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Exhibit 10
LOAN AGREEMENT
DATED AS OF FEBRUARY 12, 1998
BETWEEN
UGLY DUCKLING CORPORATION
AND
EACH OF THE LENDERS NAMED HEREIN
$15,000,000 12% SENIOR SUBORDINATED LOAN
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS................................................................1
1.01 Defined Terms.....................................................1
1.02 Other Interpretive Provisions.....................................4
ARTICLE II.
THE LOAN...................................................................5
2.01 Amount and Notes..................................................5
2.02 Interest..........................................................6
2.03 Optional Prepayments..............................................6
2.04 Computation of Fees and Interest..................................6
2.05 Payments by the Company...........................................6
2.06 Sharing of Payments, Etc..........................................7
2.07 Priority of Payments; Subordination...............................7
ARTICLE III.
CONDITIONS PRECEDENT.......................................................7
3.01 Conditions of Loans to the Company................................7
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.............................................8
4.01 Organization......................................................8
4.02 Financial Statements..............................................8
4.03 Actions Pending...................................................8
4.04 Outstanding Obligations...........................................8
4.05 Taxes.............................................................8
4.06 Conflicting Agreements and Other Matters..........................9
4.07 ERISA.............................................................9
4.08 Governmental Consent..............................................9
4.09 Disclosure........................................................9
4.10 Possession of Franchises, Licenses, etc..........................10
ARTICLE V.
AFFIRMATIVE COVENANTS.....................................................10
5.01 Financial Statements.............................................10
5.02 Certificates; Other Information..................................10
5.03 Default Disclosure...............................................11
ARTICLE VI.
NEGATIVE COVENANTS........................................................11
6.01 Debt to Tangible Equity Ratio....................................11
6.02 Terms of Subordinated Debt.......................................11
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ARTICLE VII.
EVENTS OF DEFAULT.........................................................11
7.01 Event of Default.................................................11
7.02 Other Remedies...................................................12
ARTICLE VIII.
MISCELLANEOUS.............................................................13
8.01 Amendments and Waivers...........................................13
8.02 Notices..........................................................13
8.03 No Waiver: Cumulative Remedies...................................13
8.04 Costs and Expenses...............................................13
8.05 Successors and Assigns...........................................14
8.06 Assignment, Participations, etc..................................14
8.07 Counterparts.....................................................14
8.08 Severability.....................................................14
8.09 No Third Parties Benefited.......................................15
8.10 Time.............................................................15
8.11 Governing Law....................................................15
8.12 Waiver of Jury Trial.............................................15
8.13 Entire Agreement.................................................15
8.14 Interpretation...................................................15
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EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Form of Warrant
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SCHEDULES
Schedule 2.01 Disbursement of Loans
Schedule 4.04 Outstanding Obligations
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LOAN AGREEMENT
This LOAN AGREEMENT is dated as of February 12, 1998, between UGLY
DUCKLING CORPORATION, a Delaware corporation (the "Company"); and each lender
signatory hereto (each a "Lender," and collectively the "Lenders").
WHEREAS, each Lender has agreed to make a loan to the Company in the
amount of its respective Commitment (as defined herein) upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.01 Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract or otherwise.
"Aggregate Commitment" means the amount of Fifteen Million
Dollars ($15,000,000).
"Agreement" means this Loan Agreement, as amended,
supplemented or modified from time to time in accordance with the terms
hereof.
"Assignee" has the meaning specified in Section 8.06(a).
"Attorney Costs" means and includes all fees and disbursements
of any other external or in-house counsel.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Phoenix, Arizona, New York,
Chicago or Los Angeles are authorized or required by law to close.
"Capital Lease" has the meaning specified in the definition of
"Capital Lease Obligations".
"Capital Lease Obligations" means any rental obligation which,
in accordance with GAAP, is or will be required to be capitalized on
the books of the Company (a "Capital Lease"), taken at the amount
thereof accounted for as indebtedness (net of interest expense) in
accordance with GAAP.
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"Closing Date" means the date on which all conditions
precedent set forth in Section 3.01 are satisfied or waived by all
Lenders, which is anticipated to be February 12, 1998.
"Code" means the Internal Revenue Code of 1986 and any
regulations promulgated thereunder.
"Commitment" means with respect to each Lender, the amount set
forth opposite its name on the signature pages to this Agreement.
"Debt" means any Obligation for borrowed money, including the
indebtedness portion of any Capitalized Lease Obligations.
"Debt to Tangible Net Worth Ratio" means the debt-to-equity
ratio of the Company, calculated in accordance with GAAP by comparing
total Debt to Tangible Net Worth.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied) constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and regulations promulgated
thereunder.
"Event of Default" means any of the events or circumstances
specified in Section 7.01.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or
in such other statements by such other entity as may be in general use
by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Insolvency Proceeding" means, with respect to any Person, (a)
any case, action or proceeding before any court or other Governmental
Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors or other, similar
arrangement in respect of its creditors generally or any substantial
portion of its creditors.
"Lender" and "Lenders" have the meanings specified in the
introductory clause hereto.
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"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preference, priority or other security
interest or preferential arrangement of any kind or nature whatsoever
(including those created by, arising under, or evidenced by any
conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to
which such lien relates as debtor, under the UCC or any comparable law)
and any contingent or other agreement to provide any of the foregoing,
but not including the interest of a lessor under an Operating Lease.
"Loan" means an individual term loan made by each Lender in
the amount of each Lender's respective Commitment pursuant to Article
II.
"Loans" mean all of the term loans by the Lenders to the
Company pursuant to Article II.
"Loan Documents" means this Agreement, the Notes, the Warrant
Agreement, the Warrants, and all other documents delivered to any of
the Lenders in connection therewith.
