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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 21, 1997
Ugly Duckling Corporation
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(Exact name of registrant as specified in its charter)
Delaware 20841 86-0721358
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification Number)
2525 East Camelback Road, Suite 1150, Phoenix, AZ 85016
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(Address of principal executive offices)
Registrant's telephone number, including area code: (602) 852-6600
NONE
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On August 21, 1997, Ugly Duckling Corporation (the "Company") purchased
approximately 78% of the senior bank debt of First Merchants Acceptance
Corporation ("FMAC") held by seven members (the "Selling Banks") of FMAC's
original nine-member bank group under the Fourth Amended and Restated Loan and
Security Agreement dated as of February 28, 1996 (the "Bank Group Loan
Agreement"). The total senior debt outstanding under the Bank Group Loan
Agreement equals approximately $98 million (the "Secured Claim"). The Company is
informed and believes that the debt held by the remaining two members of the
original bank group (approximately 22% of the Secured Claim) has been purchased
by a third party (the "Other Holder"). On July 11, 1997, FMAC filed for
reorganization in the United States Bankruptcy Court for the District of
Delaware (the "Court") under Chapter 11 of the Federal Bankruptcy Code.
The Company purchased its portion of the Secured Claim for approximately
$69 million, which represents a discount of 10% of the outstanding principal
amount of such debt. The Company paid 20% of the purchase price at the closing
and the remainder of the purchase price was financed through a loan to the
Company by the Selling Banks (the "Selling Bank Loan") for a term of six-months,
with interest at LIBOR plus 2%. The Selling Bank Loan is secured by the
Company's interest in the Collateral described below that secures the Secured
Claim. In connection with the purchase, the Company also issued to the Selling
Banks, warrants to purchase up to 389,800 shares of the Company's common stock
at an exercise price of $20.00 per share over a 30-month term and subject to a
call feature by the Company if the market price of the Company's common stock
exceeds $27.00 per share for a specified period.
The Secured Claim is secured by (1) installment sale contracts and related
security with a face value of approximately $113,000,000 (the "Installment
Contracts"), (2) all personal property of FMAC; (3) accounts, accounts
receivable, including tax refunds (the "Refunds"), contract rights and other
general intangibles; and (4) the common stock of First Merchants Receivable
Corporation (collectively, the "Collateral"). FMAC has filed a motion with the
Court to sell the Installment Contracts and the Refunds, which motion is
currently scheduled to be heard on September 22, 1997. Such motion is subject to
a notice period during which other creditors of FMAC may object to the sale. If
the sale occurs, the Company may instruct the agent bank under the Bank Group
Loan Agreement to credit bid the Secured Claim at such sale. If successful, this
would allow the Secured Claim to be used as payment to purchase all of the
Installment Contracts and the Refunds. The Company is currently attempting to
resolve certain issues with the Other Holder relating to a potential purchase by
the Company of the Other Holder's portion of the Secured Claim. The Other Holder
has informed the Company that it does not intend to sell its claims at this
time. In addition, the Other Holder may object to the Company's ability to
effect the credit bid without its approval. The Company is unable to predict the
outcome of this matter.
If either the sale of the Installment Contracts and the Refunds is not
allowed or the credit bid of the Secured Claim is not made or is not successful,
the Company's portion of the Secured Claim would continue to be subject to the
reorganization proceedings of FMAC under applicable laws. The Secured Claim is
being paid down on a periodic basis pursuant to a Court order in an amount
depending on FMAC's net collections on the Installment Contracts.
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At this time, the Secured Claim has not been formally "allowed" as
permitted by the Federal Bankruptcy Code and is subject to objections from
interested parties. FMAC has stipulated to the validity, priority and perfection
of the Secured Claims and has stipulated that such claims are not subject to
offset or avoidance. The Company's due diligence in connection with its purchase
described herein disclosed that the agent for the bank group had perfected a
first priority security interest in substantially all of the Collateral securing
the Secured Claim. The Company believes that the value of the Collateral exceeds
the Secured Claim.
Item 5. Other Events
Charge to Earnings
On September 2, 1997, the Company announced that it expects to record a $4
million to $6 million one time charge to net earnings in the third quarter of
this year. The charge, related primarily to loans purchased from third-party
dealers, results from a reduction in the carrying value of its residual interest
in the Company's outstanding securitizations due to higher-than-estimated loan
losses.
The Company attributes the charge primarily to the decreased effectiveness
of collection efforts resulting from a conversion to a new loan servicing system
earlier this year. The Company has aggressively addressed this issue by, among
other things, employing two executive-level managers in the collections and
management information systems areas and decreasing the number of accounts
administered by each collector. The Company believes that even at higher loss
rates, it will be able to complete future securitization on new third party
loans at a 5 to 7 percent gain on sale, although there can be no assurance in
this regard.
In recent periods, a significant portion of the Company's net earnings have
been attributable to gains on sales of contract receivables under its prior
securitization program with SunAmerica Life Insurance Company ("SunAmerica"). As
of June 30, 1997, the Company had substantially utilized its maximum commitment
from SunAmerica under that securitization program. The Company is currently
attempting to implement a new securitization program. There can be no assurance
that any such program will be successfully concluded. Failure to identify new
securitization participants and to periodically engage in securitization
transactions will adversely affect the Company's cash flows and net earnings.
The Company's ability to successfully complete securitizations in the future may
also be affected by several factors, including the condition of securities
markets generally, conditions in the asset-backed securities markets
specifically, and the credit quality of the Company's portfolio.
In addition, the amount of any gain on sale is based upon certain
estimates, which may not subsequently be realized. To the extent that actual
payments on a securitization are materially below estimates, the Company would
be required to revalue the subordinate certificate portion of the securitization
which it retains, and record a charge to earnings based upon the reduction, as
it expects to record in the third quarter of this year. In addition, the Company
records ongoing income based upon the cash flows on its subordinate certificate
portion. The income recorded on the subordinate certificate portion will vary
from quarter to quarter based upon cash flows received in a given period.
Champion Receivables Corporation ("CRC"), a bankruptcy remote entity, is the
Company's wholly-owned special purpose securitization subsidiary. Its assets
include residuals in finance receivables and investments held in trust, which
assets would not be available to satisfy claims of creditors of the Company on a
consolidated basis. The Company plans to form a new bankruptcy remote
subsidiary for the new securitization program.
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Potential Acquisition
On September 3, 1997, the Company announced that it is in negotiations to
acquire certain dealership assets of Kars Yes Holdings of Dallas, Texas. This
acquisition, if completed, would further broaden the Company's geographic reach
and increase its share of the nation's "buy here-pay here" used car industry.
The transaction is subject to completion of negotiations and execution of a
definitive agreement, including satisfactory completion of the Company's due
diligence investigation, receipt of regulatory approvals, approval of the
shareholders and lenders of Kars Yes, approval of the Company's board of
directors and numerous other requirements. The parties are endeavoring to
satisfy these conditions and to close the transaction in early September.
The Company continues to consider additional acquisitions of and alliances
with other companies that could complement the Company's existing business.
However, there can be no assurance that suitable acquisition or joint venture
candidates can be identified, or that, if identified, any such transactions
will be consummated. Furthermore, there can be no assurance that the Company
will be able to integrate successfully such acquired businesses into its
existing operations, which could increase the Company's operating expenses in
the short-term and materially and adversely affect the Company's results of
operations. Moreover, any acquisition by the Company may result in the
incurrence of additional debt, and amortization of expenses related to goodwill
and intangible assets, all of which could adversely affect the Company's
profitability. Acquisitions involve numerous risks, such as the diversion of
the attention of the Company's management from other business concerns, the
entrance of the Company into markets in which it has had no or only limited
experience, and the potential loss of key employees of the acquired company,
all of which could have a material adverse effect on the Company.
The words "believe," "except," "anticipate," "estimate," "project," and
similar expressions in this report identify forward looking statements. Such
forward looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or
quantified. Future events and actual results could differ materially from those
set forth in, contemplated by, or underlying the forward looking statements.
Statements herein describe factors, among others, that could contribute to or
cause such differences. Other such factors include, but are not limited to,
factors detailed in the section entitled "Risk Factors" in the Company's
Prospectus, dated August 1, 1997, and in the sections entitled "Factors That May
Affect Future Results and Financial Condition" and "Factors That May Affect
Future Stock Performance" and elsewhere in the Company's most recent reports on
Form 10-K/A and Form 10-Q and in the Company's other Securities and Exchange
Commission filings. The Company undertakes no obligation to publicly update or
revise any forward looking statements, whether as a result of new information,
future events, or otherwise.
Item 7. Financial Statement and Exhibits
(c) Exhibits
Exhibit Number Description
2.1 Loan Purchase Agreement dated as of August 20, 1997
among the Company and certain banks.
2.2 Assignment of Loan and Bank Claim dated as of August 20,
1997 among the Company and certain banks, as assignors.
2.3 Security Agreement dated as of August 20, 1997 among
the Company, as obligor, and certain banks.
2.4 Payment Guaranty dated as of August 20, 1997 of certain
affiliates of the Company, as guarantors.
2.5 Warrant Agreement between the Company and Harris Trust
Company of California, as warrant agent.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UGLY DUCKLING CORPORATION
(Registrant)
Dated: September 4, 1997 By: /s/ Steven P. Johnson
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Steven P. Johnson
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Exhibit 2.1
LOAN PURCHASE AGREEMENT
This LOAN PURCHASE AGREEMENT (the "AGREEMENT") is made as of August
20, 1997, by and among LASALLE NATIONAL BANK, a national banking association
("LASALLE"), NBD BANK, a Michigan banking corporation ("NBD"), HARRIS TRUST AND
SAVINGS BANK, a Illinois banking corporation ("HARRIS"), NATIONSBANK,
N.A., a national banking association, as successor to The Boatmen's National
Bank of St. Louis ("NATIONSBANK"), FIRST BANK NATIONAL ASSOCIATION, a national
banking association ("FIRST BANK"), FLEET BANK, NATIONAL ASSOCIATION (f/k/a
NatWest Bank, N.A.) ("FLEET"), and MELLON BANK, N.A., a national banking
association ("MELLON") (with each of LaSalle, NBD, Harris, NationsBank, First
Bank, Fleet and Mellon being referred to in this Agreement individually as a
"SELLER" and collectively as "SELLERS" and with LaSalle, in its separate
capacity as collateral agent for Sellers, being referred to in this Agreement as
"COLLATERAL AGENT"), and UGLY DUCKLING CORPORATION, a Delaware corporation
("BUYER").
RECITALS:
A. Sellers and certain other lenders (collectively, "LENDERS"), LaSalle,
as Agent for Lenders (in such capacity referred to herein as "AGENT") and First
Merchants Acceptance Corporation ("BORROWER") entered into that certain Fourth
Amended and Restated Loan and Security Agreement, dated as of February 28, 1996
(the "FOURTH AMENDED LOAN AGREEMENT"). The Fourth Amended Loan Agreement has
been amended by the following:
1. First Amendment to Fourth Amended and Restated Loan and Security
Agreement, dated as of May 1, 1996, among Borrower, Lenders, and Agent (the
"FIRST AMENDMENT");
2. Consent and Amendment to Fourth Amended and Restated Loan and Security
Agreement, dated as of October 29,1996, among Borrower, Lenders, and Agent (the
"CONSENT AND AMENDMENT");
3. Second Amendment to Fourth Amended and Restated Loan and Security
Agreement dated as of December 26, 1996, among Borrower, Lenders, and Agent (the
"SECOND AMENDMENT");
4. Forbearance Agreement dated as of May 8, 1997, between Borrower and
Agent (the "FORBEARANCE AGREEMENT");
5. Consents dated as of June 17, 1997 and June 20, 1997, between Borrower
and Agent (the "CONSENTS");
6. Letter Agreement, dated June 27, 1997, between Borrower and Agent (the
"LETTER AGREEMENT"); and
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7. Letter Agreement, dated June 30, 1997, between Borrower and Agent (the
"SECOND LETTER AGREEMENT"). The Fourth Amended Loan Agreement, as amended and
supplemented by the First Amendment, the Consent and Amendment, the Second
Amendment, the Forbearance Agreement, the Consents, the Letter Agreement, and
the Second Letter Agreement, are referred to collectively in this Agreement as
the "LOAN AGREEMENT". Capitalized terms used in this Agreement and not defined
in this Agreement have the meanings given to those terms in the Loan Agreement.
B. Each Seller is the owner and holder of its respective Revolving Credit
Note listed on EXHIBIT A attached hereto (collectively the "BANK NOTES"). The
Bank Notes have been issued and are outstanding pursuant to the Loan Agreement.
C. Repayment of the Bank Notes and payment and performance of the
Obligations of Borrower are secured by security interests granted by Borrower to
Agent, as agent on behalf of the Lenders, in the Collateral described on EXHIBIT
B attached hereto pursuant to the security agreement contained in the Loan
Agreement (the "CURRENT COLLATERAL"). UCC-1 financing statements have been filed
in various jurisdictions to perfect such security interests in the Current
Collateral, and a list of all such UCC-l Financing Statements is included as
part of as Exhibit B (the "UCC FINANCING STATEMENT").
D. Pursuant to the Agency Agreements listed on EXHIBIT C (the "AGENCY
AGREEMENTS"), various Authorized Representatives of Borrower are holding that
portion of the Current Collateral possession of which is required for perfection
of the security interests therein, as agents for Lenders and the Agent.
E. Pursuant to the Letter Agreement, Borrower pledged to Agent, on behalf
of Lenders, all of the issued and outstanding stock (collectively, the "PLEDGED
STOCK") of First Merchants Auto Receivables Corporation ("FMARC") and of First
Merchants Auto Receivables Corporation II as additional security for payment and
performance of the Obligations of Borrower under the Loan Agreement. Borrower
has delivered possession of the share certificates for the stock of FMARC to
Agent ("SHARE CERTIFICATE").
F. The Loan Agreement, the Bank Notes, the UCC Financing Statements, Share
Certificate and the Agency Agreements are collectively referred to in this
Agreement as the "Loan Documents." The indebtedness and Obligations evidenced by
the Loan Documents and the liens and rights created by the Loan Documents are
collectively called the "Loan."
G. On July 11, 1997 (the "Petition Date"), Borrower filed a Chapter 11
petition under the provisions of Title 11, United States Code, as amended (the
"Bankruptcy Code") in the United States District Court for the State of Delaware
(the "Court") and such petition is currently pending in the Court as Case No.
97-1500 (JJF) (the "Bankruptcy Case"). As creditors of Borrower, Lenders and
Agent have certain claims against Borrower in the Bankruptcy Case arising under
and pursuant to, relating to or otherwise connected with the Loan Documents or
the Loan (collectively, the "Bank Claim").
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H. Buyer has proposed to make certain new credit available to Borrower, as
a debtor-in-possession, during the pendency of the Bankruptcy Case (the "DIP
Facility").
I. Buyer is willing to purchase the Bank Rights (hereinafter defined) on
the terms and conditions set forth in this Agreement. Buyer, Agent (on behalf of
Lenders) and Borrower have entered into a term sheet, dated July 16, 1997,
relating to the purchase by Buyer of the Loan (the "TERM SHEET"). This Agreement
is the definitive agreement contemplated by, and supersedes, the Term Sheet with
respect to the acquisition of the Bank Rights from Sellers.
NOW THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
1. Sale and Purchase. Each Seller agrees, severally and not jointly, to
sell and assign to Buyer, and Buyer agrees to purchase and accept from each
Seller, on and subject to the terms and conditions set forth in this Agreement
the following (collectively, the "BANK RIGHTS"):
(a) Loan and Loan Documents. All rights, title, claims, and
interests of each Seller, in and to the Loan and the Loan Documents;
(b) Bank Claim. All rights, title, claims, and interests of each
Seller, in and to the Bank Claim; and
(c) Other Rights. All of the rights, titles, interests, privileges,
and appurtenances owned or held by each Seller, if any, in any way related
to or in connection with the ownership of the Loan, including without
limitation, lockbox accounts and other sweep accounts into which payments
to Borrower are made from time to time and over which Sellers have
dominion and control;
(d) The Buyer hereby assumes the obligations and liabilities of
Sellers under the Loan Documents in respect of the Interests of Sellers
accruing or chargeable to the period commencing on or after the date
hereof; excluding however the Retained Obligations (hereinafter defined)
and Sellers hereby retain any obligations and liabilities of Sellers under
the Loan Documents in respect of the Interests of Sellers accruing or
chargeable to the period prior to the date hereof (the "RETAINED
OBLIGATIONS").
2. Total Purchase Price. As consideration in exchange for the Bank Rights,
Buyer agrees to pay each of the Sellers pro rata in accordance with its Interest
(hereinafter defined), an amount equal to ninety percent (90%) of (x) the sum of
the Pre-Petition Amounts and the Post-Petition Amounts (as defined below), less
(y) the Pre-Closing Payments (as defined in Paragraph 6(b))(the "Purchase
Price"). As further consideration, Buyer also agrees to grant to each of the
Sellers, pro rata as set forth in the Warrant Agreement, stock warrants for the
purchase of up to 389,800 shares of the common stock of Buyer (the "Warrants")
on the terms and conditions set forth in the Warrant Agreement being executed
concurrently with this Agreement. As additional consideration, Buyer further
agrees that if a plan of reorganization (the "Plan") is confirmed in the
Bankruptcy Case, with the support of Buyer, and the Plan provides for and the
Borrower or
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any other party subsequently makes a cash payment or issues notes at a market
rate (but specifically excluding preferred stock or warrants) to either (i) any
non-priority unsecured creditors in the Bankruptcy Case (other than
administrative claimants or any class of administrative convenience creditors,
where such class is limited to claimants whose claims total no more than
$500.00, or claimants who have agreed to accept not in excess of $500.00 in full
settlement of their claims under the Bankruptcy Code) or (ii) equity holders,
junior in priority or security to the Bank Claim, worth, in either case, an
amount in excess of ten percent (10%) of the aggregate allowed claims of either
such creditors or equity holders, Buyer agrees to pay to each Seller, an amount
equal to the product obtained by multiplying (i) such Seller's percentage
interest set forth on Exhibit E (each, an "Interest"), by the product of (ii)
the sum of the Pre-Petition Amounts and Post-Petition Amounts, less the
Pre-Closing Payments ("Gross Purchase Price"), multiplied by (iii) the amount,
expressed as a percentage of either (1) such creditors' aggregate allowed claims
or (2) such equity holders' aggregate allowed claims, by which the cash payment
or notes exceed ten percent of either such creditors' aggregate allowed claims
or equity holders' aggregate allowed claims (the "Contingent Consideration");
provided, however, that the Contingent Consideration, shall not exceed the
difference between the Gross Purchase Price and the Purchase Price. The Purchase
Price, Warrants and Contingent Consideration shall be referred to herein as the
"Total Purchase Price."
