LOAN AGREEMENT
Dated as of January 11, 2001
between
UGLY DUCKLING CORPORATION
and
VERDE INVESTMENTS, INC.
$7,000,000 Senior Subordinated Loan
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................1
1.1 Defined Terms.............................................................1
1.2 Other Interpretive Provisions.............................................4
ARTICLE II THE LOAN...........................................................6
2.1 Amount and Notes..........................................................6
2.2 Interest..................................................................6
2.3 Optional Prepayments......................................................7
2.4 Computation of Fees and Interest..........................................7
2.5 Payments by the Company...................................................7
2.6 Priority of Payments; Subordination.......................................7
ARTICLE III ADDITIONAL AGREEMENTS.............................................7
3.1 Junior Lien...............................................................7
3.2 Release of Real Estate Purchase Options...................................8
3.3 Option to Purchase Property...............................................8
ARTICLE IV CONDITIONS PRECEDENT...............................................8
4.1 Conditions of Loans to the Company........................................8
ARTICLE V REPRESENTATIONS AND WARRANTIES......................................9
5.1 Organization..............................................................9
5.2 Financial Statements......................................................9
5.3 Actions Pending...........................................................9
5.4 Outstanding Obligations..................................................10
5.5 Taxes....................................................................10
5.6 Conflicting Agreements and Other Matters.................................10
5.7 ERISA....................................................................10
5.8 Governmental Consent.....................................................10
5.9 Disclosure...............................................................11
5.10 Possession of Franchises, Licenses, etc.................................11
ARTICLE VI AFFIRMATIVE COVENANTS.............................................11
6.1 Financial Statements.....................................................11
6.2 Certificates; Other Information..........................................11
6.3 Default Disclosure.......................................................12
ARTICLE VII NEGATIVE COVENANTS...............................................12
7.1 Debt to Tangible Equity Ratio............................................12
7.2 Terms of Subordinated Debt...............................................12
ARTICLE VIII EVENTS OF DEFAULT...............................................12
8.1 Event of Default.........................................................12
8.2 Other Remedies...........................................................14
ARTICLE IX MISCELLANEOUS.....................................................14
9.1 Amendments and Waivers...................................................14
9.2 Notices..................................................................14
9.3 No Waiver: Cumulative Remedies...........................................14
9.4 Costs and Expenses.......................................................14
9.5 Successors and Assigns...................................................15
9.6 Assignment, Participations, etc..........................................15
9.7 Counterparts.............................................................15
9.8 Severability.............................................................16
9.9 No Third Parties Benefited...............................................16
9.10 Time....................................................................16
9.11 Governing Law...........................................................16
9.12 Waiver of Jury Trial....................................................16
9.13 Entire Agreement........................................................16
9.14 Interpretation..........................................................17
EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Form of Warrant Agreement
SCHEDULES
Schedule 3.2 Leases
Schedule 3.3 Company Properties
LOAN AGREEMENT
This LOAN AGREEMENT is dated as of January 11, 2001, between UGLY DUCKLING
CORPORATION, a Delaware corporation (the "Company"); and Verde Investments,
Inc., an Arizona corporation ("Lender").
WHEREAS, Lender has agreed to make a loan to the Company in the amount of
its 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 I
DEFINITIONS
1.1 Defined Terms.
In addition to the terms defined elsewhere in this Agreement, the following
terms have the following meanings:
"Advance" means an advance by Lender to Company hereunder.
"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.
"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 9.6(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.
"Closing Date" means the date on which all conditions precedent set forth
in Section 4.1 are satisfied or waived by all Lenders, which is expected to be
on or prior to January 11, 2001.
"Code" means the Internal Revenue Code of 1986 and any regulations
promulgated thereunder.
"Commitment" means the amount of Seven Million Dollars ($7,000,000).
"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 8.1.
"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.
"Interest Accrual Period" shall mean the three-month period from and
including a Payment Date to the close of business on the day preceding the next
Payment Date, except that the first Interest Accrual Period shall commence on
the Closing Date and end at the close of business on the day preceding the
Payment Date.
"Lender" has the meaning specified in the introductory clause hereto.
"LIBOR" means the rate per annum equal to the rate appearing on Reuters
Screen FRBD as of 11:00 a.m. (London time) two LIBOR Business Days prior to the
beginning of such Interest Accrual Period, for the three-month term
corresponding to such Interest Accrual Period, or if such rate shall not be so
quoted then the applicable rate appearing on Bloomberg on the day two LIBOR
Business Days prior to the beginning of such Interest Accrual Period, or if
neither such rate shall be so quoted, the "London Interbank Offered Rates
(LIBOR)" (three month) published in the "Money Rates" section of the Wall Street
Journal two LIBOR Business Days prior to the beginning of such Interest Accrual
Period.
