<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1996
REGISTRATION NO. 333-3998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UGLY DUCKLING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5521 86-0721358
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------
2525 EAST CAMELBACK ROAD, SUITE 1150
PHOENIX, ARIZONA 85016
(602) 852-6600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN P. JOHNSON, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
UGLY DUCKLING CORPORATION
2525 EAST CAMELBACK ROAD, SUITE 1150
PHOENIX, ARIZONA 85016
(602) 852-6600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
STEVEN D. PIDGEON, ESQ. CHRISTOPHER D. JOHNSON, ESQ.
SNELL & WILMER L.L.P. SQUIRE, SANDERS & DEMPSEY
ONE ARIZONA CENTER 40 NORTH CENTRAL, SUITE 2700
PHOENIX, ARIZONA 85004-0001 PHOENIX, ARIZONA 85004-4440
(602) 382-6000 (602) 528-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
Ugly Duckling Corporation has prepared this Amendment No. 2 for the
purpose of filing with the Securities and Exchange Commission certain exhibits
to the Registration Statement. Amendment No. 2 does not modify any provision of
the Prospectus included in the Registration Statement; accordingly, the related
Cross-Reference Sheet and such Prospectus have not been included herein.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with the issuance and distribution of the
securities to be registered hereunder, all of which will be paid by the
registrant, will be substantially as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
----------------------------------------------------------------- ----------
<S> <C>
SEC Registration Fee............................................ $ 6,415
*Nasdaq Filing Fee............................................... 20,000
*Blue Sky Fees and Expenses (including legal fees)............... 30,000
*Accounting Fees and Expenses.................................... 140,000
*Legal Fees and Expenses......................................... 200,000
*Printing and Engraving.......................................... 75,000
*Registrar and Transfer Agent's Fees............................. 20,000
*Directors' and Officers' Insurance.............................. 175,000
*Representative's Nonaccountable Expense Allowance............... 367,500
*Miscellaneous Expenses.......................................... 228,585
--------
Total.................................................. $1,262,500
========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability for: (i) any breach of the director's duty of loyalty to the Company
or its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) liability for
payments of dividends or stock purchases or redemptions in violation of Section
174 of the Delaware General Corporation Law; or (iv) any transaction from which
the director derived an improper personal benefit. In addition, the Company's
Certificate of Incorporation provides that the Company shall to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than such law permitted the corporation to provide prior
to such amendment), indemnify and hold harmless any person who was or is a
party, or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that such person
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "Indemnitee")
against expenses, liabilities and losses (including attorneys' fees, judgments,
fines, excise taxes or penalties paid in connection with the Employee Retirement
Income Security Act of 1974, as amended, and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection therewith;
provided, however, that except as otherwise provided with respect to proceedings
to enforce rights to indemnification, the Company shall indemnify any such
Indemnitee in connection with a proceeding (or part thereof) initiated by such
Indemnitee only if such proceeding or part thereof was authorized by the board
of directors of the Company.
The right to indemnification set forth above includes the right to be paid
by the Company the expenses (including attorneys' fees) incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an Indemnitee in his capacity as a director or officer (and
not in any other capacity in which
II-1
<PAGE> 4
service was or is rendered by such Indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Company of an undertaking, by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is not further right to appeal that such Indemnitee is
not entitled to be indemnified for such expenses under this section or
otherwise. The rights to indemnification and to the advancement of expenses
conferred herewith are contract rights and continue as to an Indemnitee who has
ceased to be a director, officer, employee or agent and inures to the benefit of
the Indemnitee's heirs, executors and administrators.
The Delaware General Corporation Law provides that indemnification is
permissible only when the director, officer, employee, or agent acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful. The
Delaware General Corporation Law also precludes indemnification in respect of
any claim, issue, or matter as to which an officer, director, employee, or agent
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that, despite such adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
The Company has agreed to indemnify the Underwriters and their controlling
persons, and the Underwriters have agreed to indemnify the Company and its
controlling persons, against certain liabilities, including liabilities under
the Securities Act. Reference is made to the Underwriting Agreement filed as
part of Exhibit 1 hereto.
For information regarding the Company's undertaking to submit to
adjudication the issue of indemnification for violation of the securities laws,
see Item 17 hereof.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On January 1, 1994, the Company authorized a stock split-up, effected in
the form of a stock dividend, whereby each of the 1,160 issued and outstanding
shares of common stock held by Ernest C. Garcia, II, was cancelled and replaced
by 4,000 shares of Common Stock.
On February 1, 1994, Steven T. Darak purchased 174,000 shares of Common
Stock from the Company for an aggregate purchase price of $15,000.
On May 31, 1994: (i) Steven P. Johnson purchased 290,000 shares of Common
Stock from the Company for an aggregate purchase price of $25,000; (ii) Scott A.
Allen and Wm. Don Gray each purchased 116,000 shares of Common Stock from the
Company for an aggregate purchase price of $10,000; (iii) Steven T. Darak and
Nancy V. Young each purchased 58,000 shares of Common Stock from the Company for
an aggregate purchase price of $5,000; (iv) Peter R. Fratt purchased 46,400
shares of Common Stock from the Company for an aggregate purchase price of
$4,000; (v) and Eric J. Splaver and Mary E. Reiner each purchased 11,600 shares
of Common Stock from the Company for an aggregate purchase price of $1,000.
On March 22, 1995, Walter T. Vonsh purchased 58,000 shares of Common Stock
from the Company for an aggregate purchase price of $5,000.
On August 31, 1995, Sun America purchased $3 million of the Company's
convertible subordinated debt. This indebtedness is due December 31, 1998, and
bears interest at a per annum rate of 12.5%, payable quarterly.
On December 31, 1995, Verde Investments converted $10,000,000 of
subordinated debt into 1,000,000 shares of the Company's Preferred Stock.
On April 24, 1996, the Company reincorporated from Arizona to Delaware by
way of a merger in which the Company, an Arizona corporation, merged with and
into a newly created Delaware subsidiary of the Company. In the merger, each
share of the Arizona corporation's issued and outstanding common stock was
exchanged for 1.16 shares of the Delaware corporation's common stock and each
option to purchase shares of
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<PAGE> 5
the Arizona corporation's common stock was exchanged for 1.16 options to
purchase shares of the Delaware corporation's common stock. All share figures
set forth above give effect to this exchange ratio.
Exemption from registration for each transaction described above was
claimed pursuant to Section 4(2) of the Securities Act regarding transactions by
an issuer not involving any public offering and/or pursuant to Rule 145 under
the Securities Act regarding transactions the sole purpose of which is to change
an issuer's domicile solely within the United States.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement by and between Cruttenden Roth Incorporated and the
Registrant*
3.1 Certificate of Incorporation of the Registrant*
3.1(a) Amendment to Certificate of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
3.2(a) Amendment to Bylaws of the Registrant*
4.1 Certificate of Incorporation of the Registrant filed as Exhibit 3.1*
4.2 Series A Preferred Stock Agreement*
4.3 18% Subordinated Debenture of the Registrant issued to Verde Investments, Inc.*
4.4 18% Junior Subordinated Revolving Debenture of the Registrant issued to Verde
Investments, Inc., as amended*
4.5 Convertible Note of the Registrant issued to SunAmerica Life Insurance Company*
4.6 Form of Certificate representing Common Stock
4.7 Form of warrant issued to Cruttenden Roth Incorporated as Representative of the
several underwriters*
4.8 Form of warrant issued to SunAmerica Life Insurance Company
5 Opinion of Snell & Wilmer L.L.P. regarding the legality of the common stock being
registered
10.1 Motor Vehicle Installment Contract Loan and Security Agreement between the
Registrant and General Electric Capital Corporation*
10.1(a) Amendment to Motor Vehicle Installment Contract Loan and Security Agreement
between the Registrant and General Electric Capital Corporation*
10.1(b) Amendment to Motor Vehicle Installment Contract Loan and Security Agreement
between the Registrant and General Electric Capital Corporation*
10.1(c) Amendment No. 3 to Motor Vehicle Installment Contract Loan and Security Agreement
between the Registrant and General Electric Capital Corporation*
10.1(d) Amendment No. 4 to Motor Vehicle Installment Contract Loan and Security Agreement
between the Registrant and General Electric Capital Corporation*
10.1(e) Amendment No. 5 to Motor Vehicle Installment Contract Loan and Security Agreement
between the Registrant and General Electric Capital Corporation*
10.2 Note Purchase Agreement between the Registrant and SunAmerica Life Insurance
Company*
10.2(a) First Amendment to Note Purchase Agreement between the Registrant and SunAmerica
Life Insurance Company*
10.2(b) Second Amendment to Note Purchase Agreement between the Registrant and SunAmerica
Life Insurance Company*
10.2(c) Third Amendment to Note Purchase Agreement between the Registrant and SunAmerica
Life Insurance Company*
10.2(d) Fourth Amendment to Note Purchase Agreement between the Registrant and SunAmerica
Life Insurance Company
10.2(e) Commitment Letter entered into between the Registrant and SunAmerica Life
Insurance Company*
10.2(f) Letter Agreement regarding Note Conversion between the Registrant and SunAmerica
Life Insurance Company
</TABLE>
II-3
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
10.3 Registration Rights Agreement between the Registrant and SunAmerica Life Insurance
Company*
10.3(a) Amended and Restated Registration Rights Agreement between the Registrant and
SunAmerica Life Insurance Company
10.4 Form of Pooling and Servicing Agreement relating to SunAmerica securitization
program*
10.5 Form of Certificate Purchase Agreement relating to SunAmerica securitization
program*
10.6 Form of Origination Agreement and Assignment relating to SunAmerica securitization
program*
10.7 Form of Purchase Agreement and Assignment relating to SunAmerica securitization
program*
10.8 Form of Servicing Guaranty relating to SunAmerica securitization program*
10.9 Ugly Duckling Corporation Long-Term Incentive Plan*
10.9(a) Amendment to Ugly Duckling Corporation Long-Term Incentive Plan
10.10 Employment Agreement between the Registrant and Ernest C. Garcia, II*
10.11 Employment Agreement between the Registrant and Steven T. Darak*
10.12 Employment Agreement between the Registrant and Wally Vonsh*
10.13 Employment Agreement between the Registrant and Donald Addink*
10.14 Lease Agreement between the Registrant and Camelback Esplanade Limited Partnership
for corporate offices in Phoenix, Arizona*
10.15 Land Lease Agreement between the Registrant and Verde Investments, Inc. for
property located at 5104 West Glendale Avenue in Glendale, Arizona*
10.16 Building Lease Agreement between the Registrant and Verde Investments, Inc. for
property and buildings located at 9630 and 9650 North 19th Avenue in Phoenix,
Arizona*
10.17 Land Lease Agreement between the Registrant and Verde Investments, Inc. for
property located at 330 North 24th Street in Phoenix, Arizona*
10.18 Land Lease Agreement between the Registrant and Verde Investments, Inc. for
property located at 333 South Alma School Road in Mesa, Arizona*
10.19 Lease Agreements between the Registrant and Blue Chip Motors, the Registrant and S
& S Holding Corporation, and the Registrant and Edelman Brothers for certain
properties located at 3901 East Speedway Boulevard in Tucson, Arizona*
10.20 Real Property Lease between the Registrant and Peter and Alva Keesal for property
located at 3737 South Park Avenue in Tucson, Arizona*
10.21 Land Lease Agreement between the Registrant and Verde Investments, Inc. for
property located at 2301 North Oracle Road in Tucson, Arizona*
10.22 Related Party Transactions Modification Agreement between the Registrant and Verde
Investments, Inc.*
10.23 Sublease Agreement between the Registrant and Envirotest Systems Corp. for
corporate offices in Phoenix, Arizona*
10.24 Form of Indemnity Agreement between the Registrant and its directors and officers*
10.25 Ugly Duckling Corporation 1996 Director Incentive Plan
11 Earnings per Share Computation*
21 List of Subsidiaries*
23.1 Consent of KPMG Peat Marwick LLP, independent certified public accountants*
23.2 Consent of Snell & Wilmer L.L.P. (included in Exhibit 5)
24 Power of Attorney (see signature page included in Registration Statement)*
99.1 Consent of Robert J. Abrahams*
99.2 Consent of Christopher D. Jennings*
99.3 Consent of John N. MacDonough*
99.4 Consent of Arturo R. Moreno*
99.5 Consent of Frank P. Willey*
</TABLE>
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* Previously filed
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<PAGE> 7
(b) Financial Statement Schedule:
II Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filedwith the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 8
The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(b) Under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Phoenix, State of Arizona, on June 5,
1996.
Ugly Duckling Corporation
By: /s/ ERNEST C. GARCIA, II
------------------------------------
Ernest C. Garcia, II
Chairman of the Board, President,
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------
<C> <S> <C>
/s/ ERNEST C. GARCIA, II Chief Executive Officer and June 5, 1996
- --------------------------------------------- Director (Principal executive
Ernest C. Garcia, II officer)
/s/ STEVEN T. DARAK Senior Vice President and Chief June 5, 1996
- --------------------------------------------- Financial Officer (Principal
Steven T. Darak financial and accounting
officer)
</TABLE>
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<PAGE> 10
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- ---------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement between the Cruttenden Roth
Incorporated and the Registrant*.....................................
3.1 Certificate of Incorporation of the Registrant*......................
3.1(a) Amendment to Certificate of Incorporation of the Registrant*.........
3.2 Bylaws of the Registrant*............................................
3.2(a) Amendment to Bylaws of the Registrant*...............................
4.1 Certificate of Incorporation of the Registrant filed as Exhibit 3.1*.
4.2 Series A Preferred Stock Agreement*..................................
4.3 18% Subordinated Debenture of the Registrant issued to Verde
Investments, Inc.* ..................................................
4.4 18% Junior Subordinated Revolving Debenture of the Registrant issued
to Verde Investments, Inc., as amended* .............................
4.5 Convertible Note of the Registrant issued to SunAmerica Life
Insurance Company*...................................................
4.6 Form of Certificate representing Common Stock........................
4.7 Form of Warrant issued to Cruttenden Roth Incorporated as
representative of the several Underwriters*..........................
4.8 Form of Warrant issued to SunAmerica Life Insurance Company..........
5 Opinion of Snell & Wilmer L.L.P. regarding the legality of the common
stock being registered...............................................
10.1 Motor Vehicle Installment Contract Loan and Security Agreement
between the Registrant and General Electric Capital Corporation*.....
10.1(a) Amendment to Motor Vehicle Installment Contract Loan and Security
Agreement between the Registrant and General Electric Capital
Corporation*.........................................................
10.1(b) Amendment to Motor Vehicle Installment Contract Loan and Security
Agreement between the Registrant and General Electric Capital
Corporation*.........................................................
10.1(c) Amendment No. 3 to Motor Vehicle Installment Contract Loan and
Security Agreement between the Registrant and General Electric
Capital Corporation*.................................................
10.1(d) Amendment No. 4 to Motor Vehicle Installment Contract Loan and
Security Agreement between the Registrant and General Electric
Capital Corporation*.................................................
10.1(e) Amendment No. 5 to Motor Vehicle Installment Contract Loan and
Security Agreement between the Registrant and General Electric
Capital Corporation*.................................................
10.2 Note Purchase Agreement between the Registrant and SunAmerica Life
Insurance Company*...................................................
10.2(a) First Amendment to Note Purchase Agreement between the Registrant and
SunAmerica Life Insurance Company*...................................
10.2(b) Second Amendment to Note Purchase Agreement between the Registrant
and SunAmerica Life Insurance Company*...............................
10.2(c) Third Amendment to Note Purchase Agreement between the Registrant and
SunAmerica Life Insurance Company*...................................
10.2(d) Fourth Amendment to Note Purchase Agreement between the Registrant
and SunAmerica Life Insurance Company................................
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- ---------------------------------------------------------------------
<S> <C>
10.2(e) Commitment Letter entered into between the Registrant and SunAmerica
Life Insurance Company*..............................................
10.2(f) Letter Agreement regarding Note Conversion between the Registrant and
SunAmerica Life Insurance Company....................................
10.3 Registration Rights Agreement between the Registrant and SunAmerica
Life Insurance Company*..............................................
10.3(a) Amended and Restated Registration Rights Agreement between the
Registrant and SunAmerica Life Insurance Company.....................
10.4 Form of Pooling and Servicing Agreement relating to SunAmerica
securitization program*..............................................
10.5 Form of Certificate Purchase Agreement relating to SunAmerica
securitization program*..............................................
10.6 Form of Origination Agreement and Assignment relating to SunAmerica
securitization program*..............................................
10.7 Form of Purchase Agreement and Assignment relating to SunAmerica
securitization program*..............................................
