Master Security Agreement



 Exhibit 10.3 
  
 COACH INDUSTRIES GROUP, INC. AND CERTAIN OF ITS SUBSIDIARIES 
 MASTER SECURITY AGREEMENT 
  

	To:	Laurus Master Fund, Ltd. 

 c/o M&C Corporate Services
Limited 
 P.O. Box 309 GT 
 Ugland House 
 South Church Street 
 George Town 
 Grand Cayman, Cayman Islands 
  
 Date: September 29, 2004 
  
 To Whom It May Concern: 
  
 1. To secure the payment of all Obligations (as hereafter defined), Coach Industries Group, Inc., a Nevada corporation (the “Company”), each of
the other undersigned parties (other than Laurus Master Fund, Ltd, “Laurus”)) and each other entity that is required to enter into this Master Security Agreement (each an “Assignor” and, collectively, the “Assignors”)
hereby assigns and grants to Laurus a continuing security interest in all of the following property now owned or at any time hereafter acquired by any Assignor, or in which any Assignor now have or at any time in the future may acquire any right,
title or interest (the “Collateral”): all cash, cash equivalents, accounts, accounts receivable, deposit accounts (including, without limitation, the Restricted Account (the “Restricted Account”) maintained at North Fork Bank
(Account Name: Coach Industries Group, Inc., Account Number: 2704 053 244) referred to in the Restricted Account Agreement), inventory, equipment, goods, vehicles (including without limitation the chasses of vehicles), documents, instruments
(including, without limitation, promissory notes), contract rights, general intangibles (including, without limitation, payment intangibles and an absolute right to license on terms no less favorable than those current in effect among our
affiliates), chattel paper, supporting obligations, investment property (including, without limitation, all equity interests owned by any Assignor), letter-of-credit rights, trademarks, trademark applications, tradestyles, patents, patent
applications, copyrights, copyright applications and other intellectual property in which any Assignor now have or hereafter may acquire any right, title or interest, all proceeds and products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto or therefore. In the event any Assignor wishes to finance the acquisition in the ordinary course of business of any hereafter acquired equipment and has obtained a commitment from a
financing source to finance such equipment from an unrelated third party, Laurus agrees to release or subordinate (in its sole discretion) its security interest on such hereafter acquired equipment so financed by such third party financing source.
Except as otherwise defined herein, all capitalized terms used herein shall have the meaning provided such terms in the Securities Purchase Agreement referred to below. 
  
 2. The term “Obligations” as used herein shall mean and include all debts, liabilities and obligations owing by
each Assignor to Laurus arising under, out of, or in connection with: (i) that certain Securities Purchase Agreement dated as of the date hereof by and between the 







 Company and Laurus (the “Securities Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each Related Agreement, as each may be amended, modified, restated or supplemented from time to time, are collectively referred to herein as the “Documents”), and in
connection with any documents, instruments or agreements relating to or executed in connection with the Documents or any documents, instruments or agreements referred to therein or otherwise, and in connection with any other indebtedness,
obligations or liabilities of any Assignor to Laurus, whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement,
guaranty, instrument or otherwise, in each case, irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or
extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of the Obligations in any case commenced by or against any Assignor under Title 11, United States Code, including, without limitation,
obligations or indebtedness of each Assignor for post-petition interest, fees, costs and charges that would have accrued or been added to the Obligations but for the commencement of such case. 
  
 3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that: 
  
 (a) it is a
corporation, partnership or limited liability company, as the case may be, validly existing, in good standing and organized under the respective laws of its jurisdiction of organization set forth on Schedule A, and each Assignor will provide Laurus
thirty (30) days’ prior written notice of any change of its respective jurisdiction of organization; 
  
 (b) its legal name is as set forth in its respective Certificate of Incorporation or other organizational document (as applicable) as
amended through the date hereof and as set forth on Schedule A, and it will provide Laurus thirty (30) days’ prior written notice change in its legal name; 
  
 (c) its organizational identification number (if applicable) is as set forth on Schedule A hereto, and it
will provide Laurus thirty (30) days’ prior written notice of any change in any of its organizational identification number; 
  
