SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
UGLY DUCKLING CORPORATION
(NAME OF APPLICANT)
2525 E. CAMELBACK SUITE 500, PHOENIX, ARIZONA 85016
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
11% Subordinated Debentures due 2007 $27,500,000
Approximate date of proposed public offering:
February 22, 2000
Name and address of agent for service:
Jon D. Ehlinger, Esq.
General Counsel
Ugly Duckling Corporation
2525 East Camelback Road, Suite 500
Phoenix, Arizona 85016
copy to:
Steve Pidgeon
Smell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
The Company hereby amends this application for qualification on such date or
dates as may be necessary to delay its effectiveness until (i) the 20th day
after the filing of a further amendment which specifically states that it shall
supersede this application, or (ii) such date as the Securities and Exchange
Commission, acting pursuant to Section 307(c) of the Act, may determine upon
written request of the Company.
<PAGE>
The Indenture being qualified hereby was also the subject of a Form T-3
filing (No. 22-22393) made on September 17, 1998 and declared effective by the
Securities and Exchange Commission on October 20, 1998, which Form T-3 filing
described an exchange offer of the Company commenced on September 21, 1998 and
which expired October 19, 1998, and a Form T-3 filing (No. 22-22415) made on
November 20, 1998 and declared effective on December 21, 1998, which Form T-3
filing described an exchange offer of the Company commenced on November 24, 1998
and which expired December 22, 1998. Because the Company is now commencing a new
exchange offer with respect to Indenture securities, this filing is being made
for protective purposes.
GENERAL
1. General Information.
(a) Form of organization: A corporation
(b) State or other sovereign power under the laws of which organized:
Delaware
2. Securities Act exemption applicable.
Ugly Duckling Corporation, a Delaware corporation (the "Company") is
offering to exchange (the "Exchange Offer") up to 2,500,000 shares of its common
stock, par value $.001 per share ("Common Stock"), for up to $27,500,000
aggregate principal amount of its 11% Subordinated Debentures due 2007 (the
"Debentures") on the basis of $11 principal amount of Debentures per share. The
Debentures will be issued under the Indenture dated as of October 15, 1998 (the
"Base Indenture") between the Company and Harris Trust and Savings Bank, as
trustee (the "Trustee"), as amended by the First Supplemental Indenture thereto
dated as of October 15, 1998 and the Second Supplemental Indenture thereto dated
as of _________ __, 2000 (collectively, the "Indenture").
The Exchange Offer is being made pursuant to the Offering Circular
dated February 22, 2000 (the "Offering Circular"), and the related Letter of
Transmittal and Notice of Guaranteed Delivery of even date therewith.
The Company is relying on the exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 3(a)(9) thereunder in connection with the Exchange Offer.
There have been no sales of securities of the same class by the issuer
or by or through an underwriter at or about the same time as the Exchange Offer.
The Company has retained Corporate Investor Communications, Inc. as the
"Information Agent" and Harris Trust and Savings Bank as the "Exchange Agent" in
connection with the Exchange Offer. The Information Agent and the Exchange Agent
will provide to holders of Common Stock only information otherwise contained in
the Offering Circular and general information regarding the mechanics of the
exchange process. The Exchange Agent will provide the actual acceptance and
exchange services with respect to the exchange of the Common Stock and the
Debentures. Neither the Information Agent nor the Exchange Agent will solicit
exchanges in connection with the Exchange Offer or make recommendations as to
the acceptance or rejection of the Exchange Offer. Both the Information Agent
and the Exchange Agent will be paid reasonable fees directly by the Company for
their services.
There are no cash payments made or to be made by any holder of the
Common Stock.
AFFILIATIONS
3. Affiliates.
The following is a list of all direct and indirect subsidiaries and
affiliates of the Company. Indirect subsidiaries are indented and listed under
their direct parent. Unless otherwise indicated the basis of control is
ownership of equity securities and all subsidiaries are wholly-owned
subsidiaries.
<PAGE>
Ugly Duckling Corporation (Delaware)
A. Ugly Duckling Car Sales and Finance Corporation (Arizona)
1. Ugly Duckling Credit Corporation (Arizona)
a. Champion Financial Services, Inc. (Arizona)
2. Ugly Duckling Car Sales, Inc. (Arizona)
a. Ugly Duckling Car Sales Florida, Inc. (Florida)
b. Ugly Duckling Portfolio Partnership, LLP (Arizona)
1. Ugly Duckling Finance Corporation (Arizona)
2. Ugly Duckling Credit Corporation (Arizona)
3. Ugly Duckling Portfolio Corporation (Arizona)
4. Ugly Duckling Receivables Corp. (Delaware)
5. Ugly Duckling Receivables Corp. II (Delaware)
6. Drake Insurance Services, Inc. (Arizona)
a. Drake Insurance Agency, Inc. (Arizona)
b. Drake Property & Casualty Insurance Company (Turks & Caicos
Islands)
c. Drake Life Insurance Company (Turks & Caicos Islands)
7. UDRAC, Inc. (Arizona)
8. UDRAC Rentals, Inc. (Arizona)
B. Cygnet Financial Corporation (Delaware)
a. Cygnet Financial Services, Inc. (Arizona)
b. Cygnet Financial Portfolio, Inc. (Arizona)
c. Cygnet Support Services, Inc. (Arizona)
d. Fidelity Funding Auto Receivables Corp. I
e. Fidelity Funding Auto Receivables Corp. II
f. Fidelity Funding Auto Receivables Corp. III
1. Fidelity Funding Receivables, L.L.C.
Ernest C. Garcia II owns approximately 32% of the outstanding Common Stock
of the Company, but hereby disclaims control of the Company. Mr. Garcia also
owns 100% of the outstanding voting securities of Verde Investments, Inc. and a
controlling interest in other privately held companies.
MANAGEMENT AND CONTROL
4. Directors and executive officers.
The names and mailing addresses of the directors and executive officers
of the Company are set forth below. The title of each of the executive officers
set forth below refers to such executive officer's position with the Company.
<PAGE>
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
<S> <C> <C>
Ernest C. Garcia II 2525 E. Camelback Rd., Suite 500 Chairman of the Board of Directors
Phoenix, Arizona 85016
Gregory B. Sullivan 2525 E. Camelback Rd., Suite 500 President, Chief Executive Officer
Phoenix, Arizona 85016 and Director
Steven T. Darak 2525 E. Camelback Rd., Suite 500 Chief Financial Officer, Senior Vice
Phoenix, Arizona 85016 President and Principal Accounting
Officer
Donald L. Addink 2525 E. Camelback Rd., Suite 500 Senior Vice President and Treasurer
Phoenix, Arizona 85016
Jon D. Ehlinger 2525 E. Camelback Rd. , Suite 500 Vice President, Secretary and
Phoenix, Arizona 85016 General Counsel
Steven A. Tesdahl 2525 E. Camelback Rd., Suite 500 Senior Vice President and Chief
Phoenix, Arizona 85016 Information Officer
Christopher D. Jennings 2525 E. Camelback Rd., Suite 500 Independent Director
Phoenix, Arizona 85016
John N. MacDonough 2525 E. Camelback Rd., Suite 500 Independent Director
Phoenix, Arizona 85016
Frank P. Willey 2525 E. Camelback Rd., Suite 500 Independent Director
Phoenix, Arizona 85016
</TABLE>
5. Principal owners of voting securities.
Based upon the most recent information available to the Company, the
following individuals own ten percent (10%) or more of the voting securities of
the Company.
As of February 14, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME AND COMPLETE TITLE OF AMOUNT % OF VOTING
MAILING ADDRESS CLASS OWNED OWNED SECURITIES OWNED
--------------- ----------- ----- -----
Ernest C. Garcia II Common Stock 4,814,500 32%
2525 E. Camelback Rd..
Suite 500
Phoenix, Arizona 85016
Harris Associates L.P. Common Stock 1,962,000(1) 13.19%(1)
Two North LaSalle Street
Suite 500
Chicago, IL 60602-3790
<FN>
(1) Based on Schedule 13Gs filed February 7, 2000, as of December 31, 1999, by
Harris Associates L.P. ("Harris") and an affiliate Harris Associates Investment
Trust ("Harris Trust"). Harris Trust has beneficial ownership of 1,750,000
shares (or 11.76%), and Harris has beneficial ownership of 1,962,000, including
shares beneficially owned by Harris Trust.
</FN>
</TABLE>
<PAGE>
UNDERWRITERS
6. Underwriters. The following are the names and complete mailing address
of (a) each person who within three years prior to the date of filing
the application, acted as an underwriter of any securities of the
obligor which were outstanding on the date of filing the application
and (b) each proposed principal underwriter of the securities proposed
to be offered. The title of each class of securities underwritten by
each person specified in (a) also follows:
(a) The following was the underwriter in the Company's issuance in
1997 of shares of its common stock:
Friedman, Billings, Ramsey & Co., Inc.
Potomac Tower
1001 19th Street North
Arlington, VA 22209
In addition, Greenwich Capital Markets has acted as underwriter in
connection with the issuance of certificates in a number of securitizations of
finance receivables generated by Company dealerships or purchased from third
parties, certain limited obligations as to which have been guaranteed by the
Company.
(b) There are no underwriters of the securities proposed to be
offered in the Exchange Offer.
CAPITAL SECURITIES
7. Capitalization.
(a) The following information is provided as to each authorized class
of securities of the Company.
(i) Equity Securities (as of February 14, 2000)
<TABLE>
<CAPTION>
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
-------------- ----------------- ------------------
<S> <C> <C>
Common Stock 100,000,000 14,906,152 (1)
$.001 par value
Preferred Stock 10,000,000 0
$.001 par value
(1) The Company also has outstanding warrants to purchase Common Stock as follows:
</TABLE>
<TABLE>
<CAPTION>
EXERCISE PRICE
NO. OF WARRANTS EXERCISABLE THROUGH PER SHARE
--------------- ------------------- ---------
<S> <C> <C>
121,023 June 21, 2006 $ 6.75
174,000 June 21, 2001 $ 9.45
325,000 April 1, 2001 $20.00
50,000* February 9, 2001 $12.50
500,000 February, 2001 $10.00
</TABLE>
*In February 1998, the Company's Discontinued Operations entered into
servicing and transition servicing arrangements with Reliance Acceptance Group,
Inc. ("Reliance") , which company also filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code that same month. Pursuant to the
servicing agreement entered into between the Company and Reliance (the
"Servicing Agreement"), as amended, following the effective date of Reliance's
plan of reorganization, the Company will service certain receivables of Reliance
in exchange for (i) a monthly servicing fee of the greater of four percent (4%)
<PAGE>
per annum of the aggregate outstanding principal balance of all non-defaulted
receivables computed monthly on the basis of the declining balance of the
receivables portfolio (consisting of Reliance's portfolio of (A) prime
receivables and (B) sub-prime receivables), or fifteen dollars ($15.00) per
receivable per month plus reimbursement of certain costs and expenses; (ii) $1.3
million in proceeds realized from the sale of a pool of charged off receivables
existing as of the Reliance petition date ("Charged-Off Proceeds"); (iii) a
total of (A) four percent (4%) of the outstanding principal balance of each
receivable (exclusive of defaulted and certain other receivables) sold in any
bulk sale to a person other than the Company or an affiliate of the Company, and
(B) $3.25 million in net collections, recovery, and sale proceeds from the
receivables portfolio and certain other cash receipts of Reliance reduced by any
amount previously paid under clause (A) above, following payment of Reliance's
primary bank debt and, if applicable, repayment to Reliance of any proceeds of
litigation, the Reliance Warrants (as defined below),and equity proceeds used by
Reliance to pay its primary bank debt ("Post-Bank Debt Proceeds"); and (iv)
following the Company's receipt of the Post-Bank Debt Proceeds, fifteen percent
(15%) of the net collections, recovery, and sale proceeds from the receivables
portfolio and certain other cash receipts of Reliance (the "Incentive Fee").
Reliance, in consideration for entering into the Servicing Agreement will
receive privately issued warrants ("Reliance Warrants") to purchase shares of
Common Stock of the Company as follows: fifty thousand (50,000) Reliance
Warrants will be granted to Reliance upon the Company's receipt of the
Charged-Off Proceeds; up to one hundred thousand (100,000) Reliance Warrants
will be granted to Reliance based on the Company's receipt of up to $3.25
million of Post-Bank Debt Proceeds; and Reliance will be granted an additional
seventy-five thousand (75,000) Reliance Warrants for every $1 million actually
received by the Company through the Incentive Fee. The Reliance Warrants will
have a strike price of twelve dollars and 50/100 ($12.50) or one hundred twenty
percent (120%) of the market price of the Common Stock on the date of issuance
of the Reliance Warrants. The Reliance Warrants will be exercisable as follows:
(i) the first 50,000 Reliance Warrants will be exercisable for three years from
the Reliance Petition Date, and (ii) all remaining Reliance Warrants will be
exercisable for three years from the date of issuance.
As of February 17, 2000, the Company also had outstanding approximately
1,794,317 options to purchase Common Stock issued under employee benefit plans
of the Company.
(ii) Debt Securities (as of January 31, 2000).
The Company has registered $200,000,000 in aggregate principal amount
of its debt securities under the Securities Act pursuant to a Registration
Statement on Form S-3 (No. 333-31531) filed with the Commission on July 18,
1997. To date, no debt securities have been issued thereunder.
The Company also has outstanding $15 million of subordinated notes
payable, approximately $34 million of notes payable secured by the stock of the
Company's bankruptcy remote subsidiaries and certain other residuals in finance
receivables, and indebtedness outstanding from time to time under the Company's
revolving facility with General Electric Capital Corporation. In addition,
pursuant to the prior exchange offers, the Company has outstanding approximately
$17.5 million in principal amount of subordinated debt.
See also description of certain guarantees of the Company in Item 6(a).
(b) The following is a brief outline of the voting rights of each class of
voting securities referred to in paragraph (a) above.
See description of the Company's Common Stock and Preferred Stock under
"Description of Capital Stock" in the Offering Circular attached as Exhibit
T3E.l.
INDENTURE SECURITIES
8. Analysis of indenture provisions.
The following is an analysis of the Indenture provisions required under
Section 305(a)(2) of the Trust Indenture Act of 1939, as amended.
<PAGE>
Capitalized terms used herein and not otherwise defined are defined in
the Indenture or in the Offering Circular. Up to $100,000,000 of securities
("Securities") may be issued under the Indenture in one or more series of which
the Debentures will be one series.
A. EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Securities of any series: (a) failure to pay principal
of or any premium on any Securities of that series when due; (b) failure to pay
any interest on any Securities of that series when due, continued for 30 days;
(C) failure to deposit any sinking fund payment, when due, in respect of any
Securities of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a Covenant included in the Indenture solely
for the benefit of a series other than that series), continued for 90 days after
written notice has been given by the Trustee, or the Holders of at least 25% in
principal amount of the Outstanding Securities of that series, as provided in
the Indenture; (e) certain events in bankruptcy, insolvency, or reorganization,
and (f) any other Event of Default specified for such series in the supplemental
indenture or Board Resolution creating or governing such series. There are no
additional Events of Default provided for the Debentures.
If a default with respect to Securities of any series occurs, the
Trustee shall give the Holders of such Securities notice of such default as and
to the extent provided in the Trust Indenture Act; provided that in the case of
any default specified in subclause (d) of the immediately preceding paragraph,
no such notice shall be given until at least 30 days after the occurrence
thereof.
B. AUTHENTICATION AND DELIVERY
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile. The Indenture does not contain any provisions limiting the
use of proceeds from sale of the Securities. The Company will not receive any
proceeds (other than shares of Common Stock) upon issuance of the Debentures.
C. RELEASE OF PROPERTY SUBJECT TO LIEN
The Company's obligations under the Securities will not be secured by
any liens or security interests on any assets of the Company. Therefore, the
Indenture does not contain any provisions with respect to the release or the
release and substitution of any property subject to such a lien.
D. SATISFACTION AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from
all its obligations with respect to the Securities of a series (except for
certain obligations to exchange or register the transfer of such Securities, to
replace stolen, lost, or mutilated Securities, to maintain paying agencies, and
to hold moneys for payment in trust) upon satisfaction of certain conditions,
including the deposit in trust for the benefit of the Holders of such Securities
of money or U.S. Government Obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of and any premium
and interest on such Securities on the respective Stated Maturities or on any
Redemption Date established for such Securities in accordance with their terms.
Such defeasance or discharge may occur only if, among other things, the Company
has delivered to the Trustee an opinion of Counsel to the effect that the
Company has received from, or there has been published by, the United States
Internal Revenue Service a ruling, or there has been a change in tax law, in
either case to the effect that Holders of such Securities will not recognize
gain or loss for federal income tax purposes as a result of such deposit,
defeasance, and discharge and will be subject to federal income tax on the same
amount, in the same manner, and at the same times as would have been the case if
such deposit, defeasance, and discharge were not to occur.
<PAGE>
The Indenture will also be deemed to be satisfied and discharged,
except as to certain limited provisions, as to Securities of a series that have
become due and payable or will become due and payable at their Stated Maturity
within one year from the date of determination or are to be called for
redemption within one year under arrangements satisfactory to the Trustee, but
only if the Company deposits money in an amount sufficient to pay the entire
principal, premium, and interest to the date of deposit (as to Securities that
have become due and payable) or to the Stated Maturity or Redemption Date as the
case may be, and certain other conditions are satisfied.
E. EVIDENCE OF COMPLIANCE WITH CONDITIONS AND COVENANTS
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
9. Other Obligors. The following is the name and complete mailing address of
any person, other than the applicant, who is an obligor upon the Indenture
securities.
No person other than the Company is an obligor with respect to the
Debentures.
Contents of the application for qualification. This application for
qualification comprises - -
(a) Pages numbered 1 to 10, consecutively.
(b) The statement of eligibility and qualification of each trustee under the
indenture to be qualified.
(c) The following exhibits in addition to those filed as a part of the
statement of eligibility and qualification of each trustee.
(i) Exhibit T3A -- The Company's Certificate of Incorporation
(incorporated by reference to the Company's Quarterly report on Form
10-Q, filed August 10, 1998)
(ii) Exhibit T3B -- The Company's Bylaws
(iii) Exhibit T3C.l -- A copy of the Indenture to be qualified
(iv) Exhibit T3C.2 -- A copy of the First Supplemental Indenture to
the Indenture to be qualified
(v) Exhibit T3C.3 - A copy of the form of Second Supplemental Indenture to
the Indenture to be qualified
(vi) Exhibit T3D - - Not applicable
(vii)Exhibit T3E.1 -- Form of Offering Circular, dated as of February 22,
2000
(viii) Exhibit T3E.2 -- Form of Letter of Transmittal, dated as of February
22, 2000 and accompanying documents
(ix) Exhibit T3F -- Cross Reference Sheet (see page ii of Exhibit T3C. 1)
(x) Exhibit 99.7 -- Form T-l Statement of Eligibility of Harris Trust and
Savings Bank under the Trust Indenture Act of 1939
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Ugly Duckling Corporation, a corporation organized and existing under
the laws of the State of Delaware, has duly caused this application to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the city of
Phoenix, and State of Arizona, on the 21st day of February 2000.
UGLY DUCKLING CORPORATION
By: /S/ GREGORY B. SULLIVAN
---------------------------
(Gregory B. Sullivan, President, Chief Executive
Officer and Director)
Attest:
/S/ JON D. EHLINGER
- --------------------
(Jon D. Ehlinger)
By: /S/ STEVEN T. DARAK
------------------------
(Steven T. Darak, Chief Financial Officer, Senior Vice President
and Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
(i) Exhibit T3A -- The Company's Certificate of Incorporation (incorporated
by reference to the Company's Quarterly report on Form 10-Q, filed
August 10, 1998)
(ii) Exhibit T3B -- The Company's Bylaws
(iii) Exhibit T3C.l -- A copy of the Indenture to be qualified
(iv) Exhibit T3C.2 -- A copy of the First Supplemental Indenture to the Indenture to be qualified
(v) Exhibit T3C.3 - A copy of the form of Second Supplemental Indenture to the Indenture to be qualified
(vi) Exhibit T3D - - Not applicable
(vii) Exhibit T3E.1 -- Form of Offering Circular, dated as of February 22, 2000
(viii) Exhibit T3E.2 -- Form of Letter of Transmittal, dated as of February 22, 2000 and accompanying documents
(ix) Exhibit T3F -- Cross Reference Sheet (see page ii of Exhibit T3C.1)
(x) Exhibit 99.7 -- Form T-l Statement of Eligibility of Harris Trust and Savings Bank under the Trust Indenture Act of 1939
</TABLE>
<PAGE>
Exhibit EX-T3B
AMENDED AND RESTATED BY-LAWS
OF
UGLY DUCKLING CORPORATION
(the "Corporation")
ARTICLE 1
OFFICES
Section 1.1 Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 1.2 Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors or the officers may from time to time determine.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2.2 Annual Meetings. The annual meetings of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect by a plurality vote
members of the Board of Directors in the class whose term shall expire at such
annual meeting, and transact such other business as may properly be brought
before the meeting. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 2.3 Special Meetings. Unless otherwise prescribed by
law or by the Certificate of Incorporation, special meetings of stockholders,
for any purpose or purposes, may be called by either the Chairman, the
President, or the holders of 10% or more of the issued and outstanding shares of
capital stock entitled to vote thereat and shall be called by either such
officer at the request in writing of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed meeting. Written
notice of a special meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given not less than ten nor more than sixty
days before the date of the adjourned meeting to each stockholder entitled to
vote at the meeting.
<PAGE>
Section 2.5 Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy but no proxy shall be
voted on or after three years from its date, unless such proxy provides for a
longer period. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 2.6 List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 2.7 Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 2.6 or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Any good faith decision in regard to such matters by the officer of the
Corporation who has charge of the stock ledger of the Corporation, which may be
the Secretary, any Assistant Secretary or any other appropriate officer of the
Corporation, shall be final.
Section 2.8 Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation. Nominations of persons for election to
the Board of Directors may be made at any annual meeting of stockholders (a) by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section
2.8 and on the record date for the determination of stockholders entitled to
vote at such annual meeting and (ii) who complies with the notice procedures set
forth in this Section 2.8.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation, as
prescribed below.
<PAGE>
No person shall be elected to the Board of Directors of this
Corporation at an annual meeting of the stockholders, or at a special meeting
called for that purpose, unless, with respect to a person nominated by a
stockholder of the Corporation, a written notice of nomination of such person by
the stockholder shall have been received by the Secretary of the Corporation at
least ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting if an annual meeting, or seven (7) days after notice of
the meeting is mailed to stockholders if a special meeting. Each such notice
shall set forth: (a) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting (including the number of shares of
stock of the Corporation owned beneficially or of record by such stockholder and
the nominee or nominees) and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholders and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a director of the
Corporation if so elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2.8. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Notwithstanding compliance with the foregoing provisions, the
Board of Directors shall not be obligated to include information as to any
stockholder nominee for director in any proxy statement or other communication
sent to stockholders.
Section 2.9 Business at Annual Meetings. No business may be
transacted at an annual meeting of stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 2.9 and on the record date
for the determination of stockholders entitled to vote at such annual meeting
and (ii) who complies with the notice procedures set forth in this Section 2.9.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.
<PAGE>
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than sixty (60) days nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation that are owned beneficially or of record by such stockholder, (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 2.9, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 2.9 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
ARTICLE 3
DIRECTORS
Section 3.1 Duties and Powers. The business and affairs of the
Corporation shall be managed and controlled by a Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 3.2 Number. The first Board of Directors shall consist
of the persons named in the Certificate of Incorporation. Thereafter, the Board
shall consist of not less than one (1) nor more than nine (9) members. The Board
of Directors will have the power to increase or decrease its size within the
aforesaid limits and to fill any vacancies that may occur in its membership,
whether resulting from an increase in the size of the Board or otherwise.
Section 3.3 Election of Directors. Directors shall be elected
by a plurality of the votes cast at annual meetings of stockholders. Any
director may resign at any time upon notice to the Corporation. Directors need
not be stockholders. Each director elected shall hold office until his or her
successor is duly elected and qualified.
<PAGE>
Section 3.4 Meetings. The Board of Directors of the
Corporation may hold meetings both regular and special, either within or without
the State of Delaware. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special meetings of the Board of Directors
may be called by the Chairman or the President or by a majority of the directors
then in office. Notice thereof stating the place, date and hour of the meeting
shall be given to each director either by mail not less than forty-eight hours
before the date of the meeting, by telephone, facsimile or telegram on
twenty-four hours' notice, or on such shorter notice as the person or persons
calling such meeting may deem necessary or appropriate in the circumstances.
Section 3.5 Quorum. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors, a majority of the entire Board of Directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 3.6 Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 3.7 Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 3.6 shall
constitute presence in person at such meeting.
Section 3.8 Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. A majority of the members of a committee,
including any alternate members, shall constitute a quorum of such committee.
Any committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and report
to the Board of Directors when required.
<PAGE>
Section 3.9 Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings. In addition, the Board of
Directors may adopt one or more director compensation plans using securities of
the Corporation.
Section 3.10 Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such director's vote
is counted for such purpose if (i) the material facts as to such director's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
such director's relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE 4
OFFICERS
Section 4.1 General. The officers of the Corporation shall be
chosen by the Board of Directors and may include a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a Chairman
of the Board of Directors (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation. The officers of the Corporation may sign and execute documents
on behalf of the Corporation, whether requiring a seal or otherwise, when
authorized by these By-Laws, the Board of Directors, the Chairman or President.
Section 4.2 Election. The Board of Directors at its first
meeting held after each annual meeting of stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors or by a committee thereof.
Section 4.3 Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the Chairman, President or any
Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
<PAGE>
Section 4.4 Chairman of the Board of Directors. The Board of Directors
may elect a Chairman to serve as a general executive officer of the corporation.
If elected, the Chairman will preside at all meetings of the Board of Directors
and be vested with such other powers and duties as the Board of Directors may
from time to time delegate to him or her.