10.8 Form of Servicing Guaranty relating to SunAmerica securitization
program*.............................................................
10.9 Ugly Duckling Corporation Long-Term Incentive Plan*..................
10.9(a) Amendment to Ugly Duckling Corporation Long-Term
Incentive Plan.......................................................
10.10 Employment Agreement between the Registrant and Ernest C. Garcia,C II*
10.11 Employment Agreement between the Registrant and Steven T. Darak*.....
10.12 Employment Agreement between the Registrant and Wally Vonsh*.........
10.13 Employment Agreement between the Registrant and Donald Addink*.......
10.14 Lease Agreement between the Registrant and Camelback Esplanade
Limited Partnership for corporate offices in Phoenix, Arizona*.......
10.15 Land Lease Agreement between the Registrant and Verde Investments,
Inc. for property located at 5104 West Glendale Avenue in Glendale,
Arizona*.............................................................
10.16 Building Lease Agreement between the Registrant and Verde
Investments, Inc. for property and buildings located at 9630 and 9650
North 19th Avenue in Phoenix, Arizona*...............................
10.17 Land Lease Agreement between the Registrant and Verde Investments,
Inc. for property located at 330 North 24th Street in Phoenix,
Arizona*.............................................................
10.18 Land Lease Agreement between the Registrant and Verde Investments,
Inc. for property located at 333 South Alma School Road in Mesa,
Arizona*.............................................................
10.19 Lease Agreements between the Registrant and Blue Chip Motors, the
Registrant and S & S Holding Corporation, and the Registrant and
Edelman Brothers for certain properties located at 3901 East Speedway
Boulevard in Tucson, Arizona*........................................
10.20 Real Property Lease between the Registrant and Peter and Alva Keesal
for property located at 3737 South Park Avenue in Tucson, Arizona*...
10.21 Land Lease Agreement between the Registrant and Verde Investments,
Inc. for property located at 2301 North Oracle Road in Tucson,
Arizona*.............................................................
10.22 Related Party Transactions Modification Agreement between the
Registrant and Verde Investments, Inc.*..............................
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- ---------------------------------------------------------------------
<S> <C>
10.23 Sublease Agreement between the Registrant and Envirotest Systems
Corp. for corporate offices in Phoenix, Arizona*.....................
10.24 Form of Indemnity Agreement between the Registrant and its directors
and officers*........................................................
10.25 Ugly Duckling Corporation 1996 Director Incentive Plan...............
11 Earnings per Share Computation*......................................
21 List of Subsidiaries*................................................
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accounts*............................................................
23.2 Consent of Snell & Wilmer L.L.P. (included in Exhibit 5).............
24 Power of Attorney (see signature page included in Registration
Statement)*..........................................................
99.1 Consent of Robert J. Abrahams*.......................................
99.2 Consent of Christopher D. Jennings*..................................
99.3 Consent of John N. MacDonough*.......................................
99.4 Consent of Arturo R. Moreno*.........................................
99.5 Consent of Frank P. Willey*..........................................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 13
APPENDIX A
DESCRIPTION OF GRAPHIC AND IMAGE MATERIAL
1. Location: Face of the Form of Common Stock Certificate, (Exhibit 4.6)
Item: Ugly Duckling Corporation Logo
Description: The logo consists of a duck next to the words "Ugly Duckling
Corporation".
2. Location: Face of the Form of Common Stock Certificate, (Exhibit 4.6)
Item: Ugly Duckling Corporation Seal
Description: The Corporate Seal of Ugly Duckling Corporation.
<PAGE> 1
Exhibit 4.6
[LOGO]
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 903512 10 1
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
UGLY DUCKLING CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the seal of the Corporation and the signatures of its duly
authorized offices.
Dated:
/s/ Steven P. Johnson /s/ Ernest C. Garcia, II
- ------------------------------------- [SEAL] -----------------------------------
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
HARRIS TRUST COMPANY OF CALIFORNIA
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ______________ Custodian _______________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ____________________________________
(State)
UNIF TRF MIN ACT -- ______________ Custodian (until age ___)
(Cust)
________________ under Uniform Transfers
(Minor)
to Minors Act __________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ___________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________________
X ______________________________________________
X ______________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By ____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
Exhibit 4.8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND REGISTERED OR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAW OR REGISTRATION OR QUALIFICATION OF SUCH
SECURITIES UNDER THAT ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
UGLY DUCKLING CORPORATION
WARRANT CERTIFICATE
Dated as of [__________ __] [IPO DATE], 1996
Warrants to Purchase Common Stock
No. 1 Certificate for 116,000 Warrants
-----
Ugly Duckling Corporation, a Delaware corporation (the
"COMPANY"), hereby certifies that, for value received, OKGBD & Co., as nominee
of SunAmerica Life Insurance Company, an Arizona corporation ("INITIAL HOLDER"),
or registered assigns, is the registered owner of the number of Warrants of the
Company set forth above. This Warrant Certificate evidences 116,000 Warrants
(the "WARRANTS").
Each Warrant entitles the registered owner thereof to purchase
one share (each such share being referred to herein as a "WARRANT SHARE" and all
such shares being referred to herein, collectively, as the "WARRANT SHARES"), as
adjusted from time to time as provided in Section 7 hereof, of Common Stock,
$.001 par value per share, of the Company ("COMMON STOCK"). Each Warrant may be
exercised, in whole or in part, from time to time, prior to 5:00 p.m. on,
[__________ __] [IPO DATE], 2006 (the "EXPIRATION DATE"), subject to the
following terms and conditions.
1. Registration. The Company shall register each Warrant, upon
records to be maintained by the Company for such purpose (such records being
referred to herein as the "REGISTER"), in the name of the record holder of such
Warrant (the "WARRANTHOLDER") from time to time. The Company may deem and treat
the registered holder of each Warrant as the absolute owner thereof for the
purpose of any exercise thereof or any distribution to the holder thereof and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
1
<PAGE> 2
2. Registration of Transfers and Exchanges.
(a) Registration, Issuance of New Warrant Certificates. The
Company shall register in the Register the transfer of any Warrants upon the
surrender of this Warrant Certificate, with the Form of Assignment attached as
Annex A hereto duly filled in and signed (and with a signature guarantee for the
transfer of any Warrants by a registered holder which is not the Initial
Holder), to the Company at the office of the Company set forth in Section 11
hereof. Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, evidencing the Warrants so
transferred shall be issued to the transferee of such Warrants and a new Warrant
Certificate, in substantially the form of this Warrant Certificate, evidencing
the remaining Warrants, if any, not so transferred, shall be issued to the
then-registered holder thereof. The Company shall at no time close the Register
against the permitted transfer of any Warrant or Warrant Share in any manner
which materially interferes with the timely exercise of such Warrant.
(b) Warrants Exchangeable for Different Denominations. This
Warrant Certificate is exchangeable, upon the surrender hereof by the holder
hereof at the office of the Company set forth in Section 11 hereof, for new
Warrant Certificates, in substantially the form of this Warrant Certificate,
evidencing in the aggregate the right to purchase the number of Warrant Shares
which may then be purchased under this Warrant Certificate. Each such new
Warrant Certificate shall be dated the date of such exchange and represent the
right to purchase such number of Warrant Shares as shall be designated by the
holder of this Warrant Certificate at the time of such surrender.
3. Duration, Termination and Exercise of Warrants.
(a) Duration and Termination of Warrants. Warrants shall be
exercisable by the registered holder thereof from time to time on any business
day before 5:00 P.M., Los Angeles time, on the Expiration Date. At 5:00 P.M.,
Los Angeles time, on the Expiration Date, each Warrant not exercised prior
thereto shall be and become void and of no value.
(b) Right to Purchase. Subject to the provisions of this
Warrant Certificate, including adjustments to the number of Warrant Shares
issuable upon the exercise of each Warrant pursuant to Section 7 hereof, each
holder of a Warrant on or prior to the Expiration Date shall have the right, for
each Warrant so held, to purchase from the Company (and the Company shall be
obligated to issue and sell to such holder of a Warrant) at the Exercise Price
(as hereinafter defined) one fully-paid Warrant Share which is nonassessable.
(c) Method of Exercise. Subject to Sections 4 and 10 hereof,
upon (i) surrender of this Warrant Certificate, with the Form of Election to
Purchase attached as Annex B hereto (the "FORM OF ELECTION TO PURCHASE") duly
filled in and signed, to the Company at its office specified in Section 11
hereof, and (ii) payment of the Exercise Price multiplied by the number of
Warrants being so exercised, the Company shall promptly, but in any event within
three days of its receipt of the Form of Election to Purchase, together with the
Warrant Certificate and receipt of payment of the Exercise Price, issue and
cause to be delivered to or upon the written order of the registered holder of
the Warrants being so exercised, and in such name or names as such registered
holder
2
<PAGE> 3
may designate (subject to Section 4 hereof), a certificate for the Warrant
Shares issued upon such exercise of such Warrants. Any person so designated to
be named in such certificate for such Warrant Shares shall be deemed to have
become the holder of record of such Warrant Shares as of the Date of Election to
Purchase (as hereinafter defined) with respect to such Warrants. The "DATE OF
ELECTION TO PURCHASE" with respect to any Warrant means the date on which the
Company shall have received (1) this Warrant Certificate, with the Form of
Election to Purchase duly filled in and signed, and (2) payment of the Exercise
Price for such Warrant.
(d) Payment of Exercise Price. The holder hereof may pay the
Exercise Price by any of the following methods: (i) in cash, by certified or
bank cashier's check or wire transfer, (ii) by cancellation by such holder of
indebtedness of the Company to such holder (in which case the Company will
accept such cancellation of indebtedness in full payment, as if such payment had
been made in cash), (iii) by Net-Issue Exercise (as hereinafter defined), or
(iv) by any combination of (i), (ii) or (iii). A "NET-ISSUE EXERCISE" means a
"cashless" exercise by a holder by delivery of a Form of Election to Purchase
instructing the Company to retain, in payment of the Exercise Price (or portion
thereof), a number of Warrant Shares (the "PAYMENT SHARES") equal to the
quotient of the aggregate Exercise Price of the Warrants then being exercised by
Net-Issue Exercise divided by the Market Price (as hereinafter defined) of such
shares as of the date of exercise, and to deduct the number of Payment Shares
from the Warrant Shares to be delivered to such holder.
(e) Partial Exercise. The Warrants evidenced by this Warrant
Certificate shall be exercisable either as an entirety or, from time to time,
for part only of the number of Warrants evidenced hereby. If fewer than all of
the Warrants evidenced by this Warrant Certificate are exercised at any time,
the Company, at its expense, shall issue to the registered holder a new Warrant
Certificate, in substantially the form of this Warrant Certificate, for the
remaining number of Warrants evidenced by this Warrant Certificate.
(f) Restrictions on Transfer. Neither the Warrants nor the
Warrant Shares may be sold, transferred or otherwise disposed of except in
accordance with the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and any applicable state securities laws. If reasonably requested by the
Company, any sale, transfer or other disposition shall be accompanied by an
opinion of holder's counsel, in form and substance reasonably acceptable to the
Company, to the effect that the disposition has been registered or is exempt
from registration under federal and applicable state securities laws. Except as
provided below, any certificate for a Warrant issued to any subsequent
transferee upon exercise of this Warrant and any certificate for any Warrant
Shares issued hereunder or to any subsequent transferee shall be stamped or
otherwise imprinted with a legend in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND
REGISTERED OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAW OR REGISTRATION OR
QUALIFICATION OF
3
<PAGE> 4
SUCH SECURITIES UNDER THAT ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED."
Upon request of any holder of a Warrant or Warrant Shares and, if reasonably
requested by the Company, the receipt by the Company of an opinion of such
holder's legal counsel, in form and substance reasonably acceptable to the
Company, the Company shall cause its transfer agent to remove the foregoing
legend from the certificate or issue to such holder a new certificate therefor
free of any restrictive legend.
4. Payment of Taxes. The Company shall pay all issuance and
transfer taxes and charges that may be imposed on the Company or on the Warrants
or the Warrant Shares in respect of the transfer of Warrants, or the issuance or
delivery of the Certificates for Warrant Shares or other securities in respect
of the Warrant Shares upon the exercise or conversion of Warrants; provided,
however, that the Company shall not be required to pay any such tax or other
charge imposed in respect of the transfer of Warrants, or the issuance or
delivery of certificates for Warrant Shares or other securities in respect of
the Warrant Shares upon the exercise of Warrants, to a person or entity other
than a then-existing registered holder of Warrants.
5. Mutilated or Missing Warrant Certificate. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, upon request by the
registered holder of the Warrants, the Company at its expense shall issue, in
exchange for and upon cancellation of the mutilated Warrant Certificate, or in
substitution for the lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate, in substantially the form of this Warrant Certificate, of
like tenor and representing the equivalent number of Warrants; provided,
however, in the case of loss, theft or destruction of this Warrant Certificate,
the Company may first require delivery of an indemnity agreement or bond
reasonably satisfactory in form and substance to the Company.
6. Reservation and Issuance of Warrant Shares.
(a) The Company shall, at all times during the term this
Warrant is exercisable, have authorized, and reserve and keep available, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares upon
the exercise of the Warrants, the number of Warrant Shares deliverable upon
exercise of the Warrants. The Company shall take any further corporate action
which may be necessary in order that the Company may validly and legally issue,
at the Exercise Price, Warrant Shares that are fully-paid and nonassessable.
(b) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant Certificate, be (i) duly
authorized, validly issued, fully-paid and nonassessable and (ii) free from all
taxes or other governmental charges with respect to the issuance thereof (not
including (x) income taxes payable by the holders of Warrants being exercised in
respect of gains thereon, and (y) transfer taxes in accordance with the
provisions of Section 4 above) and from all liens, charges and security
interests created by the Company.
(c) If the issuance of any Warrant Shares required to be
reserved pursuant to paragraph (a) of this Section 6 requires registration with
or approval of any governmental
4
<PAGE> 5
authority under any Federal or state law (other than the Securities Act and
state securities laws, registration under which is governed by the Amended and
Restated Registration Rights Agreement, dated as of even date herewith, between
the Company and the Initial Holder), before such Warrant Shares may be issued
upon the exercise thereof, the Company shall, at its expense and as
expeditiously as possible, use reasonable efforts to cause such Warrant Shares
to be duly registered or approved, as the case may be.
7. Adjustments.
(a) Adjustments to Number of Warrant Shares. The number of
Warrant Shares issuable upon the exercise of each Warrant shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment
pursuant to any of paragraphs (b), (c), (d) or (e) of this Section 7, each
Warrant shall thereafter entitle the holder thereof to purchase at the Exercise
Price the number of Warrant Shares resulting from such adjustment (the "ADJUSTED
WARRANT SHARE AMOUNT"). The Adjusted Warrant Share Amount shall initially be
1.00.
(b) Adjustment upon Issuance of Common Stock. If at any time
after the date hereof, the Company shall grant, issue or sell in any transaction
described in Section 7(c) hereof any shares of Common Stock (including shares
deemed issued or sold pursuant to the provisions of this Section 7) for a
consideration per share less than the Market Price immediately prior to the time
of such issue or sale, then, forthwith upon such grant, issue or sale, the
Adjusted Warrant Share Amount shall be equal to the product of the Adjusted
Warrant Share Amount in effect immediately prior to the time of such grant,
issue or sale multiplied by a fraction, the numerator of which shall be the
product of (x) the total number of shares of Common Stock outstanding
immediately after such grant, issue or sale multiplied by (y) the Market Price
immediately prior to such grant, issue or sale, and the denominator of which
shall be the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such grant, issue or sale multiplied by the Market Price
immediately prior to such grant, issue or sale plus (B) the consideration
received by the Company upon such grant, issue or sale.
(c) Certain Adjustment Events and Other Provisions. For the
purposes of this Section 7, the following clauses shall also be applicable.
(i) Certain Issuances of Common Stock. Except as provided in
clause (xi) of this Section 7(c), in case at any time prior to June 30,
1998 the Company shall grant, issue or sell in a Private Transaction
(as defined below) any shares of Common Stock for a consideration per
share less than the Market Price immediately prior to the time of such
grant, issuance or sale, then appropriate adjustment shall be made
pursuant to Section 7(b) hereof. "PRIVATE TRANSACTION" means any grant,
issue or sale except (A) through a public offering or (B) through (x)
any consolidation or merger, or (y) any acquisition of assets, or (z)
any acquisition of securities of any other corporation, in which Common
Stock, Options or Convertible Securities are issued.
