STOCK PURCHASE AGREEMENT
by and among
UGLY DUCKLING CORPORATION
UGLY DUCKLING CAR SALES AND FINANCE CORPORATION
UGLY DUCKLING FINANCE CORPORATION
CYGNET DEALER FINANCE, INC.
and
CYGNET CAPITAL CORPORATION
December 30, 1999
TABLE OF CONTENTS
ARTICLE 1 OVERVIEW..................................................................................1
ARTICLE 2 THE TRANSACTION...........................................................................1
2.1 Purchase and Sale of Shares....................................................................1
2.2 Purchase Price.................................................................................2
2.3 Payment of Purchase Price......................................................................2
2.4 Transition.....................................................................................2
ARTICLE 3 CONDUCT PENDING THE CLOSING...............................................................2
3.1 Operation of Business in Ordinary Course.......................................................2
3.2 No Negotiations................................................................................2
3.3 Public Announcements...........................................................................3
3.4 Access to Information; Confidentiality.........................................................3
3.5 HSR Act........................................................................................4
3.6 Permits........................................................................................4
ARTICLE 4 THE PARTIES' OBLIGATIONS AT THE CLOSING...................................................4
4.1 The Closing....................................................................................4
4.2 Conditions to Obligations of the Parties.......................................................4
4.3 Seller's and the Company's Obligations.........................................................5
4.4 Buyer's Obligations............................................................................5
ARTICLE 5 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION...........................................6
5.1 Representations Relating to the Business.......................................................6
5.2 Representations of Buyer.......................................................................6
5.3 Nature and Survival of Representations and Warranties..........................................6
5.4 General Indemnification by Seller..............................................................6
5.5 Special Indemnification by Seller..............................................................7
5.6 General Indemnification by Buyer...............................................................7
5.7 Agreement and Special Indemnification by Buyer.................................................7
5.8 Limits on Indemnification......................................................................7
5.9 Procedure for Indemnification..................................................................7
ARTICLE 6 ADDITIONAL AGREEMENTS.....................................................................7
6.1 Termination....................................................................................7
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6.2 Trademark......................................................................................8
6.3 Compliance with Warrant........................................................................8
6.4 Books and Records..............................................................................8
6.5 Notices........................................................................................8
6.6 Governing Law and Attorneys' Fees..............................................................9
6.7 Arbitration....................................................................................9
6.8 Assignment....................................................................................10
6.9 Intent to be Binding..........................................................................10
6.10 Waiver of Provisions..........................................................................10
Schedule 2.2. Purchase Price Components
Exhibit A. Definitions
Exhibit B. Representations and Warranties of Seller and the Company
Exhibit C. Representations and Warranties of Buyer
Exhibit D. Procedure for Indemnification
Exhibit E-1. Certificate of Parent, Seller and the Company Pursuant to Section 4.3(c)
Exhibit E-2. Certificate of Buyer Pursuant to Section 4.4(h)
Exhibit F. Promissory Note
Exhibit G. Verde Guaranty
Exhibit H. Warrant
Exhibit I. Pledge Agreement
Exhibit J. Company Guaranty
ii
STOCK PURCHASE AGREEMENT
This Agreement is made of as of December 30, 1999, by and among the
following parties:
o Cygnet Dealer Finance, Inc., an Arizona corporation (the "Company");
o Ugly Duckling Corporation, a Delaware corporation (the "Parent");
o Ugly Duckling Car Sales and Finance Corporation, an Arizona corporation
(the "Seller");
o Ugly Duckling Finance Corporation ("Finance"); and
o Cygnet Capital Corporation, an Arizona corporation (the "Buyer").
ARTICLE 1.
OVERVIEW
1.1 The Company engages in the business (the "Business") of (i) providing
operating credit lines to used car dealers secured by the dealers' retail
installment portfolios, and (ii) purchasing and/or servicing third party dealer
contract portfolios.
1.2 Seller owns all of the capital stock of the Company.
1.3 By this Agreement, Buyer desires to acquire, and Seller desires to sell, all
of the capital stock of the Company.
1.4 For purposes of this Agreement, certain capitalized terms have the meanings
ascribed to them in Exhibit A. Other terms are defined in the body of this
Agreement.
ARTICLE 2.
THE TRANSACTION
2.1 Purchase and Sale of Shares. Seller agrees to sell, and Buyer agrees to
purchase, all of the outstanding capital stock of the Company (the "Shares").
