================================================================================
SENIOR SECURED LOAN AGREEMENT
Dated as of May 14, 1999
by and among
UGLY DUCKLING CORPORATION,
a Delaware corporation
("Borrower")
THE LENDERS FROM TIME TO TIME PARTY HERETO
and
XXXXXX TRUST AND SAVINGS BANK,
as Collateral Agent
$38,000,000 Senior Secured Loan
================================================================================
Page - 1
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS........................................................1
1.1. Defined Terms......................................................1
1.2. Other Interpretive Provisions.....................................15
1.3. Accounting Principles.............................................16
1.4. Times.............................................................17
ARTICLE II. THE LOAN 17
2.1. The Loan..........................................................17
2.2. Payment Upon Collection; Monthly Amortization.....................17
2.3. Payment Upon Maturity.............................................17
2.4. Interest..........................................................17
2.5. Prepayments.......................................................18
2.6. Application of Payments...........................................18
2.7. Prepayment........................................................20
2.8. Fees..............................................................20
2.9. Fees and Interest.................................................20
2.10. Payments by Borrower; Payments by Collateral Agent...............20
2.11. Taxes............................................................21
2.12. Sharing of Payments, Etc.........................................23
2.13. Suspension of LIBOR..............................................23
2.14. Increased Costs, Etc.............................................24
ARTICLE III. SECURITY AGREEMENT AND COLLATERAL...............................24
3.1. Security for Obligations..........................................24
3.2. Security Documents................................................25
3.3. Duties Regarding Collateral.......................................25
3.4. Borrower's Duties Regarding Collateral............................25
3.5. Power of Attorney.................................................26
3.6. Collateral Inspections............................................27
ARTICLE IV. CONDITIONS PRECEDENT; TERM OF AGREEMENT..........................27
4.1. Conditions Precedent..............................................27
4.2. Receipt of Documents..............................................27
4.3. Term..............................................................29
4.4. Effect of Termination.............................................29
ARTICLE V. REPRESENTATIONS AND WARRANTIES....................................29
5.1. No Encumbrances...................................................29
5.2. Location of Chief Executive Office; FEIN..........................29
5.3. Due Organization and Qualification; Subsidiaries..................29
5.4. Due Authorization: No Conflict...................................30
5.5. Litigation........................................................31
5.6. Financial Statements; No Material Adverse Change..................31
5.7. Securitization Documents..........................................31
5.8. ERISA.............................................................31
5.9. Environmental and Safety Matters..................................32
- i -
TABLE OF CONTENTS
Page
----
5.10. Tax Matters......................................................32
5.11. Year 2000 Matters................................................32
5.12. Ownership of Properties..........................................32
5.13. Investment Company Status........................................32
5.14. Solvency.........................................................33
ARTICLE VI. AFFIRMATIVE COVENANTS............................................33
6.1. Financial Statements and Other Documents..........................33
6.2. Inspection of Property............................................34
6.3. Default Disclosure................................................34
6.4. Notices to Lenders and the Collateral Agent.......................35
6.5. Books and Records.................................................35
6.6. Compliance and Preservation.......................................35
6.7. Perfection of Liens...............................................35
6.8. Cooperation.......................................................35
6.9. Use of Proceeds...................................................35
6.10. Securitizations..................................................35
6.11. Compliance with Covenants........................................36
6.12. Payment of Indebtedness..........................................36
6.13. Tangible Net Worth...............................................36
6.14. Consolidated EBITDA to Consolidated Interest Expense.............36
6.15. Consolidated Senior Debt to Consolidated Total Capitalization....36
6.16. Minimum B-Piece Cash Flows.......................................36
6.17. Sale of Cygnet...................................................36
6.18. Collateral Account...............................................37
6.19. Year 2000 Assurances.............................................37
6.20. Maintenance of Properties........................................37
6.21. Maintenance of Insurance.........................................37
ARTICLE VII. NEGATIVE COVENANTS..............................................37
7.1. Liens.............................................................37
7.2. Indebtedness......................................................37
7.3. Restrictions on Fundamental Changes...............................38
7.4. Disposal of Collateral............................................38
7.5. Change Name.......................................................38
7.6. Amendments........................................................38
7.7. Change of Control.................................................38
7.8. Distributions.....................................................38
7.9. Standing Dividend Resolutions.....................................38
7.10. Change in Location of Chief Executive Office.....................38
7.11. No Prohibited Transactions Under ERISA...........................39
7.12. Changes in Nature of Business....................................39
7.13. Transactions with Affiliates.....................................39
ARTICLE VIII. EVENTS OF DEFAULT/REMEDIES.....................................40
8.1. Event of Default..................................................40
8.2. Rights and Remedies...............................................41
- ii -
TABLE OF CONTENTS
Page
----
ARTICLE IX. THE COLLATERAL AGENT.............................................42
9.1. Authorization and Action..........................................42
9.2. Collateral Agent's Reliance, Etc..................................43
9.3. Xxxxxx Trust and Savings Bank and Affiliates......................43
9.4. Lender Credit Decision............................................43
9.5. Indemnification...................................................44
9.6. Successor Collateral Agents.......................................44
9.7. Monthly Verification Duties of Collateral Agent...................44
ARTICLE X. MISCELLANEOUS.....................................................45
10.1. Amendments and Waivers...........................................45
10.2. Notices..........................................................45
10.3. No Waiver: Cumulative Remedies..................................47
10.4. Costs and Expenses...............................................47
10.5. Indemnity........................................................48
10.6. Marshaling: Payments Set Aside..................................48
10.7. Successors and Assigns...........................................48
10.8. Set-off..........................................................48
10.9. Counterparts.....................................................49
10.10. Severability....................................................49
10.11. No Third Parties Benefited......................................49
10.12. Time............................................................49
10.13. Governing Law and Jurisdiction..................................49
10.14. Entire Agreement................................................50
10.15. Interpretation..................................................50
10.16. Assignment; Register............................................51
10.17. Revival and Reinstatement of Obligations........................51
10.18. Survival........................................................52
10.19. Confidentiality.................................................52
10.20. Actions by Portfolio Advisor....................................52
- iii -
SCHEDULES AND EXHIBITS
Schedule A Borrower's Subsidiaries
Schedule B Warrants, Options, etc.
Schedule C Litigation
Schedule D Exceptions to Financial Statements
Schedule E Permitted Liens
Schedule F Class B Certificates
Schedule G Subordinated Indebtedness
Schedule H Collateral Agent Fees
Schedule I Administrative Forms
Exhibit A UDRC and UDRC II Securitization Documents
Exhibit B Form of Collateral Account Agreement
Exhibit C Form of Assignment and Acceptance
Exhibit D Form of Promissory Note
Exhibit E Form of Guaranty
- iv -
SENIOR SECURED LOAN AGREEMENT
This SENIOR SECURED LOAN AGREEMENT (the "Agreement"), is
entered into as of May 14, 1999, among UGLY DUCKLING CORPORATION, a Delaware
corporation ("Borrower"), with a place of business located at 0000 Xxxx
Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, the Lenders party hereto
(together with their respective successors and assigns, "Lenders") and XXXXXX
TRUST AND SAVINGS BANK, as Collateral Agent (together with its successors and
assigns in such capacity, "Collateral Agent").
Lenders have agreed to make to Borrower a senior secured loan
(the "Loan") upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Defined Terms. In addition to the terms defined elsewhere in
this Agreement, the following terms have the following meanings:
"Actual Amortization Amount" has the meaning set forth in
Section 2.6.
"Additional Class B Certificates" shall mean all Class B
Certificates or similar interests which both (i) are issued during the
Securitization Period by each Securitization Trust or other similar entity with
respect to which UDRC, UDRC II or any other Affiliate of UDC or UDCC is the
seller or issuer (or equivalent), and (ii) represent the securitization of Ugly
Duckling Collateral.
"Administrative Form" means an administrative details form
delivered by the Collateral Agent and any Lender to Collateral Agent and
Borrower. The initial Administrative Forms are attached hereto as Schedule I.
The Collateral Agent and each Lender may change its Administrative Form at any
time by delivering a new Administrative Form to the Collateral Agent and
Borrower.
"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 twenty
percent (20%) 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 Lender
be deemed an "Affiliate" of Borrower.
"Agreement" means this Senior Secured Loan Agreement, as
amended, supplemented or modified from time to time in accordance with the terms
hereof.
Page -1-
"Assignment and Acceptance" means an assignment and acceptance
in substantially the form of Exhibit C.
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external or internal counsel.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal to
the highest of: (a) either (1) the "prime rate" published in the "Money Rates"
section of the Wall Street Journal, as such "prime rate" may change from time to
time or, if such rate ceases to be published, (2) the rate of interest announced
publicly by Xxxxxx Trust and Savings Bank from time to time as Xxxxxx Trust and
Savings Bank's prime rate; and (b) 1/2 of one percent per annum above the
Federal Funds Rate.
"B-Piece" means the UDRC Class B Certificates, the UDRC II
Class B Certificates and all Additional Class B Certificates.
"B-Piece Cash Flows" means, for any period, all cash
distributions with respect to a B-Piece together with all related spread account
distributions, in each case during such period.
"B-Piece Value" means, as of any date of determination with
respect to any B-Piece, the amount of the entire cash balance in the spread
account relating to such B-Piece plus the difference between (a) the outstanding
principal balance of auto loans in the pool of collateral securing the related
securitization and (b) the outstanding principal balance of all certificates and
other interests or rights to payment in respect of such securitization senior in
priority to such B-Piece, in each case as set forth in the then most recently
delivered Collateral Servicing Report (subject to confirmation of the
calculations set forth in such Collateral Servicing Report by the Collateral
Agent).
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. section 101 et seq.), as amended, and any successor statute.
"Bond Insurance Policy" shall mean a financial guaranty or
financial insurance policy issued by MBIA or any of its Affiliates or any other
financial guarantor in respect of one or more classes of investor certificates
or other interests issued by a Securitization Trust.
"Borrower Taxes" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs, duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, intangible, ad
valorem, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax or other governmental charge of any kind
whatsoever, including any interest, penalty or additions thereto.
"Borrower's Books" means all of Borrower's books and records
including: ledgers, records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral and the assets of any
Subsidiaries of Borrower) or liabilities; all information relating to Borrower's
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information.
Page -2-
"Borrowing Base" means, as of any date of determination, the
sum of the products obtained by multiplying the B-Piece Value of each B-Piece as
of the most recent Calculation Date by the Advance Rate (as set forth below)
applicable to such B-Piece as of such Calculation Date:
Complete Months of Seasoning
Since Securitization Cut-Off Date Advance Rate
--------------------------------------------------- -------------------
0 - 3 months 25%
4 - 5 months 30%
6 - 9 months 35%
10 - 12 months 40%
13 - 18 months 45%
19 - 23 months 55%
Greater than or equal to 24 months 60%
Notwithstanding the foregoing, the Advance Rate with respect to Ugly Duckling
Auto Grantor Trust 1999-A shall be 27% for the zero (0) to three (3) month
period above.
Notwithstanding the foregoing or any other provision hereof or
of any other Loan Document to the contrary, (i) no Additional Class B
Certificates shall be included in the calculation of the Borrowing Base unless
and until the provisions of Section 3.1 have been complied with respect to such
Additional Class B Certificates, and (ii) Lenders shall be entitled to exclude
from the Borrowing Base any B-Piece (or any portion thereof) as to which (A)
Required Lenders determine that the Collateral Agent does not have a perfected
first priority, valid and enforceable security interest either in such B-Piece
directly or in 100% of the capital stock of the holder of such B-Piece, or (B) a
Securitization Default exists.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in Los Angeles, California or Chicago,
Illinois and, if the applicable Business Day relates to any Eurodollar Rate
Advances, on which dealings are carried on in the London interbank market.
"Calculation Date" means the second Business Day prior to the
15th day of each month.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (49 U.S.C. Section 9601, et seq.).
"Change of Control" shall be deemed to have occurred at such
time as (i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13(d)(3) under the
Securities Exchange Act of 1934), directly or indirectly, of more than 25% of
the total voting power of all classes of stock then outstanding of Borrower
entitled to vote in the election of directors or (ii) Xxxxxx X. Xxxxxx shall
cease to be the record and beneficial owner of at least 15% of the capital stock
of Borrower, entitled, in the absence of contingencies (whether or not any of
Page -3-
such contingencies has occurred), to vote in the election of directors of
Borrower or (iii) Borrower ceases to own 100% of the capital stock of UDCSFC, or
(iv) UDCSFC ceases to own 100% of the capital stock of UDRC and UDRC II.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are either satisfied or waived by each Lender
and each Lender makes its ratable portion of the Loan.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
"Collateral" means all "Collateral" referred to in the
Security Documents and all other property that is subject to any Lien in favor
of the Collateral Agent or any Lender.
"Collateral Account" means the cash collateral account
established and maintained pursuant to Section 6.18.
"Collateral Account Agreement" means the cash collateral
account agreement in substantially the form of Exhibit B.
"Collateral Agent" has the meaning set forth in the preamble to
this Agreement.
"Collateral Servicing Report" means a report of the Borrower
with respect to the B-Piece Values, B-Piece Cash Flows and Borrowing Base and
such other information as Required Lenders may request in form and detail
acceptable to Required Lenders.
"Collections" means all proceeds of, payments or other
distributions of principal, interest or other amounts on, and other amounts
received by or on behalf of Borrower or any of its Affiliates in respect of any
B-Piece or any Collateral, including all amounts paid to Collateral Agent or any
Lender pursuant to any Dividend Direction Letter.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated EBITDA" means for any period, net income (or net
loss) plus, to the extent deducted in determining such net income (or net loss),
the sum of (a) interest expense, (b) income tax expense, (c) depreciation
expense and (d) amortization expense, in each case determined for the Borrower
and its Subsidiaries on a Consolidated basis for such period in conformity with
GAAP.
"Consolidated Interest Expense" means, for any period, total
interest expense (including the interest component of capitalized leases) of the
Borrower and its Subsidiaries on a Consolidated basis for such period in
conformity with GAAP, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to any financings or letters of
credit and net costs under hedge agreements.
"Consolidated Net Worth" means the excess of (i) the total
assets of the Borrower and its Subsidiaries determined on a Consolidated basis
in conformity with GAAP, over (ii) all liabilities of the Borrower and its
Subsidiaries determined on a Consolidated basis in conformity with GAAP.
Page -4-
"Consolidated Senior Debt" means, at any time of determination,
Consolidated Total Debt minus Subordinated Debt and Non-Recourse Debt.
"Consolidated Total Capitalization" means, at any time of
determination, the sum of (i) Consolidated Total Debt, and (ii) Consolidated Net
Worth, in each case, as of such time.
"Consolidated Total Debt" means, at any time of determination,
all indebtedness for borrowed money (including capitalized leases), in each case
of the Borrower and its Subsidiaries at such time determined on a Consolidated
basis.
"Debt" or "Indebtedness" means (i) indebtedness for borrowed
money, (ii) obligations evidenced by bonds, debentures, notes, matured
reimbursable obligations under letters of credit or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services
other than trade payables incurred in the ordinary course of business, (iv)
obligations as lessee under leases that shall have been or should be, in
accordance with GAAP recorded as capital leases, (v) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in
clauses (i) through (iv), and (vi) liabilities in respect of unfunded vested
benefits under Pension Plans covered by Title IV of ERISA.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied) constitute an Event of Default.
"Dividend Direction Letter" means (i) the UDRC Dividend
Direction Letter, (ii) the UDRC II Dividend Direction Letter, and (iii) each
letter agreement or other agreement entered into after the date hereof with
respect to any Additional Class B Certificates providing for payment of
distributions in respect of such Additional Class B Certificates (or payments
and distributions in respect of the stock or other equity interests of the
holder of such Additional Class B Certificates) to be made directly to the
Collateral Account for application to the Obligations and/or release to Borrower
in accordance with the Collateral Account Agreement and Section 2.6.
"Dollars," "dollars" and "$" each mean lawful money of the
United States.
"Environmental and Safety Laws" means all Federal, state and
local laws, regulations and ordinances, relating to the discharge, handling,
disposition or treatment of Hazardous Materials and other substances or the
protection of the environment or of employee health and safety, including
CERCLA, the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 7401, et
seq.), the Clean Air Act (42 U.S.C. Section 7401, et seq.), the Toxic Substances
Control Act (15 U.S.C. Section 2601, et seq.), the Occupational Safety and
Health Act (29 U.S.C. Section 651, et seq.) and the Emergency Planning and
Community Right-To-Know Act (42 U.S.C. Section 11001, et seq.), each as the same
may be amended and supplemented.