Section 4.5 President. Unless otherwise specified by resolution of the
Board of Directors, the President shall be the chief executive officer of the
corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present, and in the absence of a Chairman of the
Board, preside at all meetings of the stockholders and of the Board of
Directors. The President will be a proper officer to sign on behalf of the
corporation any deed, bill of sale, assignment, option, mortgage, pledge, note,
bond, evidence of indebtedness, application, consent (to service of process or
otherwise), agreement, indenture, contract, or other instrument, except in each
such case where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or executed.
The President may represent the corporation at any meeting of the stockholders
or members of any other corporation, association, partnership, joint venture, or
other entity in which the corporation then holds shares of capital stock or has
an interest, and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.
Section 4.6 Vice Presidents. At the request of the President
or in the President's absence or in the event of the President's inability or
refusal to act (and if there be no Chairman of the Board of Directors), the Vice
President or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice President shall perform such other
duties and have such other powers as the Board of Directors, Chairman and/or the
President from time to time may prescribe.
Section 4.7 Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
requested or appropriate. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, Chairman or President. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation, if there is one, and the Secretary or
any Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by such officer's signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 4.8 Treasurer. The Treasurer shall supervise the
maintenance of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors or Chairman. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, Chairman or
President for such disbursements, and shall render to the Chairman, President
and the Board of Directors, at its regular meetings, or when the Board of
Directors or Chairman so requires, an account of all transactions as Treasurer
and of the financial condition of the Corporation. The Treasurer shall perform
such other duties and have such powers as the Board of Directors, Chairman
and/or President from time to time may prescribe. If required by the Board of
Directors or Chairman, the Treasurer shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors or Chairman for the faithful performance of the duties of such office
and for the restoration to the Corporation, in case of the Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the Treasurer's possession or under
such officer's control belonging to the Corporation.
<PAGE>
Section 4.9 Assistant Secretaries. Assistant Secretaries, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the Chairman, the
President, any Vice President, if there be one, or the Secretary, and in the
absence of the Secretary or in the event of such officer's disability or refusal
to act, shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
Section 4.10 Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the Chairman, the
President, any Vice President, if there be one, or the Treasurer, and in the
absence of the Treasurer or in the event of such officer's disability or refusal
to act, shall perform the duties of the Treasurer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Treasurer. If required by the Board of Directors or Chairman, an Assistant
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors or Chairman for the
faithful performance of the duties of such officer's office and for the
restoration to the Corporation, in case of the Assistant Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in such officer's possession or under
such officer's control belonging to the Corporation.
Section 4.11 Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors, Chairman, or
President. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
ARTICLE 5
STOCK
Section 5.1 Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation.
Section 5.2 Signatures. Where a certificate is countersigned
by (i) a transfer agent other than the Corporation or its employee, or (ii) a
registrar other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 5.3 Lost Certificates. The Secretary may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Secretary may, in such officer's discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Secretary shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
<PAGE>
Section 5.4 Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued.
Section 5.5 Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty days nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 5.6 Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE 6
NOTICES
Section 6.1 Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid or such notice may be given personally, by facsimile, overnight
delivery, telegram, telex, or cable at such address. Such notice shall be deemed
to be given at the earlier of receipt of such notice or at the time when the
same shall be deposited in the United States mail or otherwise transmitted.
Section 6.2 Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE 7
GENERAL PROVISIONS
Section 7.1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves for any proper purpose, and the Board of Directors may
modify or abolish any such reserve.
<PAGE>
Section 7.2 Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 7.3 Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 7.4 Corporate Seal. The Corporation may have a
corporate seal, which shall have inscribed thereon the words "Corporate Seal".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise. However, nothing in these By-Laws or in the
Certificate of Incorporation of the Corporation shall be construed to require a
corporate seal to be affixed to any document.
ARTICLE 8
AMENDMENTS
Section 8.1 These By-Laws may be altered, amended or repealed,
in whole or in part, or new By-Laws may be adopted by the stockholders or by the
Board of Directors; provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 8.2 Entire Board of Directors. As used in this Article
and in these By-Laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.
<PAGE>
Exhibit T3C.1
UGLY DUCKLING CORPORATION
TO
HARRIS TRUST AND SAVINGS BANK
Trustee
--------------
INDENTURE
Dated as of October 15, 1998
(For Subordinated Securities or, if Article Fourteen is made non-applicable
(as permitted by Section 301), for Senior Securities)
<PAGE>
Certain Sections of this Indenture relating to Sections 310 through 318,
inclusive, of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
<S> <C>
Section 310 (a)(1).................................................................... 609
(a)(2).................................................................... 609
(a)(3).................................................................... Not Applicable
(a)(4).................................................................... Not Applicable
(a)(5).................................................................... 609
(b)....................................................................... 608
609
Section 311 (a)....................................................................... 613
(b)....................................................................... 613
Section 312 (a)....................................................................... 701
702
(b)....................................................................... 702
(c)....................................................................... 702
Section 313 (a)....................................................................... 703
(b)....................................................................... 703
(c)....................................................................... 703
(d)....................................................................... 703
Section 314 (a)....................................................................... 704
(a)(4).................................................................... 101
1004
(b)....................................................................... Not Applicable
(c)(1).................................................................... 102
(c)(2).................................................................... 102
(c)(3).................................................................... 1304
(d)....................................................................... Not Applicable
(e)....................................................................... 102
Section 315 (a)....................................................................... 601
(b)....................................................................... 602
(c)....................................................................... 601
(d)....................................................................... 601
607
(e)....................................................................... 514
Section 316 (a)....................................................................... 101
(a)(1)(A)................................................................. 502
512
(a)(1)(B)................................................................. 513
(a)(2).................................................................... Not Applicable
(b)....................................................................... 508
(c)....................................................................... 104
Section 317 (a)(1).................................................................... 503
505
(a)(2).................................................................... 504
(b)....................................................................... 1003
Section 318 (a)....................................................................... 107
</TABLE>
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
Definitions and Other Provisions
of General Application...................................................................................1
Section 101. Definitions............................................................................1
Section 102. Compliance Certificates and Opinions...................................................8
Section 103. Form of Documents Delivered to Trustee.................................................9
Section 104. Acts of Holders; Record Dates..........................................................9
Section 105. Notices, Etc., to Trustee and Company.................................................11
Section 106. Notice to Holders; Waiver.............................................................12
Section 107. Conflict with Trust Indenture Act.....................................................12
Section 108. Effect of Headings and Table of Contents..............................................12
Section 109. Successors and Assigns................................................................13
Section 110. Separability Clause...................................................................13
Section 111. Benefits of Indenture.................................................................13
Section 112. Governing Law.........................................................................13
Section 113. Legal Holidays........................................................................13
ARTICLE TWO
Security Forms..........................................................................................13
Section 201. Forms Generally.......................................................................13
Section 202. Form of Face of Security..............................................................14
Section 203. Form of Reverse of Security...........................................................16
Section 204. Form of Legend for Global Securities..................................................19
Section 205. Form of Trustee's Certificate of Authentication.......................................20
ARTICLE THREE
The Securities..........................................................................................20
Section 301. Amount of Securities; Issuable in Series..............................................20
Section 302. Denominations.........................................................................23
Section 303. Execution, Authentication, Delivery and Dating........................................23
Section 304. Temporary Securities..................................................................25
Section 305. Registration, Registration of Transfer and Exchange...................................25
Section 306. Mutilated, Destroyed, Lost and Stolen Securities......................................27
Section 307. Payment of Interest; Interest Rights Preserved........................................28
Section 308. Persons Deemed Owners.................................................................29
Section 309. Cancellation..........................................................................29
Section 310. Computation of Interest...............................................................29
Section 311. CUSIP Numbers.........................................................................30
</TABLE>
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ARTICLE FOUR
Satisfaction and Discharge..............................................................................30
Section 401. Satisfaction and Discharge of Indenture...............................................30
Section 402. Application of Trust Money............................................................31
ARTICLE FIVE
Remedies................................................................................................31
Section 501. Events of Default.....................................................................31
Section 502. Acceleration of Maturity; Rescission and Annulment....................................33
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.......................34
Section 504. Trustee May File Proofs of Claim......................................................34
Section 505. Trustee May Enforce Claims Without Possession of Securities...........................35
Section 506. Application of Money Collected........................................................35
Section 507. Limitation on Suits...................................................................35
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest..............................................................................36
Section 509. Restoration of Rights and Remedies....................................................36
Section 510. Rights and Remedies Cumulative........................................................36
Section 511. Delay or Omission Not Waiver..........................................................37
Section 512. Control by Holders....................................................................37
Section 513. Waiver of Past Defaults...............................................................37
Section 514. Undertaking for Costs.................................................................38
Section 515. Waiver of Usury, Stay or Extension Laws...............................................38
ARTICLE SIX
The Trustee.............................................................................................38
Section 601. Certain Duties and Responsibilities...................................................38
Section 602. Notice of Defaults....................................................................38
Section 603. Certain Rights of the Trustee.........................................................39
Section 604. Not Responsible for Recitals or Issuance of Securities................................40
Section 605. May Hold Securities...................................................................40
Section 606. Money Held in Trust...................................................................40
Section 607. Compensation and Reimbursement........................................................40
Section 608. Conflicting Interests.................................................................41
Section 609. Corporate Trustee Required; Eligibility...............................................41
Section 610. Resignation and Removal; Appointment of Successor.....................................41
Section 611. Acceptance of Appointment by Successor................................................43
Section 612. Merger, Conversion, Consolidation or Succession to Business...........................44
Section 613. Preferential Collection of Claims Against Company.....................................44
Section 614. Appointment of Authenticating Agent...................................................44
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company.......................................................46
Section 701. Company to Furnish Trustee Names and Addresses of Holders.............................46
</TABLE>
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Section 702. Preservation of Information; Communications to Holders................................46
Section 703. Reports by Trustee....................................................................47
Section 704. Reports by Company....................................................................47
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease....................................................47
Section 801. Company May Consolidate, Etc., Only on Certain Terms..................................47
Section 802. Successor Substituted.................................................................48
ARTICLE NINE
Supplemental Indentures.................................................................................49
Section 901. Supplemental Indentures Without Consent of Holders....................................49
Section 902. Supplemental Indentures With Consent of Holders.......................................50
Section 903. Execution of Supplemental Indentures..................................................51
Section 904. Effect of Supplemental Indentures.....................................................51
Section 905. Conformity with Trust Indenture Act...................................................51
Section 906. Reference in Securities to Supplemental Indentures....................................51
ARTICLE TEN
Covenants...............................................................................................52
Section 1001. Payment of Principal, Premium and Interest............................................52
Section 1002. Maintenance of Office or Agency.......................................................52
Section 1003. Money for Securities Payments to Be Held in Trust.....................................52
Section 1004. Statement by Officers as to Default...................................................53
Section 1005. Existence.............................................................................54
Section 1006. Maintenance of Properties.............................................................54
Section 1007. Payment of Taxes and Other Claims.....................................................54
Section 1008. Waiver of Certain Covenants...........................................................54
Section 1009. Calculation of Original Issue Discount................................................55
ARTICLE ELEVEN
Redemption of Securities................................................................................55
Section 1101. Applicability of Article..............................................................55
Section 1102. Election to Redeem; Notice to Trustee.................................................55
Section 1103. Selection by Trustee of Securities to Be Redeemed.....................................55
Section 1104. Notice of Redemption..................................................................56
Section 1105. Deposit of Redemption Price...........................................................57
Section 1106. Securities Payable on Redemption Date.................................................57
Section 1107. Securities Redeemed in Part...........................................................58
ARTICLE TWELVE
Sinking Funds...........................................................................................58
Section 1201. Applicability of Article..............................................................58
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Section 1202. Satisfaction of Sinking Fund Payments with Securities.................................59
Section 1203. Redemption of Securities for Sinking Fund.............................................59
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance......................................................................59
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance..........................59
Section 1302. Defeasance and Discharge..............................................................60
Section 1303. Covenant Defeasance...................................................................60
Section 1304. Conditions to Defeasance or Covenant Defeasance.......................................61
Section 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.......................................................63
Section 1306. Reinstatement.........................................................................63
ARTICLE FOURTEEN
Subordination of Securities.............................................................................64
Section 1401. Securities Subordinate to Senior Indebtedness.........................................64
Section 1402. Suspension of Payment When Senior Indebtedness in Default.............................64
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc........................................66
Section 1404. Monies Held in Trust..................................................................67
Section 1405. Subrogation to Rights of Holders of Senior Indebtedness...............................67
Section 1406. Unconditional Obligation..............................................................68
Section 1407. Trustee to Effectuate Subordination...................................................68
Section 1408. Notice to Trustee.....................................................................68
Section 1409. Rights of Trustee as Holder of Senior Indebtedness; Preservation of
Trustee's Rights......................................................................69
Section 1410. Trustee Not Fiduciary for Holders of Senior Indebtedness..............................70
Section 1411. No Waiver of Subordination Provisions.................................................70
Section 1412. Defeasance of this Article Fourteen...................................................71
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
vi
<PAGE>
INDENTURE, dated as of October 15, 1998, between Ugly Duckling
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
2525 East Camelback Road, Suite 1150, Phoenix, Arizona 85016, and Harris Trust
and Savings Bank, an Illinois banking corporation, as Trustee (herein called the
"Trustee").
Recitals of the Company
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted in the United
States of America;
<PAGE>
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in Phoenix, Arizona or that Place of Payment are authorized
or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, or, if at any time after the execution of this instrument
such Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at such
time.
2
<PAGE>
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Conditional Notice" has the meaning specified in Section 1104.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date hereof is located at Chicago,
Illinois.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Credit Agreement" means the Amended and Restated Motor Vehicle
Installment Contract Loan and Security Agreement dated as of August 15, 1997
among the Company, General Electric Capital Corporation, and certain other
parties, as such agreement may be amended, restated, modified, renewed,
refunded, replaced or refinanced from time to time, including any notes,
guarantees, security or pledge agreements, letters of credit and other documents
or instruments executed pursuant thereto and any exhibits or schedules to any of
the foregoing.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable
in whole or in part in the form of one or more Global Securities, a clearing
agency registered under the Exchange Act that is designated to act as Depositary
for such Securities as contemplated by Section 301.
"Designated Senior Indebtedness" means (i) all Indebtedness outstanding
under the Credit Agreement and (ii) any other Senior Indebtedness designated by
the Company as "Designated Senior Indebtedness" from time to time.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
3
<PAGE>
"Expiration Date" has the meaning specified in Section 104.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other similar accrued
liabilities arising in the ordinary course of business and payable in accordance
with customary terms), (v) all obligations for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any lien on any property or asset of such Person, the
amount of such obligation being deemed to be the lesser of the fair market value
of such property or asset or the amount of the obligation so secured, and (viii)
all obligations under currency agreements and interest swap agreements of such
Person.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an instalment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
4
<PAGE>
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an instalment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 501(4).
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President or a Vice President, and by the Chief Financial Officer, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of
the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, or other counsel who shall be acceptable to the
Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if
such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented
5
<PAGE>
to the Trustee proof satisfactory to it that such Securities are held
by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; provided, however, that in determining
whether the Holders of the requisite principal amount of the
Outstanding Securities have given, made or taken any request, demand,
authorization, direction, notice, consent, waiver or other action
hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the
amount of the principal thereof which would be due and payable as of
such date upon acceleration of the Maturity thereof to such date
pursuant to Section 502, (B) if, as of such date, the principal amount
payable at the Stated Maturity of a Security is not determinable, the
principal amount of such Security which shall be deemed to be
Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security
denominated in one or more foreign currencies or currency units which
shall be deemed to be Outstanding shall be the U.S. dollar equivalent,
determined as of such date in the manner provided as contemplated by
Section 301, of the principal amount of such Security (or, in the case
of a Security described in Clause (A) or (B) above, of the amount
determined as provided in such Clause), and (D) Securities owned by the
Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, only
Securities which the Trustee actually knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect
to such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
6
<PAGE>
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, any senior trust
officer, any trust officer or assistant trust officer, the controller or any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means all obligations on any Indebtedness of the
Company, whether outstanding on the date of original issuance of the Securities
of any series or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities of any
series. Notwithstanding the foregoing, except as otherwise provided with respect
to a series of Securities, "Senior Indebtedness" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company (including, without limitation, amounts owed for compensation),
(iii) any liability for federal, state, local or other taxes owed or owing by
the Company, and (iv) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
7
<PAGE>
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date specified in
such Security as the fixed date on which the principal of such Security or such
instalment of principal or interest is due and payable.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more other Subsidiaries of such Person or (iii) one
or more other Subsidiaries of such Person. Unless otherwise specified,
"Subsidiary" means a Subsidiary of the Company.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include,
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
8
<PAGE>
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act"
9
<PAGE>
of the Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 601) conclusive in
favor of the Trustee and the Company, if made in the manner provided in this
Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 106.
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The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of Arizona, without regard to conflicts of
laws principles thereof.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon
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as may be required to comply with the rules of any securities exchange or
Depositary therefor or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof. If
the form of Securities of any series is established by action taken pursuant to
a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
Section 202. Form of Face of Security.
[Insert any legend required by the Internal Revenue Code and the
regulations thereunder.]
UGLY DUCKLING CORPORATION
No. _____________ $_________
CUSIP NO. _______
Ugly Duckling Corporation, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _________________________ or registered
assigns, the principal sum of ___________________________ Dollars on
___________________________ [if the Security is to bear interest prior to
Maturity, insert --, and to pay interest thereon from _________________ or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on ____________________________ and
____________________________ in each year, commencing _____________________, at
the rate of ________% per annum, until the principal hereof is paid or made
available for payment [if applicable, insert --, provided that any principal and
premium, and any such instalment of interest, which is overdue shall bear
interest at the rate of _________% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment, and such interest shall be
payable on demand]. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the _______________ or _________________
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is
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registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert --
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ____________% per annum (to the extent that the
payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or made available for payment. Interest on
any overdue principal or premium shall be payable on demand. Any such interest
on overdue principal or premium which is not paid on demand shall bear interest
at the rate of ______________% per annum (to the extent that the payment of such
interest on interest shall be legally enforceable), from the date of such demand
until the amount so demanded is paid or made available for payment. Interest on
any overdue interest shall be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert -- any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in ____________________, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts [if applicable,
insert--; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed.
UGLY DUCKLING CORPORATION
By_______________________________________
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Attest:
______________________
Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of October 15, 1998 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Harris Trust and Savings Bank, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof [if applicable,
insert --, limited in aggregate principal amount to
$_____________________________ ].
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert --
(1) on _______________ in any year commencing with the year
_____________________ and ending with the year ______________________ through
operation of the sinking fund for this series at a Redemption Price equal to
100% of the principal amount, and (2)] at any time [if applicable, insert -- on
or after ____________________________ , 19____], as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [if applicable, insert -- on
or before __________________________________ , and if redeemed] during the 12-
month period beginning ___________________________ of the years indicated,
Redemption Redemption
Year Price Year Price
- ---- ----- ---- -----
and thereafter at a Redemption Price equal to ____________% of the principal
amount, together in the case of any such redemption [if applicable, insert --
(whether through operation of the sinking fund or otherwise)] with accrued
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof for such
interest installments, all as provided in the Indenture.]
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on
______________________ in any year commencing with the year ______________ and
ending with the year ________________________ through operation of the sinking
fund for this series at the Redemption Prices for redemption through operation
of the sinking fund (expressed as percentages
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of the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert -- on or after ___________________ ], as a whole or in part,
at the election of the Company, at the Redemption Prices for redemption
otherwise than through operation of the sinking fund (expressed as percentages
of the principal amount) set forth in the table below: If redeemed during the
12-month period beginning ______________________________ of the years indicated,
Redemption Price
For Redemption Redemption Otherwise
Through Operation Than Through
of the Operation
Year Sinking Fund Of the Sinking Fund
- ---- ------------ -------------------
and thereafter at a Redemption Price equal to ______________% of the principal
amount, together in the case of any such redemption (whether through operation
of the sinking fund or otherwise) with accrued interest to the Redemption Date,
but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof for such interest installments, all
as provided in the Indenture.]
[If applicable, insert -- The sinking fund for this series provides for
the redemption on ___________________________ in each year beginning with the
year __________________ and ending with the year _________________ of [if
applicable, insert -- not less than $___________________ ("mandatory sinking
fund") and not more than] $_____________ aggregate principal amount of
Securities of this series. Securities of this series acquired or redeemed by the
Company otherwise than through [if applicable, insert -- mandatory] sinking fund
payments may be credited against subsequent [if applicable, insert -- mandatory]
sinking fund payments otherwise required to be made [if applicable, insert -- in
the inverse order in which they become due].]
[If the Security is subject to redemption of any kind, insert -- In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert paragraph regarding subordination of the
Security.]
[If applicable, insert -- The Indenture contains provisions for
defeasance at any time of [the entire indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
the Indenture.]
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[If the Security is not an Original Issue Discount Security, insert --
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If
an Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to [insert -- formula for determining the
amount]. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee without
the consent of any Holders in certain limited cases, and with the consent of the
Holders of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected subject to certain exceptions. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon the Holder of this Security and upon
all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
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No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $__________________ and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of this series and of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Section 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER
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THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
Section 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
_________________________________,
As Trustee
By ______________________________
Authorized Officer
ARTICLE THREE
The Securities
Section 301. Amount of Securities; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $100,000,000, except for
Securities authenticated and delivered upon transfer of or in exchange for, or
in lieu of other Securities pursuant to Section 304, 305, 306, 906, and 1107,
and except for Securities which, pursuant to Section 303, are deemed never to
have been authenticated and delivered hereunder.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to Section 303, are
deemed never to have been authenticated and delivered hereunder);
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(3) the Person to whom any interest on a Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest;
(4) the date or dates on which the principal of any Securities
of the series is payable;
(5) the rate or rates at which any Securities of the series
shall bear interest, if any, the basis of computation of such interest
(if other than as provided in Section 310), the date or dates from
which any such interest shall accrue, the Interest Payment Dates on
which any such interest shall be payable the manner of determination of
such Interest Payment Dates and the Regular Record Date for any such
interest payable on any Interest Payment Date;
(6) the right, if any, to extend the interest payment periods
and the duration of such extension;
(7) the place or places where the principal of and any premium
and interest on any Securities of the series shall be payable;
(8) the period or periods within which, the price or prices at
which and the terms and conditions upon which any Securities of the
series may be redeemed, in whole or in part, at the option of the
Company and, if other than by a Board Resolution, the manner in which
any election by the Company to redeem the Securities shall be
evidenced;
(9) the obligation, if any, of the Company to redeem or
purchase any Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(10) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
(11) if the amount of principal of or any premium or interest
on any Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts shall
be determined;
(12) if other than the currency of the United States of
America, the currency, currencies or currency units in which the
principal of or any premium or interest on any Securities of the series
shall be payable and the manner of determining the equivalent thereof
in the currency of the United States of America for any purpose,
including for purposes of the definition of "Outstanding" in Section
101;
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(13) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency
units other than that or those in which such Securities are stated to
be payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Securities as to which
such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount shall be
determined);
(14) if other than the entire principal amount thereof, the
portion of the principal amount of any Securities of the series which
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 502;
(15) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof which shall be due and payable upon any Maturity other
than the Stated Maturity or which shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(16) if applicable, that the Securities of the series, in
whole or any specified part, shall be defeasible pursuant to Section
1302 or Section 1303 or both such Sections and, if other than by a
Board Resolution, the manner in which any election by the Company to
defease such Securities shall be evidenced;
(17) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositaries for such
Global Securities, the form of any legend or legends which shall be
borne by any such Global Securities in addition to or in lieu of that
set forth in Section 204 and any circumstances in addition to or in
lieu of those set forth in Clause (2) of the last paragraph of Section
305 in which any such Global Security may be exchanged in whole or in
part for Securities registered, and any transfer of such Global
Security in whole or in part may be registered, in the name or names of
Persons other than the Depositary for such Global Security or a nominee
thereof;
(18) any addition to or change in the Events of Default which
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to Section 502;
(19) any addition to or change in the covenants set forth in
Article Ten which applies to Securities of the series; and
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(20) the non-application of, or any addition to or change in,
Article Fourteen with respect to Securities of the series;
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by Section 901(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 201 and 301,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such
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Securities, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such
form has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
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Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.
Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office or in any other
office or agency of the Company in a Place of Payment being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Company in a Place of Payment for that series,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of the same series, of any authorized denominations and of like tenor and
aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
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All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed, the Company shall not be required (A) to issue, register the
transfer of or exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Securities selected for redemption and ending at the close of business on
the day of such mailing, or (B) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and delivered to such Depositary
or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this
Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered and no transfer of a Global Security in whole or in part may
be registered, in the name of any Person other than the Depositary for
such Global Security or a nominee thereof unless (A) such Depositary
(i) has notified the Company that it is unwilling or unable to continue
as Depositary for such Global Security or (ii) has ceased to be a
clearing agency registered under the Exchange Act, (B) there shall have
occurred and be continuing an Event of Default with respect to such
Global Security, (C) the Company executes and delivers to the Trustee a
Company Order that such Global Security shall be so transferable or
exchangeable, or (D) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this
purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global
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Security or any portion thereof shall be registered in such names as
the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section,
Section 304, 306, 906 or 1107 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
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Section 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, at the office or agency of the Company maintained for that
purpose in a Place of Payment for such series of Securities, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be given to each Holder of Securities
of such series in the manner set forth in Section 106, not less than 10
days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
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(2) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
Section 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
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Section 311. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
money in an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation, for
principal and any premium and interest to the date of such deposit (in the case
of Securities
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which have become due and payable) or to the Stated Maturity or Redemption Date,
as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
of that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of or any premium
on any Security of that series at its Maturity; or
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(3) default in the deposit of any sinking fund payment, when
and as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of a series of
Securities other than that series), and continuance of such default or
breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive
days; or
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company in
furtherance of any such action; or
(7) any other Event of Default provided with respect to
Securities of that series.