"LIBOR Business Day" means any day which is a Business Day and which is
also a day on which dealings in U.S. Dollars are carried on in the London
interbank market.
"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 Lender in the amount of
Lender's Commitment pursuant to Article II.
"Loan Documents" means this Agreement, the Note, the Warrant Agreement, the
Warrant, and all other documents delivered to the Lender 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 the earlier to occur of (a) December 31, 2003, or (b)
the date the Loan is repaid in full.
"Note" shall mean a promissory note, dated as of the Closing Date,
substantially in the form of Exhibit A annexed hereto, issued by the Company to
the order of the Lender evidencing the obligation of the Company to repay the
Loan.
"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.
"Payment Date" means March 31, June 30, September 30, and December 31 of
each year during the term of this Agreement.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture or
governmental authority.
"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 any 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 the Lender pursuant to the Warrant
Agreement substantially in the form of Exhibit B to this Agreement.
"Warrant Agreement" means the Warrant Agreement dated as of July 25, 2001
among the Company and the Lender providing for the issuance of warrants to the
Lender to acquire up to 1,500,000 shares of the Company's Common Stock,
exercisable at a price per share equal to the last sales price of the Company's
Common Stock on the date hereof, for a period of ten years.
1.2 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.
(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
2.1 Amount and Notes. The Lender shall make the Loan to the Company in a single
or multiple advances of not less than $1,000,000. The Company has authorized the
issuance of the Note or Notes in the aggregate principal amount of Seven Million
Dollars ($7,000,000). On the Closing Date, the Lender shall issue and deliver to
Lender a Note in the principal amount of $7,000,000, payable to the order of
Lender. All Notes shall be substantially in the form of Exhibit A to this
Agreement. The outstanding Notes together will evidence the outstanding
principal amount of the Loan, together with interest accrued but unpaid thereon.
The Loan is a non-revolving loan and principal paid prior to the Maturity Date
may not be re-borrowed.
2.2 Interest.
(a) Interest shall accrue on the outstanding principal amount of the Loan
during each Interest Accrual Period at a rate per annum equal to LIBOR for such
Interest Accrual Period plus six hundred (600) basis points. Upon determining
LIBOR for each Interest Accrual Period, the Lender shall notify the Company of
such LIBOR determination and the rate thereof.
(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 Loan pursuant to Section 2.3 for the portion of the Loan 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
Loan then unpaid, at a rate per annum equal to LIBOR plus 1200 basis points.
(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 Lender would be contrary to the provisions of any
law applicable to 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 Lender interest at the highest rate permitted by
applicable law.
2.3 Optional Prepayments. The Company may, at any time or from time to time,
upon at least 10 Business Days notice to the Lender, prepay the Loan 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
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.
2.4 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.
2.5 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 Lender at each of the
Lender's office as set forth on the signature page 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 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.
2.6 Priority of Payments; Subordination. The payment of principal and interest
under this Agreement on the Loan shall be pari passu with: (i) the $17,478,680
of 12% Subordinated Debentures due 2003 issued under that certain Indenture
dated as of October 15, 1998 (as amended the "Indenture"), (ii) the $11,939,565
of 11% Subordinated Debentures due 2007 issued under the Indenture, and (iii)
the $15,000,000 12% Senior Subordinated Loan between the Company and Xxxxx
Xxxxxxxx Investment Management, Inc., dated as of February 12, 1998, as amended.
Except for the preceding sentence, and notwithstanding anything else in this
Agreement to the contrary, the payment of principal and interest under this
Agreement on the Loan is expressly subordinated for all purposes to any secured
Obligations now in existence or later incurred by the Company other than
Subordinated Debt; and the Lender 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 the Lender and such institution or Person, the tenor of
which shall be to effectuate the terms of this Section.
ARTICLE III
ADDITIONAL AGREEMENTS
3.1 Junior Lien. The Company will use commercially-reasonable efforts to grant
to Lender a lien on the Pledged Shares as referenced in that Stock Pledge
Agreement of even date herewith by and among the Company, Ugly Duckling Car
Sales and Finance Corporation, and BNY Midwest Trust Company, which lien shall
be junior to the lien granted under such agreement.
3.2 Release of Real Estate Purchase Options. The Company, its Affiliates and
subsidiaries, hereby release all options to purchase real estate currently owned
by Lender and leased to the Company, its Affiliates and subsidiaries, as set
forth on Schedule 3.2.