"Environmental Liabilities and Costs" means, as to any Person,
all liabilities, obligations, responsibilities, remedial actions, losses,
damages, punitive damages, consequential damages, treble damages, contribution,
Page -5-
cost recovery, costs and expenses (including all fees, disbursements and
expenses of counsel, expert and consulting fees, and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim or demand, by any Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
permit, order or agreement with any Federal, state or local governmental
authority or other Person, arising from environmental, health or safety
conditions, or the release or threatened release of a contaminant, pollutant or
Hazardous Material into the environment, resulting from the operations of such
Person or its subsidiaries, or breach of any Environmental and Safety Law or for
which such Person or its subsidiaries is otherwise liable or responsible.
"Equity Interests" means, with respect to a Person, any common
stock, preferred stock, partnership interest (whether general or limited),
membership interest or other equity or participating interest in such Person.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and regulations promulgated thereunder.
"ERISA Affiliate" of any Person means any other Person that
for purposes of Title IV of ERISA is a member of such Person's controlled group,
or under common control with such Person, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" with respect to any Person means (a) the
occurrence of a reportable event, within the meaning of Section 4043 of ERISA,
with respect to any Plan of such Person or any of its ERISA Affiliates unless
the 30-day notice requirement with respect to such event has been waived by the
PBGC; (b) the provision by the administrator of any Plan of such Person or any
of its ERISA Affiliates of a notice of intent to terminate such Plan, pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (c) the cessation of
operations at a facility of such Person or any of its ERISA Affiliates in the
circumstances described in Section 4062(e) of ERISA; (d) the withdrawal by such
Person or any of its ERISA Affiliates from a Multiple Employer Plan during a
plan year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (e) the failure by such Person or any of its ERISA
Affiliates to make a payment to a Plan required under Section 302(f)(1) of
ERISA; (f) the adoption of an amendment to a Plan of such Person or any of its
ERISA Affiliates requiring the provision of security to such Plan, pursuant to
Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to
terminate a Plan of such Person or any of its ERISA Affiliates, pursuant to
Section 4042 of ERISA, or the occurrence of any event or condition described in
Section 4042 of ERISA that could constitute grounds for the termination of, or
the appointment of a trustee to administer, such Plan.
"Event of Default" means any of the events or circumstances
specified in Section 8.1.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
Page -6-
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
for such transactions received by Collateral Agent from three Federal funds
brokers of recognized standing selected by it.
"FEIN" means Federal Employer Identification Number.
"Financing Statements" means the Financing Statements on Form
UCC-1 relating to and filed in connection with the Collateral and naming the
Collateral Agent as secured party.
"Fiscal Quarter" means a fiscal quarter of Borrower.
"Fiscal Year" means a fiscal year of Borrower.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
accounting profession), or in such other statements by such other entity as may
be in general use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of determination.
"GECC" means General Electric Capital Corporation, a New York
corporation.
"GECC Agreement" shall mean the Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement, dated as of August 15,
1997, by and between Borrower, GECC and certain other parties thereto, as such
agreement may be amended from time to time.
"Governing Documents" means, with respect to Borrower,
Borrower's certificate of incorporation and bylaws.
"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.
"Greenwich Loan Agreement" means the Loan Agreement dated as
of March 18, 1999 between Borrower and Greenwich Capital Financial Products,
Inc.
"Guaranty" means the guaranty executed by UDCSFC on the date
hereof in substantially the form of Exhibit E.
"Guarantor" means (i) UDCSFC and (ii) each other Subsidiary of
the Borrower that, after the date hereof, becomes a party to the Guaranty.
Page -7-
"Hazardous Materials" means (a) any material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "toxic substances" or any other formulations
intended to define, list or classify substances by reason of their deleterious
properties, (b) any oil, petroleum or petroleum derived substance, (c) any
flammable substances or explosives, (d) any radioactive materials, (e) asbestos
in any form, (f) electrical equipment that contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty parts per
million, (g) pesticides or (h) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental agency
or authority or which may or could pose a hazard to the health and safety of
persons in the vicinity thereof.
"Indebtedness" see "Debt".
"Indemnified Liabilities" has the meaning specified in Section
10.5.
"Indemnified Person" has the meaning specified in Section 10.5.
"Initial Principal Amount" means the amount of Thirty Eight
Million Dollars ($38,000,000).
"Interest Accrual Period" shall mean the one-month period from
and including a Payment Date to the close of business on the day preceding the
next Payment Date, except that the first Interest Accrual Period shall commence
on the Closing Date and end at the close of business on the day preceding the
Payment Date.
"Lender Costs" or "Lender Expenses" means all: (a) costs or
expenses (including taxes and insurance premiums) required to be paid by
Borrower under any of the Loan Documents that are paid or incurred by Collateral
Agent, any Lender or any of their respective affiliates; (b) reasonable
out-of-pocket fees or charges paid or incurred by Collateral Agent or any Lender
in connection with Lenders' transactions with Borrower, including, fees or
charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation and
UCC searches and including searches with the patent and trademark office, the
copyright office or the department of motor vehicles), filing, recording,
publication, appraisals, due diligence, actual out-of-pocket costs and expenses
incurred by Collateral Agent or any Lender in the disbursement of funds to
Borrower (by wire transfer or otherwise); (c) actual out-of-pocket charges paid
or incurred by Collateral Agent or any Lender resulting from the dishonor of
checks; (d) reasonable out-of-pocket costs and expenses paid or incurred by
Collateral Agent or any Lender to correct any default or enforce any provision
of the Loan 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 costs and expenses paid or incurred by Collateral
Agent or any Lender in examining Borrower's Books; (f) reasonable out-of pocket
costs and expenses of third party claims or any other suit paid or incurred by
Collateral Agent or any Lender in enforcing or defending the Loan Documents or
Page -8-
in connection with the transactions contemplated by the Loan Documents or
Collateral Agent or any Lender's relationship with Borrower; and (g) Collateral
Agent's, any Lender's or any of their respective Affiliate's reasonable Attorney
Costs incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing, defending, or concerning the Loan Documents,
irrespective of whether suit is brought (including, without limitation, any
negotiations in the nature of a work-out). For purposes of this definition, the
term "Lender" shall include any portfolio advisor or collateral manager
(including, without limitation, SunAmerica Investment Advisor, Inc.) acting on
behalf of any Lender or in connection with such Lender's Loan hereunder.
"LIBOR" shall mean, with respect to an Interest Accrual
Period, the rate per annum equal to the rate appearing at page 3750 of the
Telerate Screen two LIBOR Business Days prior to the beginning of such Interest
Accrual Period, for the one-month term corresponding to such Interest Accrual
Period, or if such rate shall not be so quoted then the applicable rate
appearing on Bloomberg on the day two LIBOR Business Days prior to the beginning
of such Interest Accrual Period, or if neither such rate shall be so quoted, the
"London Interbank Offered Rates (LIBOR)" (one month) published in the "Money
Rates" section of the Wall Street Journal two LIBOR Business Days prior to the
beginning of such Interest Accrual Period.
"LIBOR Business Day" shall mean any day which is a Business
Day and which is also a day on which dealings in U.S. Dollars are carried on in
the London interbank market.
"Lien or Encumbrance" or "Liens and Encumbrances" means any
mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit
arrangement, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease obligation, any financing lease having substantially the
same economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the UCC or any comparable law) and any contingent or other agreement to
provide any of the foregoing.
"Loan Documents" means this Agreement, each Note, the
Guaranty, the Security Documents, the Stock Pledge Agreement, the Collateral
Account Agreement, each Dividend Direction Letter, the Financing Statements, and
all documents delivered to Collateral Agent or any Lender in connection
therewith.
"Loan Party" means Borrower, UDCSFC and each other Affiliate
of Borrower that is a party to any Loan Document.
"Material Adverse Change" or "Material Adverse Effect" means a
material adverse change in, or a material adverse effect upon, any of (a) the
operations, performance, business, properties, condition (financial or
otherwise) or prospects of any Loan Party or of Borrower and its Subsidiaries
taken as a whole, (b) the ability of Borrower or any other Loan Party to perform
under any Loan Document and avoid any Event of Default, or (c) the legality,
validity, binding effect or enforceability of any Loan Document.
"Maturity Date" shall mean June 1, 2001.
"MBIA" shall mean MBIA Insurance Corporation.
Page -9-
"Monthly Amortization Amount" means:
(i) with respect to any Payment Date occurring prior
to June 15, 2000, the greater of (A) $500,000.00, and (B) subject to
Section 2.6, the amount, if any, by which the then Outstanding
Principal Amount of the Loan exceeds the Borrowing Base as of such date
as set forth in the Collateral Servicing Report required to be
delivered with respect to such Payment Date; and
(ii) with respect to any Payment Date occurring on or
after June 15, 2000, the greatest of (A) $1,000,000, (B) 50% of the
aggregate B-Piece Cash Flows for the then most recently ended monthly
period as set forth in the Collateral Servicing Report required to be
delivered with respect to such Payment Date, and (C) the amount, if
any, by which the then Outstanding Principal Amount of the Loan exceeds
the Borrowing Base as of such date as set forth in the Collateral
Servicing Report required to be delivered with respect to such Payment
Date.
"Multiemployer Plan" of any Person means a multiemployer plan,
as defined in Section 4001(a)(3) of ERISA, to which such Person or any of its
ERISA Affiliates is making or accruing an obligation to make contributions, or
has within any of the preceding six plan years made or accrued an obligation to
make contributions.
"Multiple Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and at least one Person
other than such Person and its ERISA Affiliates or (b) was so maintained and in
respect of which such Person or any of its ERISA Affiliates could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Non-Recourse Debt" means (i) the Securitizations identified
on Exhibit A and securitizations existing on the date hereof of Cygnet Financial
Corporation and its Subsidiaries, (ii) Debt under one or more warehouse
facilities or securitizations of a Subsidiary of Borrower that is a bankruptcy
remote or other similar special purpose entity so long as such Debt satisfies
each of the following requirements: (a) the sole collateral for such Debt are
loan receivables purchased by such bankruptcy remote or other special purpose
entity and the recourse of the lenders under such warehouse facility is limited
to such collateral, (b) no Loan Party (1) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute Debt),
(2) is directly or indirectly liable as a guarantor or otherwise, or (3)
constitutes the lender; (b) the lenders with respect to such Debt have been
notified, and have acknowledged in writing or pursuant to the terms of the
instruments and agreements governing such Debt, in each case prior to the
incurrence of such Debt, that they will not have any recourse to the stock or
assets of any Loan Party, and (c) the Lenders have received notice of the amount
and principal terms of such Debt prior to its incurrence, and (iii) other Debt
approved by the Required Lenders as Non-Recourse Debt.
"Note" means a promissory note of the Borrower in favor of a
Lender in substantially the form of Exhibit D evidencing the Borrower's
obligations to such Lender in respect of the principal amount of the Loan made
by or otherwise owing to such Lender.
Page -10-
"Obligations" means all Debt, advances, debts, liabilities,
obligations, covenants and duties owing by Borrower to Collateral Agent or any
Lender, of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, arising under this Agreement, any Note
or under any other Loan Document, absolute or contingent, due or to become due,
now existing or hereafter arising and however acquired.
"Outstanding Principal Amount" means the Initial Principal
Amount minus all amounts applied to the repayment of the Loan pursuant to
Section 2.6(d).
"Payment Date" shall mean the 15th day of each month during
the term of this Agreement commencing on June 15, 1999.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (a) Liens held by Collateral Agent or
any Lender and (b) each lien existing at or prior to the date of this Agreement
that is identified on Schedule E to this Agreement.
"Permitted Subsidiary Indebtedness" means (a) Indebtedness
outstanding under agreements in effect on the date hereof with General Electric
Capital Corporation, as such agreements may be amended, supplemented or modified
from time to time but without any increase in the aggregate commitments or
Indebtedness available to be borrowed (or other credit available to be extended)
thereunder, (b) Non-Recourse Debt, and (c) other Indebtedness in an aggregate
principal amount not to exceed $10,000,000 at any time outstanding. For purposes
of calculating the amount of Indebtedness outstanding under the foregoing clause
(c), obligations in respect of capitalized leases (as described in clause (iv)
of the definition of "Debt") shall be excluded to the extent the aggregate
principal amount of all such obligations (determined in accordance with GAAP)
does not exceed $4,000,000.
"Person" means a natural person, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, limited
liability company, joint venture or Governmental Authority.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Repayment Date" means the earlier of (i) the Maturity Date or
(ii) the date that the Outstanding Principal Amount of the Loan outstanding
hereunder, together with all accrued interest in respect thereof and all other
Obligations, has been reduced to zero.
"Required Amortization Amount" has the meaning set forth in
Section 2.6.
"Required Lenders" means Lenders holding greater than fifty
percent (50%) of the aggregate principal amount of the Loan.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
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.
Page -11-
"Responsible Officer" means the chief executive officer or the
president of Borrower, 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 Borrower, or any other officer having
substantially the same authority and responsibility.
"SAI" means SAI Investment Advisor, Inc., and its successors
and assigns.
"Security Documents" means the writings described in Article
III hereof, as they may hereafter be amended, modified and/or supplemented, and
all other writings now or hereafter executed to create, evidence and/or perfect
any Lien(s) to secure the Loan or any portion(s) thereof.
"Securitization Default" means any termination event, default
or event of default, or event or occurrence which, with the passage of time or
the giving of notice or both, would become a termination event, default or event
of default under any Securitization Document, which has not been cured within
any applicable period thereunder.
"Securitization Documents" shall mean (i) each UDRC
Securitization Document, (ii) each UDRC II Securitization Document, (iii) each
purchase agreement and/or pooling and servicing agreement (or comparable
document) entered into or acknowledged by Borrower, UDCC, UDRC, UDRC II or any
Affiliate of any of them after the date hereof with respect to any Additional
Class B Certificates, and (iv) the other agreements, instruments, certificates
and documents entered into or acknowledged by Borrower, UDCC, or any Affiliate
of any of them or by a Securitization Trust (or comparable vehicle) with respect
to any Additional Class B Certificates.
"Securitization Period" shall mean the period from and
including the date hereof to and including the date immediately following the
date on which Borrower completes securitizations of at least $75,000,000 of Ugly
Duckling Collateral in the year 2000.
"Securitization Trust" shall mean any trust formed pursuant to
a purchasing agreement or a pooling and servicing agreement specified on Exhibit
A hereto or contemplated in clause (iii) of the definitions of Securitization
Documents.
"Single Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and no Person other than
such Person and its ERISA Affiliates or (b) was so maintained and in respect of
which such Person or any of its ERISA Affiliates could have liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated.
"Standing Dividend Resolutions" shall mean (i) the UDRC
Standing Dividend Resolution, (ii) the UDRC II Standing Dividend Resolution, and
(iii) all other resolutions adopted by the board of directors of Borrower or any
of its Affiliates or Subsidiaries to the effect that any amounts received as
distributions on any Additional Class B Certificates or in respect of spread
accounts (or the like) should be promptly distributed to Collateral Agent for
the ratable account of the Lenders.
Page -12-
"Stock Pledge Agreement" means that certain Stock Pledge
Agreement, dated as of the date hereof, among UDCSFC as Pledgor, Borrower and
Collateral Agent, pursuant to which UDCSFC grants to Collateral Agent a security
interest in one hundred percent (100%) of the issued and outstanding capital
stock of each of UDRC and UDRC II.
"Subordinated Debt" shall mean the Debt set forth on Schedule
G and any Debt incurred after the date hereof as to which the repayment of
principal and interest is subordinated to repayment of the Loan pursuant to
subordination provisions that have been approved in writing by Required Lenders.
"Subsidiary" of a Person means a corporation, partnership,
limited liability partnership, limited liability company or other entity in
which that Person directly or indirectly owns or controls the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability partnership, limited liability
company or other entity.
"Tangible Net Worth" of Borrower shall mean the total of
Borrower's and its consolidated Subsidiaries' shareholders' equity (including
capital stock, additional paid-in capital and retained earnings), less (i) the
total amount of all Indebtedness owing to Borrower from its consolidated
Subsidiaries, Affiliates, shareholders, officers or employees, and (ii) the
total amount of any intangible assets of Borrower and its consolidated
Subsidiaries, including unamortized discounts, deferred charges and goodwill.
