Exhibit (b)(ii)
PROMISSORY NOTE
$17,000,000.00 PHOENIX, ARIZONA
DECEMBER , 2001
FOR VALUE RECEIVED, UDC Holdings Corp., a Delaware corporation
("Borrower"), promises to pay to the order of Verde Investments, Inc., an
Arizona corporation ("Lender"), the principal sum of Seventeen Million and
00/100 Dollars ($17,000,000.00) ("Principal"), and interest thereon at 13.50 %
per annum ("Interest"). All payments under this Promissory Note shall be made in
United States currency to Lender at 2575 East Camelback Road, Suite 700,
Phoenix, Arizona 85016, or at such other address as Lender may designate from
time to time.
1. PURPOSE. The purpose of the loan evidenced by this Promissory Note
is to finance Borrower's contribution of funds to its wholly owned subsidiary
UDC Acquisition Corp. ("Acquisition Corp.") in connection with the acquisition
by Acquisition Corp. of all common stock of Ugly Duckling Corporation ("UDC")
not already owned by Borrower and/or Acquisition Corp. (the "UDC Shares"). This
Promissory Note is secured, pursuant to a stock pledge and security agreement
(the "Security Documents"), by a pledge to Lender of all capital stock of
Acquisition Corp. and by the UDC Shares now owned and/or hereafter acquired by
Acquisition Corp. and/or Borrower.
2. PAYMENT. This Promissory Note shall be payable as follows:
2.1 Interest only shall be payable on the last day of each
calendar month with the first Interest only payment due March 31, 2002.
2.2 Principal shall be paid at the times and in the amounts of any
dividends or other proceeds received by Borrower from UDC. If not sooner
paid, then the Principal balance outstanding hereunder, together with all
accred and unpaid Interest and other amounts payable hereunder, shall be
due and payable in full, without any notice or demand required, on the
eighth anniversary of the date of this Promissory Note (the "Maturity
Date"). In the event of the sale by Borrower of any equity interest in, or
substantially all of the assets of, Ugly Duckling Corporation or any
affiliate thereof, the Maturity Date shall be accelerated to the date of
such transfer and in such event the Principal balance and all accrued and
unpaid Interest and other amounts payable hereunder shall be due and
payable in full, without any notice or demand required.
2.3 The Principal amount of this Promissory Note may be prepaid in
whole or in part at any time, without penalty or premium and without any
prior notice to Lender, provided that all accrued and unpaid Interest and
other charges accrued as of the date of prepayment are also paid in full.
Any prepayments shall not delay the due date of any subsequent payment.
All payments received by Lender shall be applied first to unpaid Late
Charges, as defined herein, then to any other costs, fees or expenses
payable by Borrower to Lender, then to accrued and unpaid Interest, and
the balance of the payment, if any, shall be applied to the Principal
balance. All payments shall be made without deduction or setoff of any
kind.
3. EVENTS OF DEFAULT. Borrower shall be in default under this
Promissory Note if any of the following events occur and, if a cure period is
applicable, Borrower fails to cure the event of default within the applicable
cure period.
3.1 Borrower fails to pay when due, whether due upon a scheduled
payment date or due upon acceleration, any amount payable under this
Promissory Note or the Security Documents and such event of default is not
fully cured within five (5) days after delivery of written notice to
Borrower.
3.2 Borrower fails to perform when due any other obligation under
this Promissory Note or the Security Documents and such event of default
is not fully cured within thirty (30) days after delivery of written
notice to Borrower.
3.3 Any warranty or representation of Borrower under this
Promissory Note or Security Documents proves to be untrue or inaccurate in
any material respect as of the date made.
3.4 The filing by Borrower of any proceeding under the federal
bankruptcy laws now or hereafter existing or any other similar statute now
or hereafter in effect.
3.5 An involuntary petition or complaint is filed against Borrower
under the federal bankruptcy laws now or hereafter existing or any other
similar statute now or hereafter in effect, if such petition or complaint
shall not have been dismissed within sixty (60) days of the filing
thereof.
4. REMEDIES. Upon the occurrence of any event of default Lender shall
have all of the following rights and remedies:
4.1 If the event of default is the failure to pay when due any
amount payable under this Promissory Note and/or the Security Documents,
then, without any additional notice or demand, Borrower shall pay a late
charge in the amount of five percent (5%) of the amount not paid when due
to compensate Lender for the expense and inconvenience of the failure to
pay amounts when due (the "Late Charge"). The Late Charge shall be
immediately due and payable. The assessment and payment of the Late Charge
shall not cure the event of default nor delay or prevent Lender from
enforcing all other rights and remedies.