"Material Adverse Effect" means a material adverse change in,
or a material adverse effect upon, any of (a) the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company taken as a whole, (b) the ability of the Company to perform
under any Loan Document and avoid any Event of Default, or (c) the
legality, validity, binding effect or enforceability of any Loan
Document.
"Maturity Date" means February 12, 2001.
"Notes" shall mean the promissory notes, dated as of the
Closing Date, substantially in the form of Exhibit A annexed hereto,
issued by the Company to the order of the Lenders evidencing the
obligation of the Company to repay the Loans.
"Obligations" mean all Loans and other Debt, advances, debts,
liabilities, obligations, covenants and duties owing by the Company to
any Person, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement or under any other loan document, or out of any other
agreement or understanding, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however
acquired.
"Operating Lease" means, as applied to any Person, any lease
of property which is not a Capital Lease.
"Ordinary Course of Business" means, in respect of any
transaction involving the Company, the ordinary course of the Company's
business, substantially as conducted by the Company prior to or as of
the Closing Date, and undertaken by the Company in good faith and not
for purposes of evading any covenant or restriction in any Loan
Document.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
joint venture or governmental authority.
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"Pro-Rata Basis" means pro-rata as to the Lenders based on the
unpaid principal balance of each Lender's Loan.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility or, with respect to financial
matters, the chief financial officer or the treasurer of the Company,
or any other officer having substantially the same authority and
responsibility.
"SEC" means the Securities and Exchange Commission, or any
successor thereto.
"Subordinated Debt" means the Obligation represented by that
certain 10% Subordinated Debenture of the Company dated as of June 21,
1996, as amended, payable to Verde Investments, Inc., and any other
unsecured Obligation which by its express terms is subordinated in
right of payment to any other unsecured Obligation of the Company.
"Tangible Net Worth" means the total of the Company's
shareholders' equity (including capital stock, additional paid-in
capital, and retained earnings), less (i) the total amount of loans and
debts due from Affiliates, shareholders, officers, or employees of the
Company, and (ii) the total amount of any intangible assets, including
without limitation unamortized discounts, deferred charges, and
goodwill as determined in accordance with GAAP.
"UCC" means the Uniform Commercial Code as in effect in any
jurisdiction.
"Warrant" means the warrant issued to each of the Lenders
pursuant to the Warrant Agreement substantially in the form of Exhibit
B to this Agreement.
"Warrant Agreement" means the Warrant Agreement dated as of
February 12, 1998 among the Company and each of the Lenders providing
for the issuance of warrants to the Lenders to acquire 500,000 shares
of the Company's Common Stock, exercisable at a price of $10.00 per
share for a period of three years.
1.02 Other Interpretive Provisions.
Defined Terms. Unless otherwise specified herein or
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto. The meaning of defined terms shall be equally applicable to the singular
and plural forms of the defined terms. Terms (including uncapitalized terms) not
otherwise defined herein and that are defined in the UCC shall have the meanings
therein described.
(a) The Agreement. The words "hereof", "herein", "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
section, schedule and exhibit references are to this Agreement unless otherwise
specified.
(b) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
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(ii) The term "including" is not limiting and means
"including without limitation".
(iii) The term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or".
(c) Performance; Time. Whenever any performance obligation
hereunder (other than a payment obligation) shall be stated to be due or
required to be satisfied on a day other than a Business Day, such performance
shall be made or satisfied on the next succeeding Business Day. In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including". If any
provision of this Agreement refers to any action taken or to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
interpreted to encompass any and all means, direct or indirect, of taking, or
not taking, such action.
(d) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
(e) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(f) Captions. The captions and headings of this Agreement are
for convenience of reference only and shall not affect the construction of this
Agreement.
(g) Independence of Provisions. The parties acknowledge that
this Agreement and other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
(h) Accounting Principles.
(i) Unless the context otherwise clearly requires,
all accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(ii) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II.
THE LOAN
2.01 Amount and Notes.
Each Lender shall make its respective Loan to the Company in a
single advance to be disbursed pursuant to Schedule 2.01 on the Closing Date.
The Company has authorized the
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issuance of the Notes in the aggregate principal amount of Fifteen Million
Dollars ($15,000,000). On the Closing Date, the Company shall issue and deliver
to each Lender a Note in the principal amount equal to such Lender's Commitment,
payable to the order of such Lender, substantially in the form of Exhibit A to
this Agreement. The Notes will evidence the principal amount of each Loan
together with interest accrued and unpaid thereon.
2.02 Interest.
(a) Each Loan shall accrue interest on the outstanding
principal amount thereof for the period from and including the date of such Loan
to but excluding the date such Loan shall be paid in full at a rate per annum
equal to 12%.
(b) Accrued interest shall be paid quarterly in arrears on (i)
March 31, June 30, September 30 and December 31 of each year; and (ii) on the
Maturity Date. Accrued and unpaid interest shall also be paid on the date of any
prepayment of the Loans pursuant to Section 2.03 for the portion of the Loans so
prepaid and upon prepayment in full thereof.
(c) While any Event of Default exists and is continuing or
after acceleration, the Company shall pay interest (after as well as before
entry of judgment thereon to the extent permitted by law) on the principal
amount of the Loans then unpaid, at a rate per annum equal to 18%.
(d) The Company agrees to pay an effective contracted for rate
of interest equal to the rate of interest resulting from all interest payable as
provided herein, plus all other fees, charges and costs that may be deemed or
determined to be interest. Anything herein to the contrary notwithstanding, the
obligations of the Company hereunder shall be subject to the limitation that
payments of interest shall not be required, for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by the respective Lender would be contrary to the
provisions of any law applicable to such Lender limiting the highest rate of
interest which may be lawfully contracted for, charged or received by such
Lender, and in such event the Company shall pay such Lender interest at the
highest rate permitted by applicable law.
