EXHIBIT 10.2
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THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT
Dated as of August 2, 1999
by and between
UGLY DUCKLING CORPORATION,
a Delaware corporation
("Lender")
and
FIRST MERCHANTS ACCEPTANCE CORPORATION,
a Delaware corporation
("Borrower")
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THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT (the "Amendment
to Agreement"), is entered into as of August 2, 1999, between UGLY DUCKLING
CORPORATION, a Delaware corporation ("Lender" or "UDC"), with a place of
business located at 2525 East Camelback Road, Suite 1150, Phoenix, Arizona
85016, and FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation
("Borrower" or "FMAC"), with a principal place of business located at 303 West
Erie, Suite 410, Chicago, IL 60610.
WHEREAS, Lender agreed to make available to Borrower a revolving credit
facility (the "Loan") upon the terms and conditions set forth in that certain
Credit and Security Agreement dated as of July 17, 1997, by and between Lender
and Borrower (the "Agreement");
WHEREAS, the Agreement was amended by that certain First Amendment to
Credit and Security Agreement, dated as of January 21, 1998.
WHEREAS, the Agreement was amended by that certain Second Amendment to
Credit and Security Agreement, dated as of April 1, 1998.
WHEREAS, Lender has asserted that Borrower defaulted under the
Agreement.
WHEREAS, the Lender and the Borrower have agreed to modify the
Agreement, as amended, as set forth below to, among other things, clarify
certain of Lender's rights and to provide for the cure of certain asserted
defaults under the Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree to modify, amend and
supplement the Agreement only as follows, all other provisions of the Agreement,
as amended, not effected hereby to remain in full force and effect:
ARTICLE I
THE COMMITMENT
1.1 Lender's Ability to Draw Down on Line of Credit to Pay Monthly
Interest Charges. Section 2.4 of the Agreement is hereby modified and amended by
the addition of the following new paragraph to be designated Section 2.4(e):
"(e) Borrower hereby authorizes Lender to, on the first day
of each consecutive month, draw down on the Loan an amount sufficient to pay the
monthly interest charge at the non-default rate due and payable to Lender
pursuant to Section 2.4(c). Any such draw shall be considered an Advance and
shall be repaid pursuant to this Agreement."
1.2 Cure Fee. Borrower and Lender agree that, on or before August 2,
1999, Borrower shall pay the sum of $100,000.00 to Lender as an Advance
hereunder in full and final satisfaction of any and all default interest, late
payment fees, legal expenses and other Lender's Expenses resulting from and
associated with (i) Borrower's default under the Agreement and (ii) the
preparation, drafting and negotiation of that certain Credit and Security
Agreement II dated August 2, 1999 by and between Borrower and Lender.
Lender hereby accepts the Cure Fee in full and complete
satisfaction of all alleged defaults hereunder and acknowledges that upon
signing this Amendment to Agreement, Lender no longer asserts that Borrower is
in default.
1.3 Transition Fee. Borrower and Lender agree that, on before August 2,
1999, Borrower shall pay to Lender the sum of $130,240.70 as an Advance
hereunder in full and complete satisfaction of all obligations owed to UDC under
the Transition Services Agreement.
1.4 Dividend Direction Letter.Borrower, as sole shareholder of First
Merchants Auto Receivables Corp. ("FMARC") and First Merchants Auto Receivables
Corp. II ("FMARC II"), shall direct the directors of FMARC and FMARC II to adopt
the resolutions set forth in an Action by Unanimous Consent in the form attached
hereto as Exhibit "1." Borrower shall also deliver to Lender executed Dividend
Direction Letters, addressed to Harris Trust & Savings Bank and Chase Manhattan
Bank Delaware ("Distributors") and directing Distributors to deliver to Lender
any and all dividends and/or other distributions to which Borrower would
otherwise be entitled as a shareholder of FMARC and FMARC II. A form of such
Dividend Direction Letter is attached hereto as Exhibit "2." On the date such
dividends and/or other distributions are made by Distributors to Lender, Lender
shall apply any such monies to permanently reduce the Commitment Amount and to
pay any other amounts due and owing by Borrower to Lender pursuant to the
Agreement, the Contribution Agreement, the Credit and Security Agreement II
dated August 2, 1999, the Modified UDC Fee, any advance under the UDC Stock
Option and any other obligation secured by the B Pieces arising under the Plan;
provided, however, that nothing herein shall be deemed to grant a security
interest in the B Pieces to secure obligations such as servicing fees which may
be owed from time to time to UDC, Cygnet Financial or their affiliates which are
not currently directly secured by the B Pieces and the UDC. Once Borrower's
Obligations to Lender, pursuant to the Agreement, the Contribution Agreement,
the Credit and Security Agreement II dated August 2, 1999, the Modified UDC Fee,
any advance under the UDC Stock Option and any other obligation secured by the B
Pieces arising under the Plan; provided, however, that nothing herein shall be
deemed to grant a security interest in the B Pieces to secure obligations such
as servicing fees which may be owed from time to time to UDC, Cygnet Financial
or their affiliates which are not currently directly secured by the B Pieces are
paid in full, Borrower shall be entitled to revoke the Dividend Direction Letter
using the form of revocation letter attached hereto as Exhibit "3" (the
"Revocation Letter"). Lender shall provide Borrower and Distributors with
monthly reports, on or before the 15th day of each month, reflecting the
outstanding amount due and owing by Borrower to Lender under the Agreement, the
Contribution Agreement, the Credit and Security Agreement II, the Modified UDC
Fee, any advance under the UDC Stock Option and any other obligation secured by
the B Pieces arising under the Plan.
