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Loan and Security Agreement (AFC-Duck Final)LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is entered into by and between
Ugly Duckling Corporation, successor in interest to Ugly Duckling Holdings, Inc.
("Ugly Duckling"), a Delaware corporation;; Ugly Duckling Car Sales and Finance
Corporation ("UDCSFC"), an Arizona corporation formerly known as Duck Ventures,
Inc.; Ugly Duckling Credit Corporation ("UDCC") formerly known as Champion
Acceptance Corporation, an Arizona corporation; Ugly Duckling Car Sales, Inc.
("Sales"); an Arizona corporation; Champion Financial Services, Inc.
("Champion"), an Arizona corporation; Ugly Duckling Car Sales Florida, Inc.
("Car Sales Florida"), a Florida corporation;; Cygnet Financial Corporation
("Cygnet"), a Delaware corporation; Cygnet Support Services, Inc. ("Services"),
an Arizona corporation; Cygnet Financial Services, Inc. ("Cygnet Services"), an
Arizona corporation; Cygnet Financial Portfolio, Inc. ("Cygnet Portfolio"), an
Arizona corporation; Ugly Duckling Portfolio Partnership, L.L.P. ("UDPP"), an
Arizona limited liability partnership; and Ugly Duckling Finance Corporation
("UDFC"), an Arizona corporation (all of the foregoing entities collectively
referred to herein as "Borrower"); and Automotive Finance Corporation, an
Indiana corporation (hereinafter referred to as "Lender"). The obligations of
Borrower to Lender under this Agreement are the joint and several liability of
each Borrower. In consideration of the mutual covenants and agreements contained
herein, Borrower and Lender agree as follows:
ARTICLE I - DEFINITIONS.
Section 1.0. Definitions.
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Capitalized terms used in this Agreement shall have the meanings given to such
terms in Section 14 of this Agreement. When such defined terms are used in this
Agreement in the plural, the terms shall have the plural of such meanings. All
other terms contained in this Agreement shall, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same are
defined therein.
ARTICLE II - LOAN: GENERAL TERMS
Section 2.0. Single Loan.
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All Advances by Lender to Borrower under Section 2.1 shall constitute one loan
and all indebtedness and obligations of Borrower to Lender under the Loan
Documents shall constitute an obligation secured by Lender's security interest
in all of the Collateral. Borrower's obligation to pay the Indebtedness is
evidenced by this Agreement. Borrower shall pay all Indebtedness to Lender when
due in accordance with the terms of this Agreement. The actual amount Borrower
is obligated to pay Lender hereunder shall be determined by this Agreement and
the records of Lender.
Section 2.1. Inventory Facility.
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Subject to all of the terms and conditions of this Agreement, Lender agrees to
loan funds in an amount up to the Inventory Facility Limit to Borrower from time
to time in a series of Advances during the term of this Agreement. Funds may be
borrowed, repaid and re-borrowed on a revolving basis subject to the terms and
conditions set forth in this Agreement, provided that the amount outstanding
under the Inventory Facility shall not at any time exceed the Inventory Advance
Value. The dollar amount set forth in this Section 2.1 is an aggregate combined
total for Borrower.
Section 2.2. General Interest Rate.
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Except as modified by Sections 2.4 and 13.1, the average daily balance of the
Indebtedness shall bear interest, calculated on the basis of a 360-day year, at
a per annum rate equal to the most recent prime rate published in The Wall
Street Journal plus six percent (6%), compounded daily. The interest rate shall
automatically adjust each time the prime rate as so published changes.
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Section 2.3. Loan Term; Right to Terminate.
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Unless sooner terminated as hereinafter provided, this Agreement shall terminate
without any notice requirement on June 30, 2003 if not renewed or extended by a
mutual written agreement. Upon the occurrence of an Event of Default, Lender
may, without prior notice to Borrower, immediately terminate this Agreement. A
prepayment in full of the Indebtedness shall be a termination of this Agreement.
Notwithstanding termination of this Agreement in any manner, the Indebtedness
shall be payable in accordance with this Agreement, and all rights and remedies
granted to Lender hereunder or pursuant to applicable law shall continue until
all obligations of Borrower to Lender have been fully paid and performed.
Section 2.4. Maximum Lawful Rate.
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(A) Interest Rate. Notwithstanding any provision in this Agreement, or in
any other document, if at any time before the payment in full of the
Indebtedness, any of the rates of interest specified in this Agreement
(the "Stated Rates") exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful
Rate"), then in such event and so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time
thereafter the Stated Rates shall be less than the Maximum Lawful
Rate, then, subject to (B) below, Borrower shall continue to pay
interest at the Maximum Lawful Rate until such time as the total
interest received by Lender is equal to the total interest which
Lender would have received had the Stated Rates been (but for the
operation of this Section 2.4(A)) the interest rates payable;
thereafter, the interest rates payable shall be the Stated Rates
unless and until any of the Stated Rates shall again exceed the
Maximum Lawful Rate, in which event this Section 2.4(A) shall again
apply. In the event interest payable hereunder is calculated at the
Maximum Lawful Rate, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made.
(B) Amount of Interest. In no event shall the total interest contracted
for, charged, received or owed pursuant to the terms of this Agreement
exceed the amount which Lender may lawfully receive. In the event that
a court of competent jurisdiction, notwithstanding the provisions of
this Section 2.4, shall make a final determination that Lender has
received, charged, collected, or contracted for interest hereunder in
excess of the amount which Lender could lawfully have, Lender shall,
to the extent permitted by law, promptly apply such excess first to
any interest due (calculated at the Maximum Lawful Rate if applicable)
and not yet paid, then to the prepayment of principal, and any excess
remaining thereafter and after application to any other amounts
Borrower owes Lender shall be refunded to Borrower. In determining
whether the interest exceeds the Maximum Lawful Rate or the maximum
amount which Lender could lawfully have received, the total amount of
interest shall, to the extent allowed by law, be spread over the term
of the Loan. Any provisions of this Agreement regarding the time
during which interest accrues on Advances are only elements of the
formula for calculating interest on the Indebtedness and are not
intended to cause interest to be applied to specific Advances for
usury determination purposes.
ARTICLE III - LOAN DISBURSEMENTS
Section 3.0. Loan. ---- Provided that there does not then exist an Event of
Default or a Pre-Default Event, Lender shall, upon written request of Borrower
and subject to all of the terms and conditions of this Agreement, make Advances
to Borrower pursuant to Section 3.1.
Section 3.1. Procedure for Borrowing.
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(A) Borrower may request an Advance by providing Lender with a certificate
in a form acceptable to Lender certifying that (i) no Event of Default
has occurred or is continuing, and (ii) Borrower is in complete
compliance with the terms and conditions of this Agreement. No Advance
shall exceed the Inventory Advance Value. Lender is not obligated to
make an Advance (x) if the amount available or requested is less than
One Hundred Thousand Dollars ($100,000.00); (y) Borrower has not
provided Lender with sufficient information to calculate the Inventory
Advance Value; or (z) an Event of Default or a Pre-Default Event has
occurred and is continuing Lender's use of the information provided by
Borrower to determine the amount available for Advances is not an
admission by Lender as to the accuracy of the information, and Lender
reserves the right to verify the information and re-determine the
amount available for Advances. If at any time Borrower is in default
on any obligation to a third party who is claiming an interest in or
is encumbering the Collateral, Lender may, in its sole discretion, but
is not required, to elect to make a payment or transfer on Borrower's
behalf to the third party, in any amount up to the total obligation
owed by Borrower to the third party, as a means of satisfying
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Borrower's obligation to the third party in whole or in part. If
Lender elects to make any such payments or transfers, they shall be
deemed additional Indebtedness under this Agreement from the date on
which the payment or transfer is made. Such payments or transfers may
be made without prior notice to Borrower and without regard to the
Inventory Advance Value or the Inventory Facility Limit.
(B) Lender shall disburse each Advance requested by Borrower on the same
Business Day as Lender receives Borrower's written request for the
Advance, as long as Borrower's written request indicates that Borrower
requires such Advance on the same Business Day and as long as the
aggregate of all Advances within such Business Day is equal to or less
than Two Million Dollars ($2,000,000.00). Borrower's written request
for an Advance shall be made no later than 8:30 a.m. EST or Lender
shall not be required to make the Advance until the following Business
Day. Lender shall disburse each Advance requested by Borrower, at the
expense of Borrower, by means of a wire transfer of the funds to
Borrower.
ARTICLE IV - LOANS: PAYMENTS
Section 4.0. Payments by Borrower.
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(A) Accrued interest shall be paid by Borrower to Lender at the end of
each Accounting Period and upon termination of this Agreement. All
payments by Borrower to Lender shall be via wire transfer as per the
wire instructions listed on Exhibit 4.0(A).
(B) Upon the effective date of termination of this Agreement, Borrower
shall pay to Lender the entire Indebtedness and all accrued interest
thereon. If there is an Event of Default, Borrower shall pay the
entire Indebtedness and all accrued interest thereon, on demand if the
Indebtedness is accelerated pursuant to Section 13.2.
(C) Whenever Lender shall notify Borrower that the Indebtedness exceeds
the Inventory Advance Value or the Inventory Facility Limit, Borrower
shall within one (1) Business Day after receipt of such notice, pay
down the Indebtedness by the amount of such excess.
(D) The payment of all elements of the Indebtedness not covered by
Subsections (B) or (C) above shall be payable by Borrower to Lender as
and when provided in the Loan Documents, and, if not specified, then
on demand.
(E) Borrower has the right to prepay the Indebtedness and all accrued
interest thereon in full or in part at any time without penalty;
however, if after the Indebtedness has exceeded Three Million Five
Hundred Thousand Dollars ($ 3,500,000.00), the dollar value of the
Indebtedness falls below Three Million Five Hundred Thousand Dollars
($3,500,000.00) for at least ten (10) Business Days, then Borrower
shall pay the entire Indebtedness and all accrued interest thereon
upon Lender's demand and Borrower's payment in full of such
Indebtedness and all accrued interest thereon shall constitute a
termination of this Agreement.
ARTICLE V - ADMINISTRATION
Section 5.0. Borrower Administration.
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Borrower shall furnish to Lender such reports in such form that Lender
determines are necessary for it to track and monitor Motor Vehicles, Eligible
Vehicles, Inventory and the Inventory Advance Value. Such reports shall be in a
format and on a medium readable by Lender's computer software, or such other
format or medium acceptable to Lender. Lender agrees that providing the reports
in paper form to Lender is a medium/format acceptable to Lender. The reports
shall include but not be limited to those reports set forth on Exhibit 5.0(C)
attached hereto and made a part hereof, and shall be delivered to Lender in
accordance with such Exhibit.
ARTICLE VI - COLLATERAL: GENERAL TERMS
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Section 6.0. Security Interest.
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To secure the performance and payment of the Indebtedness and all of Borrower's
existing and future obligations to Lender whether arising under or related to
this Agreement or otherwise, Borrower hereby grants to Lender a continuing
security interest in and to all of the following property of Borrower, whether
now owned or existing or hereafter arising or acquired and regardless of where
located:
Inventory; Motor Vehicles; certificates of title related to Inventory and
the Motor Vehicles; insurance policies, and benefits and rights under
insurance policies, all as related to Inventory and the Motor Vehicles,
which Borrower is solely or jointly the owner of, insured under, the
lienholder or loss payee under, or the beneficiary of;
accessions to, substitutions for and all replacements, products and
proceeds of, any of the foregoing property;
and books and records (including, without limitation, financial statements,
accounting records, customer lists, credit files, computer programs,
electronic data, print-outs and other computer materials and records) of
Borrower pertaining to any of the foregoing property;
provided however, that the Collateral (including without limitation,
proceeds of Collateral) shall not include the Contract Collateral or other
property not described above.
Section 6.1. Disclosure of Security Interest.
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Borrower shall make appropriate entries upon its financial statements and its
books and records disclosing Lender's security interest in the Collateral.
Section 6.2. Additional Acts.
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Borrower shall perform all other acts requested by Lender for the purpose of
perfecting, protecting, maintaining and enforcing Lender's security interest in
the Collateral and the priority of such security interest. Borrower agrees that
a carbon, photographic, photostatic, or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement. Borrower, upon
request of Lender, shall either pay or reimburse Lender for all costs, filing
fees, and taxes associated with the perfection of Lender's security interest.
Section 6.3. Inspection and Access.
