Amendment No. 4 to Amended and Restated Motor Vehicle Installment Contract
Loan and Security Agreement
This Amendment 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; Ugly Duckling Car Sales Texas, L.L.P. ("Car Sales Texas"),
an Arizona limited liability partnership; Ugly Duckling Car Sales New Mexico,
Inc. ("Car Sales New Mexico"), a New Mexico corporation; Ugly Duckling Car Sales
California, Inc. ("Car Sales California"), a California corporation; Ugly
Duckling Car Sales Georgia, Inc. ("Car Sales Georgia"), a Georgia corporation;
Cygnet Financial Corporation ("Cygnet'), a Delaware corporation; Cygnet Dealer
Finance, Inc. ("Dealer Finance"), an Arizona corporation; Cygnet Finance
Alabama, Inc. ("Cygnet Alabama"), an Arizona 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; (all of the foregoing
entities collectively referred to herein as "Borrower"); and General Electric
Capital Corporation, a New York corporation ("Lender").
RECITALS
A. Borrower and Lender are parties to an Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement dated as of August 15,
1997, as amended by an Assumption and Amendment Agreement dated October 23,
1997, Amendment No. 1 dated December 22, 1997, Amendment No. 2 dated September
9, 1998 and Amendment No. 3 dated January 18, 1999 (the Amended and Restated
Motor Vehicle Installment Contract Loan and Security Agreement as so amended is
referred to herein as the "Agreement") pursuant to which Lender agreed to make
Advances to Existing Borrower on the terms and conditions set forth in the
Agreement.
B. Borrower and Lender desire to amend certain provisions of the
Agreement pursuant to the terms set forth in this Amendment.
In consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged by each of the
parties hereto, the parties agree as follows:
1. Defined Terms. Unless otherwise specified herein, all capitalized terms
used in this Amendment shall have the same meaning given to such term(s) in the
Agreement.
2. Amendments to Agreement. Effective as of June 30, 1999 , the Agreement
is hereby amended as follows:
(a) Cash Flow Based Interest Coverage Ratio. The definition of Cash Flow
Based Interest Coverage Ratio in Section 16.0 of the Agreement shall
be deleted; provided, however, should Borrower revert to utilizing any
form of "gain on sale" accounting treatment on future securitizations,
the Cash Flow Based Interest Coverage Ratio definition shall be
reinstated.
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(b) Financial Condition. Section 13.6 of the Agreement shall be amended in
its entirety to read as follows:
Financial Condition.
(A) Borrower shall not allow its Debt Ratio to exceed 2.2:1.
(B) Borrower shall maintain a Net Worth of at least One Hundred Fifty
Million Dollars ($150,000,000.00) at all times. 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 an Interest Coverage ratio each quarter
of at least the following level:
Quarter Ratio
------- -----
2Q 1999 0.60
3Q 1999 0.70
4Q 1999 0.80
1Q 2000 1.15
2Q 2000 1.25
3Q 2000 and thereafter 1.30
If, however, Borrower reverts to utilizing any form of "gain on
sale" accounting treatment on future securitizations, the
modification of the Interest Coverage ratio covenant listed above
is automatically deleted from the Agreement and the Interest
Coverage ratio of 1.5 is automatically reinstated.
(D) Borrower's Rolling Average Delinquency shall not exceed 8.5%.
(E) Borrower's three-month Rolling Average Managed Portfolio
Delinquency shall not exceed 10%.
(F) Borrower's Average Charged-Off Losses shall not exceed 1.75%.
(G) Borrower's Average Charged-Off Losses for all Managed Portfolio
Contracts shall not exceed 2.75%.
(H) Borrower's Managed Portfolio Leverage Ratio shall not exceed: (i)
3.5:1 from the effective date of Amendment No. 2 until the 1-year
anniversary of the effective date of Amendment No. 2; and (ii)
4.0:1 thereafter.
(I) Borrower's Rolling Average Managed Portfolio Deferral Rate shall
not exceed 2.25.
(J) Lender may, in its sole discretion, amend the Rolling Average
Delinquency on an annual basis.
(K) Borrower shall notify Lender in writing, promptly upon its
learning thereof of any material adverse change in the financial
condition of Borrower, Validity of Collateral Guarantor, or
Guarantor.
(L) Borrower shall provide Lender a monthly report on Borrower's
Motor Vehicle inventory detailing Borrower's purchase price for
all such inventory, which shall be received by Lender by the 15th
of each calendar month.