2.2 Purchase Price. On the Closing date, Buyer will pay to Seller an amount
equal to the sum of the book value of the Company and the amount of those
certain assets described in Schedule 2.2 hereto ("Purchase Price"). At the
Closing, Seller will deliver to Buyer a closing balance sheet dated as of the
Closing (the "Closing Balance Sheet") which will set forth a reasonable estimate
of the book value of the Company. Within 90 days after the Closing, Seller will
prepare and Seller and Buyer will agree on a final Closing Balance Sheet. If
Buyer and Seller cannot agree on a final Closing Balance Sheet, any unresolved
disputed items shall be promptly referred to an independent accounting firm
acceptable to the parties to resolve the disputed issues. The resolution of the
independent accounting firm will be final and binding on the parties. The fees
and expenses of such independent accounting firm will be borne equally by Buyer
and Seller. In the event that the actual book value of the Company is adjusted
pursuant to the determination above, then any payment shall be paid by the
appropriate party within two business days of final determination hereunder.
1
2.3 Payment of Purchase Price. Buyer will pay the Purchase Price as follows:
(a) Buyer will assume the $14 million unsecured 10% note of the Parent (the
"Subordinated Note"), which, as of the Closing, will have outstanding principal
of $8,000,000 and Verde Investments, Inc. ("Verde") will release Parent from all
obligations thereunder; and
(b) The balance of the Purchase Price shall be paid in cash utilizing the
proceeds of new financing secured by the assets of the Company and the proceeds
of financing acquired from Finance in accordance with Section 4.2(h).
2.4 Transition. Following the Closing, for a period of 45 days, Seller will use
reasonable commercial efforts to assist Buyer with transitioning the Business,
including (i) permitting Buyer to access and use of Seller's facilities and
equipment as reasonably necessary, and (ii) making available to Buyer certain
employees of Seller, in each case, upon the payment by Buyer to Seller of
reasonable compensation for such accommodations.
ARTICLE 3.
CONDUCT PENDING THE CLOSING
3.1 Operation of Business in Ordinary Course. Prior to the Closing, the Company
will conduct its business and affairs only in the ordinary course and consistent
with its prior practice, including but not limited to:
(a) using its reasonable best efforts to maintain its business and employees,
sales representatives, customers, assets, suppliers, licenses and operations in
accordance with past custom and practice;
(b) not incurring any debt other than in the ordinary course of business and in
amounts consistent with past practices; or
(c) increasing the compensation, incentive arrangements or other benefits of any
employee other than in the ordinary course of business consistent with past
practices.
3.2 No Negotiations.
(a) The Seller, Parent and Company shall not, nor shall it permit the Company
to, nor shall it authorize or permit any Representative of the Seller, Parent or
the Company to, (i) solicit, initiate or knowingly encourage the submission of
any Takeover Proposal, (ii) enter into any agreement with respect to a Takeover
Proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
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may reasonably be expected to lead to, any Takeover Proposal; provided, however,
that to the extent required by the fiduciary obligations of the Board of
Directors of the Parent, as determined in good faith by a majority of the
members thereof or a majority of the special transaction committee formed to
evaluate the transactions contemplated in this Agreement (after receipt of
advice from the Parent's legal counsel), the Parent may, in response to
unsolicited requests therefor, participate in discussions or negotiations with,
or furnish information pursuant to a confidentiality agreement to, any Person
who indicates a willingness to make a Superior Proposal. For all purposes of
this Agreement, "Takeover Proposal" means any proposal for a merger,
consolidation, share exchange, business combination or other similar transaction
involving the Company or any of its subsidiaries or any proposal or offer to
acquire, directly or indirectly, an equity interest in, any voting securities
of, or a substantial portion of the assets of, the Company or any of its
subsidiaries, other than the transactions contemplated by this Agreement. For
all purposes of this Agreement, "Superior Proposal" means a bona fide written
proposal made by a third party to acquire the Company pursuant to a tender or
exchange offer, a merger, a share exchange, a sale of all or substantially all
its assets or otherwise on terms which a majority of the members of the Board of
Directors of the Parent or a majority of the special transaction committee
formed to evaluate the transactions contemplated in this Agreement determines in
good faith (taking into account the advice of independent financial advisors) to
be more favorable to the Company and its stockholders than the transactions
contemplated in this Agreement.
(b) Neither the Board of Directors of the Parent nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, the approval or
recommendation by the Board of Directors of the Parent or any such committee of
the transactions contemplated in this Agreement or (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal. Notwithstanding the
foregoing, the Board of Directors of the Parent or any committee thereof, to the
extent required by its fiduciary obligations, as determined in good faith by a
majority of the members thereof (after receipt of advice from the Parent's
outside legal counsel), may approve or recommend a Superior Proposal and, in
connection therewith, withdraw or modify its approval or recommendation of the
transactions contemplated in this Agreement.
3.3 Public Announcements. The parties will not issue any press release or public
announcement, including announcements to employees or customers, with respect to
this Agreement without the prior written consent (which consent will not be
withheld unreasonably) of Buyer, the Company, Seller or Parent, as the case may
be, except that the Parent may make any disclosure or announcement that, in the
opinion of its counsel, it is obligated to make pursuant to applicable law or
regulation of the Nasdaq Stock Market, Inc. or any national securities exchange,
as applicable, in which case the Parent will provide a copy to Buyer prior to
making such disclosure or announcement.