(ii) Certain Issuances of Rights, Warrant or Options. Except
as provided in clause (xi) of this Section 7(c), in case at any time
prior to June 30, 1998 the Company shall
5
<PAGE> 6
grant, issue or sell in a Private Transaction any rights or warrants
(other than the Warrants) to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "CONVERTIBLE
SECURITIES") whether or not such rights or warrants or options (such
rights, warrants or options being herein called "OPTIONS") or the right
to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share (determined as provided below) for
which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities shall be
less than the Market Price determined as of the date of grant, issue or
sale of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall (as of the date of
grant, issue or sale of such Options) be deemed to be outstanding and
to have been issued for such price per share, and appropriate
adjustment shall be made pursuant to Section 7(b) hereof. Except as
provided in clause (v) of this Section 7(c), no further adjustment of
the Adjusted Warrant Share Amount shall be made upon the actual issue
of such Common Stock or such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities. For the purposes
of this clause (ii), the price per share for which Common Stock is
issuable upon the exercise of any such Options or upon conversion or
exchange of any such Convertible Securities shall be determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the grant, issue or sale of such Options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of all such Options, plus, in the case
of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options.
(iii) Certain Issuances of Convertible Securities. Except as
provided in clause (xi) of this Section 7(c), in case at any time prior
to June 30, 1998 the Company shall grant, issue or sell in a Private
Transaction any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
price per share (determined as provided below) for which Common Stock
is issuable upon the conversion or exchange of such Convertible
Securities shall be less than the Market Price determined as of the
date of such grant, issue or sale of such Convertible Securities, then
the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the grant, issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued for such price per
share, and appropriate adjustment shall be made pursuant to Section
7(b) hereof, provided that (A) except as provided in clause (v) of this
Section 7(c), no further adjustments of the Adjusted Warrant Share
Amount shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (B) if
6
<PAGE> 7
any such grant, issue or sale of such Convertible Securities is made
upon exercise of any rights or warrants to subscribe for or to purchase
or any option to purchase any such Convertible Securities for which
adjustments of the Adjusted Warrant Share Amount have been or are to be
made pursuant to clause (ii) of this Section 7(c), no further
adjustment of the Adjusted Warrant Share Amount shall be made by reason
of such grant, issue or sale. For the purposes of this clause (iii),
the price per share for which Common Stock is issuable upon conversion
or exchange of Convertible Securities shall be determined by dividing
(1) the total amount received or receivable by the Company as
consideration for the grant, issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (2) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities.
(iv) Certain Consolidations, Mergers or Acquisitions of
Assets. In case at any time prior to June 30, 1998 the Company shall,
in connection with (x) any consolidation or merger, or (y) any
acquisition of assets, or (z) any acquisition of securities of any
other corporation, grant, issue or sell any Common Stock, Options or
Convertible Securities, whether or not immediately exercisable, and the
price per share (determined, with respect to Options, as provided in
clause (ii) of this Section 7(c) and, with respect to Convertible
Securities, as provided in clause (iii) of this Section 7(c)) for which
such Common Stock is issuable (whether directly or upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities) shall be less than the Market Price determined as of the
date of grant, issue or sale of such Common Stock, Options or
Convertible Securities, as the case may be, then appropriate adjustment
shall be made pursuant to Section 7(b) hereof (determined, with respect
to Options, as provided in clause (ii) of this Section 7(c) and, with
respect to Convertible Securities, as provided in clause (iii) of this
Section 7(c)); provided, however, that no adjustment shall be required
under this clause (iv) if (A) no consent or approval of the
stockholders of the Company is required (whether by operation of any
state or federal corporate or securities laws or regulations or any
rules of any exchange or otherwise) in connection with such
consolidation, merger, or acquisition or (B) the Company receives an
opinion of a financial advisor to the effect that the consideration
received in connection with such consolidation, merger, or acquisition
is fair, from a financial point of view, to the stockholders of the
Company.
(v) Change in Option Price or Conversion Rate. If the purchase
price provided for in any Options referred to in clause (ii) above, or
the additional consideration, if any, payable upon the conversion or
exchange of Convertible Securities referred to in clause (ii) or (iii)
above, or the date at which any Convertible Securities referred to in
clause (ii) or (iii) above are convertible into or exchangeable for
Common Stock, shall change (other than under or by reason of an event
resulting in a change pursuant to provisions set forth in the documents
governing such Options or Convertible Securities designed to protect
against dilution, to the extent such event also results in an
adjustment pursuant to this Section 7), then the Adjusted Warrant Share
Amount in effect at the time of such event shall forthwith be
readjusted to the Adjusted Warrant Share Amount which would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such
7
<PAGE> 8
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. On the
expiration of, or the termination of, any such right to convert or
exchange such Convertible Securities, the Adjusted Warrant Share Amount
then in effect hereunder shall forthwith be decreased to the Adjusted
Warrant Share Amount which would have been in effect at the time of
such expiration or termination had such Option or Convertible Security,
to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. No readjustment
pursuant to this clause (v) shall have the effect of decreasing the
Adjusted Warrant Share Amount to an amount which is lower than the
greater of (A) the Adjusted Warrant Share Amount on the original date
of the related adjustment, or (B) the Adjusted Warrant Share Amount
that would have resulted from any issuance (deemed or actual) of Common
Stock between such original adjustment date and such readjustment date.
(vi) Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in Common Stock, Options or Convertible Securities, any Common
Stock, Options or Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be deemed to have
been issued or sold without consideration, and appropriate adjustment
shall be made pursuant to Section 7(b) hereof.
(vii) Consideration for Stock. In case any shares of Common
Stock or Convertible Securities or any Options to purchase any such
Common Stock or Convertible Securities shall be issued or sold:
(A) for cash, the consideration received therefor
shall be deemed to be the amount received by the Company
therefor, without deduction therefrom of any expenses incurred
or any underwriting commission or concessions paid or allowed
by the Company in connection therewith;
(B) for a consideration other than cash, the amount
of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company, in good
faith and in the exercise of reasonable business judgment,
without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith, which determination shall be conclusive
and which determination of valuation shall be sent in writing
by the Boards of Directors to the registered holders of
Warrants outstanding.
(C) in connection with any merger or consolidation in
which the Company is the surviving corporation (i.e., other
than any consolidation or merger in which the previously
outstanding shares of Common Stock of the Company shall be
changed into or exchanged for the stock or other securities of
another corporation), the amount of consideration therefor
shall be deemed to be the fair value as determined reasonably
and in good faith by the board of directors of the
8
<PAGE> 9
Company of such portion of the assets and business of the
non-surviving corporation as such board may determine to be
attributable to such shares of Common Stock, Convertible
Securities or Options, as the case may be.
(viii) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock or
in Convertible Securities, or (B) to subscribe for or purchase Common
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the case may be.
(ix) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, but the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purposes of this Section 7(c).
(x) Definition of Market Price. "MARKET PRICE" shall mean the
greater of:
(A) The Exercise Price; and
(B) Either of the following:
(I) if shares of the Common Stock are listed
or admitted to trading on any exchange or quoted through
NASDAQ or any similar organization, the average of the daily
closing prices per share of the Common Stock for the 20
consecutive trading days immediately preceding the date of
public announcement of the event giving rise to adjustment
under this Section 7 or, if no such public announcement is
made with respect to such event, the average of the daily
closing prices per share of the Common Stock for the 20
consecutive trading days immediately preceding the day as of
which "Market Price" is being determined. The closing price of
each day shall be the last sale price regular way or, in case
no such sale takes place on such day, the average of the
closing bid and asked prices regular way, in either case on
the New York Stock Exchange, or, if shares of the Common Stock
are not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange or
national market on which the shares are listed or admitted to
trading or quoted, or if the shares are not so listed or
admitted to trading or quoted, the average of the highest
reported bid and lowest reported asked prices as furnished by
the National Association of Securities Dealers, Inc. through
NASDAQ or through a similar organization if NASDAQ is no
longer reporting such information; or
(II) if such shares of Common Stock are not
listed or admitted to trading on any exchange or quoted
through NASDAQ or any similar organization,
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<PAGE> 10
such value shall be determined by the Board of Directors of
the Company, in good faith and in the exercise of reasonable
business judgment, without taking into consideration any
premium for shares representing control of the Company, any
discount for any minority interest therein or any restrictions
on transfer under Federal and applicable state securities laws
or otherwise, which determination shall be conclusive, and
which determination of valuation shall be sent in writing by
the Board of Directors to the registered holders of Warrants
outstanding.
(xi) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any
adjustment of the Adjusted Warrant Share Amount whatsoever upon the
issuance of:
(A) such additional number of shares of Common Stock
as may be fixed by the Board of Directors of the Company
issued or issuable to employees, directors, consultants or
advisors of this corporation pursuant to stock option or
restricted stock purchase or similar plans or agreements
approved by (i) the stockholders and directors of this
corporation or (ii) a majority of the independent directors of
the Company; provided, however, that the total consideration
receivable by the Company as consideration upon the exercise
of any such options or rights divided by the number of shares
of Common Stock issuable upon the exercise of such options or
rights shall equal or exceed the Market Price (as determined
by Section 7(c)(x)(B)) per share of the Common Stock on the
date of the award or grant of such options or rights;
(B) up to 400,000 (as such number may be
proportionately adjusted upon any stock split or combination
or upon a merger or other corporate reorganization) additional
shares of Common Stock issued or issuable to employees,
directors, consultants or advisors of this corporation
pursuant to stock option or restricted stock purchase or
similar plans or agreements approved by (i) the stockholders
and directors of this corporation or (ii) a majority of the
independent directors of the Company;
(C) Common Stock issued or issuable upon conversion
of the Company's Series A Preferred Stock;
(D) Common Stock issued or issuable upon exercise of
the Warrants;
(E) Common Stock issued or issuable upon the exercise
of warrants issued to underwriters in connection with the
Company's initial public offering; or
(F) Common Stock issued or issuable upon the exercise
of rights granted to stockholders pursuant to a stockholder's
rights plan or "poison pill."
(d) Certain Special Dividends. In case the Company shall
declare a dividend or make any other distribution (other than a distribution
referred to in paragraph (c)(vi) of this
10
<PAGE> 11
Section 7 or a Permitted Distribution (as defined below)) upon the Common Stock,
then in each case the Adjusted Warrant Share Amount in effect immediately prior
to the declaration of such dividend or making of such distribution shall be
adjusted so that such Adjusted Warrant Share Amount shall equal the number of
Warrant Shares determined by multiplying the Adjusted Warrant Share Amount in
effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such dividend or distribution
by a fraction, the numerator of which shall be the Market Price on the date
fixed for such determination and the denominator of which shall be the Market
Price on the date fixed for such determination less, in the case of a dividend
or distribution in cash, the amount per share of Common Stock so declared or, in
the case of any other dividend or distribution, the then fair market value (as
determined reasonably and in good faith by the Board of Directors of the
Company) of the portion of the property so distributed applicable to one share
of Common Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution, provided, however, that for
this purpose, Market Price shall be determined as provided in Section
7(c)(x)(B). "PERMITTED DISTRIBUTION" means a distribution (other than a
distribution referred to in paragraph (c)(vi) of this Section 7) that, together
with all other such distributions made within the preceding 12 months, does not
exceed ten percent (10%) of the Aggregate Market Value (as defined below) of the
Company. "AGGREGATE MARKET VALUE" means, at any given date, the Market Price (as
determined by Section 7(c)(x)(B)) multiplied by the number of shares of Common
Stock then outstanding.
(e) Subdivision or Combination of Stock. In case the Company
shall at any time subdivide the outstanding shares of Common Stock into a
greater number of shares, the Adjusted Warrant Share Amount in effect
immediately prior to such subdivision shall be proportionately increased, and
conversely, in case the outstanding shares of Common Stock shall be combined
into a smaller number of shares, the Adjusted Warrant Share Amount in effect
immediately prior to such combination shall be proportionately reduced.
(f) Adjustment for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company (i) consolidates with or merges into
any other corporation and is not the continuing or surviving corporation of such
consolidation or merger, or (ii) permits any other corporation to consolidate
with or merge into the Company and the Company is the continuing or surviving
corporation but, in connection with such consolidation or merger, the Common
Stock is changed into or exchanged for stock or other securities of any other
corporation or cash or any other assets, or (iii) transfers all or substantially
all of its properties and assets to any other corporation, or (iv) effects a
capital reorganization or reclassification of the capital stock of the Company
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash or assets with respect to or in exchange for Common Stock,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this Section 7(f), the
holder of this Warrant Certificate, upon the exercise of each Warrant at any
time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to receive (at the
aggregate Exercise Price for all shares of Common Stock issuable upon such
exercise immediately prior to such consummation as adjusted to the time of such
transaction), in lieu of the Adjusted Warrant Share Amount prior to such
consummation, the stock and other securities, cash and assets to which such
holder would have been entitled upon such consummation
11
<PAGE> 12
if such holder had so exercised such Warrant immediately prior thereto (subject
to adjustments subsequent to such corporate action as nearly equivalent as
possible to the adjustments provided for in this Section 7).
(g) Notice of Adjustment. Whenever the Adjusted Warrant Share
Amount is adjusted, then and in each such case the Company shall promptly, but
in no event later than 10 days after the date of occurrence of the event causing
such adjustment, deliver a certificate of an officer of the Company (the
"OFFICER'S CERTIFICATE") to the registered holder of the Warrants, which
Officer's Certificate shall state the Adjusted Warrant Share Amount resulting
from such adjustment and or the increase or decrease, if any, in the number of
shares of Common Stock or other stock or property issuable upon the exercise of
each Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based, including, if applicable, the
Market Price as determined in accordance with paragraph (c)(x) of this Section
7. The Company shall keep at its office copies of all certificates and cause the
same to be available for inspection at said office during normal business hours
by any holder of a Warrant or any prospective purchaser of a Warrant designated
by a holder thereof.
(h) Other Notices. In case at any time:
(i) the Company shall declare or pay any cash dividend on the
Common Stock (other than a regular periodic cash dividend);
(ii) the Company shall declare or pay any dividend payable in
stock upon the Common Stock or make any distribution (other than a
regular periodic cash dividend) to the holders of the Common Stock;
(iii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class
or other rights;
(iv) the Company shall authorize the distribution to all
holders of the Common Stock of evidence of its indebtedness or assets
(other than a regular periodic cash dividend);
(v) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with another corporation (other than a
subsidiary of the Company in which the Company is the surviving or
continuing corporation and no change occurs in the Common Stock of the
Company), or sale of all or substantially all of the Company's assets
to, another corporation;
(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors or
winding up of the Company; or
(vii) the Company proposes to take any other action or an
event occurs which would require an adjustment pursuant to this Section
7;
12
<PAGE> 13
then, in any one or more of such cases, the Company shall give written notice,
addressed to the holder of this Warrant Certificate at the address of such
holder as shown on the books of the Company, of (A) the date on which the books
of the Company shall close or a record shall be taken for any such dividend,
distribution or subscription rights, as the case may be, or (B) the date (or, if
not then known, a reasonable approximation thereof by the Company) on which any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, winding up or
other action, as the case may be, shall take place. Such notice shall also
specify (or, if not then known, reasonably approximate) the date as of which the
holders of Common Stock of record shall participate in any such dividend,
distribution or subscription rights, as the case may be, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, bankruptcy, assignment for the benefit of creditors,
winding up, or other action, as the case may be. Such written notice shall also
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders, if either is required. Such written notice
shall be given (1) at least 10 days prior to any event specified in any of
clauses (i), (ii) or (iv) of this Section 7(h) and at least 5 days prior to the
date on which the books of the Company shall close or a record shall be taken
for such event, (2) at least 20 days prior to any event specified in clauses
(iii) (prior to termination of such offer), (v) and (vii) of this Section 7(h)
and (3) with respect to events specified in clause (vi) of this Section 7(h),
(x) at least 30 days prior to a voluntary dissolution or liquidation of the
Company (y) at least three days prior to a voluntary bankruptcy, assignment for
the benefit of creditors or winding up of the Company, or (z) promptly after an
involuntary bankruptcy, assignment for the benefit of creditors or winding up of
the Company. The failure to give such written notice required by this Section
7(h) or any defect therein shall not affect any vote upon, or the taking of, any
such action.
(i) Prohibition of Certain Action. The Company shall not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed under this
Warrant Certificate by the Company, but shall at all time in good faith assist
in the carrying out of all the provisions of this Section 7. Without limiting
the generality of the foregoing, the Company (a) shall not increase the par
value of any shares of Common Stock receivable upon the exercise of the Warrants
to an amount that is greater than the Exercise Price, (b) shall take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully-paid and nonassessable shares of Common Stock upon the
exercise of all Warrants from time to time outstanding and (c) shall not take
any action which results in any adjustment of the Adjusted Warrant Share Amount
if such Adjusted Warrant Share Amount issuable after the action would exceed the
total number of shares of Common Stock then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
exercise.