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Lender and its agents (including but not limited to representatives of AutoVIN,
Inc.) shall have the right, at any time, to (i) during Borrower's usual business
hours, inspect the Collateral and the premises upon which any of the Collateral
is located; (ii) during Borrower's usual business hours, inspect, audit and make
copies or extracts from any of Borrower's records, computer systems, files, and
books of account related to the Collateral; (iii) during Borrower's usual
business hours, monitor Borrower's performance of its obligations with respect
to this Agreement; and (iv) obtain information about Borrower's affairs and
finances from any Person; and (v) verify, in Lender's name or in the name of
Borrower, the validity, amount, quality, quantity, value and condition of, or
any other matter relating to, the Collateral. Borrower shall, upon Lender's
request from time to time, instruct its vendors, banking and other financial
institutions and its accountants to make available to Lender and discuss with
Lender such information and records as Lender may reasonably request. Borrower
authorizes Lender, if requested by a Person other than a credit reporting agency
and without request if the Person is a credit reporting agency, to provide that
Person with information about the Indebtedness, Collateral and Borrower's
performance of this Agreement. If Borrower maintains or stores any data with
respect to Collateral on a computer data system, Borrower shall upon request of
Lender provide Lender with (y) on-line access to such computer data system or
(z) deliver to Lender duplicate copies of the requested data in machine readable
form acceptable to Lender along with a printout or other hard copy of such data.
If at any time during the Agreement, Lender establishes on-line access to
Borrower's computer system, Lender shall exercise such care as it exercises with
respect to its own computer systems regarding the integrity and confidentiality
of Borrower's information therein, Lender shall restrict its access to those
parts of the Borrower's computer system that relate to the Collateral and Lender
shall observe all reasonable security requirements relating to Borrower's
computer system as Lender is advised of by Borrower, provided however, that such
observance shall in no way prevent Lender from accessing Borrower's information.
Borrower agrees to pay for six (6) audits per year at each of Borrower's
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applicable Places of Business. Each such audit will be used to determine
Borrower's compliance with this Agreement including minimum levels of Inventory.
Borrower agrees to pay Lender a Sixty-Five Dollar ($65) fee for each audit
described above plus One Dollar ($1) for every Motor Vehicle audited at any one
location in excess of sixty (60) Motor Vehicles to cover the cost of such
audits.
Section 6.4. Lender Authorization.
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By execution of this Agreement, Borrower authorizes Lender and any of its
officers or employees to execute and file, on behalf of Borrower and without
Borrower's signature, original financing statements, amendments, continuation
statements, and any other documents Lender deems necessary or desirable to
protect its interests. Borrower authorizes Lender to supply any omitted
information and correct errors in any document executed by or on behalf of
Borrower.
Section 6.5. Change of Collateral, Location, Office or Structure.
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Borrower shall keep the Motor Vehicles and Inventory at Borrower's Places of
Business and shall, at Lender's request, advise Lender of the location of any
other Collateral. Borrower shall not change its name, tradename, principal place
of business and chief executive office or the location of any service center as
listed in Exhibit 8.0(A), unless Borrower gives Lender at least sixty (60) days
prior written notice of such change and prior thereto has taken all action
Lender requires to maintain the priority and perfection of its security interest
in, and access to, the Collateral. Provided, however, that Lender acknowledges
Borrower has notified Lender that Borrower will be changing its corporate
headquarters address sometime in the month of August to: ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
Section 6.6. Termination of Security Interest.
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Lender's security interest in the Collateral shall continue until performance
and payment in full of all of Borrower's obligations to Lender in accordance
with the terms of agreements creating such obligations; and if, at any time, all
or part of a payment or transfer made by Borrower or any other Person and
applied by Lender to Borrower's obligations to Lender is rescinded or otherwise
must be returned by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower or such
other Person), the security interest granted hereunder or under any other
present or future agreement between Borrower and Lender, and all rights of
Lender, shall be reinstated as to the obligations which were satisfied by the
payment or transfer rescinded or returned, all as though such payment or
transfer had not been made, and Borrower shall take the action requested by
Lender to re-perfect all terminated security interests and to reinstate all
satisfied obligations. Lender shall release its security interest in Contracts
which are sold or pledged to other Persons in accordance with Section 12.8.
ARTICLE VII - CONDITIONS TO ADVANCES
Section 7.0. Conditions to Each Advance.
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Notwithstanding any other provision of this Agreement and without affecting in
any manner the rights of Lender hereunder, Lender shall not be obligated to make
any Advances (including the initial Advance) unless at the time of the Advance,
all of the following conditions shall, in Lender's sole determination, be
satisfied:
(A) All of the representations and warranties of Borrower in all of the
Loan Documents shall be true and correct on and as of the date of such
Advance as though they were made on and as of such date and Borrower
shall have performed all of its obligations contained in the Loan
Documents required to be performed as of such date;
(B) The making of the Advance will not cause or constitute an Event of
Default or Pre-Default Event;
(C) There shall have been no material adverse change in the financial
condition of Borrower;
(D) No claim has been asserted or proceeding commenced challenging this
Agreement or Lender's rights under this Agreement, and no claim has
been asserted which if true would be a breach of a representation and
warranty in the Loan Documents;
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(E) No Event of Default shall have occurred, and no Pre-Default Event
shall have occurred and still be in existence;
(F) Lender has a first priority perfected security interest in the
Inventory and Motor Vehicles and has a perfected security interest in
the Collateral except to the extent otherwise allowed by this
Agreement or Lender in writing;
(G) Lender's most recent inspection of the Collateral or Borrower's
records or operations has been satisfactory to Lender; and
(H) Borrower shall have provided such additional information and documents
as Lender may reasonably request.
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES OF BORROWER
Section 8.0. Representations of Borrower.
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Borrower, jointly and severally hereby makes the following representations and
warranties. The representations and warranties are made as of the execution and
delivery of the Agreement, and each time Borrower requests an Advance the
representations and warranties are deemed to be made again at that time.
Lender's knowledge of any breach of the representations and warranties contained
herein shall not void any of the representations or warranties or affect
Lender's rights with respect to the breach.
(A) Organization, Good Standing, Name, and Location. Borrower is a
corporation duly organized, validly existing and in good standing
under the laws of the States where it conducts business, with power
and authority to own its properties and to conduct its business, and,
at all relevant times, has the power, authority and legal right to
acquire, own, and pledge the Pledged Contracts. Borrower has, is in
good standing under, and is in compliance with, all governmental
approvals, licenses, permits, certificates, inspections, consents and
franchises necessary to conduct its business, to enter into and
perform this Agreement, and to own and operate its business.
Borrower's places of business including without limitation the
locations where Borrower conducts Borrower's retail sales of Inventory
and Motor Vehicles, Borrower's principal place of business and chief
executive office and Borrower's proposed places of business including
without limitation the locations where Borrower conducts Borrower's
retail sales of Inventory and Motor Vehicles, Borrower's principal
place of business and chief executive office are the Borrower
addresses set forth in Exhibit 8.0(A). During the preceding five (5)
years, Borrower has not, been known by or used any other corporate,
trade or fictitious name, except as disclosed in Exhibit 8.0(A).
(B) Due Qualification. Borrower has, and is in good standing under, all
licenses, permits, and approvals in all jurisdictions that are
required for Borrower's performance of this Agreement.
(C) Power and Authority. Borrower has the power and authority to execute
this Agreement and carry out its terms, and the execution and
performance of the Agreement have been duly authorized by all
necessary corporate action. The execution and performance of this
Agreement by Borrower does not require the consent or approval of any
Person.
(D) Valid and Binding Obligations. The Agreement constitutes a valid loan
obligation of Borrower and a valid granting of a security interest in
the Collateral to Lender, and is a legal, valid and binding obligation
of Borrower enforceable in accordance with its terms. Borrower's use
of the Advances is a legal and proper corporate use. Borrower has not
used Advances to give any preference to any creditor or to make a
fraudulent transfer.
(E) No Violation. Borrower's execution and performance of this Agreement
does not conflict with, result in any breach of, nor constitute (with
or without notice or lapse of time) a default under, (i) the articles
of incorporation or bylaws of Borrower, or (ii) any indenture,
instrument, agreement, or court order by which it is bound, or (iii)
nor does it result in the creation or imposition of any lien upon any
of Borrower's properties other than that granted to Lender.
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(F) No Proceedings. Except as otherwise set forth on Exhibit 8.0 (F),
there are no proceedings or investigations pending, or to the best of
Borrower's knowledge, threatened, before any court, regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over Borrower or its properties, which (i) assert the
invalidity of the Agreement, (ii) seek to prevent the consummation of
any of the transactions contemplated by the Agreement, (iii) seek any
determination or ruling that, if determined adversely to Borrower,
would materially and adversely affect the Collateral, Borrower's
ability to perform its obligations under the Agreement, the validity
or enforceability of the Agreement, Lender's rights under the
Agreement, or Borrower's financial condition or business, or (iv)
allege that Borrower is in violation of any statute, regulation, rule
or ordinance of any governmental entity, including, without
limitation, the United States of America, any state, city, town,
municipality, county or of any other jurisdiction, or of any agency
thereof except in connection with complaints of Contract Debtors made
in the normal course of Borrower's business and not of a material
nature.
(G) Collateral. Borrower has good and marketable ownership of the
Collateral, and the Collateral is free and clear of all liens, claims,
charges, defenses, counterclaims, offsets, encumbrances and security
interests of any kind or nature, except the Permitted Liens. Unless
specifically provided otherwise herein the security interests granted
to Lender in the Motor Vehicles and Inventory pursuant hereto are
perfected first priority security interests, assuming the filing of a
UCC financing statement with the collateral description in Exhibit
8.0(G) with the office of Secretary of State of the state of
incorporation or organization of each Borrower and with the Secretary
of State of Florida for each Borrower, and no claim of ownership or
other interest has been asserted which would be a breach of this
Section 8.0(G).
(H) Taxes. All required federal, state and local tax returns of Borrower
have been accurately prepared and duly and timely filed (within the
initial or extended time period allowed therefore) and all federal,
state and local taxes required to be paid with respect to the periods
covered by such returns have been paid. Borrower has not been
delinquent in the payment of any tax, assessment or other governmental
charge which could adversely affect in any way the Collateral.
(I) Brokers. No Person has, or as a result of the transactions
contemplated hereby will have by reason of any Borrower conduct or any
agreement to which Borrower is a party, any right, interest or claim
against Borrower, Lender or the Collateral for any commission, fee or
other compensation as a finder or broker or in any similar capacity.
(J) Status and Condition. Borrower is solvent, in stable financial
condition and is able to and does pay its liabilities as they mature.
Borrower is not a party to any collective bargaining contract.
(K) Disclosure. There is no fact known to Borrower which Borrower has not
disclosed to Lender in writing with respect to the Collateral or the
assets, liabilities, financial condition or activities of Borrower or
its Affiliates which would or may be likely to have a material adverse
effect upon the Collateral or Borrower's ability to perform its
obligations under the Agreement. All information and documents
prepared by Borrower and provided to Lender at any time are true and
accurate at the time of delivery. Borrower does not have knowledge
that any information or documents, not prepared by Borrower but
delivered by Borrower to Lender were not true and accurate at the time
of delivery.
(L) Articles of Incorporation and Certificates of Good Standing. The
Borrower's Articles of Incorporation received by Lender pursuant to
this Agreement have not been modified. Borrower has not taken or
allowed any action that would result in it not being in good standing.
Borrower has not received notice of any actual or threatened action to
revoke its articles of incorporation or good standing.
(M) Financial Statements. All financial statements of Borrower and
Affiliates delivered to Lender fairly present the assets, liabilities
and financial condition and income as of the dates thereof. There are
no material omissions from the financial statements and there has been
no adverse change in the assets, liabilities or financial condition
since the date of the most recently delivered financial statements.
There exists no equity or long-term investments in, or outstanding
advances to, or guaranties of, any Person except such equity,
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investment, advances, or guaranties disclosed in the financial
statements. The financial statements accurately disclose all
transactions with Affiliates.
(N) Conditions. Each time Borrower requests an Advance, the Conditions in
Section 8.0 have been met.
(O) No Defaults. No event has occurred and no condition exists which
would, upon the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute an Event of Default. Borrower is not
in default, and no event has occurred and no condition exists which
constitutes, or with the passage of time or the giving of notice or
both, would constitute, a default under any material agreement between
Borrower and any Person, including the payment of any debt or other
obligation permitted under this Agreement to any Person for borrowed
funds, or any obligation relating to the securitization of any assets
of Borrower or any Affiliate of Borrower.
ARTICLE IX - REPRESENTATIONS AND WARRANTIES OF THE LENDER
Section 9.0. Representations of Lender.