"Trustee" means Xxxxxx Trust and Savings Bank.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of New York, and in any and all other states in which
Borrower and/or any of its Subsidiaries conduct, or are authorized to conduct
business.
"UDCC" means Ugly Duckling Credit Corp., an Arizona
corporation formerly known as Champion Acceptance Corporation.
"UDCSFC" means Ugly Duckling Car Sales and Finance
Corporation, an Arizona corporation formerly known as Duck Ventures, Inc.
"UDRC" shall mean Ugly Duckling Receivables Corp., a Delaware
corporation.
"UDRC II" shall mean Ugly Duckling Receivables Corp. II, a
Delaware corporation.
"UDRC Class B Certificates" shall mean the currently issued
and outstanding, and all further issued and then outstanding, Class B
Certificates issued by each Securitization Trust with respect to which UDRC is
the seller, including those set forth on Schedule F, which constitute all of the
UDRC Class B Certificates in existence on the Closing Date.
"UDRC II Class B Certificates" shall mean the currently issued
and outstanding, and all further issued and then outstanding, Class B
Page -13-
Certificates issued by each Securitization Trust with respect to which UDRC II
is the seller, including those set forth on Schedule F, which constitute all of
the UDRC II Class B Certificates in existence on the Closing Date.
"UDRC Dividend Direction Letter" means the letter dated May 6,
1999 in which Collateral Agent, Lenders, UDRC, UDCC and Trustee agree that
Trustee shall pay all distributions in respect of the UDRC Class B Certificates
directly to the Collateral Account for application to the Obligations and/or
release to Borrower in accordance with the Collateral Account Agreement and
Section 2.6.
"UDRC II Dividend Direction Letter" means the letter dated May
6, 1999 in which Collateral Agent, Lender, UDRC II, UDCC and Trustee agree that
Trustee shall pay all distributions in respect of the UDRC II Class B
Certificates directly to the Collateral Account for application to the
Obligations and/or release to Borrower in accordance with the Collateral Account
Agreement and Section 2.6.
"UDRC Securitization Documents" shall mean each of (i) the
purchase agreements listed on Exhibit A hereto, (ii) the pooling and servicing
agreements listed on Exhibit A hereto, and (iii) the other agreements,
instruments, certificates and documents entered into or acknowledged by
Borrower, UDCC, UDRC or any Affiliate of any of them or by a Securitization
Trust.
"UDRC II Securitization Documents" shall mean each of (i) the
purchase agreements listed on Exhibit A hereto, (ii) the pooling and servicing
agreements listed on Exhibit A hereto, and (iii) the other agreements,
instruments, certificates and documents entered into or acknowledged by
Borrower, UDCC, UDRC II or any Affiliate of any of them or by a Securitization
Trust.
"UDRC Standing Dividend Resolution" shall mean the resolution
adopted on January 27, 1998 by the board of directors of UDRC (formerly Champion
Receivables Corp.) to the effect that any amounts received as distributions on
the UDRC Class B Certificates should be distributed as dividends to UDCSFC or
any other holder or assignee of the Common Stock of UDRC.
"UDRC II Standing Dividend Resolution" shall mean the
resolution adopted on May 6, 1999 by the board of directors of UDRC II (formerly
Champion Receivables Corp. II) to the effect that any amounts received as
distributions on the UDRC II Class B Certificates should be distributed as
dividends to UDCSFC or any other holder or assignee of the Common Stock of UDRC
II.
"Ugly Duckling Collateral" shall mean any installment
contracts or conditional sales contracts, with any amendments thereto,
originated by Borrower or its Subsidiaries pursuant to which a person has: (i)
purchased a new or used motor vehicle, (ii) granted a security interest in the
motor vehicle, and (iii) agreed to pay the unpaid purchase price and a finance
charge in periodic installments.
"United States" and "U.S." each means the United States of
America.
"Voidable Transfer" has the meaning set forth in Section 10.17.
Page -14-
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. Terms (including uncapitalized terms) not
otherwise defined herein, and that are defined in the UCC shall have the
meanings therein described.
(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) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) The term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or."
(d) Performance; Time. Whenever any performance obligation
hereunder or under any Note (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 such 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.
(e) 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 Document.
(f) 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.
(g) Captions. The captions and headings of this Agreement are
for convenience of reference only and shall not affect the construction of this
Agreement.
Page -15-
(h) Independence of Provisions. The parties acknowledge that
this Agreement and other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. In the event that GAAP changes
during the term of this Agreement such that the covenants contained in Article
VI would then be calculated in a different manner or with different components,
(i) Borrower and Lenders agree to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating Borrower's
financial condition to substantially the same criteria as were effective prior
to such change in GAAP and (ii) Borrower shall be deemed to be in compliance
with the covenants contained in Article VI following any such change in GAAP if
and to the extent that Borrower would have been (and would continue to be) in
compliance therewith under GAAP as in effect immediately prior to such change.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of Borrower.
1.4 Times. All times of the day herein are Los Angeles, California time.
ARTICLE II.
THE LOAN
--------
2.1 The Loan. Each Lender, on the terms and conditions hereinafter set
forth and subject to the conditions precedent pursuant to Section 4.1 of this
Agreement, severally agrees to make the Loan to Borrower in the ratable portion
of the Initial Principal Amount set forth opposite such Lender's name on the
signature pages hereto.
2.2 Payment Upon Collection; Monthly Amortization. Upon receipt by
Borrower or any of its Affiliates of any Collections, Borrower shall promptly
(and in any event within one (1) Business Day) pay (or cause to be paid) such
Collections to Collateral Agent for deposit in the Collateral Account. Subject
to Section 2.6, Borrower shall, on each Payment Date, repay the Outstanding
Principal Amount in an amount equal to the Monthly Amortization Amount for such
Payment Date. Each Lender shall, upon receipt of any such Collections, apply
such Collections and any Collections paid directly to Lender by Trustee or
Collateral Agent in accordance with the procedures set forth in Section 2.6 (but
subject to Section 2.12).
2.3. Payment Upon Maturity. On the Maturity Date, Borrower will pay to
each Lender an amount equal to the Outstanding Principal Amount of the Loan then
owing to such Lender, together with all accrued and unpaid interest on such
Outstanding Principal Amount and any other accrued and unpaid Obligations then
owing to such Lender.
Page -16-
2.4. Interest.
(a) Interest Rate. Interest shall accrue on the Outstanding
Principal Amount of the Loan during each Interest Accrual Period at a rate per
annum equal to LIBOR for such Interest Accrual Period plus five hundred fifty
(550) basis points (the "Initial Interest Rate"). In addition, after the
occurrence of and during the continuance of any Event of Default under Section
8.1 of this Agreement, the Outstanding Principal Amount of the Loan together
with all accrued and unpaid interest on the Loan and any other accrued and
unpaid Obligations due and payable to Lender under this Agreement shall bear
interest during each Interest Accrual Period at a rate per annum equal to LIBOR
for such Interest Accrual Period plus one thousand fifty (1,050) basis points.
Upon determining LIBOR for each Interest Accrual Period, the Collateral Agent
shall notify the Lenders and Borrower of such LIBOR determination and the rate
thereof.
(b) Limitation on Interest Rate. The obligations of Borrower
hereunder and under the Notes shall be subject to the limitation that payments
of interest to any Lender, plus any other amounts paid to such Lender in
connection herewith and therewith, shall not be required, to the extent (but
only to the extent) that contracting for or receiving such payment by such
Lender would be contrary to the provisions of any law applicable to such Lender
limiting the highest rate of interest which may be lawfully contracted for,
charged or received by such Lender, and in such event Borrower shall pay such
Lender interest and other amounts at the highest rate permitted by applicable
law.
2.5 Voluntary Prepayments; Deposits to Collateral Account.
(a) Voluntary Prepayments. Borrower shall have the right, at
its option, to prepay its obligations under the Loan in whole or in part at any
time (in a minimum amount of $100,000 and an integral multiple of $10,000, or
such lesser amount as is then outstanding); provided, however, that (i) each
such voluntary prepayment shall be applied ratably among the Lenders and shall
be accompanied by payment of any amounts owing under Section 10.4(d) with
respect to such prepayment, (ii) except as set forth in the following clause
(iv), any such voluntary prepayment on or prior to December 31, 1999 shall be
accompanied by a prepayment premium in the amount of 2.0% of the amount prepaid,
(iii) except as set forth in the following clause (iv), any such voluntary
prepayment on or after January 1, 2000 and on or prior to June 30, 2000 shall be
accompanied by a prepayment premium in the amount of 1.0% of the amount prepaid,
and (iv) no prepayment premium under the foregoing clauses (ii) and (iii) shall
be required in the event of a prepayment in full of the Obligations within 30
days after the Required Lenders have refused to consent (after a reasonable
period for review) to additional Indebtedness of a Subsidiary of the Borrower
(to the extent such consent is required under Section 7.2(b)) in respect of a
bona fide proposal from a non-affiliated third party financial institution to
provide additional Indebtedness that is otherwise permitted hereunder. After
June 30, 2000, there shall be no prepayment premium. Borrower shall give each
Lender at least ten Business Days prior notice of its intention to prepay,
specifying the date of payment, the total amount and portion of the Loan of such
Lender to be paid on such date and the amount of interest to be paid with such
prepayment.
Page -17-
(b) Deposits to Collateral Account. In the event the
Outstanding Principal Amount shall at any time exceed the sum of the Borrowing
Base plus the amount then on deposit in the Collateral Account, the Borrower
shall immediately deposit cash in the amount of such excess to the Collateral
Account.
2.6 Application of Payments. All payments on the Loan shall be
applied, without duplication, in the following order:
(a) First, to Collateral Agent and each Lender for any and all
sums advanced by Collateral Agent or such Lender as are reasonably necessary in
order to preserve the Collateral or the security interests in the Collateral and
all reasonable expenses of taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral or of any exercise by
Collateral Agent or any Lender (or any portfolio advisor for any Lender) of its
rights under this Agreement or any other Loan Document, together with reasonable
Attorney Costs and unpaid fees and expenses; and
(b) Second, ratably to each Lender for application to overdue
interest on the Obligations;
(c) Third, ratably to each Lender for application to accrued
interest on the Obligations;
(d) Fourth, ratably to each Lender for application to the
Outstanding Principal Amount in an amount equal to such Lender's ratable portion
of any Monthly Amortization Amount then due and payable;
(e) Fifth, ratably to each Lender in payment of all other
accrued and unpaid Obligations owing to such Lender.
Any provision hereof to the contrary notwithstanding, if, at
any time prior to June 15, 2000, immediately after giving effect to the payment
of any Monthly Amortization Amount, the aggregate amount of all principal
payments actually made by Borrower hereunder and received by the Lenders (as of
any date of determination, the "Actual Amortization Amount") since the date
hereof exceeds the product of $500,000.00 multiplied by the number of Payment
Dates that have then occurred since the date hereof (as of any date of
determination, the "Required Amortization Amount"), then Borrower, upon written
request to the Collateral Agent (with a copy to the Lenders), may reduce the
amount of any subsequent Monthly Amortization Amount with respect to any Payment
Date occurring prior to June 15, 2000 by such amount as would not cause the
Actual Amortization Amount to be less than the Required Amortization Amount
immediately following such Payment Date.
In the event clause (i)(B) of the definition of Monthly
Amortization Amount would result in a Monthly Amortization Amount with respect
to any Payment Date in excess of $500,000.00, Borrower may elect by written
notice to Collateral Agent and Lenders received at least one Business Day in
advance of such Payment Date, to repay only $500,000.00 of the Outstanding
Principal Amount on such Payment Date and, in lieu of repaying the remainder of
any such excess on such Payment Date, elect to have such excess remain in the
Collateral Account (to be held by Collateral Agent pursuant to the Collateral
Account Agreement and this Section 2.6).
Page -18-
Any provision hereof or of the Collateral Account Agreement to
the contrary notwithstanding, any amounts held by Collateral Agent pursuant to
the Collateral Account Agreement and not otherwise required to be applied to the
Obligations shall, at the written direction of Borrower, be applied to repay
Obligations hereunder (to be applied as set forth in this Section 2.6) or, if
the Borrowing Base plus such amount on deposit in the Collateral Account exceeds
the Outstanding Principal Amount and no Default has occurred and is continuing,
such amounts held in the Collateral Account shall, upon written request by
Borrower to Collateral Agent, be released to Borrower up to the amount of such
excess; provided, however, that any release to Borrower of amounts on deposit in
the Collateral Account shall only be made on a Payment Date and only after
giving effect to the payment of all amounts due hereunder and under the other
Loan Documents on such Payment Date.
2.7 Prepayment. Upon any prepayment of the Loan, Borrower
shall pay to each Lender such Lender's ratable share of the principal amount to
be prepaid, together with all accrued and unpaid interest thereon through the
date of prepayment and any applicable premium payable pursuant to Section 2.5.
Notice of prepayment having been given in accordance with Section 2.5, the
amount specified to be prepaid shall become due and payable on the date
specified for prepayment.
2.8 Fees.
(a) Up-Front Fee. Borrower shall pay to Lenders on the Closing
Date, a non-refundable Up-Front Fee in the aggregate amount of $380,000, such
fee to be allocated ratably among the Lenders.
(b) Collateral Agent Fees. Borrower shall pay to the
Collateral Agent, as and when due, the non-refundable fees set forth on Schedule
H.
2.9. Fees and Interest. All computations of fees and interest
under this Agreement shall be made on the basis of a 360-day year and actual
days elapsed, which results in more interest being paid than if computed on the
basis of a 365-day year. Interest and fees shall accrue during each Interest
Accrual Period during which interest or such fees are computed from the first
day thereof to the last day thereof. Borrower shall pay to Lenders all accrued
and unpaid interest on each Payment Date.
2.10 Payments by Borrower; Payments by Collateral Agent.
(a) All payments (including prepayments) to be made by or on
behalf of Borrower on account of principal, interest, fees and other amounts
required hereunder or under any Note shall be made without set-off, deduction,
recoupment or counterclaim and shall, except as otherwise expressly provided
herein, be made to Collateral Agent at Collateral Agent's office as set forth on
its Administrative Form or as otherwise directed in writing by the Collateral
Agent, in dollars and in immediately available funds, no later than 11:00 a.m.
on the date specified herein. Any payment which is received by Collateral Agent
later than 11:00 a.m. shall be deemed to have been received on the immediately
succeeding Business Day and any applicable interest or fee shall continue to
accrue. The Collateral Agent will promptly after receipt of each payment cause
to be distributed like funds relating to the payment of principal and interest
Page -19-
ratably to each Lender, and like funds relating to the payment of any other
amount payable to any Lender to such Lender, in each case to be applied in
accordance with, and subject to, the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 10.16, from and after the
effective date specified in such Assignment and Acceptance, the Collateral Agent
shall make all payments hereunder, under any Note and under any other Loan
Document in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) Whenever any payment hereunder or under any Note shall be
stated to be due on a day, other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of interest or fees, as the case may be.
(c) If any payment of interest or Lender Expenses owing to any
Lender is not received by such Lender, within ten (10) days of the date when the
same is due, Borrower shall pay to such Lender a late charge in an amount equal
to five percent (5%) of the amount not so paid.
2.11. Taxes.
(a) Withholding Taxes. Any and all payments by the Borrower
hereunder and under any Note shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Collateral Agent, net income taxes that are
imposed by the United States and franchise taxes and net income taxes that are
imposed on such Lender or the Collateral Agent by the state or foreign
jurisdiction under the laws of which such Lender or the Collateral Agent (as the
case may be) is organized or any political subdivision thereof and, in the case
of each Lender, franchise taxes and net income taxes that are imposed on such
Lender by the state or foreign jurisdiction of such Lender's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder (or under any
Note) to any Lender or the Collateral Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.11(a)) such Lender Party or the Collateral Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) Other Taxes. In addition, the Borrower shall pay any
present or future stamp, documentary, excise, property or similar taxes, charges
or levies that arise from any payment made hereunder or under any Note or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
Page -20-
(c)......Indemnification. The Borrower shall indemnify each
Lender and the Collateral Agent for the full amount of Taxes and Other Taxes,
and for the full amount of taxes imposed by any jurisdiction on amounts payable
under this Section 2.11 paid by such Lender or the Collateral Agent (as the case
may be) and any liability (including penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Collateral Agent (as the
case may be) makes written demand therefor.
