Sprentd\PHX\745195.3 8
Sprentd\PHX\745195.3
November 12, 1999
SAI Investment Adviser, Inc.
1 SunAmerica Center, 34th Floor
Century City
Los Angeles, CA 90067-6022
SunAmerica Life Insurance Company
1 SunAmerica Center, 34th Floor
Century City
Los Angeles, CA 90067-6022
KZH Soleil-2 LLC
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Harris Trust & Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Ladies and Gentlemen:
Reference is made to that certain Senior Secured Loan Agreement dated
as of May 14, 1999 (the "Loan Agreement") among Ugly Duckling Corporation, a
Delaware corporation ("Borrower"), Harris Trust & Savings Bank, as Collateral
Agent (the "Collateral Agent") and the Lenders party thereto (together with
their respective successors and assigns, "Lenders"). All capitalized terms used
herein and not otherwise defined shall have the meanings given to such terms in
the Loan Agreement.
Borrower has previously advised Collateral Agent and Lenders that with
respect to the month of September 1999, Borrower is not in compliance with
Section 6.16 of the Loan Agreement (entitled "Minimum B Piece Cash Flows").
By countersigning this letter, Collateral Agent and Lenders hereby
permanently waive such failure to comply with Section 6.16 of the Loan Agreement
for such month (and only for such month) and agree that such failure shall not
constitute a Default or Event of Default pursuant to the Loan Agreement or the
other Loan Documents.
In consideration of the foregoing waiver and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Loan Documents are, upon execution hereof by Collateral Agent
and the Required Lenders, hereby amended as follows:
1. The definition of "B-Piece Cash Flows" in the Loan Agreement is hereby
amended and restated in its entirety to read as follows:
"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; provided, however, upon termination of a
Securitization Trust at recapture or the exercise of an
optional repurchase right, the B-Piece Cash Flows for such
Securitization Trust in the month of such termination shall be
(i) the B-Piece Value of such Securitization Trust as of the
Calculation Date immediately preceding the date of termination
multiplied by (ii) the Advance Rate applicable to such
Securitization Trust on such preceding Calculation Date.
2. The definition of "Monthly Amortization Amount" in the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
"Monthly Amortization Amount" means:
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(i) with respect to any Payment Date occurring prior
to November 15, 1999, 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;
(ii) with respect to the November 15, 1999 Payment
Date and each Payment Date thereafter prior to June
15, 2000, the greater of (A) $800,000.00, 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
(iii) with respect to any Payment Date occurring on
or after June 15, 2000, the greatest of (A)
$1,700,000.00, (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.
3. The definition of "Securitization Period" in the Loan Agreement is hereby
amended and restated in its entirety to read as follows:
"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; provided, however, that if
Borrower has not completed a securitization of Ugly Duckling
Collateral during the month of November or December 1999, the
Securitization Period shall extend until Borrower has
completed two (2) securitizations of Ugly Duckling Collateral
with an aggregate value of Ugly Duckling Collateral subject to
such securitizations of not less than $150,000,000.
4. The second and third paragraphs of Section 2.6 of the Loan Agreement are
hereby amended and restated in their entirety to read as follows:
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 sum of (i) the product of $500,000.00
multiplied by the number of Payment Dates that have occurred
prior to November 15, 1999, plus (ii) the product of
$800,000.00 multiplied by the number of Payment Dates that
have occurred from and after November 15, 1999 (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.
With respect to any Payment Date prior to November 15, 1999,
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). With
respect to any Payment Date from and after November 15, 1999,
in the event clause (ii)(B) of the definition of Monthly
Amortization Amount would result in a Monthly Amortization
Amount with respect to any Payment Date in excess of
$800,000.00, 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 $800,000.00
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).
5. Section 6.16 of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
6.16 Minimum B-Piece Cash Flows. Not permit aggregate B-Piece
Cash Flows deposited to the Collateral Account with respect to
any month to be less than the following amounts determined as
of the applicable Payment Date (it being understood that for
purposes of determining compliance with this Section 6.16 the
amount deemed deposited with respect to any B-Piece may not
exceed the B-Piece Cash Flow with respect to such B-Piece):
(a) For Payment Dates through and including September
15, 1999 (which represent B-Piece Cash Flows with
respect to months through August 1999), $2,000,000.
(b) For Payment Dates from October 15, 1999, through
and including March 15, 2000, $900,000 (which
represent B-Piece Cash Flows with respect to months
from September 1999 through February 2000)
(c) For the Payment Date on April 15, 2000 (which
represents B-Piece Cash Flows with respect to the
month of March 2000), $1,200,000.
(d) For the Payment Date on May 15, 2000, and
thereafter, $2,000,000.
6. Section 8.1(j) of the Loan Agreement is hereby amended to provide as follows:
(j) If a default or event of default occurs under the GECC
Agreement or under the terms of any other Indebtedness (other
than Non-Recourse Debt) 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) regardless of whether such default or event of default
is waived or amended.
7. A new Section 6.22 is hereby added to the Loan Agreement to provide as
follows:
6.22 Required Number of Securitization Trusts. Borrower agrees
that as of each Payment Date the number of Securitization
Trusts with respect to which Borrower has either pledged the
stock of a bankruptcy remote entity pursuant to the Stock
Pledge Agreement or otherwise pledged B Certificates pursuant
to the Loan Documents shall not be less than the following:
(i) For the period ending on July 14, 2000, the result of
dividing (A) the unpaid principal balance of the Loan as of
such Payment Date (after giving effect to any payments then
being made) by (B) $5,000,000; and
(ii) For the period from and after July 15, 2000, the result
of dividing (A) the unpaid principal balance of the Loan as of
such Payment Date (after giving effect to any payments then
being made) by (B) $4,000,000.