3.4 Access to Information; Confidentiality.
(a) Each party shall have the opportunity to make a complete review of the
books, records, business and affairs of the other party. To facilitate such
review, each party shall provide to the other and its agents complete access to
all of its records and documents, shall provide to the other party with
personal, bank and professional references, and shall use reasonable efforts to
3
make available for consultation customers, employees, suppliers and distribution
channels.
(b) Each party agrees that all non-public information provided to the other will
be treated as confidential, and if this Agreement is terminated, will return to
the other party all confidential documents (and all copies thereof) in its
possession, or will certify to the other that all such documents not returned
have been destroyed. Further, regardless of whether this Agreement is
terminated, each party shall continue to hold all confidential information of
the other in strictest confidence.
3.5 HSR Act. To the extent required by law, Parent, Seller and the Company on
the one hand and Buyer on the other shall each file or cause to be filed with
the FTC and the DOJ any notifications required to be filed by their respective
"ultimate parent entities" under the HSR Act, with respect to the transactions
contemplated herein. Each party shall be responsible for all expenses incurred
in the preparation of their respective HSR Act filings and the filing fees to be
paid in connection with the HSR Act filings. The parties shall use their
reasonable best efforts to make such filings promptly, to respond to any
requests for additional information made by either the FTC or DOJ, and to cause
the waiting periods under the HSR Act to terminate or expire at the earliest
possible date.
3.6 Permits. Buyer will have made provision for any Permits required to be
obtained by Buyer or the Company and for any amendments to or other approvals
required in connection with existing Permits of the Company, and Seller will not
be responsible for any Permits of the Company following the Closing.
ARTICLE 4.
THE PARTIES' OBLIGATIONS AT THE CLOSING
4.1 The Closing. The closing ("Closing") of these transactions will be held on
December 30, 1999, or such other date as the parties mutually agree.
4.2 Conditions to Obligations of the Parties. The obligations of the parties to
consummate the transactions contemplated hereby will be subject to the
fulfillment on or prior to the Closing of the following conditions:
(a) HSR Act Notification. In respect of any necessary notifications of the
parties pursuant to the HSR Act, the applicable waiting period and any
extensions thereof shall have expired or been terminated.
(b) No Injunction, etc. Consummation of the transactions contemplated hereby
shall not have been restrained, enjoined, or otherwise prohibited by any
Applicable Law, including any order, injunction, decree, or judgment of any
court or other governmental authority. No court or other governmental authority
shall have determined any Applicable Law to make illegal the consummation of the
transactions contemplated hereby, and no proceeding with respect to the
application of any such Applicable Law to such effect will be pending.
4
(c) Parent shall have obtained any required consents, including the consent of
General Electric Capital Corporation.
(d) Seller shall have received a favorable fairness opinion.
(e) The transaction shall have been approved by Parent's, Seller's and Company's
board of directors.
(f) The Agreement shall not have been terminated pursuant to Section 6.1.
(g) Buyer shall have obtained satisfactory financing secured by the assets of
the Company.
(h) Finance Loan. Buyer shall have obtained a loan in the principal amount of
$12 million from Finance which shall be evidenced by a promissory note of Buyer
payable to Finance (the "Promissory Note") attached as Exhibit F. The Promissory
Note will be secured by the Shares as evidenced by the Pledge Agreement (the
"Pledge Agreement") attached as Exhibit I to be executed by Buyer in favor of
Finance. The Note will be subordinated to the primary financing of the Company
secured by the assets of the Company. The Promissory Note shall be guaranteed by
Verde pursuant to the Guaranty in the form attached as Exhibit G (the "Verde
Guaranty") and by the Company pursuant to the Guaranty in the form attached as
Exhibit J (the "Company Guaranty"). The Buyer will issue to Finance a warrant to
purchase up to 50% of the Buyer's common stock, as set forth in the warrant
agreement attached as Exhibit H (the "Warrant").
4.3 Seller's and the Company's Obligations. At the Closing, Parent, Seller
and/or the Company will deliver the following:
(a) the Shares (subject to delivery of the Shares back to Seller pursuant to the
Pledge Agreement), and all releases required to convey the Shares free and clear
of all liens;
(b) all releases of liens required for all assets of the Company to be free of
all liens of creditors of Seller;
(c) a certificate from Parent, Seller and the Company, attached as Exhibit E-1,
in which each certifies that the representations and warranties referred to in
Section 5.1 remain true and correct as of the Closing date;
(d) certified resolutions of the Board of Directors of Parent, Seller, and
Company approving this Agreement; and
(e) an assignment of the Cygnet tradename/trademark.
The parties further agree that they will execute and deliver any further
documents and instruments of transfer reasonably requested by CCC, and will take
any other action reasonably requested by CCC consistent with the terms of this
Assignment, for the assigning and conveying to CCC the rights contemplated
herein.