8. Exercise Price. The Exercise Price of each Warrant shall be
$[______] [IPO PRICE].
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<PAGE> 14
9. No Stock Rights. This Warrant shall not entitle its holder
to any of the rights of a stockholder of the Company.
10. Fractional Warrant Shares. No fractional Warrant Shares
shall be issued upon exercise of the Warrants, and the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole share.
Whether or not fractional shares are issuable upon such exercise shall be
determined on the basis of the total number of shares of the Warrant the holder
is at that time exercising and the number of shares of Common Stock issuable
upon such aggregate exercise.
11. Notices. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
including by telecopier, addressed, if to the Initial Holder, at its office at 1
SunAmerica Center, Century City, Los Angeles, CA 90067-6022, Attn: Timothy J.
Cesarek, Telecopier (310) 772-6078, with a copy to SunAmerica Life Insurance
Company, 1 SunAmerica Center, Century City, Los Angeles, CA 90067-6022, Attn:
General Counsel, Telecopier (310) 772-6574; if to any other registered owner
hereof, to it at the address furnished by the registered owner to the Company;
and if to the Company, at its office at 2525 E. Camelback Road, Suite 1150,
Phoenix, Arizona 85016, Attention: President, Telecopier (602) 852-6696, or to
such other address as any party shall notify the other party in writing, and
shall be effective, upon receipt and, in the case of written notice by mail,
three days after placement into the mails (first class, postage prepaid), and in
the case of notice by telecopier on the same day as sent if the transmission is
confirmed at or before 5:00 p.m. local time in the place of receipt, otherwise
on the next business day.
12. Arbitration. Any controversy, claim or dispute arising out
of or relating to this Warrant, or the breach, termination, enforceability or
validity hereof, shall be submitted to arbitration in the English language in
Los Angeles, California in accordance with and to the extent permitted by the
Delaware Arbitration Act and, to the extent not inconsistent therewith, the
Rules for Large, Complex Cases of the American Arbitration Association. The
parties to the arbitration shall attempt to select an arbitrator from such
members. If the parties to the arbitration do not agree on the selection of an
arbitrator within twenty (20) days after the date demand for the arbitration is
filed, an arbitrator shall be selected in accordance with such Rules of the
American Arbitration Association. The arbitrator shall set forth his or her
determination in writing (which shall be sent to each party to such arbitration)
and shall enumerate in reasonable detail the basis of his or her determination.
No party to the arbitration may seek, and the arbitrator shall not award,
punitive or exemplary damages. To the fullest extent permitted by applicable
law, any judgment or award rendered by the arbitrator shall be final, conclusive
and binding. Judgment may be entered on any final, unappealable arbitration
award by any state or federal court having jurisdiction thereof. To the fullest
extent permitted by applicable law, any controversy concerning whether a dispute
is an arbitrable dispute or as to the interpretation or enforceability of this
Section 12 shall be determined by the arbitrator. The arbitration proceedings as
well as the fact such proceedings occur, shall be kept confidential by the
parties hereto and may only be disclosed to their personal representatives and
advisors or as required by law and insofar as is necessary to confirm, correct,
vacate or enforce the award. In the event of a breach of this provision, the
arbitrator is expressly authorized to assess damages and each of the parties
hereto consents to the expansion of the scope of arbitration for such purpose.
The pendency of any arbitration under this Section 12 shall not relieve Company
or any
14
<PAGE> 15
Warrantholder of its obligations under this Warrant. To the fullest extent
permitted by applicable law, if the Company or any Warrantholder shall resort to
legal proceedings for injunctive or other similar relief pending the outcome of
any such arbitration proceeding or prior to the initiation thereof, such party
shall not be deemed to have waived its rights to cause such matter or any other
mater to be referred to arbitration pursuant to this Section 12. The parties
intend that this agreement to arbitrate be valid, enforceable and irrevocable.
The designation of situs or a governing law for this Warrant Certificate or the
arbitration shall not be deemed an election to preclude application of the
Federal Arbitration Act if it would be applicable. The arbitrator shall have
authority in his or her discretion to grant injunctive relief, award specific
performance and impose sanctions upon any party to any such arbitration. The
fees, expenses and charges of any arbitration shall be borne equally by the
parties except that each party shall bear its own legal, expert and other costs
and expenses unless otherwise determined by the arbitrator.
13. Binding Effect. This Warrant Certificate shall be binding
upon and inure to the sole and exclusive benefit of the Company, its successors
and assigns, and the registered holder or holders from time to time of the
Warrants and the Warrant Shares.
14. Survival of Rights and Duties. This Warrant Certificate
shall terminate and be of no further force and effect on the earlier of 5:00
p.m., Los Angeles time, on the Expiration Date or the date on which all of the
Warrants have been exercised, except that the provisions of Sections 6(b) of
this Warrant Certificate shall continue in full force and effect after such
termination date.
15. Governing Law. This Warrant Certificate shall be construed
in accordance with and governed by the laws of the State of California without
regard to principles of conflicts of laws.
16. Modification and Waiver. This Warrant Certificate and any
term hereof may be amended, modified, waived, discharged or terminated only by
an instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
[Remainder of page intentionally left blank.]
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its officers thereunto duly authorized as of the
date hereof.
UGLY DUCKLING CORPORATION
By:____________________________
Name:
Title:
16
<PAGE> 17
ANNEX A
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns and transfers to each assignee set forth below all of the rights
of the undersigned in and to the number of Warrants (as defined in and evidenced
by the foregoing Warrant Certificate) set opposite the name of such assignee
below and in and to the foregoing Warrant Certificate with respect to such
Warrants and the Warrant Shares (as defined in the Warrant Certificate) issuable
upon exercise of such Warrants.
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
If the aggregate number of such Warrants shall not constitute
all the Warrants evidenced by the foregoing Warrant Certificate, the undersigned
requests that a new Warrant Certificate evidencing the Warrants not so assigned
be issued in the name of and delivered to the undersigned.
Name of
Warrantholder (Print):
_______________________________
Dated: _____________________ (By):
___________________________________________
Its:
[SIGNATURE GUARANTEE]
(Not Required for Initial
Registered Warrantholder) _____________________________________________
Secretary
17
<PAGE> 18
ANNEX B
FORM OF ELECTION TO PURCHASE
To Ugly Duckling Corporation:
The undersigned hereby irrevocably elects to exercise Warrants
(as defined in and evidenced by the foregoing Warrant Certificate) for, and to
purchase thereunder, Warrant Shares issuable upon exercise of such Warrants and
payment by the Warrantholder of the Exercise Price. Capitalized terms used
herein but not otherwise defined shall have the meanings ascribed to them in the
Warrant Certificate.
The Warrantholder desires to exercise ________ Warrants
evidenced by the foregoing Warrant Certificate.
The Warrantholder hereby elects to pay the Exercise Price as
follows:
A. the delivery of $__________ in cash;
B. the cancellation of $__________ in indebtedness of the
Company to the Warrantholder as detailed below:
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________;
and/or
C. instructing the Company to retain a number of Warrant
Shares (the "PAYMENT SHARES") equal to the quotient of the aggregate Exercise
Price of ___________ of the Warrants hereby exercised divided by the Market
Price of such shares as of the date of exercise, and to deduct the number of
Payment Shares from the Warrant Shares to be delivered.
The undersigned requests that certificates for such shares be
issued in the name of the following:
PLEASE INSERT SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER
____________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
18
<PAGE> 19
________________________________________________________________________________
If such number of Warrants shall not constitute all the
Warrants evidenced by the foregoing Warrant Certificate, the undersigned
requests that a new Warrant Certificate evidencing the Warrants not so exercised
be issued in the name of and delivered to the following:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Name of
Warrantholder (Print):
_______________________________
Dated: _____________________ (By):
___________________________________________
Its:
[SIGNATURE GUARANTEE]
(Not Required for Initial
Registered Warrantholder) _____________________________________________
Secretary
19
<PAGE> 1
EXHIBIT 5
June 5, 1996
UGLY DUCKLING CORPORATION
2525 East Camelback Road, Suite 510
Phoenix, Arizona 85016
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Ugly Duckling Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), of the Company's Registration Statement on Form S-1 (the "Registration
Statement"), relating to the registration of up to 2,300,000 shares of the
Company's Common Stock, par value $.001 per share (the "Common Stock"), the
Representative's Warrant to purchase 150,000 shares of Common Stock, and the
Common Stock underlying the Representative's Warrant. In arriving at the
opinions expressed below, we have reviewed the Registration Statement and the
exhibits thereto. In addition, we have reviewed the originals or copies
certified or otherwise identified to our satisfaction of all such corporate
records of the Company and such other instruments and other certificates of
public officials, officers and representatives of the Company and other persons,
and we have made such investigations of law, as we have deemed appropriate as a
basis for the opinions expressed below. In rendering the opinions expressed
below, we have assumed that the signatures on all documents that we have
reviewed are genuine and that the Common Stock and the Representative's Warrant
will conform in all material respects to the description thereof set forth in
the Registration Statement. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Registration Statement.
Based upon the foregoing, we advise you that, in our opinion,
when the following events have occurred:
(a) The Registration Statement has become effective under the
Securities Act of 1933, as amended;
<PAGE> 2
UGLY DUCKLING CORPORATION
June 5, 1996
Page 2
(b) The due authorization, registration and delivery of the
certificate or certificates evidencing the Common Stock has occurred;
(c) The due authorization, execution and delivery of the
Warrant Agreement pursuant to which the Warrants are to be issued has occurred;
and
(d) The Common Stock has been issued and sold in the manner
specified in the Registration Statement and the exhibits thereto; then
1. The Common Stock to be issued by you will be legally
issued, fully paid and non-assessable.
2. The Representative's Warrant to be issued by you will be
legally issued and will constitute the valid and binding obligation of the
Company enforceable in accordance with its terms, except as enforceability
thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or affecting the rights of
creditors generally, and (ii) the application of general principles of equity
(whether such enforceability is considered in a proceeding in equity or at law).
The shares of Common Stock issuable upon exercise of the Representative's
Warrant and receipt by the Company of the consideration for such shares in
accordance with the terms thereof will be legally issued, fully paid and
non-assessable.
The foregoing opinions are limited to the federal law of the
United States of America and the General Corporation Law of the State of
Delaware. We express no opinion as to the application of the various state
securities laws to the offer, sale, issuance or delivery of the Common Stock or
the Representative's Warrant.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the Registration Statement and in the Prospectus included
therein.
Very truly yours,
SNELL & WILMER L.L.P.
<PAGE> 1
EXHIBIT 10.2(d)
FOURTH AMENDMENT TO NOTE PURCHASE AGREEMENT
AND CERTAIN RELATED DOCUMENTS
This FOURTH AMENDMENT TO NOTE PURCHASE AGREEMENT AND CERTAIN
RELATED DOCUMENTS (this "FOURTH AMENDMENT") is dated as of April 24, 1996, and
is among UGLY DUCKLING CORPORATION ("HOLDINGS"), a Delaware Corporation (as
successor by merger to Ugly Duckling Holdings, Inc., an Arizona corporation
("OLD HOLDINGS")), DUCK VENTURES, INC. ("VENTURES"), CHAMPION ACCEPTANCE
CORPORATION (f/k/a Ugly Duckling Credit Corporation) ("CREDIT"), UGLY DUCKLING
CAR SALES, INC. ("SALES"), UDRAC, INC. ("UDRAC") and CHAMPION FINANCIAL
SERVICES, INC. ("CHAMPION"), each of Ventures, Credit, Sales, UDRAC and Champion
being an Arizona corporation, SUNAMERICA LIFE INSURANCE COMPANY ("SUNAMERICA")
(SunAmerica and any subsequent holder(s) of the Note (as defined below) being
the "PURCHASER" or the "HOLDER" and "HOLDERS"), Verde Investments, Inc., an
Arizona corporation, Ernest C. Garcia, II, a natural person, and Elizabeth
JoAnne Garcia, a natural person. Holdings, Ventures, Credit, Sales, UDRAC and
Champion hereinafter each separately referred to as a "BORROWER ENTITY," and
collectively referred to as the "BORROWER." The obligations of the Borrower to
the Purchaser under this Fourth Amendment are the joint and several liability of
each of Holdings, Ventures, Credit, Sales, UDRAC and Champion.
WHEREAS, pursuant to the Note Purchase Agreement dated as of
August 31, 1995 between the Borrower and Purchaser as amended by the First
Amendment to Note Purchase Agreement and Certain Related Documents dated as of
September 11, 1995, the Second Amendment to Note Purchase Agreement and Certain
Related Documents dated as of December 15, 1995 and the Third Amendment to Note
Purchase Agreement and Certain Related Documents dated as of February 27, 1996
(the "NOTE PURCHASE AGREEMENT"; capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Note Purchase
Agreement.), the Borrower sold its convertible Note to Purchaser;
WHEREAS, pursuant to the Assumption dated as of even date
herewith, Holdings has expressly assumed the obligations of Old Holdings under
the Note Purchase Agreement and each other Credit Document to which Old Holdings
is a party; and
WHEREAS, the Credit Parties and Purchaser desire to amend the
Note Purchase Agreement and certain Credit Documents on the terms and conditions
more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other agreements set forth herein, the parties hereto agree as
follows:
SECTION 1. AMENDMENTS TO THE NOTE PURCHASE AGREEMENT
1.1 AMENDMENTS TO SECTION 12: DEFINITIONS
A. Section 12A of the Note Purchase Agreement is hereby
amended by deleting therefrom the definition of "Auto Loan Securitization" and
substituting therefor the following:
"'AUTO LOAN SECURITIZATION' means the auto loan securitizations
(Rule 144A transactions or registered transactions) as contemplated by
the Commitment Letter (as such Commitment Letter may be amended,
amended and restated, supplemented or otherwise modified from time to
time."
1
<PAGE> 2
SECTION 2. AMENDMENTS TO THE PLEDGE AGREEMENT
2.1 AMENDMENTS TO INTRODUCTORY PARAGRAPH
A. The introductory paragraph of the Pledge Agreement is
hereby amended by deleting the phrase "Ugly Duckling Holdings, Inc., an Arizona
corporation (the 'Company')" thereof and substituting therefor "Ugly Duckling
Corporation, a Delaware corporation (the 'Company') (as successor by merger to
Ugly Duckling Holdings, Inc., an Arizona corporation)".
SECTION 3. AMENDMENTS TO THE COMMITMENT LETTER
3.1 AMENDMENTS TO THE COMMITMENT LETTER
A. The Commitment Letter is hereby amended by (i)
deleting the "$125,000,000" contained in clause (i) of the second paragraph
thereof and substituting therefor "$175,000,000" and (ii) deleting the
"$125,000,000" contained in clause (ii) of the second paragraph thereof and
substituting therefor "$175,000,000".
B. The Commitment Letter is hereby further amended by
deleting the "$20,000,000" contained in the fifth paragraph thereof and
substituting therefor "$10,000,000".
C. The Commitment Letter is hereby further amended by
deleting the "$20,000,000" contained in the sixth paragraph thereof and
substituting therefor "$10,000,000".
D. The Commitment Letter is hereby further amended by
deleting the "December 31, 1996" contained in the sixth paragraph thereof and
substituting therefor "the later to occur of (i) December 31, 1996 and (ii) the
issuance of $50,000,000 in Certificates on the terms set out in the Term
Sheet,".
E. The Commitment Letter is hereby further amended by
inserting between the sixth and seventh paragraphs thereof a new paragraph as
follows:
"The obligations of the Borrower under this letter
agreement, as such letter agreement may be amended,
supplemented, or otherwise modified from time to time,
shall survive payment of the Note and termination of
any other Credit Documents."
3.2 AMENDMENTS TO ANNEX A TO THE COMMITMENT LETTER
A. Annex A to the Commitment Letter is hereby amended by
deleting the "December 31, 1997" contained in the summary of the term "Amount
and Call" thereof and substituting therefor "December 31, 1998".
B. Annex A to the Commitment Letter is hereby further
amended by deleting the "$75 million" contained in the summary of the term
"Amount and Call" thereof and substituting therefor "$125 million".
C. Annex A to the Commitment Letter is hereby further
amended by deleting the "20,000,000" contained in the summary of the term
"Amount and Call" thereof and substituting therefor "$10,000,000".
D. Annex A to the Commitment Letter is hereby further
amended by deleting the "December 31, 1996, or" contained in the summary of the
term "Commitment Period" thereof and substituting therefor "the later to occur
of (i) December 31, 1996 and (ii) the issuance of $50,000,000 in Certificates.