2.03 Optional Prepayments. The Company may, at any time or from time to
time, upon at least 10 Business Days notice to each of the Lenders, prepay pro
rata the Loans in whole or in part, without penalty or premium. Such notice of
prepayment shall specify the date and amount of such prepayment. If such notice
is given by the Company, the Company shall make such prepayment on a Pro-Rata
Basis and each Lender's pro-rata share thereof and the payment amount specified
in such notice shall be due and payable on the date specified therein, together
with accrued interest to each such date on the amount prepaid.
2.04 Computation of Fees and Interest. All computations of fees and
interest under this Agreement shall be made on the basis of a 365-day year.
2.05 Payments by the Company.
(a) All payments (including prepayments) to be made by the
Company on account of principal, interest, fees and other amounts required
hereunder shall be made without set-off, deduction, recoupment or counterclaim
and shall, except as otherwise expressly provided herein, be made to the Lenders
at each of the Lender's respective offices as set forth on the applicable
signature pages hereof, in U.S. dollars and in immediately available funds, no
later than 1:30 p.m. Phoenix, Arizona time on the date specified herein. Any
payment which is received by
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the applicable Lender later than 1:30 p.m. (Phoenix, Arizona time) shall be
deemed to have been received on the immediately succeeding Business Day and any
applicable interest or fee shall continue to accrue.
(b) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.
2.06 Sharing of Payments, Etc. All principal payments shall be made to
the Lenders on a Pro-Rata Basis.
2.07 Priority of Payments; Subordination. Notwithstanding anything in
this Agreement to the contrary, the payment of principal and interest under this
Agreement on the Loans is expressly subordinated for all purposes to any
Obligations now in existence or later incurred by the Company other than
Subordinated Debt; and each of the Lenders will, upon request of any institution
or Person that is an obligee of any Obligation now in existence or incurred by
the Company in the future, execute and deliver an agreement of subordination in
form mutually satisfactory to each of the Lenders and such institution or
Person, the tenor of which shall be to effectuate the terms of this Section.
ARTICLE III.
CONDITIONS PRECEDENT
3.01 Conditions of Loans to the Company. The obligation of each Lender
to fund its Loan to the Company hereunder is subject to the condition that the
Lenders shall have received on or before February 12, 1998, in form and
substance satisfactory to each Lender and their respective counsel and in
sufficient copies for each Lender, all of the following:
(a) Loan Agreement. This Agreement executed by the Company and
each Lender;
(b) Resolutions: Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company approving and authorizing the execution,
delivery and performance by the Company of this Agreement and the other
Loan Documents to be delivered hereunder, and authorizing the borrowing
of the Loans, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers of the Company authorized to execute, deliver and perform,
as applicable, this Agreement, and all other Loan Documents to be
delivered hereunder;
(c) Articles of Incorporation: Bylaws and Good Standing. Each
of the following documents:
(i) the certificate of incorporation of the Company
as in effect on the Closing Date, certified by the Secretary of State
of the state of Delaware as of a recent date
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and by the Secretary or Assistant Secretary of the Company as of the
Closing Date, and the Bylaws of the Company as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of the Company
as of the Closing Date, and
(ii) a good standing certificate for the Company from
the Secretary of State of its state of incorporation.
(d) Notes. The Notes, executed by the Company.
(e) Warrants. The Warrant Agreement, executed by the Company
and each of the Lenders, together with the Warrants.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Lender that:
4.01 Organization. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, the Company
has the corporate power to own its property and to carry on its business as now
being conducted, and the Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it makes such qualification necessary.
4.02 Financial Statements. The Company has provided to the Lenders
copies of the following audited financial statements: a balance sheet of the
Company as of December 31, 1997, and statements of income and cash flows for the
fiscal year ended December 31, 1997. Such financial statements (including any
related schedules and/or notes) are true and correct in all material respects,
have been prepared in accordance with GAAP consistently followed throughout the
periods involved and show all liabilities, direct and contingent, of the Company
required to be shown in accordance with GAAP. The balance sheet fairly presents
the condition of the Company as at the date thereof, and the statements of
income and cash flows fairly present the results of the operations of the
Company for the periods indicated. There has been no change in the business,
condition (financial or otherwise) or operations of the Company since December
31, 1997, which could reasonably be expected to have a Material Adverse Effect.
4.03 Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any properties or rights of the Company, by or before any court,
arbitrator or administrative or governmental body which could reasonably be
expected to result in any Material Adverse Effect.
4.04 Outstanding Obligations. After giving effect to the transactions
contemplated hereby, the Company does not have any Obligations outstanding
except Obligations disclosed in the financial statements provided pursuant to
Section 4.02 and except as disclosed in Schedule 4.04 attached hereto. There
exists no default (or, to the knowledge of the Company, any event or condition
that, with the passage of time, would constitute a default) under the provisions
of any instrument evidencing such Obligations or of any agreement relating
thereto.
4.05 Taxes. The Company has filed all Federal, State and other income
tax returns which, to the best knowledge of the officers of the Company, are
required to be filed, and has paid all taxes
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as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP.
4.06 Conflicting Agreements and Other Matters. The Company is not a
party to any contract or agreement or subject to any charter or other corporate
restriction which materially and adversely affects its business, property or
assets, or financial condition. Neither the execution nor delivery of this
Agreement or the other Loan Documents, nor fulfillment of nor compliance with
the terms and provisions hereof and of the other Loan Documents will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company
pursuant to, the Certificate of Incorporation or Bylaws of the Company, any
award of any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company is subject. The Company is not a party to, or
otherwise subject to any provision contained in, any instrument evidencing
indebtedness of the Company, any agreement relating thereto or any other
contract or agreement (including its charter) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Debt of the Company of the
type to be evidenced by this Agreement or the Notes.