3.3 Option to Purchase Property. The Company, its Affiliates and subsidiaries,
hereby grant Lender and its Affiliates the option to purchase, at book value,
any or all properties owned by the Company, its Affiliates and subsidiaries, as
set forth on Schedule 3.3, as well as any or all properties acquired by the
Company, its affiliates and subsidiaries prior to the Maturity Date, and Lender
agrees that if it exercises any such option, it will lease such properties back
to the Company on terms similar to the leases set forth on Schedule 3.2.
3.4 Warrants. The Company agrees to enter into the Warrant Agreement with the
Lender and issue Warrants to the Lender in accordance with the terms thereof in
the event the Loan is not repaid on or before July 25, 2001 and any guarantee
from Lender to SunAmerica Life Insurance Company remains outstanding, provided
that: (a) any necessary approval of the Company's shareholders to the issuance
or exercise of the Warrants has been obtained; (b) Company and Lender have
obtained any necessary approvals and made any necessary filings, including, if
required, under Sections 13 and 16 of the Securities Exchange Act of 1934, and
under the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976; and (c) if the
Company or its board (or a committee of the board) elects to obtain a fairness
opinion, the Company has received a fairness opinion in form and substance
reasonably satisfactory to it, provided that no such opinion shall be required
if shareholder approval is required and has been obtained. In the event a
fairness opinion cannot be obtained based upon the amount or terms of the
Warrants to be issued hereunder, the parties agree to use commercially
reasonably efforts to modify the amount and/or terms of the Warrant Agreement
such that a fairness opinion can be rendered. Each of the parties shall use
commercially reasonable efforts to satisfy the covenants and agreements set
forth above. If despite the commercially reasonable efforts of the parties, the
Warrants are for any reason not issued on or before July 25, 2001, except for
the inability to obtain a fairness opinion, then at the option of the Lender,
upon notice to the Company, the Loan shall become immediately due and payable in
full.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions of Loans to the Company. The obligation of Lender to fund its
Loan to the Company hereunder is subject to the condition that the Lender shall
have received on or before January 11, 2001, in form and substance satisfactory
to Lender and Lender's counsel and in sufficient copies for Lender, all of the
following:
(a) Loan Agreement. This Agreement executed by the Company and 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 Loan, 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;
4.2 Articles of Incorporation: Bylaws and Good Standing. [Intentionally
omitted.]
(a) Notes. The Note, executed by the Company.
(b) Warrants. The Warrant Agreement, executed by the Company and the
Lender, together with the Warrant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Lender that, except for such matters
as are known to Lender or would not have a Material Adverse Effect:
5.1 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.
5.2 Financial Statements. The Company has provided to the Lender copies of the
following audited financial statements: a balance sheet of the Company as of
September 30, 2000, and statements of income and cash flows for the nine months
ended September 30, 2000. 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 September
30, 2000, which could reasonably be expected to have a Material Adverse Effect.
5.3 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.
5.4 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 5.2. 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.
5.5 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 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.
5.6 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.
5.7 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 5.9, 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).
5.8 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 Loan or
delivery of the Note 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.
5.9 Disclosure. Neither this Agreement nor any other document, certificate or
statement furnished to 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 Lender by or on behalf of the Company
prior to the date hereof in connection with the transactions contemplated
hereby.
5.10 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 VI
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, unless the Lender
waives compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Lender in form and
detail satisfactory to the Lender:
(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 Lender 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.
6.2 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 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 Lender) to establish whether the Company is in compliance
with the requirements of Sections 6.1; 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.
6.3 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 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 VII
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 Lender
waives compliance in writing:
7.1 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.
7.2 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 Loan to the payment of principal and interest relating to the
Subordinated Debt.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 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 Articles III or VI hereof; or
(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 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 8.1 with respect to the Company, the Loan 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, Lender may, by notice in writing to the Company, declare all
of Lender's Loan to be, and all of 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.
8.2 Other Remedies. If any Event of Default or Default shall occur and be
continuing, Lender may proceed to protect and enforce its rights under this
Agreement by exercising such remedies as are available to 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 Lender is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE IX
MISCELLANEOUS
9.1 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 Lender and the Company, and then such waiver shall
be effective only in the specific instance and for the specific purpose for
which given.
9.2 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 the
Lender, to such other address as shall be designated by such party in a written
notice to the other party, at such other address as shall be designated by such
party in a written notice to the Company and the Lender.
(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.
9.3 No Waiver: Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of 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.
9.4 Costs and Expenses. The Company shall, following consummation of the
transactions contemplated hereby:
(a) pay or reimburse Lender within 10 Business Days after demand for all
reasonable costs and expenses incurred by 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 Lender with respect thereto; and
(b) pay or reimburse Lender within 10 Business Days after demand for all
reasonable costs and expenses incurred by Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
(including in connection with any "workout" or restructuring regarding the Loan,
and including in any Insolvency Proceeding or appellate proceeding) under this
Agreement, any other Loan Document, and any such other documents, including
reasonable Attorney Costs incurred by Lender.