Notwithstanding the foregoing sentence,".
E. Annex A to the Commitment Letter is hereby further
amended by deleting the "December 31, 1997" contained in the summary of the term
"Commitment Period" thereof and substituting therefor "December 31, 1998".
2
<PAGE> 3
F. Annex A to the Commitment Letter is hereby further
amended by deleting the "$20 million and in multiples of $5 million" contained
in the summary of the term "Initial Amount" thereof and substituting therefor
"$10 million".
G. Annex A to the Commitment Letter is hereby further
amended by deleting the "$20,000,000" contained in the summary of the term
"Initial Closing Date" thereof and substituting therefor "$10,000,000".
H. Annex A to the Commitment Letter is hereby further
amended by deleting the "$75 million" contained in the summary of the term
"Additional Amount" thereof and substituting therefor "$125 million".
I. Annex A to the Commitment Letter is hereby further
amended by deleting the "$20 million and in multiples of $5 million" contained
in the summary of the term "Additional Amount" thereof and substituting therefor
"$10 million".
J. Annex A to the Commitment Letter is hereby further
amended by deleting the "second $75 million in Certificates purchased" contained
in the summary of the term "Advance Amount on Additional Contracts" thereof and
substituting therefor "$125 million in Certificates purchased in excess of the
Initial Amount".
K. Annex A to the Commitment Letter is hereby further
amended by deleting therefrom the definition of "Interest Rate Schedule for
Additional $75 million" and substituting therefor the following:
"Interest Rate Schedule for
Additional $125 million: The following spreads (in basis
points) represent the spread over
U.S. Treasury securities having a
maturity equal to the anticipated
average life of the portfolio
(estimated at 2 years).
$0-$25 million over Initial Amount T+250
$25-$50 million over Initial Amount T+225
$50-$75 million over Initial Amount T+200
$75-$100 million over Initial Amount T+175
$100-$125 million over Initial Amount T+150".
L. Annex A to the Commitment Letter is hereby further
amended by deleting the "$75 million" contained in the caption of the term
"Structure for Additional $75 million" and substituting therefor "$125 million".
M. Annex A to the Commitment Letter is hereby further
amended by deleting the "$20,000,000" contained in the summary of the term
"Purchase" thereof and substituting therefor "$10,000,000".
SECTION 4. CONDITIONS TO EFFECTIVENESS
4.1 CONDITIONS TO EFFECTIVENESS OF SECTIONS 1 & 2.
Sections 1 and 2 of this Fourth Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent:
A. SunAmerica shall have received the opinion of Snell &
Wilmer L.L.P., counsel to Holdings, in form and substance satisfactory to
SunAmerica, addressed to SunAmerica and dated the date of delivery, in the form
attached hereto as Exhibit A.
3
<PAGE> 4
4.2 CONDITIONS TO EFFECTIVENESS OF SECTION 3. Section 3 of
this Fourth Amendment shall become effective only upon the prior or concurrent
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FOURTH
AMENDMENT EFFECTIVE DATE"):
A. On or before the Fourth Amendment Effective Date,
Holdings shall deliver to SunAmerica the following, each, unless otherwise
noted, dated the Fourth Amendment Effective Date:
1. Certified copies of the Certificate or Articles of
Incorporation of each of the Borrower Entities and Verde Investments,
Inc., an Arizona corporation, as guarantor (the "CORPORATE GUARANTOR"),
certified by its corporate secretary or an assistant secretary,
together with a good standing certificate from the Secretary of State
of its state of incorporation; provided, however, that the Certificate
or Articles of Incorporation need not be delivered pursuant to this
subsection 3A.1 if such Borrower Entity or Corporate Guarantor, as
applicable, certifies that such certified Certificate or Articles of
Incorporation were delivered to SunAmerica previously and that there
has been no change in such Certificate or Articles of Incorporation
since the date of such delivery;
2. Copies of the Bylaws of each of the Borrower Entities and
the Corporate Guarantor, certified by its corporate secretary or an
assistant secretary; provided, however, that the Bylaws need not be
delivered pursuant to this subsection 3A.2 if such Borrower Entity or
Corporate Guarantor, as applicable, certifies that such Bylaws were
delivered to SunAmerica previously and that there has been no change in
such Bylaws since the date of such delivery;
3. Resolutions of the Board of Directors of each of the
Borrower Entities and the Corporate Guarantor approving and authorizing
the execution, delivery, and performance of this Fourth Amendment,
certified by its corporate secretary or an assistant secretary as being
in full force and effect without modification or amendment;
4. Signature and incumbency certificates of the officers of
each of the Borrower Entities and the Corporate Guarantor executing the
Fourth Amendment;
5. Copies of this Fourth Amendment executed by each Borrower
Entity and consented to and executed by each other Credit Party; and
4
<PAGE> 5
6. Such other documents as SunAmerica may reasonably request.
B. On or before the Fourth Amendment Effective Date,
SunAmerica shall have received the reliance letter of Snell & Wilmer L.L.P.,
counsel to Holdings, in form and substance satisfactory to SunAmerica, addressed
to SunAmerica and dated the Fourth Amendment Effective Date, to the effect that
SunAmerica may rely on the opinion of Snell & Wilmer L.L.P. delivered pursuant
to Section 4.1.A. of this Fourth Amendment with the same force and effect as
though such opinion had been delivered on the Fourth Amendment Effective Date.
C. SunAmerica shall have exercised its conversion rights
pursuant to Section 2 of the Note and shall have converted the Note (the
"CONVERSION") in whole on the closing date of the IPO; provided, however, that
upon satisfaction of the provisions of this Section 4.2.C, the provisions of
Section 3 of this Fourth Amendment shall be deemed to be effective immediately
prior to the Conversion and the documents delivered pursuant to Section 4.2
shall be deemed delivered immediately prior to the Conversion.
SECTION 5. REPRESENTATIONS AND WARRANTIES
In order to induce SunAmerica to enter into this Fourth
Amendment and to amend the Note Purchase Agreement in the manner provided
herein, the Borrower represents and warrants, and each other Credit Party
represents and warrants as to matters pertaining to it, to the Purchaser that:
A. Each of the Borrower Entities and the other corporate
Credit Parties has been duly organized, and is validly existing in good standing
under the laws of the state of its incorporation, with corporate power and
authority to own its property and assets, to carry on its business as now
conducted by it, to enter into this Fourth Amendment and to perform its
obligations under this Fourth Amendment and the Note Purchase Agreement and the
other Credit Documents, each as amended by this Fourth Amendment, and, in the
case of Holdings, to issue the Conversion Shares.
B. The execution, delivery and performance by each of the
Borrower Entities and the other corporate Credit Parties of this Fourth
Amendment and the Note Purchase Agreement and the other Credit Documents, each
as amended by this Fourth Amendment, have been duly authorized by all necessary
corporate action and this Fourth Amendment has been duly executed and delivered
by each Borrower Entity.
C. Each of this Fourth Amendment and the Note Purchase
Agreement and the other Credit Documents, each as amended by this Fourth
Amendment, constitutes the legally valid and binding obligation of each of the
Borrower Entities and other Credit Parties party thereto, enforceable in
accordance with its terms.
D. The Guaranty constitutes the legally valid and binding
obligation of the Guarantors, enforceable in accordance with its terms. The
Guaranty guarantees the payment of all amounts payable under the Note Purchase
Agreement as amended by this Fourth Amendment.
E. The Pledge Agreement as amended by this Fourth Amendment
(the "AMENDED PLEDGE AGREEMENT") secures the performance and payment by
Borrowers of the Note and the Secured Obligations (as defined in the Amended
Pledge Agreement). The Amended Pledge Agreement, together with possession by the
Purchaser of certificates representing the Pledged Shares (as defined in the
Amended Pledge Agreement) or certificates representing shares of stock of Old
Holdings, create in favor of the Purchaser a perfected security interest in the
Pledged Shares free of adverse claims.
6
<PAGE> 6
F. The execution and delivery of, and performance by each of
the Borrower Entities and Credit Parties party thereto of its obligations under
this Fourth Amendment and the Note Purchase Agreement and the other Credit
Documents, each as amended by this Fourth Amendment, and the offering, issuance,
sale and delivery of the Conversion Shares, do not and will not (i) violate such
party's charter document or bylaws, (ii) violate, breach, or result in a default
under, any provision of any agreement or other instrument to which such party or
any of its properties is subject, or (iii) breach or otherwise violate any
existing obligation of or restriction on such party under any order, judgment or
decree of any court or other government agency binding on any such party.
G. The execution and delivery by Borrower Entities and the
other Credit Parties of, and performance of its obligations under, this Fourth
Amendment and the Note Purchase Agreement and the other Credit Documents, each
as amended by this Fourth Amendment, and the offering, sale, issuance and
delivery of the Conversion Shares, do not and will not violate any provision of
law, or any rules or regulations of any governmental authority, applicable to
any Borrower Entity or Credit Party.
H. No order, consent, permit or approval of any court or
administrative or governmental authority is required on the part of any Borrower
Entity or Credit Party for the execution and delivery of, and performance of its
obligations under, this Fourth Amendment and the Note Purchase Agreement and the
other Credit Documents, each as amended by this Fourth Amendment, or the
offering, sale, issuance, delivery and payment of the Note and the Conversion
Shares.
I. The shares of common stock of Holdings held by Ernest C.
Garcia, II, and Elizabeth Joanne Garcia, as community property, have been duly
authorized and are validly issued, fully paid and non-assessable. The Conversion
Shares have been duly authorized and reserved and, upon conversion of the Note
in accordance with the terms thereof, will be validly issued, fully paid and
non-assessable.
J. The Borrower has made all filings and registrations with
such governmental authorities and public offices as are necessary to ensure the
legality, validity and enforceability of this Fourth Amendment and the Note
Purchase Agreement and the other Credit Documents, each as amended by this
Fourth Amendment.
K. There is no Default or Event of Default or event that with
the giving of notice or the lapse of time or both would constitute an Event of
Default.
SECTION 6. MISCELLANEOUS
A. Each reference in any Credit Document to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to such Credit
Document, and each reference in any other Credit Documents to such Credit
Document, "thereunder", "thereof" or words of like import referring to such
Credit Document shall mean and be a reference to such Credit Document as amended
by this Fourth Amendment.
B. Except to the extent each is expressly amended by the
terms of this Fourth Amendment, all terms and conditions of the Note Purchase
Agreement, each Credit Document and all other instruments and agreements
executed thereunder remain in full force and effect.
C. The Borrower shall reimburse the Purchaser for all
reasonable expenses, including counsel fees, in the preparation of this Fourth
Amendment.
D. This Fourth Amendment shall be governed and interpreted in
accordance with the laws of the State of California.
7
<PAGE> 7
E. This Fourth Amendment 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 an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank.]
8
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
<TABLE>
<S> <C>
BORROWER: UGLY DUCKLING CORPORATION
ADDRESS (for each Borrower Entity):
c/o Ugly Duckling Corporation By:
2525 E. Camelback Road, Ste. 510 ----------------------------------------
Phoenix, Arizona 85016 Name:
Telephone: (602) 852-6600 Title:
Facsimile: (602) 852-6696
DUCK VENTURES, INC.
By:
-----------------------------------
Name:
Title:
CHAMPION ACCEPTANCE CORPORATION
(f/k/a Ugly Duckling Credit Corporation)
By:
-----------------------------------
Name:
Title:
UGLY DUCKLING CAR SALES, INC.
By:
-----------------------------------
Name:
Title:
UDRAC, INC.
By:
-----------------------------------
Name:
Title:
CHAMPION FINANCIAL SERVICES, INC.
By:
-----------------------------------
Name:
Title:
PURCHASER: SUNAMERICA LIFE INSURANCE COMPANY
ADDRESS:
1 SunAmerica Center By:
1999 Avenue of the Stars -----------------------------------
Century City Name:
Los Angeles, CA 90067 Title:
Telephone: (310) 772-6000
Facsimile: (310) 772-6078
</TABLE>
S-1
<PAGE> 9
Attention: Timothy J. Cesarek
SunAmerica Corporate Finance
The following Credit Parties consent to this Fourth Amendment and
execute this Fourth Amendment with respect to the amendments to such Credit
Documents to which they are party and with respect to the representations and
warranties made by such parties herein.
CREDIT PARTIES: VERDE INVESTMENTS, INC.
By:
-------------------------------
Name:
Title:
ERNEST C. GARCIA, II
------------------------------------
Ernest C. Garcia, II
ELIZABETH JOANNE GARCIA
------------------------------------
Elizabeth Joanne Garcia
S-2
<PAGE> 1
EXHIBIT 10.2(f)
May [__], 1996
BY OVERNIGHT COURIER
Mr. Gregory B. Sullivan
President
Ugly Duckling Corporation
2525 Camelback Road, Suite 510
Phoenix, Arizona 85016
Dear Greg:
In connection with the anticipated initial public offering of
common stock of Ugly Duckling Corporation, a Delaware corporation (the
"COMPANY"), you have requested that we agree to convert the Note (as defined in
the Note Purchase Agreement dated as of August 31, 1995 among the Company (as
successor by merger to Ugly Duckling Holdings, Inc., an Arizona corporation),
Duck Ventures, Inc., Champion Acceptance Corporation (f/k/a Ugly Duckling Credit
Corporation), Ugly Duckling Car Sales, Inc., UDRAC, Inc., Champion Financial
Services, Inc., and SunAmerica Life Insurance Company ("SUNAMERICA") (said Note
Purchase Agreement, as amended to the date hereof, the "NOTE PURCHASE
AGREEMENT")) upon closing of said initial public offering. Accordingly, this
letter agreement (this "AGREEMENT") contains the terms of the agreement between
SunAmerica and the Company with respect to such conversion. Capitalized terms
used herein without definition shall have the meanings given to such terms in
the Note Purchase Agreement.
1. Exercise of Conversion Privilege.
(a) Conversion. Subject to the terms and conditions of this
Agreement, SunAmerica, through OKGBD & Co., as its nominee,
shall exercise its conversion rights pursuant to Section 2 of
the Note with respect to the entire principal amount of the
Note then outstanding (the "CONVERSION") on the closing date
of the IPO (the "IPO DATE").
(b) Termination. SunAmerica's obligations under Section 1(a) of
this Agreement shall terminate on September 30, 1996, unless
on or prior to such date, the Company shall have completed the
IPO.
2. Consideration. As consideration for SunAmerica's agreement in Section
1 of this Agreement, the Company agrees to the following:
(a) Conversion Fee. The Company agrees to pay SunAmerica or its
designee, on or prior to the IPO Date, in immediately
available funds, a fee of $30,000.00 in connection with the
conversion of the Note.
<PAGE> 2
Mr. Gregory B. Sullivan
May [__], 1996
Page 2
(b) Consulting Fee. The Company agrees to pay SunAmerica or its
designee, on or prior to the IPO Date, in immediately
available funds, a fee of $120,000.00 in connection with
consulting services performed prior to this Agreement.
(c) Warrants. The Company agrees to issue to SunAmerica or its
designee, on or prior to the IPO Date, warrants for 116,000
shares of Common Stock, evidenced by a warrant certificate,
substantially in the form annexed hereto as Exhibit A (the
"WARRANT CERTIFICATE").
(d) Registration Rights Agreement. The Company agrees to amend
and restate the Registration Rights Agreement substantially in
the form annexed hereto as Exhibit B (the "AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT").
3. Conditions Precedent.
(a) To the Company's Obligations. The obligations of the Company under
Section 2 of this Agreement shall become effective only upon
satisfaction of all of the following conditions, which conditions
must be satisfied on or before the IPO Date:
(i) Conversion. SunAmerica shall have delivered a notice
pursuant to Section 2 of the Note with respect to the
entire principal amount of the Note then outstanding.
(ii) Execution of Agreements. The Company shall have received
(i) an original of this Agreement duly executed by
SunAmerica, (ii) an original of the Amended and
Restated Registration Rights Agreement duly executed by
SunAmerica, and (iii) an original of the Fourth Amendment
to Note Purchase Agreement and Certain Related Documents
(the "Fourth Amendment") dated as of April 24, 1996 among
SunAmerica and the Credit Parties duly executed by
SunAmerica.
(iii) Completion of the IPO. The IPO shall have been
consummated on or prior to September 30, 1996.
