AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT DATE: AUGUST 1, 1997
DV: DUCK VENTURES, INC.
AN ARIZONA CORPORATION
0000 XXXX XXXXXXXXX XXXX, XXXXX 0000
XXXXXXX, XXXXXXX 00000
XXXXXX: XXXXXX X. XXXXXX
0000 XXXX XXXXXXX XXXXX
XXXXXXX, XXXXXXX 00000
SOCIAL SECURITY NO. ###-##-####
RECITALS
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The parties acknowledge that the following recitals are true, correct and
a material part of this Amended and Restated Employment Agreement (this
"Agreement"):
1. DV is an Arizona corporation wholly owned by Ugly Duckling
Corporation ("UDC").
2. DV owns companies engaged in sales and financing of used vehicles
(the "Vehicle Businesses").
3. One or more affiliates of UDC ("Affiliates") may engage in other
businesses from time to time affiliated with the Vehicle Business (the
"Affiliate Businesses").
4. Xxxxxx has professional expertise and experience in financial
analysis, financial investments, business operations, insurance and other
commercial activities and seeks to use his professional expertise and
experience as a full-time employee of DV for the benefit of the Vehicle
Businesses and the Affiliate Businesses.
5. This Agreement amends and restates the Employment Agreement
between DV and Xxxxxx dated June 1, 1995 (the "Prior Agreement").
NOW, THEREFORE, in consideration of the covenants, representations and
warranties of the parties stated herein, the performances of the parties
required hereby and the benefits to be obtained by the parties herefrom, DV
and Xxxxxx mutually agree and expressly intend to be legally bound as follows:
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SECTION 1. EMPLOYMENT.
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Commencing as of the Agreement Date, DV shall employ Xxxxxx on a
full-time basis to render the services required by this Agreement (the
"Services"). Xxxxxx shall render the Services on a full-time basis faithfully,
promptly and professionally as a full-time employee of DV. All Services
rendered by Xxxxxx as a full-time employee of DV shall be rendered for the
benefit of DV, the Insurance Business and Vehicle Businesses. Xxxxxx
represents and warrants unto DV that he has not entered into any agreement
that would prohibit or prevent Xxxxxx from rendering the Services.
SECTION 2. OBLIGATIONS OF XXXXXX.
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2.1 SERVICES. The Services rendered by Xxxxxx shall be rendered to
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the best of Xxxxxx'x ability, utilizing all of his experience, knowledge,
talents and ingenuity. All Services shall be rendered in compliance with all
applicable laws, the highest standards of ethics and the instructions of the
board of directors of DV or UDC and or officers of DV or UDC (collectively,
the "Board"). The Services to be rendered by Xxxxxx include, but may not be
limited to, the following:
2.1.1 OFFICES. Xxxxxx shall serve as the Vice President-Senior
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Analyst of UDC and shall serve as an officer of the Affiliates from time to
time as requested by the Board.
2.1.2 VEHICLE BUSINESSES. Xxxxxx shall perform and provide financial
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analysis, investment and operations advice and other assistance to the Vehicle
Businesses. Xxxxxx shall advise the Board on actions that can be taken to
improve the profitability of the Vehicle Businesses. Xxxxxx shall execute and
perform all directives and orders of the Board regarding the Vehicle
Businesses.
2.1.3 AFFILIATE BUSINESSES. Xxxxxx shall perform and provide
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financial analysis, investment and operations advice and other assistance to
the Affiliate Businesses. Xxxxxx shall advise the Board and or the owners of
the Affiliates, on actions that can be taken to improve the profitability of
the Affiliate Businesses.
2.1.4 OTHER. Xxxxxx shall perform and provide all other services and
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duties customarily performed and provided by an executive of a commercial
enterprise and all other services and duties required by the Board.
2.2 RESTRICTIONS. Xxxxxx acknowledges that as an executive officer
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of the Insurance Business he shall have the authority to act on behalf of DV
and to thereby incur obligations, debts and liabilities on behalf of DV.