5
4.4 Buyer's Obligations. At the Closing, Buyer will deliver the following:
(a) evidence of the assumption and release of the Subordinated Note as
contemplated by Section 2.3(a);
(b) the executed Promissory Note as contemplated by Section 4.2(h);
(c) the executed Verde Guaranty and the executed Company Guaranty as
contemplated by Section 4.2(h);
(d) the executed Pledge Agreement as contemplated by Section 4.2(h);
(e) the cash payment as contemplated by Section 2.3(b);
(f) the executed Warrant as contemplated by Section 4.2(h);
(g) certified resolutions of the Board of Directors of Buyer necessary to
approve this Agreement and of Verde necessary to approve the Verde Guaranty; and
(h) a certificate from Buyer, attached as Exhibit E-2, in which Buyer certifies
that the representations and warranties referred to in Section 5.2 remain true
and correct as of the Closing date.
ARTICLE 5.
REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
5.1 Representations Relating to the Business. Parent, Seller and the Company
warrant to Buyer that each of the representations and warranties contained in
Exhibit B are true and correct in all material respects on the date of this
Agreement, and will again be true and correct in all material respects on the
Closing date.
5.2 Representations of Buyer. Buyer warrants to Parent, Seller, Company and
Finance that each of the representations and warranties contained in Exhibit C
are true and correct in all material respects on the date of this Agreement, and
will again be true and correct in all material respects on the Closing date.
5.3 Nature and Survival of Representations and Warranties. Each statement and
agreement made by any of the parties in this Agreement or in any document or
other instrument delivered by or on behalf any of the parties pursuant to this
Agreement will survive the Closing of this Agreement for the term of the
applicable indemnification obligations under this Agreement or other express
term stated herein.
5.4 General Indemnification by Seller. Parent and Seller agree to indemnify and
hold Buyer harmless from and against any Loss incurred by Buyer in connection
with or alleged to result from the following:
6
(a) a breach by Parent, Seller or the Company of any representation or warranty
made pursuant to Section 5.1 above or otherwise in this Agreement or other
document or certificate delivered pursuant to this Agreement except the Company
Guaranty (without giving effect to any qualifications as to the materiality of
such statements);
(b) a breach by Parent, Seller or the Company of any of its other obligations or
covenants contained in this Agreement or other document delivered in connection
with this Agreement except the Company Guaranty and except for any obligation to
be performed following the Closing Date; or
(c) any liability or obligation of Parent or Seller.
5.5 Special Indemnification by Seller. Seller and Buyer acknowledge and agree
that after the Closing date there may be certain expenses or liabilities that
arise that relate solely to the operations of the Company prior to the Closing
date (the "Operating Liabilities"), but that are not disclosed in the financial
statements provided by Seller to Buyer hereunder and that neither Buyer nor
Seller may know about until after the Closing date. The Operating Liabilities
shall not include contingent liabilities such as litigation or claims against
the Company, or any matter that is reserved for on the financial statements,
regardless of the adequacy of the reserve. Seller shall indemnify Buyer for any
Operating Liabilities for a period of up to one year after the date of this
Agreement.
5.6 General Indemnification by Buyer. Buyer agrees to indemnify and hold Parent,
Seller, and Finance harmless from and against any Loss incurred by any of them
in connection with or alleged to result from the following:
(a) a breach by Buyer of any representation or warranty made pursuant to Section
5.2 above or otherwise in this Agreement or other document or certificate
delivered pursuant to this Agreement (without giving effect to any
qualifications as to the materiality of such statements);
(b) a breach by Buyer (or following the Closing Date, the Company) of any of its
obligations or covenants contained in this Agreement or other document delivered
in connection with this Agreement; or
(c) any liability or obligation of Buyer (or following the Closing Date, the
Company).
5.7 Agreement and Special Indemnification by Buyer. Buyer agrees that following
the Closing, it will use its reasonable best efforts to obtain releases of
Parent and Seller and any of their Subsidiaries as guarantors of any obligations
of the Company. If it is unable to obtain any such releases, Buyer will
indemnify Parent and Seller and each of their Subsidiaries from any continuing
liabilities under any such guarantees for the remaining term of such guarantees.
5.8 Limits on Indemnification. All indemnification obligations of the parties
(except under Section 5.7 above) shall terminate December 31, 2000.
7
5.9 Procedure for Indemnification. The party that is entitled to be indemnified
hereunder shall follow the procedures set forth in Exhibit D.
ARTICLE 6.