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The Lender hereby makes the following representations and warranties:
(A) Due Organization. The Lender is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Indiana,
and has the power to own its assets and to transact the business in
which it is presently engaged with regard to this Agreement;
(B) Requisite Power. The Lender has the power to execute, deliver and
perform this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement;
and
(C) Binding Agreement. This Agreement has been duly executed and delivered
by the Lender and constitutes the legal, valid and binding obligation
of the Lender, enforceable in accordance with its terms.
ARTICLE X - INDEMNITIES
Section 10.0. Indemnity.
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Borrower shall indemnify and hold Lender harmless from any and all losses,
claims, damages, costs, good faith settlements, expenses, taxes, reasonable
attorneys' fees or other liabilities, including but not limited to costs of
investigation, litigation fees and expenses, and costs in successfully asserting
the right to indemnification hereunder, (collectively, "Losses") incurred by
Lender at any time and pertaining to (i) facts which are, or allegations which
if true would be, a breach of any representation, warranty, obligation,
agreement or covenant of Borrower contained in the Loan Documents, or (ii)
Lender entering into the Loan Documents or making Advances, (iii) an Event of
Default or a Pre-Default Event, (iv) activities, operations or conduct of
Borrower or Affiliates or (v) or administering Pledged Contracts in the Event of
Default.
ARTICLE XI - AFFIRMATIVE COVENANTS
The following covenants shall remain in effect until the full payment and
performance of all of Borrower's obligations to Lender:
Section 11.0. Financing Statements.
--------------------
At the request of Lender, Borrower shall execute such financing statements as
Lender determines may be required by law to perfect, maintain and protect the
interest of Lender in the Collateral and in the proceeds thereof.
Section 11.1. Books and Records.
-----------------
Borrower shall maintain accurate and complete books and records with respect to
the Collateral, Borrower's business. All accounting books and records shall be
maintained in accordance with generally accepted accounting principles
consistently applied.
8
Section 11.2. Payment of Fees and Expenses.
----------------------------
Borrower shall pay to Lender, on demand, any and all fees, costs or expenses
which Lender pays to a bank or other similar institution arising out of or in
connection with the forwarding to Borrower, or any other Person on behalf of
Borrower, by Lender of Advances pursuant to this Agreement.
Section 11.3. Continuity of Business and Compliance with Agreement.
----------------------------------------------------
Borrower shall maintain its corporate existence and shall continue in business
in a prudent, reasonable and lawful manner with all necessary licenses, permits,
and qualifications necessary to perform this Agreement. Borrower shall maintain
Borrower's warehouse Borrower shall take the steps necessary for the
representations and warranties in Article VIII to be true at all times. In the
event that Borrower learns that a representation and warranty in Article VIII is
no longer true, it shall notify Lender within one (1) Business Day after
learning thereof.
Section 11.4. Financial Statements and Access to Records.
------------------------------------------
Borrower shall provide Lender with quarterly unaudited consolidated financial
statements within forty-five (45) days of the end of each of Borrower's fiscal
quarters, and with audited annual consolidated financial statements within one
hundred and twenty (120) days of Borrower's fiscal year-end audited by an
independent certified public accounting firm acceptable to Lender. Upon request
of Lender, Borrower shall provide Lender with unaudited (or audited if Borrower
so chooses) consolidated and consolidating monthly financial statements.
Borrower shall deliver to Lender with each financial statement a certificate by
Borrower's chief financial officer in the form of Exhibit 11.4.
Section 11.5. Subsequent Actions.
------------------
At the request of Lender, Borrower shall execute and deliver to Lender after
execution of this Agreement such documents or take such further action as Lender
deems necessary to carry out the Agreement.
Section 11.6. Financial Condition.
-------------------
(A) Each of unsecured debt or obligation owed by Borrower to any third
party is set forth in Exhibit 11.6(A). Borrower shall not allow its
Debt Ratio to exceed 4.50:1.
(B) Borrower shall maintain a Net Worth of at least One Hundred Fifty
Million Dollars ($150,000,000.00). If Borrower is in default of any
securitized tranche/trust, Net Worth shall be reduced by the residual
value associated with the defaulted securitization.
(C) Borrower shall maintain a cash flow Interest Coverage ratio in 2001
and through the first quarter of 2002 of 1.0:1.00, and beginning as of
the end of the first quarter of 2002, 1.25:1.00.
(D) Borrower's Rolling Average Delinquency shall not exceed 8.5%.
(E) Borrower's three-month Rolling Average Managed Portfolio Delinquency
ratio shall not exceed ten percent (10%).
(F) Borrower's three (3) month Average Charged-Off Losses for all Managed
Portfolio Contracts shall not exceed two and three-quarters percent
(2.75%).
(G) Borrower shall notify Lender in writing, promptly upon its learning of
any material adverse change in the financial condition of Borrower.
(H) Borrower shall provide Lender a daily report on Borrower's Motor
Vehicle inventory detailing Borrower's purchase price for all such
inventory as set out in Exhibit 5.0 (c).
Section 11.7. Litigation Matters.
------------------
Borrower shall notify Lender in writing, promptly upon its learning thereof, of
any litigation, arbitration or administrative proceeding which Borrower
9
reasonably believes may materially or adversely affect the operations, financial
condition or business of Borrower or Borrower's ability to perform this
Agreement or which in any way involve Lender's security interest in the
Collateral or other rights under the Loan Documents.
Section 11.8. Value of Collateral.
-------------------
Borrower shall provide Lender with written notice within one (1) Business Day of
any third party lender's determination that any of the Collateral has materially
decreased in value, other than through ordinary depreciation, and has requested,
demanded, or otherwise required Borrower to either provide enough additional
collateral or to reduce Borrower's indebtedness or other obligation to such
third party lender. In addition if in Lender's judgment the Inventory or the
Motor Vehicles have materially decreased in value, other than through ordinary
depreciation, Borrower shall either provide enough additional Collateral to
satisfy Lender or reduce the Indebtedness by an amount sufficient to satisfy
Lender.
Section 11.9. Payment of Obligations.
----------------------
Borrower shall pay and perform, as and when due, all of its obligations,
including, without limitation, all of its obligations to Lender.
Section 11.10. Borrower Insurance.
------------------
Borrower represents that Borrower is self-insured for any loss or damage to the
Inventory, but in the event that Borrower shall incur an otherwise insurable
loss in any single occurrence of One Hundred Fifty Thousand Dollars ($150,000)
or more with respect to the Inventory, then with respect to the Inventory,
Borrower shall exercise good faith best effort to promptly seek and obtain
Umbrella Liability Insurance in an amount equal to at least Ten Million Dollars
($10,000,000.00) and Comprehensive Insurance in an amount equal to at least Ten
Million Dollars ($10,000,000.00) per occurrence and in the aggregate. Borrower
shall provide Lender, or Lender's designees, with certificates as to policies of
such insurance covering the Inventory together with evidence that the premium
therefore has been paid and that Lender has been named as loss payee and
additional insured on such policies. The proceeds of loss under such policies
are hereby assigned to Lender. If Lender determines that Borrower has not
maintained the required insurance coverage for the Inventory, Lender may, but
has no obligation to, purchase a policy or policies of insurance (through forced
placement or otherwise) any may treat amounts so expended as additional
Indebtedness. The risk of loss or damage to the Collateral shall at all times
remain solely with Borrower.
Section 11.11. Unencumbered Inventory.
----------------------
Sales shall at all times maintain the Inventory and Motor Vehicles free and
clear of all liens, security interests and encumbrances, excepting the liens and
encumbrances granted to Lender, and the value of the Inventory and Motor
Vehicles shall not be valued at less than Five Million Dollars ($5,000,000.00)
in the aggregate.
Section 11.13. Borrower Agent.
--------------
Borrower hereby irrevocably appoints Ugly Duckling Corporation as its agent for
the purpose of dealing with Lender (including receiving notices from Lender and
making requests for Advances) in connection with the Indebtedness and this
Agreement. This appointment and authorization is for the convenience of the
parties and does not relieve any Borrower of any of its obligations to Lender.
Section 11.14. Primary Floorplan Source; Adesa.
-------------------------------
Borrower shall utilize this Inventory Facility as Borrower's primary floorplan
source for a period of twelve (12) months following the Closing Date. If
Borrower fails to utilize this Inventory Facility as Borrower's primary
floorplan source throughout the twelve month period, then Borrower shall pay
Lender a one time separation fee of Twenty-Five Thousand Dollars ($25,000) as
liquidated damages. Throughout the term of the Inventory Facility, Borrower
shall comply with the ADESA use requirements as set out in the letter agreement
with Lender dated July 6, 2001, attached hereto and incorporated by reference
herein as Exhibit 11.14.
10
ARTICLE XII - NEGATIVE COVENANTS
Borrower covenants and agrees that hereafter, without Lender's prior written
consent, which Lender may or may not give, in its sole discretion, until all of
Borrower's obligations to Lender with respect to this Agreement are performed
and paid in full:
Section 12.0. Mergers, etc.
------------
Borrower shall not merge with, consolidate with, acquire or otherwise combine
with, or sell or transfer all or substantially all of it assets to any Person,
transfer any division or segment of its operations to any Person or form any
subsidiary, except for investments in other Borrowers; provided, however, that
Lender acknowledges that Borrower intends to merge Car Sales Florida into Car
Sales and Lender consents to Borrower doing so, and the chairman of Guarantor is
attempting to take Guarantor private and Lender consents to that transaction.
Section 12.1. Investments.
-----------
Borrower shall not make any investment in any Person through the direct or
indirect holding of securities or otherwise nor shall Borrower use Advances or
proceeds of Inventory to purchase margin stock except as set out in Section
12.0.
Section 12.2. Dividends.
---------
Borrower shall not declare or pay dividends except in accordance with all
applicable laws and any dividends declared or paid shall not exceed, in the
aggregate, fifteen percent (15%) of each year's net income available for
distribution and except as set out in Section 12.0, Borrower shall not redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock.
Section 12.3. Loans and Advances.
------------------
Except for routine and customary salary advances, Borrower shall not make any
unsecured loans or other advances of money to officers, directors, employees,
stockholders or Affiliates in excess of Two Million Dollars ($2,000,000.00) in
total. Borrower shall not incur any long term or working capital debt (other
than the Indebtedness) secured by Inventory. All obligations and security
interests owned by any Borrower with respect to any other Borrower are
subordinated to the Indebtedness and the Lender's security interest in the
Collateral.
Section 12.4. Capital Structure.
-----------------
Borrower shall not make any change in any of its business objectives, purposes
and operations that might in any way adversely affect the payment or performance
of, or Borrower's ability to pay and perform, its obligations to Lender with
respect to this Agreement. Borrower shall not allow a transfer of ownership of
Borrower that results in less than fifteen percent (15%) of the voting stock of
Borrower being owned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Section 12.5. Transactions with Affiliate.
---------------------------
Borrower shall not enter into, or be a party to, any transaction with any
Affiliate, or stockholder of Borrower, except, consistent with Borrower's
practice before entering into this Agreement, in the ordinary course of, and
pursuant to the reasonable requirements of, Borrower's business and upon fair
and reasonable terms which are fully disclosed to Lender and are no less
favorable to Lender than would obtain in a comparable arm's length transaction
with a Person not an Affiliate or stockholder of Borrower.
Section 12.6. Adverse Transactions.
--------------------
Borrower shall not enter into any transaction that adversely affects the
Collateral or Borrower's ability to perform this Agreement or Lender's rights
under the Loan Documents.
Section 12.8. Collateral.
----------
Except as otherwise expressly permitted in the Loan Documents, Borrower shall
not convey or allow any ownership, security, or other, interest in the
Collateral other than Borrower's ownership interest and Permitted Liens.
Borrower may sell or pledge Contracts. Borrower may sell Motor Vehicles and
Inventory to bona fide retail customers.
ARTICLE XIII - EVENTS OF DEFAULT
Section 13.0. Events of Default.
-----------------
An Event of Default means the occurrence or existence of one or more of the
following events or conditions (whatever the reason for the Event of Default and
11
whether voluntary, involuntary or caused by operation of law) which is not
waived in writing by Lender or cured to the extent a cure is applicable:
(A) A breach by Borrower of any representation, warranty or obligation
contained herein or in the other Loan Documents or in any other
agreement with Lender including without limitation failure to make any
payment of principal, interest, or any other amount provide for in
this Agreement when due.
(B) A breach by an Affiliate of any representation, warranty, or
obligation contained in any other agreement with Lender.