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Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(5) or 501(6)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(5)
or 501(6) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such declaration
of acceleration and any interest thereon at the rate or rates
prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed therefor
in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that
series other than the non-payment of the principal of Securities of
that series which has become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
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No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof, the Company
will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on
such Securities for principal and any premium and interest and, to the
extent that payment of such interest shall be legally enforceable,
interest on any overdue principal and premium and on any overdue
interest, at the rate or rates prescribed therefor in such Securities,
and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement,
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adjustment or composition affecting the Securities or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; provided, however, that the Trustee may, on
behalf of the Holders, vote for the election of a trustee in bankruptcy or
similar official and be a member of a creditors' or other similar committee.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section 607;
Second: To the payment of the amounts then due and unpaid for principal
of and any premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and any premium and interest, respectively, and
Third: To the payment of the balance, if any, to the Company or any
other Person or Persons legally entitled thereto.
Section 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series; it being understood and intended that no one or more of such
Holders shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other of such Holders, or to obtain or to
seek to obtain priority or preference over any other of such Holders or
to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all of such Holders.
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, [except as provided in any Conditional
Notice given with respect thereto,] on the Redemption Date) and to institute
suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
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in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 601, the Trustee
shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of
the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
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Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee.
Section 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the
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Trust Indenture Act; provided, however, that in the case of any default of the
character specified in Section 501(4) with respect to Securities of such series,
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series.
Section 603. Certain Rights of the Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; and
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(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation
as shall be agreed to in writing between the Company and the Trustee
for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation, expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and (3) to indemnify the
Trustee for, and to hold it harmless against, any loss, liability or
expense
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incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities upon all property
and funds held by it hereunder for any amount owing it or any predecessor
Trustee pursuant to this Section 607, except with respect to funds held in trust
for the benefit of the Holders of particular Securities.
Without limiting any rights available to the Trustee under applicable
law, when the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(5) or Section 501(6), the expenses
(including the reasonable charges and expenses of its counsel) and compensation
for the services are intended to constitute expenses of administration under any
applicable Federal or State bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
Section 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be Trustee hereunder for
Securities of one or more other series. Each Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
and to the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
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Section 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(A) the Company by a Board Resolution may remove the Trustee with
respect to all Securities, or (B) subject to Section 514, any Holder
who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee with
respect to all Securities and the appointment of a successor Trustee or
Trustees.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the
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Securities of any series shall be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Securities of such series delivered to
the Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 611, become the successor Trustee with
respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such
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supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents (by giving
notice of the appointment in the manner provided in Section 106 to the Company
and to all Holders of Securities of the series with respect to which the
Authenticating Agent(s) will serve) with respect to one or
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more series of Securities, which Authenticating Agent(s) shall be authorized to
act on behalf of the Trustee to authenticate Securities of such series issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
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If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
,
-----------------------------------
As Trustee
By
--------------------------------
As Authenticating Agent
By
--------------------------------
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(1) fifteen days after each Regular Record Date, a list, in
such form as the Trustee may reasonably require, of the names and
addresses of the Holders of Securities of each series as of such
Regular Record Date, and
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list in similar form and content as of a date not more than 15 days
prior to the time such list is furnished; excluding from any such list
names and addresses received by the Trustee in its capacity as Security
Registrar.
Section 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
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The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
sixty days after each May 15 following the date of this Indenture deliver to
Holders a brief report, dated as of such May 15, which complies with the
provisions of such Section 313(a).
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when any Securities are listed on any stock
exchange.
Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
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(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership, unincorporated organization, trust, or other
entity shall be organized and validly existing under the laws of the
United States of America, any State thereof or the District of Columbia
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of and any
premium and interest on all the Securities and the performance or
observance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
any Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing;
(3) if, as a result of any such consolidation or merger or
such conveyance, transfer or lease, properties or assets of the Company
would become subject to a mortgage, pledge, lien, security interest or
other encumbrance which would not be permitted by this Indenture, the
Company or such successor Person, as the case may be, shall take such
steps as shall be necessary effectively to secure the Securities
equally and ratably with (or prior to) all indebtedness secured
thereby; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
Section 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
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ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of such series); or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change or elimination (A) shall neither (i)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (ii) modify the rights of the Holder of any such Security
with respect to such provision or (B) shall become effective only when
there is no such Security Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series
as permitted by Sections 201 and 301; or
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(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611; or
(9) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this Clause (9) shall not adversely affect the
interests of the Holders of Securities of any series in any material
respect.
Section 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security or any other Security
which would be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to Section 502, or change any Place of
Payment where, or the coin or currency in which, any Security or any
premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, [except as
provided in any Conditional Notice given with respect thereto,] on or
after the Redemption Date), or reduce the percentage in principal
amount of the Outstanding Securities of any series, the consent of
whose Holders is required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1008, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in
the references to "the
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Trustee" and concomitant changes in this Section and Section 1008, or
the deletion of this proviso, in accordance with the requirements of
Sections 611 and 901(8).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental-indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed
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by the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
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Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each business day and of general circulation in the Borough of
Manhattan, The City of New York, New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
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grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business and not disadvantageous in any material respect
to the Holders.
Section 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or upon the income,
profits or property of the Company, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (i) whose amount, applicability or validity is being
contested in good faith by appropriate proceedings or (ii) if the failure to pay
such tax, assessment, charge or claim is not likely to have a material adverse
effect on the financial condition of the Company and its consolidated
Subsidiaries, taken as a whole.
Section 1008. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(19),
901(2) or 901(7) for the benefit of the Holders of such series or in any of
Sections 1006 through 1007 if before the time for such compliance the Holders of
at least a majority in principal
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amount of the Outstanding Securities of such series shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.
Section 1009. Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities as
of the end of such year.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution or in another manner specified as contemplated by Section
301 for such Securities. In case of any redemption at the election of the
Company the Company shall, at least 45 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities (a) prior
to the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, or (b) pursuant to an election
of the Company which is subject to a condition specified in the terms of such
Securities or elsewhere in this Indenture, the Company shall furnish the Trustee
with an Officers' Certificate evidencing compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not
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previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of a
portion of the principal amount of any Security of such series, provided that
the unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
and of a specified tenor consisting of more than a single Security are
to be redeemed, the identification (and, in the case of partial
redemption of any such Securities, the principal amounts) of the
particular Securities to be redeemed and, if less than all the
Outstanding Securities of any series and
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of a specified tenor consisting of a single Security are to be
redeemed, the principal amount of the particular Security to be
redeemed,
(4) that on the Redemption Date [, except as otherwise
provided in any Conditional Notice (as defined below),] the Redemption
Price will become due and payable upon each such Security to be
redeemed and, if applicable, that interest thereon will cease to accrue
on and after said date,
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the
case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Each notice of redemption (except with respect to any mandatory sinking
fund payment, as defined in Section 1201) may include a statement that such
redemption shall be conditional upon the receipt by the Trustee on or prior to
the Redemption Date of amounts sufficient to pay principal of, and premium, if
any, and interest on, the Securities to be redeemed, and that if such amounts
shall not have been so received, said notice shall be of no force and effect,
the Securities to be redeemed will not become due and payable, and the Company
shall not be required to redeem such Securities (a "Conditional Notice"). In the
event that a Conditional Notice is given and sufficient amounts as referred to
in the Conditional Notice are not so received, the redemption shall not be made
and the Trustee shall, within a reasonable time thereafter, give notice, to the
persons and in the manner in which the notice of redemption was given, that such
amounts were not received and the redemption was not effected.
Section 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, [and, in the event
that a Conditional Notice was given, money for the payment of the Redemption
Price having been deposited as provided in Section 1105,] the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
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Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest and the holders thereof
will have no rights in respect to the Securities so to be redeemed except to
receive payment of the Redemption Price thereof, without interest accrued on any
funds held after the Redemption Date to pay such Redemption Price. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest to the Redemption Date; provided, however, that, unless
otherwise specified as contemplated by Section 301, installments of interest
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any Securities, the cash amount of any
sinking fund payment may be subject to reduction as provided in Section 1202.
Each sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
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Section 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited shall be
received and credited for such purpose by the Trustee at the Redemption Price,
as specified in the Securities so to be redeemed, for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and stating the basis for such credit and that such Securities have
not been previously so credited and will also deliver to the Trustee any
Securities to be so delivered. Not less than 30 days prior to each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section 1302
or Section 1303 applied to any Securities or any series of Securities, as the
case may be, designated pursuant to Section 301 as being defeasible pursuant to
such Section 1302 or 1303, in accordance with any applicable requirements
provided pursuant to Section 301 and upon compliance with the conditions set
forth below in this Article. Any such election shall be evidenced by a Board
Resolution or in another manner specified as contemplated by Section 301 for
such Securities.
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Section 1302. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company shall be deemed to have been discharged from its obligations, and the
provisions of Article Fourteen shall cease to be effective, with respect to such
Securities as provided in this Section on and after the date the conditions set
forth in Section 1304 are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), subject to
the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of such Securities to receive, solely from
the trust fund described in Section 1304 and as more fully set forth in such
Section, payments in respect of the principal of and any premium and interest on
such Securities when payments are due, (2) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002 and 1003 and with
respect to the Trustee under Section 607, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (4) this Article. Subject to
compliance with this Article, the Company may exercise its option (if any) to
have this Section applied to any Securities notwithstanding the prior exercise
of its option (if any) to have Section 1303 applied to such Securities.
Section 1303. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, (1)
the Company shall be released from its obligations under Section 801(3),
Sections 1006 through 1007, inclusive, and any covenants provided pursuant to
Section 301(19), 901(2), 901(6) or 901(7) for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in Sections 501(4)
(with respect to any of Section 801(3), Sections 1006 through 1007, inclusive,
and any such covenants provided pursuant to Section 301(19), 901(2), 901(6) or
901(7)), and 501(7) shall be deemed not to be or result in an Event of Default
and the provisions of Article Fourteen shall cease to be effective, in each case
with respect to such Securities as provided in this Section on and after the
date the conditions set forth in Section 1304 are satisfied (hereinafter called
"Covenant Defeasance"). For this purpose, such Covenant Defeasance means that,
with respect to such Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section (to the extent so specified in the case of Section
501(4)) or Article Fourteen, whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article to any other provision herein or in any
other document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
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Section 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
1302 or Section 1303 to any Securities or any series of Securities, as the case
may be:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such Securities,
(A) money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and
discharge, the principal of and any premium and interest on such
Securities on the respective Stated Maturities or on any Redemption
Date established pursuant to clause (9) below, in accordance with the
terms of this Indenture and such Securities. As used herein, "U.S.
Government Obligation" means (x) any security which is (i) a direct
obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (y) any depositary receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with
respect to any U.S. Government Obligation which is specified in Clause
(x) above and held by such bank for the account of the holder of such
depositary receipt, or with respect to any specific payment of
principal of or interest on any U.S. Government Obligation which is so
specified and held, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal or interest evidenced by such
depositary receipt.
(2) In the event of an election to have Section 1302 apply to
any Securities or any series of Securities, as the case may be, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
date of this instrument, there has been a change in the applicable
Federal income tax law, in either case (A) or (B) to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Securities will not recognize gain or loss for Federal income tax
purposes as a result of the deposit, Defeasance and discharge to be
effected with respect to such Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the same times
as would be the case if such deposit, Defeasance and discharge were not
to occur.
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(3) In the event of an election to have Section 1303 apply to
any Securities or any series of Securities, as the case may be, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of such Securities will not recognize gain
or loss for Federal income tax purposes as a result of the deposit and
Covenant Defeasance to be effected with respect to such Securities and
will be subject to Federal income tax on the same amount, in the same
manner and at the same times as would be the case if such deposit and
Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that neither such Securities nor
any other Securities of the same series, if then listed on any
securities exchange, will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such Securities
or any other Securities shall have occurred and be continuing at the
time of such deposit or, with regard to any such event specified in
Sections 501(5) and (6), at any time on or prior to the 90th day after
the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause
the Trustee to have a conflicting interest within the meaning of the
Trust Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) Such Defeasance or Covenant Defeasance shall not result
in the trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act unless such
trust shall be registered under such Act or exempt from registration
thereunder.
(9) If the Securities are to be redeemed prior to Stated
Maturity (other than from mandatory sinking fund payments or analogous
payments), notice of such redemption shall have been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee shall have been made.
(10) At the time of such deposit, (A) no default in the
payment of any principal of or premium or interest on any Senior Debt
shall have occurred and be continuing, (B) no event of default with
respect to any Senior Debt shall have resulted in such Senior Debt
becoming, and continuing to be, due and payable prior to the date on
which it would otherwise have become due and payable (unless payment of
such Senior Debt has been made or duly provided for), and (C) no other
event of default with respect to any Senior Debt shall
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have occurred and be continuing permitting (after notice or lapse of
time or both) the holders of such Senior Debt (or a trustee on behalf
of such holders) to declare such Senior Debt due and payable prior to
the date on which it would otherwise have become due and payable.
(11) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
Section 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee pursuant to Section 1304 in respect of any Securities shall be
held in trust and applied by the Trustee, in accordance with the provisions of
such Securities and this Indenture, to the payment, either directly or through
any such Paying Agent (including the Company acting as its own Paying Agent) as
the Trustee may determine, to the Holders of such Securities, of all sums due
and to become due thereon in respect of principal and any premium and interest,
but money so held in trust need not be segregated from other funds except to the
extent required by law.
Money and U.S. Government Obligations so held in trust shall not be
subject to the provisions of Article Fourteen.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.
Section 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit
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had occurred pursuant to this Article with respect to such Securities, until
such time as the Trustee or Paying Agent is permitted to apply all money held in
trust pursuant to Section 1305 with respect to such Securities in accordance
with this Article; provided, however, that at any such time or during the
continuance of any such event, the Company may request the return of all money
or securities deposited hereunder with respect to such Securities and the
Trustee will return to the Company all such money and securities.
ARTICLE FOURTEEN
Subordination of Securities
Section 1401. Securities Subordinate to Senior Indebtedness.
Unless otherwise provided in a supplemental indenture or pursuant to
Section 301, the Company covenants and agrees, and each Holder of Securities
issued hereunder by his acceptance thereof likewise covenants and agrees, that
all Securities shall be issued subject to the provisions of this Article
Fourteen; and each Holder of a Security, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
The payment of all Obligations on all Securities issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinate and
junior in right of payment to the prior payment in full of all Obligations on
Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred.
No provision of this Article Fourteen shall prevent the occurrence of
any default or Event of Default hereunder.
Section 1402. Suspension of Payment When Senior Indebtedness in Default.
(a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by acceleration or
otherwise, of any principal, premium or interest on any Senior
Indebtedness, no payment of any kind or character shall be made by or
on behalf of the Company or any other Person on its behalf with respect
to any Obligations on the Securities or to acquire any of the
Securities for cash or property or otherwise.
(b) In addition, if any other event of default occurs and is
continuing with respect to any Senior Indebtedness, other than
Designated Senior Indebtedness, as such event of default is defined in
the instrument creating or evidencing such Senior Indebtedness,
permitting the holders of such Senior Indebtedness then outstanding to
immediately accelerate the maturity thereof and if a representative for
such issue of Senior Indebtedness gives written notice of the event of
default to the Trustee (a "Default Notice"), then unless and until all
events of default with respect to such Senior Indebtedness have been
cured, or
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waived in writing or have ceased to exist or the Trustee receives
notice from such representative for the respective issue of Senior
Indebtedness terminating the Blockage Period (as defined below), during
the 179 days after the delivery of such Default Notice (the "Blockage
Period"), neither the Company nor any other Person on its behalf shall
(x) make any payment of any kind or character with respect to any
Obligations on the Securities or (y) acquire any of the Securities for
cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 179 days
from the date the payment on the Securities was due and only one such
Blockage Period may be commenced within any 365 consecutive days,
irrespective of the number of defaults with respect to Senior
Indebtedness during such period. In no event may the total number of
days during which any Blockage Period is or Blockage Periods are in
effect exceed 179 days in the aggregate during any consecutive 365 day
period. No event of default which existed or was continuing on the date
of the commencement of any Blockage Period with respect to the Senior
Indebtedness shall be, or be made, the basis for commencement of a
second Blockage Period by a representative of such Senior Indebtedness
unless such event of default shall have been cured or waived for a
period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a
period commencing after the date of commencement of such Blockage
Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously
existed or was continuing shall constitute a new event of default for
this purpose.)
(c) In addition, if any event of default (as defined in the
instrument creating or evidencing any Designated Senior Indebtedness)
occurs and is continuing with respect to any Designated Senior
Indebtedness or an executive officer of the Company has actual
knowledge of a default under any Designated Senior Indebtedness, which
with notice or lapse of time or both would result in an event of
default under such Designated Senior Indebtedness, then the Company
shall give notice thereof to the Trustee and, regardless of the giving
of such notice, no payment of any kind or character shall be made by or
on behalf of the Company or any other Person on its behalf with respect
to any Obligations on the Securities or to acquire any of the
Securities for cash or property or otherwise for a period of 179 days
from the date of each such event of default on the date that an
executive officer obtains actual knowledge that there is such a default
(a "Designated Senior Indebtedness Blockage Period"), unless and until
all such events of defaults or defaults with respect to such Designated
Senior Indebtedness have been cured or waived in writing pursuant to
the Designated Senior Indebtedness or have ceased to exist or the
Trustee receives notice from a representative for the applicable issue
of Designated Senior Indebtedness terminating the Designated Senior
Indebtedness Blockage Period. Immediately upon receipt of a notice of
default from a representative of any Designated Senior Indebtedness by
the Company, the Company shall give notice thereof to the Trustee, but
the failure of the Company to give such notice shall not affect the
rights of the Designated Senior Indebtedness hereunder.
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(d) The Company further agrees, for the benefit of the holders
of Designated Senior Indebtedness, that in the event any Security is
declared due and payable under Section 502 hereof before its expressed
maturity, (i) the Company will give prompt notice in writing of such
happening to the holders of Designated Senior Indebtedness and (ii) no
payment of any kind or character shall be made by or on behalf of the
Company or any other Person on its behalf with respect to any
Obligations on the Securities or to acquire any of the Securities for
cash or property or otherwise without the consent of the Designated
Senior Indebtedness.
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc.
(a) Upon any payment by the Company, or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding-up,
assignment for the benefit of creditors or marshaling of assets of the
Company or in bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to the Company or its property,
whether voluntary or involuntary, all Obligations due or to become due
upon all Senior Indebtedness shall first be paid in full, or payment
thereof duly provided for to the satisfaction of holders of Senior
Indebtedness, before any payment or distribution of any kind or
character is made on account of any Obligations on the Securities, or
for the acquisition of any of the Securities for cash, or property, or
otherwise. Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any payment by the
Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the
Holders of the Securities or the Trustee for the benefit of such
Holders would be entitled, except for the provisions of this Article
Fourteen, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holders of the Securities or by the
Trustee under this Indenture if received by them or it, directly to the
holders of Senior Indebtedness (pro rata to such holders on the basis
of the respective amounts of Senior Indebtedness held by such holders)
or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear to the extent necessary to pay all
Senior Indebtedness in full, in money or money's worth, after giving
effect to any concurrent payment or distribution or provision therefor
to or for the holders of Senior Indebtedness, before any payment or
distribution is made to the Holders of Securities or to the Trustee for
the benefit of such Holders.
(b) To the extent any payment of Senior Indebtedness (whether
by or on behalf of the Company, as proceeds of security or enforcement
of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then, if such payment is recovered by, or paid over to,
such receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person, the Senior Indebtedness or part thereof
originally
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intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
For purposes of this Article Fourteen, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Fourteen with
respect to the Securities to the payment of all Senior Indebtedness which may at
the time be outstanding; provided that (i) the Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of the Senior Indebtedness are
not, without the consent pursuant to such Senior Indebtedness, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance, transfer or lease of its
property as an entirety, or substantially as an entirety, to another corporation
upon the terms and conditions provided for in Article Eight hereof shall not be
deemed a dissolution, winding-up, or liquidation for the proposes of this
Section 1403 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Eight hereof.
Section 1404. Monies Held in Trust.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Holders of the Securities or by the Trustee on behalf of such Holders in
violation of this Article Fourteen, such payment or distribution shall be held
in trust for the benefit of and shall be paid over or delivered to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid in full in money or monies worth in
accordance with its terms, after giving effect to any concurrent payment or
distribution or provision therefor to or for the holders of such Senior
Indebtedness.
Section 1405. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
Obligations on the Securities shall be paid in full; and, for the purposes of
such subrogation, no payment or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article Fourteen, and no payment over pursuant to the provisions of this Article
Fourteen, to or for the benefit of the holders of Senior Indebtedness by Holders
of the Securities or the Trustee,
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shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness. It is understood that
the provisions of this Article Fourteen are and are intended solely for the
purposes of defining the relative rights of the Holders of the Securities, on
the one hand, and the holders of the Senior Indebtedness on the other hand.
Section 1406. Unconditional Obligation.
Nothing contained in this Article Fourteen or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company and the Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Securities
and creditors of the Company other than the holders of the Senior Indebtedness,
nor shall anything herein or therein prevent the Trustee or the Holder of any
Security from taking any action to accelerate the maturity of Securities
pursuant to Section 502 or from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Fourteen of the holders of Senior Indebtedness in respect of
cash, property or securities of the Company received upon the exercise of any
such remedy.
Section 1407. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee in his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Fourteen
and appoints the Trustee his attorney-in-fact for any and all such purposes.
Section 1408. Notice to Trustee.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company which would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Fourteen; provided, however, that
except as provided in Section 1402(c) hereof, nothing herein shall require the
Company to give any notice of a default on any of the Senior Indebtedness other
than a payment default, and the Company shall not be deemed a representative of
the Senior Indebtedness for purposes of instituting a Blockage Period.
Notwithstanding the provisions of this Article Fourteen or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities pursuant to the provisions of
this Article Fourteen, unless and until a Responsible Officer of the Trustee
shall have received written notice thereof at the Corporate Trust Office of the
Trustee from the Company or a holder or holders of Senior Indebtedness or their
representative or representatives or from any trustee or trustees therefor; and
before the receipt of
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any such written notice, the Trustee, subject to the provisions of Article Six,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 1408 prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (or premium, if any) or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purposes for which they were received.
The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Indebtedness, if any, received from the holders
of Senior Indebtedness (or their representatives) or, if such information is not
received from such holders or their representatives, from the Company and only
amounts included in the information provided to the Trustee shall be paid to the
holders of Senior Indebtedness.
The Trustee, subject to the provisions of Article Six, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a representative
or trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Indebtedness or a representative or trustee on
behalf of any such holder or holders. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article Fourteen, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Fourteen, and if
such evidence is not furnished the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Upon any payment or distribution of assets of the Company referred to
in this Article Fourteen, the Trustee, subject to the provision of Article Six,
and the Holders of the Securities shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Fourteen.
Section 1409. Rights of Trustee as Holder of Senior Indebtedness; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Fourteen in respect of any Senior Indebtedness
at any time held by it, to the same extent as any other
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holder of Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder.
Nothing in this Article Fourteen shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 607.
Section 1410. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and, subject to the provisions of Article Six,
the Trustee shall not be liable to any holder of Senior Indebtedness if it shall
in good faith mistakenly pay over or deliver to Holders of Securities, the
Company or any other person money or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article Fourteen or otherwise.
Section 1411. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
Each Holder by purchasing or accepting a Security waives any and all
notice of the creation, modification, renewal, extension or accrual of any
Senior Indebtedness and notice of or proof of reliance by any holder or owner of
Senior Indebtedness upon this Article Fourteen and Senior Indebtedness shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Article Fourteen, and all dealings between the Company and the holders
and owners of Senior Indebtedness shall be deemed to have been consummated in
reliance upon this Article Fourteen.
70
<PAGE>
Section 1412. Defeasance of this Article Fourteen.
The subordination of the Securities provided by this Article Fourteen
shall apply only to Securities that are Outstanding under this Indenture and is
expressly made subject to the provisions for Defeasance or Covenant Defeasance
in Article Thirteen hereof and the provisions for satisfaction and discharge of
this Indenture in Article Four hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such Defeasance or Covenant
Defeasance or any such satisfaction and discharge, the Securities then
Outstanding shall thereupon cease to be subordinated pursuant to this Article
Fourteen.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
UGLY DUCKLING CORPORATION
By: /s/ Steven P. Johnson
----------------------------------------
Steven P. Johnson
----------------------------------------
Sr. Vice President and Secretary
----------------------------------------
Attest:
/s/ Judith A. Boyle
- ---------------------------
HARRIS TRUST AND SAVINGS BANK, as Trustee
By: /s/ Robert D. Foltz
----------------------------------------
Robert D. Foltz
----------------------------------------
Vice President
----------------------------------------
Attest:
/s/ Megan M. Francis
- ---------------------------
Megan M. Francis
Assistant Secretary
71
<PAGE>
State of Arizona )
) ss.:
County of Maricopa )
On the 22 day of October, 1998 before me personally came Steven P.
Johnson, to me known, who, being by me duly sworn, did depose and say that he is
Senior Vice President of Ugly Duckling Corporation, one of the corporations
described in and which executed the foregoing instrument.
/s/ Peggy Sue Hurst
-------------------------------------
State of Illinois )
) ss.:
County of Cook )
On the 23 day of October, 1998, before me personally came R. Foltz, to
me known, who, being by me duly sworn, did depose and say that he is Vice
President of Harris Trust and Savings Bank, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ Maricela Marquez
-------------------------------------
72
<PAGE>
Exhibit T3C.2
UGLY DUCKLING CORPORATION
TO
HARRIS TRUST AND SAVINGS BANK
Trustee
First Supplemental Indenture
Dated as of October 15, 1998
To
Indenture
Dated as of October 15, 1998
12% Subordinated Debentures due 2003
FIRST SUPPLEMENTAL INDENTURE, dated as of October 15, 1998,
between Ugly Duckling Corporation, a corporation duly organized and existing
under the laws of the State of Arizona (herein called the "Company"), having its
principal office at 2525 East Camelback Road, Suite 1150, Phoenix, Arizona
85016, and Harris Trust and Savings Bank, an Illinois banking corporation, as
Trustee (herein called the "Trustee") under the Indenture dated as of October
15, 1998 between the Company and the Trustee (the "Indenture").