ADDITIONAL AGREEMENTS
6.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of Buyer and Parent;
(b) by either Buyer or Parent if the other party (in the case of Parent,
including Seller or the Company) breaches any of its material representations,
warranties, or covenants contained in this Agreement and, if the breach is
curable, the breach is not cured within five (5) business days after notice;
(c) by either Buyer or Parent if the Closing does not occur on or before
December 30, 1999, unless the parties otherwise agree to extend the Closing date
(except that no party shall have the right to terminate this Agreement
unilaterally if the event giving rise to the non-occurrence of the Closing is
primarily attributable to that party or to any affiliated party);
(d) by Parent if the Board of Directors of Parent shall have withdrawn or
modified its approval or recommendation of the sale of the shares to Buyer as
permitted by Section 3.2; or
(e) by either Buyer or Parent if any of the conditions set forth in Section 4.2
have not been satisfied.
If this Agreement is terminated as provided above, this Agreement will
become void and none of the parties or their Representatives will have any
further liability or obligation except as set forth below and except for
liability arising from a breach of this Agreement.
6.2 Trademark. Parent and Seller shall not use the Cygnet name or xxxx except
for the current uses by their Subsidiaries and/or affiliates and shall cease all
use of the Cygnet name and xxxx upon the termination or discontinuance of the
business activities for which it is currently being used. On the Closing date,
Seller and Parent shall assign to Buyer the Cygnet trademark and tradename but
Parent, Seller and their affiliates and/or subsidiaries shall have the limited
right to use such as set forth above.
6.3 Compliance with Warrant. The Buyer will comply with all of its obligations
under the Warrant for the full term of the Warrant. Buyer agrees that it will
not sell, transfer or otherwise dispose of any of the capital stock of the
Company and will continue to own 100% of the capital stock of the Company for
the full term of the Warrant. Buyer agrees that it will not allow the Company to
sell, transfer or otherwise dispose of all or substantially all of its assets,
8
without the prior written consent of Seller. The above provisions of this
Section 6.3 will survive for the full term of the Warrant. Buyer further agrees
that, at any time while the Note is outstanding, it will not, and will not allow
the Company to: (i) make any payment of principal or interest on any
indebtedness owed to Verde or any other affiliate of Xxxxxx X. Xxxxxx XX (with
Verde, each a "Xxxxxx Affiliate"), until such time as the principal amount
outstanding on the Note does not exceed $4 million and all accrued interest on
the Note has been paid, (ii) make any interest payment on any indebtedness owed
to any Xxxxxx Affiliate in excess of 11% per annum, (iii) make any principal
payment on any indebtedness owed to any Xxxxxx Affiliate without the consent of
Finance, (iv) make any payment of any kind or nature on any indebtedness owed to
any Xxxxxx Affiliate while there has occurred and is continuing any Event of
Default or event that with notice or lapse of time or both would become an Event
of Default under the Note, (v) amend the subordination provisions of any
subordinated indebtedness approved by Finance without the consent of Finance or
(vi) pay any dividends or make any other distribution to its shareholders,
except dividends in an amount not exceeding the amount necessary to allow
Buyer's shareholders to discharge applicable income tax liabilities then due and
owing solely as a result of income attributable to Buyer. The provisions of the
immediately preceding sentence will survive for the full term of the Note.
6.4 Books and Records. The parties will make reasonably available to one another
any records or documents that they maintain with respect to the Business for
purposes of compliance with applicable tax laws or in defending any third-party
litigation arising in respect of this Agreement.
6.5 Notices. All notices, and other communications hereunder will be in writing
and deemed to have been given when (i) delivered by hand, (ii) sent by
telecopier (with receipt confirmed), provided that a copy is mailed by
registered mail, postage pre-paid return receipt requested, or (iii) when
actually received by the addressee, in each case to the following:
If to Parent, Ugly Duckling Corporation
Seller, or Finance: 0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
FAX: (000) 000-0000
Attn: Xxx X. Xxxxxxxx, Esq.
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
FAX: (000) 000-0000
Attn:Xxxxxx X. Xxxxxxx,Esq.
9
If to Buyer: Cygnet Capital Corporation
0000 X. Xxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
FAX: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
With a copy to: Xxxxxxx Lang
Two N. Central
Phoenix, Arizona 85004
Phone: (000) 000-0000
FAX: (000) 000-0000
Attn: Xxxxx Xxxxx, Esq.
6.6 Governing Law and Attorneys' Fees. The validity, construction, and
enforceability of this Agreement shall be governed in all respects by the laws
of the State of Arizona, without regard to its conflict of laws rules. If any
legal action or any arbitration or other proceeding is brought in connection
with this Agreement, the prevailing party will be entitled to recover reasonable
attorneys' fees, accounting fees, and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
6.7 Arbitration. Any controversy relating to this Agreement or relating to the
breach hereof shall be settled by arbitration conducted in Phoenix, Arizona in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The award rendered by the arbitrator(s) shall be
final and judgment upon the award rendered by the arbitrator(s) may be entered
upon it in any court having jurisdiction thereof. The arbitrator(s) shall
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration. The expenses of the arbitration shall be borne
by the losing party unless otherwise allocated by the arbitrator(s). The
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. During the continuance of any arbitration proceedings, the
parties shall continue to perform their respective obligations under this
Agreement.