4.07 ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any plan (other than a multiemployer plan). No liability to the
Pension Benefit Guaranty Corporation has been or is expected by the Company to
be incurred with respect to any plan (other than a multiemployer plan) by the
Company which could reasonably be expected to have a Material Adverse Effect.
The Company has not incurred or does not presently expect to incur any
withdrawal liability under Title IV of ERISA with respect to any multiemployer
plan which is or would be materially adverse to the Company. The execution and
delivery of this Agreement and the other Loan Documents will not involve any
transaction which is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section 4975 of the
Code. For the purpose of this Section 4.09, the term "plan" shall mean an
"employee pension benefit plan" (as defined in section 3 of ERISA) which is or
has been established or maintained, or to which contributions are or have been
made, by the Company or by any trade or business, whether or not incorporated,
which, together with the Company, is under common control, as described in
section 414(b) or (c) of the Code; and the term "multiemployer plan" shall mean
any plan which is a "multiemployer plan" (as such term is defined in section
4001(a)(3) of ERISA).
4.08 Governmental Consent. Neither the nature of the Company's
business, nor any of its respective properties, nor any relationship between the
Company and any other Person, nor any circumstance in connection with the making
of the Loans or delivery of the Notes is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing with any
Governmental Authority that has not previously been made or taken and to which
all applicable waiting periods have expired.
4.09 Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to any Lender by or on behalf of the Company
in connection herewith contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein and therein not misleading. There is no fact peculiar to the Company
which has had a Material Adverse Effect or in the future could reasonably be
expected to have a Material Adverse Effect that has not been set forth in this
Agreement or disclosed in the Company's filings with the SEC, or in the other
documents, certificates and statements furnished to any Lender
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by or on behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby.
4.10 Possession of Franchises, Licenses, etc. The Company possesses all
franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities and all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that are necessary in any material respect
for the ownership, maintenance and operation of its properties and assets, and
the Company is not in violation of any thereof in any material respect.
ARTICLE V.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, unless the Lenders
waive compliance in writing:
5.01 Financial Statements. The Company shall deliver to each of the
Lenders in form and detail satisfactory to each of the Lenders:
(a) promptly upon transmission thereof, copies of all
financial statements, proxy statements, notices and reports as it shall send to
its stockholders and copies of all registration statements (without exhibits)
and all reports which it files with the SEC (or any governmental body or agency
succeeding to the functions of the SEC); and
(b) with reasonable promptness, such other financial data as
the Lenders may reasonably request, subject to the Company's right to maintain
confidentiality of any financial information to the extent necessary to comply
with applicable securities laws.
5.02 Certificates; Other Information. Within 60 days after the end of
each quarterly period (other than the fourth quarterly period) in each fiscal
year and within 105 days after the end of each fiscal year, the Company shall
deliver to each Lender a certificate of a Responsible Officer setting forth
(except to the extent specifically set forth in any financial statements filed
within such periods with the SEC):
(a) sufficient information (including detailed calculations
reasonably satisfactory to the Lenders) to establish whether the Company is in
compliance with the requirements of Sections 6.01; and
(b) a statement that there exists no Event of Default or
Default, or, if any such Event of Default or Default exists, specifying:
(i) the nature thereof;
(ii) the period of existence thereof; and
(iii) what action the Company proposes to take with
respect thereto.
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5.03 Default Disclosure. The Company shall forthwith, upon a
Responsible Officer of the Company obtaining knowledge of an Event of Default or
Default, promptly deliver to each Lender a Certificate of a Responsible Officer
specifying the nature and period of existence thereof and what action the
Company proposes to take with respect thereto.
ARTICLE VI.
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, unless the
Lenders waive compliance in writing:
6.01 Debt to Tangible Equity Ratio. The Company shall not permit the
Company's Debt to Tangible Equity Ratio to exceed 2.1 to 1, calculated as of the
end of each quarterly period in each fiscal year.
6.02 Terms of Subordinated Debt. The Company shall not enter into any
agreement (oral or written) which could in any way be construed as amending,
modifying, altering, changing or terminating any one or more provisions relating
to the Subordinated Debt to the extent that such amendment, modification,
alteration, change or termination would subordinate the payment of interest on
or principal of the Loans to the payment of principal and interest relating to
the Subordinated Debt.
ARTICLE VII.
EVENTS OF DEFAULT
7.01 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) The Company defaults in the payment of any principal of
the Loan when the same shall become due, either by the terms thereof or
otherwise as herein provided; or
(b) The Company defaults in the payment of any interest on the
Loan when the same shall become due and such default continues for a period of
five Business Days; or
(c) The Company fails to make any payment when due with
respect to any Obligation of the Company (other than an obligation payable
hereunder), or any breach, default or event of default shall occur, or any other
conditions shall exist under any instrument, agreement or indenture pertaining
to such Obligation, if the holder or holders of such Obligation accelerate the
maturity of any such Obligation or require a redemption or other repurchase of
such Obligation and such failure relates to the acceleration or redemption of an
amount in excess of $10 million and such acceleration continues for a period of
five Business Days; or
(d) Any representation or warranty made by the Company herein
or by the Company or any of its officers in any writing furnished in connection
with or pursuant to this Agreement shall be false in any material respect on the
date as of which made; or
(e) The Company fails to perform or observe any covenant or
agreement contained in Article VI hereof; or
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(f) The Company fails to perform or observe any other
agreement, covenant, term or condition contained herein and such failure shall
not be remedied within 30 days after receipt of notice thereof from any Lender;
or
(g) The Company makes an assignment for the benefit of
creditors or is generally not paying its debts as such debts become due; or
(h) Any decree or order for relief in respect of the Company
is entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "Bankruptcy Law"), of any
jurisdiction; or
(i) The Company petitions or applies to any tribunal for, or
consents to, the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the Company, or of any substantial
part of the assets of the Company, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings relating to the Company
under the Bankruptcy Law of any other jurisdiction; or
(j) Any such petition or application referenced in clause (i)
above is filed, or any such proceedings referenced in clause (i) above are
commenced against the Company, and the Company by any act indicates its approval
thereof, consent thereto or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 30 days;
or
(k) Any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of the Company and
such order, judgment or decree remains unstayed and in effect for more than 60
days; or
(l) Any order, judgment or decree is entered in any
proceedings against the Company decreeing a split-up of the Company which
requires the divestiture of assets representing a substantial part, and such
order, judgment or decree remains unstayed and in effect for more than 60 days.
