GUARANTY
THE UNDERSIGNED ("Guarantor") XXXXXX agrees to unconditionally and
irrevocably guarantee the payment of the amount due and the performance of the
obligations of Cygnet Capital Corporation ("Cygnet"), an Arizona corporation,
under the Promissory Note dated December 30, 1999 (the "Note"), from Cygnet to
Ugly Duckling Finance Corporation ("UD"), an Arizona corporation.
Guarantor hereby waives notice of demand, protest or notice of any
kind, including but not limited to notice of nonpayment, nonperformance or
nonobservance, or proof of notice or demand. Guarantor expressly agrees that the
UD may proceed against the Guarantor separately or jointly, before, or
simultaneously with proceedings against Cygnet for default under the Note. This
Guaranty shall be absolute and unconditional and shall remain and continue in
full force and effect as to any renewal, extension, amendment, addition, or
other modification of the Note, regardless of whether the same was made with or
without Guarantor's consent and until the payment in full of the Note. Guarantor
also waives any and all rights or defenses of guarantors arising in law or
equity, other than the actual payment or performance of the Note, including but
not limited to all of Guarantor's rights under Arizona Revised Statutes Sections
12-1641, et. seq., 44-142 and 47-3605.
Guarantor shall maintain a minimum Net Worth of Thirty Million Dollars
($30,000,000.00) at all times until the Note is paid in full. "Net Worth" shall
mean the total of shareholders' equity (including capital stock, additional
paid-in capital and retained earnings, and the junior subordinated debenture
from Cygnet to Verde which will replace the unsecured 10% subordinate debenture
of Ugly Duckling Corporation to Verde with a remaining principal balance
outstanding of $8 million assumed by Cygnet) less the total amount of loans and
debts due from affiliate companies, shareholders, officers, and employees and
the total amount of any intangible assets.
During the term of this Guaranty, Guarantor shall:
(i) deliver to UD as soon as practicable after the end of each of the first
three quarterly fiscal periods in each fiscal year of Guarantor, but, in any
event, within 45 days thereafter, (a) an unaudited consolidated balance sheet of
Guarantor as at the end of such quarter, and (b) unaudited consolidated
statements of income, retained earnings and cash flows of Guarantor, for such
quarter and for the portion of the fiscal year ending with such quarter, setting
forth in comparative form in each case the corresponding figures for the
comparable period of the prior fiscal year. Such statements shall be (1)
prepared in accordance with GAAP consistently applied, subject to normal
year-end adjustments and the absence of footnote disclosure, (2) in reasonable
detail, and (3) certified by the principal financial or accounting officer of
Guarantor; and
(ii) deliver to UD as soon as practicable after the end of each fiscal year of
Guarantor, but, in any event, within 90 days thereafter (a) an audited
consolidated balance sheet of Guarantor as at the end of such year, and (b)
audited consolidated statements of income, retained earnings and cash flows of
Guarantor for such year. Such statements shall be (1) prepared in accordance
with GAAP consistently applied, (2) in reasonable detail, and (3) certified by
KPMG LLP or such other firm of independent certified public accountants of
recognized national standing selected by Guarantor and reasonably acceptable to
UD.
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Any controversy relating to this Guaranty or relating to any breach
hereof shall be settled by arbitration conducted in Phoenix, Arizona in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The award rendered by the arbitrator(s) shall be
final and judgment upon the award rendered by the arbitrator(s) may be entered
upon it in any court having jurisdiction thereof. The arbitrator(s) shall
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration. The expenses of the arbitration shall be borne
by the losing party unless otherwise allocated by the arbitrator(s). The
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. During the continuance of any arbitration proceedings, the
parties shall continue to perform their respective obligations under this
Guaranty.
This Guaranty shall be binding upon the heirs, legal representatives,
successors and assigns of the Guarantor.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Arizona, and Guarantor hereby consents to venue for any
action arising out of this Guaranty in the state and federal courts in the State
of Arizona. Guarantor shall pay the reasonable attorney's fees incurred by UD in
connection with the collection, enforcement and/or protection of its rights
under this Guaranty.
Dated this 30th day of December, 1999.
VERDE INVESTMENTS, INC., an Arizona corporation
By: /S/ XXXXXX X. XXXXXXX
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Name: Xxxxxx X. Xxxxxxx
Its: Secretary