 (d) it is the lawful owner of its respective Collateral and it has the sole right to grant a security interest therein and will defend
such Collateral against all claims and demands of all persons and entities; 
  
 (e) it will keep its respective Collateral free and clear of all attachments, levies, taxes, liens, security interests and encumbrances of every kind and nature (“Encumbrances”), except (the following,
“Permitted Encumbrances”): (i) Encumbrances set forth on Schedule B hereto, (ii) Encumbrances securing the Obligations and (iii) any other Encumbrance, to the extent any such Encumbrance referred to in this clause (iii) does not secure
indebtedness in excess of a principal amount of $50,000 in the aggregate and such Encumbrance is removed or otherwise released within ten (10) days of the creation thereof; 
  

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 (f) it will, at its and the other Assignors, joint and several cost and expense, keep the
Collateral in good state of repair (ordinary wear and tear excepted) and will not waste or destroy the same or any part thereof other than ordinary course discarding of items no longer used or useful in its or such other Assignors’ business;

  
 (g) it will not, without Laurus’ prior
written consent, sell, exchange, lease or otherwise dispose of the Collateral, whether by sale, lease or otherwise, except for the sale of inventory in the ordinary course of business and for the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out equipment or equipment no longer necessary for its ongoing needs, having an aggregate fair market value of not more than $25,000 and only to the extent that: 
  
 (i) the proceeds of any such disposition are used to acquire
replacement Collateral which is subject to Laurus’ first priority perfected security interest subject to Laurus agreement in Section 1 hereof to release or subordinate its lien on financed equipment,, or are used to repay Obligations or to pay
general corporate expenses; and 
  
 (ii)
following the occurrence of an Event of Default which continues to exist at the time of such disposition, the proceeds of such disposition are remitted to Laurus to be held as cash collateral for the Obligations; 
  
 (h) it will insure or cause the Collateral to be insured in
Laurus’ name against loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as Laurus shall specify in amounts and under policies by insurers acceptable to Laurus and all premiums thereon shall be paid by
such Assignor and certificate of insurance with respect to the applicable insurance policies delivered to Laurus. If any such Assignor fails to do so, Laurus may procure such insurance and the cost thereof shall be promptly reimbursed by the
Assignors, jointly and severally, and shall constitute Obligations; 
  
 (i) it will at all reasonable times allow Laurus or Laurus’ representatives free access to and the right of inspection of the Collateral; 
  
 (j) such Assignor (jointly and severally with each other Assignor) hereby indemnifies and saves Laurus
harmless from all loss, costs, damage, liability and/or expense, including reasonable attorneys’ fees, that Laurus may sustain or incur to enforce payment, performance or fulfillment of any of the Obligations and/or in the enforcement of this
Master Security Agreement or in the prosecution or defense of any action or proceeding either against Laurus or any Assignor concerning any matter growing out of or in connection with this Master Security Agreement, and/or any of the Obligations
and/or any of the Collateral except to the extent caused by Laurus’ own gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and nonappealable decision); and 
  

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 (k) upon the request of Laurus, will undertake all actions necessary to perfect
Laurus’ security interest in each vehicle (including any chasse of any vehicle) owned by any Assignor, to the extent such actions are permitted under applicable law after giving effect to any Permitted Encumbrances. 
  
 4. The occurrence of any of the following events or conditions shall
constitute an “Event of Default” under this Master Security Agreement: 
  
 (a) any covenant, warranty, representation or statement made or furnished to Laurus by the Assignor or on the Assignor’s behalf
pursuant to the Documents was breached in any material respect or false in any material respect when made or furnished, as the case may be, and, in the case of a covenant, if subject to cure, shall not be cured for a period of fifteen (15) days;

  
 (b) the loss, theft, substantial damage,
destruction, sale or encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof or thereon except to the extent: 
  
 (i) such loss is covered by insurance proceeds which are used to replace the item or repay Laurus or deposited with Laurus as cash
collateral; or 
  
 (ii) said levy, seizure or
attachment does not secure indebtedness in excess of $100,000 and such levy, seizure or attachment has not been removed or otherwise released within ten (10) days of the creation or the assertion thereof; 
  
 (b) any Assignor shall become insolvent, cease operations,
dissolve, terminate our business existence, make an assignment for the benefit of creditors, suffer the appointment of a receiver, trustee, liquidator or custodian of all or any part of Assignors’ property; 
  
 (c) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against any Assignor; 
  
 (d) the Company shall repudiate, purport to revoke or fail to perform any or all of its obligations under any Note (after passage of applicable cure period, if any); or 
  
 (e) an Event of Default shall have occurred under and as defined in any Document. 
  