6.8 Assignment. This Agreement will not be assigned by operation of law or
otherwise, except that Buyer may assign all or any portion of its rights under
this Agreement to any wholly owned subsidiary, but no such assignment will
relieve Buyer of its obligations hereunder, and except that this Agreement may
be assigned by operation of law to any corporation or entity with or into which
Buyer may be merged or consolidated or to which Buyer transfers all or
substantially all of its assets, and such corporation or entity assumes this
Agreement and all obligations and undertakings of Buyer hereunder.
6.9 Intent to be Binding. The Schedules and Exhibits referred to herein are
incorporated herein by reference as if fully set forth in the text of this
Agreement. This Agreement may be executed in any number of counterparts, and
each counterpart constitutes an original instrument, but all such separate
counterparts constitute one and the same agreement. This Agreement may not be
amended except by an instrument in writing approved by Parent, Buyer, Seller,
10
and the Company. If any term, provision, covenant, or restriction of this
Agreement is held by a court to be invalid or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions of this Agreement will remain
in full force and effect and will in no way be affected or invalidated and the
court will modify this Agreement or, in the absence thereof, the parties agree
to negotiate in good faith to modify this Agreement to preserve each party's
anticipated benefits under this Agreement.
6.10 Waiver of Provisions. The terms, covenants, representations, warranties,
and conditions of this Agreement may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
to require performance of any provisions hereof will, in no manner, affect the
right at a later date to enforce the same. No waiver by any party of any
condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
Parent, Seller, Company and Buyer have executed this Agreement on the
date first written above. By signing below, each individual represents that he
or she is a duly elected officer of the company and is authorized to sign in
that capacity.
UGLY DUCKLING CORPORATION, a Delaware corporation
By: /S/ XXXXXXX X. XXXXXXXX
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
UGLY DUCKLING CAR SALES AND FINANCE CORPORATION, an
Arizona corporation
By: /S/ XXXXXXX X. XXXXXXXX
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
UGLY DUCKLING FINANCE CORPORATION, an Arizona corporation
By: /S/ XXXXXXX X. XXXXXXXX
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
CYGNET DEALER FINANCE, INC., an Arizona corporation
By: /S/ XXXXXX X. XXXXXXX
-----------------------
Name: Xxxxxx X. Xxxxxxx
Title: Secretary
CYGNET CAPITAL CORPORATION, an Arizona corporation
By: /S/ XXXXXX X. XXXXXXX
-----------------------
Name: Xxxxxx X. Xxxxxxx
Title: Secretary
12
EXHIBIT A
DEFINITIONS
1. Definitions. For purposes of this Agreement, the following terms have
the following meanings.
"Applicable Laws" means all laws and regulations of foreign, federal,
state, and local governments and all agencies regulating or otherwise affecting
the Business, including, without limitation, employee health and safety, the
discharge of pollutants or wastes, and employee benefit plans.
"DOJ" means the United States Department of Justice.
"FTC" means the United States Federal Trade Commission.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Closing Balance Sheet
and the other financial statements were prepared.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"Indemnified Party" means the party which is entitled to be indemnified
under this Agreement.
"Indemnifying Party" means the party required to indemnify under this
Agreement.
"Loss" mean all costs, expenses, losses, damages, fines, penalties,
liabilities, lost profits or other losses (including, without limitation,
interest which may be imposed in connection therewith, court costs, litigation
expenses, and reasonable attorneys' and accounting fees).
"Permits" means all government or municipal licenses, certificates,
permits, approvals, and registrations required for the operation of the
Business.
"Person" means any individual, corporation, partnership or other entity.
"Representative" means any officer, director, principal, attorney,
agent, employee or other representative.
"Subsidiary" of any Person means any corporation of which securities
having a majority of the ordinary voting power in electing directors are owned
by such Person directly or through another Subsidiary.
"UCC" means the Uniform Commercial Code as in effect in the state of
Arizona.
A-1
EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF SELLER AND
THE COMPANY
Parent, Seller and the Company represent and warrant to Buyer as
follows:
1. Organization and Qualification.
(a) Seller is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Arizona, and has the requisite corporate
power and authority to own and operate its properties and to carry on its
business as now conducted. Seller is duly qualified to do business and is in
good standing in the State of Arizona, the only jurisdiction where the failure
to be so qualified would have a material adverse effect on its business,
properties, or ability to conduct the business currently conducted by it.
(b) The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Arizona, and has the requisite corporate
power and authority to own and operate its properties and to carry on its
business as now conducted. The Company is duly qualified to do business in each
jurisdiction where the failure to be so qualified would have a material adverse
effect on its business, properties, or ability to conduct the business currently
conducted by it.
(c) The Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, and has the requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted. The Parent is duly qualified to do business in
each jurisdiction where the failure to be so qualified would have a material
adverse effect on its business, properties, or ability to conduct the business
currently conducted by it.