8. Section 3(ii) of the Cash Collateral Account Agreement is amended and
restated in its entirety to read as follows:
(ii) 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 UDC and received by the Lenders (as of any
date of determination, the "Actual Amortization Amount") since
the date hereof exceeds the sum of (A) the product of
$500,000.00 multiplied by the number of Payment Dates that
have occurred prior to November 15, 1999, plus (B) the product
of $800,000.00 multiplied by the number of Payment Dates that
have occurred from and after November 15, 1999 (as of any date
of determination, the "Required Amortization Amount"), then
UDC, upon written request to Secured Party (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.
9. Section 3(iii) of the Cash Collateral Account Agreement is amended and
restated in its entirety to read as follows:
With respect to any Payment Date prior to November 15, 1999,
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, UDC may elect, by written notice to Secured Party
and Lenders received at least 1 Business Day in advance of
such Payment Date, to have Secured Party pay only $500,000.00
of the Outstanding Principal Amount on such Payment Date and,
in lieu of paying the remainder of any such excess on such
Payment Date, elect to have such excess remain in the
Collateral Account. With respect to any Payment Date from and
after November 15, 1999, in the event clause (ii)(B) of the
definition of Monthly Amortization Amount would result in a
Monthly Amortization Amount with respect to any Payment Date
in excess of $800,000.00, UDC may elect, by written notice to
Secured Party and Lenders received at least 1 Business Day in
advance of such Payment Date, to have Secured Party pay only
$800,000.00 of the Outstanding Principal Amount on such
Payment Date and, in lieu of paying the remainder of any such
excess on such Payment Date, elect to have such excess remain
in the Collateral Account.
10. Section 7(c) of the Stock Pledge Agreement is hereby amended to add the
words "During the Securitization Period," at the beginning of such Section.
Except as specifically modified by this waiver and agreement, all of
the terms and provisions of the Loan Agreement, each other Loan Document and
each of the documents referred to therein or delivered in connection therewith
shall remain in full force and effect. The waivers set forth herein shall be
limited precisely as written and shall not be deemed, except as expressly set
forth herein, (a) to be a consent to any modification or waiver of other terms
or conditions of the Loan Agreement, any other Loan Document or any of the
documents referred to therein or delivered in connection therewith or (b) to
prejudice any right, remedy, power or privilege which any party hereto or any
party consenting hereto now has or may have in the future under or in connection
with the Loan Agreement, any other Loan Document or any of the documents
referred to therein or delivered in connection therewith. Without limiting the
generality of the foregoing, the Security Documents and all of the Collateral
described therein do and shall, to the extent set forth therein, continue to
secure the payment of all obligations and liabilities of the Borrower under the
Loan Agreement and/or any of the other Loan Documents, in each case as amended
hereby.
Upon the execution and delivery hereof by the Required Lenders and
Collateral Agent, Borrower shall pay to Lenders, ratably, a modification fee in
the aggregate amount of $50,000.
The Borrower shall promptly pay the reasonable out-of-pocket expenses
incurred by the Collateral Agent and the Lenders in connection with the
preparation of this waiver and agreement including the reasonable fees,
disbursements and other charges of its counsel
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York.
Borrower hereby represents and warrants to Collateral Agent and Lenders
as follows:
(i) The execution, delivery and performance of this Letter Agreement by
Borrower and Guarantor has been duly authorized by all necessary corporate
action of Borrower and Guarantor.
(ii) This Letter Agreement has been duly executed and delivered by
Borrower and Guarantor and constitutes the legal, valid and binding obligation
of Borrower and Guarantor in accordance with its terms, except as enforcement
may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.
(iii) As of the date hereof, the representations and warranties of
Borrower and Guarantor set forth in the Loan Documents are true and correct in
all material respects.
(iv) As of the date hereof and after giving effect to the execution and
delivery of this Letter Agreement by Borrower, Collateral Agent and Lenders, no
Default or Event of Default has occurred and is continuing.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
Please sign and return the enclosed copy of this letter.
Very truly yours,
UGLY DUCKLING CORPORATION, a Delaware corporation
By: /S/ DONALD L. ADDINK
-------------------------
Name: Donald L. Addink
Title: Vice President
CONSENTED:
GALAXY CLO 1999-1, LTD.
By: SAI Investment Adviser, Inc.,
its Collateral Manager
By: /S/ JAMES K. HUNT
----------------------
Name: James K. Hunt
Title: Executive Vice President
SUNAMERICA LIFE INSURANCE
COMPANY
By: /S/ JOHN L?????????
- ------------------------
Name: John L???????????
Title: Authorized Agent
KZH SOLEIL-2 LLC
By:/S/ PETER CHIN
- -----------------
Name: Peter Chin
Title: Authorized Agent
HARRIS TRUST & SAVINGS BANK,
as Collateral Agent
By: /S/ MEGAN CARMODY
- ----------------------
Name: Megan Carmody
Title: Assistant Vice President
Guarantor hereby consents and agrees to the foregoing and agrees that
the Guaranty remains in full force and effect and that the Guaranteed
Obligations (as defined in the Guaranty) include, without limitation, payment of
the obligations of Borrower pursuant to the foregoing Letter Agreement and the
Loan Documents as amended by the foregoing Letter Agreement.
UGLY DUCKLING CAR SALES AND FINANCE
CORPORATION, an Arizona corporation
By: /S/ JON D. EHLINGER
------------------------
Name: Jon D. Ehlinger
Title: Secretary