(C) Any default by Borrower or any Affiliate of Borrower (including but
not limited to a default due to non-payment, or a default relating to
the securitization of any assets of Borrower or any Affiliate of
Borrower) under any material agreement, document or instrument to
which it is a party or by which any of its property is bound, creating
or relating to any debt or other obligation (other than the
Indebtedness hereunder), if the payment or maturity of such debt or
obligation is accelerated as a consequence of such default or demand
for payment thereof is made.
(D) The Collateral or any other of Borrower's or an Affiliate's assets are
attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and the same is not
dissolved within thirty (30) days thereafter; an application is made
by any Person other than Borrower for the appointment of a receiver,
trustee, or custodian for the Collateral or any other of Borrower's or
an Affiliate's assets and the same is not dismissed within thirty (30)
days after the application therefore; or Borrower or an Affiliate
shall have concealed, removed or permitted to be concealed or removed,
any part of its property, with intent to hinder, delay or defraud its
creditors or made or suffered a transfer of any of its property which
may be fraudulent under any bankruptcy, fraudulent conveyance or other
similar law. Provided, however, if any of the foregoing occurs with
respect to Inventory or a Motor Vehicle, Borrower may cure the default
by not designating it as an Eligible Vehicle(s).
(E) An application is made by Borrower or an Affiliate for the appointment
of a receiver, trustee or custodian for the Collateral or any other of
Borrower's or an Affiliate's assets; a petition under any section or
chapter of the Bankruptcy Code or any similar federal or state law or
regulation shall be filed by Borrower or an Affiliate; Borrower or an
Affiliate shall make an assignment for the benefit of its creditors or
any case or proceeding is filed by Borrower or an Affiliate for its
dissolution, liquidation, or termination; Borrower ceases to conduct
its Contract purchase and servicing business.
(F) Borrower is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its business
affairs, or a petition under any section or chapter of the Bankruptcy
Code or any similar federal or state law or regulation is filed
against Borrower or an Affiliate, or any case or proceeding is filed
against Borrower or an Affiliate for its dissolution or liquidation,
and such injunction, restraint, petition, case or proceeding is not
dismissed within thirty (30) days after the entry or filing thereof.
(G) A notice of lien, levy or assessment is filed of record with respect
to all or any of Borrower's or an Affiliate's assets by the United
States, or any department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental agency and it is
not released within thirty (30) days after the filing; or if any taxes
or debts become a lien or encumbrance upon the Collateral or any other
of Borrower's or an Affiliate's assets, and the same is not released
within thirty (30) days after the same becomes a lien or encumbrance.
(H) Borrower or an Affiliate becomes insolvent or admits in writing to its
inability to pay its debts as they mature.
12
(I) There occurs or exists any situation which leads Lender to believe, in
good faith, that Borrower may not, or may be unable to, pay in the
normal course one or more payment obligations to Lender, and Lender
has given Borrower at least ten (10) days' notice thereof.
(J) A financial statement of Borrower or an Affiliate reveals that its
financial condition has materially adversely deteriorated after the
execution of this Agreement.
(K) An audited financial statement of Borrower is not unqualified.
(L) Any other event occurs which will, in Lender's reasonable opinion,
have a material adverse effect on the Collateral, Lender's rights
under the Loan Agreements, or on Borrower's financial or business
condition, operations or prospects, and Lender has given Borrower at
least ten (10) days' notice thereof.
(M) Borrower's termination or failure to maintain a warehouse facility
substantially similar to the facility identified in Exhibit 13.0(M).
Section 13.1. Default Rate of Interest.
------------------------
Upon and after an Event of Default and subject to Section 2.4, Borrower's
obligations to Lender shall continue to bear interest, calculated daily on the
basis of a 360-day year at the per annum rate set forth in Section 2.2, plus
additional post-default interest of four percent (4%) compounded daily until
paid in full.
Section 13.2. Lender's Remedies.
-----------------
Whenever a Pre-Default Event or an Event of Default has occurred, Lender may
without prior notice immediately suspend making Advances. Upon and after an
Event of Default, Lender shall have the following rights and remedies. The
rights and remedies shall be cumulative, and none exclusive, except to the
extent required by law. Lender's exercise of any right, remedy, or
attorney-in-fact appointment shall not relieve Borrower of any of its
obligations to Lender.
(A) The right, at Lender's discretion and without notice, (i) to
immediately cease further Advances and/or terminate this Agreement,
and (ii) to declare Borrower's obligations to Lender immediately due
and payable, whereupon Borrower's obligations shall become and be due
and payable, without presentment, demand, protest or further notice or
process of any kind, all of which are expressly waived by Borrower.
Borrower's obligations to Lender shall be immediately due and payable
without declaration by Lender if the Event of Default consists of an
event set forth in Section 13.0(E), (F), or (H).
(B) All of the rights and remedies of a secured party under the UCC and
other applicable laws, including the right to appoint a receiver.
(C) The right at any time to (i) enter through self-help and without
judicial process, upon the premises of Borrower, without any
obligation to pay rent to Borrower, or to enter any other place or
places where the Collateral is located and kept, and remove the
Collateral or remain on and use the premises for the purpose of
collecting or disposing of the Collateral, and (ii) require Borrower
to assemble the Collateral and make it available to Lender at a place
to be designated by Lender.
(D) The right to sell or otherwise dispose of all or any of the Collateral
at public or private sale, as Lender in its sole discretion may deem
advisable; and such sales may be adjourned from time to time with or
without notice. Lender shall have the right to conduct such sales on
Borrower's premises without charge for such time and Collateral as
Lender may see fit. Lender is hereby granted a license or other
applicable right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit for this
purpose. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of
the Collateral at public or, if permitted by law, private sale and, in
lieu of actual payment of such purchase price, may set off the amount
of such price against Borrower's obligations to Lender. If any
13
deficiency shall arise from the disposition of Collateral, Borrower
shall remain liable to Lender therefore. Borrower agrees that the
Inventory and Motor Vehicles are a type of collateral customarily sold
on a recognized market.
(E) The right at any time and from time to time thereafter, at Lender's
sole discretion and without notice to Borrower, (i) to collect and
foreclose, by legal proceedings or otherwise, the Collateral in the
name of Lender or Borrower and (ii) to take control, in any manner, of
any item of payment for or proceeds of the Collateral. Lender is not
obligated to pursue the Collateral or any other Person in order to
enforce Borrower's obligations to Lender.
(G) The right to carry out the actions within the scope of Borrower's
appointment of Lender as attorney-in-fact.
Section 13.3. Injunctive Relief.
-----------------
Borrower recognizes that if there is an Event of Default then, depending on the
nature of the Event of Default, it may be that no remedy at law will provide
complete or adequate relief to Lender, and Lender shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages. The injunctive relief shall not be a waiver of Lender's
rights to other relief and remedies.
Section 13.4. Notice.
------
Any notice required to be given by Lender of a sale, lease, or other disposition
of the Collateral which is given pursuant to Section 15.1 at least ten (10) days
prior to such proposed action, shall constitute commercially reasonable and fair
notice thereof to Borrower. Notice of less duration shall not be presumed to be
commercially unreasonable or unfair.
Section 13.5. Appointment of Lender as Borrower's Lawful Attorney.
---------------------------------------------------
Borrower irrevocably appoints Lender (and all persons designated by Lender) as
Borrower's true and lawful attorney-in- fact to act in Borrower's place in
Borrower's or Lender's name to: (i) if permitted by applicable law, sell or
assign the Collateral upon such terms, for such amounts and at such time or
times as Lender deems advisable; (ii) take control, in any manner, of any item
of Collateral or any payment or proceeds with respect to the Collateral; (iii)
prepare, file and sign Borrower's name on any notice of lien, assignment or
satisfaction of lien or similar document in connection with the Collateral; (iv)
do all acts and things necessary, in Lender's sole discretion, to exercise
Lender's rights granted in or referred to in Section 13.2 of this Agreement; (v)
endorse the name of Borrower upon any item of payment or proceeds consisting of
or relating to the Collateral and deposit the same to the account of Lender for
application to the Indebtedness; (vi) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Collateral to which Borrower has access; (vii) open Borrower's
mail to collect Collateral and direct the Post Office to deliver Borrower's mail
to an address designated by Lender; and (viii) do all things necessary to carry
out and enforce this Agreement which Borrower has failed to do. Borrower
ratifies and approves all acts of Lender as Borrower's attorney-in-fact. Lender
shall not, when acting as attorney-in-fact, be liable for any acts or omissions
as or for any error of judgment or mistake of fact or law, except for actions
taken in bad faith or resulting from Lender's gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable until all
payment and performance obligations of Borrower to Lender have been fully
satisfied. Borrower shall upon request of Lender execute powers of attorney to
separately evidence the foregoing powers granted to Lender. All costs, fees and
expenses incurred by Lender, or for which Lender becomes obligated, in
connection with exercising any of the foregoing powers shall be payable to
Lender by Borrower on demand by Lender and until paid shall be part of the
Indebtedness.
Section 13.6. Lender's Default.
------------
In the event of any default of the Loan Documents by Lender or any claim by
Borrower related to the Loan Documents, Borrower's sole and exclusive remedy
against Lender shall be a cause of action sounding in contract with damages
limited to actual and direct damages incurred. Lender shall in no event be
liable for ordinary negligence, delay in performance or any consequential,
special, punitive, incidental or indirect damages, including without limitation,
loss of profit or goodwill. Lender shall in no event be liable for any loss or
damage directly or indirectly resulting from the furnishing of services or
reports under this Agreement. With respect to any goods and services provided by
14
Lender, LENDER MAKES NO warranties, whether expressed or implied, including,
without limitation, implied WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. Borrower shall have no cause of action against Lender for a
default of the Loan Documents unless Borrower first notices Lender of the
default and allows Lender a reasonable time of at least thirty (30) Business
Days to cure the default and Lender fails to cure the default.
Section 13.7. Borrower's Right to Cure.
------------------------
In the event of an unintentional Pre-Default Event by Borrower with respect to
payment obligations, Borrower shall have three (3) Business Days to cure the
Pre-Default Event before Lender exercises its remedies as set forth in this
Article XIII. In the event of any other type of unintentional default by
Borrower (other than an Event of Default under Section 13.0 (E), (F), or (H),
Borrower shall have thirty (30) calendar days to cure the default before Lender
exercises its remedies as set forth in this Article XIII. Regardless of whether
Borrower cures a default, Lender shall be entitled to indemnification pursuant
to Article XII with respect to any Losses arising from claims asserted against
Lender.
ARTICLE XIV - DEFINITIONS
Section 14.0. Defined Terms.
-------------
Whenever used in this Agreement with such upper case letters as are shown below,
the following terms shall have the respective meanings set forth below. When the
terms are used in the plural, the plural forms of the meanings shall apply.
Accounting Period: a calendar month, beginning with the month during which this
Agreement is executed and ending with the calendar month during which the
Indebtedness has been paid in full following termination of this Agreement.
Advance: each of the advances described in Article III of this Agreement.
Affiliate: any Person, now or in the future (i) directly or indirectly owned or
controlled in whole or in part by Borrower, or (ii) under common ownership or
control with Borrower. For the purpose of this definition, "control" shall mean
the power to direct, or cause the direction of, management or policies, whether
through the ownership of voting securities, by contract or otherwise. For the
purpose of this definition, "owned" shall mean at least 10% ownership.
Average Charged-Off Losses:
(A) with respect to all Contracts, the Accounting Period average of the
Charged-Off Losses of all Contracts for any six (6) consecutive
Accounting Periods; provided that, until the first six (6) Accounting
Periods have expired, the Average Charged-Off Losses shall be the
Accounting Period average of the Charged-Off Losses for the Accounting
Periods which have expired; and
(B) with respect to Managed Portfolio Contracts, the Accounting Period
average of the Charged-Off Losses of all Managed Portfolio Contracts
for any three (3) consecutive Accounting Periods; provided that, until
the first three (3) Accounting Periods have expired, the Average
Charged-Off Losses shall be the Accounting Period average of the
Charged-Off Losses for the Accounting Periods which have expired.
Business Day: any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in the States of Arizona, Florida, Indiana and Texas
are required by law to be closed.
Certificate of Title: the certificate of title, manufacturer's certificate of
origin or other document issued by a duly authorized state, province or
government agency evidencing ownership of a Vehicle.
Charged-Off Contract: a Pledged Contract (i) for which all or part of the
Scheduled Payments are due and unpaid, ninety (90) days after the due date for
such Scheduled Payments, (ii) for which the Financed Vehicle has been
surrendered, repossessed, or unable to be located, or (iii) which has been
settled for less than the Outstanding Principal Balance.