(a) The Pre-Petition Amounts shall be the aggregate total of the sum
of the outstanding amounts due each Seller from Borrower under the Loan
Documents through July 11, 1997, including outstanding principal,
interest, fees and other expenses accrued through July 11, 1997, such
amounts being listed on Exhibit D.
(b) The Post-Petition Amounts shall be the aggregate total (but not
in any event to exceed $194,900) of the sum of all fees and expenses of
any nature accrued and payable by Borrower to any Seller under the Loan
Documents following the Petition Date.
3. Initial Payment, Interim Payments, Payment of Total Purchase Price.
(a) The Initial Payment. Upon satisfaction of the conditions
precedent set forth in Section 5 of this Agreement, Buyer will pay by wire
transfer to each Seller an amount equal to twenty percent (20%) of the
Purchase Price multiplied by such Seller's Interest (the "Initial
Payment").
(b) Interim Payments. Notwithstanding anything to the contrary
contained in this Agreement, until Buyer has paid in full the Purchase
Price, any moneys received by Buyer from and after the date hereof on
account of, or relating to, any Seller's Interest in the Bank Rights sold
and assigned hereby, including, without limitation, proceeds from
collections on or sales or other dispositions of the Current Collateral,
but excluding any servicing fees paid to Borrower on the Securitized
Portfolio (as defined in the Loan Agreement), shall be immediately paid to
Sellers, pro rata in accordance with their respective Interests, in
immediately available funds, and such payments (the "Interim Payments")
will be applied first to interest on the UDC Notes and then to principal.
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(c) Payment of Purchase Price. Subject to the satisfaction of the
conditions precedent set forth in Section 5 below, Buyer shall pay to each
Seller on the date hereof, the Purchase Price as follows: (a) in cash,
such Seller's Initial Payment, and (b) the balance of the Purchase Price
(the "PRINCIPAL NOTE AMOUNT") on or before the six-month anniversary of
the Closing Date without set-off, deduction, recoupment or counterclaim,
together with interest on the outstanding principal balance thereof,
calculated on the basis of a 360-day year and actual days elapsed, at a
rate equal to the published LIBOR rate for a six-month contract (as
published in the Wall Street Journal, Midwest Edition) (as of the Closing
Date) plus 200 basis points, and which amount shall be evidenced by notes
payable to each Seller in an amount equal to such Seller's Interest in the
Principal Note Amount (the "UDC Notes") and executed and delivered to each
Seller on the date hereof.
(d) Warrants. The Warrants shall be delivered to each Seller not
later than August 30, 1997.
(e) Contingent Consideration. Buyer shall pay the Contingent
Consideration, if any, by wire transfer to each Seller on or before ten
(10) days after the payment to any creditor or interest holder of any
payment which obligates Buyer to pay to Sellers any Contingent
Consideration.
4. Security. To secure Buyer's performance and payment of the Purchase
Price, Buyer agrees to grant the Collateral Agent, as collateral agent on behalf
of Sellers, a security interest in certain property pursuant to the terms and
conditions of the security agreement in the form of Exhibit G attached hereto
(the "Security Agreement"). As additional security for the performance of each
and every obligation of Buyer under this Agreement, Buyer agrees to cause each
of the Guarantors (as defined below) to jointly and severally guarantee Buyer's
performance and payment hereunder pursuant to the terms and conditions of a
guaranty in the form of Exhibit H attached hereto ("Guaranty").
5. Closing Conditions.
(a) Conditions Precedent to Closing.
(i) Buyer. Buyer's obligation to close this transaction is
subject to the satisfaction (or waiver by Buyer in writing) of the
following conditions on and as of the date of this Agreement:
(A) The representations and warranties of Sellers set
forth in this Agreement are true, complete and correct
on and as of the Closing.
(B) Each Seller has fully performed all of its
respective obligations to be performed by such party.
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(C) The delivery and, if applicable, execution of each
of the following documents by the Collateral Agent and
Sellers to Buyer (or waiver in writing of such by Buyer)
shall constitute separate and distinct conditions
precedent to Buyer's obligations to close the sale and
purchase contemplated by this Agreement:
(1) Closing Purchase Price Statement. A statement of the
Purchase Price as of the date of this Agreement, prepared by
Collateral Agent, on behalf of each Seller (the "CLOSING PURCHASE
PRICE STATEMENT").
(2) General Assignment. An Assignment of Notes and Bank Claim
in the form of Exhibit F, duly executed by each of the Sellers;
(3) Bank Notes. The original of each of the Bank Notes held by
each Seller, endorsed by such Seller on the reverse side or by
separate endorsement in the following manner: "Pay to the order of
Ugly Duckling Corporation, a Delaware corporation without recourse
and without any warranties or representations of any kind, except as
set forth in the Loan Purchase Agreement"; and
(ii) Collateral Agent and Sellers. The delivery of the Initial
Payment to the Sellers and the delivery and, if applicable,
execution, of each of the following documents (collectively, the
"Loan Purchase Documents") by Buyer or Guarantors to Sellers (or
waiver in writing of such by Sellers) shall constitute separate and
distinct conditions precedent to the Sellers' obligations to close
the sale and purchase contemplated by this Agreement:
(A) This Agreement, duly executed.
(B) The duly executed Security Agreement.
(C) The duly executed Warrant Agreement.
(D) The duly executed UDC Notes.
(E) Opinion letter of Buyer's and Guarantors' counsel.
(F) UCC Financing Statements of the Buyer.
(G) The original Bank Notes.
(H) The Guaranty duly executed by each of the following
parties: Duck Ventures, Inc., an Arizona corporation, Champion
Acceptance Corporation, an Arizona corporation, Ugly Duckling
Car Sales, Inc., an Arizona corporation, Ugly Duckling Car
Sales Florida, Inc.,
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a Florida corporation, UDRAC, Inc., an Arizona corporation,
UDRAC Rentals, Inc., an Arizona corporation, Champion
Financial Services, Inc., an Arizona corporation, Drake
Insurance Services, Inc., an Arizona corporation, Drake
Insurance Agency, Inc., an Arizona corporation, Drake Life
Insurance Co., a Turks and Caicos Islands corporation, and
Drake Property & Casualty Insurance Co., a Turks and Caicos
Islands corporation (each, a "Guarantor").
(I) A copy of the resolutions of the Buyer's board of
directors approving and authorizing the execution, delivery
and performance by Buyer of this Agreement and each of the
Loan Purchase Documents and designating the individuals
authorized to execute and deliver all such documents,
certified as of the date of this Agreement by the secretary or
assistant secretary of the Buyer.
(J) A copy of the resolutions of each Guarantor's board
of directors approving and authorizing the execution, delivery
and performance by that Guarantor of its Guaranty and
designating the individuals authorized to execute and deliver
its Guaranty certified as of the Closing Date by the secretary
or assistant secretary of the Guarantor.
6. Additional Terms
(a) Prior to the date hereof, each Seller has filed proofs of
claims, in an amount equal to each such Seller's Interest in the Bank
Claim, and such aggregate amount is not less than the Pre-Petition Amount.
(b) Pre-Closing Payments. Each Seller shall be entitled to receive
and retain, all principal, interest and expense payments due to such
Seller on account of the collection by Borrower of amounts due on
pre-petition Contracts and in connection with the repossession and
liquidation of pre-petition collateral for the Loan, to the extent any
such amounts are actually received by Borrower prior to the date of this
Agreement (all such amounts, the "Pre-Closing Payments"). To the extent
that, following the Closing, Buyer receives any payments from Borrower on
account of Pre-Closing Payments, Buyer shall immediately remit such
amounts to Collateral Agent for allocation and disbursement to Sellers.
(c) Payments Belonging to Buyer. Subject to Section 3(b) hereof, any
and all payments due from Borrower under the Loan Documents, including all
principal and interest, other than the Pre-Closing Payments, shall belong
to Buyer, and, to the extent that Collateral Agent or any Seller receives
any payments from Borrower on account of amounts described in this
PARAGRAPH 6(b), including, without limitation, any amounts deposited in
any lockbox or other account of Borrower with Collateral Agent or such
Seller, Collateral Agent or such Seller, as the case may be, shall
immediately remit such amounts to Buyer.
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(d) Assignment of UDC Notes. Any Seller may assign, sell or transfer
its UDC Note, or any interest in such note, without the prior written
consent of any other parties, but such assignee shall be subject to the
provisions of this Agreement.
7. Modification of Agent's Duties. Effective as of the date of this
Agreement, LaSalle shall be appointed the Collateral Agent solely for the
purpose of administering the collateral pledged to Sellers under the Security
Agreement, and the provisions of the Loan Documents relating to the rights and
obligations of LaSalle, as agent for Lenders and the rights and obligations of
each Lender to Agent and to each other Lender, including without limitation,
with respect to indemnification of the Agent, sharing of expenses and
enforcement of rights and remedies, are incorporated herein in their entirety
and deemed to be a part hereof solely for the benefit of Collateral Agent and
Sellers, but shall not create any rights in favor of Buyer. Buyer shall have no
duties as Agent for any Sellers and shall not be deemed to be any Seller's agent
for any purpose.
8. Representations and Warranties of Sellers. As of the date hereof each
Seller (each a "WARRANTING PARTY") severally, not jointly, represents and
warrants the following to Buyer, each of which is acknowledged to constitute a
material part of the consideration to Buyer hereunder, and is accurate and true
in all material respects:
(a) Organizational Status and Authority. The Warranting Party is an
entity of the type described in the first paragraph of this Agreement and
is duly organized, validly existing and in good standing in each state
where the nature of its business requires such qualification. The
Warranting Party has full power and authority to enter into and to perform
its obligations under this Agreement. The persons executing this Agreement
on behalf of the Warranting Party have full power and authority to do so
and to perform every act and to execute and deliver every document and
instrument necessary or appropriate to consummate the transactions
contemplated by this Agreement. The Warranting Party has all necessary
power and authority to own its properties and to conduct its business as
now owned and conducted by such Warranting Party.
(b) Entity Action. All entity action on the part of the Warranting
Party and its constituent owners which is required for the execution,
delivery and performance by such Warranting Party of this Agreement and
each of the documents and agreements to be delivered by such Warranty
Party at the Closing has been duly and effectively taken.
(c) Enforceable Nature of Agreement. This Agreement and each of the
documents and agreements to be delivered by the Warranting Party at the
Closing, constitute legal, and binding obligations of such Warranting
Party, enforceable against such Warranting Party in accordance with their
respective terms, except to the extent that enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium,
or similar laws affecting the enforcement of creditors' rights generally,
and subject as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a court of law or equity).
-8-
<PAGE> 9
(d) Violations; Consents; Defaults. Neither the execution of this
Agreement nor the performance by the Warranting Party of its obligations
under this Agreement will result in any breach or violation of the terms
of any law, rule, ordinance, or regulation or of any decree, judgment or
order to which such Warranting Party or any officer or director of such
Warranting Party is a party now in effect from any court or governmental
body. There are no consents, waivers, authorizations or approvals from any
third party necessary to be obtained by such Warranty Party in order to
carry out the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and performance by the Warranting Party of
its respective obligations under this Agreement will not conflict with or
result in a breach or default (or constitute an event which, with the
giving of notice or the passage of time, or both, would constitute a
default) under such Warranting Party's organizational documents or any
indenture, mortgage, lease, agreement, or other instrument to which such
Warranting Party is a party or by which such Warranting Party or any of
its assets may be bound.
(e) Ownership. The Warranting Party is the sole, exclusive and
lawful, owner and holder of each of the Bank Notes identified on EXHIBIT A
as being owned by such Warranting Party and of its respective interest in
the Obligations, the Loan Documents, and the Bank Claim, in each case free
and clear of all liens and encumbrances whatsoever. Such Warranting Party
has not previously assigned or encumbered its Bank Notes or its interest
in the Obligations, the Loan Documents, or the Bank Claim in whole or in
part.
(f) Loan Fully Funded. The Warranting Party has fully funded all
amounts to which Borrower is entitled under the Loan Agreement, and there
are no continuing unsatisfied obligations of such Warranting Party to
Borrower or any other party under any of the Loan Documents (except for
amounts due from Sellers to Agent as reimbursement of expenses under the
Loan Documents).
(g) Enforceability; Compliance. The Loan Documents to which the
Warranting Party is a party are valid, binding and enforceable obligations
of such Warranting Party, enforceable in accordance with their terms and
constitute all of the agreements with Borrower pertaining to the Loan and
the Obligations. Such Warranting Party has complied in all respects with
all applicable Federal, state, and local laws, rules, and regulations
relating to the Loan and the Collateral.
(h) Confirmation of Amounts Due. The Pre-Petition Amounts set forth
on EXHIBIT D with respect to the Warranting Party are correct and complete
in all respects. The Closing Purchase Price Statement is correct and
complete in all respects with respect to the Warranting Party.
(i) Subsidiaries. Borrower has no Subsidiaries that have become Co-
Borrowers pursuant to the Second Amendment.
-9-
<PAGE> 10
9. Survival of Warranting Parties' Representations and Warranties. The
representations, warranties and covenants of each Warranting Party set forth in
Paragraph 9 shall be subject to the following terms and conditions:
(a) The representations, warranties and covenants shall be deemed to
be continuing;
(b) The representations, warranties and covenants shall survive the
closing of the transactions contemplated by this Agreement. Each
Warranting Party shall be obligated to cure any material breach or untruth
of any such representations, warranties and covenants of which Buyer gives
such Warranting Party written notice and shall otherwise indemnify Buyer
and hold Buyer harmless from and against any loss, liability, damages,
judgments, costs and expenses arising from or relating to the material
breach of any such representations, warranties and covenants; and
(c) No investigation or inspection by Buyer or Buyer's
representatives shall be deemed to have in any way diminished or waived
the representations, warranties and covenants of such Warranting Party set
forth in this Agreement, unless Buyer shall have obtained actual knowledge
of such matters prior to the date hereof.
10. Representations and Warranties of Buyer. As of the date hereof, Buyer
makes the following representations and warranties to Sellers each of which is
agreed to constitute a material part of the consideration to Sellers hereunder,
and is accurate and true in all material respects:
(a) Organizational Status and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, is qualified to do business in each state where the
nature of its business requires such qualification, and has full power and
authority to enter into and to perform its obligations under this
Agreement. The persons executing this Agreement on behalf of Buyer have
full power and authority to do so and to perform every act and to execute
and deliver every document and instrument necessary or appropriate to
consummate the transactions contemplated by this Agreement. Buyer has all
necessary power and authority to own its properties and to conduct its
business as now owned and conducted by Buyer.
(b) Entity Action. All corporate action on the part of Buyer and its
shareholders which is required for the execution, delivery and performance
by Buyer of this Agreement and each of the documents and agreements to be
delivered by Buyer at the Closing has been duly and effectively taken.
(c) Enforceable Nature of Agreement. This Agreement and each of the
documents and agreements to be delivered by Buyer hereunder constitute
legal, valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, moratorium, or similar laws affecting the
-10-
<PAGE> 11
enforcement of creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
(d) Violations; Consents; Defaults. Neither the execution of this
Agreement nor the performance by Buyer of its obligations under this
Agreement will result in any breach or violation of the terms of any law,
rule, ordinance, or regulation or of any decree, judgment or order to
which Buyer or any officer, director or shareholder of Buyer is a party
now in effect from any court or governmental body. There are no consents,
waivers, authorizations or approvals from any third party necessary to be
obtained by Buyer in order to carry out the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and
performance by Buyer of its obligations under this Agreement will not
conflict with or result in a breach or default (or constitute an event
which, with the giving of notice or the passage of time, or both, would
constitute a default) under Buyer's articles of incorporation or bylaws or
any indenture, mortgage, lease, agreement, or other instrument to which
Buyer is a party or by which Buyer or any of its assets may be bound.
(e) Investment Intent. Buyer is not acquiring the Sellers' interests
in the Bank Rights with a view to, or for sale in connection with, any
public distribution thereof, and it has no present intention of making any
distribution or transfer of the Loan in a manner which would violate
applicable laws. Buyer is able to bear the economic risk associated with
the purchase of the interests of Sellers in the Bank Rights. Buyer will
not rely upon the Agent or the Lenders to furnish or make available any
documents or other information regarding the credit, affairs, financial
condition or business of, or any other matter concerning, the Borrower or
any of its affiliates or the Bankruptcy Case. Buyer is an "accredited
investor" as defined in Rule 501(a) of Regulation D under the Securities
Act and Buyer is not purchasing the Loan on behalf of one or more employee
benefit plans, or with proceeds which constitute "plan assets," as defined
in the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder.
(f) Sophisticated Buyer. Buyer is a sophisticated buyer with respect
to the Bank Rights, has adequate information concerning the business and
financial condition of Borrower and its affiliates and the status of the
Bankruptcy Case to make an informed decision regarding the purchase of
Sellers' interests in the Bank Rights and has independently and without
reliance upon the Sellers, and based on such information as Buyer has
deemed appropriate and sufficient, made its own analysis and decision to
enter into this Agreement, except that Buyer has relied upon the
representations, warranties and covenants of the Sellers expressly
provided in this Agreement. Buyer acknowledges that the Sellers have not
made and do not make any representation or warranty, whether express or
implied, of any kind or character, except as expressly set forth in this
Agreement, and that Buyer has made its own assessment of the Bank Rights
based upon information available to it. Buyer acknowledges that the
assignment and transfer of Sellers' interest in the Bank Rights to Buyer
is irrevocable, and that Buyer has no
-11-
<PAGE> 12
recourse to the Collateral Agent or any Seller, except with respect to
remedies resulting from breaches of representations, warranties, covenants
and agreements expressly provided in this Agreement.
(g) Review of Documents. Buyer acknowledges that it and its counsel
have had the opportunity to review the Loan Documents and the Loan
Purchase Documents.
(h) Possession of Material Information. Buyer acknowledges and
understands that the Collateral Agent and the Sellers may possess material
information not known to Buyer regarding or relating to the Loan or the
Collateral, the Borrower, and the Bankruptcy Case (the "Excluded
Information of Sellers"), including, without limitation, information
received from the Borrower or its professionals or the Collateral Agent or
its professionals. Buyer acknowledges that Buyer has not requested the
Excluded Information of Sellers and agrees that the Collateral Agent and
the Sellers shall have no liability to the Buyer with respect to the
non-disclosure of the Excluded Information of Sellers, except to the
extent such non-disclosure renders inaccurate any representation or
warranty of the Collateral Agent or the Sellers contained herein.
(i) No Broker. Buyer has not retained any broker in connection with
its purchase of the Sellers' interests in the Bank Rights.