Notwithstanding such authority, Xxxxxx shall not execute any contract, incur
any debt or incur any other liability on behalf of DV unless the same is
either in the ordinary course of the Insurance Business or is first authorized
by the Board. Xxxxxx shall not make any misrepresentations to any person or
entity regarding DV, UDC, the Insurance Business, the Vehicle Businesses or
Xxxxxx'x authority. Xxxxxx acknowledges that the Board may from time to time
establish budgets, policies and other regulations regarding the Insurance
Business and Vehicle Businesses. Xxxxxx shall at all times perform the
Services in compliance with such budgets, policies and regulations established
by the Board.
SECTION 3. DV OBLIGATIONS.
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DV shall provide the following to Xxxxxx for use and utilization by
Xxxxxx in connection with, in support of, and for the benefit of, the Services
of Xxxxxx.
3.1 OFFICE. DV shall maintain an office in the Phoenix metropolitan
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area and all equipment, supplies, furniture and fixtures as may be reasonably
required by Xxxxxx to perform the Services (the "Office").
3.2 PERSONNEL. DV shall employ or retain such personnel as may be
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reasonably required by Xxxxxx to perform the Services and shall be responsible
for the compensation thereof (the "Personnel").
3.3 INSURANCE. DV shall maintain such general liability and casualty
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insurance as may be reasonably required by and available to the Insurance
Business and Vehicle Businesses. DV shall also maintain insurance coverage for
the errors and omissions of the directors and officers of DV or any of its
affiliates. DV shall indemnify Xxxxxx for liabilities incurred by Xxxxxx as an
officer or employee in accordance with the Articles and Bylaws of DV.
3.4 OTHER. DV shall provide other items and services that may be
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requested by Xxxxxx and that are reasonably required by Xxxxxx to perform the
Services.
SECTION 4. COMPENSATION.
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During the term of this Agreement and not thereafter, DV shall compensate
Xxxxxx for the Services rendered by Xxxxxx pursuant to this Agreement by
paying and providing to Xxxxxx the following:
4.1 SALARY. Xxxxxx shall receive an annual salary of One Hundred
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Sixty Five Thousand Dollars ($165,000.00) (the "Salary"). The Salary shall be
payable in arrears in regularly scheduled installments commencing on the first
regular payday after the Agreement Date. The Salary shall be payable only as
it is earned and upon termination or expiration of this Agreement no Salary
shall be payable thereafter.
4.2 BONUS. On the Agreement Date Xxxxxx shall receive a bonus of Ten
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Thousand Dollars ($10,000.00) (the "Bonus").
4.3 INSURANCE BENEFITS. On the Commencement Date, Xxxxxx shall be
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insured by and included in the group medical insurance policy maintained by DV
for its full time employees (the "Insurance Benefits"). All Insurance Benefits
shall be provided under the terms and conditions stated in the policies
therefor and all deductibles, co-payments and other charges payable by
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employees insured thereunder shall be paid by Xxxxxx without reimbursement by
DV.
4.4 VACATION DAYS. Xxxxxx may be absent from the Offices and not
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perform Services for fifteen (15) business days during 1997 and each calendar
year thereafter, whether said absence is for vacation, personal business or
any other purposes ("Vacation Days"). Vacation Days not taken in one calendar
year shall not accumulate and shall not be taken in a subsequent calendar year
and no compensation shall be payable to Xxxxxx at any time for Vacation Days
not taken.
4.5 EXPENSES. DV shall reimburse Xxxxxx for reasonable and necessary
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expenses incurred by Xxxxxx in performing the Services, including payment of
professional organization membership dues and the cost of the attending
meetings of such organizations as required to maintain Xxxxxx'x continuing
education requirements, knowledge and expertise in the insurance industry. All
such expenses shall be reimbursed in accordance with DV's expense
reimbursement policies.
4.6 WITHHOLDINGS. All installments of the Salary and all other funds
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paid to Xxxxxx pursuant to this Section 4, shall have withheld therefrom all
federal and state income taxes and all other amounts that DV is required by
law to withhold.
4.7 UDC OPTIONS. Xxxxxx was granted and Xxxxxx now holds options to
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acquire 100,000 shares of common stock of UDC (the "UDC Options") pursuant to
UDC's long term incentive stock option plan (the "Plan"). The UDC Options were
granted on the following dates, in the following amounts and for the following
exercise prices:
June, 1995 . . 58,000 shares $ 1.72/share
June, 1996 . . 25,000 shares $ 6.75/share
December, 1996 17,000 shares $17.69/share
As an additional benefit to Xxxxxx pursuant to this Agreement, the terms of
the award to Xxxxxx of the UDC Options are hereby amended to provide that the
UDC Options shall be fully vested on the following dates:
June, 1995 UDC Options vest on Agreement Date
June, 1996 UDC Options vest on January 15, 1998
December, 1996 UDC Options vest on Agreement Date
The foregoing shall not effect any other options to acquire any securities of
UDC now held by Xxxxxx or hereafter acquired by Xxxxxx. Neither DV nor UDC nor
any of their respective shareholders, directors, officers or employees make
any representation or warranty of any kind regarding the value of the UDC
Options or the value of the common stock of UDC that may be acquired by
exercise of the UDC Options.
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SECTION 5. TERM AND TERMINATION.
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5.1 TERM. This Agreement shall commence as of the Agreement Date and
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shall expire on May 31, 2000 (the "Expiration Date"), unless terminated prior
thereto. Neither party has any obligation to extend this Agreement upon its
expiration. If a party does not intend to extend this Agreement beyond the
Expiration Date, then said party shall notify the other of its intention not
to extend by delivery of written notice thereof thirty (30) or more days prior
to the Expiration Date. If neither party gives written notice of its intention
not to extend this Agreement, then this Agreement shall automatically be
extended and continued on a month-to-month basis and may be terminated by
either party at any time effective thirty (30) days after delivery of written
notice of termination.
5.2 TERMINATION BY XXXXXX. Xxxxxx may terminate this Agreement at
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any time, with or without cause, by delivery of written notice of termination
to DV thirty (30) or more days prior to the effective date of the termination.
DV shall continue to pay the Salary and provide Insurance Benefits during said
thirty (30) day period but may suspend Xxxxxx from his position at any time
during said thirty (30) day period. If Xxxxxx terminates this Agreement all
of Xxxxxx'x rights under this Agreement shall terminate except for the right
to receive the Salary and Insurance Benefits during said thirty (30) day
period and Xxxxxx shall not receive nor be entitled to receive any additional
or other benefits after Xxxxxx'x delivery of written notice of termination.
5.3 TERMINATION BY DV. DV may terminate this Agreement as follows:
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5.3.1 TERMINATION WITHOUT CAUSE. DV may terminate this Agreement
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immediately or at any time, and without cause, by delivery of written notice
to Xxxxxx on, or at any time prior to, the effective date of the termination.
If DV terminates this Agreement without cause, then DV shall continue to pay
the Salary to Xxxxxx for twelve (12) months after the termination of this
Agreement, but not beyond the Expiration Date. The continuation of the Salary
for a limited time after termination of this Agreement pursuant to this
Section 5.3.1 shall constitute a severance or termination fee (the
"Termination Fee") and shall be the exclusive remedy of Xxxxxx for the
termination of the Agreement by DV without cause. In the event of termination
of this Agreement pursuant to this Section 5.3.1, Xxxxxx shall not receive nor
be entitled to any additional benefits from and after the effective date of
termination of this Agreement. No Termination Fee shall be payable to Xxxxxx
in the event of the expiration or termination of this Agreement pursuant to
Section 5.1, the termination of this Agreement by Xxxxxx pursuant to Section
5.2 or in the event of termination of this Agreement by DV pursuant to Section
5.3.2 or 5.3.3.
5.3.2 TERMINATION WITH CAUSE. Notwithstanding any other provision of
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this Agreement, if any of the following events or actions occur, DV may
immediately terminate this Agreement by delivery of written notice of
termination to Xxxxxx and no Termination Fee shall be payable in the event of
termination pursuant to this Section 5.3.2:
5.3.2.1 Xxxxxx commits any fraud, embezzlement or other act of
dishonesty, commits any criminal act, makes any material misrepresentation
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regarding DV, UDC, the Vehicle Businesses or the Affiliate Businesses.
5.3.2.2 Xxxxxx knowingly violates any laws, rules or regulations
applicable to the Vehicle Businesses or Affiliate Businesses.
5.3.2.3 Xxxxxx engages in any conduct or action that materially and
personally xxxxx or threatens to materially and personally harm any employee
or customer of DV, UDC or their affiliates, the Vehicle Businesses, the
Affiliate Businesses or any person with whom DV, UDC or their affiliates, the
Vehicle Businesses or the Affiliate Businesses is involved with.