2. Authority Relative to this Agreement. Each of Parent, Seller and the Company
has the requisite corporate power and authority to enter into this Agreement and
to carry out its obligations hereunder. The execution and delivery of this
Agreement by each of Parent, Seller and the Company and the consummation by each
of Parent, Seller and the Company of these transactions has been duly authorized
by the Board of Directors of each of Parent, Seller and the Company and has been
duly approved by all necessary action of the shareholders of Seller and Parent,
and no other corporate proceedings on the part of Seller are necessary to
authorize this Agreement and such transactions. This Agreement has been duly
executed and delivered by Parent, Seller and the Company, and constitutes a
valid and binding obligation of each of Parent, Seller and the Company,
enforceable against each in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
3. No Conflicts. Except for the needed consents of third parties identified in
Section 4.2(c) and except for the matters described in Section 3.6, neither
Parent nor Seller is subject to, or obligated under, any provision of (a) its
Articles of Incorporation, Bylaws, or other organizational documents, (b) any
agreement, arrangement, or understanding, (c) any license, franchise, or permit,
B-1
or (d) any Applicable Law which would be breached or violated, or in respect of
which a right of termination or acceleration would arise, or pursuant to which
any encumbrance on any of its assets would be created, by its execution,
delivery, and performance of this Agreement and the consummation by it of the
transactions contemplated hereby.
4. No Consents. Except as provided in the HSR Act and as provided in Section
3.6, no authorization, consent, or approval of, or filing with, any public body,
court, or authority is necessary on the part of Parent or Seller for the
consummation by Parent, Seller and the Company of the transactions contemplated
by this Agreement.
5. Capitalization. The Shares represent all of the issued and outstanding shares
of capital stock of the Company and there are no other shares of capital stock
of the Company outstanding. Other than the Warrant, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating the Company to issue or to transfer from
treasury any additional shares of its capital stock. Except for liens in favor
of GE Capital, the Shares are owned free and clear by Seller.
6. Financial Statements. Seller has provided to Buyer the Company's 1998
year-end unaudited financial statements and the Company's most current monthly
financial statements. All of these financial statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved and fairly present the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
then ended, subject, in the case of interim financial statements, to normal
recurring year-end adjustment and the absence of notes.
7. Subsidiaries. Except for Cygnet Dealer Finance Florida, Inc. and Cygnet
Dealer Finance Alabama, Inc., the Company has no Subsidiaries. Each Subsidiary
is a corporation duly organized, validly existing, and in good standing under
its state of incorporation.
8. Good Title to and Condition of the Company's Assets.
(a) The Company does not own any real estate.
(b) The Company's tangible assets (i) are in good condition and repair, ordinary
wear and tear excepted, (ii) are usable in the ordinary course of business, and
(iii) are satisfactory for the conduct of the Business.
(c) The Company owns all of its assets free and clear of all liens, encumbrances
and security interests, except those liens Seller has agreed to have released as
a condition of this transaction and Permitted Liens, or leases such equipment
under valid leases. As used herein, "Permitted Liens" means (i) liens reserved
against in the Company's financial statements, and (ii) liens for current taxes
and assessments not yet due and payable or being contested in good faith by
appropriate proceedings.
B-2
9. Brokers' Fees. Neither Seller nor the Company have dealt with any broker,
finder, or other person entitled to any brokerage commissions, finders' fees, or
similar compensation in connection with the transactions contemplated by this
Agreement.
B-3
EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Parent, Seller and Finance each of the
following:
1. Organization and Qualification. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Arizona,
and has the requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted in every jurisdiction
where the failure to do so would have a material adverse effect on its business,
properties, or ability to conduct the business currently conducted by it.
2. Authority Relative to this Agreement. Buyer has the requisite corporate power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by Buyer, and, to the extent required, by its shareholders and no
other corporate proceedings on the part of Buyer are necessary to authorize this
Agreement and such transactions. This Agreement has been duly executed and
delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, or other similar laws
relating to the enforcement of creditors' rights generally and by general
principles of equity.
3. No Conflicts. Buyer is not subject to, or obligated under, any provision of
(a) its Certificate of Incorporation or Bylaws, (b) any material agreement,
arrangement, or understanding, (c) any material license, franchise, or permit,
or (d) any law, regulation, order, judgment, or decree, which would be breached
or violated, or in respect of which a right of termination or acceleration would
arise, or pursuant to which any encumbrance on any of its or any of its
subsidiaries' material assets would be created, by its execution, delivery, and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby.
4. No Consents. Except for such filings to be made pursuant to federal or state
securities or other laws and regulations, including any required filing under
the HSR Act, all of which have been made or will be made prior to the Closing,
no authorization, consent, or approval of, or filing with, any public body,
court, or authority is necessary on the part of Buyer for the consummation by
Buyer of the transactions contemplated by this Agreement.