11. Miscellaneous.
(a) Notices. Notices will be in writing and will be given by
personal delivery, by deposit in the United States mail, certified mail,
return receipt requested, postage prepaid, by facsimile transmission, or
by express delivery service, freight prepaid. Notices will be delivered or
addressed to the parties at the addresses or facsimile numbers set forth
opposite their signatures at the end of this Agreement or at such other
address or number as a party may designate in writing to all parties. The
date notice is deemed to have been given, received and become effective
will be (i) the date on which the notice is delivered, if notice is given
by personal delivery, (ii) the date of actual receipt, if the notice is
sent through the United States mail or by express delivery service, or
(iii) if notice is sent by facsimile transmission, on the date of
transmission, if the transmission is commenced prior to 4:00 o'clock p.m.
(local time at the place of receipt) and continuously transmitted
thereafter until complete, otherwise on the day following the date of
transmission.
(b) Attorney's Fees. If suit is brought or otherwise an attorney is
retained by any party to this Agreement to enforce the terms hereof or
collect any sums due hereunder or to collect money damages for breach
hereof, the prevailing party shall be entitled to collect from the other
party reimbursement for reasonable attorneys' fees and court costs in
connection with such proceeding or suit.
(c) Time is of the Essence. Time is of the essence in this
Agreement.
-12-
<PAGE> 13
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered shall be an original, but
all such counterparts shall together constitute one and the same
instrument. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one
document. Telecopied signature pages will be acceptable, provided
originally signed signature pages are provided to each of the other
parties by overnight courier.
(e) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois, without
giving effect to its conflict of laws provisions.
(f) Binding Effect. The provisions of this Agreement are binding
upon and will inure to the benefit of the parties and their respective
successors and assigns; provided however, Buyer may not assign its rights
hereunder to any entity other than a subsidiary of Buyer in which it owns
a controlling interest or assign its obligations hereunder without the
prior written consent of Sellers. This Agreement shall be binding upon
Buyer, Collateral Agent and Sellers, and their successors and assigns.
(g) Waivers. No waiver of any of the provisions of this Agreement
will constitute a waiver of any other provision, whether or not similar,
nor will any waiver be a continuing waiver. No waiver will be binding
unless executed in writing by the party making the waiver. A party may
waive any provision of this Agreement intended for its benefit, provided
however, such waiver will in no way excuse the other parties from the
performance of any of its other obligations under this Agreement.
(h) Further Documentation. Each of the parties agrees to execute
such further or additional documents as may be necessary or appropriate to
fully carry out the intent and purpose of this Agreement.
(i) Headings and References. The headings of this Agreement are for
purposes of reference only and will not limit or define the meaning of any
provision of this Agreement. References in this Agreement to "Paragraphs"
and "Exhibits" refer to the Paragraphs in and Exhibits to this Agreement,
unless otherwise noted.
(j) Amendments. This Agreement may be amended only by a written
instrument signed by each of the parties hereto.
(k) Entire Agreement. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter contained
in this Agreement. All prior and contemporaneous agreements, term sheets,
representations and understandings of the parties, oral or written, are
superseded by and merged in this Agreement.
(l) Reservation of Rights. Sellers and Buyer agree that this
Agreement effectuates the terms of the Term Sheet by and between Agent and
UDC (the "Term
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<PAGE> 14
Sheet") and that the Sellers and Buyer are prepared to enter into
documents formalizing the binding commitments of both the Lenders and
Buyer under the Term Sheet. Buyer reserves and shall not be deemed to have
waived by entry into definitive documentation any claim, right or remedy
(whether legal or equitable) it may have against any of CoreStates Bank,
N.A., Firstar Bank Milwaukee, N.A., or Cerberus Partners, L.P. Upon
execution, of this agreement, Buyer confirms and agrees that the Sellers
have satisfied any obligations Sellers had under the Term Sheet.
(m) Release. To the extent Buyer seeks and obtains a release from
Borrower under that certain Joint Motion for Order Authorizing and
Approving (1) Settlement and compromise, pursuant to Bankruptcy Rule 9019,
between and among the Debtor, the Bank Group and Ugly Duckling Corporation
regarding DIP Financing; and (2) Sale and Transfer of the Bank Group's
Secured Claim Against the Debtor to Ugly Duckling Corporation pursuant to
Bankruptcy Rule 3001(e) (the "Motion") filed in the Bankruptcy Case,
Sellers shall be entitled to and receive the benefits of the relief
requested in the Motion, including any release from the Borrower and its
estate sought therein.
[remainder of page intentionally left blank]
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.
SELLERS:
LASALLE NATIONAL BANK,
a national banking association
By /s/ James Thompson
-----------------------------
Its Senior Vice President
-----------------------------
Address for Notices:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: James Thompson
Telecopier No.: (312) 765 - 1724
NBD BANK, a Michigan banking corporation
By /s/ Thomas T. Bower
-----------------------------
Its Vice President
-----------------------------
Address for Notices:
c/o The First National Bank of Chicago
One First National Plaza, Mail Suite 0630,
Chicago, Illinois 60670
Attn: Thomas Bower
Telecopier No.: (312) 732 - 6904
HARRIS TRUST AND SAVINGS BANK, an
Illinois banking corporation
By /s/ Sandra J. Sanders
-----------------------------
Its Sandra J. Sanders
-----------------------------
Vice President
Address for Notices:
200 West Monroe Street, 17th Floor
Chicago, Illinois 60603
Attn: Sandra Sanders
Telecopier No.: (312) 765 - 1724
<PAGE> 16
NATIONSBANK, N.A., a national banking
association
By /s/ Jay T. Wampler
-----------------------------
Its Senior Vice President
-----------------------------
Address for Notices:
NationsBank Plaza, 901 Main Street
Dallas, Texas 75283-1000
Attn: Pete Joost
Telecopier No.: (214) 508 - 0966
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By /s/ David Larsen
-----------------------------
Its Vice President
-----------------------------
Address for Notices:
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attn: David Larsen
Telecopier No.: (612) 973 - 2149
FLEET BANK, NATIONAL ASSOCIATION,
a national banking association
By /s/ Edward Walsh
-----------------------------
Its Senior Vice President
-----------------------------
Address for Notices:
777 Main Street, Mail Code CTMOH 20A
Hartford, Connecticut 06115
Attn: Edward Walsh
Telecopier No.: (212) 703 - 1684
<PAGE> 17
MELLON BANK, N.A.
a national banking association
By /s/ Ryan Busch
-----------------------------
Its Assistant Vice President
-----------------------------
Address for Notices:
One Mellon Bank Center, Room 4835
Pittsburgh, Pennsylvania 15258-0001
Attn: Christopher Shannon
Telecopier No.: (412) 236 - 1174
AGENT:
LASALLE NATIONAL BANK,
a national banking association
By /s/ James Thompson
-----------------------------
Its Senior Vice President
-----------------------------
Address for Notices:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: James Thompson
Telecopier No.: (312) 904 - 8169
BUYER:
UGLY DUCKLING CORPORATION,
a Delaware corporation
By /s/ Steven P. Johnson
-----------------------------
Its Senior Vice President
-----------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
Attn: Steven Johnson
Telecopier No.: (602) 852 - 6696
<PAGE> 18
INDEX TO EXHIBITS
A. Bank Notes
B. Current Collateral and UCC Financing Statements
C. Agency Agreements [Form of Attached]
D. Pre-Petition Amounts
E. Sellers Interest (Pro-Rata Share of Purchase Price)
F. Form of Assignment of Loan and Bank Claim
G. Form of Security Agreement
H. Form of Guaranty
<PAGE> 19
EXHIBIT A TO LOAN PURCHASE AGREEMENT
LIST OF BANK NOTES
BANK NOTES:
<TABLE>
<CAPTION>
LENDER AMOUNT
<S> <C>
1. LASALLE NATIONAL BANK $ 30,000,000.00
2. NBD BANK $ 25,000,000.00
4. HARRIS TRUST AND SAVINGS BANK $ 20,000,000.00
5. NATIONSBANK, N.A. $ 15,000,000.00
6. FIRST BANK NATIONAL ASSOCIATION $ 25,000,000.00
8. FLEET BANK NATIONAL ASSOCIATION $ 25,000,000.00
9. MELLON BANK, N.A. $ 20,000,000.00
TOTAL: $ 160,000,000.00
</TABLE>
<PAGE> 20
EXHIBIT B TO LOAN PURCHASE AGREEMENT
LIST OF CURRENT COLLATERAL AND UCC FINANCING STATEMENTS
Subject to the exceptions below, the Current Collateral consists of the
following:
A. All of the assets of First Merchants Acceptance Corporation ("FMAC"),
including all of FMAC's right, title and interest in and to the following,
whether now owned or existing or hereafter acquired or arising:
1. Rights to payment for goods sold or leased or for services rendered,
including, without limitation, accounts receivable, bank accounts, contract
rights, chattel paper, instruments, tax refunds and rights to receive tax
refunds, claims for tax or other refunds, insurance policies (including business
interruption insurance), insurance proceeds, deposits, progress payments,
investments, whether now owned or hereafter acquired by FMAC ("Accounts");
2. Goods intended for sale or lease by FMAC, or for display or
demonstration, all work in process, all finished goods intended for sale, rent
or lease, all raw materials and other materials and supplies of very nature and
description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing or such goods or
otherwise used or consumed in FMAC's business, including such inventory as is
temporarily out of FMAC's custody or possession and any returns upon any
accounts or other proceeds ("Inventory");
3. Machinery, apparatus, equipment, fittings, furniture, trade fixtures,
motor vehicles and other tangible personal property (other than Inventory) of
every kind and description used in FMAC's operations or owned by FMAC or in
which FMAC has an interest, wherever located, and all parts, accessories and
special tools ("Equipment");
4. General intangibles, now owned or hereafter acquired by FMAC, including
without limitation, all choses in action, causes of action, corporate or other
business records, hospital relationships, service provider relationships,
trained and assembled work forces, technician networks, inventions, designs,
patents, patent applications, trademarks, trade names, trade secrets,
blue-prints, know-how, royalties, goodwill, methods, sales literature, drawings,
specifications, descriptions, name plates, catalogues, employee data bases,
confidential information, copyrights, registrations, licenses, franchises,
customer lists, all claims under guaranties, security interests or other
security held by or granted to FMAC to secure payment of any of the Accounts by
an account debtor, all rights of indemnification, rights to refunds,
contribution and subrogation, deposits, progress payments, investments and all
other intangible property of every kind and nature (other than Accounts)
("General Intangibles");
5. Documents, Instruments and Chattel Paper, each as defined in Section
9-105 of the Uniform Commercial Code as in effect in the State of Illinois;
including, without limitation, all installment sale agreements or other deferred
payment obligations and all documents, instruments and agreements related
thereto together with all collateral and security therefor and all payments and
proceeds arising therefrom.
<PAGE> 21
6. Monies, reserves and property, and interests in any kind of property
and asset, whether real, personal or mixed, or tangible or intangible of any
kind now or at any time or times hereafter, in the possession or under the
control of FMAC, Lender or a bailee of Lender;
7. Accessions to, substitutions for and all replacements, products and
proceeds of (A), (B), (C), (D), (E) and (F) above, including, without
limitation, proceeds of insurance policies;
8. Books of account and records (including without limitation, customer
lists, credit files, computer programs and software, print-outs, and other
computer materials and records) of the FMAC pertaining to any of (A), (B), (C),
(D), (E), (F) or (G) above; and
9. All of the common stock of First Merchants Auto Receivables
Corporation, which collateral was acquired as security for additional advances
made to FMAC shortly before the bankruptcy filing of FMAC and which security
interest may be subject to avoidance under the Bankruptcy Code.
Exceptions to the above-listed collateral: (1) that certain collateral that has
been released in connection with previous securitization transactions in which
FMAC sold certain of its accounts receivables, which releases are identified in
the table attached hereto; (2) those certain contracts acquired by FMAC shortly
before the FMAC bankruptcy filing which may not be subject to the security
interest of LaSalle National Bank, as Agent, because the contracts were not paid
for by FMAC; and (3) the common stock of First Merchants Auto Receivables
Corporation II.
<PAGE> 22
EXHIBIT C
AGENCY AGREEMENTS
See attached copies of Agency Agreements.
[Form of Agency Agreements is Attached]
<PAGE> 23
AGENCY AGREEMENT
This Agency Agreement ("Agreement") between LaSalle National Bank ("LaSalle"),
as agent for the financial institutions ("Lenders") who are now or may
hereafter be parties to the "Loan Agreement" (hereinafter defined), and
("Agent") is dated as of the 15th day of November, 1993.
WHEREAS, First Merchants Acceptance Corporation ("Borrower") has entered into a
certain Amended and Restated Loan and Security Agreement dated October 29, 1993
as the same may hereafter be furthered amended, supplemented or otherwise
modified or restated from time to time (the "Loan Agreement") with Agent and
Lenders which provides, among other things, that Lenders will, from time to
time, make loans to Borrower secured by certain collateral including without
limitation "Contracts" as described in the Loan Agreement;
WHEREAS, pursuant to the terms of the Loan Agreement, Borrower will be required
to relinquish physical possession of the original Contracts and certain
underlying collateral, including vehicle titles, to Agent or Lenders only under
certain conditions set forth therein;
WHEREAS, LaSalle and Lenders desire to appoint Agent and Agent agrees to act
without compensation as LaSalle's and Lenders' agent, for the purpose of
perfecting Agent's and Lender's interest in the Contracts as well as any
Related Security which is from time to time the subject of any Contract or
serves as collateral therefore arising out of or relating to Borrower's
business operations from its CHARLOTTE office (the Contracts and all such other
real and personal property are hereinafter collectively referred to as the
"Collateral").
NOW, THEREFORE, in consideration of the premises contained herein and intending
to be legally bound hereby, Agent and LaSalle hereby agrees as follows:
a. Under and subject to all the terms and conditions set forth in this
Agreement, Agent hereby agrees to act solely and exclusively for and
on behalf of LaSalle and Lenders as agent for purpose of perfecting
and protecting LaSalle's and Lenders' lien in the Collateral;
provided, however, Agent may act as agent for Continental Bank, N.A.
("Continental"), as agents for other financial institutions for
purposes of perfecting and protecting Continental's subordinate and
junior lien on the Collateral.
b. During the continuance of this Agreement, Agent shall accept and
shall cause to be held solely and exclusively for LaSalle and Lenders
all Collateral for and on behalf of LaSalle and Lenders in
safekeeping and shall maintain or cause to be maintained such
Collateral in a safe and secure manner.
c. Agent shall take such further actions and institute such necessary
procedures as are reasonably required to protect or cause to be
protected the Collateral from loss, theft, damage and/or destruction
from any reason or source whatsoever.
d. Agent shall assure that all of the Contracts are endorsed with the
legend required under the Loan Agreement.
e. Agent shall be permitted to release Contracts and all collateral and
security therefor, including certificates of title upon receipt of
payment in full by borrower of all sums due under the Contracts. At
any time after notice by LaSalle to Agent of the occurrence of an
Event of Default under the Loan Agreement, Agent shall not release
any Collateral, except upon the express written direction of LaSalle,
and upon request of LaSalle, immediately turn all of the Collateral
over to LaSalle.
<PAGE> 24
f. This Agreement may be terminated by LaSalle upon written notice to
Agent. Agent shall terminate this Agreement upon Agent's termination
of employment with Borrower and may terminate this Agreement upon ten
(10) business days' prior written notice; provided, however, no
termination of this Agreement shall be effective unless and until
LaSalle shall have appointed a successor agent. Upon termination of
this Agreement, Agent shall advise LaSalle of the status of all
Collateral and thereafter shall be relieved of all responsibilities
and held harmless with respect to Agent's duties under this Agreement
except for any breach of this Agreement occurring prior to the date
of such termination.
g. All notices herein required to be given shall be in writing and
personally served or sent by United States Mail and shall be deemed
to be given, if personally served, when served, or, mailed, on the
third business day after deposit in the United States Mail, certified
mail, return receipt requested, postage prepaid and properly
addressed. For purpose of the above, the address of the persons to
whom notice shall be sent are as follows:
Lender: LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
Attn: Commercial Lending
Agent: KEVIN NORMAN
FIRST MERCHANTS ACCEPTANCE CORPORATION
8510 MCALPINE PARK DRIVE
SUITE 205
CHARLOTTE, NC 28211
h. This Agreement shall inure to the benefit of LaSalle and Lenders and
their successors and assigns. Agent may not assign its rights or
delegate its duties under this Agreement without the prior written
consent of LaSalle.
i. This Agreement constitutes the entire Agreement between the parties
with respect to the subject matter hereof and shall not be modified,
amended or waived unless such modifications, amendment or waiver is
in writing and duly executed by the parties hereto.
j. This Agreement shall be governed in all respects by the laws of the
State of Illinois.
IN WITNESS WHEREOF, the parties hereto have execute this Agreement this
day of .
By:
--------------------------------
KEVIN NORMAN
LASALLE NATIONAL BANK, as agent
on behalf of the Lenders
By:
--------------------------------
Title:
-----------------------------
<PAGE> 25
EXHIBIT D
PRE-PETITION AMOUNTS
<TABLE>
<S> <C>
FLEET BANK $12,584,110.53
MELLON BANK $10,075,620.67
FIRSTBANK NATIONAL ASSOCIATION $12,579,394.86
HARRIS TRUST AND SAVINGS BANK $10,059,724.16
LASALLE NATIONAL BANK $15,124,436.11
NBD BANK $12,776,453.21
NATIONSBANK $ 7,544,793.13
</TABLE>
<PAGE> 26
EXHIBIT E
(PRO-RATA SHARE OF PURCHASE PRICE)
<TABLE>
<CAPTION>
Lender Purchase Price
------ --------------
<S> <C>
1. LaSalle National Bank 18.705942195%
2. NBD Bank 15.823259994%
3. Harris Trust 12.470628151%
4. NationsBank 9.352971123%
5. First Bank 15.588285193%
6. Fleet Bank 15.588285193%
7. Mellon Bank 12.470628151%
-------------
100.000000000%
</TABLE>
<PAGE> 27
EXHIBIT F
FORM OF ASSIGNMENT OF LOAN AND BANK CLAIM
<PAGE> 28
ASSIGNMENT OF LOAN AND BANK CLAIM
ASSIGNOR: LASALLE NATIONAL BANK, a national banking association
("LaSalle"), NBD BANK, a Michigan banking corporation ("NBD"),
HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation
("Harris"), NATIONSBANK, N.A., a national banking association,
as successor to The Boatmen's National Bank of St. Louis,
("NationsBank"), FIRST BANK NATIONAL ASSOCIATION, a national
banking association ("First Bank"), FLEET BANK, NATIONAL
ASSOCIATION (f/k/a NatWest Bank, N.A.)("Fleet"), and MELLON
BANK, N.A., a national banking association ("Mellon")(with each
of LaSalle, NBC, Harris, NationsBank, First Bank, Fleet and
Mellon being referred to in this Assignment individually as a
"Assignor" and collectively as "Assignors".
ASSIGNEE: UGLY DUCKLING CORPORATION, a Delaware corporation.