(b) To SunAmerica's Obligations: The obligations of SunAmerica under
Section 1 of this Agreement shall become effective only upon
satisfaction of all of the following conditions, which conditions
must be satisfied on or before the IPO Date:
(i) Execution of Agreements. SunAmerica shall have received
(i) an original of this Agreement duly executed by the
Company, (ii) an original of the Amended and Restated
Registration Rights Agreement duly executed by the
Company, and (iii) an original of the Fourth Amendment
duly executed by the Company and the Credit Parties.
(ii) Payment of Fees. The Company shall have paid (i) the fees
required by Section 2(a) hereof and (ii) the fees required
by Section 2(b) hereof.
(iii) Delivery of Warrant Certificate. SunAmerica shall have
received an original of the Warrant Certificate duly
executed by the Company.
(iv) Delivery of Stock Certificate. The Company shall have
delivered to SunAmerica a certificate representing the
Conversion Shares (as defined in the Amended and Restated
Registration Rights Agreement).
(v) Payment of Interest. The Company shall have paid all
accrued and unpaid interest on the Note through the IPO
Date, without regard to whether interest is otherwise
payable on the IPO Date.
<PAGE> 3
Mr. Gregory B. Sullivan
May [__], 1996
Page 3
(vi) Effectiveness of Fourth Amendment. The conditions of
Section 4.2 of the Fourth Amendment shall have all been
satisfied, Section 3 of the Fourth Amendment shall have
become effective and the Fourth Amendment shall
otherwise be fully effective.
(vii) No Default; Representations and Warranties. On and as of
the IPO Date, and after giving effect to the transactions
contemplated to occur on such date (other than the
conversion of the Note), (i) no Default or Event of
Default shall have occurred and be continuing, and (ii)
all representations and warranties contained herein and in
the Warrant Certificate and the Amended and Restated
Registration Agreement shall be true and complete in all
material respects on and as of the IPO Date; the Company
shall have delivered to SunAmerica an officer's
certificate, dated as of the IPO Date, signed by the
President and the Chief Financial Officer of the
Company, in form and substance satisfactory to
SunAmerica, to such effect.
(viii) Corporate Documents; Proceedings. The Company shall have
delivered to SunAmerica a good standing certificate from
the Secretary of State of Delaware and dated within five
days of the IPO Date together with evidence of telephonic
confirmation of the Company's good standing on the IPO
Date. The Company shall have delivered to SunAmerica a
certificate, dated the IPO Date, and signed by the
President or a Vice President of the Company and attested
to by the Secretary or an Assistant Secretary of the
Company, in form and substance satisfactory to SunAmerica,
certifying (i) resolutions duly adopted by the Board of
Directors of the Company approving and authorizing the
transactions contemplated hereby, the Warrant Certificate
and the Amended and Restated Registration Rights
Agreement, (ii) the signature and incumbency of the
officers of the Company executing the Warrant Certificate
and the Amended and Restated Registration Rights
Agreement, and (iii) the Certificate of Incorporation and
Bylaws of the Company, together with a copy of the
resolutions referred to in such certificate and copies (or
certification regarding absence of changes) of the
Certificate of Incorporation and Bylaws of the Company.
(ix) Completion of the IPO. The IPO shall have been
consummated on or prior to September 30, 1996.
(x) Completion of Verde Transactions. The Company shall have
consummated, in form and substance reasonably satisfactory
to SunAmerica, the transactions (other than the purchase
of properties from Verde Investments) contemplated under
the heading "Recapitalization and Related Transactions --
Verde Investments" contained in the Form S-1 (Registration
No. 333-3998 filed by the Company with the Commission on
April 25, 1996.
<PAGE> 4
Mr. Gregory B. Sullivan
May [__], 1996
Page 4
(xi) Opinion of Counsel. SunAmerica shall have received the
opinion of Snell & Wilmer L.L.P., counsel to the Company,
in form and substance reasonably satisfactory to
SunAmerica, addressed to SunAmerica and dated the IPO
Date, as to the matters set forth on Exhibit C, subject
to reasonable and customary qualifications and
limitations.
<PAGE> 5
Mr. Gregory B. Sullivan
May [__], 1996
Page 5
4. Representations And Warranties. In order to induce SunAmerica to enter
into this Agreement, the Company represents and warrants to SunAmerica
that:
(a) The Company has been duly organized, and is validly existing
in good standing under the laws of the State of Delaware, with
corporate power and authority to own its property and assets,
to carry on its business as now conducted by it, to enter
into, and to perform its obligations under, this Agreement,
the Warrant Certificate and the Amended and Restated
Registration Rights Agreement, and to issue the Warrant Shares
(as defined in the Amended and Restated Registration Rights
Agreement).
(b) The execution, delivery and performance of this Agreement, the
Warrant Certificate and the Amended and Restated Registration
Rights Agreement have been duly authorized by all necessary
corporate action and each of this Agreement, the Warrant
Certificate and the Amended and Restated Registration Rights
Agreement has been duly executed and delivered by the Company.
(c) Each of this Agreement, the Warrant Certificate and the
Amended and Restated Registration Rights Agreement constitutes
the legally valid and binding obligation of the Company,
enforceable in accordance with its terms.
<PAGE> 6
Mr. Gregory B. Sullivan
May [__], 1996
Page 6
(d) The Company's execution and delivery of, and performance of
its obligations under this Agreement, the Warrant Certificate
and the Amended and Restated Registration Rights Agreement,
and the offering, issuance, sale and delivery of the Warrant
Shares, do not and will not (i) violate the Company's
certificate of incorporation or bylaws, (ii) violate, breach,
or result in a default under, any provision of any agreement
or other instrument to which the Company or any of its
properties is subject, or (iii) breach or otherwise violate
any existing obligation of or restriction on the Company under
any order, judgment or decree of any court or other government
agency binding on the Company.
(e) The execution and delivery by the Company of, and performance
of its obligations under, this Agreement, the Warrant
Certificate and the Amended and Restated Registration Rights
Agreement, and the offering, sale, issuance and delivery of
the Warrant Shares, do not or will not violate any provision
of law, or any rules or regulations of any governmental
authority, applicable to the Company.
(f) No order, consent, permit or approval of any governmental
authority is required for the execution and delivery of, and
performance of its obligations under, this Agreement, the
Warrant Certificate and the Amended and Restated Registration
Rights Agreement, except as contemplated therein, or for the
offering, sale issuance and delivery of the Warrant Shares.
(g) There are no actions, suits or proceedings pending or
threatened against or affecting the Company or any property of
the Company, in any court or before and governmental authority
or arbitration board or tribunal which, if decided adversely
to Company or any property of Company would have or would
reasonably be expected to have a material adverse effect on
the Company on the condition (financial or otherwise),
business, results of operations, prospects, liabilities
(absolute, accrued, contingent or otherwise), properties or
assets of the Company.
(h) The Warrant Shares have been duly authorized and reserved and,
upon exercise of the Warrant Certificate in accordance with
the terms thereof, will be validly issued, fully paid and
non-assessable.
(i) It is not necessary in connection with the offering, issuance,
sale and delivery of the Warrant Certificate or the Warrant
Shares under the circumstances contemplated by this Agreement
and the Warrant Certificate to register the Warrant
Certificate or the Warrant Shares under the Securities Act of
1933, as amended, or to qualify the offer or sale of the
Conversion Shares under the securities or Blue Sky laws of any
state.
(j) There is no Default or Event of Default or event that with the
giving of notice or the lapse of time or both would constitute
an Event of Default.
<PAGE> 7
Mr. Gregory B. Sullivan
May [__], 1996
Page 7
5. Miscellaneous
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of
California.
(b) Counterparts. 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 an original, but all such counterparts
together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
(c) Amendment. No amendment, modification or waiver of this
Agreement shall be effective without the written agreement of
the Company and SunAmerica.
(d) Headings. The headings of the several sections and subsections
of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any
provision of this Agreement.
Our offer will terminate on [____________], 1996, unless on or
before that date you sign and return an enclosed counterpart of this letter. If
you are in agreement with the foregoing, please sign and return one copy of this
letter which will constitute our legally binding agreement with respect to the
subject matter hereof.
Very truly yours,
SUNAMERICA LIFE INSURANCE COMPANY
By:
--------------------------------
Its:
ACKNOWLEDGED AND AGREED TO:
UGLY DUCKLING CORPORATION
By:
-------------------------------
Its:
<PAGE> 8
EXHIBIT A
FORM OF
WARRANT CERTIFICATE
(see attached)
<PAGE> 9
EXHIBIT B
FORM OF
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
(see attached)
<PAGE> 10
EXHIBIT C
FORM OF LEGAL OPINIONS
1. The Company has been duly organized, and is validly existing in good
standing under the laws of the State of Delaware, with corporate power and
authority to own its property and assets, to carry on its business as now
conducted by it, to enter into, and to perform its obligations under, this
Agreement, the Warrant Certificate and the Amended and Restated Registration
Rights Agreement, and to issue the Warrant Shares (as defined in the Amended
and Restated Registration Rights Agreement).
2. The execution, delivery and performance of this Agreement, the Warrant
Certificate and the Amended and Restated Registration Rights Agreement have
been duly authorized by all necessary corporate action and each of this
Agreement, the Warrant Certificate and the Amended and Restated Registration
Rights Agreement has been duly executed and delivered by the Company.
3. Each of this Agreement, the Warrant Certificate and the Amended and
Restated Registration Rights Agreement constitutes the legally valid and
binding obligation of the Company, enforceable in accordance with its terms.
4. The Company's execution and delivery of, and performance of its obligations
under this Agreement, the Warrant Certificate and the Amended and Restated
Registration Rights Agreement, and the offering, issuance, sale and delivery
of the Warrant Shares, do not and will not (i) violate the Company's
certificate of incorporation or bylaws, (ii) to such counsel's knowledge
after reasonable inquiry, (a) violate, breach, or result in a default under,
any provision of any agreement or other instrument to which the Company or
any of its properties is subject, or (b) breach or otherwise violate any
existing obligation of or restriction on the Company under any order,
judgment or decree of any court or other government agency binding on the
Company.
5. The execution and delivery by the Company of, and performance of its
obligations under, this Agreement, the Warrant Certificate and the Amended
and Restated Registration Rights Agreement, and, under the circumstances
contemplated by this Agreement and the Warrant Certificate, the offering,
sale, issuance and delivery of the Warrant Shares to SunAmerica or its
nominee, do not violate any provision of law, or any rules or regulations of
any governmental authority, applicable to the Company.
6. No order, consent, permit or approval of any governmental authority is
required for the execution and delivery of, and performance of its
obligations under, this Agreement, the Warrant Certificate and the Amended
and
<PAGE> 11
Restated Registration Rights Agreement, except as
contemplated therein, or, under the
circumstances contemplated by this Agreement and
the Warrant Certificate, for the offering, sale
issuance and delivery of the Warrant Shares
(provided that no opinion need be expressed with
respect to any order, consent, permit or approval
of any governmental authority pursuant to any
agreement between the Company and such
governmental authority except as provided in
Section 3(b)(xi)(d) of this Agreement).
7. To such counsel's knowledge, there are no
actions, suits or proceedings pending or
threatened against or affecting the Company or
any property of the Company, in any court or
before any governmental authority or arbitration
board or tribunal which, if decided adversely to
Company or any property of Company would have or
would reasonably be expected to have a material
adverse effect on the condition (financial or
otherwise), business, results of operations,
prospects, liabilities (absolute, accrued,
contingent or otherwise), properties or assets of
the Company.
8. The Warrant Shares have been duly authorized and
reserved and, upon exercise of the Warrant
Certificate in accordance with the terms thereof,
will be validly issued, fully paid and
non-assessable.
9. It is not necessary in connection with the
offering, issuance, sale and delivery of the
Warrant Certificate or, under the circumstances
contemplated by this Agreement and the Warrant
Certificate, the offering, sale, issuance and
delivery of the Warrant Shares to SunAmerica or
its nominee, to register the Warrant Certificate
or the Warrant Shares under the Securities Act of
1933, as amended, or to qualify the offer or sale
of the Conversion Shares under the securities or
Blue Sky laws of the State of Arizona or the
State of California.
10. Such other opinions as SunAmerica may reasonably
request.
<PAGE> 1
EXHIBIT 10.3(a)
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"AGREEMENT") is made and entered into as of [__________ __] [IPO DATE], 1996,
between UGLY DUCKLING CORPORATION, a Delaware corporation (the "COMPANY"), and
SUNAMERICA LIFE INSURANCE COMPANY (the "PURCHASER"), as the purchaser of the
Convertible Note due June 30, 1998 (the "NOTE") pursuant to the Note Purchase
Agreement (the "NOTE PURCHASE AGREEMENT") dated as of August 31, 1995 by and
among the Purchaser, the Company and certain subsidiaries of the Company and as
holder of the Warrant (as defined below), in connection with the issuance of the
Note and the Warrant.
RECITALS
WHEREAS, Purchaser holds the Note and possesses registration
and other rights pursuant to a Registration Rights Agreement dated as of August
31, 1995 between the Company and Purchaser (the "1995 AGREEMENT"); and
WHEREAS, Purchaser and Company have entered into an agreement
(the "CONVERSION AGREEMENT") dated as of [__________ __], pursuant to which
Purchaser has agreed, subject to certain conditions specified therein, to
convert the Note upon completion of the IPO (as defined below); and
WHEREAS, as partial consideration for Purchaser's obligations
under the Conversion Agreement, Company has issued Purchaser a warrant to
purchase shares of the Company's common stock pursuant to that certain Warrant
Certificate dated as of even date herewith (the "WARRANT"); and
WHEREAS, it is a condition precedent to Purchaser's
obligations under the Conversion Agreement that Company shall have amended and
restated the 1995 Agreement in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of these premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Company and Purchaser hereby agree to amend and restate the
1995 Agreement as follows:
1. Defined Terms.
(a) Terms Defined in Note Purchase Agreement. Capitalized
terms used herein, unless otherwise defined herein, shall have the meanings set
forth in the Note Purchase Agreement.
(b) Certain Definitions. As used herein, the following
capitalized defined terms shall have the following meanings:
"CONVERSION SHARES" shall mean the shares of Common Stock of
the Company into which the Note is convertible or has been converted as
provided in the Note and under the Note Purchase Agreement.
"DEMAND REGISTRATION" shall mean a registration under the
Securities Act effected pursuant to Section 2 hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"HOLDER" shall mean any holder of Registrable Securities and
each subsequent holder thereof, if any, for so long as it owns any
Registrable Securities, and each of each holder's and each subsequent
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holder's successors, assigns and direct and indirect transferees who
become registered owners of Registrable Securities.
"INITIAL HOLDER" shall mean SunAmerica Life Insurance Company.
"PERSON" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"PIGGYBACK REGISTRATION" shall mean a registration under the
Securities Act effected pursuant to Section 3 hereof.
"PROSPECTUS" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, and by all other amendments and supplements to a
prospectus, including post-effective amendments, and in each case
including all material incorporated by reference therein.
"REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement
in compliance with the Securities Act and the declaration or ordering
by the SEC of the effectiveness of such Registration Statement.
"REGISTRABLE SECURITIES" shall mean the Conversion Shares and
the Warrant Shares and shall include any securities issued as a
dividend, distribution or adjustment on account of such Conversion
Shares or Warrant Shares and includes any shares of Common Stock
received by any Holder by way of sub-division of the outstanding shares
of Common Stock into a greater number of shares (by reclassification,
stock split or otherwise), provided, however, that any such securities
shall cease to be Registrable Securities when they have been Registered
under a Demand Registration or a Piggyback Registration.
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including but not limited to (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws, (iii) all expenses
and disbursements of any Persons in preparing or assisting in
preparing, word processing, duplicating, printing, distributing
messengering and delivering any Registration Statement, any Prospectus,
any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) the reasonable
fees and disbursements of counsel for the Company and one counsel for
the Holders selected by the Holder or Holders of not less than 51% of
the Registrable Securities being registered, and (v) the fees and
disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, and
transfer taxes, but excluding underwriting discounts and commissions,
if any, relating to the sale or disposition of Registrable Securities
by a Holder.
"REGISTRATION RIGHTS EXPIRATION DATE" with respect to a
particular Holder, shall mean such time as such Holder may sell,
without violation of any provision of the Securities Act, the Exchange
Act or any SEC rule or regulation, under Rule 144 (other than Rule
144A) within a three-month period all Registrable Securities held by
such Holder.
"REGISTRATION STATEMENT" shall mean a registration statement
of the Company pursuant to the provisions of Section 2 or Section 3
hereof, and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"TRIGGER AMOUNT OF REGISTRABLE SECURITIES" shall mean 25% of
the Registrable Securities.
"WARRANT SHARES" shall mean the shares of Common Stock of the
Company issuable upon exercise of, and as provided in, the Warrant.