15
Charged-Off Losses: as of the end of an Accounting Period, the Outstanding
Principal Balance of Charged-Off Contracts which become Charged-Off Contracts
during the Accounting Period minus amounts received by Borrower during the
Accounting Period and applied to Charged-Off Contracts which became Charged-Off
Contracts during a previous Accounting Period, divided by the Outstanding
Principal Balance of all Contracts owned by Borrower which are not Charged-Off
Contracts; expressed as a percentage.
Closing Date: the date of execution of this Agreement.
Collateral: the property in which Lender is granted a security interest pursuant
to Section 6 of this Agreement.
Contract: an installment or conditional sale contract, with any amendments,
owned or acquired by Borrower pursuant to which a Contract Debtor has: (i)
purchased a new or used Motor Vehicle, (ii) granted a security interest in the
Motor Vehicle to secure the Contract Debtor's payment obligations, and (iii)
agreed to pay the unpaid purchase price and a finance charge in periodic
installments no less frequently than monthly.
Contract Collateral: this term has the meaning provided in Section 16 of this
Agreement.
Contract Debtor: the Person that has executed a Contract as a purchaser, and any
guarantor, co-signer or other Person obligated to make payments under the
Contract.
Contract Debtor Documents: the original Certificate of Title, the original
executed Contract with original Contract Debtor signatures and the other
documents and instruments relating to the Contract.
Contract Debtor Insurance: the liability insurance coverage required by law and
any insurance, other insurance which insures a Financed Vehicle or a Contract
Debtor's obligations under a Contract. (Added back)
Contract Rights: with respect to Pledged Contracts, (i) Borrower's interest in
the Financed Vehicle; (ii) all rights of Borrower regarding the Contract and
Financed Vehicle, including but not limited to rights to electronic funds
transfers and rights under all dealer agreements and purchase agreements
pursuant to which the Contract was acquired by Borrower; (iii) all rights of
Borrower with respect to Contract Debtor Insurance and any other policies of
fire, theft or comprehensive insurance, collision insurance, public liability
insurance or property damage insurance maintained with respect to the Financed
Vehicle, the Contract, or the Contract Debtor; (iv) all rights of Borrower, if
any, to prepaid dealer rate participation in connection with the Contract; (v)
Remittances, and (vi) all rights of Borrower to the originals of all books,
records (including electronic data), reports, files, and documents relating to
the Contracts, including, but not limited to, Contract Debtor Documents,
financial statements of Contract Debtors, and all payment reports or records
relating to the Contracts. (Added back)
Debt Ratio: the debt-to-equity ratio of Borrower, calculated in accordance with
generally accepted accounting principles by comparing Borrower's total
liabilities other than Subordinated Debt less amounts owed by any
bankruptcy-remote subsidiary via associated securitization trusts to
unaffiliated bondholders or certificate holders which are included in Borrower's
on-book liabilities (including amounts owed to any bondholders who may not have
any legal recourse to any non-bankruptcy remote subsidiaries), divided by Net
Worth of Borrower.
Delinquency Measurement: as of the end of an Accounting Period, the sum of the
Outstanding Principal Balances of all Delinquency Measurement Contracts which
have Scheduled Payments which are due and partially or completely unpaid more
than thirty (30) days from the due date of such Scheduled Payments, divided by
the sum of the Outstanding Principal Balances of all Delinquency Measurement
Contracts; expressed as a percentage.
16
Delinquency Measurement Contracts: all Pledged Contracts which do not constitute
Charged-Off Losses.
Eligible Vehicle: a Motor Vehicle (i) which Borrower has purchased for at least
$1,500 and not more than $15,000; (ii) which has been in Borrower's possession
for no more than 150 days; (iii) which has not been repossessed by Borrower
(unless subsequently re-purchased at auction); (iv) for which Borrower holds in
its possession the title and purchase documentation, provided, however, that, if
all other criteria for Eligible Vehicles are met, Motor Vehicles may be held in
Borrower's possession for 40 days without title documentation; and (v) is not
subject to any lien, encumbrance or security interest of any kind other than the
interest of Lender as granted hereunder or any other agreement with Lender and
as otherwise agreed to by Lender.
Eligible Vehicle Advance Value: for each Eligible Vehicle in Borrower's
inventory purchased by Borrower:
(A) at an ADESA location, an amount equal to one hundred percent (100%) of
the pre-confirmed purchase price for such item of Inventory plus up to
One Thousand Dollars ($1,000) in approved reconditioning costs;
(B) at a non-ADESA location, an amount equal to ninety percent (90%) of
the applicable regional NADA trade value at the time of purchase for
such item of Inventory plus up to One Thousand Dollars ($1,000) in
approved reconditioning costs; or
(C) at non-auction locations, an amount equal to eighty percent (80%) of
the applicable regional NADA trade value at the time of purchase for
such item of Inventory plus up to One Thousand Dollars ($1,000) in
approved reconditioning costs.
Provided, however, once any Eligible Vehicle has been in Borrower's possession
for 120 days, the Eligible Vehicle Advance Value for that Motor Vehicle shall be
reduced by 10%.
Event of Default: this term has the meaning provided in Section 15.0 of this
Agreement.
Financed Vehicle: the new or used Motor Vehicle purchased by a Contract Debtor
pursuant to a Contract, or any substituted vehicle which is properly documented
and approved by Lender. (Added back)
Indebtedness: the Advances and all other amounts, including but not limited to
all other amounts advanced, expended or applied by Lender under this Agreement
to or for the benefit of Borrower or to perform or enforce Borrower's covenants
in this Agreement, attorney fees, costs of collection, and interest, that
Borrower owes Lender in connection with this Agreement.
Interest Coverage: the sum of Borrower's year-to-date pre-tax income plus
Borrower's year to date interest expense, compared to Borrower's year-to-date
interest expense.
Inventory: goods, other than Contract Collateral, which are held for sale or
lease or to be furnished under a contract of service.
Inventory Advance Value: the lesser of (i) the Inventory Facility Limit or (ii)
the cumulative Eligible Vehicle Advance Value for all Eligible Vehicles in
Borrower's inventory.
Inventory Facility: the loan facility described in Section 2.1 herein.
Inventory Facility Limit: Thirty Six Million Dollars ($36,000,000.00).
Loan Documents: this Agreement, the Note, the guaranties signed by the
Guarantors, and the Supplemental Documentation.
17
Managed Portfolio Contracts: Installment contracts, serviced by Borrower, which
were originated or purchased by Borrower, including but not limited to those
contracts which have been subsequently sold to a third party, with the servicing
retained by Borrower and with a residual interest in the installment contracts
held by Borrower.
Maximum Lawful Rate: this term has the meaning provided in Section 2.4.
Motor Vehicle: A passenger motor vehicle, van, motorcycle, truck or light duty
truck which is not manufactured for a particular commercial purpose and which
can be registered for use on public highways and is not a "grey market" vehicle
provided that Motor Vehicles shall not include Financed Vehicles.
Net Worth: the total of shareholders' equity (including capital stock,
additional paid-in capital, and retained earnings) plus Subordinated Debt, less
(i) the total amount of loans and debts due from Affiliates, shareholders,
officers, or employees, and (ii) the total amount of any intangible assets,
including without limitation unamortized discounts, deferred charges, and
goodwill.
Outstanding Principal Balance: the outstanding principal balance of a Contract
calculated by subtracting the unearned finance charge (determined by the finance
charged refund method applicable to the Contract) from the sum of the unpaid
Scheduled Payments.
Permitted Lien: (i) any security interest or lien at any time granted in favor
of Lender; (ii) liens securing claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar Persons for labor, materials, supplies
or rentals incurred in the ordinary course of Borrower's business; (iii) liens
resulting from deposits made in the ordinary course of business in connection
with workers compensation, unemployment insurance, social security and other
similar laws; and (iv) liens agreed to in writing by Lender.
Person: any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution, entity,
party, or government (including, any instrumentality or division thereof).
Places of Business: those locations set forth in Exhibit 8.0(A), including any
third party servicer locations to which Borrower may send a Motor Vehicle to
prepare the Motor Vehicle for sale or for repair
Pledged Contract: a Contract owned on the Closing Date or in the future by
Borrower.
Pre-Default Event: an event that with the passage of time, the giving of notice,
or both, would constitute an Event of Default.
Rolling Average Delinquency: the average of the Delinquency Measurements for any
six (6) consecutive Accounting Periods; provided that, until the first six (6)
Accounting Periods have expired, the Rolling Average Delinquency shall be the
average of the Delinquency Measurements for the Accounting Periods which have
expired.
Rolling Average Managed Portfolio Delinquency: the average of the Managed
Portfolio Delinquency Measurements for any three (3) consecutive Accounting
Periods; provided that, until the first three (3) Accounting Periods have
expired, the Rolling Average Managed Portfolio Delinquency shall be the average
of the Managed Portfolio Delinquency Measurements for the Accounting Periods
which have expired.
Scheduled Payment: the periodic installment payment amount disclosed in a
Contract.
Stated Rate: this term has the meaning provided in Section 2.4.
18
Subordinated Debt: an unsecured debt obligation of Borrower as listed on Exhibit
11.6(A) which is subordinated to Lender pursuant to a subordination agreement
which is in the form of Exhibit 14.0 or pursuant to some other agreement
approved in writing by Lender, except as otherwise set forth in this Agreement
Supplemental Documentation: all agreements, instruments, documents, certificates
of title, financing statements, notices of assignment, powers of attorney,
subordination agreements, and other written matter necessary or reasonably
requested by Lender to perfect and maintain perfected Lender's security interest
in the Collateral or to consummate the transactions contemplated by this
Agreement.
UCC: the Uniform Commercial Code as adopted and in effect in Indiana.
Section 14.1. Other Terms:
-----------
All other terms contained in this Agreement shall, unless the context indicates
otherwise, have the meanings provided in the UCC to the extent the same are
defined therein.
Section 14.2. Accounting Terms.
----------------
Any accounting terms used in this Agreement which are not specifically defined
shall have the meanings customarily given them in accordance with generally
accepted accounting principles.
ARTICLE XV - GENERAL TERMS AND CONDITIONS
Section 15.0. Applicable Law.
---------------
This Agreement shall be governed and construed in accordance with the laws of
the State of Indiana.
Section 15.1. Notices.
-------
Any notice, request, demand, instruction or other communication to be given any
party hereto in writing shall be effective upon delivery during regular business
hours at the offices of Borrower and Lender hereinafter set forth or at such
other offices that either party notifies the other of in writing. The failure to
deliver a copy as set forth below shall not affect the validity of the notice to
the Borrower or Lender. Such communications shall be given by telecopy,
commercial delivery service, or sent by certified mail, postage prepaid and
return receipt requested, as follows:
If to Borrower:
Ugly Duckling Corporation
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Electronic FAX (▇▇▇) ▇▇▇-▇▇▇▇
ATTN: Treasurer
With a copy to the General Counsel at the same address.
As of no later than September 1, 2001, notices shall go to the address set forth
in Section 6.5 hereof.
If to Lender:
Automotive Finance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Electronic FAX (▇▇▇) ▇▇▇-▇▇▇▇
Attention: C.O.O.
Section 15.2. Headings.
--------
Paragraph headings have been inserted in this Agreement as a matter of
convenience for reference only. The paragraph headings shall not be used in the
interpretation of this Agreement.
Section 15.3. Severability.
------------
If any one or more of the provisions of this Agreement are held to be invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
19
and enforceability of any such provision or provision in every other respect and
of the remaining provisions of this Agreement shall not be in any way impaired.
Section 15.4. Offset.
------
Lender has the right to offset, apply, or recoup any obligation of Borrower to
Lender, arising under the Loan Documents or otherwise, against any obligations
or payments Lender owes to Borrower, arising under the Loan Documents or
otherwise, or against any property of Borrower held by Lender. Borrower waives
any right to offset, apply, or recoup against any obligation it owes to Lender.
Lender is not obligated to pursue any of the Collateral or any of Lender's
rights at any time as a condition to payment and performance by Borrower.
Section 15.5. Independent Contractor.
-----------------------
Borrower is an independent contractor in all matters relating to this Agreement
and the Collateral and is not an agent or representative of Lender. Borrower has
no authority to act on behalf of or bind Lender.
Section 15.6. Expenses.
--------
Each party shall bear the expenses of its own performance of this Agreement.
Section 15.7. Modification of Loan Documents; Sale of Interest.