(d)......Evidence of Payment. Within 30 days after the date of
any payment of Taxes, the Borrower shall furnish to the each Lender the original
receipt of payment thereof or a certified copy of such receipt. In the case of
any payment hereunder or under any Note by the Borrower through an account or
branch outside the United States or on behalf of the Borrower by a payor that is
not a United States person, if the Borrower determines that no Taxes are payable
in respect thereof, the Borrower shall furnish, or shall cause such payor to
furnish, to each Lender an opinion of counsel acceptable to such Lender stating
that such payment is exempt from Taxes. For purposes of this subsection (d) and
subsection (e), the terms "United States" and "United States person" shall have
the meanings specified in Section 7701 of the Internal Revenue Code.
(e)......Foreign Lenders and Issuing Banks. Each Lender
organized under the laws of a jurisdiction outside the United States shall, on
or prior to the date of it becomes a party to this Agreement, and from time to
time thereafter upon the reasonable request in writing by the Borrower or the
Collateral Agent (but only so long thereafter as such Lender remains lawfully
able to do so), provide the Collateral Agent and the Borrower with Internal
Revenue Service Form 1001 or 4224 (or other appropriate form), as appropriate,
or any successor form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or is entitled to a reduced rate of United
States withholding tax on payments under this Agreement. If the form provided by
a Lender at the time such Lender first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from Taxes unless and
until such Lender provides the appropriate form certifying that a lesser rate
applies, whereupon withholding tax at such lesser rate only shall be considered
excluded from Taxes for periods governed by such form; provided, however, that,
if at the date of the assignment pursuant to which a Lender assignee becomes a
party to this Agreement, the Lender assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date.
(f)......Failure to Provide Forms. For any period with respect
to which a Lender has failed to provide the Borrower with the appropriate form
described in Section 2.11(e) (other than if such failure is due to a change in
law occurring after the date on which a form originally was required to be
provided or if such form otherwise is not required under Section 2.11(e)), such
Lender Party shall not be entitled to indemnification under Section 2.11(a) or
Section 2.11(c) with respect to Taxes imposed by the United States; provided,
however, that should a Lender become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes.
Page -21-
2.12.....Sharing of Payments, Etc.. If any Lender shall obtain at any
time any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) (a) on account of Obligations due and payable to
such Lender hereunder or under any Note at such time in excess of its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lenders hereunder and under the Notes at such
time) of payments on account of the Obligations due and payable to all Lenders
hereunder and under the Notes at such time obtained by all the Lenders at such
time or (b) on account of Obligations owing (but not due and payable) to such
Lender hereunder or under any Note at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing to such
Lender at such time to (ii) the aggregate amount of the Obligations owing (but
not due and payable) to all Lenders hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lenders hereunder and under the Notes at such time obtained by all the Lenders
at such time, such Lender shall forthwith purchase from the other Lenders such
participations in the Obligations due and payable or owing to them, as the case
may be, as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each other Lender shall be rescinded and such other
Lender shall repay to the purchasing Lender the purchase price to the extent of
such other Lender's ratable share (according to the proportion of (i) the
purchase price paid to such Lender to (ii) the aggregate purchase price paid to
all Lenders) of such recovery together with an amount equal to such Lender's
ratable share (according to the proportion of (i) the amount of such other
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.12 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
2.13.....Suspension of LIBOR.
(a)......Illegality. Notwithstanding any other provision of
this Agreement, if the introduction of or any change in or in the interpretation
of any law or regulation shall make it unlawful, or any central bank or other
governmental authority shall assert that it is unlawful, for any Lender to
perform its obligations hereunder to make, fund or maintain its portion of the
Loan as a LIBOR based obligation, then, on notice thereof and demand therefor by
such Lender to the Borrower, the interest rate applicable to the Loan pursuant
to Section 2.4 shall thereafter be the Base Rate plus 4.50% until such Lender
shall notify the Borrower that such Lender has determined that the circumstances
causing such suspension no longer exist.
(b)......Other Circumstances. If any Lender shall determine in
good faith (which determination shall be conclusive) that (A) LIBOR cannot be
determined in accordance with the definition thereof, or (B) LIBOR for any
Interest Accrual Period will not adequately reflect the cost to such Lender of
Page -22-
making, funding or maintaining such Lender's ratable portion of the Loan for
such Interest Period, such Lender shall forthwith so notify the Borrower and the
other Lenders, whereupon the interest rate applicable to the Loan pursuant to
Section 2.4 for such Lender shall thereafter be the Base Rate plus 4.50%.
2.14.....Increased Costs, Etc..
(a)......Increased Costs. If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or of
making, funding or maintaining its portion of the Loan based on LIBOR, then the
Borrower shall from time to time, upon demand by such Lender pay to such Lender
additional amounts sufficient to compensate such Lender for such increased cost
A certificate as to the amount of such increased cost, submitted to the Borrower
by such Lender, shall be conclusive and binding for all purposes, absent
manifest error.
(b)......Capital Requirements. If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender as a result
of or based upon the existence of such Lender's commitment to lend hereunder,
then, upon demand by such Lender, the Borrower shall pay to such Lender, from
time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender in the light of such circumstances, to the extent that
such Lender reasonably determines such increase in capital to be allocable to
the existence of such Lender's commitment to lend hereunder. A certificate as to
such amounts submitted to the Borrower by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
2.15.....Promissory Notes. The Borrower hereby agrees that if, in the
opinion of any Lender, a promissory note or other evidence of debt is required,
appropriate or desirable to reflect or enforce the indebtedness of the Borrower
resulting from the Loan made by or otherwise owing to such Lender, then upon
request of such Lender, the Borrower shall (in the case of any such request by a
Lender that is not an initial party hereto, in accordance with Section 10.16)
promptly execute and deliver to such Lender, a promissory note substantially in
the form of Exhibit D, payable to the order of such Lender in an amount equal to
the principal amount of the Loan made by or otherwise owing to such Lender.
ARTICLE III.
SECURITY AGREEMENT AND COLLATERAL
3.1......Security for Obligations. As security for the payment and
performance of the Obligations under this Agreement and the other Loan Documents
and all other present and future debts, obligations and liabilities of any
nature whatsoever of Borrower to Collateral Agent or any Lender in respect of
this Agreement and the other Loan Documents, and all modifications, renewals,
replacements and extensions thereof, UDCSFC shall grant Collateral Agent (for
Collateral Agent's benefit and the ratable benefit of the Lenders) a security
Page -23-
interest in the Collateral pursuant to the Stock Pledge Agreement, the
Collateral Account Agreement and such other agreements, documents and
instruments as Required Lenders may reasonably require. Borrower shall cause
UDCSFC to execute and deliver the Stock Pledge Agreement and to perform its
obligations thereunder. Borrower will, prior to the creation of any Additional
Class B Certificates, take and cause its Affiliates and Subsidiaries to take,
such actions and execute such agreements, documents and instruments (and deliver
such opinions of counsel) as may be necessary or as Collateral Agent or Required
Lenders may reasonably request in order to create a perfected first priority
security interest securing the Obligations in favor of Collateral Agent (for
Collateral Agent's benefit and the ratable benefit of the Lenders) in such
Additional Class B Certificates or in 100% of the capital stock or other equity
interests of the entity owning such Additional Class B Certificates, including,
without limitation, compliance with Section 7(c) of the Stock Pledge Agreement.
Borrower will execute, and shall cause UDCSFC and Borrower's other Affiliates
and Subsidiaries, to execute, any security agreements, collateral assignments,
financing statements for filing and/or recording and any other agreements,
documents or instruments reasonably required by Collateral Agent or Required
Lenders to evidence and perfect the Liens and security interests of Collateral
Agent. A carbon, photographic or other reproduced copy of this Agreement and/or
any financing statement relating hereto shall be sufficient for filing and/or
recording as a financing statement.
3.2......Security Documents. The Financing Statements shall remain on
file in the appropriate jurisdictions and Borrower shall promptly execute or
cause to be executed any other financing statements and notices as are necessary
to properly perfect Collateral Agent's security interest in the Collateral.
3.3......Duties Regarding Collateral. Neither Collateral Agent nor any
Lender (nor any portfolio advisor for any Lender) shall have any duty or
obligation to protect, insure, collect or realize upon the Collateral or
preserve rights in it against prior parties. Borrower releases Collateral Agent
and each Lender (and each portfolio advisor) from, and shall indemnify
Collateral Agent and each Lender (and each portfolio advisor) against, any
liability for any act or omission relating to the Collateral, except with
respect to any such Person for any liability directly resulting from such
Person's gross negligence or willful misconduct.
3.4......Borrower's Duties Regarding Collateral. Borrower agrees as
follows:
(a)......General Maintenance of Collateral. Borrower: (i)
shall keep the Collateral free from all Liens (other than the Liens of ad
valorem property taxes which are not delinquent, any statutory landlords' liens
which are covered by lien waivers satisfactory to Required Lenders, mechanic's
liens, Permitted Liens, and any Liens in favor of Collateral Agent for the
benefit of the Lenders); (ii) shall defend the Collateral against all claims and
legal proceedings by persons other than Collateral Agent and Lenders; (iii)
shall pay and discharge when due all taxes, levies and other charges upon the
Collateral; (iv) shall cause UDCSFC and Borrower's other Affiliates and
Subsidiaries not to sell, lease or otherwise dispose of the Collateral; and (v)
shall not permit the Collateral to be used in violation of any Requirement of
Law or any policy of insurance.
Page -24-
(b)......Perfection and Priority. Borrower shall pay all
Lender's Expenses necessary to, take all actions necessary to, and, upon
Collateral Agent's or any Lender's request, execute all writings and take and
cause Borrower's Affiliates and Subsidiaries to take all other actions
reasonably deemed advisable by Collateral Agent or any Lender to, preserve the
Collateral or to establish, and determine priority of, perfection, continued
perfection or enforce Collateral Agent's interest in the Collateral.
(c)......Records and Inspections. Upon reasonable notice to
Borrower, any Lender may examine and conduct audits of the Collateral, and
Borrower's and UDCSFC's and Borrower's other Affiliates' and Subsidiaries'
records concerning it, wherever located, and make copies of such records, at any
time during normal business hours, and Borrower shall assist such Lender in so
doing. Borrower shall keep accurate, complete and current records respecting the
Collateral. In addition to the specific requirements of Section 6.1, Borrower
shall, within ten (10) Business Days of any request by any Lender, furnish to
such Lender a detailed statement, certified as being substantially accurate by a
Responsible Officer, setting forth the current status, value and location of all
or any portion of the Collateral.
3.5......Power of Attorney. Borrower hereby makes, constitutes and
appoints Collateral Agent and each Lender and its portfolio advisor the true and
lawful attorney-in-fact of Borrower, in the name, place and stead of Borrower,
or otherwise, upon the occurrence of any Event of Default which remains uncured
following the receipt of a notice pursuant to Section 10.2:
(a)......To take all actions and to execute, acknowledge,
obtain and deliver any and all writings necessary or deemed advisable by
Collateral Agent or such Lender in order to exercise any rights of Borrower with
respect to the Collateral or to receive and enforce any payment or performance
due to Borrower with respect to the Collateral;
(b)......To give any notices, instructions or other
communications to any person or entity in connection with the Collateral;
(c)......To demand and receive all performances due under or
with respect to the Collateral and to take all lawful steps to enforce such
performances and to compromise and settle any claim or cause of action of
Borrower arising from or related to the Collateral and give acquittances and
other discharges relating thereto; and
(d)......To file any claim or proceeding or to take any other
action, in the name of Collateral Agent or such Lender, Borrower or otherwise,
to enforce performances due under or related to the Collateral or to protect and
preserve the right, title and interest of Collateral Agent or such Lender
thereunder.
The foregoing power of attorney is a power coupled with an interest and shall be
irrevocable and unaffected by the disability of the principal so long as any
portion of the Obligations remains contingent, unmatured, unliquidated, unpaid
or unperformed. Lender shall have no obligation to exercise any of the foregoing
rights and powers in any event.
3.6......Collateral Inspections. Collateral Agent and each Lender shall
have the right (but not the obligation) to do a physical on-site examination of
the Collateral. All costs and expenses associated therewith shall be included in
Lender Expenses.
Page -25-
ARTICLE IV.
CONDITIONS PRECEDENT; TERM OF AGREEMENT
4.1......Conditions Precedent. No Lender shall be required to make the
Loan to be made by it hereunder if Borrower has not fulfilled to the
satisfaction of such Lender and its counsel, each of the following conditions on
or before the Closing Date; provided, however, that each Lender, in its sole and
absolute discretion, may waive any of the following conditions.
4.2......Receipt of Documents. Each Lender shall have received each of
the following documents, duly executed, and each such document shall be in full
force and effect:
(a)......This Agreement executed by Borrower, Collateral Agent
and each Lender;
(b)......The Notes duly executed, the Guaranty duly executed,
the Collateral Account Agreement duly executed and the Stock Pledge Agreement
duly executed together with the certificates representing 100% of the capital
stock of UDRC and UDRC II and undated stock powers relating thereto duly
endorsed in blank;
(c)......The UDRC Dividend Direction Letter;
(d)......The UDRC II Dividend Direction Letter;
(e)......The UDRC Standing Dividend Resolution certified by
UDRC's Secretary;
(f)......The UDRC II Standing Dividend Resolution certified by
UDRC II's Secretary;
(g)......A consent and subordination from GECC consenting to
the execution, delivery and performance by Borrower and UDCSFC of the Loan
Documents and subordinating to Collateral Agent GECC's Lien on any assets
constituting Collateral;
(h)......A consent by MBIA to the pledge of the Collateral to
Collateral Agent;
(i)......Certified copies of the resolutions of the board of
directors of Borrower approving and authorizing the execution, delivery and
performance by Borrower of this Agreement and the other Loan Documents to be
delivered hereunder, and authorizing the Loan, certified as of the Closing Date
by the Secretary or an Assistant Secretary of Borrower;
(j)......A certificate of the Secretary or Assistant Secretary
of Borrower certifying the names and true signatures of the officers of Borrower
authorized to execute, deliver and perform, as applicable, this Agreement, the
Stock Pledge Agreement and all other Loan Documents to be delivered hereunder;
(k)......Certified copies of the resolutions of the board of
directors of UDCSFC approving and authorizing the execution, delivery and
performance by UDCSFC of the applicable Loan Documents to be delivered
hereunder, certified as of the Closing Date by the Secretary or an Assistant
Secretary of UDCSFC;
Page -26-
(l)......A certificate of the Secretary or Assistant Secretary
of UDCSFC certifying the names and true signatures of the officers of UDCSFC
authorized to execute, deliver and perform the Stock Pledge Agreement and all
other applicable Loan Documents to be delivered hereunder;
(m)......Copies of each of Borrower's, UDCSFC's, UDRC's and
UDRC II's certificate of incorporation certified by the Secretary of the State
of their respective jurisdictions of incorporation and bylaws certified by their
respective Secretaries or Assistant Secretaries;
(n)......Good standing certificates for the jurisdiction of
incorporation and the jurisdiction in which the chief executive office is
located for each of Borrower, UDCSFC, UDRC and UDRC II;
(o)......A copy of lien searches, completed as of a recent
date, against Borrower and UDCSFC, UDRC and UDRC II, in such jurisdictions as
shall be satisfactory to Lenders and its counsel;
(p)......Legal opinions from counsel for Borrower with respect
to the transactions contemplated by the Loan Documents, which opinions shall be
in form and substance satisfactory to Lenders and from counsel satisfactory to
Lenders; and
(q)......Evidence satisfactory to Lenders of the termination
of the Greenwich Loan Agreement, satisfaction of all obligations of Borrower and
its Subsidiaries thereunder and the release of all Liens relating thereto.
(r)......There shall have occurred since December 31, 1998, no
Material Adverse Change.
(s)......Lenders shall have received Borrower's audited
financial statements for the fiscal year ended December 31, 1998.
(t)......Officers Certificate as to no default and truth of
representations and warranties.
(u)......Completion of due diligence.
4.3......Term. This Agreement shall become effective upon the execution
and delivery hereby by Borrower, Collateral Agent and Lenders and shall continue
in full force and effect for a term ending on the earliest of (a) the Repayment
Date, or (b) the date of termination of this Agreement in accordance with its
terms after the occurrence and during the continuation of an Event of Default.