2. Demand Registration.
(a) At any time after the Company's first underwritten
public offering of its securities for the account of the Company (the "IPO"), if
the Company receives from any Holder or Holders (collectively, the "REQUESTING
HOLDER") holding in aggregate not less than 10% of the Registrable Securities, a
written request (the "INITIATING REQUEST") that the Company effect a
Registration for a public offering of Registrable Securities, the Company will
within ten business days thereafter give written notice (the "NOTICE") of the
Initiating Request to all Holders. Any Holder wishing to participate (a
"PARTICIPATING HOLDER") with respect to some or all of such Participating
Holder's Registrable Securities (the "PARTICIPATING SECURITIES") in the Demand
Registration described in the Notice must so notify the Company within ten
calendar days (the "NOTICE PERIOD") after such Participating Holder's receipt of
the Notice. If the aggregate number of Participating Securities is less than the
Trigger Amount of Registrable Securities, the Company shall not be obligated to
take further action hereunder until a new Initiating Request is delivered to the
Company. Consistent with the foregoing, if the Requesting Holder is the only
Holder, such Holder's Initiating Request must be for at least the Trigger Amount
of Registrable Securities. If the aggregate number of Participating Securities
equals or exceeds the Trigger Amount of Registrable Securities, then the Company
will within ten business days after the expiration of the Notice Period give
written notice (the "REGISTRATION NOTICE") of the Demand Registration to all
Holders and the Company shall use its best efforts to cause a Registration
Statement on any appropriate registration form to effect a public offering of
the Participating Securities (together with any Registrable Securities entitled
to registration in accordance with Section 3 hereof) to be filed as soon as
practicable but in any event not later than 60 days after delivery by the
Company of the Registration Notice. The Company shall have the right to
participate in a Demand Registration to register authorized but unissued shares
of Common Stock, provided such participation does not reduce the amount or sale
price of securities for which the Holders are requesting registration.
(b) The Company shall use its best efforts to complete the
Demand Registration as provided above, and shall comply with the applicable
requirements of the Securities Act, the Exchange Act, and all other applicable
laws and the rules and regulations thereunder in connection with the Demand
Registration. The Demand Registration shall not be subject to any other
conditions, other than that the Demand Registration does not violate applicable
law or any applicable interpretation of the staff of the SEC and that no order
of any government agency or court of competent jurisdiction would be violated by
consummating the Demand Registration and that no action or proceeding is pending
before any such agency or court claiming that consummating the Demand
Registration would violate applicable law.
(c) Expenses. The Company shall pay all Registration
Expenses in connection with each Demand Registration pursuant to this Section 2.
(d) Effective Registration Statement. A Registration
Statement pursuant to this Section 2 will not be deemed to have become effective
unless it has been declared effective by the SEC.
(e) Limitations. The Company shall be obligated to prepare,
file and cause to become effective only two Demand Registrations hereunder with
respect to all Registrable Securities (counting for these purposes only
registrations which have been declared and ordered effective by the SEC and
pursuant to which
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<PAGE> 4
Registrable Securities have been sold and registrations which have been
withdrawn by the Holders; provided, however, that (i) if the Holders elect to
bear the Registration Expenses for any registration proceeding begun pursuant to
this Section 2 and subsequently withdrawn by the Holders registering Registrable
Securities therein, then such registration proceeding shall not be counted as a
Demand Registration for purposes of this Section 2(e), or (ii) if such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or available to the Holders
requesting registration at the time of their request for such Demand
Registration, then such registration proceeding shall not be counted as a Demand
Registration for purposes of this Section 2(e)). No Holder may, by virtue solely
of the rights granted in this Agreement, request or participate in a Demand
Registration after the Registration Rights Expiration Date with respect to such
Holder.
(f) Market "Stand-Off". Any Holder, if requested by any
managing underwriter of Common Stock (or other securities) of the Company in
connection with the IPO, shall agree not to sell or otherwise transfer or
dispose of, pursuant to a Demand Registration hereunder or otherwise, any Common
Stock (or other Registrable Securities) of the Company held by such Holder
during the period not to exceed the shorter of (i) 180 days following the
effective date of the Registration Statement of the Company filed under the
Securities Act for the IPO, and (ii) the shortest "lock-up" period agreed to by
any officer, director or 5% or more shareholder of the Company in connection
with the IPO; provided, however, that the foregoing shall not preclude or in any
way restrict the Holders from exercising their Piggyback Registration rights
with respect to any Registered offering of securities after the IPO.
3. Piggyback Registration.
(a) Notice of Piggyback Registration and Inclusion of
Registrable Securities. In addition to, and not in lieu of, the Demand
Registration rights set forth in Section 2 hereof, in the event the Company,
whether through a Demand Registration or otherwise, is to register any of its
Common Stock (either for its own account or for the account of a security holder
or holders), other than a registration on Form S-4 or Form S-8 or its
registration of securities for sale in the IPO, for sale to the general public
for cash on a registration form that would be suitable for a registration
involving the Registrable Securities, the Company will (i) promptly give each
Holder written notice thereof, and (ii) include in such registration (and in any
related qualification under blue sky or other state securities laws), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request delivered to the Company by any Holder within 20 calendar days
after delivery of such written notice from the Company, provided that such
Holder has requested such Piggyback Registration with respect to no less than
10% of the Registrable Securities. If the Piggyback Registration is an
underwritten offering, and the underwriter or the Company, based upon the advice
of its underwriter(s), in good faith requests in writing, due to market
conditions, that the number of securities covered by the Registration be
reduced, the Company may reduce the number of Registrable Securities (or, in the
case of a Demand Registration, the number of remaining Registrable Securities
after excluding the Participating Securities) to be included in the Piggyback
Registration pro rata with the reduction of shares of Common Stock included with
respect to other participants in the Registration other than the Company. No
Holder may, by virtue solely of the rights granted to such Holder in this
Agreement, participate in a Piggyback Registration after the Registration Rights
Expiration Date for such Holder. There shall be no limit on the number of
occasions on which the Company shall be obligated to effect registration under
this Section 3.
(b) Expenses. The Company shall pay all Registration
Expenses in connection with each Piggyback Registration pursuant to this Section
3.
(c) Third Party Registration Rights. From and after the date
hereof, the Company will not grant any rights of registration under the
Securities Act relating to any of its shares of capital stock or other
securities to any third party, unless Holders of Registrable Securities shall
have the right to have included in any Piggyback Registration all Registrable
Securities requested by them to be so included in such Piggyback Registration
prior to the inclusion of any securities requested to be registered by the third
parties entitled to any such other registration rights.
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<PAGE> 5
4. Registration Procedures.
In connection with the obligations of the Company with respect
to the Demand Registrations pursuant to Section 2 hereof and the Piggyback
Registrations pursuant to Section 3 hereof, the Company at its expense shall:
(a) prepare and file with the SEC a Registration Statement
which shall comply as to form in all material respects with the requirements of
the applicable form under the Securities Act and include all financial
statements required by the SEC to be filed therewith, and use its best efforts
to cause such Registration Statement to become effective and remain effective
for six months; provided, however, that such six-month period shall be extended
for a period of time equal to the longest period during which a Holder refrains
from selling any securities included in such Registration at the request of the
underwriter, if any, of such Registration;
(b) during such period prepare and file with the SEC such
amendments and supplements to such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement;
(c) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest practicable time and provide immediate notice to each Holder of the
withdrawal of any such order;
(d) use its best efforts to register and qualify the
securities covered by such Registration Statement under such securities or blue
sky laws and regulations of such jurisdictions as shall be necessary or
appropriate for the distribution of the securities covered by the Registration
Statement, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;
(e) furnish to each Holder such number of prospectuses and
other documents incident thereto as Holders from time to time may reasonably
request;
(f) notify each Holder at any time when a Prospectus
relating to a Registration Statement is required to be delivered under the
Securities Act of the happening of any event as a result of which the Prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing, and at the request of
any such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such Prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such shares, such
Prospectus shall not include an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing; and
(g) cause all such Registrable Securities registered
pursuant to this Agreement to be listed on each securities exchange on which the
same class of securities issued by the Company are then listed.
5. Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless each
Holder, the directors, officers, employees, subsidiaries and agents of each such
Holder and each Person who controls any such Holder within the meaning of the
Securities Act or the Exchange Act (a "CONTROLLING PERSON"), from and against
any and all losses, claims, damages, liabilities and expenses (including,
without limiting the foregoing but subject to Section 5(c) hereof, the legal and
other expenses incurred in connection with any action, suit or proceeding or any
claim asserted) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (as amended or supplemented if the Company shall have furnished any
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<PAGE> 6
amendments or supplements thereto), or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the Company shall not be liable in any such case to a Holder to the extent
that such losses, claims, damages, liabilities or expenses arise out of or are
based upon any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and conformity with information specifically
relating to such Holder, furnished in writing to the Company by such Holder
expressly for use in such Registration Statement or Prospectus.
(b) Each Holder agrees to indemnify and hold harmless the
Company, the directors, officers, employees, subsidiaries and agents of the
Company and each Controlling Person, from and against any and all losses,
claims, damages, liabilities and expenses (including, without limiting the
foregoing but subject to Section 5(c) hereof, the legal and other expenses
incurred in connection with any action, suit or proceeding or any claim
asserted) arising out of or based upon any untrue statement made in such
Registration Statement or Prospectus in reliance upon or in conformity with
information relating specifically to such Holder which was furnished in writing
to the Company by such Holder expressly for use in such Registration Statement
or Prospectus, provided that such Holder shall not be liable in any such case to
the extent that such losses, claims, damages, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or alleged untrue
statement or omission for which such Holder is entitled to indemnification under
Section 5(a) hereof.
(c) In case any action or proceeding (including any
governmental or regulatory investigation or proceeding) shall be brought against
any party indemnified under either of paragraphs (a) or (b) above (an
"INDEMNIFIED PARTY"), based upon the Registration Statement or any Prospectus,
or any amendment or supplement thereto, and with respect to which indemnity may
be sought against the party to provide such indemnification (the "INDEMNIFYING
PARTY"), the Indemnified Party shall promptly notify the Indemnifying Party in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
payment of all reasonable fees and expenses relating thereto. The Indemnified
Party shall have the right to employ separate counsel in any such action or
proceeding and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the Indemnified Party's expense unless (i) the
employment of such counsel has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party has not assumed the defense and
employed counsel reasonably satisfactory to such Indemnified Party within 15
days after notice of any such action or proceeding, or (iii) the named parties
to any such action or proceeding (including any impleaded parties) include both
the Indemnified Party and the Indemnifying Party and such Indemnified Party
shall have been advised by such counsel that there may be one or more legal
defenses available to the Indemnifying Party that are different from or
additional to those available to the Indemnifying Party (in which case the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
separate but substantially similar or related actions arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to all local
counsel which is necessary, in the good faith opinion of counsel for the
Indemnified Party in order to adequately represent the Indemnified Party) for
the Indemnified Party, which firm shall be designated in writing by the
Indemnified Party and that all such fees and expenses shall be reimbursed as
they are incurred upon written request and presentation of invoices). The
Indemnified Party shall not be liable for any settlement of any such action
effected without the written consent of the Indemnifying Party, which cannot be
unreasonably withheld, but if settled with the written consent of the
Indemnifying Party or if there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify and hold harmless such Indemnified Party
from and against any loss or liability by reason of such settlement or judgment.
The Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which such Indemnified Party is a party and indemnity has been
sought hereunder by such Indemnified Party unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such proceeding to which it is entitled to be
indemnified, and may not settle matters as to which the Indemnified Party is not
entitled to indemnification.
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(d) If the indemnification provided for in this Section 5 is
unavailable to an Indemnified Party under paragraph (a) or (b) hereof (other
than by reason of the exceptions provided therein) in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable to such Indemnified Party as a result
of such losses, claims, damages, liabilities and expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other hand from the
original sale by the Company of the Registrable Securities, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other hand in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other hand shall be determined by reference to among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party on the one hand or by the Indemnified Party on the other hand
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined by
a pro rata allocation or by any other method of allocation that does not take
account the equitable considerations referred to in paragraph (d) above which
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating any claim or defending any such action, suit or
proceeding. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) The provisions of this Section 5 will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Indemnified Party or any of the officers, directors, employees, agents or
Controlling Persons of such Indemnified Party, and will survive the sale by a
Holder of Registrable Securities of such securities.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents and
warrants that it has not entered into nor will the Company on or after the date
of this Agreement enter into any agreement which is inconsistent with the rights
granted to the Holders in this Agreement or which otherwise conflict with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) Amendments; Waivers. This Agreement may not be changed
orally, but (subject to the provisions of this Section 6(b)) only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought. Any term, covenant, agreement or
condition of this Agreement may be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in writing of the
majority-in-interest of the Holders. The Company shall promptly send copies of
any request for consent, amendment or waiver (and any request for any such
amendment, consent or waiver) relating to this Agreement to each Holder. No
waiver of any right or remedy hereunder shall be effective unless in writing and
then only with the written concurrence of the Holders as set forth above. Any
such waiver shall be effective only in the specific instance and for the
specific purpose for which it was given. No course of dealing between the
Company and any Holder and no failure to exercise or delay in exercising any
rights or remedies hereunder or under the Note, the Note Purchase Agreement or
any related documents or instruments shall operate as a waiver of any rights or
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remedies of any Holder, and no single or partial exercise by any Holder of any
right or remedy under this Agreement shall preclude any other or further
exercise thereof or the exercise of any right or remedy.
(c) Notices. All communications provided for hereunder shall
be in writing and sent by telecopier, certified or registered first class mail
or nationwide overnight delivery service (with charges prepaid) and (i) if to
Purchaser, addressed to it at the address specified in the Note Purchase
Agreement, or to such other address as Purchaser may have designated to the
Company in writing, (ii) if to any other Holder, addressed to such Holder at the
registered address of such Holder as set forth in the register kept by the
Company at its principal office, and (iii) if to the Company, addressed to it at
the address specified in the Note Purchase Agreement or to such other address
for purposes hereof as the Company may have designated in writing to each Holder
(such notice being effective on receipt).
(d) Rules 144 and 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
the Company is not required to file such reports, the Company shall (i) upon the
request of any Holder of Registrable Securities made after 24 months from the
closing of the Company's first underwritten public offering (or at such earlier
date as is necessary to enable Holders to sell Registrable Securities under Rule
144) make publicly available such information as is necessary to enable Holders
to sell Registrable Securities pursuant to Rule 144 or (ii) deliver such
information to a prospective purchaser as is necessary to enable Holders to sell
Registrable Securities pursuant to Rule 144A), and the Company shall take such
further action as any Holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitations of the exemptions provided by any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration. Upon the
request of any Holder of Registrable Securities, the Company shall deliver to
such Holder a written statement as to whether it has complied with such
requirements.
(e) Successors and Assigns. All covenants and agreements in
this Agreement shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto (including, without limitation, any transferee
of a Holder) whether so expressed or not; provided, however, that the Company
may not transfer or assign any of its rights or obligations under this Agreement
without the prior written consent of all Holders.
(f) Counterparts. This Agreement and any amendments,
waivers, consents, or supplements hereto or hereunder may be executed in any
number of counterparts, and by different parties hereto or thereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective upon the execution and
delivery of a counterpart hereof by each of the parties hereto.
(g) Descriptive Headings. Descriptive headings of sections
of this Agreement are for convenience of reference only and do not constitute a
part of this Agreement.
(h) Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the internal laws of the State of California, without regard to principles of
conflicts of law.
(i) Independence of Covenants. All covenants hereunder
shall be given independent effect.
(j) Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
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<PAGE> 9
(k) Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein or made in
writing by or on behalf of the Company in connection herewith shall survive the
execution and delivery of this Agreement and the Note, the transfer by any
Holder of the Note or portion thereof or interest therein and the payment or
conversion of the Note, and may be relied upon by any Holders and their
transferees regardless of any investigation made at any time by or on behalf of
the Purchaser, the Holders or any transferee. Subject to the preceding sentence,
this Agreement, the Note Purchase Agreement, the Note and the other Credit
Documents (as that term is defined in the Note Purchase Agreement) embody the
entire agreement and understanding between the parties hereto and supersede all
prior agreements and understandings, if any, relating to the subject matter
hereof.
(l) Satisfaction Requirement. If any agreement, certificate
or other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any party, the determination by such
party of such satisfaction shall be made by such party in its own independent
judgment exercised in good faith.
(m) Remedies. Nothing contained in this Agreement shall in
any manner be construed to limit the rights and remedies of the Holders arising
under the Note Purchase Agreement or any of the other Credit Documents or
otherwise.
