to Debtor
of the sales. The report must also state the net reduction of the value of the Collateral , at
cost for the week.
V. Environmental Report
On or before ______ (date) , Debtor must deliver to Lender a copy of the most recent
EPA Phase I report prepared with respect to any real property included in the Collateral, if any.
VI. Operations
From ______ (date) to ________ (date) , Debtors may use an amount not to exceed
$_________ per week, to pay Debtor's reasonable and customary operating expenses, derived
solely from the following sources:
A. The proceeds actually received from sale of Floor Plan and Nonfloor Plan
Collateral in excess of the amounts payable to Lender, plus costs of sale and any
applicable sales tax; and
B. All proceeds arising from any labor, or services performed by Debtor. To the
extent that the permitted sources of funds are less than $____________, and are also
insufficient to pay Debtor's operating expenses for the period _____ (date) through
________ (date) , Lender may make a future advance under the Security Agreement to fund
such expenses.
C. From and after _____ (date) , Debtors must not use any proceeds of any
Collateral, without the express written permission of Lender. Debtors must immediately
pay to Lender all proceeds of Collateral held or thereafter received by Debtor, all such
proceeds to be held in trust for Lender.
D. From and after _____ (date) , Lender may take possession of the Collateral
without any further notice or action required by Lender . If requested by Lender, Debtor
must assemble the Collateral at the Property, and voluntarily and peaceably turn over
possession of the Collateral to Lender. Any Collateral held or received by Debtor on or
after such date will be deemed to be held in trust by Debtor for the benefit of Lender, and
Debtor must immediately deliver possession of such Collateral to Lender. Debtor must
follow Lender's other reasonable instructions with respect to the liquidation of all or part
of the Collateral.
E. From and after ________ (date) , Lender will have the right, but will not be
obligated, to take possession of and sell any and all Collateral, and to apply the net
proceeds received to the outstanding amount of the Existing Debt. Debtor agrees that any
disposition of Floor Plan or Nonfloor Plan Collateral by public auction sale, if
advertised not less than ____times in __________________ (name of newspaper) will be
a commercially reasonable sale of such Collateral.
VII. Debtor’s Continued Liability
Even after full performance by Debtor under this Agreement, Lender must retain all of its
rights and remedies under the Security Agreement, including but not limited to enforcement of its
rights and remedies against any remaining Collateral, seeking judgment against Debtor for the
full amount of the Existing Debt, or any deficiency remaining after the disposition of some or all
of the Collateral, for all of which Debtor will remain liable.
VIII. Notice to Account Debtors
Lender may if it deems itself insecure at any time notify in writing each account debtor of
Debtor, that all rents, profits, receipts, accounts, income of any kind, and any right to payment
owned or due to Debtor, has been assigned to Lender, and that all future payments due Lender
must be made directly to Lender, under the terms of a Security Agreement between the parties,
and that the notification may not be changed except by written notice signed by Lender.
IX. Notice of Sale and Commercial Reasonableness
The Debtor hereby waives and renounces his rights to notice of the sale and disposition
of any of the Collateral to the full extent allowed by law. Debtor agrees that the method of sales
of the Floor Plan and Nonfloor Plan Collateral contemplated by this Agreement, has been
requested by the Debtor, and will constitute a commercially reasonable disposition of the
Collateral and collection of the accounts.
X. Subject to Lender Approval
The terms and conditions of this Agreement are subject to the approval of Lender’s
management, and will not be binding on the Lender until such approval is obtained in writing.
XI. Forbearance
Lender must not exercise its right to take possession of and sell the Collateral as a
repossessing creditor, under the Uniform Commercial Code until the earlier of: (1) ________
(date) ; (2) the occurrence of any event of default under this Agreement; or (3) the failure of
Debtor to promptly take all steps reasonably necessary to sell the Collateral.
XII. Events of Default
The following events will constitute an event of default under this Agreement:
A. Any default in the payment when due, of any amounts due to Lender under this
Agreement;
B. Any failure by Debtor to pay and account for the proceeds of sales of Floor Plan
and Nonfloor Plan Collateral strictly in accordance with the terms of this Agreement;
C. A material decrease in the value of the Inventory, occurring after ________
(date) , unless Debtor pay the amount equal to the net decrease at cost of the Collateral to
Lender within five business days after the weekly report for such week is due to be
delivered to Lender;
D. Any failure by Debtor to perform all of their obligations under this Agreement;
E. An application for the appointment of a receiver for, or the making of an
assignment for the benefit of creditors by, or the filing of a voluntary petition under the
U.S. Bankruptcy Code, however expressed or indicated, by Debtor within ___year(s) of
the date of execution of this Agreement; and
F. Any nonmonetary default under the terms of the Security Agreement occurring
after the date of execution of this Agreement.