4.4......Effect of Termination. Upon termination of this Agreement, all
Obligations shall become due and payable immediately without notice or demand.
No termination of this Agreement, however, shall relieve or discharge Borrower
of Borrower's duties, Obligations, or covenants hereunder, and Collateral
Agent's continuing security interest in the Collateral shall remain in effect
until all Obligations have been fully and finally discharged.
Page -27-
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and
make the Loan, Borrower makes the following representations and warranties which
shall be true, correct, and complete in all respects as of the date hereof, and
shall be true, correct, and complete in all respects as of the Closing Date
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1......No Encumbrances. UDCSFC has good and indefeasible title to the
Collateral, free and clear of
Liens except for Permitted Liens.
5.2......Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 00-0000000. The chief executive office of
UDCSFC is located at the address of Borrower indicated in the preamble to this
Agreement and UDCSFC's FEIN is 00-0000000.
5.3......Due Organization and Qualification; Subsidiaries.
(a)......Each Loan Party is duly organized, validly 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 the failure to be so licensed or qualified reasonably could be expected to
have a Material Adverse Effect.
(b)......Set forth on Schedule A is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
Equity Interests authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding Equity Interests of each such
Subsidiary have been validly issued and are fully paid and non-assessable.
(c)......Except as set forth on Schedule B, no Equity
Interests (or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for Equity Interests) of any direct or indirect
Subsidiary of Borrower is subject to the issuance of any security, instrument,
warrant, option, purchase right, conversion or exchange right, call, commitment
or claim of any right, title, or interest therein or thereto.
5.4......Due Authorization: No Conflict.
(a)......The execution, delivery, and performance by each Loan
Party of each of the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
Page -28-
(b)......The execution, delivery, and performance by each Loan
Party of each of the Loan 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 T, U, and X of the Federal Reserve Board) applicable to
such Loan Party, the Governing Documents of such Loan Party, or any order,
judgment, or decree of any court or other Governmental Authority binding on any
Loan Party, (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 or material lease of any Loan Party, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of any Loan Party, other than pursuant to the Security Documents, or
(iv) require any approval of stockholders or any approval or consent of any
Person under any material contractual obligation of any Loan Party. No Loan
Party or any of its Subsidiaries is in violation of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or in breach
of any such contract, loan agreement, indenture, mortgage, deed of trust, lease
or other instrument, the violation or breach of which could have a Material
Adverse Effect.
(c)......Other than the taking of any other action expressly
required under this Agreement or any of the other Loan Documents, the execution,
delivery, and performance by each Loan Party of this Agreement and the other
Loan Documents to which such Loan Party 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.
(d)......This Agreement, the other Loan Documents and all
other documents contemplated hereby and thereby, when executed and delivered by
any Loan Party party thereto, will be the legally valid and binding obligations
of such Loan Party, enforceable against such Loan Party 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.
(e)......The Stock Pledge Agreement and the stock powers
delivered in connection therewith, and the Collateral Account Agreement when
executed and delivered by UDCSFC and UDC, will be the legally valid and binding
obligations of UDCSFC and UDC, enforceable against each of UDCSFC and UDC 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.
(f)......The Lien granted by UDCSFC and UDC on the Collateral
is a validly created and perfected first priority Lien, and the Collateral is
subject to no other Liens other than Liens in favor of Collateral Agent and the
Liens referred to in item 1 on Schedule E.
5.5......Litigation. Except as set forth in Schedule C, there are no
actions or proceedings pending by or against Borrower before any court or
administrative agency and Borrower does not have knowledge or belief of any
pending, threatened, or imminent litigation, governmental investigations, or
claims, complaints, actions, or prosecutions involving Borrower, except for: (a)
ongoing collection matters in which Borrower is the plaintiff and (b) matters
that, if decided adversely to Borrower, would not have a Material Adverse
Effect.
Page -29-
5.6......Financial Statements; No Material Adverse Change. All
financial statements relating to Borrower, UDRC and UDRC II that have been
delivered by Borrower to Lenders have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition as of the date thereof and the results of operations for
the period then ended for Borrower and its consolidated Subsidiaries, except as
disclosed on Schedule D. No information, exhibit or report furnished by Borrower
or any other Loan Party to the Collateral Agent or any Lender in connection with
the negotiation of the Loan Documents or pursuant to the terms of the Loan
Documents contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements made therein not misleading.
There has not been a Material Adverse Change with respect to Borrower since
December 31, 1998.
5.7......Securitization Documents. Borrower, UDRC and UDRC II and each
of their Affiliates are in full compliance with their respective obligations
under the Securitization Documents, and no Securitization Default exists.
5.8......ERISA. No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any plan (other than a multiemployer plan). No liability to the
Pension Benefit Guaranty Corporation has been or is expected by Borrower to be
incurred with respect to any plan (other than a multiemployer plan) by Borrower
which is or would have a Material Adverse Effect. Borrower has not incurred and
does not presently expect to incur any withdrawal liability under Title IV of
ERISA with respect to any multiemployer plan which is or would be materially
adverse to Borrower. The execution and delivery of this Agreement and the other
Loan Documents will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975 of the Code. For the purpose of this Section
5.8, the term "plan" shall mean an "employee pension benefit plan" (as defined
in section 3 of ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by Borrower or by any trade or
business, whether or not incorporated, which, together with Borrower, is under
common control, as described in Section 414(b) or (c) of the Code; and the term
"multiemployer plan" shall mean any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA). No plan providing welfare
benefits to retired former employees of Borrower has been established or is
maintained for which the present value of future benefits payable, in excess of
irrevocably designated funds for such purpose, is or would have a Material
Adverse Effect.
5.9......Environmental and Safety Matters. Borrower (a) has complied in
all material respects with all applicable material Environmental and Safety
Laws, and Borrower has not received (i) notice of any material failure so to
Page -30-
comply, (ii) any letter or request for information under Section 104 of CERCLA
or comparable state laws or (iii) any information that would lead it to believe
that it is the subject of any Federal or state investigation concerning
Environmental and Safety Laws; (b) does not manage, generate, discharge or store
any Hazardous Materials in material violation of any material Environmental and
Safety Laws; (c) does not own, operate or maintain any underground storage tanks
or surface impoundments; and (d) except as disclosed to Lenders in writing prior
to the date hereof, is not aware of any conditions or circumstances associated
with its currently or previously owned or leased properties or operations (or
those of its tenants) which may give rise to any Environmental Liabilities and
Costs which could have a Material Adverse Effect.
5.10.....Tax Matters. Each of Borrower and its Subsidiaries has filed
all tax returns that it was required to file. All such tax returns were correct
and complete in all material respects. All Borrower Taxes owed by any of
Borrower and its Subsidiaries have been paid.
5.11.....Year 2000 Matters. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) each Loan Party's and
each of its Subsidiaries' computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which any Loan Party's or any of its Subsidiaries' systems interface) and the
testing of all such systems and equipment, as so reprogrammed, will be completed
by June 30, 1999. The cost to the Loan Parties of such reprogramming and testing
of the reasonably foreseeable consequences of year 2000 to the Loan Parties and
their respective subsidiaries (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, each Loan Party's and
each of its Subsidiaries' computer and management information systems are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit such Loan Party and its Subsidiaries
to conduct its business without Material Adverse Effect. Each Loan Party
represents and warrants that it has a reasonable basis to believe that no year
2000 problem will cause a Material Adverse Effect.
5.12.....Ownership of Properties. Each Loan Party and its Subsidiaries
has good, marketable and insurable title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to, or a valid leasehold
interest in, all its other Property.
5.13.....Investment Company Status. Neither any Loan Party nor any of
its Subsidiaries is an "investment company," or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended. Neither the
making of the Loan nor the application of the proceeds or repayment thereof by
Borrower, nor the consummation of the other transactions contemplated hereby,
will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
5.14.....Solvency. Each Loan Party is, individually and together with
its Subsidiaries, Solvent. For purposes hereof, the term "Solvent" means, with
respect to any Person on a particular date, that on such date (a) the fair value
of the property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature and (d) such Person
is not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities at any time
shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
Page -31-
ARTICLE VI.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Required Lenders shall otherwise consent in writing,
Borrower shall do all of the following:
6.1......Financial Statements and Other Documents. Borrower shall
deliver to Lenders in form and detail satisfactory to Required Lenders:
(a)......Within 45 days of the end of each fiscal quarter
(except the last fiscal quarter of each fiscal year), Borrower's consolidated
unaudited financial statements for such quarter, and, within 90 days of the end
of Borrower's fiscal year, Borrower's consolidated audited financial statements
for such period, certified by Borrower's Chief Financial Officer or Treasurer as
fairly presenting in all material respects, in accordance with GAAP (subject, in
the case of unaudited financial statements, to ordinary, good faith year-end
adjustments and to the absence of footnote disclosure), the financial position
and results of operations of Borrower and together, in each case, with a
certificate of the Chief Financial Officer of Borrower stating that the
representations and warranties herein are true and correct in all material
respects as of the date of such certificate and that no Default has occurred and
is continuing or, if a default has occurred and is continuing, a statement as to
the nature thereof and the action that Borrower has taken and proposes to take
with respect thereto and setting forth in reasonable detail satisfactory to
Required Lenders the calculations demonstrating compliance with Sections 6.13
through 6.16;
(b)......Promptly upon receipt thereof, any financial
statements of Borrower distributed to other lenders or financing parties;
(c)......On or prior to each Calculation Date, a Collateral
Servicing Report certified as true and correct by an officer of Borrower and
including the calculation of the Borrowing Base as of such Calculation Date and
certifying such calculation as true and correct.
(d)......Promptly upon preparation thereof, a copy of each
other report, if any, submitted to Borrower by independent accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower;
(e)......Promptly after its submission, copies of any other
information or documents regularly provided by Borrower to any of its other
lenders or holders of Borrower's Debt;
(f)......Promptly upon receipt thereof, copies of any other
information or documents received by Borrower pursuant to any Securitization
Document (including, without limitation, monthly servicing reports with respect
to each Securitization);
(g)......With reasonable promptness, such other financial data
and information as any Lender may reasonably request; and
Page -32-
(h)......Promptly upon receipt thereof, (i) copies of any
federal revenue agent's reports (so called "thirty-day letter") issued by the
IRS, and copies of any equivalent documents from state or local tax authorities;
(ii) copies of any federal notice of deficiency (so-called "ninety-day letters")
issued by the IRS, and copies of any equivalent documents from state or local
tax authorities; and (iii) copies of any information requests or document
requests received from federal, state or local tax authorities that are not in
the ordinary course of business.
6.2......Inspection of Property. Borrower shall permit any Person
designated by any Lender in writing, to visit and inspect any of the properties
of Borrower, to examine the corporate books and financial records of Borrower
and make copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers of
Borrower and its independent public accountants, all at such reasonable times
and as often as any Lender may reasonably request.
6.3......Default Disclosure.
(a)......Borrower shall forthwith, upon a Responsible Officer
of Borrower obtaining knowledge of an Event of Default or Default, promptly
deliver to each Lender a certificate of a Responsible Officer specifying the
nature and period of existence thereof and what action Borrower proposes to take
with respect thereto.
(b)......Borrower shall forthwith, upon a Responsible Officer
of Borrower obtaining knowledge of a Securitization Default, deliver to each
Lender a certificate of a Responsible Officer specifying the nature and period
of existence thereof, what action the defaulting party proposes to take with
respect thereto, and what action Borrower proposes to take with respect thereto.
6.4......Notices to Lenders and the Collateral Agent. Borrower shall
promptly notify each Lender and the Collateral Agent in writing of:
(a)......Any lawsuit over One Hundred Thousand Dollars
($100,000) against Borrower or any of its Subsidiaries;
(b)......Any substantial dispute between Borrower or any of
its subsidiaries and any Governmental Authority; or
(c)......Any change in any Loan Party's name, address, or
legal structure.
6.5......Books and Records. Borrower shall maintain adequate books and
records in accordance with generally accepted accounting principles.
6.6......Compliance and Preservation. Borrower shall and shall cause
its Subsidiaries to:
(a)......Comply with the laws (including any fictitious name
statute), regulations and orders of any government body with authority over its
business;
(b)......Maintain and preserve all privileges and franchises
such Person now has provided, however, that neither the Borrower nor any of its
Page -33-
Subsidiaries shall be required to preserve any privilege or franchise (other
than the corporate existence of each Loan Party, UDCC, UDRC and UDRC II) if the
Board of Directors of the Borrower shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Borrower or such
Subsidiary, as the case may be, and that the loss thereof is not disadvantageous
in any material respect to the Borrower, such Subsidiary or the Lenders; and
(c)......Make any repairs, renewals, or replacements
reasonably necessary to keep such Person's properties in good working condition.
6.7......Perfection of Liens. Borrower shall take such actions as may
be necessary or as Collateral Agent or any Lender may request in order to
perfect and protect Collateral Agent's security interests and liens.
6.8......Cooperation. Borrower shall take any reasonable action
requested by Collateral Agent or any Lender to carry out the intent of this
Agreement.
6.9......Use of Proceeds. Borrower shall use the proceeds of the Loan
for (i) repayment of all amounts outstanding under the Greenwich Loan Agreement
and repayment of other indebtedness of the Borrower (other than Subordinated
Debt), (ii) general working capital to facilitate ongoing growth in Borrower's
core operations and (iii) to the extent permitted by Section 7.8 and by the
documents and instruments governing other indebtedness of the Borrower, the
repurchase of common stock of the Borrower.
6.10.....Securitizations. Any securitizations of Ugly Duckling
Collateral executed during the Securitization Period shall be executed through
either UDRC II or a New Issuer (as defined in the Stock Pledge Agreement) that
meets the requirements of Section 7(c) of the Stock Pledge Agreement (and
Borrower shall ensure that Pledgor performs its obligations pursuant to the
Stock Pledge Agreement) or by a person or entity otherwise able to satisfy the
requirements of Section 3.1 with respect to the related Additional Class B
Certificates. Borrower shall continue to execute periodic securitizations (in an
amount of not less than $75,000,000 in any period of six consecutive months) of
the Ugly Duckling Collateral during the Securitization Period and each such
securitization shall include b-pieces constituting Additional Class B
Certificates which grant an affiliate of UDCC acceptable to the Required Lenders
a 100% interest in all securitization assets to the extent interests have not
been sold to senior third party investors and with respect to which the
provisions of Section 3.1 have been complied with.
6.11.....Compliance with Covenants. Borrower shall perform, keep and
observe each term, provision, condition or covenant or agreement contained in
each Bond Insurance Policy, the GECC Agreement and any other agreement
evidencing Indebtedness.
6.12.....Payment of Indebtedness. Borrower shall timely pay and shall
cause its Subsidiaries to timely pay all Indebtedness which, if not paid, could
result in the imposition of a Lien on any of the assets of UDRC or UDRC II or
any holder of Additional Class B Certificates.
6.13.....Tangible Net Worth. Borrower shall maintain a consolidated
Tangible Net Worth of not less than the sum of (i) $130,000,000, plus (ii) 50%
of the cumulative net earnings (but only to the extent positive) after taxes of
Page -34-
the Borrower and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles for each period ending
after December 31, 1999.
6.14.....Consolidated EBITDA to Consolidated Interest Expense. Maintain
a ratio of Consolidated EBITDA to Consolidated Interest Expense of not less than
the amount set forth below for each period set forth below:
Period Ratio
------------------------------------------------------ ---------------
Closing to and including June 30, 1999 0.60 to 1.0
July 1, 1999 to and including September 30, 1999 0.85 to 1.0
October 1, 1999 to and including December 31, 1999 1.00 to 1.0
January 1, 2000 to and including March 31, 2000 1.35 to 1.0
April 1, 2000 and thereafter 1.50 to 1.0
6.15. Consolidated Senior Debt to Consolidated Total Capitalization.
Not permit at any time Consolidated Senior Debt of the Borrower and its
Subsidiaries on a consolidated basis to exceed 50% of Consolidated Total
Capitalization.
6.16. Minimum B-Piece Cash Flows. Not permit aggregate B-Piece Cash
Flows deposited to the Collateral Account for any month to be less than
$2,000,000.