W I T N E S S E T H:
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Assignor does hereby grant, bargain, sell,
assign, and transfer to Assignee, its successors and assigns, without recourse
to any Assignor except as set forth in the Loan Purchase Agreement (hereinafter
defined), all right, title and interest of Assignors in and to the Bank Rights
including, without limitation, all right, title and interest of Assignors in
the following, such assignment being made pursuant to that certain Loan
Purchase Agreement, dated as of August 20, 1997, between Agent, Assignors and
Assignee (the "Loan Purchase Agreement") and with capitalized terms used in
this Assignment and not defined in this Assignment having the meanings set
forth in or determined pursuant to the Loan Purchase Agreement:
A. That certain Fourth Amended and Restated Loan and Security
Agreement, dated as of February 28, 1996 (the "Fourth Amended Loan
Agreement"), as amended and supplemented by the following:
1. First Amendment to Fourth Amended and Restated Loan and
Security Agreement, dated as of May 1, 1996, among Borrower,
Assignors, certain other parties and Agent (the "First
Amendment");
2. Consent and Amendment to Fourth Amended and Restated Loan and
Security Agreement, dated as of October 29, 1996, among
Borrower, Assignors, certain other parties and Agent (the
"Consent and Amendment");
<PAGE> 29
3. Second Amendment to Fourth Amended and Restated Loan and
Security Agreement, dated as of December 26, 1996, among
Borrower, Assignors, certain other parties and Agent (the
"Second Amendment");
4. Forbearance Agreement, dated as of May 8, 1997, between
Borrower and Agent (the "Forbearance Agreement");
5. Consents dated June 17, 1997 and June 20, 1997 between
Borrower and Agent (the "Consents");
6. Letter Agreement, dated June 27, 1997, between Borrower and
Agent (the "Letter Agreement"); and
7. Letter Agreement, dated June 30, 1997 between Borrower and
Agent (the "Second Letter Agreement"). The Fourth Amended
Loan Agreement, as amended and supplemented by the First
Amendment, the Consent and Amendment, the Second Amendment,
the Forbearance Agreement, the Consents, the Letter Agreement,
and the Second Letter Agreement, are referred to collectively
in this Agreement as the "Loan Agreement."
B. The Revolving Credit Notes listed on Exhibit A to the Loan
Purchase Agreement (collectively, the "Bank Notes").
C. All of the Assignors' interest in all Collateral of whatever
type or nature securing the payment or performance of the Loan
Documents and the Obligations.
D. All of the Assignors' interest in the proofs of claim filed by
or on behalf of Assignors in the Bankruptcy Case.
E. All of the Assignors' interest in any and all lockbox accounts
and other sweep accounts into which payments to Borrower are made from
time to time and over which Assignors have dominion and control.
Assignors deliver to Assignee herewith the Bank Notes and all other
documents, instruments and agreements evidencing or governing the property
conveyed hereby. Assignors further agree that they shall deliver to Assignee,
upon request and at the expense of Assignee, such other bills of sale,
assignments and instruments or documents as may reasonably be necessary to
evidence or confirm the assignment and transfer contemplated hereby.
The transfers made pursuant to this Assignment are made subject to the
terms, conditions and limitations set forth in the Loan Purchase Agreement, the
Security Agreement and the related Loan Purchase Documents, and Assignors make
no representations or warranties whatever except as specifically set forth in
the Loan Purchase Agreement.
-2-
<PAGE> 30
Dated this 20th day of August, 1997.
ASSIGNORS:
LASALLE NATIONAL BANK,
a national banking association
By
---------------------------------
Its
--------------------------------
NBD BANK,
a Michigan banking corporation
By
---------------------------------
Its
--------------------------------
HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation
By
---------------------------------
Its
--------------------------------
NATIONSBANK,
a national banking association
By
---------------------------------
Its
--------------------------------
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By
---------------------------------
Its
--------------------------------
FLEET BANK, NATIONAL ASSOCIATION,
a national banking association
By
---------------------------------
Its
--------------------------------
MELLON BANK, N.A.,
a national banking association
By
---------------------------------
Its
--------------------------------
-3-
<PAGE> 31
EXHIBIT G
FORM OF SECURITY AGREEMENT
<PAGE> 1
Exhibit 2.2
ASSIGNMENT OF LOAN AND BANK CLAIM
ASSIGNOR: LASALLE NATIONAL BANK, a national banking association
("LaSalle"), NBD BANK, a Michigan banking corporation
("NBD"), HARRIS TRUST AND SAVINGS BANK, an Illinois
banking corporation ("Harris"), NATIONSBANK, N.A., a
national banking association, as successor to The
Boatmen's National Bank of St. Louis, ("NationsBank"),
FIRST BANK NATIONAL ASSOCIATION, a national banking
association ("First Bank"), FLEET BANK, NATIONAL
ASSOCIATION (f/k/a NatWest Bank, N.A.)("Fleet"), and
MELLON BANK, N.A., a national banking association
("Mellon")(with each of LaSalle, NBC, Harris,
NationsBank, First Bank, Fleet and Mellon being referred
to in this Assignment individually as a "Assignor" and
collectively as "Assignors".
ASSIGNEE: UGLY DUCKLING CORPORATION, a Delaware corporation.
W I T N E S S E T H:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each Assignor does hereby grant, bargain, sell, assign,
and transfer to Assignee, its successors and assigns, without recourse to any
Assignor except as set forth in the Loan Purchase Agreement (hereinafter
defined), all right, title and interest of Assignors in and to the Bank Rights
including, without limitation, all right, title and interest of Assignors in the
following, such assignment being made pursuant to that certain Loan Purchase
Agreement, dated as of August 20, 1997, between Agent, Assignors and Assignee
(the "Loan Purchase Agreement") and with capitalized terms used in this
Assignment and not defined in this Assignment having the meanings set forth in
or determined pursuant to the Loan Purchase Agreement:
A. That certain Fourth Amended and Restated Loan and Security
Agreement, dated as of February 28, 1996 (the "Fourth Amended Loan
Agreement"), as amended and supplemented by the following:
1. First Amendment to Fourth Amended and Restated Loan and
Security Agreement, dated as of May 1, 1996, among Borrower,
Assignors, certain other parties and Agent (the "First
Amendment");
2. Consent and Amendment to Fourth Amended and Restated Loan and
Security Agreement, dated as of October 29, 1996, among
Borrower, Assignors, certain other parties and Agent (the
"Consent and Amendment");
<PAGE> 2
3. Second Amendment to Fourth Amended and Restated Loan and
Security Agreement, dated as of December 26, 1996, among
Borrower, Assignors, certain other parties and Agent (the
"Second Amendment");
4. Forbearance Agreement, dated as of May 8, 1997, between
Borrower and Agent (the "Forbearance Agreement");
5. Consents dated June 17, 1997 and June 20, 1997 between
Borrower and Agent (the "Consents");
6. Letter Agreement, dated June 27, 1997, between Borrower and
Agent (the "Letter Agreement"); and
7. Letter Agreement, dated June 30, 1997 between Borrower and
Agent (the "Second Letter Agreement"). The Fourth Amended Loan
Agreement, as amended and supplemented by the First Amendment,
the Consent and Amendment, the Second Amendment, the
Forbearance Agreement, the Consents, the Letter Agreement, and
the Second Letter Agreement, are referred to collectively in
this Agreement as the "Loan Agreement."
B. The Revolving Credit Notes listed on Exhibit A to the Loan
Purchase Agreement (collectively, the "Bank Notes").
C. All of the Assignors' interest in all Collateral of whatever type
or nature securing the payment or performance of the Loan Documents and
the Obligations.
D. All of the Assignors' interest in the proofs of claim filed by or
on behalf of Assignors in the Bankruptcy Case.
E. All of the Assignors' interest in any and all lockbox accounts
and other sweep accounts into which payments to Borrower are made from
time to time and over which Assignors have dominion and control.
Assignors deliver to Assignee herewith the Bank Notes and all other
documents, instruments and agreements evidencing or governing the property
conveyed hereby. Assignors further agree that they shall deliver to Assignee,
upon request and at the expense of Assignee, such other bills of sale,
assignments and instruments or documents as may reasonably be necessary to
evidence or confirm the assignment and transfer contemplated hereby.
The transfers made pursuant to this Assignment are made subject to the
terms, conditions and limitations set forth in the Loan Purchase Agreement, the
Security Agreement and the related Loan Purchase Documents, and Assignors make
no representations or warranties whatever except as specifically set forth in
the Loan Purchase Agreement.
-2-
<PAGE> 3
Dated this 20th day of August, 1997.
ASSIGNORS:
LASALLE NATIONAL BANK,
a national banking association
By /s/ James Thompson
-----------------------------------
Its Senior Vice President
-----------------------------------
NBD BANK,
a Michigan banking corporation
By /s/ Thomas Bower
-----------------------------------
Its Vice President
-----------------------------------
HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation
By /s/ Sandra J. Sanders
-----------------------------------
Sandra J. Sanders
Its Vice President
-----------------------------------
NATIONSBANK, a national banking association
By /s/ Jay T. Wampler
-----------------------------------
Its Senior Vice President
-----------------------------------
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By /s/ David Larsen
-----------------------------------
Its Vice President
-----------------------------------
FLEET BANK, NATIONAL ASSOCIATION,
a national banking association
By /s/ Edward Walsh
-----------------------------------
Its Senior Vice President
-----------------------------------
MELLON BANK, N.A.,
a national banking association
By /s/ Ryan Busch
-----------------------------------
Its Assistant Vice President
-----------------------------------
-3-
<PAGE> 1
Exhibit 2.3
SECURITY AGREEMENT
This SECURITY AGREEMENT (the "Agreement"), is entered into as of the
20th day of August, 1997, by and among UGLY DUCKLING CORPORATION, a Delaware
corporation ("Obligor"), and LASALLE NATIONAL BANK, a national banking
association ("LASALLE"), NBD BANK, a Michigan banking corporation ("NBD"),
HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation ("HARRIS"),
NATIONSBANK, N.A., a national banking association, as successor to The Boatman's
National Bank of St. Louis, ("NATIONS BANK"), FIRST BANK NATIONAL ASSOCIATION, a
national banking association ("FIRST BANK"), FLEET BANK NATIONAL ASSOCIATION,
("Fleet"), and MELLON BANK, N.A., a national banking association
("MELLON")(LaSalle, NBD, Harris, NationsBank, First Bank, Fleet, and Mellon are
hereinafter referred to individually as "SELLER" and collectively as "SELLERS"
and with LaSalle, in its separate capacity as collateral agent for Sellers,
being referred to as "Agent").
WHEREAS, Sellers and Obligor have entered into a Loan Purchase
Agreement pursuant to which Obligor has agreed to purchase and Sellers have
agreed to sell, Sellers' interest in the Bank Rights.
WHEREAS, to induce the Sellers to enter into the Loan Purchase
Agreement, the Obligor proposes to secure its obligations to the Sellers under
the Loan Purchase Agreement by granting to the Sellers a security interest in
all of the "Collateral" as defined herein; and
WHEREAS, the Sellers are willing to enter into the Loan Purchase
Agreement only on such a secured basis.
NOW THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein the parties agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of five percent
(5%) or more of the equity of a Person shall for the purposes of this Agreement,
be deemed to control the other Person. In no event shall any Seller or Agent be
deemed an "Affiliate" of Obligor.
<PAGE> 2
"Agency Agreements" means the agreements between FMAC and various
Authorized Representatives as agents for Lenders and the Agent, pursuant to
which the Authorized Representatives are holding that portion of the Current
Collateral (as Lenders, Agent, Authorized Representatives and Current Collateral
are defined in the Bank Loan Agreement) possession of which is required for
perfection of the security interests therein, and which are attached as Exhibit
C to the Purchase Agreement.
"Agreement" means this Security Agreement, as amended, supplemented or
modified from time to time in accordance with the terms hereof.
"Bank Claim" has the meaning set forth in the Purchase Agreement.
"Bank Financing Agreements" means those certain UCC-1 financing
statements described on Exhibit B to the Purchase Agreement.
"Bank Loan" means the indebtedness and "Obligations" (as such term is
defined in the Bank Loan Agreement) evidenced by the Bank Loan Documents and the
liens and rights created by the Bank Loan Documents.
"Bank Loan Agreement" has the meaning ascribed to the term "Loan
Agreement" in the Purchase Agreement.
"Bank Loan Documents" mean collectively, the Bank Loan Agreement, the
Bank Notes, the Bank Financing Statements, the Share Certificates and the Agency
Agreements.
"Bank Notes" means those certain Revolving Credit Notes listed on
Exhibit A to the Purchase Agreement.
"Bank Rights" has the meaning set forth in the Purchase Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C,
Section 101 et seq.), as amended and any successor statute.
"Business Day" means a day of the year on which banks are not required
or authorized to close in Phoenix, Arizona or Chicago, Illinois.
"Code" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
"Collateral" means all of Obligor's right, title and interest in, to
and under each of the following:
(a) the DIP Loan Documents;
-2-
<PAGE> 3
(b) the Bank Loan Documents;
(c) the collateral securing the DIP Loan;
(d) the collateral securing the Bank Loan;
(e) the Bank Notes; and
(f) the Bank Rights.
"DIP Credit Agreement" means that certain Security Agreement dated as
of July 14, 1997, by and between Obligor, as Seller, and FMAC, as borrower.
"DIP Loan Documents" means the DIP Credit Agreement, the DIP Pledge
Agreement, and all documents delivered to Obligor, as Seller, in connection
therewith.
"DIP Pledge Agreement" means that certain Pledge Agreement (Stock),
dated as of July 17, 1997, among FMAC, as pledgor, Obligor, as Seller, and
Harris, as collateral agent.
"Dollars" , "dollars" and "$" each mean lawful money of the United
States.
"Event of Default" means any of the events or circumstances specified
in Section 8.1.
"FEIN" means Federal Employer Identification Number.
"FMAC" means First Merchants Acceptance Corporation, a Delaware
corporation.
"Guaranty" means the Payment Guaranty of Guarantors for the benefit of
Agent and Sellers in substantially the form of Exhibit H to the Purchase
Agreement.
"Guarantor" means each of Duck Ventures, Inc., an Arizona corporation,
Champion Acceptance Corporation, an Arizona corporation, Ugly Duckling Car
Sales, Inc., an Arizona corporation, Ugly Duckling Car Sales Florida, Inc., a
Florida corporation, UDRAC, Inc., an Arizona corporation, UDRAC Rentals, Inc.,
an Arizona corporation, Champion Financial Services, Inc., an Arizona
corporation, Drake Insurance Services, Inc., an Arizona corporation, Drake
Insurance Agency, Inc., an Turks and Caicos Island corporation , Drake Life
Insurance Co., an Arizona corporation, and Drake Property & Casualty Insurance
Co., a Turks and Caicos Islands corporation.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity, body, authority, bureau, department
or instrumentality exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Loan Purchase Documents" has the meaning set forth in the Purchase
Agreement.
-3-
<PAGE> 4
"Obligor Financing Statements" means such UCC-1 Financing Statements as
Agent or Sellers may reasonably require to perfect the security interests in the
Collateral granted herein.
"Obligor Notes" shall mean the "UDC Notes" (as defined in the Purchase
Agreement).
"Obligations" means all loans, advances, debts, liabilities,
obligations, covenants and duties owing by Obligor to Sellers, of any kind or
nature, present or future, whether or not evidenced by the UDC Notes or any
other note, guaranty or other instrument arising under this Agreement or under
any other Loan Purchase Document.
"Ordinary Course of Business" means, in respect of any transaction
involving Obligor, the ordinary course of such Person's (including Obligor's)
business, substantially as conducted by any such Person prior to or as of the
Closing Date, and undertaken by such Person in good faith and not for purposes
of evading any covenant or restriction in any Loan Purchase Document, Bank Loan
Document or DIP Loan Document.
"Permitted Liens" mean liens held by Agent or Sellers.
"Person" means a natural person, partnership, corporation, business
trust, joint stock company, trust unincorporated association, joint venture or
Governmental Authority.
"Purchase Agreement" means that certain Loan Purchase Agreement dated
as of August 20, 1997, by and between Sellers, LaSalle, as its capacity as
collateral agent for the Sellers and Obligor.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of in arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
President of Obligor, or any other officer having substantially the same
authority and responsibility or, with respect to financial matters, the chief
financial officer or the treasurer of Obligor. or any other officer having
substantially the same authority and responsibility.
"Seller" or "Sellers" shall have the meaning set forth in the Preamble
hereto.
"Seller Expenses" means: (a) all costs or expenses (including taxes and
insurance premiums) required to be paid by Obligor under any of the Loan
Purchase Documents that are paid or incurred by Agent or Sellers; (b) actual
filing, recording, and publication expenses incurred by Agent or Sellers in
connection with the transactions contemplated by the Loan Purchase Documents;
(c) actual out-of-pocket charges paid or incurred by Agent or Sellers resulting
from the dishonor of checks; (d) reasonable out-of-pocket costs and expenses
paid or incurred by Agent or Sellers to correct any
-4-
<PAGE> 5
default or enforce any provision of the Loan Purchase Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated; (e) reasonable out-of
pocket costs and expenses of third party claims or any other suit paid or
incurred by Agent or Sellers in enforcing or defending the Loan Purchase
Documents or Obligor's obligations thereunder, (f) and reasonable attorneys'
fees and costs incurred in connection with the foregoing.
"Share Certificates" means the share certificates representing all of
the stock of First Merchants Auto Receivables Corporation pledged by FMAC to
Lenders and Agent (as Lenders and Agent are defined in the Bank Loan Agreement)
as additional security for payment and performance of the obligations of FMAC
under the Bank Loan Agreement.
1.2 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or therein, all
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto. The meaning of
defined terms shall be equally applicable to the singular and plural forms of
the defined terms.
(b) The Agreement. The words "hereof," "herein," "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) Performance; Time. Whenever any performance obligation hereunder
(other than a payment obligation) shall be stated to be due or required to be
satisfied on a day other than a Business Day, such performance shall be made or
satisfied on the next succeeding Business Day. In the computation of periods of
time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding,"
and the word "through" means "to and including." If any provision of this
Agreement refers to any action taken or to be taken by any Person, or which
Person is prohibited from taking, such provision shall be interpreted to
encompass any and all means, direct or indirect, of taking, or not taking, such
action.
(d) Contracts. Unless otherwise expressly provided herein, references
to agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of any
Loan Purchase Document.
(e) Laws. References to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
-5-
<PAGE> 6
(f) Captions. The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
1.3 Times. All times of the day herein shall be construed to mean local
time in Chicago, Illinois.
SECTION 2. SECURITY INTEREST AND COLLATERAL.