then (a) if such event is an Event of Default specified in any of clauses (g)
through (l) of this Section 7.01 with respect to the Company, all of the Loans
at the time outstanding shall automatically become immediately due and payable
at par together with interest accrued thereon, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the Company,
and (b) if such event is any other Event of Default, any Lender may, by notice
in writing to the Company, declare all of such Lender's Loan to be, and all of
such Lender's Loan shall thereupon be and become, immediately due and payable
together with interest accrued thereon without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company.
7.02 Other Remedies. If any Event of Default or Default shall occur and
be continuing, each Lender may proceed to protect and enforce its rights under
this Agreement by exercising such remedies as are available to such Lender in
respect thereof under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any covenant or other
agreement contained in this Agreement or in aid of the exercise of any power
granted in this Agreement. No remedy conferred in this Agreement upon the
Lenders is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition
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to every other remedy conferred herein or now or hereafter existing at law or in
equity or by statute or otherwise.
ARTICLE VIII.
MISCELLANEOUS
8.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Lenders and the Company, and then such waiver shall
be effective only in the specific instance and for the specific purpose for
which given.
8.02 Notices.
(a) All notices, requests and other communications provided
for hereunder shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that, any matter
transmitted by the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on the applicable
signature page hereof, and (ii) shall be followed promptly by a hard copy
original thereof) and mailed, faxed, telecopied or delivered, to the address or
facsimile number specified for notices on the applicable signature page hereof;
or, as to the Company or each of the Lenders, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to each other party, at such other address as shall be designated by
such party in a written notice to the Company and each of the Lenders.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery or faxed, be effective when delivered for
overnight (next day) delivery, transmitted by facsimile machine, respectively,
or if delivered, upon delivery.
8.03 No Waiver: Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
8.04 Costs and Expenses. The Company shall, following consummation of
the transactions contemplated hereby:
(a) pay or reimburse each Lender within 10 Business Days after
demand for all reasonable costs and expenses incurred by each Lender in
connection with any amendment, supplement, waiver or modification to this
Agreement, any other Loan Document and any other documents prepared in
connection therewith, including the reasonable Attorney Costs incurred by any
Lender with respect thereto; and
(b) pay or reimburse each Lender within 10 Business Days after
demand for all reasonable costs and expenses incurred by them in connection with
the enforcement, attempted enforcement, or preservation of any rights or
remedies (including in connection with any "workout" or restructuring regarding
the Loans, and including in any Insolvency Proceeding or appellate
13
19
proceeding) under this Agreement, any other Loan Document, and any such other
documents, including reasonable Attorney Costs incurred by any Lender.
8.05 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender.
8.06 Assignment, Participations, etc.
(a) Any Lender may, with the written consent of the Company
(which consent shall be obtained prior to such Lender's delivery of any
information (including financial information) to any Assignee (as hereinafter
defined) relating to an assignment of such Lender's rights and obligations under
the Loan Documents, at all times other than during the existence of an Event of
Default, which consent shall not be unreasonably withheld, at any time assign
and delegate to one or more person or entity (provided, that, no written consent
of the Company shall be required in connection with any assignment and
delegation by a Lender to a Lender Affiliate of such Lender) (each an
"Assignee") all (but no less than all) of its interest in the Loan and the other
rights and obligations of such Lender hereunder, provided, however, that, the
Company and each other Lender may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee shall have been given to the
Company by such Lender and the Assignee.
(b) From and after the date that such Lender notifies the
Company of such assignment and the Company consents to such assignment, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it by such Lender, shall have the
rights and obligations of such Lender under the Loan Documents, and (ii) the
assignor Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such assignment, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Immediately after compliance with the conditions contained
in Sections 8.06(a) and (b) with respect to any Lenders making an assignment or
delegation to an eligible Assignee, this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Loans arising therefrom.
8.07 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts
taken together shall be deemed to constitute but one and the same instrument. A
set of the copies of this Agreement signed by all the parties shall be lodged
with the Company and the Lenders.
8.08 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
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8.09 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company and the Lenders,
and their permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other Loan
Documents. No Lender shall have any obligation to any Person not a party to this
Agreement or other Loan Documents.
8.10 Time. Time is of the essence as to each term or provision of this
Agreement and each of the other Loan Documents.
8.11 Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO HAVE BEEN MADE
IN THE STATE OF CALIFORNIA; AND (B) THE VALIDITY OF THIS AGREEMENT AND THE
NOTES, AND THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
ALL CLAIMS MADE IN CONNECTION THEREWITH, AND THE RIGHTS OF THE PARTIES THERETO
SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA.
8.12 Waiver of Jury Trial.
THE COMPANY AND THE LENDERS HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
COMPANY AND THE LENDERS HEREBY AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT IN ANY WAY LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM, OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. A COPY OF THIS SECTION 8.12 MAY BE FILED WITH ANY COURT AS WRITTEN
EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND CONSENT TO TRIAL.