 5. Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus shall have the remedies of a secured party provided in the Uniform Commercial Code as in effect in the State of New York, this Agreement and other applicable law. Upon the
occurrence of any Event of Default and at any time thereafter, Laurus will have the right to take possession of the Collateral and to maintain such possession on our premises or to remove the Collateral or any part thereof to such other premises as
Laurus may desire, all in accordance with applicable law. Upon Laurus’ request, each of the Assignors shall assemble or cause the Collateral to be assembled and make it available to Laurus at a place designated by Laurus. If any notification of
intended disposition of 
  

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 any Collateral is required by law, such notification, if mailed, shall be deemed properly and reasonably given if mailed
at least ten (10) days before such disposition, postage prepaid, addressed to any Assignor either at such Assignor’s address shown herein or at any address appearing on Laurus’ records for such Assignor. Any proceeds of any disposition of
any of the Collateral shall be applied by Laurus to the payment of all expenses in connection with the sale of the Collateral, including reasonable attorneys’ fees and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of such proceeds may be applied by Laurus toward the payment of the Obligations in such order of application as Laurus may elect, and each Assignor shall be liable for any
deficiency. For the avoidance of doubt, following the occurrence and during the continuance of an Event of Default, Laurus shall have the immediate right to withdraw any and all monies contained in the Restricted Account or any other deposit
accounts in the name of the Assignor and controlled by Laurus and apply same to the repayment of the Obligations (in such order of application as Laurus may elect). 
  
 6. If any Assignor defaults in the performance or fulfillment of any of the terms, conditions, promises, covenants,
provisions or warranties on such Assignor’s part to be performed or fulfilled under or pursuant to this Master Security Agreement, Laurus may, at its option without waiving its right to enforce this Master Security Agreement according to its
terms, immediately or at any time thereafter and without notice to any Assignor, perform or fulfill the same or cause the performance or fulfillment of the same for each Assignor’s joint and several account and at each Assignor’s joint and
several cost and expense, and the cost and expense thereof (including reasonable attorneys’ fees) shall be added to the Obligations and shall be payable on demand with interest thereon at the highest rate permitted by law, or, at Laurus’
option, debited by Laurus from the Restricted Account or any other deposit accounts in the name of the Assignor and controlled by Laurus. 
  
 7. Each Assignor appoints Laurus, any of Laurus’ officers, employees or any other person or entity whom Laurus may designate as our attorney, with
power, (i) after and during the continuance of an Event of Default, to execute such documents in each of our behalf and to supply any omitted information and correct patent errors in any documents executed by any Assignor or on any Assignor’s
behalf; (ii) to file financing statements against us covering the Collateral (and, in connection with the filing of any such financing statements, describe the Collateral as “all assets and all personal property, whether now owned and/or
hereafter acquired” (or any substantially similar variation thereof)); (iii) after and during the continuance of an Event of Default, to sign our name on public records; and (iv) to do all other things Laurus deem necessary to carry out the
intent of this Master Security Agreement. Each Assignor hereby ratifies and approves all acts of the attorney and neither Laurus nor the attorney will be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact
or law other than gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision). This power being coupled with an interest, is irrevocable so long as any Obligations remain unpaid.

  
 8. No delay or failure on Laurus’ part in exercising any
right, privilege or option hereunder shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver whatever shall be valid unless in writing, signed by Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other 
  

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 default or of the same default on a future occasion. Laurus’ books and records containing entries with respect to
the Obligations shall be admissible in evidence in any action or proceeding, shall be binding upon each Assignor for the purpose of establishing the items therein set forth and shall constitute prima facie proof thereof. Laurus shall have the right
to enforce any one or more of the remedies available to Laurus, successively, alternately or concurrently. Each Assignor agrees to join with Laurus in executing financing statements or other instruments to the extent required by the Uniform
Commercial Code in form satisfactory to Laurus and in executing such other documents or instruments as may be required or deemed necessary by Laurus for purposes of affecting or continuing Laurus’ security interest in the Collateral.