2.1 Security for Obligations. As security for the payment of the
Obligor Notes, Obligor hereby grants to Agent, on behalf of the Sellers, a first
priority lien and security interest in and to all of the Collateral. Obligor
agrees to execute any security agreements, collateral assignments, financing
statements for filing and recording and any other documents reasonably required
by any Seller, and to transfer possession of the Collateral to the Sellers, if
requested, to further evidence and perfect the liens and security interests of
Sellers provided for in this SECTION 2.1. A carbon, photographic or other
reproduced copy of this Agreement and any financing statement relating hereto
shall be sufficient for filing and/or recording as a financing statement.
2.2 Sellers' Duty Regarding Collateral. Agent and Sellers shall have no
duty or obligation to protect, insure, collect or realize upon the Collateral or
preserve rights in it against prior parties. Obligor releases Agent and Sellers
from, and shall indemnify Agent and Sellers against, any liability for any act
or omission relating to the Collateral, except for any liability directly
resulting from Agent or Sellers' gross negligence or willful misconduct. The
foregoing sentence is independent of the Purchase Agreement and shall not in any
way limit any rights or powers of Obligor, Sellers or Agent, or any obligation
or liability of Agent or Sellers pursuant to the Purchase Agreement.
2.3 Obligor's Duties Regarding Collateral. Obligor agrees as follows:
(a) General Maintenance of Collateral. Obligor shall: (i) keep
the Collateral free from all Liens (other than Permitted Liens); (ii)
defend the Collateral against all claims and legal proceedings by
persons other than Agent or Sellers; and (iii) not sell or otherwise
dispose of the Collateral, except in the Ordinary Course of Business
and where the proceeds of such sale are paid to Sellers pro rata for
application to the outstanding balance of the Obligor Notes.
Subsections (i) and (ii), with respect to the Collateral that Obligor
purchased from Sellers, shall only apply to voluntary acts of Obligor
after the date hereof that give rise to such liens, claims or
proceedings.
(b) Records. Upon reasonable notice to Obligor, Agent or
Sellers may examine and conduct audits of the Collateral and Obligor's
records concerning it, wherever located, and make copies of such
records, at any time during normal business hours, and Obligor shall
assist Agent and Sellers in so doing. Obligor shall keep accurate,
complete and current records respecting the Collateral. In addition to
the specific requirements of SECTION 6, Obligor shall, within ten (10)
Business Days of any request by Agent or Sellers, furnish to Agent or
Sellers a detailed statement, certified as being substantially accurate
by a
-6-
<PAGE> 7
Responsible Officer, setting forth the current status and location of
all or any portion of the Collateral.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF OBLIGOR. To induce Agent and
Sellers to enter into this Agreement, Obligor hereby represents and warrants the
following as of the date hereof and as of the Closing Date:
3.1 Location of Chief Executive Office. The chief executive office of
Obligor is located at the address indicated on the applicable signature page
hereto.
3.2 Due Organization: and Qualification. Obligor and each Guarantor is
duly organized and existing and in good standing under the laws of the
jurisdiction of its incorporation and qualified and licensed to do business in.
and in good standing in, any state where it is required to be so licensed.
3.3 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Obligor of this
Agreement, the Obligor Notes and the Loan Purchase Documents to which it is a
party, and the execution, delivery, and performance by each Guarantor of each
Guaranty, have been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Obligor of this
Agreement, the Obligor Notes and the Loan Purchase Documents to which it is a
party do not and will not (i) violate any provision of federal, state, or local
law or regulation (including Regulations (G, T, U, and X of the Federal Reserve
Board) applicable to Obligor, the governing documents of Obligor, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Obligor, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Obligor, (iii) result in or require the creation or imposition of
any lien of any nature whatsoever upon any properties or assets of Obligor,
other than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Obligor. The execution, delivery, and performance by each Guarantor of its
Guaranty does not and will not (i) violate any provision of federal, state, or
local law or regulation (including Regulations G, T, V, and X of the Federal
Reserve Board) applicable to such Guarantor, the governing documents of such
Guarantor, or any order, judgment, or decree of any court or other Governmental
Authority binding on such Guarantor, (ii) conflict with, result in a breach of,
or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of such Guarantor, (iii) result in or require
the creation or imposition of any lien of any nature whatsoever upon any
properties or assets of such Guarantor, other than Permitted Liens, or (iv)
require any approval of stockholders or any approval or consent of any Person
under any material contractual obligation of such Guarantor.
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<PAGE> 8
(c) The execution, delivery, and performance by Obligor of this
Agreement, the Obligor Notes and the Loan Purchase Documents to which Obligor is
a party, do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any federal, state, foreign or
other Governmental Authority or other Person. The execution, delivery, and
performance by each Guarantor of its Guaranty does not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any federal, state, foreign, or other Governmental Authority or other
Person.
(d) This Agreement, the Obligor Notes, and the Loan Purchase Documents,
when executed and delivered by Obligor will be the legally valid and binding
obligations of Obligor, enforceable against Obligor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally. The Guaranty, when executed
and delivered by its respective Guarantor will be the legally valid and binding
obligations of such Guarantor, enforceable against such Guarantor in accordance
with its terms, except as enforcement may be limited by equitable principles or
by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating
to or limiting creditors' rights generally.
SECTION 4. AFFIRMATIVE COVENANTS. Obligor covenants and agrees that, so long as
any Obligation shall remain outstanding and unless Agent and Sellers shall
otherwise consent in writing, Obligor shall do all of the following:
4.1 Default Disclosure. Obligor shall forthwith, upon a Responsible
Officer of Obligor obtaining knowledge of an Event of Default, promptly deliver
to Agent a certificate of such Responsible Officer specifying the nature and
period of existence thereof and what action Obligor proposes to take with
respect thereto.
4.2 Notices to Agent. Obligor shall promptly notify Agent in writing
of:
(a) Any lawsuit seeking in excess of Five Hundred Thousand and No/100
Dollars ($500,000.00) against Obligor, and
(b) Any change in Obligor's name, address, legal structure or location
of the Collateral.
4.3 Compliance and Preservation. Obligor shall:
(a) Comply with the laws (including any fictitious name statute),
regulations and orders of any government body with authority over
Obligor's business; and
(b) Maintain and preserve all privileges and franchises Obligor now
has.
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<PAGE> 9
4.4 Cooperation. Obligor shall take any reasonable action requested by
Agent to carry out the intent of this Agreement.
SECTION 5. NEGATIVE COVENANTS. Obligor covenants and agrees that, so long as,
any Obligation shall remain outstanding, Obligor will not, and will not permit
any of the Guarantors to, do any of the following without Agents prior written
consent:
5.1 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to the Collateral, except for junior
liens in existence prior to the date hereof.
5.2 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stocks or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution).
5.3 Change Name. Change Obligor's name, FEIN, corporate structure
(within the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name.
5.4 Nature of Business. Make any change in the principal nature of
Obligor's business.
5.5 Change in Location of Chief Executive Office. Relocate its chief
executive office to a new location without providing thirty (30) days prior
written notification thereof to Agent and so long as, at the time of such
written notification, Obligor provides any financing statements or fixture
filings necessary to perfect and continue perfected Agent's security interests.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES.
6.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) If Obligor fails to pay when due and payable or when declared due
and payable, any portion of the Obligations (whether of principal, interest,
fees and charges due Agent or Sellers, reimbursement of Seller Expenses, or
other amounts constituting Obligations);
(b) If Obligor fails to perform, keep, or observe any terms, provision,
condition, covenant, or agreement contained in this Agreement, the Obligor
Notes, any of the Loan Purchase Documents, or in any other future agreement
between Obligor and Agent or Sellers, and such failure continues for a period of
twenty (20) days following written notice of default from any Agent or Seller;
provided, however, that if the failure is curable but cannot reasonably be cured
within such 20-day period, then Obligor will not be in default if Obligor
commences such cure within the 20 day period and thereafter diligently proceeds
and cures the failure;
(c) Obligor or any Guarantor (i) is unable or admits in writing
Obligor's inability to pay Obligor's or such Guarantor's monetary obligations as
they becomes due, (ii) makes a general assignment for the benefit of creditors,
or (iii) applies for, consents to, or acquiesces in, the
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<PAGE> 10
appointment of a trustee, receiver, or other custodian for Obligor or such
Guarantor or the property of Obligor or such Guarantor or any part thereof, or
in the absence of such application, consent, or acquiescence, a trustee,
receiver, or other custodian is appointed for Obligor or such Guarantor or the
property of Obligor or such Guarantor or any part thereof, and such appointment
is not discharged within 60 days.
(d) Commencement of any case under Title 11 of the United States Code
or commencement of any other bankruptcy arrangement, reorganization,
receivership, custodianship, or similar proceeding under any federal, state, or
foreign law by or against Obligor or any Guarantor and with respect to any such
case or proceeding that is involuntary, such case or proceeding is not dismissed
with prejudice within 60 days of the filing thereof.
(e) If (i) a final judgment in an amount in excess of $1,000,000 is
rendered against Obligor or any Guarantor (ii) final judgments, in amounts in
excess of $1,000,000 in the aggregate are rendered against Obligor or any
Guarantor and within sixty (60) days after entry thereof, such judgments are not
discharged or execution thereof stayed pending appeal, or within sixty (60) days
after the expiration of any such stay, such judgment(s) are not discharged;
(f) If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Agent or
Sellers by Obligor or any officer, employee, agent, or director of Obligor which
has not been corrected to date, or if any such warranty or representation is
withdrawn; or
(g) If Obligor or any Guarantor contests the validity or enforceability
of this Agreement, the Obligor Notes, the Loan Purchase Documents or any
Guaranty.
6.2 Sellers' Rights and Remedies. Upon the occurrence, and during the
continuation of an Event of Default, Agent may, upon the direction of the
holders of 66 2/3% of the principal amount of the Obligor Notes, without further
notice, and without demand, do any one or more of the following:
(a) Declare all Obligations, whether evidenced by this Agreement or by
any of the other Loan Purchase Documents, immediately due and payable; and
(b) Exercise any and all rights and remedies with respect to the
Collateral to which such Agent or any Seller is entitled as a secured party
under this Agreement and the applicable Uniform Commercial Code provisions
governing the Collateral.
The Agent's and each Seller rights and remedies under this Agreement, the
Obligor Notes, the Loan Purchase Documents, and all other agreements shall be
cumulative. No exercise by the Agent or a Seller of one right or remedy shall be
deemed an election by the Agent or such Seller, and no waiver by the Agent or
such Seller of any Event of Default shall be deemed a continuing waiver or a
waiver
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<PAGE> 11
by the Agent or any other Seller. No delay by the Agent or any Seller shall
constitute a waiver, election, or acquiescence by the Agent or such Seller or
any other Seller.
SECTION 7. MISCELLANEOUS.
7.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement, the Obligor Notes or any other Loan Document and no consent with
respect to any departure by Obligor therefrom, shall be effective unless the
same shall be in writing and signed by the Agent, and then such waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
7.2 Notices. All notices, requests and other communications provided
for hereunder shall comply with the notice provisions in the Purchase Agreement.
7.3 No Waiver: Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or Sellers of any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
7.4 Marshaling: Payments Set Aside. Agent and Sellers shall not be
under any obligation to marshal any assets in favor of Obligor or any other
Person or against or in payment of any or all of the Obligations. To the extent
the Obligor makes a payment or payments to Agent, or to the extent Agent enforce
its Liens or exercise its rights of set-off, and such payment or payments or the
proceeds of such enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustees receiver or any other party in correction with any
bankruptcy proceeding or otherwise, then to the extent, of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.
7.5 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that Obligor may not assign or transfer any of
its rights or delegate its obligations under this Agreement or any of the Loan
Purchase Documents without the prior written consent of the Agent.
7.6 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts
taken together shall be deemed to constitute but one and the same instrument.
7.7 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or
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<PAGE> 12
enforceability of the remaining provisions of this Agreement or any instrument
or agreement required hereunder.
7.8 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of Obligor, Agent and Sellers, and
their permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Purchase
Documents. Agent and Sellers shall have no obligation to any Person not a party
to this Agreement or other Loan Purchase Documents.
7.9 Time. Time is of the essence as to each term or provision of this
Agreement and each of the other Loan Documents.
7.10 Governing Law. This Agreement, the Obligor Notes and the Loan
Purchase Documents shall be deemed to have been made in the State of Illinois;
and the validity of this Agreement, the Obligor Notes and the Loan Purchase
Documents and the construction, interpretation, and enforcement hereof and
thereof, all claims made in connection therewith, and the rights of the parties
thereto shall be determined under, governed by, and construed in accordance with
the laws of the State of Illinois. .
7.11 Entire Agreement. This Agreement, together with the other Loan
Purchase Documents, embodies the entire Agreement and understanding among
Obligor, Agent and Sellers and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
7.12 Agency. The provisions of the Bank Loan Documents as they exist as
of the date hereof relating to the rights and obligations of LaSalle as Agent
for Sellers and the rights and obligations of Sellers to Agent and to each other
Seller, including, without limitation, with respect to indemnification of the
Agent, sharing of payments from Buyer and expenses, and enforcement of rights
and remedies, are hereby incorporated herein in their entirety and deemed to be
a part hereof solely for the benefit of Agent and Sellers to permit LaSalle to
act as collateral agent hereunder, but shall not create any rights in favor of
Obligor. All references to the Borrower in such provisions of the Bank Loan
Documents incorporated herein shall be deemed to be references to Buyer.
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<PAGE> 13
IN WITNESS THEREOF, the parties hereby have caused this Agreement to
be, executed as of the date first written above.
OBLIGOR:
UGLY DUCKLING CORPORATION,
a Delaware corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Sr. Vice President
----------------------------------
Address for Notice:
2525 East Camelback Road, Suite 1150
Phoenix, AZ 85016
Attn: Steven Johnson
Telecopier No. (602) 852-6696
COLLATERAL AGENT:
LASALLE NATIONAL BANK, a national
banking association
By: /s/ James Thompson
-------------------------------------
Name: James Thompson
-----------------------------------
Title: Senior V. P.
----------------------------------
Address for Notice:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: James Thompson
Telecopier No. (312) 904 - 8169
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<PAGE> 14
SELLERS:
LASALLE NATIONAL BANK,
a national banking association
By: /s/ James Thompson
-------------------------------------
Name: James Thompson
-----------------------------------
Title: Senior V.P.
----------------------------------
Address for Notice:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: James Thompson
Telecopier No. (312) 904 - 8169
NBD BANK, a Michigan banking corporation
By: /s/ Thomas T. Bower
-------------------------------------
Name: Thomas T. Bower
-----------------------------------
Title: Vice President
----------------------------------
Address for Notice:
The First National Bank of Chicago
One First National Plaza, Mail Suite 0630
Chicago, Illinois 60670
Attn: Thomas T. Bower
Telecopier No. (312) 732 - 6904
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<PAGE> 15
HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation
By: /s/ Sandra J. Sanders
-------------------------------------
Name: Sandra J. Sanders
-----------------------------------
Title: Vice President
----------------------------------
Address for Notice:
111 West Monroe Street
Chicago, Illinois 60603
Attn: Sandra Sanders
Telecopier No. (312) 765 - 1724
NATIONSBANK, N.A., a banking
association
By: /s/ Jay T. Wampler
-------------------------------------
Name: Jay T. Wampler
-----------------------------------
Title: Senior Vice President
----------------------------------
Address for Notice:
NationsBank Plaza, 901 Main Street
Dallas, Texas 75283-1000
Attn: Jay Wampler
Telecopier No. (214) 508 - 0966
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<PAGE> 16
FIRST BANK NATIONAL
ASSOCIATION, a national banking
association
By: /s/ David C. Larsen
-------------------------------------
Name: David C. Larsen
-----------------------------------
Title: Vice President
----------------------------------
Address for Notice:
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attn: David Larsen
Telecopier No. (612) 973 - 2148
FLEET BANK, NATIONAL
ASSOCIATION, a national association
By: /s/ Edward J. Walsh
-------------------------------------
Name: Edward J. Walsh
-----------------------------------
Title: SVP
----------------------------------
Address for Notice:
777 Main Street, Mail Code CTMOH20A
Hartford, Connecticut 06115
Attn: Edward Walsh
Telecopier No. (212) 703 - 1684
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<PAGE> 17
MELLON BANK, N.A., a national banking
association
By: /s/ Ryan Busch
-------------------------------------
Name: Ryan Busch
-----------------------------------
Title: Assistant Vice President
----------------------------------
Address for Notice:
One Mellon Bank Center
Room 4835
Pittsburgh, PA 15258-0001
Attn: Christopher Shannon
Telecopier No. (412) 235 - 1174
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<PAGE> 1
Exhibit 2.4
PAYMENT GUARANTY
This PAYMENT GUARANTY ("GUARANTY") is made as of August 20, 1997, by
each of the undersigned (each, a "GUARANTOR" and collectively, the "GUARANTORS")
in favor of LASALLE NATIONAL BANK, a national banking association ("LASALLE"),
NBD BANK, a Michigan banking corporation ("NBD"), HARRIS TRUST AND SAVINGS BANK,
an Illinois corporation ("HARRIS"), NATIONSBANK, N.A., a national banking
association, as successor to the Boatmen's National Bank of St. Louis,
("NATIONSBANK"), FIRST BANK NATIONAL ASSOCIATION, a national banking association
("FIRST BANK"), FLEET BANK, NATIONAL ASSOCIATION, ("FLEET"), and MELLON BANK,
N.A., a national banking association ("MELLON") (with each of LaSalle, NBD,
Harris, NationsBank, First Bank, Fleet and Mellon being referred to in this
Payment Guaranty individually as a "SELLER" and collectively as "LENDERS").
FACTUAL BACKGROUND
A. Each Guarantor is executing this Guaranty to induce Sellers to enter
into that certain Loan Purchase Agreement dated as of August 20, 1997, by and
among Ugly Duckling Corporation, a Delaware corporation ("OBLIGOR"), and
Sellers, among others. All capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Loan Purchase Agreement.
B. Under the terms and conditions of the Loan Purchase Agreement,
Obligor has agreed to pay to Sellers a Total Purchase Price consisting of a
Purchase Price, Warrants and Contingent Consideration.
C. A portion of the Purchase Price is evidenced by the UDC Notes, with
each Note being made payable to a Seller in an amount equal to each Seller's pro
rata portion of the Purchase Price as more specifically detailed in the Loan
Purchase Agreement. Payment of the Purchase Price and the other Obligations
under the Loan Purchase Agreement is secured by a lien and security interest
granted to Agent, on behalf of Sellers, in the Collateral.
D. This Guaranty is one of several Loan Purchase Documents, as defined
in the Loan Purchase Agreement.