5.3.2.4 Xxxxxx breaches any of the covenants made in Section 6 hereof
and DV, UDC, the Vehicle Businesses or the Affiliate Businesses are materially
harmed or damaged as a result of Xxxxxx'x breach.
5.3.2.5 The death of Xxxxxx.
5.3.3 DISABILITY. If Xxxxxx is unable to perform the Services on a
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full-time basis for sixty (60) days, whether due to illness, injury or any
other physical or mental condition, then Xxxxxx shall be deemed disabled. In
such event, DV may then reduce the Salary to Five Thousand Dollars ($5,000.00)
per month until Xxxxxx is able to perform the Services on a full-time basis in
the same manner as prior to being disabled. If Xxxxxx remains disabled for
sixty (60) days such that Xxxxxx has not fully performed the Services on a
full-time basis for a total of one hundred twenty (120) days, then DV may at
any time terminate this Agreement and no Termination Fee shall be payable in
the event of termination pursuant to this Section 5.3.3. This Section 5.3.3
is not intended to effect any disability benefits that Xxxxxx may be entitled
to under any governmental or private disability benefits program but DV does
not make any representations or warranties regarding the effect of this
Section 5.3.3 on any governmental or private disability benefits program.
5.4 EFFECT OF TERMINATION. If this Agreement is terminated, DV shall
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have no obligation to Xxxxxx except for the payment of Salary and Insurance
Benefits earned prior to the effective date of the termination and payment of
the Termination Fee, if a Termination Fee is payable in connection with the
termination. If this Agreement is terminated, Xxxxxx shall not be entitled to
any additional Salary, Insurance Benefits, Vacation Days or other amounts or
benefits other than those earned and received by Xxxxxx prior to the effective
date of the termination, and the Termination Fee if a Termination Fee is
payable in connection with the termination. Notwithstanding any other
provision of this Agreement, upon termination of this Agreement by Xxxxxx
pursuant to Section 5.2 or by DV pursuant to Sections 5.3.1 or 5.3.3, and upon
the death of Xxxxxx, any UDC Options not then fully vested shall automatically
be fully vested and may be exercised by Xxxxxx or his heirs at any time within
fifteen (15) months following the termination or death.
SECTION 6. CONFIDENTIALITY, BUSINESS PROPERTY AND NON-COMPETITION.
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6.1 CONFIDENTIALITY. Xxxxxx acknowledges that certain information
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regarding DV, UDC and their affiliates, the Vehicle Businesses and Affiliate
Businesses may be business secrets and that the confidentiality thereof is a
valuable right of DV. At all times during and after the term of this
Agreement, Xxxxxx shall use his best efforts to maintain the confidentiality
of such information. At all times during and after the term of this Agreement
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Xxxxxx shall not knowingly or intentionally disclose such information to
persons not authorized to receive such information without the prior written
consent of the Board, unless the disclosure is either required by law or is
made in the ordinary course of business.
6.2 BUSINESS PROPERTY. Xxxxxx acknowledges that all tangible and
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intangible property of DV, UDC and their affiliates and the Vehicle
Businesses, including, but not limited to, records, files, data, contracts and
information regarding employees and customers belong exclusively to DV and
Xxxxxx shall not own nor acquire any interest therein. Upon expiration or
termination of this Agreement, all such property in the possession of Xxxxxx
shall be immediately surrendered and returned to the Office.
6.3 NON-COMPETITION.
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6.3.1 DURING AGREEMENT. During the term of this Agreement Xxxxxx
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shall not render any services to any person or entity in any business that
competes with DV, UDC or their affiliates, the Vehicle Businesses or the
Affiliate Businesses without the prior written consent of the Board. During
the term of this Agreement Xxxxxx shall not engage in any activity that
conflicts or interferes with, impedes or hampers Xxxxxx'x performance of the
Services required by this Agreement on a full-time basis or that is
prejudicial or harmful to DV, UDC or their affiliates, the Vehicle Businesses
or the Affiliate Businesses.