[Remainder of page intentionally left blank.]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the date first written above.
UGLY DUCKLING CORPORATION
By:
-------------------------------
Name:
Title:
SUNAMERICA LIFE INSURANCE COMPANY
By:
-------------------------------
Name:
Title:
S-1
<PAGE> 1
10.9A
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE DIRECTORS OF
UGLY DUCKLING CORPORATION
The undersigned, constituting all of the members of the Board of
Directors of Ugly Duckling Corporation, a Delaware corporation (the
"Corporation"), hereby adopt the following resolutions by written consent
pursuant to Section 141(f) of the Delaware General Corporation Law:
SunAmerica Conversion
WHEREAS, the Corporation previously approved the issuance to SunAmerica
Life Insurance Company of a warrant to purchase 100,000 shares of the
Corporation's Common Stock at the initial public offering price of such stock;
WHEREAS, pursuant to the Corporation's reincorporation in Delaware, the
Corporation effected a 1.16 to 1 split of its Common Stock;
WHEREAS, the Corporation desires to amend its prior resolution with
respect to the SunAmerica warrant to reflect such stock split;
NOW, THEREFORE, BE IT RESOLVED, that, in connection the
conversion by SunAmerica of its $3 million subordinated note into
Common Stock of the Corporation at the initial public offering price
and in addition to any other agreement related thereto, the
Corporation shall grant to SunAmerica a ten-year warrant to purchase
116,000 shares of Common Stock at the initial public offering price;
FURTHER RESOLVED, that the Corporation hereby reserves from the
authorized and unissued shares of Common Stock such number of shares of
the Common Stock as shall be necessary to satisfy the provisions of the
SunAmerica warrant; and
FURTHER RESOLVED, that all other resolutions previously adopted
relating to the SunAmerica conversion remain in full force and effect.
Amendment of Long-Term Incentive Plan
WHEREAS, the Corporation has reserved 580,000 shares of its Common
Stock for issuance in connection with awards granted pursuant to its Long-Term
Incentive Plan; and
WHEREAS, the Corporation desires to increase the number of shares of
Common Stock available for issuance under the Long-Term Incentive Plan to
800,000;
NOW, THEREFORE, BE IT RESOLVED, that the Corporation hereby
amends its Long-Term Incentive Plan to allow for the issuance of up to
800,000 shares of Common Stock in connection with awards granted to
eligible participants under such plan; and
<PAGE> 2
FURTHER RESOLVED, that the Corporation hereby reserves from the
authorized and unissued shares of Common Stock such number of shares of
the Common Stock as shall be necessary to satisfy the provisions of the
Long-Term Incentive Plan, as amended.
General Authority
RESOLVED, that the officers of this Corporation and each of
them be, and they hereby are, authorized, empowered, and directed to
take such actions as they or any of them may deem necessary or
appropriate in order fully to effectuate the purposes of the foregoing
resolutions; and
RESOLVED, that any actions taken by any of the officers of the
Corporation or any of them prior to the adoption of these resolutions,
which would have been within the authority conferred hereby if done
after the date these resolutions are adopted, are hereby ratified and
approved.
Effective Date
RESOLVED, that except as otherwise indicated in such
resolutions, the effective date of these resolutions shall be the
date indicated below.
IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of and the above resolutions, unless otherwise indicated herein,
shall be effective on the 29th day of May, 1996.
By: /s/ Ernest C. Garcia, II
----------------------------------
Ernest C. Garcia, II
Title: Director
2
<PAGE> 3
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE SHAREHOLDERS
OF
UGLY DUCKLING CORPORATION
The undersigned, constituting all of the shareholders of Ugly Duckling
Corporation, a Delaware corporation (the "Corporation"), hereby adopt the
following resolutions by unanimous written consent:
WHEREAS, the Corporation has established a Long Term Incentive Plan and
has reserved 500,000 shares of its common stock for issuance in connection with
awards granted pursuant to the Long Term Incentive Plan.
WHEREAS, pursuant to the Corporation's reincorporation in Delaware, the
Corporation effected a 1.16 to 1 split of its common stock and, therefore, the
shares reserved for award pursuant to the Long Term Incentive Plan were
increased from 500,000 shares to 580,000 shares.
WHEREAS, the Corporation seeks to increase the number of shares of
common stock available for issuance under the Long Term Incentive Plan to
800,000 shares.
RESOLVED, that the Corporation amend its Long Term Incentive
Plan to allow for the issuance of up to 800,000 shares of common stock
in connection with awards granted to eligible participants under such
plan, and
RESOLVED, that the Corporation reserve from the authorized and
unissued shares of common stock 800,000 shares of common stock to
satisfy the provisions of the Long Term Incentive Plan as amended.
RESOLVED, that the directors and officers of the Corporation and
each of them be, and they hereby are authorized, empowered and directed
to take such actions as they or any of them may deem necessary or
appropriate in order to fully effectuate the purposes of the foregoing
resolutions and that any actions taken by the directors or officers of
the Corporation or any of them prior to the adoption of these
resolutions, which would have been made with the authority conferred
hereby if done after the date these resolutions are adopted, are hereby
ratified and approved.
RESOLVED, that except as otherwise indicated in such
resolutions, the effective date of these resolutions shall be May 29,
1996.
SHAREHOLDERS: /s/ Ernest C. Garcia II
-------------------------------
Ernest C. Garcia II
/s/ Steven P. Johnson
-------------------------------
Steven P. Johnson
/s/ Steven T. Darak
-------------------------------
Steven T. Darak
/s/ Scott A. Allen
-------------------------------
Scott A. Allen
<PAGE> 4
/s/ Wm. Don Gray
-------------------------------
Wm. Don Gray
/s/ Nancy V. Young
-------------------------------
Nancy V. Young
/s/ Peter R. Fratt
-------------------------------
Peter R. Fratt
Eric J. and Jennifer L. Splaver
Revocable Trust U/A May 5, 1995
By: /s/ Eric J. Splaver
---------------------------
Eric J. Splaver, Trustee
/s/ Mary E. Reiner
--------------------------------
Mary E. Reiner
/s/ Walter T. Vonsh
--------------------------------
Walter T. Vonsh
<PAGE> 1
EXHIBIT 10.25
UGLY DUCKLING CORPORATION
1996 DIRECTOR INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Ugly Duckling Corporation, a Delaware
corporation, hereby establishes the "Ugly Duckling Corporation 1996 Director
Incentive Plan" (the "Plan") for the benefit of its Nonemployee Directors. The
Plan sets forth the terms of grants of Restricted Stock to Nonemployee
Directors, and such grants are subject to the terms in this Plan.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to encourage
ownership in the Company by Nonemployee Directors, and to strengthen the ability
of the Company to attract and retain the services of experienced and
knowledgeable individuals as Nonemployee Directors of the Company and to provide
those individuals with a further incentive to work for the best interests of the
Company and its shareholders.
1.3 DURATION OF THE PLAN. Upon approval by the Board of Directors of
the Company, and conditioned upon prior approval of the Plan by the shareholders
of the Company, the Plan is effective as of the date of the Company's initial
public offering of its Shares (the "Effective Date"). The Plan shall remain in
effect until all Shares subject to it shall have been earned according to the
Plan's provisions, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Article 8 or Section 9.4.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. For purposes of the Plan, the following terms will
have the meanings set forth below:
(a) "Award" means a grant of Restricted Stock under the Plan.
(b) "Board" or "Board of Directors" means the Board of
Directors of the Company, and includes any committee of the Board of
Directors designated by the Board to administer this Plan.
(c) "Change of Control" means and includes each of the
following:
(1) there shall be consummated any consolidation or
merger of the Company in which the Company is not the
continuing or surviving entity, or pursuant to which Shares
would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the
Company's Shares immediately prior to the merger have the same
proportionate ownership of beneficial interest of common stock
or other voting securities of the surviving entity immediately
after the merger;
<PAGE> 2
(2) there shall be consummated any sale, lease,
exchange or other transfer (in one transaction or a series of
related transactions) of assets or earning power aggregating
more than 40% of the assets or earning power of the Company
and its subsidiaries (taken as a whole), other than pursuant
to a sale-leaseback, structured finance or other form of
financing transaction;
(3) the shareholders of the Company shall approve any
plan or proposal for liquidation or dissolution of the
Company;
(4) any person (as such term is used in Section 13(d)
and 14(d)(2) of the Exchange Act), other than any current
shareholder of the Company or affiliate thereof or any
employee benefit plan of the Company or any subsidiary of the
Company or any entity holding shares of capital stock of the
Company for or pursuant to the terms of any such employee
benefit plan in its role as an agent or trustee for such plan,
shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 20% or more of the Company's
outstanding Stock; or
(5) during any period of two consecutive years,
individuals who at the beginning of such period constituted a
majority of the Board of Directors shall fail to constitute a
majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of each new director
was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of
the period.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" means the committee appointed by the Board to
administer the Plan.
(f) "Company" means Ugly Duckling Corporation, a Delaware
corporation, or any successor as provided in Section 9.3.
(g) "Director" means any individual who is a Director of the
Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor provision.
(i) "Fair Market Value" means the closing price for Shares on
the relevant date as reported on the NASDAQ National Market System (or
any national securities exchange on which the Shares are then listed),
or (if there were no sales on such date) the closing price on the next
preceding date for which a closing price was reported.
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<PAGE> 3
(j) "Grant Date" means, with respect to Initial Grants of
Restricted Stock under Section 6.1, the date of the Company's initial
public offering of its Shares. Grant Date means, with respect to
Subsequent Grants of Restricted Stock under Section 6.2, the date on
which an individual first becomes a member of the Board.
(k) "Nonemployee Director" means any individual who is a
Director of the Company, but who is not otherwise a common-law employee
of the Company.
(l) "Participant" means a Nonemployee Director of the Company
who has been granted an Award under the Plan.
(m) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way, and the
Shares are subject to a substantial risk of forfeiture, as provided in
Article 6.
(n) "Restricted Stock" means an Award granted to a Nonemployee
Director pursuant to Article 6.
(o) "Shares" means the shares of common stock of the Company.
2.2 GENDER AND NUMBER. Except as indicated by the context, any
masculine term also shall include the feminine, the plural shall include the
singular and the singular shall include the plural.
2.3 SEVERABILITY. If any provision of the Plan is determined to be
invalid for any reason, the remaining portion of the Plan shall be construed and
enforced as if the invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan will be administered by the Committee,
subject to the restrictions set forth in the Plan.
3.2 ADMINISTRATION BY THE COMMITTEE. The Committee has the full power,
discretion, and authority to interpret and administer the Plan in a manner that
is consistent with the Plan's provisions. However, the Committee does not have
the power to (i) determine Plan eligibility, or to determine the number, the
price, the vesting period, or the timing of Awards to be made under the Plan to
any Participant, or (ii) take any action that would result in the Awards not
being treated as "formula awards" within the meaning of Rule 16b-3(c)(ii) of the
Exchange Act or any successor provision thereto, so long as Rule 166-3 of the
Exchange Act provides such restrictions.
3.3 DECISIONS BINDING. The Committee's determinations and decisions
under the Plan, and all related orders or resolutions of the Board shall be
final, conclusive, and
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<PAGE> 4
binding on all persons, including the Company, its stockholders, employees,
Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. The total number of Shares available for grant
under the Plan may not exceed 50,000, subject to adjustment as provided in
Section 4.2.
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, the number and/or type of Shares
subject to any outstanding Award will be automatically adjusted so that the
proportionate interests of the Participants will be maintained as before the
occurrence of such event. Any adjustment pursuant to this Section 4.2 will be
conclusive and binding for all purposes of the Plan.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in the Plan are
limited to Nonemployee Directors.
5.2 ACTUAL PARTICIPATION. All eligible Nonemployee Directors will
receive grants of Restricted Stock pursuant to Article 6.
ARTICLE 6. RESTRICTED STOCK GRANTS
6.1 INITIAL GRANT OF RESTRICTED STOCK. Each individual who is a
Nonemployee Director on the Grant Date shall be granted that number of Shares of
Restricted Stock equal to the number derived by dividing 30,000 by the initial
public offering price per Share on the Grant Date.
6.2 SUBSEQUENT GRANTS OF RESTRICTED STOCK. Each individual who, after
the Effective Date, first becomes a Nonemployee Director shall be granted that
number of Shares of Restricted Stock equal to the number derived by dividing
30,000 by the Fair Market Value per Share on the Grant Date.
6.3 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that will not include any terms or
conditions that are inconsistent with the terms and conditions of the Plan.
6.4 NONTRANSFERABILITY OF RESTRICTED STOCK. The Shares of Restricted
Stock granted may not be sold, transferred, pledged, assigned, or otherwise
alienated until the end of the applicable Period of Restriction.
6.5 PERIOD OF RESTRICTION. Restricted Stock granted at each Grant Date
shall be deemed a separate grant. The Period of Restriction for each grant of
Shares of Restricted
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<PAGE> 5
Stock under this Article 6 shall expire on the date the Restricted Stock grant
vests in accordance with the schedule below.
<TABLE>
<CAPTION>
===============================================================================
PERCENTAGE OF SHARES DATE RESTRICTED STOCK
IN GRANT BECOME GRANT VESTS
UNRESTRICTED
- -------------------------------------------------------------------------------
<S> <C>
First 34% First anniversary of the
Grant Date
- -------------------------------------------------------------------------------
Second 33% Second anniversary of the
Grant Date
- -------------------------------------------------------------------------------
Third 33% Third anniversary of the
Grant Date
===============================================================================
</TABLE>
6.6 CERTIFICATE LEGEND. Any certificate representing Shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the Shares of stock represented
by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on
transfer as set forth in the Ugly Duckling Corporation 1996
Director Incentive Plan, and the corresponding Restricted
Stock Agreement. A copy of the Plan and the Restricted Stock
Agreement may be obtained from the Secretary of Ugly Duckling
Corporation."
6.7 REMOVAL OF RESTRICTIONS. Except as otherwise provided in the Plan,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall become freely transferable by the Director after the last day of the
Period of Restriction. Once the Shares are released from the restrictions, the
Director shall be entitled to have the legend required by Section 6.6 removed
from his or her Share certificate. All rights with respect to the Restricted
Stock granted to a Director under the Plan shall be available during his or her
lifetime only to such Director.
6.8 VOTING RIGHTS. During the Period of Restriction, Directors holding
Shares of Restricted Stock granted hereunder shall have voting rights with
respect to those Shares.
6.9 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, Directors holding Shares of Restricted Stock granted hereunder
shall be entitled to receive any dividend or other distribution paid with
respect to those Shares while they are so held.
6.10 TERMINATION OF SERVICE ON BOARD. If a Participant's service on the
Board terminates for any reason before the end of a Period of Restriction with
respect to any
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<PAGE> 6
grant of Restricted Stock, the Restricted Stock that is subject to a Period of
Restriction shall be forfeited (and will be again available for grant under the
Plan).
ARTICLE 7. CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Awards granted
under the Plan that are still outstanding and are subject to restrictions, shall
become immediately free of any restrictions, as of the first date that the
definition of Change in Control has been fulfilled.
ARTICLE 8. AMENDMENT, MODIFICATION, AND TERMINATION
8.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms set
forth in this Section 8.1, the Committee may terminate, amend, or modify the
Plan at any time; provided, however, that shareholder approval is required for
any Plan amendment that would materially increase the benefits to Participants
or the number of securities that may be issued, or materially modify the
eligibility requirements in the Plan. Further, Plan provisions relating to the
amount, price, and timing of securities to be awarded under the Plan may not be
amended more than once every six (6) months.
8.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no termination,
amendment, or modification of the Plan shall in any manner adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant holding the Award.
ARTICLE 9. MISCELLANEOUS
9.1 INDEMNIFICATION. Each individual who is or was a member of the
Board shall be indemnified and held harmless by the Company from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under this Plan and from any and
all amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to assume and defend the same
before he or she undertakes to defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such individuals may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
9.2 BENEFICIARY DESIGNATION. Each Participant under the Plan may name
any beneficiary or beneficiaries to whom any benefit under the Plan is to be
paid in the event of his or her death. Each designation will revoke all prior
designations by the same
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<PAGE> 7
Participant, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Participant in writing with the Committee
during his or her lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
9.3 SUCCESSORS. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
9.4 REQUIREMENTS OF LAW. The granting of Awards under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
Notwithstanding any other provision of the Plan, the Committee may, at its sole
discretion, terminate, amend, or modify the Plan in any way necessary to comply
with applicable requirements of Rule 16b-3 promulgated by the Securities and
Exchange Commission as interpreted pursuant to no-action letters and
interpretive releases.
9.5 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Arizona.
7