<PAGE>
Recitals of the Company
The Company has executed and delivered the Indenture to the
Trustee to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (the "Securities"), said
Securities to be issued in one or more series as in the Indenture provided.
Pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of its Securities to be known as
its 12% Subordinated Debentures due 2003 (herein called the "Debentures"), the
form and substance of such Debentures and the terms, provisions and conditions
thereof to be set forth as provided in the Indenture and this First Supplemental
Indenture.
All things necessary to make this First Supplemental Indenture
a valid agreement of the Company, and to make the Debentures, when executed by
the Company and authenticated and delivered by the Trustee, the valid
obligations of the Company, have been done.
Now, Therefore, This First Supplemental Indenture Witnesseth:
For and in consideration of the premises and the purchase of
the Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, it is mutually agreed, for the equal
and proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE ONE
General Terms and Conditions of
the Debentures
Section 101. There shall be and is hereby authorized a series
of Securities designated the "12% Subordinated Debentures due 2003", limited in
aggregate principal amount to $32,500,000, which amount shall be as set forth in
any written order of the Company for the authentication and delivery of
Debentures. The Debentures shall mature and the principal shall be due and
payable together with all accrued and unpaid interest thereon on the fifth
anniversary of the date of initial issuance thereof and shall be issued in the
form of registered Debentures without coupons in denominations of $1.00 and any
integral multiple thereof.
Section 102. Except as provided in Section 103 herein, the
Debentures shall be issued in certificated form. Principal and interest on the
Debentures issued in certificated form will be payable, the transfer of such
Debentures will be registrable and such Debentures will be exchangeable for the
Debentures bearing identical terms and provisions at the Corporate Trust Office
of the Trustee from time to time, which is initially in Chicago, Illinois;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the registered holder at such address as shall appear
in the Security Register.
2
<PAGE>
Section 103. Each Note will bear interest at the rate of 12%
per annum from the original date of issuance until the principal thereof becomes
due and payable, and on any overdue principal, payable semiannually on April 15
and October 15 of each calendar year (each, an "Interest Payment Date"),
commencing on April 15, 1999, to the person in whose name such Note or any
predecessor Note is registered, at the close of business on each April 1 and
October 1 next preceding such Interest Payment Date. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be
payable to the registered holders on such Regular Record Date, and may be paid
to the person in whose name the Note (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered holders of the Debentures not less than 10 days prior to
such Special Record Date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Interest will accrue
from the date of original issuance to, but not including, the relevant payment
date. In the event that any date on which interest is payable on the Debentures
is not a Business Day, then payment of interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), in each case with the
same force and effect as if made on such date.
Section 104. The Debentures shall be defeasible pursuant to
Section 1302 and Section 1303 of the Indenture.
ARTICLE TWO
Redemption of the Debentures
Section 201. The Debentures will be redeemable at any time and
from time to time prior to maturity at the option of the Company, as a whole or
in part, upon not less than 30 nor more than 60 days' notice, at the principal
amount to be redeemed, together with accrued interest to the date fixed for
redemption.
ARTICLE THREE
Additional Covenants
Section 301. Definitions. For purposes of this Article Three,
except as otherwise expressly provided or unless the context otherwise requires:
"CONSOLIDATED LEVERAGE RATIO" as of any date of determination
means the ratio of (i) the total liabilities of the Company and its
consolidated Subsidiaries, as determined in accordance with GAAP,
excluding Junior Subordinated Obligations, to (ii) the Consolidated Net
Worth of the Company.
3
<PAGE>
"CONSOLIDATED NET WORTH" as of any date of determination means
the consolidated stockholders' equity of the Company and its
consolidated Subsidiaries, as determined in accordance with GAAP, plus
all Junior Subordinated Obligations of the Company and its consolidated
Subsidiaries.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
"JUNIOR SUBORDINATED OBLIGATION" means any indebtedness of the
Company or its Subsidiaries that by its terms is expressly subordinated
in right of payment to the Debentures.
Section 302. Minimum Equity. The Company shall, at all times
while any of the Debentures remain Outstanding, maintain Consolidated Net Worth
of at least $100,000,000.
Section 303. Consolidated Leverage Ratio. The Company will not
allow its Consolidated Leverage Ratio to exceed 6.0 to 1.0.
ARTICLE FOUR
Form of Debentures
Section 401. The Debentures and the Trustee's certificate of
authentication to be endorsed thereon are to be substantially in the following
form:
[INSERT OID LEGEND]
UGLY DUCKLING CORPORATION
No. _____________ $______________
CUSIP NO. __________________ Date of Original Issuance: October __, 1998
Ugly Duckling Corporation, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ______________ or registered assigns, the
principal sum of ___________ Dollars on the date that is five (5) years from the
date of original issuance set forth above, and to pay interest thereon from the
original date of issuance or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on April 15 and
October 15 in each year, commencing April 15, 1999, at the rate of 12% per
annum, until the principal hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
4
<PAGE>
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the April 1 or October 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such interest
on this Security will be made at the office or agency of the Company maintained
for that purpose in Chicago, Illinois, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed.
UGLY DUCKLING CORPORATION
By_______________________________________
Attest:
- ----------------------
5
<PAGE>
Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of October 15, 1998 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Harris Bank and Trust Company, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $32,500,000.
The Securities of this series are subject to redemption upon not less
than 30 days' notice by mail, at any time, as a whole or in part, at the
election of the Company, at a Redemption Price equal to 100% of the principal
amount, together with accrued interest to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof for such interest installments, all as provided
in the Indenture. The Indenture provides that a notice of redemption may be
given that is conditional upon the receipt by the Trustee on or prior to the
Redemption Date of amounts sufficient to pay principal of, and premium, if any,
and interest on, the Securities to be redeemed, and that if such amounts shall
not have been so received, said notice shall be of no force and effect, the
Securities to be redeemed will not become due and payable on the Redemption
Date, and the Company will not be required to redeem such Securities on such
date.
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Securities of this series are subordinate in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior Indebtedness of the Company. To the extent and in the manner
provided in the Indenture, Senior Indebtedness must be paid before any payment
may be made to any Holder of this Security. Any Holder by accepting this
Security agrees to the subordination and authorizes the Trustee to give it
effect.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
6
<PAGE>
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee without
the consent of any Holders in certain limited cases, and with the consent of the
Holders of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected subject to certain exceptions. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon the Holder of this Security and upon
all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
7
<PAGE>
The Securities of this series are issuable only in registered form
without coupons in denominations of $1.00 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE FIVE
Original Issue of Debentures
Section 501. Debentures in the aggregate principal amount of
$32,500,000, may, upon execution of this First Supplemental Indenture, or from
time to time thereafter, be executed by the Company and delivered to the Trustee
for authentication, and the Trustee shall thereupon authenticate and deliver
said Debentures to or upon the written order of the Company, signed by its
Chairman, its President, or any Vice President and its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, without any further action
by the Company.
ARTICLE SIX
Application of Article Fourteen
Section 6.01. The Debentures will be subject to the
subordination provisions of Article Fourteen of the Indenture. Notwithstanding
the definition of Senior Indebtedness in the Indenture, for purposes of the
Debentures, Senior Indebtedness will include the Company's 10% Subordinated
Debenture dated June 21, 1996 payable to Verde Investments, Inc.
8
<PAGE>
ARTICLE SEVEN
Paying Agent and Registrar
Section 701. The Trustee will be the Paying Agent, transfer
agent, and Registrar for the Debentures.
ARTICLE EIGHT
Interest and Original Issue Discount Reporting, Backup Withholding
Section 801. On or before January 31 following each calendar
year with respect to which there are Outstanding Debentures or such other due
date prescribed therefor, as advised to the Trustee by the Company, the Trustee
will prepare and mail to each Holder of Outstanding Debentures at any time
during the preceding calendar year Forms 1099-INT and 1099-OID or such other
forms prescribed therefor by the Internal Revenue Service, as advised to the
Trustee by the Company, containing such information as instructed by the
Company, including the information contained in Section 1009 of the Indenture,
together with any letter prepared by the Company explaining tax issues relating
thereto to the extent not otherwise prohibited by law. Further, on or before
February 28 following each calendar year with respect to which there are
Outstanding Debentures or such other due date prescribed therefor, as advised to
the Trustee by the Company, the Trustee will prepare and file with the Internal
Revenue Service or any other relevant taxing authority, as advised to the
Trustee by the Company, by magnetic tape or other required transmission source,
as advised to the Trustee by the Company, containing the aforementioned
information furnished by the Company.
Section 802. During each calendar year with respect to which
there are Outstanding Debentures, the Trustee will satisfy all applicable
backup withholding rules in connection with payments made or deemed made with
respect to the Debentures including, without limitation, payments of interest,
accruals of original issue discount, and payments associated with redemptions
and other dispositions of Debentures.
ARTICLE NINE
Sundry Provisions
Section 901. Except as otherwise expressly provided in this
First Supplemental Indenture or in the form of Debentures or otherwise clearly
required by the context hereof or thereof, all terms used herein or in said form
of Debentures that are defined in the Indenture shall have the several meanings
respectively assigned to them thereby.
Section 902. The Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed, and this
First Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused this First
Supplemental Indenture to be duly executed all as of the day and year first
above written.
UGLY DUCKLING CORPORATION
By /s/ Steven P. Johnson
---------------------------
Steven P. Johnson
Senior Vice President and
Secretary
Attest:
/s/ Judith A. Boyle
- ----------------------------
9
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
As Trustee
By: /s/ Robert D. Foltz
-------------------------
Robert D. Foltz
Vice President
(seal)
Attest: /s/ Megan M. Francis
--------------------
Megan M. Francis
Assistant Secretary
10
<PAGE>
State of Arizona )
) ss.:
County of Maricopa )
On the 22 day of October, 1998, before me personally came
Steven P. Johnson, to me known, who being by me duly sworn, did depose and say
that she/he is the Senior Vice President of Ugly Duckling Corporation, one of
the corporations described in and which executed the foregoing instrument; and
that she/he signed her/his name thereto by the authority of the Board of
Directors of said Corporation.
--------------------------------------
Official Seal
Peggy Sue Hurst
State of Illinois )
) ss.:
County of Cook )
On the 23 day of October, 1998, before me personally came R.
Foltz, to me known, who being by me duly sworn, did depose and say that she/he
is the Vice President of Harris Trust and Savings Bank, one of the corporations
described in and which executed the foregoing instrument; that she/he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that she/he signed her/his name thereto by like authority.
/s/ Maricela Marquez
--------------------------------------
Official Seal
(seal)
11
<PAGE>
Exhibit T3C.3
UGLY DUCKLING CORPORATION
TO
HARRIS TRUST AND SAVINGS BANK
Trustee
Second Supplemental Indenture
Dated as of __________ __, 2000
To
Indenture
Dated as of October 15, 1998
11% Subordinated Debentures due 2007
SECOND SUPPLEMENTAL INDENTURE, dated as of __________ __, 2000, between
Ugly Duckling Corporation, a corporation duly organized and existing under the
laws of the State of Arizona (herein called the "Company"), having its principal
office at 2525 East Camelback Road, Suite 500, Phoenix, Arizona 85016, and
Harris Trust and Savings Bank, an Illinois banking corporation, as Trustee
(herein called the "Trustee") under the Indenture dated as of October 15, 1998
between the Company and the Trustee (as amended from time to time, the
"Indenture").
<PAGE>
Recitals of the Company
The Company has executed and delivered the Indenture to the Trustee to
provide for the issuance from time to time of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities"), said Securities to be issued
in one or more series as in the Indenture provided.
Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of a new series of its Securities to be known as its 11%
Subordinated Debentures due 2007 (herein called the "Debentures"), the form and
substance of such Debentures and the terms, provisions and conditions thereof to
be set forth as provided in the Indenture and this Second Supplemental
Indenture.
All things necessary to make this Second Supplemental Indenture a valid
agreement of the Company, and to make the Debentures, when executed by the
Company and authenticated and delivered by the Trustee, the valid obligations of
the Company, have been done.
Now, Therefore, This Second Supplemental Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, it is mutually agreed, for the equal
and proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE One
General Terms and Conditions of the Debentures
Section 101. There shall be and is hereby authorized a series of Securities
designated the "11% Subordinated Debentures due 2007", limited in aggregate
principal amount to $27,500,000, which amount shall be as set forth in any
written order of the Company for the authentication and delivery of Debentures.
The Debentures shall mature and the principal shall be due and payable together
with all accrued and unpaid interest thereon on April 15, 2007, and shall be
issued in the form of registered Debentures without coupons in denominations of
$1.00 and any integral multiple thereof.
Section 102. Except as provided in Section 103 herein, the Debentures shall be
issued in certificated form. Principal and interest on the Debentures issued in
certificated form will be payable, the transfer of such Debentures will be
registrable and such Debentures will be exchangeable for the Debentures bearing
identical terms and provisions at the Corporate Trust Office of the Trustee from
time to time, which is initially in Chicago, Illinois; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the registered holder at such address as shall appear in the Security Register.
Section 103. Each Debenture will bear interest at the rate of 11% per annum from
the original date of issuance until the principal thereof becomes due and
payable, and on any overdue principal, payable semiannually on April 15 and
2
<PAGE>
October 15 of each calendar year (each, an "Interest Payment Date"), commencing
on April 15, 2000, to the person in whose name such Debenture or any predecessor
Debenture is registered, at the close of business on each April 1 and October 1
next preceding such Interest Payment Date. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
registered holders on such Regular Record Date, and may be paid to the person in
whose name the Debenture (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date to be fixed by the Trustee for
the payment of such defaulted interest, notice whereof shall be given to the
registered holders of the Debentures not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Interest will accrue from the
date of original issuance to, but not including, the relevant payment date. In
the event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), in each case with the same force and
effect as if made on such date.
Section 104. The Debentures shall be defeasible pursuant to Section 1302 and
Section 1303 of the Indenture.
ARTICLE Two
Redemption of the Debentures
Section 201. The Debentures will be redeemable at any time and from time to time
prior to maturity at the option of the Company, as a whole or in part, upon not
less than 30 nor more than 60 days' notice, at the principal amount to be
redeemed, together with accrued interest to the date fixed for redemption.
ARTICLE Three
Additional Covenants
Section 301. Definitions. For purposes of this Article Three, except as
otherwise expressly provided or unless the context otherwise requires:
"Consolidated Net Worth" as of any date of determination means the
consolidated stockholders' equity of the Company and its consolidated
Subsidiaries, as determined in accordance with GAAP, plus all Junior
Subordinated Obligations of the Company and its consolidated Subsidiaries.
3
<PAGE>
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"Junior Subordinated Obligation" means any indebtedness of the Company
or its Subsidiaries that by its terms is expressly subordinated in right of
payment to the Debentures.
Section 302. Minimum Equity. The Company shall, at all times while any of the
Debentures remain Outstanding, maintain Consolidated Net Worth of at least
$100,000,000.
ARTICLE Four
Form of Debentures
Section 401. The Debentures and the Trustee's certificate of authentication to
be endorsed thereon are to be substantially in the following form:
[INSERT OID LEGEND]
UGLY DUCKLING CORPORATION
No. $
-----------------------
CUSIP NO. Date of Original Issuance: __________ __, 2000
--------------------
Ugly Duckling Corporation, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ______________, or registered assigns, the
principal sum of ___________ Dollars on April 15, 2007, and to pay interest
thereon from the original date of issuance or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on April 15 and October 15 in each year, commencing April 15, 2000, at the rate
of 11% per annum, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 1 or October 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
4
<PAGE>
Payment of the principal of (and premium, if any) and any such interest
on this Security will be made at the office or agency of the Company maintained
for that purpose in Chicago, Illinois, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed.
UGLY DUCKLING CORPORATION
By_______________________
Attest:
_______________________
5
<PAGE>
Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of October 15, 1998 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Harris Bank and Trust Company, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $27,500,000.
The Securities of this series are subject to redemption upon not less
than 30 days' notice by mail, at any time, as a whole or in part, at the
election of the Company, at a Redemption Price equal to 100% of the principal
amount, together with accrued interest to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof for such interest installments, all as provided
in the Indenture. The Indenture provides that a notice of redemption may be
given that is conditional upon the receipt by the Trustee on or prior to the
Redemption Date of amounts sufficient to pay principal of, and premium, if any,
and interest on, the Securities to be redeemed, and that if such amounts shall
not have been so received, said notice shall be of no force and effect, the
Securities to be redeemed will not become due and payable on the Redemption
Date, and the Company will not be required to redeem such Securities on such
date.
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Securities of this series are subordinate in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior Indebtedness of the Company. To the extent and in the manner
provided in the Indenture, Senior Indebtedness must be paid before any payment
may be made to any Holder of this Security. Any Holder by accepting this
Security agrees to the subordination and authorizes the Trustee to give it
effect.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
6
<PAGE>
affected under the Indenture at any time by the Company and the Trustee without
the consent of any Holders in certain limited cases, and with the consent of the
Holders of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected subject to certain exceptions. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon the Holder of this Security and upon
all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1.00 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
7
<PAGE>
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE Five
Original Issue of Debentures
Section 501. Debentures in the aggregate principal amount of $27,500,000, may,
upon execution of this Second Supplemental Indenture, or from time to time
thereafter, be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Debentures to or upon the written order of the Company, signed by its Chairman,
its President, or any Vice President and its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, without any further action by the
Company.
ARTICLE Six
Application of Article Fourteen
Section 601. The Debentures will be subject to the subordination provisions of
Article Fourteen of the Indenture. The Debentures will be pari passu with the
12% Subordinated Debentures due 2003 previously issued under the Indenture. The
indebtedness under the Senior Secured Loan Agreement, dated as of May 14, 1999,
as amended from time to time, by and among the Company, the Lenders party
thereto, and the Trustee will be Designated Senior Indebtedness.
ARTICLE Seven
Paying Agent and Registrar
Section 701. The Trustee will be the Paying Agent, transfer agent, and Registrar
for the Debentures.
8
<PAGE>
ARTICLE Eight
Interest and Original Issue Discount Reporting, Backup Withholding
Section 801. On or before January 31 following each calendar year with respect
to which there are Outstanding Debentures or such other due date prescribed
therefor, as advised to the Trustee by the Company, the Trustee will prepare and
mail to each Holder of Outstanding Debentures at any time during the preceding
calendar year Forms 1099-INT and 1099-OID or such other forms prescribed
therefor by the Internal Revenue Service, as advised to the Trustee by the
Company, containing such information as instructed by the Company, including the
information contained in Section 1009 of the Indenture, together with any letter
prepared by the Company explaining tax issues relating thereto to the extent not
otherwise prohibited by law. Further, on or before February 28 following each
calendar year with respect to which there are Outstanding Debentures or such
other due date prescribed therefor, as advised to the Trustee by the Company,
the Trustee will prepare and file with the Internal Revenue Service or any other
relevant taxing authority, as advised to the Trustee by the Company, by magnetic
tape or other required transmission source, as advised to the Trustee by the
Company, containing the aforementioned information furnished by the Company.
Section 802. During each calendar year with respect to which there are
Outstanding Debentures, the Trustee will satisfy all applicable backup
withholding rules in connection with payments made or deemed made with respect
to the Debentures including, without limitation, payments of interest, accruals
of original issue discount, and payments associated with redemptions and other
dispositions of Debentures.
ARTICLE Nine
Sundry Provisions
Section 901. Except as otherwise expressly provided in this Second Supplemental
Indenture or in the form of Debentures or otherwise clearly required by the
context hereof or thereof, all terms used herein or in said form of Debentures
that are defined in the Indenture shall have the several meanings respectively
assigned to them thereby.
Section 902. The Indenture, as previously supplemented and as supplemented by
this Second Supplemental Indenture, is in all respects ratified and confirmed,
and this Second Supplemental Indenture shall be deemed part of the Indenture in
the manner and to the extent herein and therein provided.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
9
<PAGE>
In Witness Whereof, the parties hereto have caused this Second
Supplemental Indenture to be duly executed all as of the day and year first
above written.
UGLY DUCKLING CORPORATION
By
Attest:
HARRIS TRUST AND SAVINGS BANK, As Trustee
By
Attest:
<PAGE>
State of Arizona )
) ss:
County of Maricopa )
On the ____ day of __________ __, 2000, before me personally came
_____________________________, to me known, who being by me duly sworn, did
depose and say that she/he is the ________________ of Ugly Duckling Corporation,
one of the corporations described in and which executed the foregoing
instrument; and that she/he signed her/his name thereto by the authority of the
Board of Directors of said Corporation.
______________________
Notary Public
Official Seal
State of ___________ )
)ss:
County of _________ )
On the ____ day of __________ __, 2000, before me personally came
_____________________________, to me known, who being by me duly sworn, did
depose and say that she/he is the ________________ of Harris Trust and Savings
Bank, one of the corporations described in and which executed the foregoing
instrument; that she/he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation; and that she/he signed
her/his name thereto by like authority.
______________________
Notary Public
Official Seal
<PAGE>
Exhibit T3E.1
Ugly Duckling Corporation
2525 East Camelback Road, Suite 500
Phoenix, Arizona 85016
To the Holders of Our Common Stock:
Enclosed are materials relating to our offer to exchange up to
$27,500,000 aggregate principal amount of our 11% Subordinated Debentures due
2007 (the "Debentures") for up to 2,500,000 shares of our common stock, par
value $.001 per share ("Common Stock"), as described in the enclosed Offering
Circular dated February 22, 2000 (the "Exchange Offer").
This exchange would be made on the following basis:
- --------------------------------------------------------------------------------
$11.00 PRINCIPAL AMOUNT OF DEBENTURES
FOR EACH SHARE OF COMMON STOCK
- --------------------------------------------------------------------------------
Interest on the Debentures will accrue from their date of issuance, and
will be payable in cash semiannually on each April 15 and October 15, commencing
April 15, 2000, until the Debentures are paid in full.
The principal purpose of the Exchange Offer is to reduce the number of
shares of Common Stock outstanding, thereby offering the potential for increased
earnings per share in the future. To effect this reduction, the Company is
offering to purchase outstanding shares of its Common Stock at a purchase price
paid in Debentures of $11.00 per share, representing a premium of approximately
38% above its market price as reported on the Nasdaq National Market on February
14, 2000. The Company does not believe the current market price adequately
reflects the underlying value of its Common Stock, all as more fully described
in the enclosed materials. Among other conditions, the Exchange Offer is
contingent upon the valid tender of at least 500,000 shares of Common Stock.
Ernest C. Garcia II, the chairman and principal stockholder of the Company, has
advised the Company that he will tender shares of Common Stock in the Exchange
Offer.
PLEASE READ THE ENCLOSED MATERIALS CAREFULLY.
For further assistance or additional copies of any of the enclosed
materials, please call Corporate Investor Communications, Inc. at 1-877-977-6192
(toll free).
Very truly yours,
GREGORY B. SULLIVAN
President and Chief Executive Officer
Ugly Duckling Corporation
February 22, 2000
Phoenix, Arizona
<PAGE>
Ugly Duckling Corporation
Offer to Exchange
up to $27,500,000 aggregate principal amount of its
11% Subordinated Debentures due 2007
for up to 2,500,000 shares of its
Common Stock
Ugly Duckling Corporation, a Delaware corporation ("Ugly Duckling" or
the "Company"), hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), up to $27,500,000 aggregate principal
amount of its 11% Subordinated Debentures due 2007 (the "Debentures") for up to
2,500,000 shares ("Shares") of its common stock, $.001 par value per share
("Common Stock") on the basis of $11.00 principal amount of Debentures for each
share of Common Stock.
On February 14, 2000, the closing price of the Common Stock as reported
on Nasdaq's National Market System ("Nasdaq") was $8.00. For a further
description of the Common Stock, see "Description of Capital Stock." The Company
has applied for listing of the Debentures on the American Stock Exchange. There
can be no assurance that Ugly Duckling will be able to effect the listing or
that any public market will develop for the Debentures.
See "Risk Factors-- Possible Lack of Trading Market for the Debentures."
The Debentures will be unsecured obligations of the Company
subordinated and subject in right of payment to all existing and future senior
indebtedness of the Company. As of December 31, 1999, the Company's outstanding
senior indebtedness aggregated approximately $94 million (not including on
balance sheet indebtedness related to the Company's securitizations). The
Debentures will bear interest at 11% per annum from their date of issuance,
payable semiannually on each April 15 and October 15, commencing April 15, 2000,
until the Debentures are paid in full. The Company will be required to repay the
principal amount of the Debentures on April 15, 2007. The Debentures will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, at the principal amount to be redeemed plus accrued and unpaid interest
thereon to the redemption date. The Debentures will be issued pursuant to an
Indenture between the Company and Harris Trust and Savings Bank, as Trustee. The
Company will be subject to certain limited financial covenants as more fully
described in the Indenture. See "Description of the Debentures."
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON TUESDAY,
MARCH 21, 2000, UNLESS EXTENDED.
The Company will accept up to 2,500,000 Shares if tendered
(representing approximately 17% of the Shares outstanding as of February 14,
2000). If more than 2,500,000 shares of Common Stock are tendered, the Company
will accept no more than 2,500,000 of the tendered Shares, to be allocated among
tendering stockholders on a pro rata basis. The Exchange Offer is contingent
upon the tender of at least 500,000 Shares of Common Stock. If less than 500,000
Shares of Common Stock are tendered, the Company will accept none of the Shares
tendered. The Exchange Offer is subject to a number of additional conditions as
described herein and may be amended or withdrawn in certain circumstances. See
"The Exchange Offer -- Conditions to and Amendment of the Exchange Offer."