8.13 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire Agreement and understanding among the Company and
the Lenders and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof and any prior arrangements made with respect to the
payment by the Company (or any indemnification for) any fees, costs or expenses
payable to or incurred (or to be incurred) by or on behalf of the Lenders
pursuant to the Loan Documents.
8.14 Interpretation. This Agreement is the result of negotiations
between and has been reviewed by counsel to the Lenders, the Company and other
parties, and is the product of all parties hereto. Accordingly, this Agreement
and the other Loan Documents shall not be construed against
15
21
the Company merely because of the Company's involvement in the preparation of
such documents and agreements.
[Balance of Page Intentionally Left Blank]
16
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
UGLY DUCKLING CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Senior Vice President and General Counsel
Address for notices:
Ugly Duckling Corporation
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Senior Vice President and General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Commitment: $2,700,000 ARBCO ASSOCIATES, L.P.
By: KAIM Non-Traditional, L.P.
Its: General Partner
By: Xxxxx Xxxxxxxx Investment Management, Inc.
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Title: Authorized Officer
--------------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy : (000) 000-0000
17
23
Commitment: $3,000,000 XXXXX XXXXXXXX NON-TRADITIONAL
INVESTMENTS, L.P.
By: Xxxxx Xxxxxxxx Non-Traditional, L.P.
Its: General Partner
By: Xxxxx Xxxxxxxx Investment Management, Inc.
Its: General Partner
By: /s/ XXXXXXX X. XXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: Authorized Officer
----------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Commitment: $2,400,000 OFFENSE GROUP ASSOCIATES, L.P.
By: Xxxxx Xxxxxxxx Non-Traditional, L.P.
Its: General Partner
By: Xxxxx Xxxxxxxx Investment Management, Inc.
Its: General Partner
By: /s/ XXXXXXX X. XXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: Authorized Officer
----------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy : (000) 000-0000
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Commitment: $900,000 OPPORTUNITY ASSOCIATES,
LIMITED PARTNERSHIP
By: Xxxxx Xxxxxxxx Non-Traditional, L.P.
Its: General Partner
By: Xxxxx Xxxxxxxx Investment Management, Inc.
Its: General Partner
By: /s/ XXXXXXX X. XXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: Authorized Officer
----------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Commitment: $300,000 XXXXX XXXXXXXX OFFSHORE LIMITED
By: /s/ XXXX XXXXXX
-------------------------------
Name: Xxxx Xxxxxx
-----------------------------
Title: Authorized Officer
----------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
19
25
Commitment: $2,100,000 GLACIER WATER SERVICES, INC.
By: /s/ XXXXX XXXXX
--------------------------------
Name: Xxxxx Xxxxx
------------------------------
Title: Authorized Officer
-------------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Commitment: $1,200,000 PARADIGM INSURANCE COMPANY
By: /s/ XXXXX XXXXXXX
--------------------------------
Name: Xxxxx Xxxxxxx
------------------------------
Title: Authorized Officer
-------------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Commitment: $1,500,000 FOREMOST INSURANCE COMPANY
By: /s/ XXXXXX XXXXX
--------------------------------
Name: Xxxxxx Xxxxx
------------------------------
Title: Authorized Officer
-------------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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Commitment: $900,000 TOPA INSURANCE COMPANY
By: /s/ NOSH XXXXXXXX
--------------------------------
Name: Nosh Xxxxxxxx
------------------------------
Title: Authorized Officer
-------------------------------
Address for notices:
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
21
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EXHIBIT A
PROMISSORY NOTE
Original Face Amount: $____________
Maker: UGLY DUCKLING CORPORATION, a Delaware corporation
Dated as of: February 12, 1998
1. Promise to Repay. FOR VALUE RECEIVED, UGLY DUCKLING
CORPORATION, a Delaware corporation ("Maker"), promises to pay to
_____________________ ("Payee"), or order, the principal sum of
_________________ Dollars ($________) or such lesser amount as shall equal the
outstanding amount of the loan (the "Loan") made by Payee to Maker, pursuant to
Section 2.01 of that certain Loan Agreement, dated as of February 12, 1998,
entered into between Maker and each of Payee and the other Lenders named therein
(the "Loan Agreement").
2. Defined Terms. Any and all initially capitalized terms used
herein shall have the meaning ascribed thereto in the Loan Agreement, unless
specifically defined herein. The term "or" as used in this Note has, except
where otherwise indicated, the inclusive meaning represented by the phrase
"and/or". This Promissory Note (this "Note") is one of the promissory notes
defined in the Loan Agreement as the "Notes" and is subject to, and entitled to
the benefits of, the terms and provisions of the Loan Agreement.
3. Payments of Principal and Interest.
(a) Maker hereby promises to make payments of
principal and interest with respect to the Loan evidenced hereby at the rates
and times, and in the amounts, and in all other respects in the manner as
provided in the Loan Agreement.
(b) As more fully set forth in the Loan Agreement,
Maker shall not be obligated to pay, and the holder of this Note shall not be
obligated to charge, collect, receive, reserve, or take interest (it being
understood that interest shall be calculated as the aggregate of all charges
which constitute interest under applicable law that are contracted for, charged,
reserved, received, or paid) in excess of the maximum nonusurious interest rate,
as in effect from time to time, which may be charged, contracted for, reserved,
received, or collected by Payee in connection with the Loan Agreement, this
Note, the other Loan Documents, or any other documents executed in connection
herewith or therewith.
4. Prepayments. Maker may prepay the principal balance due
under this Note, in whole or in part, without penalty or premium, only in
accordance with the provisions of the Loan Agreement.