9.5 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 Lender.
9.6 Assignment, Participations, etc.
(a) Lender may, with the written consent of the Company (which consent
shall be obtained prior to Lender's delivery of any information (including
financial information) to any Assignee (as hereinafter defined) relating to an
assignment of 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 Lender to an
Affiliate of Lender) (each an "Assignee") all (but no less than all) of its
interest in the Loan and the other rights and obligations of Lender hereunder,
provided, however, that, the Company may continue to deal solely and directly
with 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 Lender and the Assignee.
(b) From and after the date that 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 Lender, shall have the rights
and obligations of Lender under the Loan Documents, and (ii) the 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
9.6(a) and (b) with respect to Lender 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 Loan arising therefrom.
9.7 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 Lender.
9.8 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.
9.9 No Third Parties Benefited. This Agreement is made and entered into for the
sole protection and legal benefit of the Company and the Lender, 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.
Lender shall not have any obligation to any Person not a party to this Agreement
or other Loan Documents.
9.10 Time. Time is of the essence as to each term or provision of this Agreement
and each of the other Loan Documents.
9.11 Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF
ARIZONA AND 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
ARIZONA.
9.12 Waiver of Jury Trial.
THE COMPANY AND THE LENDER 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 LENDER 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 9.12 MAY BE FILED WITH ANY COURT AS WRITTEN
EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND CONSENT TO TRIAL.
9.13 Entire Agreement. This Agreement, together with the other Loan Documents,
embodies the entire Agreement and understanding among the Company and the Lender
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 Lender pursuant to the Loan
Documents.
9.14 Interpretation. This Agreement is the result of negotiations between and
has been reviewed by counsel to the Lender, 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 the Company merely because of the
Company's involvement in the preparation of such documents and agreements.
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:________________________________
Xxx X. Xxxxxxxx
Vice President, General Counsel, and Secretary
Address for notices:
Ugly Duckling Corporation
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxx X. Xxxxxxxx
Vice President, General Counsel and Secretary
Telephone: 000-000-0000
Telecopy: 000-000-0000
VERDE INVESTMENTS, INC.
By:_________________________________
Name:
Title:
Address for notices:
0000 Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy : (000) 000-0000
Exhibit A
FORM OF PROMISSORY NOTE
Exhibit B
FORM OF WARRANT AGREEMENT
Schedule 3.2
Leases
Xxxx Road
0000 X. Xxxx Xx.
Xxxxxxx, XX 00000
00xx Xxxxxx & Van Buren
000 X. 00xx Xx.
Xxxxxxx, XX 00000
Mesa
000 X. Xxxx Xxxxxx Xx.
Xxxx, XX 00000
Glendale
0000 X. Xxxxxxxx Xxx.
Xxxxxxxx, XX 00000
19th Ave.
0000 X. 00xx Xxx.
Xxxxxxx, XX 00000
Gilbert Credit Corp.
0000 X. Xxxxxxxx Xx.
Xxxxxxx, XX 00000
Chandler
000 X. Xxxxxxx Xxx.
Xxxxxxxx, XX 00000
South Central
0000 X. Xxxxxxx Xxx.
Xxxxxxx, XX 00000
Phoenix Recon
0000 X. Xxxxx Xx.
Xxxxxxx, XX 00000
Grant & Oracle
0000 X. Xxxxxx
Xxxxxx, XX 00000
Tucson Recon
0000 X. Xxxxxx
Xxxxxx, XX 00000
Tucson
0000 X. Xxxxxxxx
Xxxxxx, XX
Griegos
0000 0xx Xxxxxx XX
Xxxxxxxxxxx, XX 00000
Wyoming
000 Xxxxxxx Xxxx., XX
Xxxxxxxxxxx, XX 00000
Bandera
0000 Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
XX Xxxxx
000 X. XX Xxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Southside Inspection Center
0000 XX Xxxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
40th & Indian School
0000 X. Xxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Schedule 3.3
Company Properties
Garden Grove
00000 Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Garland Road
00000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Xxxxx Xxxxx
00000 Xxxxx Xxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Xxxxxxx
0000 X. Xxxxx Xxxxx
Xxxxx, XX 00000
Florida Avenue
00000 X. Xxxxxxx Xxxxxx
Xxxxx, XX 00000
Grand Prairie
0000 X. Xxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Arlington
000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Douglasville
0000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Petersburg
0000 X. Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Orlando Insp. Ctr.
0000 XxXxxxxx Xxxx
Xxxxxxx, XX 00000