6.17. Sale of Cygnet. Borrower shall use its best efforts to consummate
the sale of Cygnet Dealer Finance, Inc. on or prior to the date one year after
the date hereof.
6.18. Collateral Account. Borrower shall establish and maintain the
Collateral Account free and clear of all liens other than liens in favor of the
Collateral Agent pursuant to the Loan Documents.
6.19. Year 2000 Assurances. Borrower and each of its Subsidiaries shall
take all action necessary and commit adequate resources to assure that their
respective computer-based and other systems are able to effectively process data
including dates before, on and after January 1, 2000 without experiencing any
year 2000 problem that could cause a Material Adverse Effect. At the request of
the Collateral Agent or any Lender, the Borrower shall use commercially
reasonable efforts to provide or cause to be provided to the Collateral Agent or
such Lender, as the case may be, with assurance and substantiation (including,
but not limited to, the results of internal or external audit reports prepared
in the ordinary course of business) reasonably acceptable to the Collateral
Agent or such Lender, as the case may be, as to the year 2000 capability of the
Borrower and its Subsidiaries and their respective abilities to conduct their
respective businesses and operations before, on and after January 1, 2000
without experiencing a year 2000 problem causing a Material Adverse Effect.
6.20. Maintenance of Properties. Borrower shall maintain and preserve,
and cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted and excepting
replacement in the ordinary course of business.
Page -35-
6.21. Maintenance of Insurance. Borrower shall maintain, and cause each
of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by prudent companies engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower or such
Subsidiary operates.
ARTICLE VII.
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do any of the following without Required Lender's
prior written consent:
7.1. Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of the assets of UDRC and UDRC II
or any holder of Additional Class B Certificates, including the UDRC Class B
Certificates, the UDRC II Class B Certificates and any Additional Class B
Certificates, or any income or profits from any of the foregoing, except for
Permitted Liens listed on Schedule E or liens of Collateral Agent for the
benefit of Lenders.
7.2. Indebtedness.
(a)......Permit UDRC or UDRC II or any holder of Additional
Class B Certificates to incur, assume, or permit to exist, directly or
indirectly any Indebtedness; or
(b)......permit any other Subsidiary of the Borrower to incur,
assume, or permit to exist, directly or indirectly any Indebtedness other than
Permitted Subsidiary Indebtedness without the prior written consent of the
Required Lenders.
7.3. Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets (excluding the sale of Cygnet Dealer Finance, Inc.) or
cease to be a public company.
7.4. Disposal of Collateral, B-Pieces, Additional Class B Certificates.
Except as expressly consented to by Required Lenders in writing, sell, lease,
assign, transfer, or otherwise dispose of any of the Collateral or permit any of
its Affiliates to do any of the foregoing or permit UDRC to sell, lease, assign,
transfer or otherwise dispose of any UDRC Class B Certificates, or permit UDRC
II to sell, lease, assign, transfer or otherwise dispose of any UDRC II Class B
Certificates, or permit the Person or entity that is the holder of any
Additional Class B Certificates at the time such Additional Class B Certificates
are first included in the Borrowing Base to sell, lease, assign, transfer or
otherwise dispose of any such Additional Class B Certificates.
7.5. Change Name. Without giving thirty (30) days prior written
notification to Collateral Agent and each Lender, change Borrower's or any other
Page -36-
Loan Party's name, FEIN, corporate structure (within the meaning of Section
9402(7) of the Code), or identity, or add any new fictitious name.
7.6. Amendments. Except as expressly consented to by Required Lenders
in writing, directly or indirectly, amend, modify, alter, increase, or change
any of the terms or conditions of any Securitization Document.
7.7. Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.8. Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding, for cash, other than, so long as no
Default exists, the buyback after the date hereof of 2,500,000 shares of
Borrower's common stock previously approved by Borrower's Board of Directors on
April 20, 1999.
7.9. Standing Dividend Resolutions. Permit any Standing Dividend
Resolution to be rescinded, amended, modified, revoked or altered in any manner.
7.10. Change in Location of Chief Executive Office. Relocate, or permit
any other Loan Party to relocate, any Loan Party's chief executive office to a
new location without providing 30 days prior written notification thereof to
Collateral Agent and each Lender and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Collateral Agent's security
interests and also provides to Collateral Agent a Collateral access agreement
with respect to such new location.
7.11. No Prohibited Transactions Under ERISA. Directly or indirectly:
(a)......Engage, or permit any Subsidiary of Borrower to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
Code for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
(b)......Permit to exist with respect to any Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Code), whether or not waived;
(c)......Fail, or permit any Subsidiary of Borrower to fail,
to pay timely required contributions or annual installments due with respect to
any waived funding deficiency to any Plan;
(d)......Terminate, or permit any Subsidiary of Borrower to
terminate, any Plan where such event would result in any liability of Borrower
or any of its Subsidiaries under Title IV of ERISA;
(e)......Fail, or permit any Subsidiary of Borrower to fail,
to make any required contribution or payment to any Multiemployer Plan;
Page -37-
(f)......Fail, or permit any Subsidiary of Borrower to fail,
to pay any required installment or any other payment required under Section 412
of the Code on or before the due date for such installment or other payment;
(g)......Amend, or permit any Subsidiary of Borrower to amend,
a retirement plan resulting in an increase in current liability for the plan
year such that either of Borrower or any Subsidiary of Borrower is required to
provide security to such retirement plan under Section 401 (a)(29) of the Code;
or
(h)......Withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA.
7.12. Changes in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
7.13. Transactions with Affiliates. Not engage, and not permit any of
its Subsidiaries to engage, in any transaction with any Affiliate of Borrower or
such Subsidiary except on terms that are fair and reasonable and no less
favorable to the Borrower or such Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate (it being
understood that the foregoing shall not prohibit any transaction otherwise
permitted hereunder among the Borrower and any of its wholly owned
Subsidiaries).
ARTICLE VIII.
EVENTS OF DEFAULT/REMEDIES
8.1. Event of Default. Any of the following shall constitute an "Event
of Default":
(a)......If Borrower 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 Collateral Agent or any Lender, reimbursement of
Lender Costs, or other amounts constituting Obligations) or if Borrower fails to
make when due any deposit to the Collateral Account required pursuant to Section
2.5(b);
(b)......If Borrower fails to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other future agreement between Borrower
and any Lender;
(c)......If there is a Material Adverse Change with respect to
Borrower, UDCSFC, UDRC or UDRC II or any holder of Additional Class B
Certificates (the occurrence or non-occurrence of which shall be determined by
the Required Lenders in the exercise of reasonable discretion);
(d)......If Borrower is enjoined or restrained, by court order
from continuing to conduct all or any material part of its business affairs,
unless such order is stayed;
Page -38-
(e)......If notices of any Lien, levy, or assessment in excess
of $250,000 other than of Permitted Liens are filed of record with respect to
any of Borrower's properties or assets which have not been cured within ten (10)
days after the Lien has been filed;
(f)......Any judgment or order for the payment of money in
excess of $1,000,000 not covered by insurance as to which the insurer has
acknowledged liability shall be rendered against any Loan Party or UDRC or UDRC
II and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order and are not stayed or dismissed within 45
days or (ii) there shall be any period of 45 consecutive days during which such
judgment remains unpaid or unbonded and a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect;
(g)......If Borrower makes any payment on account of
Indebtedness that is contractually subordinated in right of payment to the
payment of the Obligations, except to the extent such payment is permitted by
the terms of the subordination provisions applicable to such Indebtedness;
(h)......If any material misstatement or misrepresentation
exists now or hereafter in any warranty, representation, statement, or report
(including, without limitation, any Collateral Servicing Report) made to
Collateral Agent, any Lender by Borrower or any officer, employee, agent, or
director of Borrower, or if any such warranty or representation is withdrawn;
(i)......If any Standing Dividend Resolution is rescinded,
amended, altered, revoked or modified in any manner;
(j)......If a default or event of default occurs under the
GECC Agreement or under the terms of any other Indebtedness aggregating in
excess of $3,000,000 (with respect to any particular item of Indebtedness or in
the aggregate and in each case after any applicable cure or grace period) or
there is a termination event under the terms of any Bond Insurance Policy (or
the policy of another bond insurer), regardless of whether such default or
termination event is waived or amended;
(k)......If Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors, or an order, judgment or decree
is entered adjudicating the Borrower or any of its Subsidiaries bankrupt or
insolvent, or any order for relief with respect to the Borrower or any of its
Subsidiaries is entered under the Federal Bankruptcy Code, or Borrower or any of
its Subsidiaries petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of Borrower or any of its
Subsidiaries or of any substantial part of the assets of the Borrower or any of
its Subsidiaries, or commences any proceeding relating to the Borrower or any of
its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction, or any
such petition or application is filed, or any such proceeding is commenced
against the Company or any of its Subsidiaries; or
(l)......Any ERISA Event shall have occurred with respect to a
Plan of any Loan Party or any of its ERISA Affiliates and the liability of the
Loan Parties and their ERISA Affiliates related to such ERISA Event and any and
Page -39-
all other ERISA Events which shall have occurred and then exist with respect to
any Plans of the Loan Parties and their ERISA Affiliates exceeds $1,000,000; or
(m)......any provision of any Loan Document shall for any
reason cease to be valid and binding on or enforceable against any Loan Party
party to it, or any such Loan Party shall so state in writing; or
(n)......any Security Document shall for any reason (other
than pursuant to the terms thereof) cease to create a valid and perfected first
priority Lien on the Collateral purported to be covered thereby.
8.2. Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, Required Lenders may (and may direct the
Collateral Agent to, and upon such direction the Collateral Agent shall), at
their sole and absolute discretion, without further notice, do any one or more
of the following, all of which are authorized by Borrower:
(a)......declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (and upon the occurrence of any Event of Default described in Section
8.1(k) all Obligations shall automatically and without action by Collateral
Agent or any Lender be and become immediately due and payable);
(b)......terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of each Lender, but without
affecting any Lender's or the Collateral Agent's rights and security interests
in the Collateral and without affecting the Obligations;
(c)......without notice to or demand upon Borrower, make such
payments and do such acts as Required Lenders consider necessary or reasonable
to protect the security interests of the Collateral Agent in the Collateral;
(d)......without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the UCC),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by any Lender, or (ii) indebtedness at any time owing to or for
the credit or the account of Borrower held by any Lender; or
(e)......direct the Collateral Agent to collect, receive,
appropriate and realize upon the Collateral, on such terms as Required Lenders,
in their sole and absolute discretion, deem appropriate without any liability
for any loss due to a decrease in the market value of the Collateral during the
period held, without demand of performance or other demand, advertisement or
notice of any kind, except as specified below, to or upon Borrower or any other
person (all and each of which demands, advertisements and/or notices are hereby
expressly waived to the extent permitted by law). If any notification to
Page -40-
Borrower of intended disposition of the Collateral is required by law, such
notification shall be deemed reasonable and properly given if mailed to
Borrower, postage prepaid, at least ten (10) days before any such disposition at
the address indicated by Borrower's signature. Any disposition of the Collateral
or any part thereof shall be free of any equity or right of redemption in
Borrower, which right of equity is, to the extent permitted by applicable law,
hereby expressly waived or released by Borrower. Borrower further agrees that
such sale or sales made under the foregoing circumstances shall be deemed to
have been made in a commercially reasonable manner. Neither Collateral Agent nor
any Lender shall be obligated to make any sale or other disposition of the
Collateral permitted under this Loan Agreement, unless the terms thereof shall
be satisfactory to Required Lenders.
The rights and remedies of Collateral Agent and each Lender under this
Agreement, the Loan Documents, and all other agreements shall be cumulative. No
exercise by Collateral Agent or any Lender of one right or remedy shall be
deemed an election, and no waiver by Collateral Agent or any Lender of any Event
of Default shall be deemed a continuing waiver. No delay by Collateral Agent or
any Lender shall constitute a waiver, election, or acquiescence by it.
ARTICLE IX.
THE COLLATERAL AGENT
9.1. Authorization and Action. Each Lender hereby appoints and
authorizes the Collateral Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Collateral Agent by the terms hereof and thereof, together with
such powers as are reasonably incidental thereto. Except as specifically
provided for by the Loan Documents, the Collateral Agent shall not be required
to exercise any discretion or take any action under any of the Loan Documents,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding upon all Lenders and
the Collateral Agent shall not be liable to the Borrower or any Lender for any
action taken or omitted at the direction of the Required Lenders; provided,
however, that the Collateral Agent shall not be required to take any action that
exposes the Collateral Agent, in its sole judgment, to personal liability or
that is contrary to this Agreement or applicable law. The Collateral Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
9.2. Collateral Agent's Reliance, Etc.. Neither the Collateral Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Collateral Agent: (i) may treat the Lender that made any portion of the Loan as
the holder of the debt resulting therefrom until the Collateral Agent receives
notice of an assignment by such Lender; (ii) may consult with legal counsel
(including counsel for any Loan Party), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made by any Person other than the Collateral Agent in or in
connection with the Loan Documents; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of any Loan Document on the part of any Loan Party or to inspect the
Page -41-
property (including the books and records) of any Loan Party; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
other instrument or document furnished pursuant hereto or thereto; and (vi)
shall incur no liability under or in respect of any Loan Document by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopy, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
9.3. Xxxxxx Trust and Savings Bank and Affiliates. Xxxxxx Trust and
Savings Bank and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if Xxxxxx Trust and Savings Bank were
not the Collateral Agent and without any duty to account therefor to the Lender
Parties.
9.4. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Collateral Agent or any other Lender
and based on the financial statements referred to herein and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Collateral Agent or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
9.5. Indemnification. Each Lender severally agrees to indemnify the
Collateral Agent (to the extent not promptly reimbursed by the Borrower) from
and against such Lender's ratable share of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Collateral Agent in any way relating to or arising
out of the Loan Documents or any action taken or omitted by the Collateral Agent
under the Loan Documents; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Collateral Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse the Collateral Agent promptly
upon demand for its ratable share of any costs and expenses payable by the
Borrower under Section 10.4, to the extent that the Collateral Agent is not
promptly reimbursed for such costs and expenses by the Borrower.
9.6. Successor Collateral Agents. The Collateral Agent may resign at
any time by giving written notice thereof to the Lenders and the Borrower and
may be removed at any time with cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Collateral Agent. If no successor Collateral Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Collateral Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Collateral Agent,
then the retiring Collateral Agent may, on behalf of the Lender Parties, appoint
a successor Collateral Agent, which shall be a commercial bank organized under
the laws of the United States or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Collateral Agent hereunder by a successor Collateral Agent and
upon the execution and filing or recording of such financing statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Required Lenders may request, in order to continue the
perfection of the liens granted or purported to be granted by the Security
Page -42-
Documents, such successor Collateral Agent shall succeed to and become vested
with all the rights, powers, discretion, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall be discharged from its
duties and obligations under the Loan Documents. After any retiring Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Article IX shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent under this Agreement.
9.7. Monthly Verification Duties of Collateral Agent. Upon receipt of
each Collateral Servicing Report and in no event later than the Calculation Date
in respect thereof, the Collateral Agent shall verify the following items in
such Collateral Servicing Report against the monthly servicing reports with
respect to each Securitization:
(a) the outstanding principal balance of auto loans in
the pool of collateral securing the related
securitization;
(b) the outstanding principal balance of all certificates
and other interests or rights to payment in respect
of such securitization senior in priority to such
B-Piece;
(c) the amount of the cash balance in the spread account
relating to such B-Piece; and
(d) the B-Piece Cash Flows.
The Collateral Agent shall also verify the following rates and
amounts on the Collateral Servicing Report:
(y) LIBOR; and
(z) the pro rata payments of interest and Monthly
Amortization Amount made to each Lender.
ARTICLE X.
MISCELLANEOUS
10.1. Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by Required Lenders and Borrower, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders, do any of the
following at any time: (i) change the percentage of the aggregate unpaid
principal amount of the Loan that shall be required for the Lenders or any of
them to take any action hereunder, (ii) permit the creation, incurrence,
assumption or existence of any Lien on any item of Collateral to secure any
obligations other than Obligations owing to the Lenders and Collateral Agent
Page -43-
under the Loan Documents, (iii) amend this Section 10.1, (iv) increase the
outstanding principal amount of the Loan, (v) reduce the principal of, or
interest on, the Loan or any fees or other amounts payable hereunder or (vi)
postpone any date fixed for any payment of principal of, or interest on, the
Loan or any fees or other amounts payable hereunder; and provided further that
no amendment, waiver or consent shall, unless in writing and signed by the
Collateral Agent in addition to the Lenders required above to take such action,
affect the rights or duties of the Collateral Agent under this Agreement or any
other Loan Document.