5. Application of Payments. All payments (including
prepayments) made hereunder shall be applied first to accrued and unpaid
interest and then to principal.
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6. Time and Place of Payments. All principal and interest due
hereunder is payable in U.S. Dollars in immediately available funds at Payee's
office located at 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000 (or
at such other office as may be designated from time to time by Payee), not later
than 1:30 p.m., Phoenix, Arizona time, on the date of payment.
7. Waivers. Maker, for itself and its legal representatives,
successors, and assigns, expressly waives presentment, demand, protest, notice
(except as required by the Loan Agreement), and all other requirements of any
kind, in connection with the enforcement or collection of this Note.
8. Acceleration and Waiver. IT IS EXPRESSLY AGREED THAT, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT AS SPECIFIED IN SECTIONS 7.01(g) THROUGH
(l) OF THE LOAN AGREEMENT, THE UNPAID PRINCIPAL BALANCE OF AND ANY ACCRUED AND
UNPAID INTEREST UNDER THIS NOTE SHALL AUTOMATICALLY BECOME IMMEDIATELY DUE AND
PAYABLE PURSUANT TO THE TERMS OF THE LOAN AGREEMENT, AND, UPON THE OCCURRENCE OF
ANY OTHER EVENT OF DEFAULT SPECIFIED IN SECTION 7.01 OF THE LOAN AGREEMENT, THE
UNPAID PRINCIPAL BALANCE OF ANY ACCRUED AND UNPAID INTEREST UNDER THIS NOTE MAY,
BY NOTICE IN WRITING TO MAKER, BE DECLARED TO BE IMMEDIATELY DUE AND PAYABLE
PURSUANT TO THE TERMS OF THE LOAN AGREEMENT, WITHOUT PRESENTMENT, DEMAND,
PROTEST, NOTICE (EXCEPT AS REQUIRED THE LOAN AGREEMENT), OR OTHER REQUIREMENTS
OF ANY KIND, ALL OF WHICH AR HEREBY EXPRESSLY WAIVED BY MAKER.
9. Attorneys' Fees. In the event it should become necessary to
employ counsel to collect or enforce this Note, Maker agrees to pay the
reasonable attorneys' fees and costs (including those of in-house counsel) of
the holder hereof, irrespective of whether suit is brought, to the extent and as
provided in the Loan Agreement.
10. Amendments. This Note may not be changed, modified,
amended, or terminated except by a writing duly executed by Maker and the holder
hereof.
11. Headings. Section headings used in this Note are solely
for convenience of reference, shall not constitute a part of this Note for any
other purpose, and shall not affect the construction of this Note.
12. GOVERNING LAW. EXCEPT AS OTHERWISE PROVIDED IN THE LOAN
AGREEMENT: (a) THIS NOTE SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF
CALIFORNIA; AND (b) THE VALIDITY OF THIS NOTE AND THE CONSTRUCTION,
INTERPRETATION AND ENFORCEMENT OF, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.
13. WAIVER OF TRIAL BY JURY. MAKER, TO THE EXTENT IT MAY
LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS NOTE, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE
DEALINGS OF MAKER, AND PAYEE, WITH RESPECT TO THIS
2
29
NOTE, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE. TO THE EXTENT IT MAY LEGALLY DO SO, MAKER HEREBY AGREES THAT ANY SUCH
CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A
COURT TRIAL WITHOUT A JURY AND THAT PAYEE MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF MAKER
TO WAIVER OF ITS RIGHT TO TRIAL BY JURY.
Dated as of February 12, 1998.
UGLY DUCKLING CORPORATION,
a Delaware corporation
By:
--------------------------------
Name: Xxxxxx X. Xxxxxxx
-------------------------------
Title: Senior Vice President and
-------------------------------
General Counsel
3
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EXHIBIT B
Warrant No. ___
WARRANT TO PURCHASE _________ SHARES OF COMMON STOCK
VOID AFTER 1:30 P.M.,
PHOENIX, ARIZONA TIME, ON FEBRUARY 12, 2001
OR SUCH LATER DATE SET FORTH HEREIN
UGLY DUCKLING CORPORATION
This certifies that, for value received, _____________________, the
registered holder hereof or assigns (the "Holder"), is entitled to purchase from
UGLY DUCKLING CORPORATION, a Delaware corporation (the "Company"), at any time
after February 12, 1998, and before the later of (i) 1:30 p.m., Phoenix, Arizona
time, on February 12, 2001 or (ii) such time as the Company has repaid in full
its Notes issued pursuant to that certain Loan Agreement dated as of February
12, 2001 between the Company and each of the Lenders named therein, at the
purchase price per share of $10.00 (the "Warrant Price"), the number of shares
of Common Stock, par value $0.001 per share, of the Company set forth above (the
"Shares"). The number of shares of Common Stock purchasable upon exercise of the
Warrant evidenced hereby and the Warrant Price is subject to adjustment from
time to time as set forth in the Warrant Agreement referred to below.
This Warrant may be redeemed, at the option of the Company and as more
specifically provided in the Warrant Agreement, at $.10 per share of Common
Stock purchasable upon exercise hereof, at any time after the average Daily
Market Price (as defined in Section 10 of the Warrant Agreement) per share of
the Common Stock for a period of at least twenty (20) consecutive trading days
ending not more than fifteen days prior to the date of the notice given pursuant
to Section 10(b) thereof has equaled or exceeded $16.00, and prior to expiration
of this Warrant. The Holder's right to exercise this Warrant terminates at 1:30
p.m. (Phoenix, Arizona time) on the date fixed for redemption in the notice of
redemption delivered by the Company in accordance with the Warrant Agreement.