------------------------------------------------
This Agreement may not be modified, altered or amended, except by an agreement
in writing signed by Borrower and Lender. The rights of Lender granted in or
referred to in this Agreement shall apply to any modification of or supplement
to the Loan Documents. Borrower may not without Lender's prior written
permission sell, assign or transfer any of the Loan Documents, or any portion
thereof, including, without limitation, Borrower's rights, title, interests,
remedies, powers and duties thereunder. Any sale, assignment, or transfer by
Borrower without Lender's permission shall be void ab initio. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of any of the Loan Documents, or of
any portion thereof, including, without limitation, Lender's rights, title,
interests, remedies, powers and duties thereunder. The Loan Documents shall be
binding upon and inure to the benefit of the permitted successors and assigns of
Borrower and Lender.
Section 15.8. Attorneys' Fees and Lender's Expenses.
-------------------------------------
If Lender shall in good faith employ counsel for advice or other representation
or shall incur other costs and expenses in connection with entering into any
future amendments or modifications to the Agreement; or if, following an Event
of Default, Lender shall in good faith employ counsel for advice or other
representation or shall incur other costs and expenses in connection with (i)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, Borrower or any other Person) in any way relating to the Collateral,
any of the Loan Documents or any other agreements executed or delivered in
connection herewith, (ii) any attempt to enforce, or enforcement of, any rights
of Lender against Borrower or any other Person, that may be obligated to Lender
by virtue of any of the Loan Documents, or (iii) any actual or attempted
inspection, audit, monitoring, verification, protection, collection, sale,
liquidation or other disposition of the Collateral; then, in any such event, the
attorneys' fees arising from such services and all expenses, costs, charges and
other fees (including expert's fees) incurred by Lender in any way arising from
or relating to any of the events or actions described in this Section shall be
payable to Lender by Borrower on demand by Lender and until paid shall be part
of the Indebtedness.
Section 15.9. Waiver by Lender.
----------------
Lender's failure, at any time or times hereafter, to require strict performance
by Borrower of any provision of this Agreement or any of the other Loan
Documents shall not waive, affect or diminish any right of Lender thereafter to
demand strict performance therewith. Any suspension or waiver by Lender of an
Event of Default by Borrower under the Loan Documents shall not suspend, waive
or affect any other Event of Default by Borrower under the Loan Documents,
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in the Loan Documents and no Event of
Default by the Borrower under the Loan Documents shall be deemed to have been
suspended or waived by Lender unless such suspension or waiver is by an
instrument in writing signed by a manager of Lender and identifies the matter
20
waived or suspended. Any consent or approval by Lender pursuant to this
Agreement is not a waiver by Lender of, or an admission by Lender of the truth
of, any of Borrower's representations and warranties in this Agreement.
Section 15.10. Waiver by Borrower.
-----------------------
Except as otherwise provided for in this Agreement, Borrower waives (i) notice
and consummation of presentment, demand, protest, dishonor, intent to
accelerate, acceleration; (ii) all rights to notice and a hearing prior to
taking possession or control of, or Lender's replevy, attachment or levy upon,
the Collateral; (iii) any bond or security in a judicial proceeding as a
condition to Lender exercising any of Lender's remedies; (iv) the benefit of all
valuation, appraisement and exemption laws, and (v) TRIAL BY JURY in any dispute
with Lender arising out of or related to any of the Loan Documents. The failure
or delay of Borrower to strictly enforce the terms of this Agreement shall not
be a waiver of Borrower's right to do so.
Section 15.11. Counterparts.
------------
This Agreement may be executed in two or more counterparts, with the same effect
as if all parties had signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one and the
same instrument.
Section 15.12. Entire Agreement.
----------------
This Agreement contains the entire agreement among the parties regarding the
loan by Lender to Borrower based on Contracts and supersedes all prior
agreements, whether written or oral, with respect thereto.
Section 15.13. Statements of Account.
---------------------
Each report, billing statement, payment transcript, or other statement which is
prepared by Lender shall, except for manifest errors, be deemed final, binding
and conclusive upon Borrower in all respects as to all matters reflected
therein, and shall constitute an account stated between Borrower and Lender,
unless thereafter waived in writing by Lender or unless, within thirty (30) days
after Borrower's receipt of such document, Borrower delivers to Lender notice of
a written objection thereto specifying the claimed error. In the event of such
an error, only those items expressly objected to in such notice shall be deemed
to be disputed by Borrower and Lender's only liability to Borrower shall be to
issue a corrected document.
Section 15.14. Publicity.
---------
Borrower shall not (i) issue any press release or make any public announcement
or otherwise publicize the consummation of this Agreement with Lender, or (ii)
make a public disclosure of any kind regarding the subject matter hereof, or
(iii) make use of Lender's name, tradename, logo or trademark without the
express written consent of Lender, except that Borrower may publicly disclose
information relating to this Agreement if Borrower gives Lender 48 hours advance
written notice (or if upon advice of counsel Borrower or Guarantor cannot wait
48 hours then upon such notice as Borrower or Guarantor may reasonably provide
to Lender) prior to releasing any disclosure required by law or in connection
with its registration of securities with the U.S. Securities and Exchange
Commission or any state securities commission, or in connection with a filing
pursuant to Borrower's listing with a national securities exchange or
governmental entity. Lender shall not (i) issue any press release or make any
public announcement or otherwise publicize the consummation of this Agreement
with Borrower, or (ii) make a public disclosure of any kind regarding the
subject matter hereof, or (iii) make use of Borrower's name, tradename, logo or
trademark without the express written consent of Borrower.
Section 15.15. Faxed Documents.
---------------
In order to expedite the acceptance and execution of this Agreement and any of
the Supplemental Documents, each of the parties hereto agrees that a faxed copy
of any original executed document shall have the same binding effect on the
party so executing the faxed document as an original handwritten executed copy
thereof.
Section 16. Contract Collateral.
-------------------
Lender agrees that the definition of "Collateral: in this Agreement may not be
amended to include additional types of property without the consent of
Greenwhich Capital Financial Products, Inc. and its successors and assigns and
other lenders in connection with "warehouse" lending facilities so long as
Greenwich Capital Financial Products or such successors and assigns remain as
`warehouse' lenders. Lender further agrees that Lender shall not have any lien
or security interest with respect to Contract Collateral. As used herein
"Contract Collateral" shall mean each Contract owned by the Borrower and each of
the following items with respect to such Contract:
21
(A) the Contract Debtor Documents;
(B) the Contract Rights;
(C) any payments from a bank account of, and any electronic funds
transfers from, any Contract Debtor or Contract Rights Payor (subject
to the terms and conditions of the Master Agency Agreement);
(D) any associated chattel paper, lease, instrument, installment sale
contract or installment loan contract;
(E) all rights of the Borrower in and to the related Financed Vehicle,
including any repossessed Financed Vehicle, and in and to any other
collateral securing such Contract, including any security deposit;
(F) any contract purchase discount;
(G) any rights of Borrower to dealer reserves or rate participation with
respect to such Contract, if any;
(H) any money, payments or proceeds of any insurance policies with respect
to any or all Contracts or any Financed Vehicles with respect to which
Borrower is solely or jointly the owner or is insured or is the loss
payee or is a beneficiary, including any insurance proceeds;
(I) all books and records of the Borrower (including financial statements,
accounting records, customer lists, credit files, computer programs,
electronic data print-outs and other computer materials and records)
with respect to such Contract;
(J) all accessions to, substitutions for and all replacements and products
of, any of the foregoing property; and (K) all moneys, instruments and
other proceeds of the foregoing.
Each such secured creditor and transferee, purchaser and assignee of Contract
Collateral will be a third party beneficiary of this provision.
[Signature Pages to follow - End of Page]
22
EXHIBIT 4.0(A)
AFC WIRE INSTRUCTIONS
BANK NAME: SUNTRUST BANK ORLANDO
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ABA (ROUTING) : ▇▇▇-▇▇▇-▇▇▇
ACCOUNT #: 0215252159679
BENEFICIARY: AFC FUNDING CORP.
▇▇▇ ▇. ▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
OTHER INFORMATION: DEALER NAME: UGLY DUCKLING CORPORATION
DEALER #:
EXHIBIT 4.0(A)
AFC WIRE INSTRUCTIONS
BANK NAME: SUNTRUST BANK ORLANDO
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ABA (ROUTING) : ▇▇▇-▇▇▇-▇▇▇
ACCOUNT #: 0215252159679
BENEFICIARY: AFC FUNDING CORP.
▇▇▇ ▇. ▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
OTHER INFORMATION: DEALER NAME: UGLY DUCKLING CORPORATION
DEALER #:
Exhibit 8.0 (A) CAR SALES LIST OF LOCATIONS, page 7
EXHIBIT 8.0 (A)
UGLY DUCKLING CAR SALES - LIST OF LOCATIONS
CORPORATE OFFICE
----------------
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Credit Corp. Offices
Ugly Duckling Credit Corp.
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Mailing Address:
P. ▇. ▇▇▇ ▇▇▇▇
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Ugly Duckling Credit Corp.
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Ugly Duckling Credit Corp.
-
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Plano Servicing Center
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Administrative Service Offices
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LOS ANGELES (WEST)
DOWNEY
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VAN NUYS
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TORRANCE
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WILMINGTON
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EL MONTE (H)
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OXNARD
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SAN ▇▇▇▇▇▇▇▇ (H)
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WILMINGTON
INSPECTION CENTER
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ATLANTA
MEMORIAL
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JONESBORO
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MARIETTA
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COLLEGE PARK
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SMYRNA
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RIVERDALE
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DOUGLASVILLE
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DORAVILLE
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DOUGLASVILLE
INSPECTION CENTER
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MEMORIAL DRIVE
INSPECTION CTR
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DALLAS
GARLAND ROAD
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
REDBIRD
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FIRST STREET
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ARLINGTON
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ (H)
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ALTA MERE
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ALTA MERE SRV CTR
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ CITY
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
BUCKNER
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GRAND PRAIRIE
▇▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dallas
REDBIRD INSP CTR
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ROAD
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GLENDALE
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MESA
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
APACHE TRAIL
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CHANDLER
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SOUTH CENTRAL (H)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PHOENIX
INSPECTION CENTER
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TAMPA
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WEST HILLSBOROUGH (H)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LAKELAND
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NEW PORT ▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
PINELLAS PARK
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ SVC CTR
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BRADENTON
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FLORIDA AVENUE
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BRANDON
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CLEARWATER
INSPECTION CENTER
▇▇▇▇ ▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
SAN ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LOOP 410
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SW MILITARY
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SAN ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BROADWAY
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SE MILITARY (H)
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
I-35
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SOUTHSIDE
INSPECTION CENTER ▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BROADWAY
INSPECTION CENTER
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TUCSON
SPEEDWAY
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PARK (H)
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GRANT
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TUCSON
TUCSON INSPECTION CTR
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NEVADA
FREMONT
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NORTH VEGAS
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FREMONT
INSPECTION CENTER
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NEW MEXICO
CENTRAL SW (H)
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WYOMING
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GRIEGOS
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WYOMING
INSPECTION CENTER
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ORLANDO
OCALA
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LEESBURG
▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WEST COLONIAL
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
EAST COLONIAL
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
KISSIMMEE
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DELAND
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SANFORD
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ORLANDO INSPECTION CTR
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RICHMOND
MIDLOTHIAN
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MECHANICSVILLE
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BROAD STREET
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PETERSBURG
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ROUTE 1
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MIDLOTHIAN
INSPECTION CENTER
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LOS ANGELES (EAST)
GARDEN GROVE
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RIVERSIDE
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MONTCLAIR
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FONTANA
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
STANTON
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
COSTA MESA
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
MONTCLAIR
INSPECTION CENTER
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Exhibit 8.0 (F)
Litigation
1. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ v. Ugly Duckling Car Sales Florida, Ugly Duckling
---------------------------------------------------------------------------
Corporation, Ugly Duckling Credit Corporation; Florida.
-------------------------------------------------------
Filed December 16, 1998. Purportedly a class action; class has not been
certified. Alleged claims include (i) violations of the Florida Deceptive
and Unfair Trade Practices Act, (ii) unconscionable purchase contract, and
(iii) violation of the Florida Uniform Commercial Code in repossessing the
automobile. The second and third counts were dismissed with prejudice; the
first count was dismissed with leave to amend, which amended complaint was
filed. Ugly Duckling Corporation and Ugly Duckling Credit Corporation have
been dismissed from the action. Answer was filed on August 21, 2000. Almost
no activity since that time other than a few nominal discovery requests.
2. Delaware Lawsuits Related to ▇▇▇▇▇▇ Offer to Take the Company Private.
-----------------------------------------------------------------------
On March 20, 2001, a shareholder derivative complaint was filed,
purportedly on behalf of UDC, in the Court of Chancery for the State of
Delaware in New Castle Court, captioned ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ ▇▇., ▇▇.