  
 9. This Master Security Agreement shall be governed by and
construed in accordance with the laws of the State of New York and cannot be amended or terminated orally. All of the rights, remedies, options, privileges and elections given to Laurus hereunder shall inure to the benefit of Laurus’ successors
and assigns. The term “Laurus” as herein used shall include Laurus, any parent of Laurus’, any of Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now existing or hereafter created or acquired, and all
of the terms, conditions, promises, covenants, provisions and warranties of this Agreement shall inure to the benefit of each of the foregoing, and shall bind the representatives, successors and assigns of each Assignor. Laurus and each Assignor
hereby (a) waive any and all right to trial by jury in litigation relating to this Agreement and the transactions contemplated hereby and each Assignor agrees not to assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan, the city of New York and (c) waive any objection Laurus or each Assignor may have as to the bringing or maintaining of such action with any such court. 
  
 10. It is understood and agreed that any person or entity that desires to
become an Assignor hereunder, or is required to execute a counterpart of this Master Security Agreement after the date hereof pursuant to the requirements of any Document, shall become an Assignor hereunder by (x) executing a Joinder Agreement in
form and substance satisfactory to Laurus, (y) delivering supplements to such exhibits and annexes to such Documents as Laurus shall reasonably request and (z) taking all actions as specified in this Agreement as would have been taken by such
Assignor had it been an original party to this Agreement, in each case with all documents required above to be delivered to Laurus and with all documents and actions required above to be taken to the reasonable satisfaction of Laurus. 
  
 11. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor’s address set forth below. 
  
 12. This Master Security Agreement and the security interests granted by the Assignors hereunder shall terminate (except with respect to indemnification provisions set forth herein which shall terminate in accordance with their terms) upon
the provision by Laurus of written confirmation to the Company, either independently or upon the written request of the Company following such repayment or termination, that (x) all indebtedness obligations owed by any Assignor to Laurus has been
repaid in full (including, without limitation, all principal, interest, fees, premiums, costs and expenses related to the Note and any other indebtedness outstanding at such time and owed to Laurus) and (y) any and all commitments by Laurus to fund
any indebtedness to any Assignor have been terminated in their entirety. Upon such 
  

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 termination, Laurus will, at the Company’s expense, execute and deliver to the Company such documents as the Company
shall reasonably request to evidence such termination. 
  

			
	 Very truly yours,

	
	 COACH INDUSTRIES GROUP, INC.

		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 
	
	 Address: 12555 Orange Drive, Suite 261
 Davie, Florida 33330

	
	 SPRINGFIELD COACH BUILDERS, INC.

		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 
	 Address: c/o Coach Industries Group, Inc.
 12555 Orange Drive, Suite 261
 Davie, Florida 33330

	
	SPRINGFIELD COACH INDUSTRIES CORPORATION, INC.
		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 
	 Address: c/o Coach Industries Group, Inc.
 12555 Orange Drive, Suite 261
 Davie, Florida 33330



  

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	COMMERCIAL TRANSPORTATION MANUFACTURING CORP.
		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 
	 Address: c/o Coach Industries Group, Inc.
 12555 Orange Drive, Suite 261
 Davie, Florida 33330

	
	COACH FINANCIAL SERVICES, INC.
		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 
	 Address: c/o Coach Industries Group, Inc.
 12555 Orange Drive, Suite 261
 Davie, Florida 33330



  

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	 ACKNOWLEDGED:

	
	 LAURUS MASTER FUND, LTD.

		
	 By:
	 	  


	 Name:
	 	 
	 Title
	 	 


  

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 SCHEDULE A 

 

					
	 Entity

	  	 Jurisdiction of
Organization

	  	 Organization Identification
Number



  

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 SCHEDULE B 
 PERMITTED ENCUMBRANCES 
  

 11