THESE SECURITIES ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"). THE COMMISSION DOES NOT PASS UPON THE MERITS OF ANY SECURITIES
NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR
OTHER SELLING LITERATURE.
The date of this Offering Circular is February 22, 2000
<PAGE>
For a discussion of certain risks and other factors to be considered in
connection with the Exchange Offer, see "Risk Factors."
The Company, its Board of Directors and its executive officers make no
recommendations as to whether any stockholders should tender any or all of such
stockholders' Shares pursuant to the Exchange Offer. Each stockholder must make
his, her or its own decision whether to tender Shares of Common Stock and, if
so, how many Shares to tender. Ernest C. Garcia II, the Company's chairman and
principal stockholder, has advised the Company that he intends to tender Shares
in the Exchange Offer. See "The Exchange Offer - Executive Officer and Director
Participation."
The Company has made no arrangements for and has no understanding with
any dealer, salesman or other person regarding the solicitation of tenders
hereunder, and no person has been authorized to give any information or to make
any representation not contained in this Offering Circular in connection with
the Exchange Offer, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or any other
person. Neither the delivery of this Offering Circular nor any exchange or sale
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given.
This Offering Circular does not constitute an offer to exchange or
sell, or a solicitation of an offer to exchange or buy, any securities other
than the securities covered by this Offering Circular by the Company or any
other person, or any such offer or solicitation of such securities by the
Company or any such other person in any state or other jurisdiction to any
person to whom it is unlawful to make any such offer or solicitation. In any
state or other jurisdiction where it is required that the securities offered by
this Offering Circular be qualified for offering or that the offering be
approved pursuant to tender offer statutes in such state or jurisdiction, no
offer is hereby being made to, and tenders will not be accepted from residents
of any such state or jurisdiction unless and until such requirements have been
satisfied.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
AVAILABLE INFORMATION............................................................................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................1
SUMMARY OF EXCHANGE OFFER........................................................................................1
The Company......................................................................................................1
Background, Purpose and Effect of the Exchange Offer.............................................................2
The Exchange Offer...............................................................................................2
RISK FACTORS.....................................................................................................5
Exchange Offer Subject to Certain Contingencies.........................................................5
Loss of Rights Associated with Common Stock.............................................................5
Market Issues...........................................................................................5
Possible Lack of Trading Market for Debentures..........................................................5
Increased Percentage of Shares Held by Management.......................................................6
Restrictions Imposed by Terms of Debentures.............................................................6
Arbitrary Determination of Terms of Debentures..........................................................6
No Assurance of Increased Earnings Per Share............................................................6
Marginability...........................................................................................7
Increased Leverage and Debt Service Obligations.........................................................7
Subordination...........................................................................................8
Holding Company Structure; Effects of Asset Encumbrances................................................9
Risk of Prepayment......................................................................................9
Fraudulent Transfer Statutes............................................................................9
Certain United States Federal Income Tax Risks.........................................................10
Tax Consequences of Exchange Offer............................................................10
Interest on Debentures-- General..............................................................11
Original Issue Discount on Debentures.........................................................11
Market Discount...............................................................................11
Forward Looking Statements.............................................................................12
THE EXCHANGE OFFER..............................................................................................13
General ..............................................................................................13
Executive Officer and Director Participation...........................................................14
Expiration Time, Extensions, Termination and Amendments................................................14
How to Tender..........................................................................................14
Withdrawal Rights......................................................................................16
Acceptance of Shares for Exchange; Delivery of Debentures to be Exchanged..............................16
<PAGE>
TABLE OF CONTENTS
(continued) Page
Denominations; Fractional Interests....................................................................17
Proration if Shares Tendered Exceed Maximum............................................................17
Conditions to and Amendment of the Exchange Offer......................................................17
Exchange Agent.........................................................................................18
Harris Trust and Savings Bank..........................................................................18
Information Agent......................................................................................18
No Financial Advisor...................................................................................18
Payment of Expenses....................................................................................18
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER............................................................20
CAPITALIZATION..................................................................................................22
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA....................................................................23
CERTAIN PRO FORMA FINANCIAL INFORMATION.........................................................................25
PRICE RANGE OF COMMON STOCK.....................................................................................27
DIVIDENDS.......................................................................................................27
BUSINESS 28
General ..............................................................................................28
Recent Developments....................................................................................28
DESCRIPTION OF THE DEBENTURES...................................................................................30
Principal, Maturity and Interest.......................................................................30
Payment and Paying Agents..............................................................................30
Form, Exchange, and Transfer...........................................................................30
Redemption.............................................................................................31
Selection and Notice of Redemption.....................................................................31
Subordination..........................................................................................31
Certain Covenants......................................................................................34
Events of Default......................................................................................34
Modification and Waiver................................................................................35
Defeasance and Covenant Defeasance.....................................................................36
Satisfaction and Discharge.............................................................................37
Notices ..............................................................................................37
Title ..............................................................................................37
Governing Law..........................................................................................37
Regarding the Trustee..................................................................................37
<PAGE>
TABLE OF CONTENTS
(continued) Page
DESCRIPTION OF CAPITAL STOCK....................................................................................38
Common Stock...........................................................................................38
Preferred Stock........................................................................................38
EXECUTIVE OFFICER AND DIRECTOR BENEFICIAL OWNERSHIP.............................................................39
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...........................................................41
General ..............................................................................................41
Scope ..............................................................................................41
Certain Federal Income Tax Consequences to Tendering Stockholders......................................41
Characterization of the Exchange..............................................................41
Constructive Ownership of Stock...............................................................42
Section 302 Tests.............................................................................42
"Issue Price" of Debentures Defined...........................................................43
Corporate Stockholder Dividend Treatment......................................................44
Certain Federal Income Tax Consequences to Prospective Holders of Debentures...........................45
Interest on the Debentures-- General..........................................................45
Original Issue Discount on Debentures.........................................................45
Taxation of Original Issue Discount on Debentures - General...................................45
Acquisition Premium...........................................................................46
Election .....................................................................................46
Market Discount...............................................................................46
Redemption or Sale of Debentures..............................................................47
Backup Withholding............................................................................47
Tax Consequences to Company............................................................................47
</TABLE>
<PAGE>
AVAILABLE INFORMATION
Corporate Investor Communications, Inc. (toll free telephone no.
1-877-977-6192) will act as Information Agent in connection with the Exchange
Offer. See "The Exchange Offer-- Information Agent."
Ugly Duckling is subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information filed electronically by Ugly
Duckling with the Commission which can be accessed over the Internet at
http:\\www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated by
reference into this Offering Circular: (i) Ugly Duckling's Annual Report on Form
10-K for the fiscal year ended December 31, 1998; (ii) Ugly Duckling's Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30,
1999; (iii) Ugly Duckling's Reports on Form 8-K filed with the Commission on
March 16, 1999, August 26, 1999, November 9, 1999, December 21, 1999, January 5,
2000 and February 17, 2000; and (iv) Ugly Duckling's Notice and Proxy Statement
dated April 26, 1999. If any statement contained in any of the foregoing
documents is modified or superseded by a statement in this Offering Circular or
in any document subsequently filed and incorporated by reference herein, the
statement in any such foregoing document will be deemed for the purposes of this
Offering Circular to have been modified or superseded by such statement in this
Offering Circular or subsequently filed document, and the statement in any such
foregoing document is incorporated by reference herein only as modified or to
the extent it is not superseded. All documents subsequently filed by the Company
during the period of the Exchange Offer pursuant to Sections 13, 14 or 15(d) of
the Exchange Act shall be deemed to be incorporated by reference in and made a
part of this Offering Circular from the date of filing such documents.
SUMMARY OF EXCHANGE OFFER
The following is a summary of certain features of the Exchange Offer
and other matters, and all statements contained herein are qualified in their
entirety by reference to the more detailed information and financial statements
hereinafter set forth.
The Company
We operate a chain of buy here-pay here used car dealerships and
underwrite, finance and service retail installment contracts generated from the
sale of used cars by our dealerships. We target our products and services to the
sub-prime segment of the automobile financing industry, which focuses on selling
and financing the sale of used cars to persons who have limited credit
histories, low incomes, or past credit problems. For additional information
about our business and certain recent developments, see "Business."
<PAGE>
Background, Purpose and Effect of the Exchange Offer
We do not believe the current market price adequately reflects the
underlying value of our common stock. The principal purpose of the Exchange
Offer is to reduce the number of shares of common stock outstanding by offering
to purchase shares in the Exchange Offer, thereby offering the potential for
increased earnings per share in the future. Holders of shares of common stock
electing to participate in the Exchange Offer should consider the additional
considerations set forth under "Background, Purpose and Effect of the Exchange
Offer."
<TABLE>
<CAPTION>
The Exchange Offer
<S> <C>
Expiration Time.......................... 5:00 p.m., New York City time, on March 21, 2000, unless extended (the "Expiration
Time").
Exchange Ratio........................... $11.00 principal amount of debentures for each share of common stock validly tendered.
Acceptance of Shares; We will accept up to 2,500,000 shares in the Exchange Offer. This represents
Conditions of the Exchange Offer......... approximately 17% of our outstanding common stock as of February 14, 2000. If less than
500,000 shares are duly tendered, we will not accept any of the shares tendered. If
more than 2,500,000 shares are tendered, we will only accept 2,500,000 shares of common
stock, to be allocated among the tendering stockholders on a pro rata basis. The
Exchange Offer is subject to a number of conditions. See "The Exchange Offer --
Conditions to and Amendment of the Exchange Offer."
Description of Debentures................ o Unsecured.
o Subordinate to all our existing and future senior indebtedness. Our
senior indebtedness aggregated approximately $94 million at December 31,
1999 (not including on balance sheet indebtedness related to our
securitization transactions).
o Interest at 11% per annum from date of issuances, payable semiannually
on April 15 and October 15 of each year, beginning April 15, 2000.
o The debentures will mature on April 15, 2007.
o We can redeem all or any part of the debentures at any time at the
principal amount to be redeemed plus accrued and unpaid interest to the
redemption date.
o We will issue the debentures under the Indenture dated as of October 15,
1998 between us and Harris Trust and Savings Bank, as Trustee.
o We will be subject to limited financial covenants under the Indenture.
See "Description of the Debentures."
Officer and Director Participation....... Our chairman, Ernest C. Garcia II, will tender the greater of 294,500 Shares or 25% of
the Shares tendered. See "The Exchange Offer - Executive Officer and Director
Participation."
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How to Tender............................ If you wish to accept the exchange offer and your shares of common stock are registered
in your name, you must:
o complete the accompanying Letter of Transmittal; and
o send the Letter of Transmittal, the shares you want to tender, and other
required documents to Harris Trust and Savings Bank, the Exchange Agent.
If your shares are registered in the name of a broker, dealer, bank, trust company, or
other nominee, you must contact that institution to tender the shares.
You can make physical delivery of your shares up to three Nasdaq trading days after the
expiration of the offer if you follow our guaranteed delivery procedures. We will also
accept confirmation of book-entry transfers of the shares if delivered to the Exchange
Agent's account at The Depository Trust Company ("DTC") in a timely fashion. See "The
Exchange Offer -- How to Tender."
Delivery of Securities................... We will deliver debentures in exchange for shares that you tender as soon as
practicable after the Expiration Time. See "The Exchange Offer-- Acceptance of Shares
for Exchange; Delivery of Debentures to be Exchanged."
Withdrawal Rights........................ You can withdraw tenders of shares pursuant to the Exchange Offer:
o prior to 5:00 p.m., New York City time, on March 21, 2000;
and
o if we have not previously accepted such shares for
exchange, after April 17, 2000.
Except for these rights of withdrawal, all tenders are irrevocable. See "The Exchange
Offer - Withdrawal Rights."
Certain United States Federal Income The exchange of Shares for Debentures by a tendering stockholder will be a taxable
Tax Consequences......................... event treated for United States federal income tax purposes as either (i) a sale or
exchange of the stockholder's Shares or (ii) a deemed distribution of property by the
Company with respect to such Shares.
Stated interest on the Debentures will be taxable as ordinary income to holders of
Debentures at the time such amounts are received or accrued in accordance with the
holder's method of accounting. Additionally, the Debentures may be issued with
significant original issue discount ("OID"). As a consequence of the rules governing
OID, holders of Debentures may be required to recognize significant amounts of ordinary
income in advance of receipt of the cash payments to which the income is attributable
for United States federal income tax purposes.
See "Certain United States Federal Income Tax Consequences" for a discussion of certain
federal income tax consequences associated with the Exchange Offer and the ownership of
the Debentures, and "Risk Factors -- Certain United States Federal Income Tax Risks."
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<PAGE>
Listing and Trading of Securities ....... Our common stock (symbol: UGLY) is listed on Nasdaq's National Market System. On
February 14, 2000, two business days before the announcement of the Exchange Offer, the
closing per share price for the common stock as reported by Nasdaq was $8.00. We have
applied to list the debentures for trading on AMEX. However, we cannot assure you that
AMEX will list the debentures or that any trading market will develop for the
debentures. If a trading market does develop, we cannot assure you as to any price at
which the debentures will trade. See "Risk Factors-- Possible Lack of Trading Market
for the Debentures."
Exemption from Registration Requirements. In making the exchange offer, we are relying on the exemption from the registration
requirements of the Securities Act of 1933 contained in Section 3(a)(9) of that Act for
the debentures. Under that exemption, if common stock tendered is freely tradable, the
debentures received in the exchange will be freely tradable. If the common stock
tendered in the exchange is restricted, the debentures will be restricted to the same
degree.
Exchange Agent and Trustee............... Harris Trust and Savings Bank will serve as the Exchange Agent for the Exchange Offer
and as Trustee under the Indenture. See "The Exchange Offer-- Exchange Agent" and
"Description of the Debentures -- Regarding the Trustee."
Information Agent........................ Corporate Investor Communications, Inc. will serve as the Information Agent in
connection with the Exchange Offer. The Information Agent's telephone no. is
1-877-977-6192 (toll-free). See "The Exchange Offer-- Information Agent."
Common Stock Outstanding................. Approximately 14,906,152 shares of common stock were outstanding as of February 14,
2000.
</TABLE>
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RISK FACTORS
Investment in the Debentures is subject to certain risks and other
factors, including but not limited to those set forth below. In considering the
Exchange Offer, an investor should carefully consider the following risk
factors, as well as the risk factors appearing in the Company's filings with the
Commission and incorporated herein by reference, including the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1999, and all
other information appearing in this Offering Circular, as well as his or her
particular financial circumstances, investment objectives and tax situation.
Exchange Offer Subject to Certain Contingencies
The Exchange Offer is subject to certain contingencies that are not
within the control of the Company. First, the Exchange Offer is subject to the
condition that holders of at least 500,000 Shares validly tender their Shares.
If less than 500,000 Shares are validly tendered, the Company will accept none
of the Shares and the Exchange Offer will be terminated or extended. If more
than 2,500,000 Shares are validly tendered, the Company will allocate Debentures
among the tendering stockholders on a pro-rata basis based on the number of
Shares tendered. In addition, the Exchange Offer requires qualification of the
Indenture under the Trust Indenture Act and may require certain approvals or
consents from government regulatory agencies, self regulatory organizations, and
other third parties. Certain consents may be obtained only if the Company is
willing to provide certain concessions to third parties. There can be no
assurance that all required conditions, consents, or regulatory approvals will
be obtained or achieved in a timely manner. Moreover, the Exchange Offer may be
modified or withdrawn in certain circumstances subject to the discretion of the
Company's Board of Directors.
See "The Exchange Offer-- Conditions to and Amendment of the Exchange Offer."
Loss of Rights Associated with Common Stock
To the extent that stockholders exchange their Shares for Debentures,
they will be relinquishing certain rights available to holders of Common Stock
in exchange for acquiring rights as holders of debt. Stockholders whose Shares
are validly tendered and accepted for exchange will lose the right to share in
any capital appreciation of the Company's Common Stock, will not be entitled to
vote upon any matters submitted to the Company's stockholders, and will no
longer be entitled to dividends paid, if any, on the Company's Common Stock. In
addition, even if the Debentures can be listed, it is likely that trading in the
Debentures will be thin and that the liquidity of a tendering stockholder's
investment in the Company will be reduced.
Market Issues
If successful, the Exchange Offer will reduce the Company's
stockholder's equity and increase its indebtedness, thereby increasing the
Company's debt to equity ratio and its debt service obligations. There can be no
assurance that the market will not regard these results unfavorably and that the
price of the Company's Common Stock will not be adversely affected. To the
extent that the market does not regard the Exchange Offer as favorable, the
market price of the Debentures also could be adversely affected. In addition,
although the Company believes that the Exchange Offer complies with all
applicable listing and maintenance requirements imposed by the Nasdaq National
Market, there can be no assurance that issues regarding the Common Stock's
listing status will not arise.
Possible Lack of Trading Market for Debentures
No market currently exists for the Debentures. Although the Company has
applied to list the Debentures on AMEX, there is no assurance that such listing
will be accomplished, or, if listed, as to the extent of trading that will
develop in the Debentures. Accordingly, no assurance can be given as to the
liquidity of the Debentures after their issuance or the prices at which they may
trade, or that a trading market will develop.
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<PAGE>
Increased Percentage of Shares Held by Management
As of February 14, 2000, the Company's executive officers and directors
beneficially owned approximately 34% of the outstanding Shares of the Company's
Common Stock, with Mr. Ernest Garcia II, the Company's Chairman of the Board,
beneficially owning approximately 32%. Mr. Garcia has advised the Company that
he will participate in the Exchange Offer. See "The Exchange Offer - Executive
Officer and Director Participation." If Mr. Garcia tenders the maximum number of
shares that he has advised us he will tender, and:
o........assuming the minimum number of Shares are exchanged in the Exchange
Offer, the Company's executive officers and directors will
beneficially own (without inclusion of vested options)
approximately 33% of the Company's outstanding Shares of Common
Stock (with Mr. Garcia owning approximately 31%); and
o assuming the maximum number of Shares are exchanged in the
Exchange Offer (and assuming Mr. Garcia tenders 25% of the shares
exchanged), the Company's executive officers and directors will
beneficially own approximately 36% of the Company's outstanding
Shares of Common Stock (with Mr. Garcia owning approximately 33%).
Restrictions Imposed by Terms of Debentures
The Indenture will contain certain covenants that, among other things,
will require the Company to maintain at all times a Consolidated Net Worth (as
defined herein) of at least $100,000,000. If the Company fails to meet this
covenant, such failure will constitute an Event of Default (as defined herein)
under the Indenture. See "Description of the Debentures." As of December 31,
1999, the Company's Consolidated Net Worth was $165.7 million. If the maximum
Shares are tendered and $27,500,000 of Debentures are issued, the Company's
Consolidated Net Worth will be approximately $143.0 million (depending on the
stock price at the time the Debentures are issued) and if the minimum Shares are
issued, the Company's Consolidated Net Worth will be approximately $161.0
million (depending on the stock price at the time the Debentures are issued).
There can be no assurance that the Company will be able to satisfy this
financial covenant and any other covenants contained in the Indenture in the
future. If the Company is unable to cure an Event of Default on a timely basis,
the principal amount of the Debentures may be declared immediately due and
payable. There can also be no assurance that this financial covenant will not
materially and adversely affect the Company's ability to finance its future
operations or capital needs or to engage in other business activities, including
implementation of its business and growth strategies.
Arbitrary Determination of Terms of Debentures
The Company has determined the terms of the Debentures without
retaining any independent financial advisor or investment banking firm.
Accordingly, there can be no assurance that the terms of the Debentures are fair
from a financial point of view to tendering stockholders. In this regard, there
can be no assurance that if the Company were to issue subordinated debt in the
capital markets, the interest rate on such debt would not be higher than 11% per
annum, or that the financial and other covenants would not be more restrictive.
For example, companies that issue unsecured, non-investment grade subordinated
debt similar to the Debentures typically are subject to more restrictions than
those imposed by the Indenture with respect to the Debentures, including
restrictions on incurring additional indebtedness above a specified amount or in
violation of a specified formula, paying dividends or making certain other
distributions, payments and investments, creating liens, and engaging in
transactions with affiliates or in unrelated businesses, among others. In
addition, the terms of such securities typically include a change of control
provision, which typically provides a right to debt holders to force a company
to redeem their debt in the event of a change of control of that company's
voting securities. As a result, stockholders who tender their Shares in exchange
for Debentures may not receive the same level of protection that typically would
be afforded to holders of unsecured, non-investment grade subordinated debt
issued by other similarly situated companies. In addition, the relative lack of
standard restrictive covenants may adversely affect the liquidity and the
trading price of the Debentures.
No Assurance of Increased Earnings Per Share
Although the primary purpose of the Exchange Offer is to reduce the
number of the Company's outstanding shares of Common Stock, thereby offering the
potential for increased earnings per share in the future, the reduction in
equity and corresponding increase in indebtedness could have a negative effect
on earnings per share. In this regard, the table set forth in the Section
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<PAGE>
entitled "Certain Pro Forma Financial Information," which shows the pro forma
effects of the Exchange Offer on the Company's financial results assuming the
minimum and maximum number of Shares tendered, indicates that earnings per share
from continuing operations for the year ended December 31, 1999 would have
decreased slightly on a pro forma basis. For the year ended December 31, 1998,
the table shows that earnings per share from continuing operations would have
decreased significantly assuming the maximum number of Shares was exchanged.
Further, following the Exchange Offer, the Company expects that the Debentures
will be recorded at the fair market value of the Shares tendered in exchange as
of the date the Shares are exchanged, with the difference being amortized over
the term of the Debentures as additional interest expense, which would have a
negative effect on earnings per share.
Marginability
Generally speaking, the Debentures should be margin stock for purposes
of Regulation T which governs the extension of credit by brokers and dealers
and, to the extent the Debentures are listed on a national securities exchange,
for Regulation U which governs the extension of credit by other lenders. Under
Regulation U, the Debentures will likely not be margin stock if they are not
listed on a national securities exchange. Under Regulation T, the required
margin for the Debentures will likely be the margin required by the creditor in
good faith or the percentage set by the regulatory authority where the trade
occurs, whichever is greater. Under Regulation U, the maximum loan value of
margin stock is fifty percent (50%) of its current market value, while the
maximum loan value of non-margin stock and other collateral is their good faith
loan value.
In addition, under Regulation U, to enable a customer to participate in
an exchange offer that is made to holders of an issue of margin stock, a lender
may allow substitution of the securities received in the exchange, and a
non-margin, non-exempted security acquired in exchange for a margin stock will
be treated as if it were a margin stock for a period of 60 days following the
exchange.
Stockholders contemplating an exchange of Common Stock for Debentures
should consult with their brokers concerning the marginability of the Debentures
and the required margin.
Increased Leverage and Debt Service Obligations
Following the Exchange Offer, the Company will be more highly leveraged
and will have incurred substantial additional debt service in addition to
operating expenses and planned capital expenditures. At December 31, 1999, as
adjusted to give effect to the issuance of the maximum $27,500,000 principal
amount of the Debentures, the total indebtedness of the Company would have been
approximately $363.6 million. Assuming the issuance of the maximum $27,500,000
principal amount of the Debentures pursuant to the Exchange Offer, the Company
would incur additional debt service of approximately $3.0 million annually.
The Company's increased level of indebtedness may have several
important effects on its future operations, including, without limitation, (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest and principal on its indebtedness, reducing the funds
available for operations and for capital expenditures, including acquisitions,
(ii) covenants contained in the Indenture will require the Company to meet
certain financial tests, and other restrictions may limit its ability to borrow
additional funds or to dispose of assets, and may affect the Company's
flexibility in planning for, and reacting to, changes in its business, including
possible acquisition activities, (iii) the Company's leveraged position will
substantially increase its vulnerability to adverse changes in general economic,
industry and competitive conditions, (iv) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate and other purposes may be limited, and (v) the Company's
leveraged position and the various covenants contained in the Indenture may
place the Company at a relative competitive disadvantage as compared to certain
of its competitors. The Company's ability to meet its debt service obligations
and to reduce its total indebtedness will be dependent upon the Company's future
performance, which will be subject to general economic, industry and competitive
conditions and to financial, business and other factors affecting the operations
of the Company, many of which are beyond its control, or its ability to raise
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additional equity. There can be no assurance that the Company's business will
continue to generate cash flow at or above current levels. If the Company is
unable to generate sufficient cash flow from operations in the future to service
its debt, it may be required, among other things, to seek additional financing
in the debt or equity markets, to refinance or restructure all or a portion of
its indebtedness, including the Debentures, to sell selected assets, or to
reduce or delay planned capital expenditures and growth or business strategies.
There can be no assurance that any such measures would be sufficient to enable
the Company to service its debt, or that any of these measures could be effected
on satisfactory terms, if at all.
If the Company fails to pay any required payment of interest or
principal with respect to the Debentures on a timely basis, such failure will
constitute a default under the terms of the Indenture. An event of default under
the Indenture also may trigger an event of default under certain other existing
obligations of the Company, including its revolving credit facility (the
"Revolving Facility") with General Electric Capital Corporation ("GE Capital").
As a result, the incurrence of additional debt resulting from the Exchange Offer
will increase the risk of possible default by the Company with respect to its
current and future obligations.