10.2. Notices.
(a)......All notices, requests and other communications
provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided, that, any
matter transmitted by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient, and (ii) shall be followed promptly by a hard
copy original thereof by over-night courier to the address set forth below; or
to such other address as shall be designated by such party in a written notice
to the other party, and as directed to each other party, at such other address
as shall be designated by Lender or Borrower in a written notice to Borrower and
Lender.
If to Borrower: Ugly Duckling Corporation
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
If to any Lender: As set forth on the Administrative
Form of such Lender
If to Collateral Agent: Xxxxxx Trust and Savings Bank
000 Xxxx Xxxxxx Xxxxxx - 12th floor
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b)......All such notices, requests and communications shall,
when transmitted by overnight delivery or faxed, be effective when delivered for
overnight (next day) delivery, transmitted by facsimile machine, respectively,
or if delivered, upon delivery, except that notices pursuant to Article II shall
not be effective until actually received by each Lender.
(c)......Borrower acknowledges and agrees that any agreement
of Collateral Agent or any Lender to receive certain notices by telephone and
facsimile is solely for the convenience and at the request of Borrower. Each of
Collateral Agent and each Lender shall be entitled to rely on the authority of
Page -44-
any Person purporting to be a Person authorized by Borrower to give such notice
and neither Collateral Agent nor any Lender shall have any liability to Borrower
or to other Person on account of any action taken or not taken by Collateral
Agent or any Lender in reliance upon such telephonic or facsimile notice. The
obligations of Borrower hereunder shall not be affected in any way or to any
extent by any failure by Collateral Agent or any Lender to receive written
confirmation of any telephonic or facsimile notice or the receipt by Collateral
Agent or any Lender of a confirmation which is at variance with the terms
understood by Collateral Agent or such Lender to be contained in the telephonic
or facsimile notice.
10.3. No Waiver: Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Collateral Agent or Lender, 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.
10.4. Costs and Expenses. Borrower shall, whether or not the
transactions contemplated hereby shall be consummated:
(a)......pay or reimburse Collateral Agent and each Lender and
each portfolio advisor within ten (10) Business Days after demand for all Lender
Costs incurred by Collateral Agent or such Lender or such portfolio advisor in
connection with the development, preparation, delivery, administration and
execution of (and any amendment, supplement, waiver or modification to (in each
case whether or not consummated)), this Agreement, any other Loan Document and
any other documents prepared in connection herewith, or therewith, and the
consummation of the transactions contemplated hereby and thereby, including the
reasonable Attorney Costs incurred by Collateral Agent or any Lender or any
portfolio advisor with respect thereto;
(b)......pay or reimburse Collateral Agent and each Lender and
each portfolio advisor within ten (10) Business Days after demand for all Lender
Costs incurred by Collateral Agent or such Lender or such portfolio advisor in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement, any other Loan Document, and any such
other documents, including reasonable Attorney Costs incurred by Collateral
Agent or any Lender or any portfolio advisor; and
(c)......pay or reimburse Collateral Agent and each Lender and
each portfolio advisor within ten (10) Business Days after demand for all
reasonable appraisal (including the allocated cost of internal appraisal
services), audit, due diligence, monitoring review, syndication, environmental
inspection and review (including the allocated cost of such internal services
and the allocated costs of services of SAI or its Affiliates and Trustee),
search and filing costs, fees and expenses, rating agency costs, fees and
expenses, transportation costs and other out-of-pocket expenses incurred or
sustained by Collateral Agent, any Lender or any portfolio advisor, SAI or any
of their respective affiliates in connection with the Loan, the Loan Documents,
any of the Obligations and the matters referred to under (a) and (b) of this
Section 10.4.
(d)......In addition to the foregoing, if any payment of
Page -45-
principal on the Loan is made by the Borrower to or for the account of a Lender
other than on the last day of the then current Interest Accrual Period, as a
result of a payment, acceleration or for any other reason, Borrower shall, upon
demand by such Lender, pay to such Lender any amounts required to compensate
such Lender for any additional losses, costs or expenses that it may reasonably
incur as a result of such payment, including, without limitation, any loss, cost
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain the Loan or any portion
thereof.
10.5. Indemnity. Borrower shall pay, indemnify, and hold Collateral
Agent, each Lender, SAI, Trustee and each of their respective Affiliates and
Subsidiaries, and each of their respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any environmental liabilities and obligations of Borrower, any
of its Subsidiaries or any of their properties and from and against any and all
claims, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses or disbursements (including Attorney
Costs) of any kind or nature whatsoever with respect to or in connection with
the execution, delivery, enforcement, performance and administration of this
Agreement and any other Loan Documents, or the transactions contemplated hereby
and thereby, and with respect to any investigation, litigation or proceeding
related to this Agreement or the use of the proceeds thereof or any B-Piece,
Securitization Document or Securitization Trust, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, however, Borrower shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person or the breach
by such Indemnified Person of its obligations hereunder. The agreements in this
Section 10.5 shall survive payment of all other Obligations and the termination
of this Agreement.
10.6. Marshaling: Payments Set Aside. Neither Collateral Agent nor any
Lender shall be under any obligation to marshal any assets in favor of Borrower
or any other Person or against or in payment of any or all of the Obligations.
To the extent that Borrower makes a payment or payments to Collateral Agent or
any Lender, or to the extent Collateral Agent or any Lender enforces its Liens
or exercises 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 trustee, receiver or any other party in connection with any bankruptcy, 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.
10.7. 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 Borrower may not assign or transfer any of
its rights or delegate obligations under this Agreement or any of the Loan
Documents without the prior written consent of each Lender.
10.8. Set-off. In addition to any rights and remedies of Lenders
provided by law, if an Event of Default exists, each Lender is authorized at any
time and from time to time, without prior notice to Borrower, any such notice
being waived by Borrower to the fullest extent permitted by law, to set off and
Page -46-
apply any and all monies or deposits at any time held by, and other indebtedness
at any time owing by, such Lender to or for the credit or the account of
Borrower against any and all Obligations owing to such Lender, now or hereafter
existing, irrespective of whether or not such Lender shall have made demand
under this Agreement or any Loan Document and although such Obligations may be
contingent or unmatured. Each Lender agrees promptly to notify Borrower after
any such set-off and application made by such Lender; provided, however, that,
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Lender under this Section 10.8 are in
addition to the other rights and remedies (including other rights of set-off)
which such Lender may have.
10.9. 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.
10.10. 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 enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
10.11. No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of Borrower, Collateral Agent and
each Lender (and its portfolio advisor), 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 Documents. Neither Collateral Agent nor any
Lender shall have any obligation to any Person not a party to this Agreement or
other Loan Documents.
10.12. Time. Time is of the essence as to each term or provision of
this Agreement and each of the other Loan Documents.
10.13. Governing Law and Jurisdiction.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS,
THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
IT BEING THE INTENT OF THE PARTIES THAT THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO WITHOUT REGARD TO CHOICE OR
CONFLICTS OF LAW PRINCIPLES; EXCEPT THAT THE PROVISIONS HEREIN THAT PERTAIN TO
THE PERFECTION OR THE EFFECT OF PERFECTION OF SECURITY INTERESTS IN COLLATERAL
SHALL BE GOVERNED BY THE LAWS OF SUCH STATE AS ARE SPECIFIED IN SECTION 9103 OF
THE UCC.
THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK
Page -00-
XXXXX XXXXX XX XXXXXXX XXXXX XX XXX XXXXXX XXXXXX OF AMERICA SITTING IN NEW YORK
CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
TO WHICH IT IS OR IS TO BE A PARTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW,
IN SUCH FEDERAL COURT. THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS TO WHICH IT IS OR IS TO BE A PARTY IN THE COURTS OF ANY
JURISDICTION.
THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
TO WHICH IT IS OR IS TO BE A PARTY IN ANY NEW YORK STATE OR FEDERAL COURT. THE
BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.14. Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire Agreement and understanding among Borrower,
Collateral Agent and Lenders and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof and any prior arrangements made with
respect to the payment by Borrower (or any indemnification for) any Lender Costs
incurred (or to be incurred) by or on behalf of Collateral Agent or any Lender.
Page -48-
10.15. Interpretation. This Agreement is the result of negotiations
between and has been reviewed by counsel to Collateral Agent, Lenders, Borrower
and other parties, and is the product of all parties hereto. Accordingly, this
Agreement and the other Loan Documents shall not be construed against Collateral
Agent or any Lender merely because of Lenders' involvement in the preparation of
such documents and agreements.
10.16. Assignment; Register. Each Lender may assign, sell
participations in or pledge its rights hereunder and under the Loan Documents
without the consent of Borrower; provided, however, that no such assignment
shall be effective until the parties thereto shall have executed and delivered
to the Collateral Agent for acceptance and recording in the Register (as defined
below) an Assignment and Acceptance. Upon such execution, delivery, acceptance
and recording, from and after the effective date specified in such Assignment
and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto). Borrower may not assign or delegate any of its rights, interest or
obligations hereunder or under any of the Loan Documents.
The Collateral Agent, on behalf of the Borrower, shall
maintain at the Collateral Agent's address referred to in Section 9.02 a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and the principal
amount of the Loan owing to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Collateral Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee, the Collateral Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form of
Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of written
request therefor, the Borrower, at its own expense, shall execute and deliver to
the Collateral Agent in exchange for any Note surrendered in connection with an
assignment hereunder, a new Note to the order of the assignee in an amount equal
to the principal amount of the Loan assumed by it and, if the assigning Lender
has retained a portion of the Loan hereunder, a new Note to the order of the
assigning Lender in an amount equal to such portion retained by it hereunder.
Such new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be dated the
effective date of the applicable Assignment and Acceptance and shall otherwise
be in substantially the form of Exhibit D.
Page -49-
10.17. Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or the transfer by Borrower to Collateral
Agent or any Lender of any property of either or both of such parties should for
any reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Collateral Agent or any Lender is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Lender is required or elects
to repay or restore, and as to all reasonable costs, expenses, and Attorney
Costs of Lender related thereto, the liability of Borrower automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
10.18. Survival. Notwithstanding any provision of this agreement or any
other Loan Document to the contrary, the provisions of Sections 2.11, 2.12,
2.13, 2.14, 9.4, 9.5, 10.4 and 10.5 shall survive payment of all other
Obligations and the termination of this Agreement.
10.19. Confidentiality. Each Lender and Collateral Agent agrees to hold
any confidential information that it may receive from Borrower pursuant to this
Agreement in confidence, except for disclosure: (a) to other Lenders, rating
agencies, trustees, reference lenders, portfolio advisors, any direct or
indirect contractual counterparty in swap agreements or such contractual
counterparty's professional advisor, and any other parties relevant to any
investment vehicle managed by SAI Investment Adviser, Inc.; (b) to legal counsel
and accountants for Borrower, Collateral Agent or any Lender or prospective
Lender; (c) to other professional advisors to Borrower, Collateral Agent or any
Lender or prospective Lender; (d) to regulatory officials; (e) as required by
law or legal process; and (f) to another proposed Lender in connection with a
proposed assignment permitted hereunder provided that the recipient has accepted
such information subject to a confidentiality agreement substantially similar to
this Section 10.19. For purposes of the foregoing "confidential information"
shall mean any information respecting Borrower, its Subsidiaries or Affiliates
delivered to Lenders and marked confidential, other than (i) information
previously filed with any governmental agency and available to the public, (ii)
information previously published in any public medium from a source other than
directly or indirectly, that Lender, (iii) information previously disclosed by
Borrower to any Person not associated with Borrower without a confidentiality
agreement or obligation substantially similar to this Section 10.19, and (iv)
any such information that is or becomes generally available to the public other
than as a result of a breach by Collateral Agent or any Lender of its
obligations hereunder or that is or becomes available to Collateral Agent or
such Lender from a source other than Borrower.
10.20. Actions by Portfolio Advisor. Any rights of a Lender hereunder
or under any other Loan Document may be exercised by such Lender's portfolio
advisor or collateral manager upon delivery to the Collateral Agent of evidence
in writing, reasonably satisfactory to the Collateral Agent, setting forth such
authority (which may be in the form of a written confirmation of such authority
from the applicable Lender).
* * * * *
Page -50-
X-0
X-0
[Signature Page to Loan Agreement]
IN WITNESS WHEREOF, the parties hereby have caused this
Agreement to be executed as of the date first written above.
UGLY DUCKLING CORPORATION,
a Delaware corporation
By: /S/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: Sr. V.P./Secretary/General Counsel
Lenders:
CIBC INC.
By: /S/ XXXXXXX X. XXXXXXX
Name: Xxxxxxx X. Xxxxxxx
Title: Authorzied Signatory
Portion of Loan: $18,000,000
Ratable Share: 47.368421052%
Address for Notice:
000 Xxxxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
SUNAMERICA LIFE INSURANCE COMPANY
By: /S/ XXXX X. XXXXXX, III
Name: Xxxx X. Xxxxxx, III
Title: Authorized Agen
Portion of Loan: $7,000,000
Ratable Share: 18.421052631%
Address for notices in respect of
payment:
SunAmerica Investments
0 XxxXxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
Attn: Investment Accounting, 36th Floor
Facsimile: (000) 000-0000
Address for all other notices:
SunAmerica Corporate Finance
0 XxxXxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
Attn: Xxx Xxxxxxx
Facsimile: (000) 000-0000
Collateral Agent:
XXXXXX TRUST AND SAVINGS BANK, as Collateral Agent
By: /S/ XXXXXXXX XXXXXX
Name: Xxxxxxx Xxxxxx
Title: Authorized Agent
Portion of Loan: $13,000,000
Ratable Share: 34.210526315%
SCHEDULES A - I and EXHIBITS A - C ARE OMITTED AND SINCE THEY ARE NOT MATERIAL
OR SIGNIFICANT DOCUMENTS.
EXHIBIT D
FORM OF PROMISSORY NOTE
$____________ Dated: _____________, 199_
FOR VALUE RECEIVED, the undersigned, UGLY DUCKLING CORPORATION, a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
[_______________] (the "Lender") the principal sum of
[__________________________] [($___________)] in consecutive monthly
installments until such principal amount has been paid in full, such
installments (other than the last installment owing hereunder which shall be due
and payable on the Maturity Date (as defined in the Loan Agreement referred to
below)) shall be due and payable on each Payment Date (as defined in such Loan
Agreement), the amount payable on each such Payment Date being equal to the
Monthly Amortization Amount (as defined in such Loan Agreement ) for such
Payment Date, subject to Section 2.6 of the Loan Agreement; provided, however
that the last such installment shall be in the amount necessary to repay in full
the aggregate unpaid principal amount of this Note and shall, in any event, be
due and payable on the Maturity Date.
The Borrower promises to pay interest on the unpaid principal
amount of this Note from the date hereof until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in the
Loan Agreement.
Both principal and interest are payable in lawful money of the
United States of America in same day funds to the Lender in accordance with the
provisions of the Loan Agreement. All payments made on account of principal
hereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto, which is part of this Note; provided,
however, that any failure to make such endorsement on such grid shall in no way
alter, impair or limit the Borrower's obligations hereunder.
This Note is one of the Notes referred to in, and is entitled
to the benefits of, the Senior Secured Loan Agreement dated as of May [__], 1999
(as the same may be amended, supplemented or otherwise modified from time to
time, the "Loan Agreement") among the Borrower, the Lender and certain other
lenders parties thereto, and Xxxxxx Trust and Savings Bank, as Collateral Agent
for the Lender and such other lenders. The Loan Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
The Borrower and any endorser of this Note hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
UGLY DUCKLING CORPORATION
By: ______________________
Title:____________________
EXHIBIT E
FORM OF GUARANTY
GUARANTY dated as of May 14, 1999 (as amended, supplemented or
otherwise modified from time to time, this "Guaranty") made by UGLY DUCKLING CAR
SALES AND FINANCE CORPORATION, an Arizona corporation (together with any future
subsidiary of the Borrower (as hereinafter defined) that agrees to be bound by
the terms hereof, each a "Guarantor" and, collectively, the "Guarantors"), in
favor of the financial institutions from time to time party to the Loan
Agreement referred to below as Lenders and Xxxxxx Trust and Savings Bank, as
collateral agent (in such capacity, together with any successor appointed
pursuant to Article IX of the Loan Agreement, the "Collateral Agent"; the
Collateral Agent and such Lenders are each referred to individually herein as a
"Guaranteed Party" and are collectively referred to herein as the "Guaranteed
Parties").