(c) Loans and Advances. Section 14.3 is deleted in its entirety and
replaced with the following:
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 Contracts, and shall not create, incur,
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assume or suffer to exist any short term indebtedness which is not
Subordinated Debt. All obligations and security interests owned by
any Borrower with respect to any other Borrower are subordinated to
the Loan and the Lender's security interest in the Collateral.
Borrower shall not have loans or purchases of more than Three Million
Five Hundred Dollars ($3,500,000) outstanding at the same time under
any Dealer Contract, except for DCT and Texas Auto Outlet.
(d) Debt Ratio. The definition of "Debt Ratio" in Section 16.0 of the
Agreement is amended in its entirety to be:
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.
(e) Managed Portfolio Leverage Ratio. The definition of "Managed Portfolio
Leverage Ratio" in Section 16.0 of the Agreement is amended in its
entirety to be:
Managed Portfolio Leverage Ratio: Borrower's on-book liabilities other
than Subordinated Debt, plus amounts owed by any bankruptcy-remote
subsidiary via associated securitization trusts to unaffiliated
bondholders or certificate holders which are not 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.
3. Incorporation of Amendment: The parties acknowledge and agree that this
Amendment is incorporated into and made a part of the Agreement, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, are hereby affirmed and ratified and remain in full
force and effect. To the extent that any term or provision of this Amendment is
or may be deemed expressly inconsistent with any term or provision of the
Agreement, the terms and provisions of this Amendment shall control. Each
reference to the Agreement shall be a reference to the Agreement as amended by
this Amendment. This Amendment, taken together with the Agreement, which is
affirmed and ratified by Borrower, contains the entire agreement among the
parties regarding the transactions described herein and supersedes all prior
agreements, written or oral, with respect thereto.
4. Borrower Remains Liable. Borrower hereby confirms that the Agreement and
each document executed by Borrower in connection therewith continue unimpaired
and in full force and effect and shall cover and secure all of Borrower's
existing and future obligations to Lender.
5. Headings. The paragraph headings contained in this Amendment are for
convenience of reference only and shall not be considered a part of this
Amendment in any respect.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Arizona. Nothing herein shall preclude
Lender from bringing suit or taking other legal action in any jurisdiction.
7. Execution in Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have entered into this Amendment as of July
19, 1999.
GENERAL ELECTRIC CAPITAL
CORPORATION UGLY DUCKLING CAR SALES, INC.
By: /S/ XXXX XXXXX By: /S/ XXX X. XXXXXXXX
Title: Account Executive Title: Secretary
UGLY DUCKLING CORPORATION UGLY DUCKLING CAR SALES NEW MEXICO, INC.
By: /S/ XXXXXX X. XXXXXX By: /S/ XXX X. XXXXXXXX
Title: Vice President Title: Secretary
UGLY DUCKLING CAR SALES AND CHAMPION FINANCIAL SERVICES, INC.
FINANCE CORPORATION
By: /S/ XXX X. XXXXXXXX By: /S/ XXX X. XXXXXXXX
Title: Secretary Title: Secretary
UGLY DUCKLING CAR SALES FLORIDA, UGLY DUCKLING CREDIT CORPORATION
By: /S/ XXX X. XXXXXXXX By: /S/ XXX X. XXXXXXXX
Title: Secretary Title: Secretary
UGLY DUCKLING CAR SALES TEXAS, UGLY DUCKLING CAR SALES
L.L.P. CALIFORNIA, INC.
By: Ugly Duckling Car Sales, Inc.
Its: General Partner By: /S/ XXX X. XXXXXXXX
Title: Secretary
By: /S/ XXX X. XXXXXXXX
Title: Secretary UGLY DUCKLING CAR SALES GEORGIA, INC.
By: /S/ XXX X. XXXXXXXX
Title: Secretary
CYGNET FINANCIAL CORPORATION CYGNET DEALER FINANCE, INC.
By: /S/ XXXXXX X. XXXXXX By: /S/ XXXXXX X. XXXXX
Title: Vice President Title: Secretary
CYGNET FINANCE ALABAMA, INC. CYGNET SUPPORT SERVICES, INC.
By: /S/ XXXXXX X. XXXXX By: /S/ XXXXXX X. XXXXX
Title: Secretary Title: Secretary
CYGNET FINANCIAL SERVICES, INC. CYGNET FINANCIAL PORTFOILIO, INC.
By: /S/ XXXXXX X. XXXXXX By: /S/ XXXXXX X. XXXXXX
Title: Vice President Title: Vice President
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