Subordination
The Debentures will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined in the Indenture), which includes virtually all of the Company's
existing indebtedness, except its 12% Subordinated Debentures due 2003
previously issued under the Indenture (the "12% Debentures"). The Debentures
will rank pari passu with the 12% Debentures. The Debentures will rank senior
only to other indebtedness of the Company that expressly provides that it is
subordinated in right of payment to the Debentures, if any. In the event of
bankruptcy, liquidation, insolvency, reorganization or similar proceeding
relating to the Company, the assets of the Company will be available to pay
obligations on the Debentures only after all Senior Indebtedness has been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the Debentures outstanding. The Company may not pay principal of
or interest on the Debentures, make any deposit pursuant to defeasance
provisions or repurchase or redeem or otherwise retire any Debentures (i) if any
payment obligation on Senior Indebtedness is not paid when due or (ii) if any
other event of default on Senior Indebtedness occurs that permits the holders of
such Senior Indebtedness to accelerate the maturity of such Senior Indebtedness,
in accordance with its terms, and the Trustee for the Debentures receives a
notice of such default unless, in either case, the default has been cured or
waived, any such acceleration has been rescinded or such Senior Indebtedness has
been paid in full or, in the case of any default other than a payment default,
179 days have passed since the default notice is given. In addition, if there
exists an event of default as such term is defined in any instrument creating or
evidencing any Designated Senior Indebtedness (described below), on any
Designated Senior Indebtedness or if an executive officer of the Company has
actual knowledge of a default on any Designated Senior Indebtedness, which with
notice or lapse of time or both would become an event of default, then no
payment can be made on the Debentures for a period of 179 days from the date of
such event of default or the date that an executive officer of the Company
obtains actual knowledge that there is such a default unless such default is
cured or waived or a representative of such Designated Senior Indebtedness
terminates the payment blockage period. Moreover, even if there is an event of
default with respect to the Debentures and the Debentures are declared due and
payable as a result thereof, no payment can be made on the Debentures while any
Designated Senior Indebtedness is outstanding without the consent of the
Designated Senior Indebtedness. In the event that there is an event of default
under the Designated Senior Indebtedness or an executive officer of the Company
has actual knowledge of a default under Designated Senior Indebtedness and a
payment is made on the Debentures in violation of the above provisions, holders
of Debentures receiving such payment may be required to return the monies paid
for the benefit of the Senior Indebtedness. In addition, in an insolvency,
bankruptcy or liquidation scenario, there is always the risk that senior
creditors would seek to recover any monies paid on the Debentures. Designated
Senior Indebtedness includes the Revolving Facility with GE Capital and certain
indebtedness secured by the stock of the Company's securitization subsidiaries
and certain other residual interests, as amended from time to time and any
refundings or replacements thereof, as well as any other Senior Indebtedness
designated by the Company from time to time as Designated Senior Indebtedness.
There are no restrictions in the Indenture on the ability of the Company to
designate Senior Indebtedness as Designated Senior Indebtedness. As of December
31, 1999, without including any indebtedness under the Debentures or the 12%
Debentures, the Company had approximately $341.1 million of indebtedness
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outstanding, approximately $94 million of which would be Senior Indebtedness
(not including the on balance sheet indebtedness related to the Company's
securitizations) and approximately $76 million of which would be Designated
Senior Indebtedness. Additional Senior Indebtedness and Designated Senior
Indebtedness may be incurred by the Company and its subsidiaries from time to
time, subject to certain restrictions imposed by the Indenture, the Revolving
Facility with GE Capital and other agreements of the Company. See "Description
of the Debentures -- Subordination" and "-- Certain Covenants."
Holding Company Structure; Effects of Asset Encumbrances
The Debentures will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. The Debentures will also be structurally subordinated to all
indebtedness and other liabilities of the Company's subsidiaries. Substantially
all of the Company's operating income is generated by its subsidiaries and the
Company generally does not hold assets other than the stock of its subsidiaries.
As a result, the Company will rely on dividends and other payments received from
its subsidiaries to provide substantially all of the funds necessary to meet its
debt service obligations, including the payment of principal of and interest on
the Debentures. Certain agreements of the Company may now or in the future limit
the ability of its subsidiaries in certain situations to pay dividends to the
Company or to repay intercompany debt. The Debentures are not guaranteed by any
of the subsidiaries of the Company, and therefore, should the Company fail to
satisfy any payment obligation under the Debentures, the holders would not have
a direct claim therefor against the subsidiaries. Any indebtedness incurred
directly by the subsidiaries of the Company, including guarantees, will be
senior in right of payment to the common stock of such subsidiaries. This means
that in the event of any liquidation or bankruptcy of a subsidiary, all debt of
such subsidiary would be entitled to be paid before any amounts would be
available to the Company by virtue of ownership of the common stock. Except as
described above under "Risk Factors -- Restrictions Imposed by Terms of
Debentures" and under "Description of the Debentures -- Certain Covenants," the
Indenture will not limit the ability of the Company and its subsidiaries to
incur additional indebtedness, including Senior Indebtedness. Moreover, certain
Senior Indebtedness of the Company is now and may in the future be guaranteed
by, and secured by the assets of, the Company's subsidiaries. In the event of a
default under any such Senior Indebtedness, the lenders thereunder would be
entitled to a claim on the assets securing such indebtedness. Accordingly,
because of any or all of the above, the Company may not have sufficient monies
available from its subsidiaries or from other means, or assets remaining after
payment of prior claims from time to time, to pay amounts due on the Debentures.
In addition, the Company has pledged the stock of Ugly Duckling Receivables
Corporation ("UDRC") and Ugly Duckling Receivables Corporation II ("UDRC II"),
which are the Company's wholly-owned special purpose "bankruptcy remote"
entities, to secure a $38 million loan with certain third party lenders. Their
assets, including assets in discontinued operations, are comprised of Residuals
in Finance Receivables Sold and Investments Held In Trust, in the amounts of
approximately $16.7 million and $11.9 million, respectively, at December 31,
1999. These amounts would not be available to satisfy claims of creditors of the
Company on a consolidated basis even if the stock of such subsidiaries were not
pledged.
Risk of Prepayment
The Debentures are subject to redemption at the option of the Company
in whole at any time or in part from time to time without penalty or premium
upon notice to the holders of the Debentures. As a result, the holders of the
Debentures will be subject to a risk of prepayment at a time when interest rates
may be generally declining. In such case, holders of Debentures that are
redeemed who tendered their Shares to acquire an interest-bearing security will
no longer have the right to receive interest and may be forced to reinvest the
redemption proceeds in securities with a lower rate of interest.
Fraudulent Transfer Statutes
Various fraudulent conveyance laws enacted for the protection of
creditors may apply to the issuance of the Debentures. Under federal or state
fraudulent transfer laws, if a court were to find that, at the time the
Debentures were issued, the Company (i) issued the Debentures with the intent of
hindering, delaying or defrauding current or future creditors or (ii) (A)
received less than fair consideration or reasonably equivalent value for
incurring the indebtedness represented by the Debentures and (B) (1) was
insolvent or was rendered insolvent or contemplated insolvency by reason of the
issuance of the Debentures, (2) was engaged, or about to engage, in a business
or transaction for which its assets or capital were unreasonably small or (3)
intended to incur, or believed (or should have believed) it would incur, debts
beyond its ability to pay as such debts mature (as all of the foregoing terms
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are defined in or interpreted under such fraudulent transfer statutes), such
court could void all or a portion of the Company's obligations to the holders of
the Debentures, or void or subordinate the Company's obligations to the holders
of the Debentures, and take other action detrimental to the holders of the
Debentures, including in certain circumstances, invalidating the Debentures. In
that event, there would be no assurance that any repayment on the Debentures
would ever be recovered by the holders of the Debentures.
The definition of insolvency for purposes of the foregoing
consideration varies among jurisdictions depending upon the federal or state law
that is being applied in any such proceeding. Generally, however, the Company
would be considered insolvent at the time it incurs the indebtedness
constituting the Debentures, if (i) the fair market value (or fair saleable
value) of its assets is less than the amount required to pay its total existing
debts and liabilities (including the probable liability on contingent
liabilities) as they become absolute or matured or (ii) it is incurring debts
beyond its ability to pay as such debts mature. Based upon financial and other
information, the Company believes that it is solvent and will continue to be
solvent after issuing the Debentures, will have sufficient capital for carrying
on its business after such issuance and will be able to pay its debts as they
mature. There can be no assurance, however, that a court passing on such
standards would agree with the Company. There can also be no assurance as to
what standard a court would apply in order to determine whether the Company was
"insolvent" as of the date the Debentures were issued, or that, regardless of
the method of valuation, a court would not determine that the Company was
insolvent on that date or otherwise agree with the Company with respect to the
above standards.
Certain United States Federal Income Tax Risks
Tax Consequences of Exchange Offer
The exchange of Shares for Debentures by a tendering stockholder
pursuant to the Exchange Offer will be a taxable event treated for United States
federal income tax purposes as either (1) a sale or exchange of the
stockholder's Shares or (2) a deemed distribution of property by the Company
with respect to such Shares.
Sale or exchange treatment will result if a tendering stockholder
satisfies any of three tests under Section 302 of the Code which measure
reductions in a stockholder's overall equity interest. If treated as a sale or
exchange, a stockholder should recognize capital gain or loss in an amount equal
to the difference between (a) the "issue price" of the Debentures, and (b) the
stockholder's adjusted tax basis of the Shares exchanged pursuant to the
Exchange Offer. Depending upon the particular circumstances, the "issue price"
of the Debentures will be either (a) the fair market value of the Debentures as
of the date of the Exchange, (b) the fair market value of the Shares as of the
date of the Exchange, (c) the "stated redemption price at maturity" of the
Debentures (generally the face amount of the Debentures), or (d) the present
value of all payments to be made on the Debentures, discounted at the applicable
federal rate.
If none of the Section 302 tests is satisfied, then to the extent of
the Company's current or accumulated "earnings and profits" (as determined for
federal income tax purposes), a tendering stockholder will be treated as having
received a dividend taxable as ordinary income in an amount equal to the fair
market value of the Debentures received without reduction for the adjusted tax
basis of the Shares exchanged pursuant to the Exchange Offer. The stockholder's
adjusted tax basis in the Shares exchanged will be added to the stockholder's
remaining Shares; however, if the stockholder retains no Shares following the
exchange, the benefit of such basis will be permanently lost. To the extent, if
any, that the fair market value of the Debentures exceeds the Company's current
and accumulated earnings and profits (as determined for federal income tax
purposes), the excess will be treated first as a tax-free return of such
stockholder's tax basis in the Shares and thereafter as capital gain. Corporate
stockholders receiving a dividend must assess the applicability of the
dividends-received deduction to the extent applicable and the impact of Section
1059 governing "extraordinary dividends."
In determining whether any one of the Section 302 tests is satisfied, a
tendering stockholder must take into account not only the Shares actually owned
by such stockholder but also Shares which are constructively owned by the
stockholder by reason of attribution rules contained in Section 318 of the Code.
The Company cannot predict whether or to what extent the Exchange Offer will be
oversubscribed. If the Exchange Offer is oversubscribed, proration of the
tenders pursuant to the Exchange Offer will cause the Company to accept fewer
Shares than are tendered. Therefore, a stockholder can be given no assurance
10
<PAGE>
that a sufficient number of such stockholder's Shares will be exchanged pursuant
to the Exchange Offer to ensure that such exchange will satisfy one or more of
the Section 302 tests and be treated as a sale, rather than as a dividend, for
United States federal income tax purposes.
If a stockholder sells Shares to persons other than the Company at or
about the same time such holder also exchanges Shares pursuant to the Exchange
Offer and the various sales effected by the stockholder are part of a plan to
reduce or terminate the stockholder's proportionate equity interest in the
Company, then sales to persons other than the Company may, for United States
federal income tax purposes, be integrated with the stockholder's exchange of
Shares pursuant to the Exchange Offer and, if integrated, should be taken into
account in determining whether a tendering stockholder satisfies any of the
Section 302 tests.
Because a tendering stockholder will receive no cash pursuant to the
Exchange Offer, a stockholder will need to use other cash resources of the
stockholder to satisfy any tax liability arising from an exchange of Shares for
Debentures.
See "Certain United States Federal Income Tax Consequences" -- "Certain
Federal Income Tax Consequences to Tendering Stockholders" -- "Characterization
of the Exchange."
Interest on Debentures -- General
In general, stated interest on the Debentures will be taxable as
ordinary income to holders of Debentures at the time such amounts are accrued or
received in accordance with the holder's method of accounting. See "Certain
United States Federal Income Tax Consequences" -- "Certain Federal Income Tax
Consequences to Prospective Holders of Debentures" -- "Interest on the
Debentures -- General". Depending upon a stockholder's particular circumstances,
the tax consequences of holding Debentures may be less advantageous than the
consequences of holding Shares because, for example, interest payments on the
Debentures will not be eligible for any dividends-received deduction that might
otherwise be available to corporate stockholders.
Original Issue Discount on Debentures
The Debentures may be issued with significant "original issue discount"
("OID") for United States federal income tax purposes. Consequently, holders of
the Debentures may be required to recognize significant amounts of ordinary
income in advance of receipt of the cash payments to which the income is
attributable for United States federal income tax consequences, regardless of
the holders' methods of accounting. See "Certain United States Federal Income
Tax Consequences" -- "Certain Federal Income Tax Consequences to Prospective
Holders of Debentures" -- "Original Issue Discount on Debentures" and "Taxation
of Original Issue Discount on Debentures."
Market Discount
If the "issue price" of a Debenture exceeds the holder's adjusted tax
basis in the Debentures at the time of the exchange of Shares for Debentures,
the Debenture will be considered issued with "market discount" unless such
excess is less than a specified de minimis amount. Under the market discount
rules, a holder of a market discount Debenture will be required to treat any
principal payment on the Debenture or any gain on a sale, exchange or other
disposition of the Debenture as ordinary income to the extent of the market
discount which has not previously been included in income and which is treated
as having accrued on the Debenture at the time of such payment or disposition.
Additionally, a holder of such a Debenture may be required to defer, until the
maturity of the Debenture or its earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry the Debenture. See "Certain United
States Federal Income Tax Consequences" -- "Certain Federal Income Tax
Consequences to Prospective Holders of Debentures" - "Market Discount."
STOCKHOLDERS CONTEMPLATING AN EXCHANGE OF SHARES FOR DEBENTURES
PURSUANT TO THE EXCHANGE OFFER ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
OF EXCHANGES MADE BY THEM PURSUANT TO THE EXCHANGE OFFER AS WELL AS THE SPECIFIC
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES ASSOCIATED WITH THE
OWNERSHIP OF DEBENTURES RECEIVABLE IN THE EXCHANGE.
11
<PAGE>
Forward Looking Statements
This Offering Circular contains certain forward looking statements.
Additional written or oral forward looking statements may be made by the Company
from time to time in filings with the Commission or otherwise. Such statements
may include, but not be limited to, estimates of the value of the Company's
Common Stock, projections of revenues, income, earnings per share, loss, capital
expenditures, plans for future operations, financing needs or plans, the
Company's ability to service its debt obligations, and plans relating to
products or services of the Company as well as assumptions relating to the
foregoing. The words "believe," "expect," "anticipate," "estimate," "project,"
and similar expressions identify forward looking statements. Forward looking
statements are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified. Future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the forward
looking statements. Statements in this Offering Circular, including those
contained in the section entitled "Risk Factors," and in the section entitled
"Background, Purpose and Effect of the Exchange Offer," describe factors, among
others, that could contribute to or cause such differences. The Company
undertakes no obligation to update any forward looking statements.
12
<PAGE>
THE EXCHANGE OFFER
General
The Company hereby offers, upon the terms and subject to the conditions
set forth herein and in the accompanying Letter of Transmittal, to exchange up
to $27,500,000 aggregate principal amount of its Debentures for up to 2,500,000
Shares of its outstanding Common Stock on the basis of $11.00 principal amount
of Debentures for each Share of Common Stock outstanding.
If more than 2,500,000 Shares are tendered, the Company will accept no
more than 2,500,000 Shares of Common Stock, with Debentures to be allocated
among the tendering stockholders on a pro rata basis. If less than 500,000
Shares are tendered, the Company will not accept any of the Shares tendered and
the Exchange Offer will be terminated, unless it is extended. The Exchange Offer
is subject to a number of additional conditions. See "The Exchange Offer --
Conditions to and Amendment of the Exchange Offer."
Stockholders who do not tender will retain their Shares of Common Stock
and stockholders who tender will receive Debentures with the following rights
compared to those associated with the ownership of Common Stock.
<TABLE>
<CAPTION>
Common Stock Debentures
- ------------------------------------------------------- ---------------------------------------------------
<S> <C>
Equity; pro rata claim to assets of the Company after Debt; right to receive specified principal amount
payment of all debt obligations, plus right to share with senior claim to assets of the Company compared
in capital appreciation. to holders of equity, but subordinated to all other
senior debt obligations of the Company, plus the right
to receive interest, but no right to capital
appreciation. The Debentures will rank pari passu
with the 12% Subordinated Debentures due 2003
previously issued under the Indenture.
No interest payable on Common Stock, although Interest at 11% year annum, payable semiannually
dividends are possible. in cash on each April 15 and October 15,
commencing April 15, 2000.
Voting rights on all matters submitted to No voting rights.
stockholders.
Shares are listed on Nasdaq and are subject to The Company has applied to list the Debentures on
established trading market. AMEX; no assurance of such listing or of any
effective trading market even if listing is
effected.
</TABLE>
The foregoing table is set forth for comparative purposes only and does
not take into account all factors relating to a comparison of the Shares to the
Debentures, nor does it take into account any factors relating to the tax
consequences of accepting the Exchange Offer. For a more complete description of
the Debentures and the Common Stock, see "Description of the Debentures" and
"Description of Capital Stock." See also "Certain United States Federal Income
Tax Consequences."
Tendering stockholders will not be obligated to pay brokerage
commissions or fees or, subject to Instruction 9 of the Letter of Transmittal,
transfer taxes with respect to the exchange of Shares for Debentures pursuant to
the Exchange Offer. The Company will pay all charges and expenses of the
Exchange Agent, the Information Agent, and the Trustee in connection with the
Exchange Offer. See "The Exchange Offer -- Payment of Expenses."
13
<PAGE>
Executive Officer and Director Participation
The executive officers and directors of the Company have advised the
Company that they will participate in the Exchange Offer as follows:
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
NAME TITLE PARTICIPATION
---- ----- -------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Ernest C. Garcia II Chairman of the Board 294,500 shares, if the maximum
number of shares are tendered. If
less than the maximum number of
shares are tendered, Mr. Garcia will
tender the greater of 294,500 Shares
or 25% of the Shares tendered.
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
Expiration Time, Extensions, Termination and Amendments
The Exchange Offer will terminate at 5:00 p.m., New York City time, on
March 21, 2000, unless extended by the Company in its sole discretion. During
any extension of the Exchange Offer, all Shares previously tendered and not yet
exchanged will remain subject to the Exchange Offer (subject to withdrawal
rights specified herein) and may be accepted for exchange by the Company. The
later of 5:00 p.m., New York City time, on March 21, 2000, or the latest time
and date to which the Exchange Offer may be extended, is referred to herein as
the "Expiration Time."
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time for which the Exchange Offer is to remain
open by giving oral or written notice to Harris Trust and Savings Bank (the
"Exchange Agent") of such extension prior to 9:00 am., New York City time, on
the business day after the previously scheduled Expiration Time. The Company
also expressly reserves the right (i) to terminate the Exchange Offer and not
accept for exchange any Shares not theretofore accepted for exchange upon the
occurrence of any of the events set forth herein under "The Exchange Offer --
Conditions to and Amendment of the Exchange Offer" or (ii) to amend the Exchange
Offer. Any such extension, termination or amendment will be followed as promptly
as practicable by public announcement thereof, such announcement in the case of
an extension to be issued no later than 9:00 am., New York City time, on the
next business day after the previously scheduled Expiration Time. Without
limiting the manner in which the Company may choose to make such public
announcement, the Company shall not, unless otherwise required by law, have an
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
How to Tender
Except as set forth below, for a stockholder to duly tender Shares
pursuant to the Exchange Offer, certificates representing the Shares (or a
confirmation of a book-entry transfer of the Shares into the Exchange Agent's
account at The Depository Trust Company ("DTC") as described below), together
with a properly completed and duly executed Letter of Transmittal or manually
signed facsimile thereof, with any required signature guarantees, or an Agent's
Message in the case of a book-entry transfer, and any other required documents,
must be transmitted to and received by the Exchange Agent on or prior to the
Expiration Time at one of the addresses specified below under "The Exchange
Offer -- Exchange Agent." LETTERS OF TRANSMITTAL AND CERTIFICATES REPRESENTING
THE SHARES SHOULD NOT BE SENT TO UGLY DUCKLING OR TO THE INFORMATION AGENT.
Signatures on Letters of Transmittal need not be guaranteed by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. ("NASD") or by a commercial bank or
trust company having an office in the United States ("Eligible Institution"),
provided the Shares tendered pursuant thereto are tendered (i) by a registered
holder of the Shares who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In all other cases, signatures
must be guaranteed by an Eligible Institution. If Shares are registered in the
name of a person other than the signer of the Letter of Transmittal, the
certificates representing the Shares must be endorsed by, or be accompanied by,
a written instrument or instruments of transfer or exchange in form satisfactory
to the Company, duly executed by the registered holder, with the signature
thereon guaranteed as aforesaid.
14
<PAGE>
The Exchange Agent has established an account with respect to the
Shares at DTC and any financial institution which is a participant in the DTC
system may make book-entry delivery of the Shares by causing DTC to transfer
such Shares into the Exchange Agent's account in accordance with DTC's procedure
for such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or manually signed facsimile thereof), with any required signature
guarantees, or an Agent's Message in the case of a book-entry thereof, and any
other required documents, must in any case be transmitted to and received by the
Exchange Agent prior to the Expiration Time at one of the addresses specified
below under "The Exchange Offer -- Exchange Agent", or the guaranteed delivery
procedure described below must be complied with. Delivery of documents to DTC in
accordance with DTC's procedures does not constitute delivery to the Exchange
Agent.
Tendering stockholders are required under federal income tax law to
provide a correct Taxpayer Identification Number on a Substitute Form W-9, which
is included, together with guidelines relating to the form, with the Letter of
Transmittal. Failure to complete and return this Substitute Form W-9 to the
Exchange Agent may subject a stockholder to a $50 penalty imposed by the
Internal Revenue Service and will result in backup withholding of 31% on
interest and other payments with respect to the Debentures and cash in lieu of
fractional interests in the Debentures.
The method of delivery of certificates representing the Shares and all
other required documents is at the election and risk of the tendering
stockholder but delivery by registered mail with return receipt requested,
properly insured, is recommended.
If a stockholder desires to tender Shares and certificates representing
the Shares are not immediately available or time will not permit such holder's
Letter of Transmittal, certificates representing the Shares or other required
documents to reach the Exchange Agent before the Expiration Time, such holder's
tender may be effected if:
(a) such tender is made through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, is received
prior to the Expiration Time by the Exchange Agent as provided below;
and
(c) the Common Stock Certificates (or a Book-Entry Confirmation) evidencing
all tendered Common Stock, in proper form for transfer, in each case
together with the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of
Transmittal are received by the Exchange Agent within three Nasdaq
National Market trading days of the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the Nasdaq
National Market is open for business.
The acceptance by a stockholder of the Exchange Offer pursuant to one
of the procedures set forth above will constitute an agreement between the
stockholder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the accompanying Letter of Transmittal.
The Company will accept Shares by giving notice thereof to the Exchange
Agent.
All questions as to the form of all documents and the validity
(including time of receipt) and acceptance of all tenders will be determined by
the Company, in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
not in proper form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any of the Shares. The Company's interpretation of the terms
15
<PAGE>
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final. No tender of Shares will be deemed to
have been properly made until all defects and irregularities have been cured or
waived. Neither the Company, the Information Agent, the Exchange Agent nor any
other person shall be under any duty to give notification of any defects or
irregularities in tenders, nor shall any of them incur any liability for failure
to give such notification.
Withdrawal Rights
All tenders duly and validly made are irrevocable, except that Shares
tendered pursuant to the Exchange Offer may be withdrawn prior to the Expiration
Time, and, unless theretofore accepted for exchange as provided in the Exchange
Offer, may also be withdrawn after 5:00 p.m., New York City time, on April 17,
2000.
To be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be received by the Exchange Agent on a timely basis at
one of the addresses specified under "The Exchange Offer -- Exchange Agent." Any
notice of withdrawal must specify the name of the person having tendered the
Shares to be withdrawn, the names in which the Shares are registered if
different from that of the tendering stockholder and the number of Shares to be
withdrawn. If certificates representing the Shares have been physically
delivered to the Exchange Agent, then prior to the release of such certificates,
the tendering stockholder must also submit the certificate number of the
certificates representing the Shares to be withdrawn and the signature on such
holder's notice of withdrawal must be guaranteed by an Eligible Institution. If
certificates representing the Shares have been delivered pursuant to the
book-entry procedures set forth above under "The Exchange Offer -- How to
Tender," any notice of withdrawal must specify the name and number of the
participant's account at DTC to be credited with the withdrawn Shares. All
questions as to validity, form and eligibility (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding. Any Shares effectively withdrawn
will be deemed not to have been duly tendered for purposes of the Exchange
Offer.
None of the Company, the Exchange Agent, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give such notification. However, the Exchange Agent will attempt to correct any
defective tenders by contacting the tendering stockholder. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer.
However, withdrawn Shares may be retendered by following one of the procedures
described under "The Exchange Offer -- How to Tender" at any time prior to the
Expiration Time.
Acceptance of Shares for Exchange; Delivery of Debentures to be Exchanged
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Shares validly tendered and not withdrawn will be
made promptly after the Expiration Time. For purposes of the Exchange Offer, the
Company will be deemed to have accepted for exchange validly tendered Shares
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering
stockholders for the purposes of receiving Debentures from the Company and
transmitting such securities to such stockholders. If the Company should extend
the Exchange Offer or be delayed in consummation of the Exchange Offer for any
reason, then, without prejudice to the Company's rights under the Exchange
Offer, the Exchange Agent acting on behalf of the Company may retain tendered
Shares, and such Shares may not be withdrawn, subject to the withdrawal rights
of tendering stockholders set forth above under "The Exchange Offer --
Withdrawal Rights." Tendered Shares not accepted for exchange by the Company
because of an invalid tender, the termination of the Exchange Offer as a result
of the existence of a condition set forth below under "The Exchange Offer --
Conditions to and Amendment of the Exchange Offer" or for any other reason, will
be returned without expense to the tendering stockholders (or, in the case of
Shares delivered by book-entry transfer within DTC, will be credited to the
account maintained within DTC by the participant in the DTC system who delivered
such Shares) as promptly as practicable following the expiration or termination
of the Exchange Offer.