6.3.2 AFTER AGREEMENT. For thirty (30) days after the expiration or
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termination of this Agreement, Xxxxxx shall not, directly or indirectly, be
employed by, provide any services to, or hold any interest in, any business
that competes with the Vehicle Businesses or Affiliate Businesses. For twelve
(12) months after the expiration or termination of this Agreement, Xxxxxx
shall not communicate with the owners, operators, employees or customers of
DV, UDC or their affiliates, the Vehicle Businesses or the Affiliate
Businesses for the purpose of inducing such persons to terminate or not renew
their relations with DV, UDC or their affiliates, the Vehicle Businesses or
the Affiliate Businesses. Xxxxxx acknowledges that the covenants of Xxxxxx
stated in this Section 6.3.2 are fair, reasonable and appropriate.
6.4 ENFORCEMENT. Xxxxxx acknowledges that DV will incur substantial,
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irreparable, immediate and continuing harm if any of the covenants of Xxxxxx
stated in this Section 6 are violated and that monetary awards will not be
adequate remedies for the violations. Therefore, Xxxxxx acknowledges and
agrees that equitable remedies may be sought and obtained by DV including, but
not limited to, temporary and permanent restraining orders and injunctions.
SECTION 7. GENERAL PROVISIONS.
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7.1 NOTICES. All notices and communications hereunder shall be in
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writing and shall be given by personal delivery or mailed first class,
registered or certified mail, postage prepaid, and shall be deemed received
upon the earlier of actual delivery or three (3) business days after deposit
in the United States Mail. Notices to the parties shall be delivered or
mailed to the addresses set forth in this Agreement.
7.2 TIME. Time is of the essence of this Agreement. However, if any
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action is required to be taken on a Saturday, Sunday or legal holiday, the
action shall be deemed timely taken if it is taken on the next regular
business day.
7.3 LAW. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Arizona. Any action brought in
connection with this Agreement shall be brought and prosecuted in a federal or
state court of competent jurisdiction in Arizona.
7.4 LIABILITY OF AFFILIATES. The parties acknowledge that this
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Agreement is made exclusively between DV and Xxxxxx and that neither the
shareholders, directors, officers, employees or agents of DV, UDC or their
affiliates, shall have any liability under this Agreement of any kind at any
time.
7.5 NEGOTIATIONS AND INTEGRATION. The terms and provisions of this
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Agreement represent the results of extensive negotiations between the parties.
Each party has obtained, or had the opportunity to obtain, the advice of
independent legal counsel. The terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary
meanings. All understandings and agreements between the parties are merged in
this Agreement which alone fully and completely expresses their agreement.
This Agreement is entered into after full investigation, neither party relying
upon any statements or representations made by the other not embodied in this
Agreement. This Agreement supersedes all prior employment between DV and
Xxxxxx and all personnel policies of DV.
7.6 ASSIGNMENT AND MODIFICATION. This Agreement may not be assigned,
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delegated or subcontracted at any time. DV shall not merge, liquidate or
distribute substantially all of its assets without the prior written consent
of Xxxxxx, which consent will not be unreasonably withheld. This Agreement may
not be changed orally, but only by an agreement in writing, signed by the
parties. The parties shall execute all amendments and restatements of this
Agreement recommended by counsel to DV, provided such amendments and
restatements do not substantially modify nor adversely affect any of the
material provisions of this Agreement.
7.7 SEVERANCE. If any provision of this Agreement or the application
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of such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons
or circumstances other than those to which it was held invalid, shall not be
effected thereby.
7.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
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parties hereto, their successors and assigns. However, nothing herein shall be
deemed to permit assignment except in strict accordance with the provisions of
this Agreement.
7.9 COUNTERPARTS. This Agreement may be executed in counterparts,
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each of which shall be deemed an original, but all of which together shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereby acknowledge their receipt, review,
understanding and acceptance of every provision of this Agreement as of the
dates stated below, effective as of the Agreement Date.
DV: Duck Ventures, Inc.,
an Arizona corporation
By: /s/ Xxxxxx X. Xxxxxx XX
Name: Xxxxxx X. Xxxxxx XX
Its: President
Date: August 1, 1997
UDC: In approval of Section 4.6,
Ugly Duckling Corporation,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx XX
Name: Xxxxxx X. Xxxxxx XX
Its: CEO
Date: August 1, 1997
Xxxxxx: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Date: August 1, 1997
XX.XX:XXXXXX.DOC