The Warrants evidenced hereby may be exercised during the period
referred to above, in whole or in part, by presentation of this Warrant
certificate with the Purchase Form attached hereto duly executed and guaranteed
and simultaneous payment of the Warrant Price (as defined in the Warrant
Agreement and subject to adjustment as provided therein) at the principal office
of the Company. Payment of such price may be made at the option of the Holder in
cash or by certified check or bank draft, all as provided in the Warrant
Agreement.
The Warrants evidenced hereby are part of a duly authorized issue of
Warrants and are issued under and in accordance with the Warrant Agreement dated
as of February 12, 1998, between the Company and the Lenders party thereto, and
are subject to the terms and provisions
31
contained in such Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference herein and made a part hereof and is hereby referred
to for a description of the rights, limitations, duties and indemnities
thereunder of the Company and the Holder of the Warrants, and to all of which
the Holder of this Warrant certificate by acceptance hereof consents. A copy of
the Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Company.
Upon any partial exercise of the Warrants evidenced hereby, there will
be issued to the Holder a new Warrant certificate in respect of the Shares
evidenced hereby that have not been exercised. This Warrant certificate may be
exchanged at the office of the Company by surrender of this Warrant certificate
properly endorsed either separately or in combination with one or more other
Warrants for one or more new Warrants to purchase the same aggregate number of
Shares as evidenced by the Warrant or Warrants exchanged. No fractional Shares
will be issued upon the exercise of rights to purchase hereunder, but the
Company will pay the cash value of any fraction upon the exercise of one or more
Warrants, as provided in the Warrant Agreement.
The Warrant Price and the number of shares of Common Stock issuable
upon exercise of this Warrant is subject to adjustment as provided in Section 8
of the Warrant Agreement. The Warrant Agreement may be amended by the Company
and the holder or holders of a majority of the outstanding Warrants representing
a majority of the shares of Common Stock underlying such Warrants; provided that
without the consent of each holder of a Warrant certain specified changes cannot
be made to such holder's Warrants.
Neither the Warrants nor the shares of Common Stock underlying the
Warrants may be sold, assigned, or otherwise transferred except in accordance
with the provisions of the Warrant Agreement.
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant certificate as the absolute owner hereof for all
purposes and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding, and until any transfer is entered on
such books, the Company may treat the Holder hereof as the owner for all
purposes. Notices and demands to be given to the Company must be given by
certified or registered mail at the addresses provided in the Warrant Agreement.
All terms used in the Warrant Certificate that are defined in the
Warrant Agreement shall have the respective meanings ascribed to such terms in
the Warrant Agreement.
Dated: February 12, 1998 UGLY DUCKLING CORPORATION
By:
------------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President and
General Counsel
2
32
UGLY DUCKLING CORPORATION
PURCHASE FORM
Mailing Address:
UGLY DUCKLING CORPORATION
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant certificate for, and to purchase
thereunder, _____________Shares of Common Stock provided for therein, and
requests that certificates for such Shares be issued in the name of:
________________________________________________________________________________
________________________________________________________________________________
(Please Print or Type Name, Address and Social Security Number)
and that such certificates be delivered to _____________________________________
whose address is _______________________________________________________________
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant certificate for the balance of the Shares purchasable under
the within Warrant certificate be registered in the name of the undersigned
Holder or his or her Assignee as below indicated and delivered to the address
stated below.
Dated:___________
Name of Holder or Assignee:
________________________________________________________________________________
(Please Print)
Address: _______________________________________________________________________
________________________________________________________________________________
Signature:
________________________
Note: The above signature must correspond with the name as it appears upon the
face of the within Warrant certificate in every particular, without alteration
or enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed:
________________________
3
33
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Association, and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15.
4
34
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________________________________________________________
(Name and Address of Assignee Must Be Printed or Typewritten)
______________ Warrants, hereby irrevocably constituting and appointing _______
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises.
Dated:_______________________
__________________________________
Signature of Registered Holder
Note: The signature on this assignment
must correspond with the name as it
appears upon the face of the within
Warrant certificate in every
particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:
_____________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stock Brokers, Savings and Loan Association, and Credit
Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM
PURSUANT TO S.E.C. RULE 17Ad-15.
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SCHEDULE 2.01
DISBURSEMENT OF LOANS
Name of Lender Commitment
-------------- ----------
ARBCO Associates, L.P. $ 2,700,000
Xxxxx Xxxxxxxx Non-Traditional
Investments, L.P. $ 3,000,000
Offense Group Associates, L.P. $ 2,400,000
Opportunity Associates, Limited
Partnership $ 900,000
Xxxxx Xxxxxxxx Offshore Limited $ 300,000
Glacier Water Services, Inc. .. $ 2,100,000
Paradigm Insurance Company $ 1,200,000
Foremost Insurance Company $ 1,500,000
Topa Insurance Company $ 900,000
-----------
$15,000,000
36
SCHEDULE 4.04
OUTSTANDING OBLIGATIONS
On January 28, 1998, the Company borrowed $7 million from Greenwich
Capital Financial Products, Inc. ("Greenwich") pursuant to a Loan Agreement,
dated as of January 28, 1998 (the "Greenwich Loan"). The Greenwich Loan was used
to repay amounts owing to GE Capital under the Revolving Facility. The Greenwich
Loan is secured by (1) a pledge by Duck Ventures, Inc., a direct wholly-owned
subsidiary of the Company ("DVI") of all of the issued and outstanding common
stock of Champion Receivables Corp. II ("CRC II"), a bankruptcy remote
subsidiary wholly-owned by DVI, and (2) all of the Company's right, title and
interest in and to certain collateral arising from the bankruptcy of Fist
Merchants Acceptance Corporation. The Greenwich Loan is payable by the Company
on April 28, 1998 and bears interest at the rate of 9 1/2 percent per annum.