5. Buyer's Review of Seller's and Company Information. Buyer acknowledges that
its controlling-shareholder has been involved in the day-to-day operations of
the Company since the Company's formation. Buyer acknowledges that, except for
the representations set forth on Exhibit B, neither Seller nor the Company nor
any of their Representatives have made any other representations regarding the
Company upon which Buyer has relied, and Buyer desires no further information
pertaining to the Company. Buyer acknowledges that its investment in the Company
involves a significant degree of risk, and that it is able to bear the risk of
loss of this investment.
C-1
EXHIBIT D
PROCEDURE FOR INDEMNIFICATION
1. The Indemnified Party will promptly give notice hereunder to the Indemnifying
Party after obtaining written notice of any claim as to which recovery may be
sought against the Indemnifying Party.
2. If the indemnity claim arises from the claim of a third-party, the
Indemnified Party will permit the Indemnifying Party to assume the defense of
any such claim and any litigation resulting from such claim. If the Indemnifying
Party assumes the defense of a third-party claim, the obligations of the
Indemnifying Party as to such claim will include taking all steps necessary in
the defense or settlement of such claim or litigation and holding the
Indemnified Party harmless from and against any and all damages caused by or
arising out of any settlement approved by the Indemnifying Party or any judgment
in connection with such claim or litigation. The Indemnifying Party shall not,
in the defense of such claim or any litigation resulting therefrom, consent to
entry of any judgment (other than a judgment of dismissal on the merits without
costs) except with the written consent of the Indemnified Party, or enter into
any settlement (except with the written consent of the Indemnified Party) which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party a release from all liability in respect
of such claim or litigation. The Indemnified Party may, with counsel of its
choice and at its expense, participate in the defense of any such claim or
litigation.
3. If the Indemnifying Party does not assume the defense of any such claim by a
third-party or resulting litigation after receipt of notice from the Indemnified
Party, the Indemnified Party may defend against such claim or litigation in such
manner as it deems appropriate, and unless the Indemnifying Party deposits with
the Indemnified Party a sum equivalent to the total amount demanded in such
claim or litigation plus the Indemnified Party's estimate of the costs of
defending the same, the Indemnified Party may settle such claim or litigation on
such terms as it may deem appropriate and the Indemnifying Party will promptly
reimburse the Indemnified Party for the amount of such settlement and for all
damages incurred by the Indemnified Party in connection with the defense against
or settlement of such claim or litigation. If the Indemnifying Party fails to
notify an Indemnified Party of its election to defend any such claim or action
by a third party within 15 days after the Indemnifying Party received noticed of
such claim or action, then the Indemnifying Party will be deemed to have waived
its right to defend such claim or action.
4. Except as otherwise expressly provided herein, the Indemnifying Party will
promptly reimburse the Indemnified Party for the amount of any judgment rendered
with respect to any claim by a third-party in such litigation and for all damage
incurred by the Indemnified Party in connection with the defense against such
claim or litigation, whether or not resulting from or arising out of the act of
a third-party.
5. The right to indemnification hereunder will not be affected by any failure of
an Indemnified Party to give such notice, or delay by an Indemnified Party in
giving such notice, unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party will have been prejudiced as a result of the
failure to give, or delay in giving, such notice.
D-1
EXHIBIT E-1
CERTIFICATE OF PARENT, SELLER AND THE COMPANY PURSUANT
TO SECTION 4.3(c)
Ugly Duckling Corporation, a Delaware corporation, Ugly Duckling Car
Sales and Finance Corporation, an Arizona corporation, and Cygnet Dealer
Finance, Inc., an Arizona corporation, each hereby certifies that the
representations and warranties referred to in Section 5.1 of the Stock Purchase
Agreement between Ugly Duckling Corporation, Ugly Duckling Car Sales and Finance
Corporation, Ugly Duckling Finance Corporation, Cygnet Dealer Finance, Inc., and
Cygnet Capital Corporation, dated December 30, 1999, remain true and correct
as of the Closing date.
UGLY DUCKLING CORPORATION
By:
Name:
Title:
UGLY DUCKLING CAR SALES AND FINANCE CORPORATION
By:
Name:
Title:
CYGNET DEALER FINANCE, INC.
By:
Name:
Title:
EXHIBIT E-2
CERTIFICATE OF BUYER PURSUANT
TO SECTION 4.4(h)
Cygnet Capital Corporation, an Arizona corporation, hereby certifies
that the representations and warranties referred to in Section 5.2 of the Stock
Purchase Agreement between Ugly Duckling Corporation, a Delaware corporation,
Ugly Duckling Car Sales and Finance Corporation, an Arizona corporation, Ugly
Duckling Finance Corporation, an Arizona corporation, Cygnet Dealer Finance,
Inc., an Arizona corporation, and Cygnet Capital Corporation, dated
December 30, 1999, remain true and correct as of the Closing date.
CYGNET CAPITAL CORPORATION
By:
Name:
Title:
