EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated April 2, 2007 (the “Agreement”), by and among
Manchester Inc., a Nevada corporation (the “Company”), and Richard D. Gaines
(the “Executive”).

WHEREAS, the Company desires to engage Mr. Gaines as an officer to assist the
Company with the development of its Buy Here/Pay Here car business;

NOW THEREFORE, in consideration of the premises and the mutual agreements made
herein, the Company and Mr. Gaines agree as follows:

1. Employment; Duties. The Company shall employ the Executive as Executive Vice
President of Corporate Development. The Executive shall serve the Company in
such capacity in addition to his current capacity as Corporate Secretary of the
Company during the “Engagement Period” as defined in Section 2. The Executive
agrees that during the term of his employment hereunder, he shall devote 50% of
his professional working time to the Company, and give his commercially
reasonable efforts, skills and abilities to promote the business and interests
of the Company. The precise duties, responsibilities and authority of the
Executive may be reasonably expanded, limited or modified, from time to time, as
directed by the Board of Directors of the Company or a committee of the Board to
which the Board has delegated such authority (collectively, the “Board”). The
Executive agrees to faithfully and diligently perform such duties as may from
time to time be assigned to the Executive by the Board.

2. Employment Period. This Agreement shall have an initial term of three (3)
years to be effective as of the date hereof and ending on March 31, 2010 (the
“Initial Period”), unless sooner terminated in accordance with the provisions of
Section 7 or Section 8. On the expiration of such Initial Period, this Agreement
shall automatically renew and continue to remain in effect for successive one
year periods, until terminated in accordance with the provisions of Section 7 or
Section 8, unless either party provides the other party with written notice of
non-renewal not later than 10 days prior to the expiration of the Initial Period
or the anniversary of such date in any subsequent renewal period. Each effective
period of this Agreement is referred to herein as the “Employment Period.”

3. Compensation and Benefits.

(a) Base Compensation. The Executive shall be paid a base salary of $280,000 per
annum, payable in monthly increments less applicable statutory and regulatory
deductions (the “Base Salary”). The Base Salary shall be payable each month in
accordance with the Company’s regular payroll practices, as the same may be
modified from time to time. In addition, the Executive may, at the discretion of
the Board, receive such compensation as other members of the Board shall be
entitled to, during the duration of his service thereon.

(b) Expense Reimbursement. The Executive shall be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in connection with travel related to
the Company's business and affairs upon receipt of itemized vouchers approved in
accordance with Company policy as in effect from time to time.

 
 

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(c) Benefits. The Executive shall be immediately eligible for participation in
any and all Company benefits that may be available to employees as in effect
from time to time. In addition, the Executive shall be entitled to receive
reimbursement (i) for the monthly medical and dental insurance premiums of the
Executive and his spouse, as provided through such insurance carrier as the
Executive may designate; and (ii) the Executive shall be entitled to be provided
a Company car or provided reimbursement for the monthly cost of a vehicle,
including insurance, of the make and model selected by Company and approved by
the Board.

(d)  Bonus. The Executive shall receive an annual bonus to be determined at the
sole discretion of the Board of Directors.

(e) Equity Compensation. The Executive shall be eligible to receive stock
options as granted by the Board of Directors for the purchase of shares of
Company common stock in accordance with the terms and conditions of the
Company’s stock option plan.

(f) Vacation. The Executive shall be entitled to three (3) weeks paid vacation
per calendar year, pro-rated with respect to the portion of the year in which
employment commenced with the Company, in each case in accordance with Company
general policies regarding vacations. A maximum of one week of any accrued but
untaken vacation may be carried over and used up to nine months after the year
in which accrued, but not thereafter. No compensation shall be paid for accrued
but untaken vacation.

4. Trade Secrets. The Executive recognizes that it is in the Company's
legitimate business interest to restrict his disclosure or use of trade secrets
and confidential information relating to the Company or its affiliates for any
purpose other than in connection with his performance of his duties to the
Company.

5. Return of Documents and Property. Upon the expiration or termination of the
Executive's employment with the Company, or at any time upon the request of the
Company, the Executive (or his heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets and Confidential Information relating
to the Company's business and affairs, and (b) all documents, materials,
equipment and other property (including, without limitation, computer files,
computer programs, computer operating systems, computers, printers, scanners,
pagers, telephones, credit cards and ID cards) belonging to the Company, which
in either case are in the possession or under the control of the Executive (or
his heirs or personal representatives).

6. Discoveries and Works. All Discoveries and Works made or conceived by the
Executive during his employment by the Company, solely, jointly or with others,
that relate to the Company's present or anticipated activities, or are used or
useable by the Company shall be owned by the Company. The term “Discoveries and
Works” includes, by way of example but without limitation, Trade Secrets and
other Confidential Information, patents and patent applications, service marks,
and service mark registrations and applications, trade names, copyrights and
copyright registrations and applications. The Executive shall (a) promptly
notify, make full disclosure to, and execute and deliver any documents requested
by the Company, as the case may be, to evidence or better assure title to
Discoveries and Works in the Company, as so requested, (b) renounce any and all
claims, including but not limited to claims of ownership and royalty, with
respect to all Discoveries and Works and all other property owned or licensed by
the Company, (c) assist the Company in obtaining or maintaining for itself at
its own expense United States and foreign patents, copyrights, trade secret
protection or other protection of any and all Discoveries and Works, and (d)
promptly execute, whether during his employment with the Company or thereafter,
all applications or other endorsements necessary or appropriate to maintain
patents and other rights for the Company and to protect the title of the Company
thereto, including but not limited to assignments of such patents and other
rights. Any Discoveries and Works which, within one year after the expiration or
termination of the Executive's employment with the Company, are made, disclosed,
reduced to tangible or written form or description, or are reduced to practice
by the Executive and which pertain to the business carried on or products or
services being sold or delivered by the Company at the time of such termination
shall, as between the Executive and, the Company, be presumed to have been made
during the Executive's employment by the Company. The Executive acknowledges
that all Discoveries and Works shall be deemed “works made for hire” under the
Copyright Act of 1976, as amended 17 U.S.C. Sect. 101.
 
 
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7. Termination.

(a) Manner of Termination. The Company and the Executive may terminate this
Agreement, with or without cause, only in accordance with the provisions of this
Section 7.

(b) Termination Without Cause. During the Employment Period, if the Company
terminates this Agreement other than for cause, the Executive shall continue to
receive his salary for 12 additional months payable in accordance with the
Company’s normal payroll practice, plus reimbursement of any and all expenses
incurred by Executive as of the date of notice of such date and through the
twelve (12) month anniversary thereof to the extent otherwise permitted
hereunder, plus payment of any and all bonus payments payable as of such date,
and, subject to the terms and conditions of applicable option agreements, all of
such equity instruments that would by their own terms vest and become
exercisable as of the twelve (12) month anniversary date of such notice of
termination other than for cause, which options shall remain so vested and
exercisable and non-forfeitable by the Executive (but in no event beyond the
expiration of the stated term of such instrument), and all of such payments and
vesting of such equity instruments shall completely and fully discharge any and
all obligations and liabilities of the Company to the Executive with respect to
this Agreement.

(c) Termination for Cause. The Company may terminate this Agreement for cause at
any time during the Employment Period effective immediately upon giving written
notice of termination to the Executive. For purposes of this Agreement, “cause”
shall mean, with respect to the Executive, (i) any act of fraud or dishonesty,
willful misconduct or negligence in connection with the Executive's duties, (ii)
a breach by the Executive of any provision hereof or of any contractual or legal
fiduciary duty to the Company (including, but not limited to, the unauthorized
disclosure of Trade Secrets or other Confidential Information, or non-compliance
with the policies, guidelines and procedures of the Company), (iii) the arrest
of the Executive for the commission of a felony, whether or not such alleged
felony was committed in connection with the Company's business or (iv) the
commencement of any bankruptcy proceedings (whether voluntary or involuntary),
the appointment of a trustee or receiver for the Executive or the general
assignment of the Executive's assets to his creditors.

 
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(d) Termination by Executive . The Executive may terminate this Agreement with
or without good reason at any time during the Employment Period effective
immediately upon giving written notice of termination to the Company. For
purposes of this Agreement, with respect to the Company, “good reason” shall
mean (i) the failure to pay any amounts due Executive hereunder (and not
disputed in good faith by the Company) within one month after their due date;
(ii) breach of performance by the Company of any other term herein due to the
Executive; (iii) requirement that Executive relocate away from his principal
residence as of the date of this Agreement; (iv) travel on Company related
matters without notice of not less than five business days; or (v) travel on
Company related matters more than five business days in any 30 day period days.

(e) Effect of Termination. Except as otherwise provided herein, in the event
this Agreement is terminated for cause, the Executive's rights and the Company's
obligations hereunder shall cease as of the effective date of the termination,
including, without limitation, the right to receive Base Salary, bonus and all
other compensation, expense allowance or benefits provided for in this
Agreement, and the Executive shall not be entitled to any further compensation,
expense allowance, benefits, or severance compensation of any kind, and shall
have no further right or claim to any compensation, benefits or severance
compensation under this Agreement or otherwise against the Company or its
subsidiaries and affiliates, from and after the date of such termination. For
purposes of clarity, in the event of a termination of this Agreement the
Executive shall not be entitled to any bonus other than any bonus payable
through the date of notice of such termination.

(f) Change in Control Termination. Notwithstanding any other provision in this
Agreement, in the event the Executive's employment with the Company is
terminated by the Company following a Change in Control (as defined below), the
Executive shall receive within ten (10) calendar days of notice of such
termination, in lieu of the payment specified in Section 7(b) above, a lump sum
payment equivalent to twelve (12) months salary, plus reimbursement of any and
all expenses incurred by Executive as of such date, plus payment in full of any
and all prospective annual bonus payments with respect to the next succeeding
twelve (12) month Employment Period, and, subject to the terms and conditions of
the option agreement attached hereto as Exhibit A, all of such equity
instruments granted therein shall fully and irrevocably vest and become
exercisable and/or non-forfeitable by the Executive until the first anniversary
of the termination of the Executive's employment (but in no event beyond the
expiration of the stated term of such instrument), and all of such payments and
vesting of equity instruments shall completely and fully discharge any and all
obligations and liabilities of the Company to the Executive with respect to this
Agreement.

(g) Survival. Any termination under this Section 7 is subject to the provisions
of Sections 18 and 20 hereof.

 
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(h) Relinquishment of Authority. Notwithstanding anything to the contrary set
forth herein, upon written notice to the Executive, the Company may immediately
relieve the Executive of all his duties and responsibilities hereunder and may
relieve the Executive of authority to act on behalf of, or legally bind, the
Company.

(i) Change in Control. For purposes of this Agreement “Change in Control” means
(i) the acquisition (by means of purchase, merger or otherwise) by any person or
any two or more persons acting as a partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of such securities of beneficial
ownership of fifty-one percent (51%) or more of the sum of the amount of the
shares of Company common stock (the “Shares”) then outstanding, plus any Shares
which may be issued pursuant to the conversion or exercise of all outstanding
options, rights or warrants; or (ii) the sale of all or substantially all of the
assets of the Company. Notwithstanding anything to the contrary, for purposes of
this Section, a person shall not be deemed to have made an acquisition of
beneficial ownership of Shares if such person: (a) acquires beneficial ownership
of such Shares directly from the Company; (b) assumes beneficial ownership of
more than the permitted percentage of Shares solely as a result of the
acquisition of beneficial ownership of Shares by the Company which, by reducing
the proportional beneficial ownership of Shares by other security holders,
increases the proportional beneficial ownership of Shares by such person; or (c)
is (1) the Company or any corporation or other person of which a majority of its
voting power or its equity securities or equity interest is owned directly or
indirectly by the Company (a “Controlled Entity”) or is owned directly or
indirectly by the stockholders of the Company in the same proportion as their
beneficial ownership of Shares or (2) a trustee or other fiduciary holding
securities under one or more employee benefit plans or arrangements (or any
trust forming a part thereof) maintained by the Company or any Controlled
Entity.

(j) For purposes of clarity and notwithstanding the foregoing provisions of this
Section 7, the termination of the Employment Term of this Agreement in
accordance with ordinary termination of this Agreement without renewal shall not
be deemed to be a termination which requires any supplemental payments,
compensation, consideration or remuneration of any nature to be paid to the
Executive as a function of such termination.

8. Disability: Death.

(a) If, prior to the expiration of the Employment Period, the Executive shall be
unable to perform his duties hereunder by reason of physical or mental
disability for at least thirty (30) consecutive calendar days, the Company shall
have the right to terminate this Agreement and the remainder of the Employment
Period by giving written notice to the Executive to that effect. Immediately
upon the giving of such notice, the Employment Period shall terminate and such
termination shall be deemed to be a termination without cause.

(b) Upon termination of this Agreement pursuant to Section 8(a), the Executive
shall be paid his Base Salary and bonus (if any) through the effective date of
such termination and all other compensation and benefits shall be subject to
Section 7(b).

 
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(c) In the event of a dispute as to whether the Executive is disabled within the
meaning of Section 8(a), either party may from time to time request a medical
examination of the Executive by a doctor appointed by the chief of staff of a
hospital selected by mutual agreement of the parties, or as the parties may
otherwise agree, and the written medical opinion of such doctor shall be
conclusive and binding upon the parties as to whether the Executive has become
disabled and the date when such disability arose. The cost of any such medical
examination shall be borne by the requesting party.

(d) If, prior to the expiration of the Employment Period or the termination of
this Agreement, the Executive shall die, the Executive's estate shall be paid in
accordance with Section 7(b). Any bonus payable shall be payable on the first
bonus payment date following such termination. Except as otherwise provided in
this Section 8(d), upon the death of the Executive, the Employment Period shall
terminate without further notice and the Company shall have no further
obligations hereunder, including, without limitation, obligations with respect
to compensation, expense allowance and benefits provided for in Section 3 of
this Agreement, other than as set forth in in Section 7(b).

(e) Any termination under this Section 8 is subject to the provisions of Section
18 hereof.

9. No Conflicts. The Executive has represented and hereby represents to the
Company and its affiliates that the execution, delivery and performance by the
Executive of this Agreement do not conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default under any contract, agreement or understanding, whether oral or written,
to which the Executive is a party or of which the Executive is or should be
aware and that there are no restrictions, covenants, agreements or limitations
on his right or ability to enter into and perform the terms of this Agreement,
and agrees to indemnify and save the Company and its affiliates harmless from
any liability, cost or expense, including attorney’s fees, based upon or arising
out of any such restrictions, covenants, agreements, or limitations that may be
found to exist.

For purposes of this Agreement, “affiliate” shall include any person or entity
directly or indirectly controlled by or controlling the Company.

10. Non-competition. Except as authorized by the Board of Directors, during the
Engagement Period Executive will not (except as an officer, director,
stockholder, employee, agent or consultant of the Company or any subsidiary or
affiliate thereof) directly, own, manage, operate, join, or have a financial
interest in, control or participate in the ownership, management, operation or
control of, or be employed as an employee, agent or consultant, or in any other
individual or representative capacity for any business which is directly and
geographically competitive within a 25 mile radius of any business carried on or
planned to be carried on by the Company or any of its subsidiaries or
affiliates.

 
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11. Non-Solicitation. During the Restricted Period, the Executive, directly or
indirectly, whether for his account or for the account of any other individual
or entity, shall not solicit or canvas the trade, business or patronage of, or
sell to, any individuals or entities that were either customers of the Company
during the time the Executive was employed by the Company, or prospective
customers with respect to whom a sales effort, presentation or proposal was made
by the Company or its affiliates, during the one year period prior to the
termination or expiration of this Agreement, as the case may be. The Executive
further agrees that during the Restricted Period, he shall not, directly or
indirectly, (i) solicit, induce, enter into any agreement with, or attempt to
influence any individual who was an employee or consultant of the Company at any
time during the time the Executive was employed by the Company, to terminate his
or her employment relationship with the Company or to become employed by the
Executive or any individual or entity by which the Executive is employed or (ii)
interfere in any other way with the employment, or other relationship, of any
employee or consultant of the Company or its affiliates.

12. Enforcement. The Executive agrees that any breach of the provisions of
Sections 4, 5, 6, 10 and 11 hereof would cause substantial and irreparable harm,
not readily ascertainable or compensable in terms of money, to the Company for
which remedies at law would be inadequate and that, in addition to any other
remedy to which the Company may be entitled at law or in equity, the Company
shall be entitled to temporary, preliminary and other injunctive relief in the
event the Executive violates or threatens to violate the provisions of Sections
4, 5, 6, 10 or 11 hereof, as well as damages, including, without limitation
consequential damages, and an equitable accounting of all earnings, profits and
benefits arising from such violation, in each case without the need to post any
security or bond. Nothing herein contained shall be construed as prohibiting the
Company from pursuing, in addition, any other remedies available to the Company
for such breach or threatened breach. A waiver by the Company of any breach of
any provision hereof shall not operate or be construed as a waiver of a breach
of any other provision of this Agreement or of any subsequent breach by the
Executive.