<PAGE> 2
GUARANTY
1. Guaranty of Loan. Each Guarantor, jointly with every other Guarantor
and severally, unconditionally guarantees to each Seller the full payment of
such Seller's UDC Note, and unconditionally agrees to pay each Seller the full
amount of such Seller's UDC Note. This is a guaranty of payment, not of
collection. If Obligor defaults in the payment when due of any UDC Note or any
part of it, each Guarantor shall in lawful money of the United States pay to
such Seller or to its order, on demand, all sums due and owing on the UDC Note,
including all interest, charges, fees and other sums, costs and expenses.
2. Rights of Seller. Each Guarantor authorizes each Seller to perform
any or all of the following acts at any time in its sole discretion, all without
notice to any Guarantor and without affecting any Guarantor's obligations under
this Guaranty:
(a) Seller may alter any terms of its UDC Note or any part of
it, including renewing, compromising, extending or accelerating, or
otherwise changing the time for payment of, or increasing or decreasing
the rate of interest on, its UDC Note or any part of it.
(b) Seller may take and hold security of its UDC Note or this
Guaranty, accept additional or substituted security for either, and
subordinate, exchange, enforce, waive, release, compromise, fail to
perfect and sell or otherwise dispose of any such security.
(c) Seller may direct the order and manner of any sale of all
or any part of any security now or later to be held for its UDC Note or
this Guaranty, and Seller may also bid at any such sale.
(d) Seller may apply any payments or recoveries from Obligor,
any Guarantor or any other source, and any proceeds of any security, to
Obligor's obligations under the Loan Purchase Documents in such manner,
order and priority as Seller may elect, whether or not those
obligations are guaranteed by this Guaranty or secured at the time of
the application.
(e) Seller may release Obligor of its liability for its UDC
Note or any part of it.
(f) Seller may substitute, add or release any one or more
guarantors or endorsers.
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<PAGE> 3
3. Guaranty to be Absolute. Each Guarantor expressly agrees that until
each and every UDC Note is paid and performed in full and each and every term,
covenant and condition of this Guaranty is fully performed, such Guarantor shall
not be released by or because of:
(a) Any act or event which might otherwise discharge, reduce,
limit or modify any Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification, forbearance, delay or
other act or omission of any Seller, or its failure to proceed promptly
or otherwise as against Obligor, any Guarantor or any security;
(c) Any action, omission or circumstance which might increase
the likelihood that any Guarantor may be called upon to perform under
this Guaranty or which might affect the rights or remedies of any
Guarantor as against Obligor; or
(d) Any dealings occurring at any time between Obligor and
Seller, whether relating to its UDC Note or otherwise.
Each Guarantor hereby expressly waives and surrenders any and all defenses to
its liability under this Guaranty based upon any of the foregoing acts,
omissions, agreements, waivers or matters. It is the purpose and intent of this
Guaranty that the obligations of each Guarantor hereunder shall be absolute and
unconditional under any and all circumstances.
4. Guarantor Waivers. Each Guarantor waives:
(a) All statutes of limitations as a defense to any action or
proceeding brought against any Guarantor by any Seller, to the fullest
extent permitted by law;
(b) Any right it may have to require a Seller to proceed
against Obligor, proceed against or exhaust any security held from
Obligor, or pursue any other remedy in Seller's power to pursue;
(c) Any defense based on any claim that any Guarantor's
obligations exceed or are more burdensome than those of Obligor;
(d) Any defense based on: (i) any legal disability of Obligor,
(ii) any release, discharge, modification, impairment or limitation of
the liability of Obligor to Seller from any cause, whether consented to
by Seller or arising by operation of law or from any Bankruptcy or
other voluntary or involuntary proceeding, in or out of court, for the
adjustment of debtor-creditor relationships ("INSOLVENCY PROCEEDING"),
and (iii) any
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<PAGE> 4
rejection or disaffirmance of a UDC Note, or any part of it, or any
security held for it, in any such Insolvency Proceeding;
(e) Any defense based on any action taken or omitted by a
Seller in any insolvency Proceeding involving Obligor, including any
election to have Seller's claim allowed as being secured, partially
secured or unsecured, any extension of credit by Seller to Obligor in
any Insolvency Proceeding, and the taking and holding by Seller of any
security for any such extension of credit; and
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor,
notices of acceptance of this Guaranty and of the existence, creation,
or incurring of new or additional indebtedness, and demands and notices
of every kind except for any demand or notice by a Seller to a
Guarantor expressly provided for in Section 1.
5. Waiver of Subrogation and Other Rights.
(a) Upon a default by Obligor, each Seller in its
sole discretion, without prior notice to or consent of any
Guarantor, may elect to: (i) compromise or adjust its UDC Note
or any part of it or make any other accommodation with Obligor
or any Guarantor, or (ii) exercise any other remedy against
Obligor or any security. No such action by a Seller shall
release or limit the liability of any Guarantor, whom shall
remain liable under this Guaranty after the action, even if
the effect of the action is to deprive any Guarantor of any
subrogation rights, rights of indemnity, or other rights to
collect reimbursement from Obligor for any sums paid to
Seller, whether contractual or arising by operation of law or
otherwise.
(b) Regardless of whether any Guarantor may have made any
payments to a Seller, each Guarantor forever waives: (i) all rights of
subrogation, all rights of indemnity, and any other rights to collect
reimbursement from Obligor for any sums paid to Seller, whether
contractual or arising by operation of law (including the United States
Bankruptcy Code or any successor or similar statute) or otherwise, (ii)
all rights to enforce any remedy that Seller may have against Obligor,
and (iii) all rights to participate in any security now or later to be
held by Seller for its UDC Note.
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<PAGE> 5
6. Revival and Reinstatement. If a Seller is required to pay, return or
restore to Obligor or any other person any amounts previously paid on its UDC
Note because of any Insolvency Proceeding of Obligor, any stop notice or any
other reason, the obligations of each Guarantor shall be reinstated and revived
and the rights of Seller shall continue with regard to such amounts, all as
though they had never been paid.
7. Information Regarding Borrower and the Collateral. Before signing
this Guaranty, each Guarantor investigated the financial condition and business
operations of Obligor, the Collateral, and such other matters as Guarantor
deemed appropriate to assure itself of Obligor's ability to discharge its
obligations under the Loan Purchase Documents. Each Guarantor assumes full
responsibility for that due diligence, as well as for keeping informed of all
matters which may affect Obligor's ability to pay and perform its obligations to
Sellers. Sellers have no duty to disclose to any Guarantor any information which
Sellers may have or receive about Obligor's financial condition or business
operations, the Collateral, or any other circumstances bearing on Obligor's
ability to perform.
8. Events of Default. Any Seller may declare any Guarantor to be in
default under this Guaranty upon the occurrence of any of the following events
("EVENTS OF DEFAULT"):
(a) Any Guarantor fails to perform any of its obligations
under this Guaranty;
or
(b) Any Guarantor revokes its Guaranty or its Guaranty becomes
ineffective for any reason; or
(c) Any Guarantor becomes insolvent or the subject of any
Insolvency Proceeding; or
(d) Any Guarantor dissolves or liquidates.
9. Authorization; No Violation. Each Guarantor is authorized
to execute, deliver and perform under this Guaranty, which is a valid and
binding obligation of such Guarantor. No provision or obligation of any
Guarantor contained in this Guaranty violates any applicable law, regulation or
ordinance, or any order or ruling of any court or governmental agency. No such
provision or obligation conflicts with, or constitutes a breach or default
under, any agreement to which any Guarantor is a party.
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<PAGE> 6
10. Additional and Independent Obligations. Each Guarantor's
obligations under this Guaranty are independent of those of Obligor on the UDC
Notes. A Seller may bring a separate action, or commence a separate reference or
arbitration proceeding against any Guarantor without first proceeding against
Obligor, any other person or any security that Seller may hold, and without
pursuing any other remedy. A Seller's rights under this Guaranty shall not be
exhausted by any action by Seller until its UDC Note has been paid and performed
in full.
11. No Waiver; Consents; Cumulative Remedies. Each waiver by a
Seller must be in writing, and no waiver shall be construed as a continuing
waiver. No waiver shall be implied from Seller's delay in exercising or failure
to exercise any right or remedy against Obligor, any Guarantor or any security.
Consent by a Seller to any act or omission by Obligor or any Guarantor shall not
be construed as a consent to any other or subsequent act or omission, or as a
waiver of the requirement for Seller's consent to be obtained in any future or
other instance. All remedies of each Seller against Obligor and each Guarantor
are cumulative.
12. No Release. No Guarantor shall be released from its
obligations under this Guaranty except by a writing signed by each Seller.
13. Successors and Assigns; Participations. The terms of this
Guaranty shall bind and benefit the successors and assigns of each Seller and
each Guarantor; provided, however, that no Guarantor may assign this Guaranty,
or assign or delegate any of its rights or obligations under this Guaranty,
without the prior written consent of each Seller in each instance. A Seller in
its sole discretion may sell or assign participations or other interests in its
UDC Note and this Guaranty, in whole or in part, all without notice to or the
consent of any Guarantor and without affecting any Guarantor's obligations under
this Guaranty. Also without notice to or the consent of any Guarantor, Seller
may disclose any and all information in its possession concerning any Guarantor,
this Guaranty and any security for this Guaranty to any actual or prospective
purchaser of any securities issued or to be issued by Seller, and to any actual
or prospective purchaser or assignee of any participation or other interest in
its UDC Note and this Guaranty.
14. Notices. Any notice or other communication given hereunder
shall be in writing and shall be sent by registered mail, postage prepaid,
overnight courier or personally delivered or telecopied to the Guarantor at the
address set forth on the signature pages hereto.
15. Rules of Construction. In this Guaranty, the word
"Obligor" includes both the named Obligor and any other person who at any time
assumes or otherwise becomes primarily liable for all or any part of the
obligations of the named Obligor on the UDC Note. The word "person" includes any
individual, company, trust or other legal entity of any kind. The word
"include(s)" means "include(s), without limitation," and the word "including"
means
-6-
<PAGE> 7
"including, but not limited to." When the context and construction so require,
all words used in the singular shall be deemed to have been used in the plural
and vice versa. No listing of specific instances, items or matters in any way
limits the scope or generality of any language of this Guaranty. All headings
appearing in this Guaranty are for convenience only and shall be disregarded in
construing this Guaranty.
16. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of Illinois.
17. Costs and Expenses. If any lawsuit, reference or
arbitration is commenced which arises out of, or which relates to this Guaranty,
the Loan Purchase Documents or UDC Note, the prevailing party shall be entitled
to recover from each other party such sums as the court, referee or arbitrator
may adjudge to be reasonable attorneys' fees (including allocated costs for
services of in-house counsel) in the action or proceeding, in addition to costs
and expenses otherwise allowed by law. In all other situations, including any
Insolvency Proceeding, each Guarantor agrees to pay all of Sellers' costs and
expenses, including attorneys' fees (including allocated costs for services of
Sellers' in-house counsel) which may be incurred in any effort to collect or
enforce a UDC Note or any part of it or any term of this Guaranty. From the
time(s) incurred until paid in full to Seller, all sums shall bear interest at
the rate set forth in Section 3 of the Loan Purchase Agreement.
18. Consideration. Each Guarantor acknowledges that it expects
to benefit from each Seller's sale of its interest in the Bank Rights to Obligor
because of its relationship to Obligor, and that it is executing this Guaranty
in consideration of that anticipated benefit.
19. Integration; Modifications. This Guaranty (a) integrates
all the terms and conditions mentioned in or incidental to this Guaranty; (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter; and (c) is intended by each Guarantor and each Seller as the final
expression of the agreement with respect to the terms and condition set forth in
this Guaranty and as the complete and exclusive statement of the terms agreed to
by each Guarantor and each Seller. No representation, understanding, promise or
condition shall be enforceable against any party unless it is contained in this
Guaranty. This Guaranty may not be modified except in a writing signed by each
Seller sought to be charged therewith and each Guarantor.
20. Miscellaneous. The liability of all persons who are in any
manner obligated under this Guaranty shall be joint and several. The illegality
or unenforceability of one or more provisions of this Guaranty shall not affect
any other provision. Time is of the essence in the performance of this Guaranty
by each Guarantor.
-7-
<PAGE> 8
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
date first above written.
DUCK VENTURES INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
------------------------------------
Name: Steven P. Johnson
----------------------------------
Title: Secretary
---------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
CHAMPION ACCEPTANCE CORPORATION,
an Arizona corporation
By: /s/ Steven P. Johnson
------------------------------------
Name: Steven P. Johnson
----------------------------------
Title: Secretary
---------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
UGLY DUCKLING CAR SALES, INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
------------------------------------
Name: Steven P. Johnson
----------------------------------
Title: Secretary
---------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
-8-
<PAGE> 9
UGLY DUCKLING CAR SALES FLORIDA,
INC., an Arizona corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
UDRAC, INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
UDRAC RENTALS, INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
-9-
<PAGE> 10
CHAMPION FINANCIAL SERVICES, INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
DRAKE INSURANCE SERVICES, INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
DRAKE INSURANCE AGENCY, INC.,
an Arizona corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
-10-
<PAGE> 11
DRAKE LIFE INSURANCE CO.,
a Turks and Caicos Island corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
DRAKE PROPERTY & CASUALTY
INSURANCE CO.,
a Turks and Caicos Islands corporation
By: /s/ Steven P. Johnson
-------------------------------------
Name: Steven P. Johnson
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
-11-
<PAGE> 1
EXHIBIT 2.5
UGLY DUCKLING CORPORATION
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement"), dated as of August 20, 1997,
is between UGLY DUCKLING CORPORATION, a Delaware corporation (the "Company"),
and HARRIS TRUST COMPANY OF CALIFORNIA, as warrant agent (the "Warrant Agent").
WHEREAS, the Company has entered into a Loan and Purchase Agreement
dated as of August 20, 1997 (the "Loan Purchase Agreement"), by and among the
Company and the Sellers (as defined in the Loan Purchase Agreement), among
others, pursuant to which the Company has agreed to purchase certain claims and
loans of the Sellers with respect to loans previously made by the Sellers to
First Merchants Acceptance Corporation and the Sellers have agreed to sell such
loans and claims, all as set forth in, and subject to the terms and conditions
of, the Loan Purchase Agreement; and
WHEREAS, as a condition precedent to the effectuation of the purchase
contemplated in the Loan Purchase Agreement, the Company has agreed to issue to
the Sellers warrants (the "Warrants") to purchase up to an aggregate of 389,800
shares of common stock, $.001 par value per share ("Common Stock"), of the
Company, subject to the terms and conditions of this Agreement; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange, exercise, and redemption of the
Warrants.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties agree as follows:
Section 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints
the Warrant Agent to act as agent of the Company for the Warrants, and the
Warrant Agent hereby accepts such appointment and agrees to perform the same in
accordance with the terms and conditions set forth in this Agreement.
Section 2. ISSUANCE OF WARRANTS AND FORM OF WARRANTS.
(a) Subject to the terms and conditions hereof, at the Closing (as
defined in the Loan Purchase Agreement), the Company shall issue to the Sellers
and the Sellers shall accept from the Company, Warrants substantially in the
form attached hereto as Exhibit A. Each Seller will be entitled to receive
Warrants to purchase that number of shares of Common Stock of the Company set
forth opposite such Seller's name on Exhibit B hereto.
(b) Each Warrant shall entitle the registered holder of the certificate
representing such Warrant to purchase upon the exercise thereof one share of
Common Stock, subject to the
<PAGE> 2
adjustments provided for in Section 9 hereof, at any time until 5:00 p.m., New
York City time, on February 20, 2000 [30 months following the Closing Date],
unless earlier redeemed pursuant to Section 11 hereof.
(c) The Warrant certificates shall be in registered form only. Each
Warrant certificate shall be dated by the Warrant Agent as of the date of
issuance thereof (whether upon initial issuance or upon transfer or exchange),
and shall be executed on behalf of the Company by the manual or facsimile
signature of its President or a Vice President, and attested to by the manual or
facsimile signature of its Secretary or an Assistant Secretary. In case any
officer of the Company who shall have signed any Warrant certificate shall cease
to be such officer of the Company prior to the issuance thereof, such Warrant
certificate may nevertheless be issued and delivered with the same force and
effect as though the person who signed the same had not ceased to be such
officer of the Company.
Section 3. EXERCISE OF WARRANTS, DURATION AND WARRANT PRICE. Subject to
the provisions of this Agreement, each registered holder of one or more Warrant
certificates shall have the right, which may be exercised as provided in such
Warrant certificates, to purchase from the Company (and the Company shall issue
and sell to such registered holder) the number of shares of Common Stock to
which the Warrants represented by such certificates are at the time entitled
hereunder.
(a) Each Warrant not exercised by its expiration date shall become
void, and all rights thereunder and all rights in respect thereof under this
Agreement shall cease on such date.
(b) A Warrant may be exercised by the surrender of the certificate
representing such Warrant to the Company, at the office of the Warrant Agent, or
at the office of a successor to the Warrant Agent, with the subscription form
set forth on the reverse thereof duly executed and properly endorsed with the
signatures properly guaranteed, and upon payment in full to the Warrant Agent
for the account of the Company of the Warrant Price (as hereinafter defined) for
the number of shares of Common Stock as to which the Warrant is exercised. Such
Warrant Price shall be paid in full in cash, or by certified check or bank draft
payable in United States currency to the order of the Warrant Agent.
(c) The price per share of Common Stock at which the Warrants may be
exercised (the "Warrant Price") shall be $20 (subject to adjustment in
accordance with Section 9 hereof).
(d) Subject to the further provisions of this Section 3 and of Section
6 hereof, upon surrender of Warrant certificates and payment of the Warrant
Price, the Company shall issue and cause to be delivered, with all reasonable
dispatch to or upon the written order of the registered holder of such Warrants
and in such name or names as such registered holder may designate, subject to
applicable securities laws, a certificate or certificates for the number of
securities so purchased upon the exercise of such Warrants, together with cash,
as provided in Section 10 of this Agreement, in respect of any fraction of a
share or security otherwise issuable upon such surrender. All shares
2
<PAGE> 3
of Common Stock issued upon the exercise of a Warrant shall be validly issued,
fully paid and nonassessable.
(e) Certificates representing such securities shall be deemed to have
been issued and any person so designated to be named therein shall be deemed to
have become a holder of record of such securities as of the date of the
surrender of such Warrants and payment of the Warrant Price; provided, however,
that if, at the date of surrender of such Warrants and payment of such Warrant
Price, the transfer books for the Common Stock or other securities purchasable
upon the exercise of such Warrants shall be closed, the certificates for the
securities in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened and until such
date the Company shall be under no duty to deliver any certificate for such
securities and the person to whom such securities are issuable shall not be
deemed to have became a holder of record of such securities. The rights of
purchase represented by each Warrant certificate shall be exercisable, at the
election of the registered holder thereof, either as an entirety or from time to
time for part of the number of securities specified therein and, in the event
that any Warrant certificate is exercised in respect of less than all of the
securities specified therein at any time prior to the expiration date of the
Warrant certificate, a new Warrant certificate or certificates will be issued to
such registered holder for the remaining number of securities specified in the
Warrant certificate so surrendered.