▇▇▇▇▇▇▇. The complaint alleges that UDC's current directors breached
fiduciary duties owed to UDC in connection with certain transactions
between UDC and ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, UDC's Chairman and majority
stockholder, and various entities controlled by ▇▇. ▇▇▇▇▇▇. The complaint
was amended on April 17, 2001 to add a second cause of action, on behalf of
all persons who own UDC common stock, and their successors in interest,
which alleges that UDC's current directors breached fiduciary duties in
connection with the proposed acquisition by ▇▇. ▇▇▇▇▇▇ of all of the
outstanding shares of UDC common stock not owned by him. UDC is named as a
nominal defendant in the action. The original cause of action seeks to void
all transactions deemed to have been approved in breach of fiduciary duty
and recovery by UDC of alleged compensatory damages sustained as a result
of the transactions. The second cause of action seeks to enjoin UDC from
proceeding with the proposed acquisition by ▇▇. ▇▇▇▇▇▇, or, in the
alternative, awarding compensatory damages to the class.
Following ▇▇. ▇▇▇▇▇▇'▇ offer in early April 2001 to purchase all
outstanding shares of UDC common stock, five additional and separate
purported shareholder class action complaints were filed between April 17
and April 25, 2001 in the Court of Chancery for the State of Delaware in
New Castle County. They are captioned Turberg v. Ugly Duckling Corp., et
al., No. 18828NC, ▇▇▇▇▇▇▇ v. Ugly Duckling Corp., et al., No. 18829NC,
▇▇▇▇▇▇▇ ▇. Ugly Duckling Corporation, et al., No. 18830NC, Benton v. Ugly
Duckling Corp., et al., No. 18838NC, and ▇▇▇ ▇▇▇▇▇▇ Living Trust v. Ugly
Duckling Corporation, et al., No. 18843NC. Each complaint alleges that UDC,
and its directors, breached fiduciary duties in connection with the
proposed acquisition by ▇▇. ▇▇▇▇▇▇ of all of the outstanding shares of UDC
common stock not owned by him. The complaints seek to enjoin the proposed
acquisition by ▇▇. ▇▇▇▇▇▇ and to recover compensatory damages caused by the
proposed acquisition and the alleged breach of fiduciary duties. These
cases were consolidated in June, 2001.
EXHIBIT 8.0(G)
AFC's UCC Collateral Description for the Ugly Duckling Loan
All now owned or hereafter acquired goods which are held for sale or lease
or to be furnished under a contract of service and all now owned or
hereafter acquired passenger motor vehicles, vans, motorcycles, trucks or
light duty trucks; and
all certificates of title, accessions to, substitutions for and all
replacements, products and proceeds of, all the foregoing property and any
and all books and records (including, without limitation, financial
statements, accounting records, customer lists, credit files, computer
programs, electronic data, print-outs and other computer materials and
records) of debtor pertaining to any or all of the foregoing property;
provided however, that the following shall not be included as secured
party's collateral: any and all installment or conditional sale contracts,
and any amendments (collectively "Contracts"), owned or acquired by debtor
and proceeds thereof including without limitation any and all right or
rights to payment or payments under any or all of the Contracts.
EXHIBIT 11.4
CERTIFICATE OF CHIEF FINANCIAL OFFICER
The undersigned, ________________ the duly authorized chief financial
officer of Ugly Duckling Corporation, a Delaware corporation ("UDC") DOES HEREBY
CERTIFY, for purposes of the Loan and Security Agreement dated as of August __,
2001 (the "Agreement") between UDC and Automotive Finance Corporation that: (i)
the attached financial statements are accurate in all material respects and
present the true financial condition of UDC as of the dates shown, (ii) the
assets of the Company shown on the financial statements exist, are solely owned
by UDC, are not subject to any liens other than the lien of Automotive Finance
Corporation and those disclosed in the financial statements or allowed by the
Agreement, and are accurately valued on the financial statements, (iii) the
attached financial statements were prepared in accordance with generally
accepted accounting principals, and (iv) there has been no material adverse
change in the financial condition of UDC after the dates that the financial
statements cover.
IN WITNESS WHEREOF, the undersigned has hereto set his hand the __ day of
________, 200_.
------------------------------------
Sr. Vice President and Chief Financial Officer
Exhibit 8.0 (A) CAR SALES LIST OF LOCATIONS, page 2
EXHIBIT 11.6 (A)
SUBORDINATED INDEBTEDNESS
1. That certain Loan Agreement, dated as of February 12, 1998, between Ugly
Duckling Corporation ("UDC") and certain Lenders (the "Duck ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Lenders"), as amended, whereby the Duck ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Lenders loaned UDC
the sum of $15,000,000 and were issued by UDC subordinated notes bearing
interest at 15% and maturing on February 12, 2003.
2. That certain Indenture, dated October 15, 1998, from UDC to ▇▇▇▇▇▇ Trust
and Savings Bank, as trustee, whereby UDC issued 12% subordinated
debentures which mature on October 23, 2003.
3. That certain Indenture, dated April 15, 2000, from UDC to ▇▇▇▇▇▇ Trust and
Savings Bank, as trustee, whereby UDC issued 11% subordinated debentures
which mature on April 15, 2007.
4. That certain Loan Agreement, dated as of January 11, 2001, between UDC and
Verde, whereby Verde loaned UDC the sum of $7,000,000 and was issued by UDC
(i) a subordinated Promissory Note bearing interest at LIBOR plus 600 basis
points and maturing on December 31, 2003 and (ii) 1,500,000 warrants to
purchase common stock of UDC, which may be exercised by Verde incrementally
after July 25, 2001 if the Note is not paid in full by July 25, 2001.
Automotive Finance Corporation
July 6,2001
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Ugly Duckling Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
Automotive Finance Corporation ("AFC") is pleased to advise you that it will
approve the credit facility~ (the "Line") to Ugly Duckling Corporation (the
"Borrower") as described below subject to the terms and conditions set forth
herein. Except as otherwise provided herein, this letter does not constitute a
legally binding and enforceable agreement. Moreover, this letter is not a
complete statement of the parties' intentions and agreements with respect to the
matters addressed herein. Nevertheless, upon acceptance by the Borrower, this
letter will serve as an expression of the parties' mutual intent to proceed in
good faith with the negotiation and execution of definitive agreements providing
for the transactions described herein and with the other steps necessary to
consummate such transactions. The date upon which such transactions shall be
consummated shall be a mutually agreed date within 30 days after completion of
the parties' due diligence investigations described herein and is referred to
herein as the "Closing Date".
The material terms of our Line are summarized below~
Borrower: Ugly Duckling Corporation (the "Borrower")
Loan Facility: $36,000,000 Revolving Purchase Money Inventory Line
Purpose: To finance the purchase of used vehicles for retail
sa1e at the Borrower's dealership locations.
Term: The Line will be established through July 30,
2002, at which it is due and payable in full. An
annual review will be due by the above date at
which time AFC will determine the Line's
continuation. (to be discussed)
Fees and Rates: Each vehicle will be charged at a variable
rate, adjusted each business day, based upon the most
recent prime rate published in the Wall Street
Journal plus 6.0 % per annum on the outstanding
principal amount per vehicle.
Period/Curtailment Date: Vehicles may be floored on the Line for a maximum of
150 days, and will have a 10% curtailment due at day
120 with full payoff due at day 150.
Two PARK WOOD CROSSING ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ FAX ▇▇▇-▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Ugly Duckling Corporation
July 6, 2001
Page 2
Advance Rate: a. ADESA Auction Purchased Vehicles: 100% of pre-
confirmed purchase price plus up to $1,000 in
reconditioning costs (with supporting documentation).
b. Non-ADESA Auction Purchased Vehicles: 90% of
clean black book value (no add-on's) plus up to
$1,000 in reconditioning costs (with supporting
documentation).
c. Non-Auction Purchased Vehicles: 80% of clean
black book value (no add-on's) plus up to $1,000 in
reconditioning costs (with supporting documentation).
Collateral: A perfected first priority purchase money security
interest, as applicable, and a perfected security
interest in all inventory, equipment, and general
intangibles as described in the UCC financing
statements. (to be discussed)
Guarantors: All subsidiary companies of Ugly Duckling
Corporation.
Insurance: Acquire Umbrella Liability and Comprehensive
insurance immediately after any loss at any one time
of $150,000 or more for an amount equal to
$10,000,000 with AFC listed as additional insured
and loss payee.
(to be discussed)
Borrower
Commitment: Borrower will keep AFC and the above facility in
place as its primary floorplan source for a period of
12 months. If the Borrower chooses not to keep AFC as
its primary floorplan source within the 12 month
period, the Borrower will pay AFC a separation fee of
$25,000.
Origination Fee: $5,000 non-refundable, due within 5 business days of
the complete execution of this agreement.
The following sets forth additional material terms and conditions of the Line.
Additional terms and conditions may be a part of the final documentation:
1. Each vehicle financed on the Floorplan Line is to be paid off within
two (2) business days from the date the vehicle is sold or otherwise
disposed of
2. Floorplan audits will be conducted 6 times per year at each of the
Borrower's locations. Audits will focus on the physical inventory and
collateral security as well as "deal audits" which will consist of a
comparison of dates associated within the making of a car deal:
i.e. sold, funded and pay-off dates. An event of default will occur if
more than 5% of the vehicles are sold out of trust ("SOT") during any
one lot audit. SOT occurs when the Borrower fails to payoff a specific
vehicle within 2 business days after the disposition by sale of the
vehicle. There will be a charge of $50 per vehicle for the first seven
days it remains SOT. From the 8th through the 14th day that it is SOT
there will be a charge of $100 per vehicle. From the l5t~~ through the
21St that it is SOT there will be a charge of
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Ugly Duckling Corporation
July 6, 2001
Page 3
$100 per vehicle. If there are SOT vehicles over 21 days old at any
one location that location will be in default and all obligations for
the vehicles at that location will be immediately due and payable. The
Borrower will be assessed a $65 charge per audit plus $1 for every
vehicle audited in excess of 60 vehicles to cover the cost of such
audits.
3. Financial Covenants: (to be discussed)
a. Audited financial statements within 120 days of each fiscal
year end.
b. Quarterly financial statements within 45 days of each
quarter end.
c. The Borrower will maintain an interest coverage ratio of
at all times.
d. The Borrower will maintain a minimum net worth of__________
at all times.
4. The Line will be cross-defaulted with all of the Borrower's other
credit facilities. AFC may periodically conduct a title audit at
the Borrower's premises.
5. As a condition for AFC offering this Line, The Borrower agrees
that:
a. 50% of all repo'd vehicles and 25% of all wholesale
returned vehicles sold at auction will be sold at an ADESA
auction and
b. ADESA will experience a 30% increase in auction purchases as
A direct result of Borrower's purchases;
c. Borrower will test ADESA's post-sale "full-disclosure"
inspection @ $50 per vehicle to protect Borrower from
unseen mechanical difficulties and will adopt the program if
it proves to be commercially viable; and d. Borrower will
provide ADESA and AFC with access to Borrower's wholesalers
for marketing of ADESA auctions and AFC floorplan services.
6. The final documentation may contain additional terms as AFC deems
necessary or desirable for this type of loan facility.
7. The Borrower will pay any reasonable costs incurred by AFC to
document this loan, together with any out of pocket costs for
attorneys, recording fees, and title work. A preliminary
estimate of these costs is approximately $10,000.
If you are in agreement with the terms and conditions contained herein, please
sign below and return: this letter to my attention. AFC `s receipt of this
signed letter, along with the commitment fee of $5,000 will constitute our
acceptance to begin the documentation of the loan subject to AFC's due
diligence. A formal loan agreement evidencing the terms of this letter will be
our final binding agreement.
Best Regards,
/s/ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ President
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Ugly Duckling Corporation
July 6, :2001
Page 4
Accepted this 9th day of July, 2001
---- ------
Ugly Duckling Corporation
By: (sign) /s/ ▇. ▇. ▇▇▇▇▇▇
----------------
By: (Print) ▇.▇. ▇▇▇▇▇▇
-----------
Title-Vice President & Treasurer
cc: ▇▇▇▇▇▇ ▇▇▇▇▇▇
February 20, 2001
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Chairman
Ugly Duckling Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
Ugly Duckling Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
This letter agreement (the "Agreement") confirms the commitment of Greenwich
Capital Financial Products, Inc. and its applicable affiliates (collectively,
"Greenwich") to Ugly Duckling Corporation and its applicable affiliates
(collectively, "UDC") to provide, and of UDC to accept, subject to the Summary
of Terms attached hereto and incorporated herein by reference, as well as the
further conditions set forth herein below, the senior financing facility
described herein (the "Senior Facility").