FMAC shall not give the Revocation Letter for payments under
the B Pieces until it has either (i) obtained a report from UDC showing that no
further obligations secured by the B Pieces are owed to UDC or (ii) obtained a
final order from the Bankruptcy Court or any other court of competent
jurisdiction after notice to UDC and a hearing that all such amounts have been
satisfied. The form of Revocation Letter shall be in the form of Exhibit "3"
hereto, shall attach the UDC report or applicable court order as an exhibit and
shall be sent to UDC prior to or at the same time it is sent to the Trustee. The
Distributors shall be expressly directed not to honor the Revocation Letter
unless it receives a fully signed copy of the Revocation Letter together with
the required report from UDC or final order of the applicable court.
1.5 Application of Owned Loan and B Piece Distributions. The provisions
of the Settlement Agreement regarding the application of Owned Loan and B Piece
Distributions shall govern such application. The Settlement Agreement is
incorporated herein by this reference.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Amendment, Borrower
represents and warrants that the Representations and Warranties made by Debtor
in the Credit and Security Agreement II are true, correct, and complete in all
respects as of the date hereof. The covenants, representations and warranties
and disclosure schedules thereto in Credit and Security Agreement II are hereby
incorporated by reference and replace for all purposes from the date of this
Amendment forward the representations, warranties and covenants and disclosure
schedules in the Agreement. Any liens granted or other actions taken pursuant to
the Credit and Security Agreement II shall not be a breach hereunder.
ARTICLE III
MISCELLANEOUS
3.1 Amendments and Waivers. No amendment or waiver of any provision of
this Amendment, the 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 Lender and Borrower, and then such waiver
shall be effective only in the specific instance and for the specific purpose
for which given.
3.2 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 directed to each other party at the following address (or at such
other address as shall be designated by Lender or Borrower in a written notice
to Borrower and Lender).
If to Borrower: FIRST MERCHANTS ACCEPTANCE CORPORATION
303 West Erie, Suite 410
Chicago, Illinois 60610
Attn: Ms. Teresa McMahon, President
Facsimile No. (312) 397-1050
With a copy to: Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606-6404
Attn: Robert Richards, Esquire
Facsimile No. (312) 876-7934
If to Lender: UGLY DUCKLING CORPORATION
2525 East Camelback Road
Suite 1150
Phoenix, Arizona 85016
Attn: Steven Johnson
Facsimile No.: (602) 852-6696
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Christopher H. Bayley, Esquire
Facsimile No.: (602) 382-6070
(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 Lender.
(c) Borrower acknowledges and agrees that any agreement of
Lender to receive certain notices by telephone and facsimile is solely for the
convenience and at the request of Borrower. Lender shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by Borrower to
give such notice and Lender shall not have any liability to Borrower or to other
Person on account of any action taken or not taken by Lender in reliance upon
such telephonic or facsimile notice. The obligation of Borrower to repay the
Advances shall not be affected in any way or to any extent by any failure by
Lender to receive written confirmation of any telephonic or facsimile notice or
the receipt by Lender of a confirmation which is at variance with the terms
understood by Lender to be contained in the telephonic or facsimile notice.
3.3 No Waiver: Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of 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.
3.4 Counterparts. This Amendment may be executed by one or more of the
parties to this Amendment 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.
3.5 Severability. The illegality or unenforceability of any provision
of this Amendment 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 Amendment or any instrument or agreement required hereunder.
3.6 No Third Parties Benefited. This Amendment is made and entered into
for the sole protection and legal benefit of Borrower and Lender, 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 Amendment or any of the other Loan Documents.
Lender shall have no obligation to any Person not a party to this Amendment or
other Loan Documents.
3.7 Time. Time is of the essence as to each term or provision of
this Amendment and each of the other Loan Documents.
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3.8 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 UNITED STATES OF AMERICA
(INCLUDING THE BANKRUPTCY CODE), IT BEING THE INTENT OF THE PARTIES THAT FEDERAL
LAW SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO WITHOUT REGARD TO
THE APPLICATION OF ANY PROVISION OF STATE LAW. TO THE EXTENT THAT FEDERAL LAW
WOULD APPLY THE LAW OF ANY STATE AS THE FEDERAL RULE FOR THE PURPOSES OF THIS
AGREEMENT, THE PARTIES AGREE THAT THE LAWS OF THE STATE OF ARIZONA SHALL BE USED
TO SUPPLEMENT APPLICABLE FEDERAL LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY COURT.
BORROWER AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
3.8.
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.
3.9 Entire Agreement. The Agreement, as amended, together with the
other Loan Documents and that certain "Settlement Agreement" dated August 2,
1999 by and between Borrower and Lender, embodies the entire Agreement and
understanding among Borrower and Lender 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 Lender.
3.10 Interpretation. This Amendment is the result of negotiations
between and has been reviewed by counsel to Lender, Borrower and other parties,
and is the product of all parties hereto. Accordingly, this Amendment, the
Agreement and the other Loan Documents shall not be construed against Lender
merely because of Lender's involvement in the preparation of such documents and
agreements.
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IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed as of the date first written above.
FIRST MERCHANTS ACCEPTANCE CORPORATION,
a Delaware corporation
By: /S/ GREGORY L. BURDETT
Name: Gregory L. Burdett
Title: Vice President & Controller
UGLY DUCKLING CORPORATION,
a Delaware corporation
By: /S/ DONALD L. ADDINK
Name: Donald L. Addink
Title: Vice President