13. Determinations by the Company. All determinations and calculations with
respect to this Agreement shall be made by the Board or any committee thereof to
which the Board has delegated such authority in accordance with applicable law,
the certificate of incorporation and by-laws of the Company, in its sole
discretion, and shall be final, conclusive and binding on all persons, including
the Executive and the personal representative of his estate.

14. Successors and Assigns. This Agreement shall inure to the benefit of and
shall be binding upon (i) the Company, its successors and assigns, and any
company with which the Company may merge or consolidate or to which the Company
may sell substantially all of its assets, and (ii) Executive and his executors,
administrators, heirs and legal representatives. Since the Executive’s services
are personal and unique in nature, the Executive may not transfer, sell or
otherwise assign his rights, obligations or benefits under this Agreement.

 
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15. Notices. Any notice required or permitted under this Agreement shall be
deemed to have been effectively made or given if in writing and personally
delivered, mailed properly addressed in a sealed envelope, postage prepaid by
certified or registered mail, delivered by a reputable overnight delivery
service or sent by facsimile. Unless otherwise changed by notice, notice shall
be properly addressed to the Executive if addressed to the address of record
then on file with the Company; and properly addressed to the Company if
addressed to:

MANCHESTER INC.
100 Crescent Court, 7th Floor
Dallas, Texas 75201
Attention: Board of Directors

with a copy to:

Wuersch & Gering LLP
100 Wall Street, 21st Floor
New York, New York 10005
Telephone: 212-509-4723
Telecopier: 212-509-9559
Attention: Travis L. Gering, Esq.

16. Severability. It is expressly understood and agreed that although the
Company and the Executive consider the restrictions contained in this Agreement
to be reasonable and necessary for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Company, if a final judicial
determination is made by a court having jurisdiction that any restriction
contained in this Agreement is invalid, the provisions of this Agreement shall
not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable. Alternatively, if the court referred to
above finds that any restriction contained in this Agreement or any remedy
provided herein is unenforceable, and such restriction or remedy cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained therein or the
availability of any other remedy. The provisions of this Agreement shall in no
respect limit or otherwise affect the Executive's obligations under other
agreements with the Company.

17. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

18. Effects of Termination. Notwithstanding anything to the contrary contained
herein, if this Agreement is terminated pursuant to Section 7 or Section 8 or
expires by its terms, the provisions of Sections 4, 5, 6, 10, 11, 12, 13, 14,
15, 16, 19, 20 and this Section 18 shall continue in full force and effect.

19. Miscellaneous. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. This Agreement cannot be
modified, altered or amended except by a writing signed by all the parties. No
waiver by either party of any provision or condition of this Agreement at any
time shall be deemed a waiver of such provision or condition at any prior or
subsequent time or of any other provision or condition at the same or any prior
or subsequent time.

 
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20. Governing Law; Arbitration.

(a) This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.

(b) The parties hereto agree to submit to arbitration any and all matters in
dispute or in controversy among them concerning the terms and provisions of this
Agreement. All such disputes and controversies shall be determined and adjudged
by the decision of an arbitrator (hereinafter sometimes called the “Arbitrator”)
selected by mutual agreement of the parties hereto or if the parties hereto fail
to reach agreement on the Arbitrator within ten days after a party has notified
the other of its interest to submit a matter to arbitration, the Arbitrator
shall be selected by the American Arbitration Association upon application made
to it for such purpose by the parties. Arbitration shall take place in the City
of New York in the Borough of Manhattan, or such other place as the parties
hereto may agree in writing. The Arbitrator shall reach and render a decision in
writing with respect to the amount, if any, of payment respecting the disputed
matter. The arbitration proceedings shall be held in accordance with the
applicable rules of the American Arbitration Association. Any award rendered
shall be final and conclusive upon the parties and adjudgment thereon may be
entered in the highest court of the forum, state or federal, having
jurisdiction. The fees and expenses of the Arbitrator and the respective fees
and expenses of the parties hereto in connection with any such arbitration
(including, without limitation, reasonable fees and expenses of legal counsel
and consultants) shall be paid by the party against whom a decision by the
Arbitrator is rendered.

 
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the day and year first above written.
 

       
  /s/    Richard D. Gaines   

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RICHARD D. GAINES  

        MANCHESTER INC.  
   
   
    By:   /s/ Lawrence A. Taylor  

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Name:  Lawrence A. Taylor   Title:   Executive Vice President and Chief
Financial Officer

 
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