XIII. Remedies upon Default
If an event of default or defaults under this Agreement occurs, in addition to all other
rights and remedies available to Lender, Lender will be entitled to:
A. Recover from Debtor the entire amount of the Existing Debt, plus interest
accruing after _____ (date) , until all such amounts are paid in full, plus charges and any
other advances made under the Security Agreement, less a credit in the aggregate amount
of payments actually made by Debtor to Lender after the execution of this Agreement, for
all of which Debtor will remain liable to Lender and which amount will be immediately
due and payable without demand or notice;
B. Take possession of and sell all of the Collateral as a repossessing creditor under
the Uniform Commercial Code; and
C. Collect any of the accounts or general intangibles due or to become due Debtor.
D. In the event that Lender takes possession of and sells any of the Collateral, or
collects any accounts or general intangibles, and any amount remains due under the
Security Agreement, Debtor will be liable for payment of such deficiency to Lender.
E. Any bankruptcy reorganization or receivership proceeding commenced by Debtor
will be an event of default under this Agreement, and such processing will be deemed to
have been commenced in bad faith, and the parties irrevocably agree that Lender would
be entitled to immediate relief from the automatic stay for cause under 11 U.S.C.A. § 362
with respect to the Collateral in any such proceeding.
F. In the event of any litigation in connection with this Agreement, the prevailing
party will be entitled to recover its collection expenses, court costs and reasonable
attorneys' fees, including any post judgment collection costs and attorneys' fees and costs
incurred in connection with an appeal or any bankruptcy proceeding.
XIV. Miscellaneous
A. This Agreement is not intended as a novation, nor does it discharge or constitute
payment of the Existing Debt. Except as expressly modified, all terms of the Security
Agreement will continue in full force and effect, and all of the Debtor’s obligations t
hereunder will continue in full force and effect.
B. Debtor will execute and deliver to Lender such other security agreements, loan
documents or financing statements or amendments covering the Collateral as requested
by Lender.
C. Failure or failures by Lender to exercise any right hereunder will not be construed
as a waiver of its right to exercise the same or any other right at any time or from time to
time thereafter nor will any single or partial exercise of any right preclude other or further
exercise thereof or the exercise of any other rights or remedies.
D. Unless Debtor gives Lender written notice of change of address, any notice to
Debtor will be effective when sent, if sent to Debtor at the addresses set forth below, by
telecopy or similar facsimile transmission, certified mail, return receipt requested, or
express mail overnight service by private carriers or by first class mail.
If intended for Debtor : _____________________________________________
(street address, city, county, state, zip code) ;
If intended for Lender: _____________________________________________
(street address, city, county, state, zip code) .
E. Time is of the essence in this Agreement.
F. This Agreement and the Security Agreement represent the entire agreement
between the parties and may not be modified or amended except by a writing signed by
the party against whom enforcement of the modification or amendment is sought. All
prior negotiations, representations, understandings or course of dealing are merged into
the terms of this Agreement, and the Security Agreement.
G. This Agreement will be governed by and construed in accordance with laws of the
State of ___________.
H. If any term or terms of this Agreement are found to be invalid or unenforceable,
such invalidity or unenforceability will not affect the remaining terms of this Agreement.
I. This Agreement may be executed in counterparts, each of which will constitute an
original and all of which will constitute a single instrument.
J. The parties waive any right to a trial by jury in any action arising from or related
to, to enforce the terms of, or to collect any amounts due under any or all of this Agreement or
the Note and Security Agreement.
XV. Mandatory Arbitration
Notwithstanding the foregoing, and anything herein to the contrary notwithstanding,
any dispute under this Agreement shall be required to be resolved by binding arbitration of the
parties hereto. If the parties cannot agree on an arbitrator, each party shall select one arbitrator
and both arbitrators shall then select a third. The third arbitrator so selected shall arbitrate said
dispute. The arbitration shall be governed by the rules of the American Arbitration Association
then in force and effect.
WITNESS our signatures as of the day and date first above stated.
_____________________ , INC.
________________________ By_______________________
(Name of Debtor) (Name and Office in Corporation)
(Attach Exhibits and Schedules, if any)