Delivery of Debentures in exchange for Shares tendered pursuant to the
Exchange Offer will be made by the Company to the Exchange Agent, as agent for
the tendering stockholders, only after receipt by the Exchange Agent of
16
<PAGE>
certificates representing the tendered Shares (or confirmation of the book-entry
transfer of such Shares into the Exchange Agent's account at DTC), a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof), or an Agent's Message, in the case of a book-entry transfer, and any
other required documents.
Denominations; Fractional Interests
The Debentures will be issued only in denominations of $1.00 and
integral multiples thereof.
Proration if Shares Tendered Exceed Maximum
If stockholders tendering Shares validly tender more than 2,500,000
Shares, the Company will accept for exchange no more than 2,500,000 Shares. In
such event, Debentures will be allocated to tendering stockholders on a pro rata
basis based on the number of Shares tendered by each tendering stockholder. The
Company will accept from each tendering stockholder that number of Shares equal
to 2,500,000 multiplied by a fraction, the numerator of which is the total
number of Shares validly tendered by such tendering stockholder and the
denominator of which is the total number of Shares validly tendered by all
tendering stockholders. The number of Shares will be rounded up or down as
nearly as practicable to result in the tender of whole Shares rather than
fractional Shares. Any Shares not accepted by the Company as a result of the
allocation described above will be returned promptly to the tendering
stockholder.
Conditions to and Amendment of the Exchange Offer
The Exchange Offer is subject to the tender of a minimum of 500,000
Shares, and to the other conditions described below.
An application will be filed with the Commission for qualification of
the Indenture under which the Debentures will be issued under the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Exchange Offer is
conditioned upon the Indenture being qualified under the Trust Indenture Act. In
addition to the foregoing conditions, the Company may decline to accept any
Shares in exchange for Debentures and may withdraw the Exchange Offer as to
Shares not then accepted if, before the time of acceptance, there shall have
occurred any of the following events which, in the Company's sole judgment,
makes it inadvisable to proceed with such acceptance:
(a) any government agency or other person shall have instituted or
threatened any action or proceeding before any court or administrative
agency (i) challenging the acquisition of Shares pursuant to the
Exchange Offer or otherwise in any manner relating to the Exchange
Offer or (ii) otherwise materially adversely affecting the Company, or
there shall have occurred any existing action or proceeding with
respect to the Company; or
(b) any statute, rule or regulation shall have been proposed or enacted, or
any action shall have been taken by any governmental authority, which
would or might prohibit, restrict or delay consummation of the Exchange
Offer or materially impair the contemplated benefits of the Exchange
Offer to the Company; or
(c) any state of war, national emergency, banking moratorium or suspension
of payments by banks in the State of New York shall have occurred, or
any currency or exchange control laws or regulations or general
suspension of trading or limitation on prices on Nasdaq shall have been
imposed or there shall have occurred a material adverse change in the
securities markets generally; or
(d) any required consents or approvals from third parties or government
regulatory agencies shall not have been obtained; or
(e) the Exchange Offer would result in the Company's Shares being delisted
from the Nasdaq National Market; or
(f) any material change, or development involving a prospective material
change, in or affecting the business or financial affairs of the
Company shall have occurred.
17
<PAGE>
The Company reserves the right to waive any of the foregoing
conditions. The Company will determine that these conditions (except for certain
regulatory approvals) have been satisfied or waived prior to the Expiration
Time. The Company also reserves the right to amend the Exchange Offer by public
announcement of any amendment. The Exchange Offer, however, may not be amended
or withdrawn unless the amendment or the circumstances described above regarding
withdrawal occur prior to the Expiration Time.
Exchange Agent
Harris Trust and Savings Bank has been appointed as Exchange Agent for
the Exchange Offer. All correspondence in connection with the Exchange Offer and
the Letter of Transmittal should be addressed to the Exchange Agent, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Harris Trust and Savings Bank
Mailing Address: Facsimile Copy Number (For Hand/Overnight Delivery:
c/o Harris Trust Eligible Institutions Only):
Company of New York 212-701-7636 c/o Harris Trust Company of
Wall Street Station Confirm Receipt of Facsimile By New York
P.O. Box 1010 Telephone 88 Pine Street, 19th Floor
New York, N.Y. 10268-1010 212-701-7624 New York, NY 10005
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE VALID DELIVERY.
Information Agent
Corporate Investor Communications. Inc. will act as Information Agent in connection with the Exchange
Offer. For further assistance or additional copies of documents call the Information Agent toll-free at
1-877-977-6192 or write to the Information Agent at:
Mailing Address: Facsimile Copy Number Hand Delivery:
Corporate Investor 201-804-8693 Corporate Investor
Communications, Inc. Communications, Inc.
111 Commerce Road 111 Commerce Road
Carlstadt, NJ 01072-2586 Carlstadt, NJ 01072-2586
LETTERS OF TRANSMITTAL AND CERTIFICATES REPRESENTING THE SHARES SHOULD NOT BE SENT TO THE INFORMATION AGENT. See "The
Exchange Offer-- How to Tender."
</TABLE>
No Financial Advisor
No financial advisor has been retained to render, and no financial
advisor has rendered, an opinion as to the fairness of the Exchange Offer to
holders of the Company's Common Stock or to solicit exchanges of Common Stock
for Debentures.
Payment of Expenses
The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act of 1933, as
amended, afforded by Section 3(a) (9) thereof. Therefore, the Company will not
pay any commission or other remuneration to any broker, dealer, salesman or
other person for soliciting tenders of the Shares. However, regular employees of
the Company (who will not be additionally compensated therefor) may solicit
tenders and will answer inquiries concerning the Exchange Offer.
18
<PAGE>
The Company will pay the Exchange Agent and the Information Agent
reasonable and customary fees for their services and will reimburse such parties
for their reasonable out-of-pocket expenses in connection therewith. The Company
will also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this Offering Circular and related documents to the beneficial owners of the
Shares held of record by such persons and in handling or forwarding tenders for
their customers.
19
<PAGE>
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Ugly Duckling completed its initial public offering in June 1996 with
the sale of 2,300,000 Shares of its Common Stock at a price of $6.75 per share.
Following the initial public offering, the price of the Company's Common Stock
increased significantly, to a high of $25.75 per share in the first quarter of
1997, reflecting a stock market with generally increasing stock prices, a
healthy used car sales and finance industry, and growth in the Company's
revenues and earnings. Subsequently, however, the used car sales and financing
industry has encountered difficulties, with several subprime companies
announcing major downward adjustments to their financial statements, violations
of loan covenants, related litigation, and other events. In addition, certain of
these companies have filed for bankruptcy protection. These difficulties have
corresponded with a general decline in the stock prices of companies involved in
this industry. Consistent with this decline, the 52 week price range of the
Company's Common Stock as of February 14, 2000 was approximately $4.00 to $9.00
per share. As of February 14, 2000, the closing price of the common stock on
Nasdaq was $8.00.
The Company does not believe that recent prices reflect the underlying
value of its Common Stock. In this regard, in establishing a tender price that
is significantly higher than the market price of the Shares as of February 14,
2000, the Company considered the following factors, among others.
o The closing price of $8.00 per Share as of February 14, 2000,
two business days prior to the announcement of the Exchange
Offer, represents a 69% decline from its all-time high in the
first quarter of 1997 and a 11% decline from its high in 1999.
See "Price Range of Common Stock."
o The recent Share price reflects a discount of approximately
28% to the Company's book value per share of $11.13 as of
December 31, 1999. See "Summary Selected Consolidated
Financial Data."
o The Company's recent and historical financial results,
including the Company's increase in revenues ($467,275,000
million compared to $332,553,000 million) and diluted earnings
per share from continuing operations ($0.57 compared to $0.19)
for the twelve month period ended December 31, 1999 as
compared to the twelve month period ended December 31, 1998.
See "Summary Selected Consolidated Financial Data."
The principal purpose of the Exchange Offer is to reduce the number of
Shares of Common Stock outstanding by offering to purchase Shares in the
Exchange Offer, thereby offering the potential for increased earnings per share
in the future. However, see "Risk Factors - No Assurance of Increased Earnings
Per Share" and "Certain Pro Forma Financial Information." In addition, see
"Business - Recent Developments - Status of FMAC Transaction" for a description
of the relation of the exchange offer to the possible issuance of additional
shares of common stock to First Merchants Acceptance Corporation. The Company
believes that if it is able to increase earnings per share, this development
could have a positive influence on the price of its Common Stock. The increased
indebtedness resulting from the Exchange Offer, however, will significantly
increase the Company's debt service requirements and could negatively affect
earnings per share. See "Risk Factors -- Increased Leverage and Debt Service
Obligations" and "-- No Assurance of Increased Earnings Per Share."
Holders of Shares of Common Stock electing to participate in the
Exchange Offer will realize the following benefits.
o In exchange for Shares, tendering stockholders will receive
a debt security with a principal amount approximately 38%
greater than the market price of the Shares as of February
14, 2000.
o The Debentures will bear interest at 11% per annum, payable
each April 15 and October 15 until the Debentures are paid
in full.
o The Debentures, although subordinated in right of payment to
all other existing and future senior indebtedness of the
Company, represent a claim on the Company's assets senior to
any claim of the holders of the Company's Common Stock.
20
<PAGE>
Notwithstanding the benefits to tendering stockholders summarized
above, holders of Shares contemplating the Exchange Offer should take into
account the following considerations.
o Tendering stockholders receiving Debentures will relinquish
the right to share in any capital appreciation of the
Company's Common Stock.
o Unlike the Shares, even if the Debentures can be listed on
AMEX, it is highly unlikely that trading in the Debentures
will be as liquid as trading in the Common Stock.
o Unlike holders of Common Stock, holders of the Debentures will
have no rights to vote on matters submitted to the Company's
stockholders.
o The Company has the right to prepay the Debentures at any time
without penalty or premium by paying the unpaid principal
amount and accrued interest on the Debentures.
o Tendering stockholders will be subject to certain tax
consequences that may differ from those that would be realized
if the Shares were sold for cash.
Finally, holders of Shares contemplating the Exchange Offer should
consider that the Company has not retained any financial advisor or investment
banking firm to assist the Company in determining the price and terms of the
Indentures or whether the consideration offered in the Exchange Offer is
adequate to tendering stockholders. The Company also has not requested any
report, opinion, or appraisal relating to the fairness of the consideration
being offered pursuant to the Exchange Offer. For a discussion of risk factors
which should be taken into account in considering the Exchange Offer, see "Risk
Factors."
If the Exchange Offer is completed, the Shares accepted for exchange
will be held by the Company as treasury stock.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December 31,
1999 and pro forma to give effect to the exchange of Debentures assuming the
minimum and maximum number of Shares were tendered, respectively, as if such
exchanges had occurred on December 31, 1999 and were valued at $9.00 per share.
<TABLE>
<CAPTION>
As Adjusted
-------------------------------------
Maximum Minimum
No. of No. of
Shares Shares
Actual Exchanged Exchanged
------------------ ------------------ -----------------
Debt: (In thousands and unaudited)
<S> <C> <C> <C>
Revolving Facility...................................... $ 41,717 $ 41,717 $ 41,717
Notes Payable........................................... 270,215 270,215 270,215
Subordinated Notes Payable.............................. 29,217 29,217 29,217
11% Subordinated Debentures due 2010.................... -- 22,500 4,500
---------------- ---------------- ----------------
Total Debt........................................ 341,149 363,649 345,649
------------------ ------------------ -----------------
Stockholders' Equity:
Common Stock; $.001 par value, 100,000 shares authorized, 14,890,000 issued
and outstanding (Actual), 12,390,000 and 14,390,000 issued and
outstanding, respectively (As Adjusted)................. 152,971 130,271 148,271
Retained Earnings................................................ 12,715 $ 12,715 $ 12,715
---------------- ---------------- ----------------
Total Stockholders' Equity.................................. 165,686 142,986 160,986
------------------ ------------------ -----------------
Total Capitalization........................................ $ 506,835 $ 506,635 $ 506,635
================== ================== =================
</TABLE>
22
<PAGE>
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Statement of Operations
Data" and "Balance Sheet Data" for, and as of the end of, each of the years in
the four-year period ended December 31, 1998 are derived from the consolidated
financial statements of the Company, which consolidated financial statements
have been audited by KPMG LLP, independent auditors. The selected data as of and
for the year ended December 31, 1999 are derived from the unaudited condensed
consolidated financial statements of the Company. The information presented
below under the caption "Dealership Operating Data" is unaudited. In the opinion
of management, such unaudited data reflect all adjustments, consisting only of
normally recurring adjustments, necessary to fairly present the Company's
financial position and results of operations for the periods presented. Certain
reclassifications have been made to the prior year financial statements to
conform to current year presentation.
<TABLE>
<CAPTION>
Year Ended December 31,
(in thousands)
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Sales of Used Cars........................ $ 389,908 $ 287,618 $ 123,814 $ 53,768 $ 47,824
Less:
Cost of Used Cars Sold.................... 219,071 167,014 72,358 31,879 29,733
Provision for Credit Losses............... 102,955 65,318 22,354 9,657 8,359
-------------------------------------------------------------------------
67,882 55,286 29,102 12,232 9,732
-------------------------------------------------------------------------
Net Interest Income....................... 51,172 14,404 12,384 8,597 8,227
Gain on Sale of Loans..................... -- 12,093 6,721 3,925 --
Servicing and Other Income................ 8,793 16,335 12,325 2,537 308
-------------------------------------------------------------------------
-------------------------------------------------------------------------
59,965 42,832 31,430 15,059 8,535
-------------------------------------------------------------------------
Income before Operating Expenses.......... 127,847 98,118 60,532 27,291 18,267
Operating Expenses:
Selling and Marketing..................... 23,752 20,285 10,538 3,585 3,856
General and Administrative................ 82,236 66,977 39,413 12,221 11,677
Depreciation and Amortization............. 6,948 4,912 3,148 1,382 1,225
-------------------------------------------------------------------------
-------------------------------------------------------------------------
112,936 92,174 53,099 17,188 16,758
-------------------------------------------------------------------------
Income before Interest Expense............ 14,911 5,944 7,433 10,103 1,509
Interest Expense.......................... 224 138 531 2,429 5,328
-------------------------------------------------------------------------
Earnings (Loss) before Income Taxes 14,687 5,806 6,902 7,674 (3,819)
Income Taxes (Benefit).................... 6,000 2,351 2,820 694 --
----------- ----------- ----------- ----------- -----------
Earnings (Loss) from Continuing Operations
8,687 3,455 4,082 6,980 (3,819)
Discontinued Operations:
Earnings (Loss) from Discontinued
Operations, net of income taxes....... 580 (9,158) 5,363 (1,114) (153)
-------------------------------------------------------------------------
Net Earnings (Loss)....................... $ 9,267 $ (5,703) $ 9,445 $ 5,866 $ (3,972)
=========================================================================
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
------------ ----------- ------------ ----------- ------------
1999 1998 1997 1996 1995
------------ ----------- ------------ ----------- ------------
Earnings (Loss) per Common Share from
Continuing Operations:
<S> <C> <C> <C> <C> <C>
Basic..................................... $ 0.58 $ 0.19 $ 0.23 $ 0.89 $ (0.69)
============ =========== ============ =========== ============
Diluted................................... $ 0.57 $ 0.19 $ 0.22 $ 0.84 $ (0.69)
============ =========== ============ =========== ============
Net Earnings (Loss) per Common Share:
Basic..................................... $ 0.61 $ (0.32) $ 0.53 $ 0.74 $ (0.72)
============ =========== ============ =========== ============
Diluted................................... $ 0.62 $ (0.31) $ 0.52 $ 0.71 $ (0.72)
============ =========== ============ =========== ============
Shares Used in Computation - Continuing
Operations
Basic Shares.............................. 15,093 18,082 17,832 7,887 5,522
============ =========== ============ =========== ============
Diluted Shares............................ 15,329 18,405 18,234 8,298 5,522
============ =========== ============ =========== ============
Shares Used in Computation - Net
Earnings (Loss)
============ =========== ============ =========== ============
Basic Shares.............................. 15,093 18,082 17,832 7,887 5,522
============ =========== ============ =========== ============
Diluted Shares............................ 15,329 18,045 18,234 8,298 5,522
============ =========== ============ =========== ============
Earnings to Fixed Charges(1).............. 3.19 2.22 3.91 2.62 (2)
============ =========== ============ =========== ============
Balance Sheet Data:
Cash and Cash Equivalents................. $ 3,683 $ 2,544 $ 3,537 $ 18,455 $ 1,419
Finance Receivables, Net.................. 365,586 126,168 60,778 14,186 27,732
Total Assets............................. 537,950 338,306 275,633 117,629 60,712
Subordinated Notes Payable................ 29,217 38,741 12,000 14,000 14,553
Total Debt............................... 341,149 156,636 77,171 26,904 49,754
Preferred Stock........................... -- -- -- -- 10,000
Common Stock.............................. 152,971 159,318 172,622 82,612 127
Total Stockholders' Equity............... 165,686 162,767 181,774 82,319 4,884
Principal Balances Serviced
Dealership Sales.......................... 358,818 93,936 55,965 7,068 34,226
Securitized with Servicing Retained....... 61,484 198,747 238,025 51,662 --
Discontinued Operations................... 25,725 73,770 29,965 49,772 13,805
Servicing on Behalf of Others............. 12,983 47,947 127,322 -- --
------------ ----------- ------------ ----------- ------------
Total Serviced Portfolios................. $ 459,010 $ 414,400 $ 451,277 $ 108,502 $ 48,031
============ =========== ============ =========== ============
Dealership Operating Data (unaudited):
Average Sales Price per Car............... 8,454 7,997 7,443 7,107 6,478
Number of Used Cars Sold.................. 46,120 35,964 16,636 7,565 7,383
Company Dealerships....................... 72 56 41 8 8
Number of Contracts Originated............ 45,756 35,560 29,251 6,929 6,129
Principal Balances Originated (dollars
in thousands)......................... 382,335 277,226 172,230 48,996 36,568
Retained Portfolio:
Number of Contracts Outstanding........... 53,081 12,415 7,993 1,045 8,049
Allowance as % of Outstanding Principal... 21.0% 26.4% 18.5% 23.0% 21.9%
Average Yield on Contracts................ 26.0% 25.8% 26.7% 29.2% 28.0%
Delinquencies - Retained Portfolio:
Principal Balances 31 to 60 Days.......... 5.0% 2.3% 2.2% 2.3% 4.2%
Principal Balances over 60 days........... 4.9% 0.5% 0.6% 0.6% 1.1%
<FN>
(1) Ratio of Earnings to Fixed Charges for September 30, 1999 was 3.04.
(2) Earnings did not cover Fixed Charges by $3.9 million in the year ended December 31, 1995.
</FN>
</TABLE>
24
<PAGE>
CERTAIN PRO FORMA FINANCIAL INFORMATION
The table set forth below shows the pro forma effects the Exchange Offer would
have had on the adjusted financial condition and results of operations of the
Company for the years ended December 31, 1999 and December 31, 1998, and the
nine months ended September 30, 1999, assuming the maximum and minimum number of
Shares had been exchanged on the first day of the respective periods and are
valued at $9.00 per share. Certain reclassifications have been made to the prior
year financial statements to conform to current year presentation.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Nine Months Ended September 30, 1999
----------------------------------------- -----------------------------------------
--------------------------- ---------------------------
Pro Forma Pro Forma
--------------------------- ---------------------------
Maximum Minimum Maximum Minimum
No. of No. of No. of No. of
Shares Shares Shares Shares
Exchanged Exchanged Actual Exchanged Exchanged
------------- ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales of Used Cars $ 389,908 $ 389,908 $ 389,908 $ 307,633 $ 307,633 $ 307,633
Less:
Cost of Used Cars Sold 219,071 219,071 219,071 173,429 173,429 173,429
Provision for Credit Losses 102,955 102,955 102,955 81,113 81,113 81,113
------------- ------------- ------------ ------------- ------------- ------------
67,882 67,882 67,882 53,091 53,091 53,091
------------- ------------- ------------ ------------- ------------- ------------
Interest Income 51,172 51,172 51,172 34,914 34,914 34,914
Gain on Sale of Loans -- -- -- -- -- --
Servicing and Other Income 8,793 8,793 8,793 7,290 7,290 7,290
------------- ------------- ------------ ------------- ------------- ------------
Other Income 59,965 59,965 59,965 42,204 42,204 42,204
------------- ------------- ------------ ------------- ------------- ------------
Income before Operating Expenses 127,847 127,847 127,847 95,295 95,295 95,295
Operating Expenses
Selling and Marketing 23,752 23,752 23,752 18,577 18,577 18,577
General and Administrative 82,236 82,236 82,236 61,413 61,413 61,413
Depreciation and Amortization 6,948 6,948 6,948 5,037 5,037 5,037
------------- ------------- ------------ ------------- ------------- ------------
112,936 112,936 112,936 85,027 85,027 85,027
------------- ------------- ------------ ------------- ------------- ------------
Operating Income 14,911 14,911 14,911 10,268 10,268 10,268
Interest Expense 224 3,672 914 -- 2,586 518
------------- ------------- ------------ ------------- ------------- ------------
Earnings (Loss) before Income Taxes 14,687 11,239 13,997 10,268 7,682 9,750
Income Taxes (Benefit) 6,000 4,586 5,717 4,200 3,140 3,988
------------- ------------- ------------ ------------- ------------- ------------
Earnings (Loss) from Continuing
Operations $ 8,687 $ 6,653 $ 8,280 $ 6,068 $ 4,542 $ 5,762
============= ============= ============ ============= ============= ============
Earnings (Loss) per Common Share from
Continuing Operations:
Basic $ 0.58 $ 0.53 $ 0.57 $ 0.40 $ 0.36 $ 0.39
============= ============= ============ ============= ============= ============
Diluted $ 0.57 $ 0.52 $ 0.56 $ 0.39 $ 0.35 $ 0.39
============= ============= ============ ============= ============= ============
Shares Used in Computation -
Continuing Operations:
Basic Shares 15,093 12,593 14,593 15,161 12,661 14,661
============= ============= ============ ============= ============= ============
Diluted Shares 15,329 12,829 14,829 15,384 12,884 14,884
============= ============= ============ ============= ============= ============
25
<PAGE>
Year Ended December 31, 1998
-----------------------------------------
---------------------------
Pro Forma
---------------------------
Maximum Minimum
No. of No. of
Shares Shares
Actual Exchanged Exchanged
------------- ------------- -------------
Sales of Used Cars $ 287,618 $ 287,618 $ 287,618
Less:
Cost of Used Cars Sold 167,014 167,014 167,014
Provision for Credit Losses 65,318 65,318 65,318
------------- ------------- -------------
55,286 55,286 55,286
------------- ------------- -------------
Interest Income 14,404 14,404 14,404
Gain on Sale of Loans 12,093 12,093 12,093
Servicing and Other Income 16,335 16,335 16,335
------------- ------------- -------------
Other Income 42,832 42,832 42,832
------------- ------------- -------------
Income before Operating Expenses 98,118 98,118 98,118
Operating Expenses
Selling and Marketing 20,285 20,285 20,285
General and Administrative 66,977 66,977 66,977
Depreciation and Amortization 4,912 4,912 4,912
------------- ------------- -------------
92,174 92,174 92,174
------------- ------------- -------------
Operating Income 5,944 5,944 5,944
Interest Expense 138 3,586 828
------------- ------------- -------------
Earnings (Loss) before Income Taxes 5,806 2,358 5,116
Income Taxes (Benefit) 2,351 937 2,068
------------- ------------- -------------
Earnings (Loss) from Continuing
Operations $ 3,455 $ 1,421 $ 3,048
============= ============= =============
Earnings (Loss) per Common Share from
Continuing Operations:
Basic $ 0.19 $ 0.09 $ 0.17
============= ============= =============
Diluted $ 0.19 $ 0.09 $ 0.17
============= ============= =============
Shares Used in Computation -
Continuing Operations:
Basic Shares 18,082 15,582 17,582
============= ============= =============
Diluted Shares 18,405 15,905 17,905
============= ============= =============
</TABLE>
25A
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Nine Months Ended September 30, 1999
----------------------------------------- -----------------------------------------
--------------------------- ---------------------------
Pro Forma Pro Forma
--------------------------- ---------------------------
Maximum Minimum Maximum Minimum
No. of No. of No. of No. of
Shares Shares Shares Shares
Exchanged Exchanged Actual Exchanged Exchanged
------------- ------------- ------------ ------------- ------------- ------------
Balance Sheet Data:
<S> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents............ $ 3,683 3,683 3,683 2,293 2,293 2,293
Finance Receivables, Net............. 365,586 365,586 365,586 260,026 260,026 260,026
Total Assets..................... 537,950 537,950 537,950 518,765 518,765 518,765
Subordinated Notes Payable........... 29,217 51,717 33,717 37,077 59,577 41,577
Total Debt....................... 341,149 363,649 345,649 317,440 339,940 321,940
Preferred Stock...................... -- -- -- -- -- --
Common Stock......................... 152,971 130,271 148,271 152,955 130,255 148,255
Total Stockholders' Equity....... 165,686 142,986 160,986 162,477 139,777 157,777
Common Shares Outstanding............ 14,890 12,390 14,390 15,834 13,334 15,334
Book Value per share................. 11.13 11.54 11.19 10.26 10.48 10.29
Year Ended December 31, 1999 Nine Months Ended September 30, 1999
---------------------------------------- ----------------------------------------
Maximum Minimum Maximum Minimum
No. of No. of No. of No. of
Shares Shares Shares Shares
Exchanged Exchanged Exchanged Exchanged
------------------- ------------------- ------------------- -------------------
Par Value of Debentures Issued........ $ 27,500 $ 5,500 $ 27,500 $ 5,500
=================== =================== =================== ===================
Interest Incurred During the period
at 11%............................ $ 3,025 $ 605 $ 2,269 $ 454
------------------- ------------------- ------------------- -------------------
Amortization of the Discount of
$5,000,000 and $1,000,000 for
the Maximum and Minimum Shares
Exchanged, Respectively........... 423 85 317 64
------------------- ------------------- ------------------- -------------------
Interest Expense Adjustment........... $ 3,448 $ 690 $ 2,586 $ 518
=================== =================== =================== ===================
Year Ended December 31, 1999 Nine Months Ended September 30, 1999
---------------------------------------- ----------------------------------------
Maximum Minimum Maximum Minimum
No. of No. of No. of No. of
Shares Shares Shares Shares
Exchanged Exchanged Exchanged Exchanged
------------------- ------------------- ------------------- -------------------
Par Value of Subordinated Debentures.. $ 27,500 $ 5,500 $ 27,500 $ 5,500
Less: Discount........................ 5,000 1,000 5,000 1,000
------------------- ------------------- ------------------- -------------------
Carrying Value of Subordinated Notes
Payable........................... 22,500 4,500 22,500 4,500
Estimated Stock Acquisition Costs..... 200 200 200 200
------------------- ------------------- ------------------- -------------------
Common Stock Acquired................. $ 22,700 $ 4,700 $ 22,700 $ 4,700
=================== =================== =================== ===================
26
<PAGE>
Year Ended December 31, 1998
-----------------------------------------
---------------------------
Pro Forma
---------------------------
Maximum Minimum
No. of No. of
Shares Shares
Actual Exchanged Exchanged
------------- ------------- -------------
Balance Sheet Data:
Cash and Cash Equivalents............ 2,544 2,544 2,544
Finance Receivables, Net............. 127,733 127,733 127,733
Total Assets..................... 338,306 338,306 338,306
Subordinated Notes Payable........... 38,741 61,241 43,241
Total Debt....................... 156,636 179,136 161,136
Preferred Stock...................... -- -- --
Common Stock......................... 159,318 136,618 154,618
Total Stockholders' Equity....... 162,767 140,067 158,067
Common Shares Outstanding............ 15,845 13,345 15,345
Book Value per share................. 10.27 10.50 10.30
Year Ended December 31, 1998
----------------------------------------
Maximum Minimum
No. of No. of
Shares Shares
Exchanged Exchanged
------------------- -------------------
Par Value of Debentures Issued........ $ 27,500 $ 5,500
=================== ===================
Interest Incurred During the period
at 11%............................ $ 3,025 $ 605
------------------- -------------------
Amortization of the Discount of
$5,000,000 and $1,000,000 for
the Maximum and Minimum Shares
Exchanged, Respectively........... 423 85
------------------- -------------------
Interest Expense Adjustment........... $ 3,448 $ 690
=================== ===================
Year Ended December 31, 1998
----------------------------------------
Maximum Minimum
No. of No. of
Shares Shares
Exchanged Exchanged
------------------- -------------------
Par Value of Subordinated Debentures.. $ 27,500 $ 5,500
Less: Discount........................ 5,000 1,000
------------------- -------------------
Carrying Value of Subordinated Notes
Payable........................... 22,500 4,500
Estimated Stock Acquisition Costs..... 200 200
------------------- -------------------
Common Stock Acquired................. $ 22,700 $ 4,700
=================== ===================
</TABLE>
26A
<PAGE>
34
PRICE RANGE OF COMMON STOCK
The Company's Common Stock trades on the Nasdaq Stock Market under the
symbol "UGLY." The Company's initial public offering was effected on June 17,
1996 at a price of $6.75 per share. The high and low closing sales prices of the
Common Stock as reported by Nasdaq since that date are reported below.