PRELIMINARY STATEMENT. Ugly Duckling Corporation, a Delaware
corporation (the "Borrower") has entered into that certain Senior Secured Loan
Agreement dated as of May 14, 1999 with the financial institutions from time to
time party thereto as Lenders and Xxxxxx Trust and Savings Bank, as Collateral
Agent (said Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Loan Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined).
Each Guarantor will derive substantial direct and indirect benefit from the
transactions contemplated by the Loan Agreement. It is a condition precedent to
the making of the Loan by the Lenders under the Loan Agreement that each
Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to make the Loan under the Loan Agreement, each Guarantor
hereby agrees as follows:
Section 1. Guaranty ; Limitation of Liability. (a) Each
Guarantor hereby unconditionally and irrevocably guarantees, on a joint and
several basis, the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of the Borrower now or hereafter
existing under the Loan Documents, whether for principal, interest, fees,
expenses, indemnities or otherwise (such Obligations being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including counsel fees
and expenses) incurred by the Collateral Agent or any other Guaranteed Party in
enforcing any rights under this Guaranty. Without limiting the generality of the
foregoing, each Guarantor's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by the Borrower
to the Collateral Agent or any other Guaranteed Party under the Loan Documents
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding.
1
(b) Any provision of this Guaranty to the contrary
notwithstanding, the liability of each Guarantor under this Guaranty shall be
limited to such maximum aggregate amount as would not render such Guarantor's
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of any state or foreign law having similar effect.
Section 2. Guaranty Absolute. Each Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of the
Collateral Agent or any other Guaranteed Party with respect thereto. The
Obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations or any other Obligations of any other Loan Party under
the Loan Documents, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or any other Loan Party or
whether the Borrower or any other Loan Party is joined in any such action or
actions. The liability of each Guarantor under this Guaranty is joint and
several and shall be irrevocable, absolute and unconditional irrespective of,
and each Guarantor hereby irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan
Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other Obligations of any other Loan Party under the Loan Documents, or
any other amendment or waiver of or any consent to departure from any
Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional
credit to the Borrower or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Guaranteed Obligations or any other Obligations of any other Loan Party
under the Loan Documents or any other assets of the Borrower or any of
its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries;
(f) any failure of any Guaranteed Party to disclose to the
Borrower or any Guarantor any information relating to the financial
condition, operations, properties or prospects of any other Loan Party
now or in the future known to any Guaranteed Party (each Guarantor
hereby waiving any duty on the part of the Guaranteed Parties to
disclose such information); or
2
(g) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Collateral Agent or any other Guaranteed Party
that might otherwise constitute a defense available to, or a discharge
of, the Borrower, any Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Guaranteed Party or any other Person upon
the insolvency, bankruptcy or reorganization of the Borrower or any other Loan
Party or otherwise, all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) Each Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Collateral Agent or any other Guaranteed Party protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other Person or any
collateral.
(b) Each Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waivers set forth in this
Section 3 are knowingly made in contemplation of such benefits.
Section 4. Subrogation; Subordination; Contribution. (a) Each
Guarantor agrees that it will not exercise any rights that it may now or
hereafter acquire against the Borrower or any other insider guarantor that arise
from the existence, payment, performance or enforcement of such Guarantor's
Obligations under this Guaranty or any other Loan Document, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the
Collateral Agent or any other Guaranteed Party against the Borrower or any other
insider guarantor or any collateral, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Borrower or any other insider
guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim, remedy or right,
unless and until all of the Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash. If any amount shall be paid to
any Guarantor in violation of the preceding sentence at any time prior to the
later of the payment in full in cash of the Guaranteed Obligations and all other
amounts payable under this Guaranty and the Maturity Date, such amount shall be
held in trust for the benefit of the Collateral Agent and the other Guaranteed
Parties and shall forthwith be paid to the Collateral Agent to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
Guaranty, whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) any Guarantor
3
shall make payment to the Collateral Agent or any other Guaranteed Party of all
or any part of the Guaranteed Obligations, (ii) all of the Guaranteed
Obligations and all other amounts payable under this Guaranty shall be paid in
full in cash and (iii) the Maturity Date shall have occurred, the Collateral
Agent and the other Guaranteed Parties will, at such Guarantor's request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.
(b) Each Guarantor hereby agrees that any indebtedness of the
Borrower now or hereafter owing to such Guarantor (the "Subordinated Debt") is
hereby subordinated to all of the Guaranteed Obligations and all other amounts
payable under this Guaranty, whether heretofore, now or hereafter created, and
that without the prior consent of the Collateral Agent, the Subordinated Debt
shall not be paid in whole or in part until the Guaranteed Obligations and all
other amounts payable under this Guaranty have been paid in full and the Loan
Agreement has been terminated and is of no further force or effect, except that
payments of principal and interest on the Subordinated Debt shall be permitted
(i) so long as no Event of Default shall have occurred and be continuing and
(ii) during the continuance of any Event of Default so long as the Collateral
Agent has not provided the Company and each Guarantor with written notice of
default stating that such payment shall no longer be permitted, but in either of
the foregoing events only to the extent such payments would not render the
Borrower incapable of performing the Guaranteed Obligations. Each Guarantor
agrees that it will not accept any payment of or on account of any Subordinated
Debt at any time in contravention of the foregoing. At the request of the
Collateral Agent, following the occurrence and during the continuance of an
Event of Default, each Guarantor hereby agrees to direct the Borrower to pay to
the Collateral Agent, for the account of the Collateral Agent and the Lenders,
all or any part of the Subordinated Debt and any amount so paid to the
Collateral Agent shall be applied to payment of the Guaranteed Obligations and
all other amounts payable under this Guaranty. Each payment on the Subordinated
Debt received in violation of any of the provisions hereof shall be deemed to
have been received as trustee for the Collateral Agent and shall be paid over to
the Collateral Agent immediately on account of the Guaranteed Obligations, but
without otherwise affecting in any manner any Guarantor's liability under any of
the provisions of this Guaranty. Each Guarantor agrees to file all claims
against the Borrower in any bankruptcy or other proceeding in which the filing
of claims is required by law in respect of any Subordinated Debt, and the
Collateral Agent shall be entitled to all of such Guarantor's rights thereunder.
If for any reason any Guarantor fails to file such claim at least 30 days prior
to the last date on which such claim should be filed, the Collateral Agent, as
such Guarantor's attorney-in-fact, is hereby authorized to do so in such
Guarantor's name or, in the Collateral Agent's discretion, to assign such claim
to and cause proof of claim to be filed in the name of the Collateral Agent or
its nominee. In all such cases, whether in reorganization, bankruptcy or
otherwise, the Person or Persons authorized to pay such claim shall pay to the
Collateral Agent, for the account of the Collateral Agent and the Lenders, the
full amount payable on the claim in the proceeding, and, to the full extent
necessary for that purpose, each Guarantor hereby assigns to the Collateral
Agent, for the account of the Collateral Agent and the Lenders, all of such
4
Guarantor's rights to any payments or distributions to which such Guarantor
otherwise would be entitled. If the amount so paid is greater than such
Guarantor's liability hereunder, the Collateral Agent will pay the excess amount
to the party entitled thereto. In addition, each Guarantor hereby appoints the
Collateral Agent as its attorney-in-fact to exercise all of such Guarantor's
voting rights in connection with any bankruptcy proceeding or any plan for the
reorganization of the Borrower.
(c) In order to provide for just and equitable contribution
among the Guarantors, the Guarantors agree, inter se, that in the event any
payment or distribution is made by any Guarantor (a "Funding Guarantor") under
this Guaranty, such Funding Guarantor shall be entitled to a contribution from
all other Guarantors in a pro rata amount based on the Adjusted Net Assets (as
hereinafter defined) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Guaranteed Obligations or any other Guarantor's Obligations with respect to
this Guaranty. "Adjusted Net Assets" of any Guarantor at any date means the
lesser of (a) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (including, without
limitation, contingent liabilities, but excluding liabilities of such Guarantor
under this Guaranty) of such Guarantor at such date, and (b) the amount by which
the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty) as they become
absolute and matured.
Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and
all payments made by any Guarantor hereunder shall be made free and clear of and
without deduction for any and all present or future Taxes. If any Guarantor
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Collateral Agent or any other Guaranteed Party, (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Collateral Agent or such other Guaranteed Party (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) such Guarantor shall make such deductions and
(iii) such Guarantor shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Guarantor agrees to pay any present or
future Other Taxes.
(c) Each Guarantor will indemnify the Collateral Agent and
each other Guaranteed Party for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Collateral Agent
or such other Guaranteed Party (as the case may be) and any liability (including
penalties, additions to tax, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 30 days from the date
the Collateral Agent or such other Guaranteed Party (as the case may be) makes
written demand therefor.
5
(d) Within 30 days after the date of any payment of Taxes by
or on behalf of any Guarantor, such Guarantor will furnish to the Collateral
Agent, at its address referred to in the Loan Agreement, the original receipt of
payment thereof or a certified copy of such receipt. In the case of any payment
hereunder by or on behalf of any Guarantor through an account or branch outside
the United States or on behalf of any Guarantor by a payor that is not a United
States person, if such Guarantor determines that no Taxes are payable in respect
thereof, such Guarantor shall furnish, or shall cause such payor to furnish, to
the Collateral Agent, at such address, an opinion of counsel acceptable to the
Collateral Agent stating that such payment is exempt from Taxes. For purposes of
this Section 5(d) and Section 5(e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Without prejudice to the survival of any other agreement
of any Guarantor hereunder or under any other Loan Document, the agreements and
obligations of each Guarantor contained in this Section 5 shall survive the
payment in full of the Guaranteed Obligations and all other amounts payable
under this Guaranty.
Section 6. Representations and Warranties. Each Guarantor
hereby represents and warrants as follows:
(a) Such Guarantor (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify or be licensed
except where the failure to so qualify or be licensed is not reasonably likely
to have a Material Adverse Effect and (iii) has all requisite corporate power
and authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance by such Guarantor
of this Guaranty and each other Loan Document to which it is or is to be a
party, and the consummation of the transactions contemplated hereby and thereby,
are within such Guarantor's corporate powers, have been duly authorized by all
necessary corporate action, and do not (i) contravene such Guarantor's charter
or by-laws, (ii) violate any law (including, without limitation, the Securities
Exchange Act of 1934), rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System), order,
writ, judgment, injunction, decree, determination or award, (iii) conflict with
or result in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding
on or affecting such Guarantor, any of its Subsidiaries or any of their
properties or (iv) except for the Liens created by the Collateral Documents,
result in or require the creation or imposition of any Lien upon or with respect
to any of the properties of such Guarantor or any or any of its Subsidiaries.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery, recordation,
filing or performance by such Guarantor any Loan Party of this Guaranty or any
other Loan Document to which it is or is to be a party, or for the consummation
6
of the transactions contemplated hereby and thereby, (ii) the grant by any Loan
Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the
perfection or maintenance of the Liens created by the Collateral Documents
(including the first priority nature thereof) or (iv) the exercise by the
Collateral Agent or any Lender of its rights under the Loan Documents or the
remedies in respect of the Collateral pursuant to the Collateral Documents,
except for the authorizations, approvals, actions, notices and filings which
have been duly obtained, taken, given or made and are in full force and effect.
(d) This Guaranty has been, and each of the other Loan
Documents to which such Guarantor is a party have been, duly executed and
delivered by such Guarantor and constitute the legal, valid and binding
obligation of such Guarantor, enforceable against such Guarantor in accordance
with their respective terms.
(e) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
(f) Such Guarantor has, independently and without reliance
upon the Collateral Agent or any other Guaranteed Party and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Guaranty, and such Guarantor has
established adequate means of obtaining from any other Loan Parties on a
continuing basis information pertaining to, and is now and on a continuing basis
will be completely familiar with, the financial condition, operations,
properties and prospects of such other Loan Parties.
Section 7. Covenants. So long as any part of the Guaranteed
Obligations shall remain unpaid, each Guarantor agrees that if, under the terms
of the Loan Agreement, the Borrower is required to cause such Guarantor or any
of such Guarantor's Subsidiaries to take, or to refrain from taking, any action,
or to comply with any requirements, obligations, limitations or restrictions
contained therein, in each case whether individually or together with any other
Loan Parties, such Guarantor shall, and shall cause each of its Subsidiaries to,
take or refrain from taking (as the case may be) any such action and comply with
all such requirements, obligations, limitations and restrictions.
Section 8. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty and no consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent (with the consent or at the direction of the
Required Lenders) and, in the case of any such amendment, by each Guarantor, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all of the Lenders (or
by the Collateral Agent with the consent or at the direction of all of the
Lenders), (i) further reduce or limit the liability of any Guarantor hereunder,
(ii) postpone any date fixed for payment hereunder or (iii) change the number or
percentage of Lenders required to take any action hereunder.
Section 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
7
to it, if to any Guarantor, addressed to it at its address set forth on the
applicable signature page hereto, if to the Collateral Agent or any Guaranteed
Party, at its address specified in the Loan Agreement, or as to any party at
such other address as shall be designated by such party in a written notice to
each other party. All such notices and other communications shall, when mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
delivered to the telegraph company, transmitted by telecopier or confirmed by
telex answerback, respectively.
Section 10. No Waiver; Remedies. No failure on the part of the
Collateral Agent or any other Guaranteed Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 11. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default, each Guaranteed Party and each
of its respective Affiliates is hereby authorized, by each Guarantor, at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Guaranteed Party or such Affiliate to or for the credit or the account of such
Guarantor against any and all of the Obligations of such Guarantor now or
hereafter existing under this Guaranty, whether or not such Guaranteed Party
shall have made any demand under this Guaranty and although such Obligations may
be unmatured. Each Guaranteed Party agrees promptly to notify the applicable
Guarantor after any such set-off and application; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Guaranteed Party and its respective Affiliates
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that such Guaranteed Party and its
respective Affiliates may have.
Section 12. Indemnification. Without limitation on any other
Obligations of any Guarantor or remedies of the Guaranteed Parties under this
Guaranty, each Guarantor shall, to the fullest extent permitted by law,
indemnify, defend and save and hold harmless each Guaranteed Party from and
against, and shall pay on demand, any and all losses, liabilities, damages,
costs, expenses and charges (including the fees and disbursements of such
Guaranteed Party's legal counsel) suffered or incurred by such Guaranteed Party
as a result of any failure of any Guaranteed Obligations to be the legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their terms.
Section 13. Continuing Guaranty; Assignments under the Loan
Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty and the
Maturity Date (b) be binding upon each Guarantor, its successors and assigns and
(c) inure to the benefit of and be enforceable by the Collateral Agent and the
other Guaranteed Parties and their successors, transferees and assigns. Without
8
limiting the generality of the foregoing clause (c), any Guaranteed Party may
assign or otherwise transfer all or any portion of its rights and obligations
under the Loan Agreement (including, without limitation, all or any portion of
the Loan owing to it and any Note or Notes held by it) to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Guaranteed Party herein or otherwise, in each case as
and to the extent provided in Section 10.16 of the Loan Agreement.
Section 14. Governing Law; Jurisdiction; Waiver of Jury Trial,
Etc. (a) This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of New York.
(b) Each Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Guaranty or any of the other Loan
Documents to which it is or is to be a party, or for recognition or enforcement
of any judgment, and each Guarantor hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each Guarantor agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Guaranty shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Guaranty or any of the
other Loan Documents to which it is or is to be a party in the courts of any
jurisdiction.
(c) Each Guarantor irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Guaranty or any of the other Loan
Documents to which it is or is to be a party in any New York State or federal
court. Each Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) Each Guarantor hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the transactions contemplated thereby or the actions of the
Collateral Agent or any other Guaranteed Party in the negotiation,
administration, performance or enforcement thereof.
9
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
UGLY DUCKLING CAR SALES AND FINANCE CORPORATION, an
Arizona corporation
By: ________________________
Title:
Address for Notice:
____________________________
____________________________
____________________________
Telecopier: ______________________
Telephone: ______________________
Attention: ______________________