The obligation of Greenwich to complete the transaction described herein is
subject to satisfaction of the conditions precedent set forth in the Summary of
Terms and completion of documentation in respect of such Senior Facility as
described in the Summary of Terms satisfactory to Greenwich and UDC.
This agreement may be executed in one or more counterparts, all of which taken
together shall constitute one and the same agreement.
The commitment contained herein shall terminate if this letter is not fully
executed and returned to Greenwich by Friday, March 2, 2001.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇
Its: Senior Vice President
Date: March 1, 2001
AGREED AND ACCEPTED,
UGLY DUCKLING CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
Date: March 5, 2001
Ugly Duckling Corporation
$75 / $100 million Revolving Credit Facility
Summary of Terms
Borrower: A [bankruptcy-remote] special purpose subsidiary of Ugly Duckling
Corporation ("UDC"). Lender: Greenwich Capital Financial Products, Inc. or
an affiliate thereof ("Greenwich")
Guarantor: Ugly Duckling Corporation
Facility Size: $75,000,000. For the period from December 1st through March
31St, the Facility Size will be expanded to $100,000,000 to accommodate the
seasonality of IJDC ` s origination cycle.
Facility Term: 364-day term, renewable upon the conclusion of the initial
term for an additional 364-day period at Greenwich's sole discretion with
not less than 90 days' advance notice. Subsequent renewals require mutual
consent of both the Borrower and the Lender.
Commitment Fee: $750,000, due at closing.
Renewal Fee: $250,000, due upon receipt of Lender notice of intent to
renew.
Interest Rate: One month LIBOR plus 2.80%
Contract: A retail installment contract, secured by a motor vehicle, which
was originated or acquired by UDC in the ordinary course of its business.
Collateral: The Facility will be secured by a direct pledge of (a) all UDC
Contracts and (b) a blanket lien on all tangible and intangible assets of
UDC in existence and as created by UDC and its affiliates.
Servicer: Ugly Duckling Credit Corporation
Facility Advance: For each UDC Eligible Contract (as defined hereinbelow),
the product of such Eligible Contract's unpaid principal balance and the
least of:
(a) The UDC Securitization Net Advance (as defined hereinbelow) less
4.00% for the most recently completed UDC securitization transaction;
(b) The weighted average of the three IJDC Securitization Net Advances
less 4.00% from the most recently completed UDC securitization
transactions; and
(c) 65.00%
For the purposes of determining the Facility Advance, the UDC
Securitization Net Advance shall equal the Class A Advance Rate less the
Class A Reserve Fund Initial Deposit (expressed as a percentage of the
Initial Pool Balance); each capitalized term being defined as expressed in
the transaction documentation for such securitization transaction
Existing non-UDC originated Contracts which are submitted for inclusion to
the Facility will receive a Facility Advance equal to that provided under
the existing GECC Facility. In the event that UDC acquires Contracts from
an originator subsequent to the implementation of this Facility, the Lender
will review the Contract portfolio attributes and the portfolio's prior
performance history and, in its sole discretion determine an appropriate
Facility Advance for such Contracts.
UDC Eligible Contract: Substantially similar to GECC Facility, but
specifically excluding Contracts which:
i) Are more than 59 days contractually delinquent and not designated
by the Servicer as out for or in repossession;
ii) Are 30 or more days contractually delinquent, and when taken
together with all other Contracts which are 30 or more days contractually
delinquent, exceed [3.001% of the aggregate principal balance of IJDC
Eligible Contracts;
iii)The Lender shall not have received expressed written confirmation
from the Custodian of its possession of the related retail installment
contract and other customary documentation for such Contract.
Contraet Collections: The Servicer shall establish a bank account (the
"Collection Account") in the name of the Lender to which collections and
recoveries on pledged Contracts (irrespective of Facility eligibility) will
be swept on a daily basis and within 24 hours of identification by the
Servicer. It is anticipated that all collections will be identified and
swept to this Collection Account within three business days of receipt by
the Servicer.
Funds deposited into the Collection Account shall be applied, on a daily
basis, to first pay the Lender interest and fees or expenses which have
accrued on the Facility and then to reduce amounts borrowed under the
Facility.
Borrowing Base Calculation: UDC will deliver to Greenwich, on a daily
basis, a report and accompanying data file (in format and content
acceptable to Greenwich) delineating the Contracts pledged to the Facility,
newly calculated UDC Eligible Contracts and the related maximum permitted
borrowings as of such date.
Monthly Reports: Complete Covenant analysis and any other data and
reporting information as reasonably requested by the Lender.
Aging Constraints: UDC Eligible Contracts originated prior to the cut-off
date of the most recent UDC securitization may only comprise the greater of
(i) $12,500,000 of Borrowing Base or (ii) 20% of the aggregate Facility
Advance.
Custodian: [Bank of New York]
Hot Backup Servicer: ▇▇▇▇▇ Fargo Financial Corporation. In the event that
Servicing transfers to the Hot Backup Servicer, such party will be paid a
fee equal to that provided in their proposal letter dated October 10, 2000.
Affirmative and Negative Covenants: The Lender will include the following
financial and portfolio performance covenants in the Facility, which
covenants shall be satisfactory to Greenwich: Liquidity Test-- {$7.Slmm
cash and/or warehouse availability
Gross Margin Maintenance Test Net Worth Test Cash Flow Interest Coverage
Test Debt to EB1TDA Test 3 month Rolling Average Delinquency and Gross Loss
Tests for both the Facility and for UDC Managed Assets
Remedies: To include Advance Rate adjustment (margin call), Capital Calls
(as described hereinbelow in a UDC post-privatization environment) and the
termination and wind down of the Facility.
Conditions Precedent to Implementation of the Facility: To include: i)
Execution of documentation and receipt of legal opinions in form and
content acceptable to the Lender and its counsel; ii) Receipt of the
Facility Commitment Fee; and iii)Receipt by the Lender of an executed
Commitment Letter providing UDC with an Inventory Finance Facility of not
less than $25 million with terms reasonably acceptable to the Lender.
Conditions Precedent to the Privatization of UDC: The Guarantor will
covenant that the privatization of UDC will meet the following conditions
precedent: i) UDC will not use more than [$10] million of corporate cash
will be used in a stock tender; ii) TJDC will not incur more than [$32]
million of incremental subordinated term debt with a maturity of not less
than [five] years in any stock tender; iii)Neither ▇▇▇▇▇ ▇▇▇▇▇▇ nor ▇▇▇▇
▇▇▇▇▇▇▇▇ will participate in such tender offer; iv) TJDC will have executed
an inventory finance facility of not less than $25 million; v) MBIA shall
have expressed written approval of the proposed transaction and its
willingness and intent to continue as surety provider for UDC
securitizations; vi) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have committed in writing to
receive not more than $4mm per annum (in not more than $1 mm per quarter
installments) in repayment of its subordinated debt until such debt is
retired OR ▇▇▇▇▇ ▇▇▇▇▇▇ shall personally commit to meeting any repayment
demand by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in excess of the aforementioned proposed repayment
schedule; and vii)None of UDC's MBIA-wrapped term securitizations will be
in breach of either a Performance or Event of Default Trigger, each as
defined in such transaction's documentation when such privatization effort
is commenced or executed upon.
Post-Privatization Constraints: If UDC management should succeed in
effecting a privatization of the Company, the Guarantor shall make the
following additional covenants:
i) The Company shall not sell UDC equity to a third-party without the
Lenders express written consent;
ii) Subject to the maintenance of [Gross Margin Maintenance /
Liquidity I Other? Tests], UDC may bear up to [$2,000,000] of Verde
corporate expenses per annum to be applied evenly on a monthly basis.
Verde expenses paid by UDC are subject to a Capital Call at the
Lender's discretion in the event that a Facility financial covenant is
breached;
iii)▇▇▇▇▇ ▇▇▇▇▇▇ Bonus I Dividend formula subject to Lender approval.
The Lender may request a capital call on tax adjusted bonus
distributions if [Gross Margin Maintenance / Liquidity I Other? Tests]
are breached. Distributions will be constrained so as to ensure a
minimum of $10 million TJDC Liquidity as of the most recent TJIDC
Covenant Report and are subject to Lenders sign-off on pro-forma
financial projections evidencing not less than $10 million of UDC
Liquidity for the next twelve months; and iv) Any effort to convert
UDC into a Subchapter S Corporation is subject to the prior written
approval of the Lender.
Pursuit of a Facility Rating: In the event that Greenwich elects to pursue
an investment-grade rating for the Facility, UDC agrees to accept any
reasonable modification to the operating attributes of the Facility as
mandated by such rating agency as a requirement for obtaining the rating
letter. UDC further agrees to pay the costs and expenses of the rating
agency related to obtaining such rating letter. In the event that an
investment-grade rating is obtained for the Facility, Greenwich agrees to
increase the Facility Size to $100,000,000 throughout the calendar year.
Costs and Expenses: UDC to bear all costs and expenses associated with any
due diligence associated with the creation and maintenance of the Facility
as well as all legal costs (including, but not limited to the out-of-pocket
expenses of Greenwich's counsel) associated with the creation and
enforcement of the Facility.
Underwriting Commitment: UDC to execute an Underwriting Commitment with
Greenwich for AAA-rated securities with an underwriting fee equal to 0.40%
on the face amount of securities purchased. This commitment will provide
Greenwich with underwriting exclusivity for all receivables originated or
purchased by UDC during the Facility's term (as extended), irrespective of
whether they were financed by Greenwich.
SUBORDINATION AND STANDSTILL AGREEMENT
THIS SUBORDINATION AND STANDSTILL AGREEMENT ("Agreement") is entered into
by and among UGLY DUCKLING CORPORATION, a Delaware corporation ("UDC"), VERDE
TNVESTMENTS, INC., an Arizona corporation ("Verde') and Automotive Finance
Corporation ("Senior Lender') under that certain Senior Secured Loan Agreement
dated January 11,2001.
RECITALS
A. UDC has borrowed money and obtained credit from Verde pursuant to that
certain Loan Agreement dated January 11,2001 among UDC and Verde ("Junior Loan
Agreement");
B. UDC is also in the process of obtaining a loan from the Senior Lender
pursuant to the Senior Loan Agreement (as defined below); and
C The Senior Lender has indicated that it will enter into the Senior Loan
Agreement if certain conditions are met, including, without limitation, the
requirement that Verde execute this Agreement,
NOW, THEREFORE, as an inducement to the Senior Lender to enter into the
Senior Loan Agreement and any future credit between Senior Lender and UDC, and
for other valuable consideration, the parties hereto agree as follows:
1- INDEBTEDNESS AND LIENS SUBORDINATED. Verde subordinates (1) all
indebtedness and other obligations of every typo and nature created under or in
connection with the Junior Loan Agreement, including any amendments or
modifications thereto, and now or at any time hereafter owing from UDC to Verde
pursuant to the Junior Loan Agreement (including, without limitation, interest
thereon which may accrue subsequent to IJDC becoming subject to any state or
federal debtor-relief statute) ("Junior Debt") and (ii) all liens and/or
security interests held by Verde in any Collateral ("Junior Liens") to the prior
payment in full in cash of all Senior Debt (as defined below) and all liens
and/or security interests, if any, held by the Senior Lender in the Collateral
("Senior Liens"). Subject to the provisions of Section 2, Verde irrevocably
agrees and directs that all Senior Debt shall be paid in full in cash prior to
UDC making any payment on any Junior Debt, unless the Senior Lender authorize
such payments on the Senior Debt. Verde will, and the Senior Lender is
authorized in the name of Verde from time to time to, execute and file such
financing statements and other documents as the Senior Lender may require in
order to give notice to other persons and entities of the terms and provisions
of this Agreement. For purposes hereof, the term "Senior Debt" means the
"Obligations" (as such term is defined in the Senior Loan Agreement), together
with (a) any partial or complete refinancing of the Obligations, (b) any
amendments, restatements, modifications, renewals or extensions of any of the
foregoing, and (c) any interest accruing on any of the foregoing before or after
the commencement of any bankruptcy, insolvency, reorganization or similar
proceeding, without regard to whether or not such interest is an allowed claim.
For purposes hereof, the term "Senior Loan Agreement" means that certain Loan
and Security Agreement by and among UDC, certain UDC subsidiaries, and Senior
Lender, dated as of August --, 2001, as the same may be amended, supplemented or
otherwise modified from time to time. For purposes hereof, the tent
UGLY DUCKLING CORPORATION, a
Delaware corporation
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: Secretary
VERDE INVESTMENTS, INC., an Arizona
Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President & Secretary
AFC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