Section 4. COUNTERSIGNATURE AND REGISTRATION.
(a) The Warrant Agent shall maintain books (the "Warrant Register") for
the registration and the registration of transfer of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the Sellers in accordance with Section 2 hereof. The
Warrant certificates shall be countersigned manually or by facsimile by the
Warrant Agent (or by any successor to the Warrant Agent then acting as such
under this Agreement) and shall not be valid for any purpose unless so
countersigned. Warrant certificates may be so countersigned, however, by the
Warrant Agent and delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
(b) Prior to due presentment for registration of transfer of any
Warrant certificate, the Company and the Warrant Agent may deem and treat the
person in whose name such Warrant certificate shall be registered upon the
Warrant Register (the "registered holder") as the absolute owner of such Warrant
certificate and of each Warrant represented thereby (notwithstanding any
notation of ownership or other writing on the Warrant certificate made by anyone
other than the Company or the Warrant Agent), for the purpose of any exercise
thereof, of any distribution or notice to the holder thereof, and for all other
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
3
<PAGE> 4
Section 5. TRANSFER AND EXCHANGE OF WARRANTS.
(a) The Warrant Agent shall register the transfer, from time to time,
of any outstanding Warrant or portion thereof upon the Warrant Register, upon
surrender of the certificate evidencing such Warrant for transfer, properly
endorsed with signatures properly guaranteed and accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant certificate
representing an equal aggregate number of Warrants so transferred shall be
issued to the transferee and the surrendered Warrant certificate shall be
canceled by the Warrant Agent. In the event that only a portion of a Warrant is
transferred at any time, a new Warrant certificate representing the remaining
portion of the Warrant will also be issued to the transferring holder. The
Warrant certificates so canceled shall be delivered by the Warrant Agent to the
Company from time to time upon request. Notwithstanding the foregoing, no
transfer or exchange may be made except in compliance with applicable securities
laws and Section 14 hereof.
(b) Warrant certificates may be surrendered to the Warrant Agent,
together with a written request for exchange, and thereupon the Warrant Agent
shall issue in exchange therefor one or more new Warrant certificates as
requested by the registered holder of the Warrant certificate or certificates so
surrendered, representing an equal aggregate number of Warrants.
(c) The Warrant Agent shall not be required to effect any registration
of transfer or exchange which will result in the issuance of a Warrant
certificate for a fraction of a Warrant.
(d) No service charge shall be made for any exchange or registration of
transfer of Warrant certificates.
(e) The Warrant Agent is hereby authorized to countersign and to
deliver, in accordance with the terms of this Agreement, the new Warrant
certificates required to be issued pursuant to the provisions hereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with certificates duly executed on behalf of the Company for such purpose.
Section 6. PAYMENT OF TAXES. The Company will pay any documentary stamp
taxes attributable to the initial issuance of the shares of Common Stock
issuable upon the exercise of Warrants; provided, however, the Company shall not
be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificates for shares of
Common Stock in a name other than registered holder of Warrants in respect of
which such shares are issued, and in such case neither the Company nor the
Warrant Agent shall be required to issue or deliver any certificate for shares
of Common Stock or any Warrant certificate until the person requesting the same
has paid to the Company the amount of such tax or has established to the
Company's satisfaction that such tax has been paid.
Section 7. MUTILATED OR MISSING WARRANTS. In case any of the Warrant
certificates shall be mutilated, lost, stolen or destroyed, the Company may
issue, and the Warrant Agent shall countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated
4
<PAGE> 5
Warrant certificate, or in lieu of and substitution for the Warrant certificate
lost, stolen or destroyed, a new Warrant certificate representing an equal
aggregate number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant certificate and reasonable indemnity, if requested, also satisfactory to
them. Applicants for such substitute Warrant certificates shall also comply with
such other reasonable conditions and pay such reasonable charges as the Company
or the Warrant Agent may prescribe.
Section 8. RESERVATION OF COMMON STOCK.
(a) There have been reserved, and the Company shall at all times keep
reserved, out of its authorized and unissued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants then outstanding or issuable upon exercise, and the
transfer agent for the Common Stock and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid are hereby irrevocably authorized and directed at
all times to reserve such number of authorized and unissued shares as shall be
requisite for such purpose. The Company will keep a copy of this Agreement on
file with the transfer agent for the Common Stock and with every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants.
(b) The Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such transfer agent stock certificates required to honor
outstanding Warrants. The Company will supply such transfer agent with duly
executed certificates for such purpose and will itself provide or otherwise make
available any cash as provided in Section 10 of this Agreement. All Warrant
certificates surrendered in the exercise of the rights thereby evidenced shall
be canceled by the Warrant Agent and shall thereafter be delivered to the
Company. Promptly after the expiration date of the Warrants, the Warrant Agent
shall certify to the Company the aggregate number of such Warrants which expired
unexercised, and after the expiration date of the Warrants, no shares of Common
Stock shall be subject to reservation in respect of such Warrants.
Section 9. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES OF COMMON
STOCK. The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
9.1 ADJUSTMENTS. The number of shares of Common Stock purchasable upon
the exercise of each Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) If the Company (i) pays a dividend in Common Stock or
makes a distribution in Common Stock, (ii) subdivides its outstanding Common
Stock into a greater number of shares, (iii) combines its outstanding Common
Stock into a smaller number of shares, or (iv) issues, by reclassification of
its Common Stock, other securities of the Company, then the number of shares of
Common Stock purchasable upon exercise of a Warrant immediately prior thereto
will be adjusted
5
<PAGE> 6
so that the holder of a Warrant will be entitled to receive the kind and number
of shares of Common Stock or other securities of the Company that such holder
would have owned or would have been entitled to receive immediately after the
happening of any of the events described above, had the Warrant been exercised
immediately prior to the happening of such event or any record date with respect
thereto. Any adjustment made pursuant to this subsection 9.1(a) will become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(b) No adjustment in the number of shares purchasable pursuant
to the Warrants shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of shares then
purchasable upon the exercise of the Warrants.
(c) Whenever the number of shares purchasable upon the
exercise of the Warrants is adjusted, as herein provided, the Warrant Price for
shares payable upon exercise of the Warrants shall be adjusted by multiplying
such Warrant Price immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of shares purchasable upon the exercise
of the Warrant immediately prior to such adjustment, and the denominator of
which shall be the number of shares so purchasable immediately thereafter.
(d) Whenever the number of shares purchasable upon the
exercise of the Warrants and/or the Warrant Price is adjusted as herein
provided, the Company shall cause to be promptly mailed to the Warrant Agent and
each registered holder of a Warrant by first class mail, postage prepaid, notice
of such adjustment and a certificate of the chief financial officer of the
Company setting forth the number of shares purchasable upon the exercise of the
Warrants after such adjustment, the Warrant Price as adjusted, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made. The Warrant Agent shall be fully protected in relying on
any such certificate and any adjustment therein contained, and shall not be
obligated or responsible for calculating any adjustment nor shall it be deemed
to have knowledge of such an adjustment unless and until it shall have received
such certificate.
(e) For the purpose of this subsection 9.1, the term "Common
Stock" shall mean (i) the class of stock designated as the voting Common Stock
of the Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 9, a registered holder shall become
entitled to purchase any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so purchasable upon
exercise of the Warrants shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares contained in this Section 9.
6
<PAGE> 7
9.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection 9.1,
no adjustment in respect of any dividends or distributions shall be made during
the term of the Warrants or upon the exercise of the Warrants.
9.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustments are required to be
made pursuant to Section 9 hereof in connection with the issuance of shares of
Common Stock or the Warrants (or the underlying shares of Common Stock) in the
transactions contemplated by this Agreement.
9.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Warrant Agent
an agreement that the registered holders of the Warrants shall have the right
thereafter, upon payment of the Warrant Price in effect immediately prior to
such action, to purchase, upon exercise of each Warrant, the kind and amount of
shares and other securities and property which it would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale or
conveyance had each Warrant been exercised immediately prior to such action. Any
such agreements referred to in this subsection 9.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 9 hereof. The provisions of this subsection
9.4 shall similarly apply to successive consolidations, mergers, sales, or
conveyances.
9.5 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action that
would cause an adjustment reducing the Warrant Price below the then par value of
the Common Stock issuable upon exercise of the Warrants, the Company will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Common Stock at such adjusted Warrant Price.
9.6 INDEPENDENT PUBLIC ACCOUNTANTS. The Company may but shall not be
required to retain a firm of independent public accountants of recognized
regional or national standing (which may be any such firm regularly employed by
the Company) to make any computation required under this Section 9, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 9.
9.7 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments
in the Warrant Price or the number of securities issuable upon exercise of
Warrants, Warrant certificates theretofore or thereafter issued may continue to
express the same price and number of securities as are stated in the similar
Warrant certificates initially issuable pursuant to this Agreement. However, the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the form of Warrant certificate that it may deem appropriate
and that does not affect the substance thereof; and any Warrant certificate
thereafter issued, whether upon registration of, transfer of, or in exchange or
substitution for, an outstanding Warrant certificate, may be in the form so
changed.
7
<PAGE> 8
9.8 NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDERS OF WARRANTS. If, at
any time prior to the expiration of a Warrant and prior to its exercise, any one
or more of the following events shall occur:
(a) any action that would require an adjustment pursuant to
subsection 9.1 or 9.4 hereof; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall be
proposed; then the Company must give notice in writing of such event to the
registered holders of the Warrants, as provided in Section 20 hereof, at least
20 days to the extent practicable, prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the stockholders
entitled to any relevant dividend, distribution, subscription rights or other
rights or for the determination of stockholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice must specify such
record date or the date of closing the transfer books, as the case may be.
Failure to mail or receive such notice or any defect therein will not affect the
validity of any action taken with respect thereto.
Section 10. FRACTIONAL INTERESTS. The Company is not required to issue
fractional shares of Common Stock on the exercise of a Warrant. If any fraction
of a share of Common Stock would, except for the provisions of this Section 10,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company will in lieu thereof pay an amount in cash equal to the then Current
Market Price multiplied by such fraction. For purposes of this Agreement, the
term "Current Market Price" means (i) if the Common Stock is listed for
quotation on the Nasdaq National Market or the Nasdaq SmallCap Market or on a
national securities exchange, the average for the 10 consecutive trading days
immediately preceding the date in question of the daily per share closing prices
of the Common Stock as quoted by the Nasdaq National Market or the Nasdaq
SmallCap Market or on the principal stock exchange on which it is listed, as the
case may be, whichever is the higher, or (ii) if the Common Stock is traded in
the over-the-counter market and is not listed for quotation on the Nasdaq
National Market or the Nasdaq SmallCap Market nor on any national securities
exchange, the average of the per share closing bid prices of the Common Stock on
the 10 consecutive trading days immediately preceding the date in question, as
reported by Nasdaq or an equivalent generally accepted reporting service. The
closing price referred to in clause (i) above shall be the last reported sale
price or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices, in either case as quoted by the
Nasdaq National Market or the Nasdaq SmallCap Market or on the national
securities exchange on which the Common Stock is then listed. For purposes of
clause (ii) above, if trading in the Common Stock is not reported by Nasdaq, the
bid price referred to in said clause shall be the lowest bid price as reported
on the OTC Bulletin Board or in the "pink sheets" published by National
Quotation Bureau, Incorporated.
8
<PAGE> 9
Section 11. REDEMPTION.
(a) The then outstanding Warrants may be redeemed, at the
option of the Company, at $.10 per share of Common Stock purchasable upon
exercise of such Warrants, at any time after the average Daily Market Price per
share of the Common Stock for a period of at least 5 consecutive trading days
ending not more than fifteen days prior to the date of the notice given pursuant
to Section 11(b) hereof has equaled or exceeded $27.00, and prior to expiration
of the Warrants. The Daily Market Price of the Common Stock will be determined
by the Company in the manner set forth in Section 11(e) as of the end of each
trading day (or, if no trading in the Common Stock occurred on such day, as of
the end of the immediately preceding trading day in which trading occurred) and
verified to the Warrant Agent before the Company may give notice of redemption.
All outstanding Warrants must be redeemed if any are redeemed, and any right to
exercise an outstanding Warrant shall terminate at 5:00 p.m. (New York City
time) on the date fixed for redemption. Trading day means a day in which trading
of securities occurred on the Nasdaq National Market.
(b) The Company may exercise its right to redeem the Warrants
only by giving the notice set forth in the following sentence. If the Company
exercises its right to redeem, it shall give notice to the Warrant Agent and the
registered holders of the outstanding Warrants by mailing or causing the Warrant
Agent to mail to such registered holders a notice of redemption, first class,
postage prepaid, at their addresses as they shall appear on the records of the
Warrant Agent. Any notice mailed in the manner provided herein will be
conclusively presumed to have been duly given whether or not the registered
holder actually receives such notice.
(c) The notice of redemption must specify the redemption
price, the date fixed for redemption (which must be at least 30 days after such
notice is mailed), the place where the Warrant certificates must be delivered
and the redemption price paid, and that the right to exercise the Warrant will
terminate at 5:00 P.M. (New York City time) on the date fixed for redemption.
(d) Appropriate adjustment shall be made to the redemption
price and to the minimum Daily Market Price prerequisite to redemption set forth
in Section 11(a) hereof, in each case on the same basis as provided in Section 9
hereof with respect to adjustment of the Warrant Price.
(e) For purposes of this Agreement, the term "Daily Market
Price" means (i) if the Common Stock is quoted on the Nasdaq National Market or
the Nasdaq SmallCap Market or on a national securities exchange, the daily per
share closing price of the Common Stock as quoted on the Nasdaq National Market
or the Nasdaq SmallCap Market or on the principal stock exchange on which it is
listed on the trading day in question, as the case may be, whichever is the
higher, or (ii) if the Common Stock is traded in the over-the-counter market and
not quoted on the Nasdaq National Market or the Nasdaq SmallCap Market nor on
any national securities exchange, the closing bid price of the Common Stock on
the trading day in question, as reported by Nasdaq or an equivalent generally
accepted reporting service. The closing price referred to in clause (i) above
shall be the
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last reported sale price or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices, in either case on
the Nasdaq National Market or the Nasdaq SmallCap Market or on the national
securities exchange on which the Common Stock is then listed. For purposes of
clause (ii) above, if trading in the Common Stock is not reported by Nasdaq, the
bid price referred to in said clause shall be the lowest bid price as quoted on
the OTC Bulletin Board or reported in the "pink sheets" published by National
Quotation Bureau, Incorporated.
(f) On the redemption date, each Warrant will be automatically
converted into the right to receive the redemption price and the Warrant Agent
will no longer honor any purported exercise of a Warrant. On or before the
redemption date, the Company will deposit with the Warrant Agent sufficient
funds for the purpose of redeeming all of the outstanding unexercised Warrants.
All such funds shall be maintained by the Warrant Agent in an interest-bearing,
segregated account. funds remaining in such account on the date three years from
the redemption date will be returned to the Company. Any Warrants thereafter
submitted to the Warrant Agent for redemption will be forwarded for redemption
by the Warrant Agent to the Company, and the Warrant Agent will have no further
responsibility with respect thereto.
Section 12. RIGHTS AS WARRANTHOLDERS. Nothing contained in this
Agreement or in any of the Warrants shall be construed as conferring upon the
holders thereof, as such, any of the rights of stockholders of the Company,
including, without limitation, the right to receive dividends or other
distributions, to exercise any preemptive rights, to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or the
election of directors of the Company or any other matter.
Section 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS. The
Warrant Agent must account promptly to the Company with respect to Warrants
exercised, and must promptly pay to the Company all monies received by it upon
the exercise of such Warrants, and agrees to keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.
Section 14. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) Each holder of a Warrant agrees that prior to making any
disposition or transfer of the Warrants or shares issuable upon exercise of the
Warrants ("Shares"), unless a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), is in effect with regard thereto and
the disposition may be effected in accordance therewith and with applicable
state securities laws, the holder shall give written notice to the Company
describing briefly the manner in which any such proposed disposition or transfer
is to be made; and no such disposition shall be made except pursuant to an
exemption from the registration requirements of all applicable federal and state
securities laws, which exemption shall be proved to the satisfaction of the
Company and its counsel prior to the effectuation of any such disposition or
transfer.
(b) Each certificate evidencing the Warrants and Shares
issuable upon exercise of the Warrants shall bear a legend in substantially the
following form, until such time as such
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Warrants or such Shares have been sold pursuant to a registration statement
contemplated in subsection (c) below or unless, in the opinion of legal counsel
to the Company, such legend is not required in order to establish compliance
with any provisions of applicable security laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE
WITH SECTION 14 OF THE WARRANT AGREEMENT DATED AS OF AUGUST
20, 1997, BETWEEN UGLY DUCKLING CORPORATION AND HARRIS TRUST
COMPANY OF CALIFORNIA, AS WARRANT AGENT, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME.
(c) Subject to the next sentence below, whenever during the
one-year period beginning on the date of issuance of the Warrants hereunder the
Company proposes to file with the Commission a registration statement with
respect to equity securities of the Company (other than as to securities issued
pursuant to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Securities Act or for which a Form S-4 Registration
Statement could be used), it shall, at least 30 days prior to such filing, give
written notice of such proposed filing to the holders of Warrants and Shares
which bear a legend as contemplated in Section 14(b) above and which shall not
have previously been included in a registration statement filed under this
Section 14(c), at their respective addresses as they appear on the records of
the Warrant Agent or the Company, and shall offer to include and shall include,
subject to the provisions of this Section 14(c), in such filing any proposed
disposition of such Warrants and Shares upon receipt by the Company, not less
than 10 days prior to the proposed filing date, of a request therefor setting
forth the facts with respect to such proposed disposition and all other
information with respect to the holders of such Warrants or Shares requested to
be included in such filing as shall be reasonably necessary to be included in
such Registration Statement. Notwithstanding the above, after such time as the
holders shall have been given two opportunities to include their Warrants and
underlying Shares in a Registration Statement of the Company pursuant to the
next sentence above, and all securities of holders who shall have requested such
inclusion in accordance herewith and who have not withdrawn such request have
been included in such a Registration Statement, the Company will have no further
obligation to the holders under this Section 14(c) and the holders of Warrants
and Shares that have not been included previously in a Registration Statement
under this Section 14(c) will have no further registration rights under this
Agreement. In the event that (i) the managing underwriter for any such offering
advises the Company in writing that the inclusion of such securities in the
offering would be detrimental to the offering or (ii) in the event that there is
no managing underwriter, if, in the good faith judgment of the Board of
Directors of the Company, inclusion of the Warrants and/or the Shares in the
registration would be seriously detrimental to the Company, then, such
securities shall not be included in the Registration Statement. In the event
that securities requested to be included in an offering are not included in
accordance with the immediately
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preceding sentence, any notice given to holders of Warrants and Shares hereunder
with respect to such offering shall not be counted against the limitation
provided for in the second sentence of this Section 14(c).