4.2 Lender may declare all amounts due under this Promissory Note
immediately due and payable in full, all without additional notice or
right to cure the event of default.
4.3 Lender may exercise all rights and remedies as a secured party
under the Uniform Commercial Code pursuant to the Security Documents.
4.4 Additionally, alternatively and cumulatively, Lender may
exercise and enforce all other rights and remedies that Lender may be
legally or equitably entitled to exercise or enforce.
4.5 If an event of default occurs and if an attorney is retained
by Lender to enforce this Promissory Note, to exercise any of Lender's
remedies or to represent Lender in any legal action relating to this
Promissory Note or the Security Documents, then Borrower shall pay to
Lender all reasonable attorney's fees and costs incurred by Lender,
whether or not any judicial proceeding has been commenced.
5. INDEMNIFICATION. To the fullest extent permitted by law, Borrower
shall indemnify, defend and hold harmless the Lender from any and all claims,
demands, causes of action, liability, loss, cost or damage of any kind or nature
on account of any matter or thing or action or failure to act, whether in suit
or not, arising out of or in connection with Borrower's acquisition of UDC made
or alleged by any person other than Lender (the "Third Party Claims"). The
obligations of Borrower to indemnify Lender
against Third Party Claims pursuant to this section shall survive the payment of
all amounts due under the Stock Purchase Documents.
6. WAIVERS BY BORROWER. The Borrower unconditionally and irrevocably
waives all defenses to the enforcement of this Promissory Note including,
without limitation the following:
6.1 All presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor and
notices of acceptance.
6.2 Any right to acquire the Lender to proceed against or exhaust
any security held by the Lender at any time or to pursue any other remedy
whatsoever at any time, including without limitation, any rights of
Borrower under any law, rule, arrangement or relationship to require or
compel Lender to pursue any other remedy whatsoever.
6.3 The defense of any statute of limitations effecting the
liability of the Borrower to Lender or the liability of any guarantor or
the enforcement of any of the Stock Purchase Documents to the extent
permitted by law.
6.4 Any disability of the Borrower or any guarantor, any manner in
which the Lender has exercised its rights and remedies under any
agreements between Borrower and Lender or any cessation from any cause
whatsoever of the liability of the Borrower or any guarantor or any other
person.
7. NOTICE. Any notice to Borrower provided for in this Promissory Note
shall be given by personal delivery, by United States mail, by "overnight"
delivery service or by telephonic facsimile transmission, all to the address of
Borrower stated herein. Notices shall be deemed delivered and received upon
actual receipt in the case of personal delivery, within three (3) days after
deposit into the United States mail or within twenty-four (24) hours after
delivery to an "overnight" delivery service or telephonic facsimile
transmission.
8. LEGAL ACTIONS. The validity, interpretation, effect and enforcement
of this Promissory Note shall be governed by the laws of the State of Arizona.
Any legal actions in connection with this Promissory Note shall be brought and
prosecuted in a court of competent jurisdiction in Maricopa County, Arizona and
Lender, Borrower and all guarantors and endorser, if any, of this Promissory
Note consent to the jurisdiction and venue of such court. BORROWER VOLUNTARILY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTIONS RELATING TO THIS PROMISSORY NOTE OR
THE LOAN DOCUMENTS.
10. TIME. Time is of the essence of each term of this Promissory Note.
However, any action required hereunder on a day other than a business day shall
be deemed performed timely if taken on the next business day.
11. NATURE OF OBLIGATION. This Promissory Note evidences a commercial
loan and not a consumer loan. This Promissory Note is the joint and several
obligation of each Borrower and any and all guarantors if any and the
dissolution, death, insolvency or bankruptcy of any one of said parties shall
neither prevent nor limit the enforcement of this Promissory Note against each
Borrower and any and all guarantors, if any or the assets of Borrower and any
and all guarantors, if any. This Promissory Note shall be enforceable by and
against the successors and assigns of Lender and Borrower.
Borrower:
UDC Holdings Corp.,
a Delaware corporation
2575 East Camelback Road, Suite 700
Phoenix, Arizona 85016
Fax: 602-778-5025
By:
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