(d) All fees, disbursements, and out-of-pocket expenses
incurred in connection with the filing of any Registration Statement under
Section 14(c) hereof and in complying with applicable securities and Blue Sky
laws shall be borne by the Company, provided, however, that any expenses of the
holders of the Warrants or the Shares, including but not limited to attorneys'
fees and discounts and commissions, shall be borne by such holders. The Company
at its expense will supply the holders of the Warrants and Shares included in a
Registration Statement with copies of such Registration Statement and the
prospectus or offering circular included therein in such quantities as may be
reasonably requested by such holders.
(e) Each holder of a Warrant or Shares to be included in a
Registration Statement pursuant to this Section 14 agrees to cooperate with the
Company and to provide the Company on its request with all information
concerning such holder and such Warrants and Shares that may reasonably be
requested by the Company in order for the Company to perform its obligation
under this Section 14.
Section 15. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement
with respect to the Warrants or the Shares pursuant to Section 14 above, the
Company agrees to indemnify and hold harmless the holders of such Warrants or
Shares (for purposes of this Section 15, references to any holder of Shares
shall refer only to such holders who have agreed to be bound by this Section
15), and each person who controls such holders within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all attorneys' fees), to
which such holders or such controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any such Registration Statement, or any related preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement, preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by any such holder specifically for use in the
preparation thereof and, provided further, that the indemnity agreement provided
in this Section 15(a) with respect to any preliminary prospectus shall not inure
to the benefit of any holder of Warrants or Shares from whom the person
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<PAGE> 13
asserting any losses, claims, damages, liabilities or actions based upon any
untrue statement or alleged untrue statement of material fact or omission or
alleged omission to state therein a material fact purchased Warrants or Shares,
if a copy of the prospectus in which such untrue statement or alleged untrue
statement or omission or alleged omission was corrected had not been sent or
given to such person within the time required by the Securities Act and the
rules and regulations thereunder, unless such failure is the result of
non-compliance by the Company with the last sentence of Section 14(d) hereof.
This indemnity will be in addition to any liability which the Company may
otherwise have.
(b) Each holder of a Warrant and each holder of a Share agrees
that he will indemnify and hold harmless the Company, each other person referred
to in subparts (1), (2) and (3) of Section 11(a) of the Securities Act in
respect of the Registration Statement, each officer of the Company, and each
person who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
director, officer or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any such
Registration Statement, or any related preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such holder specifically for use in the preparation thereof. This indemnity will
be in addition to any liability which the holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 15 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 15, notify the indemnifying party of the commencement
thereof. No indemnification provided for in this Section 15 shall be available
to any party who shall fail to give the notice if the party to whom such notice
was not given was prejudiced by the failure to give the notice, but the omission
so to notify the indemnifying party will not relieve the indemnifying party or
parties from any liability which it may have to any indemnified party for
contribution otherwise than as to the particular item as to which
indemnification is then being sought solely pursuant to this Section 15. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, reasonably assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under
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this Section 15 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation unless the indemnifying party shall not pursue the action
to its final conclusion. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party. No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such indemnified
party.
Section 16. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
(a) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 19 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement and any of the Warrant certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
certificates so countersigned; and in case at that time any of the Warrant
certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent, and in
all such cases the Warrants represented by such Warrant certificates shall have
the full force provided in the Warrant certificates and in this Agreement. Any
such successor Warrant Agent shall promptly give notice of its succession as
Warrant Agent to the Company and to the registered holder of each Warrant
certificate.
(b) If at any time the name of the Warrant Agent is changed and at such
time any of the Warrant certificates have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrant certificates so countersigned; and if at that time any of the
Warrant certificates have not been countersigned, the Warrant Agent may
countersign such Warrant certificates either in its prior name or in its changed
name; and in all such cases the Warrants represented by such Warrant
certificates will have the full force provided in the Warrant certificates and
in this Agreement.
Section 17. CONCERNING THE WARRANT AGENT. The Company agrees to pay to
the Warrant Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Warrant Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Warrant Agent, and its
officers, agents and directors for, and to hold each of them harmless against,
any loss, liability, or expense incurred without negligence or willful
misconduct on the part of the Warrant Agent, for anything
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done or omitted by the Warrant Agent or such indemnified party in connection
with the acceptance or administration of this Agreement or the exercise or
performance of its duties hereunder, including the costs and expenses of
defending against any claim of liability in the premises. The indemnification
provided for hereunder shall survive the expiration of the Warrant, the
termination of this Agreement and the resignation or removal of the Warrant
Agent. The costs and expenses of enforcing this right of indemnification shall
also be paid by the Company.
The Warrant Agent may conclusively rely upon and shall be protected by
the Company and shall incur no liability for, or in respect of any action taken,
suffered or omitted by it in connection with, its administration of this
Agreement or the exercise or performance of its duties hereunder in reliance
upon any Warrant certificate or certificate for the Common stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth herein.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Warrant Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Warrant Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action.
Section 18. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Warrant
Agent, upon the following terms and conditions, by all of which the Company and
the holders of Warrant certificates, by their acceptance thereof, shall be
bound:
(a) Before the Warrant Agent acts or refrains from acting, the Warrant
Agent may consult with legal counsel (who may be legal counsel for the Company)
and the opinion of such counsel shall be full and complete authorization and
protection to the Warrant Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or factual
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any person believed in good faith by the
Warrant Agent to be one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
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(c) The Warrant Agent shall be liable hereunder to the Company and any
other Person only for its own negligence or wilful misconduct.
(d) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Warrant
certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Warrant Agent is serving as an administrative agent and,
accordingly, shall not be under any responsibility in respect of the validity of
any provision of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant certificate; nor shall
it be responsible for any change in the exercisability of the Warrant (including
the Warrant becoming void) or any adjustment in the terms of the Warrant
(including the manner, method or amount thereof) provided for herein, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of any Warrant evidenced by a
Warrant certificate after actual notice to the Warrant Agent that such change or
adjustment is required); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common stock to be issued pursuant to this Agreement or any Warrant
certificate or as to whether any shares of Common stock will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Warrant Agent for the carrying out or performing by the Warrant Agent of
the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed in good faith by the Warrant Agent to be one of the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer, or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in accordance with
instructions of any such officer of for any delay in acting while waiting for
those instructions.
Any application by the Warrant Agent for written instructions
from the Company may, at the option of the Warrant Agent, set forth in writing
any action proposed to be taken or omitted by the Warrant Agent under this
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Warrant Agent shall not be liable for any
action taken by, or omission of, the Warrant Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than ten
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Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Warrant Agent shall have received written
instructions in response to such application subject to the proposed action or
omission and/or specifying the action to be taken or omitted.
(h) Subject to applicable law, the Warrant Agent and any stockholder,
director, officer or employee of the Warrant Agent may buy, sell or deal in any
of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Warrant Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided that reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Warrant Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) The Warrant Agent shall not be required to take notice or be deemed
to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement) under this Agreement
unless and until the Warrant Agent shall be specifically notified in writing by
the Company of such fact, event or determination.
Section 19. CHANGE OF WARRANT AGENT. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving the
Company at least 30 days prior notice in writing, and by mailing notice in
writing to the registered holders at their addresses appearing on the Warrant
Register, of such resignation, at least 15 days prior to the date such
resignation shall take effect and specifying a date when such resignation shall
take effect. The Warrant Agent may be removed by like notice to the Warrant
Agent from the Company and by like mailing of notice to the registered holders
of the Warrants. If the Warrant Agent resigns or is removed or otherwise becomes
incapable of acting, the Company shall appoint a successor to the Warrant Agent.
If the Company fails to make such appointment within 30 days after such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Warrant Agent or by the registered holder of a
Warrant (who shall, with such notice, submit his Warrant certificate for
inspection by the Company), then the registered holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor
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Warrant Agent, whether appointed by the Company or by such a court, must be
registered and otherwise authorized to serve as a transfer agent pursuant to the
Securities Exchange Act of 1934, as amended. If at any time the Warrant Agent
ceases to be eligible in accordance with the provisions of this Section 19, it
will resign immediately in the manner and with the effect specified in this
Section 19. After acceptance in writing of the appointment, the successor
Warrant Agent will be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent will deliver and transfer to
the successor Warrant Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
this purpose. Upon request of any successor Warrant Agent, the Company will
make, execute, acknowledge and deliver any and all instruments in writing for
more fully and effectually vesting in and confirming to such successor Warrant
Agent all such powers, rights, duties and responsibilities. Failure to file or
mail any notice provided in this Section 19, however, or any defect therein,
will not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor Warrant Agent, as the case may
be.
Section 20. IDENTITY OF TRANSFER AGENT. Following the appointment of
any transfer agent for the Common Stock or of any subsequent transfer agent for
shares of the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such transfer agent.
Section 21. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Warrant Agent or by the holder of any Warrant
certificate to or on the Company shall be sufficiently given or made if sent by
registered or certified mail, addressed (until another address is filed in
writing with the Warrant Agent) as follows (and shall be deemed given upon
receipt):
Ugly Duckling Corporation
2525 East Camelback Road
Suite 1150
Phoenix, Arizona 85016
Attention: Steven P. Johnson, Senior Vice President,
General Counsel and Secretary
With a copy to:
Steven D. Pidgeon
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Notices or demands authorized by this Agreement to be given or made by the
Company or by the holder of any Warrant certificate to or on the Warrant Agent
shall be sent by registered or certified
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mail, addressed (until another address is filed in writing with the Company) as
follows (and shall be deemed given upon receipt):
Harris Trust Company of California
601 South Figueroa
49th Floor
Los Angeles, CA 90017
Attention: Neil Rosso, Corporate Trust
Notices or demands authorized by this Agreement to be given or made by the
Company or the Warrant Agent to the holder of any Warrant certificate shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed to such holder at the address of such holder as shown in the Warrant
Register. The Company shall deliver a copy of any notice or demand it delivers
to the holder of any Warrant certificate to the Warrant Agent.
Section 22. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants, or which shall not adversely
affect the interests of the holders of Warrants (including reducing the Warrant
Price or extending the redemption or expiration date). In any situation in which
this Agreement cannot be amended pursuant to the next sentence above, this
Agreement may be amended by the holder or holders of a majority of the
outstanding Warrants representing a majority of the shares of Common Stock
underlying such Warrants; provided, however, that without the consent of each
holder of a Warrant, there can be no increase of the Warrant Price or reduction
of the exercise period for such holder's Warrants and provided, further, that no
such supplement or amendment may affect the rights or duties of the Warrant
Agent under this Agreement without the written consent of the Warrant Agent.
Section 23. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company, or the Warrant Agent or the
registered holders of the Warrants will bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 24. GOVERNING LAW. This Agreement will be deemed to be a
contract made under the laws of the State of Arizona and for all purposes will
be construed in accordance with the laws of said State, except as to Sections
17, 18 and 22, which shall be governed by and construed in accordance with the
laws of the State of Illinois. Each holder of a Warrant by its acceptance
thereof agrees to submit to the jurisdiction of a court of competent
jurisdiction in the State of Arizona, but to the State of Illinois as to
Sections 17, 18 and 22, for the purpose of resolving any disputes arising with
respect to the Warrants or this Agreement.
19
<PAGE> 20
Section 25. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement will
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement. This Agreement is for the sole and
exclusive benefit of the Company, the Warrant Agent and the registered holders
of the Warrants.
Section 26. COUNTERPARTS. This Agreement may be executed in
counterparts and each of such counterparts will for all purposes be deemed to be
an original, and all such counterparts will together constitute but one and the
same instrument.
Section 27. DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Agreement are inserted for convenience only and do not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
UGLY DUCKLING CORPORATION
By: /s/ Steven P. Johnson
--------------------------------------
Name: Steven P. Johnson
------------------------------------
Its: Secretary
-------------------------------------
HARRIS TRUST COMPANY
OF CALIFORNIA
By: /s/ Neil T. Rosso
--------------------------------------
Name: Neil T. Rosso
------------------------------------
Its: Assistant Vice President
-------------------------------------
20
<PAGE> 21
Warrant No. ____
EXHIBIT A
WARRANT TO PURCHASE ________ SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON FEBRUARY 20, 2000
UGLY DUCKLING CORPORATION
This certifies that, for value received ________________________, the
registered holder hereof or assigns (the "Holder"), is entitled to purchase from
UGLY DUCKLING CORPORATION, a Delaware corporation (the "Company"), at any time
before 5:00 p.m., New York City time, on February 20, 2000, at the purchase
price per share of $20 (the "Warrant Price"), the number of shares of Common
Stock, par value $0.001 per share, of the Company set forth above (the
"Shares"). The number of shares of Common Stock purchasable upon exercise of the
Warrant evidenced hereby and the Warrant Price is subject to adjustment from
time to time as set forth in the Warrant Agreement referred to below.
This Warrant may be redeemed, at the option of the Company, at $.10 per
share of Common Stock purchasable upon exercise hereof, at any time after the
average Daily Market Price (as defined in Section 11 of the Warrant Agreement)
per share of the Common Stock for a period of at least 5 consecutive trading
days ending not more than fifteen days prior to the date of the notice given
pursuant to Section 11(b) thereof has equaled or exceeded $27.00, and prior to
expiration of this Warrant. The Holder's right to exercise this Warrant
terminates at 5:00 p.m. (New York City time) on the date fixed for redemption in
the notice of redemption delivered by the Company in accordance with the Warrant
Agreement.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant certificate with the Purchase Form attached hereto
duly executed and guaranteed and simultaneous payment of the Warrant Price
(subject to adjustment) at the principal office in Los Angeles, California, of
Harris Trust Company of California (the "Warrant Agent"). Payment of such price
may be made at the option of the Holder in cash or by certified check or bank
draft, all as provided in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly authorized issue of
Warrants and are issued under and in accordance with the Warrant Agreement dated
as of August 20, 1997, between the Company and the Warrant Agent, and are
subject to the terms and provisions contained in such Warrant Agreement, to all
of which the Holder of this Warrant certificate by acceptance hereof consents. A
copy of the Warrant Agreement may be obtained for inspection by the Holder
hereof upon written request to the Warrant Agent.
21
<PAGE> 22
Upon any partial exercise of the Warrants evidenced hereby, there will
be issued to the Holder a new Warrant certificate in respect of the Shares
evidenced hereby that have not been exercised. This Warrant certificate may be
exchanged at the office of the Warrant Agent by surrender of this Warrant
certificate properly endorsed either separately or in combination with one or
more other Warrants for one or more new Warrants to purchase the same aggregate
number of Shares as evidenced by the Warrant or Warrants exchanged. No
fractional Shares will be issued upon the exercise of rights to purchase
hereunder, but the Company will pay the cash value of any fraction upon the
exercise of one or more Warrants.
The number of shares of Common Stock issuable upon exercise of this
Warrant is subject to adjustment as provided in Section 9 of the Warrant
Agreement. The Warrant Agreement may be amended by the holder or holders of a
majority of the outstanding Warrants representing a majority of the shares of
Common Stock underlying such Warrants; provided that without the consent of each
holder of a Warrant certain specified changes cannot be made to such holder's
Warrants and no amendment may affect the rights and duties of the Warrant Agent
without the consent of the Warrant Agent. Pursuant to the Warrant Agreement, by
acceptance of a Warrant, each holder consents to the jurisdiction of a court of
competent jurisdiction in the State of Arizona for the purpose of resolving any
disputes arising with respect to the Warrants or the Warrant Agreement.
The Holder hereof may be treated by the Company, the Warrant Agent and
all other persons dealing with this Warrant certificate as the absolute owner
hereof for all purposes and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding, and until any
transfer is entered on such books, the Company may treat the Holder hereof as
the owner for all purposes. Notices and demands to be given to the Company or
the Warrant Agent must be given by certified or registered mail at the addresses
provided in the Warrant Agreement.
Dated: __________________________ UGLY DUCKLING CORPORATION
By:__________________________________
President
ATTEST:
_________________________________
Secretary
This is one of the Warrants referred
to in the within mentioned Warrant
Agreement.
HARRIS TRUST COMPANY
OF CALIFORNIA
By:_____________________________________
Authorized Representative
22
<PAGE> 23
UGLY DUCKLING CORPORATION
PURCHASE FORM
Mailing Address:
UGLY DUCKLING CORPORATION
2525 East Camelback Road
Suite 1150
Phoenix, Arizona 85016
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant certificate for, and to purchase
thereunder, _____________Shares of Common Stock provided for therein, and
requests that certificates for such Shares be issued in the name of:
_______________________________________________________________________________
_______________________________________________________________________________
(Please Print or Type Name, Address and Social Security Number)
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant certificate for the balance of the Shares purchasable under
the within Warrant certificate be registered in the name of the undersigned
Holder or his or her Assignee as below indicated and delivered to the address
stated below.
Dated:__________________________
Name of Holder or Assignee:
_______________________________________________________________________________
(Please Print)
Address:_______________________________________________________________________
_______________________________________________________________________________
Signature:
______________________________
NOTE: The above signature must correspond with the name as it appears upon the
face of the within Warrant certificate in every particular, without alteration
or enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed:
______________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Association, and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15.
23
<PAGE> 24
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(Name and Address of Assignee Must Be Printed or Typewritten)
________________________________________________________________________________
the within Warrants, hereby irrevocably constituting and appointing ____________
__________ Attorney to transfer said Warrants on the books of the Company, with
full power of substitution in the premises.
Dated:_________________________
___________________________________________
Signature of Registered Holder
Note: The signature on this assignment must
correspond with the name as it appears upon
the face of the within Warrant certificate
in every particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:
________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Association, and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15.
24
<PAGE> 25
EXHIBIT B
<TABLE>
<CAPTION>
Name and Address of Sellers No. of Warrants
- --------------------------- ---------------
<S> <C>
LaSalle National Bank 72,916
135 South LaSalle Street
Chicago, IL 60603
Attn: James Thompson
Fleet Bank, National Association 60,763
777 Main Street
Mail Code CTMOH2OA
Hartford, CT 06115
Attn: Edward Walsh
NBD Bank 61,680
c/o The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attn: Thomas T. Bower
NationsBank, N.A. 36,458
NationsBank Plaza
901 Main Street, 66th Floor
Dallas, TX 75283-1000
Attn: Jay Wampler
Harris Trust and Savings Bank 48,610
200 West Monroe Street
Chicago, IL 60606
Attn: Sandra Sanders
First Bank National Association 60,763
601 Second Avenue
Minneapolis, MN 55402-4302
Attn: David Larsen
Mellon Bank, N.A. 48,610
One Mellon Center, Room 4835
Pittsburgh, PA 15258-0001
Attn: Christopher Shannon
</TABLE>
25