<TABLE>
<CAPTION>
Market Price
High Low
<S> <C> <C>
Fiscal Year 1996:
Second Quarter (from June 18, 1996) $10.00 $ 8.50
Third Quarter $15.50 $ 8.13
Fourth Quarter $21.63 $13.00
Fiscal Year 1997:
First Quarter $25.75 $16.25
Second Quarter $18.06 $13.13
Third Quarter $17.00 $12.50
Fourth Quarter $16.75 $ 7.69
Fiscal Year 1998:
First Quarter $10.88 $ 6.31
Second Quarter $12.70 $ 8.00
Third Quarter $ 9.13 $ 4.63
Fourth Quarter $ 6.00 $ 4.25
Fiscal Year 1999:
First Quarter $ 6.50 $ 4.25
Second Quarter $ 7.69 $ 5.13
Third Quarter $ 9.00 $ 6.88
Fourth Quarter $ 8.88 $ 6.81
</TABLE>
On February 14, 2000, there were approximately 77 holders of record of
the Company's Common Stock.
Ugly Duckling's capital stock consists of 100,000,000 shares of Common
Stock, of which approximately 14,906,152 shares were outstanding as of February
14, 2000 and 10,000,000 shares of Preferred Stock, none of which were issued and
outstanding as of February 14, 2000.
DIVIDENDS
Cash dividends have never been paid on Ugly Duckling's Common Stock.
The Company presently intends to retain earnings and does not anticipate that
cash dividends will be paid on its Common Stock in the foreseeable future. Under
the terms of the Revolving Facility with GE Capital, the Company may not declare
or pay dividends in excess of 15% of each year's net earnings available for
distribution.
27
<PAGE>
BUSINESS
General
The Company operates a chain of buy here-pay here used car dealerships
and underwrites, finances and services retail installment contracts generated
from the sale of used cars by its Company dealerships. The Company targets its
products and services to the sub-prime segment of the automobile financing
industry, which focuses on selling and financing the sale of used cars to
persons who have limited credit histories, low incomes, or past credit problems.
Dealership Operations and Related Securitization Program. As of the
date of this Offering Circular, the Company was operating 74 used car
dealerships ("Company Dealerships") located in 11 metropolitan areas and 8
states. The Company distinguishes its Company Dealership operations from those
of typical buy here -- pay here dealers through its network of multiple
locations, upgraded facilities, large inventories of used cars, regional
centralized purchasing, value-added marketing programs, and dedication to
customer service. Company Dealerships are typically located in high visibility,
high traffic commercial areas, and generally are newer and cleaner in appearance
than other buy here -- pay here dealers, helping promote the Company's image as
a friendly and reputable business. For the 12 months ended December 31, 1999,
the Company generated revenues from its continuing dealership operations of
$467.3 million and net earnings of $8.7 million, compared to $332.6 million in
revenues and $3.5 million in net earnings, respectively, for the 12 months ended
December 31, 1998.
The address and telephone number of our principal executive office is
2525 East Camelback Road, Suite 500, Phoenix, Arizona 85016, telephone
1-800-THE-DUCK.
Recent Developments
Sale of Cygnet Dealer. The Company's Cygnet Dealer program provided
qualified used car dealers with warehouse purchase facilities and revolving
lines of credit primarily secured by the dealers finance receivable portfolios.
In December, 1999, the Company sold Cygnet Dealer to an entity controlled by
Ernest C. Garcia II, the Company's Chairman and principal shareholder, for
approximately $38 million, the estimated book value of Cygnet Dealer plus the
value of certain receivables for advances to Cygnet Dealer. The purchase price
of Cygnet Dealer was paid through assumption by the buyer of approximately $8
million of outstanding debt the Company owed to Verde Investments, Inc., an
affiliate of Mr. Garcia; a $12 million, 10-year promissory note from the buyer
bearing interest at 9.0% per year that is guaranteed by Verde and Cygnet Dealer
and secured by a pledge of the stock of Cygnet Dealer, and the remainder in
cash. The note is subordinate to the initial financing obtained by Cygnet
Dealer. The Company also received warrants to acquire up to 50% of the buyer for
$1 beginning two years after close until five years after the note is paid in
full. The warrants would be forfeited in the event that the note is repaid
within one year. The percentage of Cygnet Dealer purchasable will be reduced to
25% if the note is reduced to $4 million within two years, and to 10% if the
note is paid in full within two years.
Discontinued Operations. In 1994, the Company acquired Champion
Financial Services, Inc., an independent automobile finance company. In April
1995, the Company began to expand Champion's branch office network and, by
December 31, 1997, the Company operated 83 branch offices across the country. In
February 1998, the Company announced its intention to close the branch office
network and exit this line of business in the first quarter of 1998. The Company
recorded a pre-tax charge to discontinued operations totaling approximately $9.1
million (approximately $5.6 million net of income taxes) during the first
quarter of 1998. In addition, a $6.0 million charge (approximately $3.6 million
net of income taxes) was taken during the third quarter of 1998 and a $2.5
million charge (approximately $1.5 million net of income taxes) was taken during
the fourth quarter of 1999, due primarily to higher than anticipated loan losses
and servicing expenses. The branch office closure was substantially complete by
the end of the first quarter of 1998.
Effective December 31, 1999, the Company adopted a formal plan to
abandon any effort for its third party dealer operations to acquire loans or
servicing rights to additional portfolios. Accordingly, our Cygnet Servicing and
the associated Cygnet Corporate segment also are reported as components of
discontinued operations. The Company plans to complete servicing the portfolios
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that it currently services. For 1999, the Cygnet Servicing and Cygnet Corporate
segments incurred net earnings of $1.4 million and $2.3 million for the fourth
quarter and year ended December 1999, respectively. No loss has been recorded on
the disposal of this segment as the Company anticipates that over the run-off
period, expected to be approximately 30 months, it will ultimately realize a net
gain.
Status of FMAC Transaction. The Company has entered into several
transactions in the bankruptcy proceedings of First Merchants Acceptance
Corporation. The Company has the right to 17 1/2% of the recoveries on First
Merchants' residual interests in certain securitized loan pools and other
contracts after First Merchants pays off certain prior debt and other amounts.
In addition, if the Company meets certain conditions (including a minimum stock
price of 8.00 per share), the Company has the right to issue its common stock at
a small discount to the market price to First Merchants or its unsecured
creditors or equity holders in exchange for a portion of First Merchants' 82
1/2% share of collections on the residual interests. The Company is considering
exercising this right sometime after April of this year. The Company estimates
having to issue approximately $30 million of its common stock to do so. The
exchange offer complements this exercise by reducing the number of outstanding
Shares of its common stock making it more likely the Company's stock price will
rise and allowing it to meet the stock price condition to the exercise. In
addition, an increase in stock price will allow the Company to issue a lower
number of shares in the First Merchants transaction. The exchange offer also has
the potential of reducing the dilutive effect on the Company's earnings per
share of the exercise.
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DESCRIPTION OF THE DEBENTURES
The Debentures will be issued under an Indenture, as supplemented and
amended by the First Supplemental Indenture thereto and the Second Supplemental
Indenture thereto (collectively, the "Indenture"), by and between the Company
and Harris Trust and Savings Bank, as Trustee (the "Trustee"). The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act, and to all of the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the Trust Indenture Act as in effect on the date of
the Indenture. A copy of the Indenture will be filed with the Commission as an
exhibit to the Form T-3 filed in connection with the qualification of the
Indenture under the Trust Indenture Act.
The Indenture allows the issuance of debt securities of the Company
("Debt Securities"), in one or more series, in an aggregate principal amount up
to $100,000,000. The Second Supplemental Indenture establishes the Debentures as
a series of Debt Securities under the Indenture.
Principal, Maturity and Interest
The Debentures are limited in aggregate principal amount to
$27,500,000, and will mature on April 15, 2007. Interest on the Debentures will
accrue from the date of original issuance at the rate of 11% per annum and will
be payable semiannually in cash on each April 15 and October 15 (each, an
"Interest Payment Date"), commencing on April 15, 2000, to the registered
holders of the Debentures ("Holders") at the close of business on the April 1
and October 1 immediately preceding the applicable Interest Payment Date.
Interest is payable on the Debentures from the most recent date to which
interest has been paid or, if no interest has been paid, from and including the
date of issuance.
The Debentures will be unsecured obligations of the Company and will
not be entitled to the benefit of any mandatory sinking fund.
Payment and Paying Agents
Payment of interest on a Debenture on any Interest Payment Date will be
made to the Person in whose name such Debenture (or one or more Predecessor
Debentures) is registered at the close of business on the Regular Record Date
for such interest. (Section 307).
Principal of and interest on the Debentures will be payable at the
office of such Paying Agent or Paying Agents as the Company may designate for
such purpose from time to time, except that at the option of the Company payment
of any interest may be made by check mailed to the address of the Person
entitled thereto as such address appears in the Security Register. (Section
307). The corporate trust office of the Trustee in Chicago, Illinois will be
designated as the Company's Paying Agent for payments with respect to the
Debentures. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that the Company will be required to
maintain a Paying Agent in each Place of Payment for the Debentures. (Section
1002).
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debentures which remain unclaimed
at the end of two years after such principal, premium, or interest has become
due and payable will be repaid to the Company, subject to certain publication
requirements, and the Holder of such Debentures thereafter may look only to the
Company for payment thereof (Section 1003).
Form, Exchange, and Transfer
The Debentures will be issuable only in fully registered form without
coupons and in denominations of $1.00 and any integral multiple thereof.
(Section 302).
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At the option of the Holder, subject to the terms of the Indenture,
Debentures will be exchangeable for other Debentures, of any authorized
denomination and of like tenor and aggregate principal amount. (Section 305).
Subject to the terms of the Indenture, Debentures may be presented for exchange
as provided above or for registration of transfer (duly endorsed or with the
form of transfer endorsed thereon duly executed) at the office of any transfer
agent designated by the Company for such purpose. No service charge will be made
for any registration of transfer or exchange of Debentures, but, with certain
limited exceptions, the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. The
Company has appointed the Trustee as Security Registrar and transfer agent for
the Debentures. (Section 305). The Company may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts, except that the
Company will be required to maintain a transfer agent in each Place of Payment
for the Debentures. (Section 1002).
If the Debentures are to be redeemed, the Company will not be required
to (i) issue, register the transfer of, or exchange any Debentures during a
period beginning at the opening of business 15 days before the day of mailing of
a notice of redemption of any such Debentures that may be selected for
redemption and ending at the close of business on the day of such mailing or
(ii) register the transfer of or exchange any Debenture so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Debenture being redeemed in part. (Section 305).
Redemption
The Debentures will be redeemable, at the Company's option, in whole at
any time or in part from time to time, upon not less than 30 nor more than 60
days' notice, at the principal amount to be redeemed, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption.
Selection and Notice of Redemption
In the event that less than all of the Debentures are to be redeemed at
any time, selection of such Debentures for redemption will be made by the
Trustee, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate. Notice of redemption shall be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Debentures to be redeemed at its registered address. If any Debenture is to
be redeemed in part only, the notice of redemption that relates to such
Debenture shall state the portion of the principal amount thereof to be
redeemed. A new Debenture in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Debenture. On and after the redemption date, interest will cease to
accrue on Debentures or portions thereof called for redemption as long as the
Company has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to the Indenture. Each notice of redemption
may include a statement that such redemption shall be conditional upon the
receipt by the Trustee on or prior to the Redemption Date of amounts sufficient
to pay principal of, and interest on, the Debentures to be redeemed, and that if
such amounts shall not have been so received, said notice shall be of no force
and effect, the Debentures to be redeemed will not become due and payable on the
Redemption Date, and the Company shall not be required to redeem such Debentures
on such date. If such a Conditional Notice is given, failure by the Company to
deposit money necessary to effect the redemption on or prior to the Redemption
Date will not result in a default under the Indenture.
Subordination
The payment of all obligations on the Debentures is subordinated in
right of payment to the prior payment in full of all obligations on Senior
Indebtedness. Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding up, assignment for the benefit of
creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
(as hereafter defined) due or to become due upon all Senior Indebtedness shall
first be paid in full, or such payment duly provided for to the satisfaction of
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the holders of Senior Indebtedness, before any payment or distribution of any
kind or character is made on account of any Obligations on the Debentures, or
for the acquisition of any of the Debentures for cash or property or otherwise.
If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by acceleration or otherwise, of any principal
of, or premium or interest on any Senior Indebtedness, no payment of any kind or
character shall be made by or on behalf of the Company or any other Person on
its behalf with respect to any Obligations on the Debentures or to acquire any
of the Debentures for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing
with respect to any Senior Indebtedness, other than the Designated Senior
Indebtedness (as hereafter defined), as such event of default is defined in the
instrument creating or evidencing such Senior Indebtedness, permitting the
holders of such Senior Indebtedness then outstanding to immediately accelerate
the maturity thereof and if a representative for such issue of Senior
Indebtedness gives written notice of the event of default to the Trustee (a
"Default Notice"), then, unless and until all events of default with respect to
such Senior Indebtedness have been cured or waived in writing or have ceased to
exist or the Trustee receives notice from such representative for the respective
issue of Senior Indebtedness terminating the Blockage Period (as defined below),
during the 179 days after the delivery of such Default Notice (the "Blockage
Period"), neither the Company nor any other Person on its behalf shall (x) make
any payment of any kind or character with respect to any Obligations on the
Debentures or (y) acquire any of the Debentures for cash or property or
otherwise. Notwithstanding the above, in no event will a Blockage Period extend
beyond 179 days from the date the payment on the Debentures was due and only one
such Blockage Period may be commenced within any 365 consecutive days
irrespective of the number of defaults with respect to Senior Indebtedness
during such period. In no event may the total number of days during which any
Blockage Period is or Blockage Periods are in effect exceed 179 days in the
aggregate during any consecutive 365 day period. No event of default which
existed or was continuing on the date of the commencement of any Blockage Period
with respect to the Senior Indebtedness shall be, or be made, the basis for
commencement of a second Blockage Period by a representative of such Senior
Indebtedness unless such event of default shall have been cured or waived for a
period of not less than 90 consecutive days. However, any subsequent action, or
any breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose.
In addition, if any event of default (as defined in the instrument
creating or evidencing any Designated Senior Indebtedness) occurs and is
continuing with respect to any Designated Senior Indebtedness or an executive
officer of the Company has actual knowledge of a default under any Designated
Senior Indebtedness, which with notice or lapse of time or both would result in
an event of default under such Designated Senior Indebtedness, then the Company
shall give notice thereof to the Trustee and, regardless of the giving of such
notice, no payment of any kind or character shall be made by or on behalf of the
Company or any other Person on its behalf with respect to any Obligations on the
Debentures or to acquire any of the Debentures for cash or property or otherwise
for a period of 179 days from the date of each such event of default or the date
that an executive officer obtains actual knowledge that there is such a default
(a "Designated Senior Indebtedness Blockage Period"), unless and until all such
events of defaults or defaults with respect to such Designated Senior
Indebtedness have been cured or waived in writing pursuant to the Designated
Senior Indebtedness or have ceased to exist or the Trustee receives notice from
a representative for the applicable issue of Designated Senior Indebtedness
terminating the Designated Senior Indebtedness Blockage Period. In the event any
Debenture is declared due and payable before its expressed maturity under
Section 502 of the Indenture, (i) the Company will give prompt notice in writing
of such happening to the holders of Designated Senior Indebtedness and (ii) no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its behalf with respect to any obligations on the Debentures
or to assume any of the Debentures for cash or property or otherwise without the
consent of the Designated Senior Indebtedness.
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the Holders of the Debentures, may recover less, ratably, than holders
of Senior Indebtedness. See also "Risk Factors -- Subordination."
For purposes of the subordination provisions of the Debentures, the
following definitions apply:
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"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Credit Agreement" means the Amended and Restated Motor Vehicle
Installment Contract Loan and Security Agreement dated as of August 15, 1997
among the Company, General Electric Capital Corporation, and certain other
parties, as such agreement may be amended, restated, modified, renewed,
refunded, replaced or refinanced from time to time, including any notes,
guarantees, security or pledge agreements, letters of credit and other documents
or instruments executed pursuant thereto and any exhibits or schedules to any of
the foregoing.
"Designated Senior Indebtedness" means (i) all Indebtedness outstanding
under the Credit Agreement and (ii) any other Senior Indebtedness designated by
the Company as "Designated Senior Indebtedness" from time to time.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"Indebtedness" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other similar accrued
liabilities arising in the ordinary course of business and payable in accordance
with customary terms), (v) all obligations for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any lien on any property or asset of such Person, the
amount of such obligation being deemed to be the lesser of the fair market value
of such property or asset or the amount of the obligation so secured, and (viii)
all obligations under currency agreements and interest swap agreements of such
Person.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Senior Indebtedness" means all Obligations on any Indebtedness of the
Company, whether outstanding on the date of original issuance of the Debentures
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Debentures.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company (including, without limitation, amounts owed for compensation),
(iii) any liability for federal, state, local or other taxes owed or owing by
the Company, and (iv) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company.
Except to the extent described below under "Certain Covenants," the
Indenture does not limit the aggregate amount of Senior Indebtedness that the
Company may issue. As of December 31, 1999, outstanding Senior Indebtedness of
the Company was approximately $94 million and Designated Senior Indebtedness
aggregated approximately $76 million.
The subordination provisions apply only to Debentures that are
Outstanding. Debentures will not be deemed to be Outstanding if, among other
circumstances, money in the necessary amount has been deposited with the Trustee
or any Paying Agent (other than the Company) in trust, or set aside and
segregated in trust by the Company (if it acts as its own Paying Agent) for the
redemption of such Debentures and notice of redemption has been given as
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required in the Indenture or provision therefor satisfactory to the Trustee has
been made. In addition, upon the effectiveness of any Defeasance or Covenant
Defeasance as described below under the heading "Defeasance and Covenant
Defeasance," the Debentures then Outstanding shall cease to be subordinated
under the Indenture.
Certain Covenants
The Indenture will contain, among others, the following covenant
provided for the Debentures:
Minimum Equity. The Company will at all times maintain Consolidated Net
Worth (defined above) of at least $100,000,000.
Events of Default
Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Securities of that series when due; (b)
failure to pay any interest on any Debt Securities of that series when due,
continued for 30 days; (c) failure to deposit any sinking fund payment, when
due, in respect of any Debt Securities of that series; (d) failure to perform
any other covenant of the Company in the Indenture (other than a covenant
included in the Indenture solely for the benefit of a series other than that
series), that continues for 90 days after written notice has been given by the
Trustee, or the Holders of at least 25% in principal amount of the Outstanding
Debt Securities of that series, as provided in the Indenture; (e) certain events
in bankruptcy, insolvency, or reorganization, and (f) any other Event of Default
specified for such series in the supplemental indenture or Board Resolution
creating or governing such series. (Section 501). There are no additional Events
of Default provided for the Debentures.
If an Event of Default (other than an Event of Default described in
clause (e) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series by notice as provided in the Indenture may declare the principal
amount of the Debt Securities of that series (or, in the case of any Debt
Security that is an Original Issue Discount Security or the principal amount of
which is not then determinable, such portion of the principal amount of such
Debt Security, or such other amount in lieu of such principal amount, as may be
specified in the terms of such Debt Security) to be due and payable immediately.
If an Event of Default described in clause (e) above with respect to the Debt
Securities of any series at the time Outstanding shall occur, the principal
amount of all the Debt Securities of that series (or, in the case of any such
Original Issue Discount Security or other Debt Security, such specified amount)
will automatically, and without any action by the Trustee or any Holder, become
immediately due and payable. After any such acceleration, but before a judgment
or decree based on acceleration, the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of that series may rescind
and annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal (or other specified amount), have been cured or waived
as provided in the Indenture and payment of all overdue interest and certain
other payments are made by the Company. (Section 502). For information as to
waiver of defaults, see "Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. (Section
603). Subject to such provisions for the indemnification of the Trustee and to
certain other conditions, the Holders of a majority in principal amount of the
Outstanding Debt Securities of any series will have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512).
No Holder of a Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture, or for the appointment
of a receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt Securities
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of that series have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and (iii) the Trustee has failed to institute such proceeding, and has
not received from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request, within 60 days after such notice, request, and offer. (Section 507).
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for the enforcement of payment of the principal of or any premium
or interest on such Debt Security on or after the applicable due date specified
in such Debt Security. (Section 508).
The Company will be required to furnish to the Trustee annually a
statement by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the performance or observance of any of the terms,
provisions, and conditions of the Indenture and, if so, specifying all such
known defaults. (Section 1004).
If a default occurs under the Indenture with respect to Debt Securities
of any series, the Trustee shall give the Holders of Securities of such series
notice of such default as required by the Trust Indenture Act, provided that in
the case of a default described in clause (d) in the first paragraph under
"Events of Default" herein, no such notice to Holders shall be given until at
least 30 days after the occurrence of such default.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the
Company and the Trustee at any time and from time to time without the consent of
the Holders of any of the Debt Securities in certain limited cases. (Section
901). In addition, modifications and amendments of the Indenture may be made by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series affected by such modification or amendment; provided, however, that
no such modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of principal of or interest on, any Debt
Security, (b) reduce the principal amount of, or any premium or interest on, any
Debt Security, (c) reduce the amount of principal of an Original Issue Discount
Security or any other Debt Security payable upon acceleration of the Maturity
thereof, (d) change the place or currency of payment of principal of, or any
premium or interest on, any Debt Security, (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security,
(f) reduce the percentage in principal amount of Outstanding Debt Securities of
any series, the consent of whose Holders is required for modification or
amendment of the Indenture, reduce the percentage in principal amount of
Outstanding Debt Securities of any series necessary for waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults, or
modify such provisions with respect to modification and waiver. (Section 902).
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Debt Securities of any series may waive compliance by the
Company with certain restrictive provisions of the Indenture. (Section 1008).
The Holders of a majority in principal amount of the Outstanding Debt Securities
of any series may waive any past default under the Indenture with respect to
such series, except a default in the payment of principal, premium, or interest
and certain covenants and provisions of the Indenture which cannot be amended
without the consent of the Holder of each Outstanding Debt Security of such
series affected. (Section 513).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any request, demand, authorization, direction, notice, consent, waiver, or
other action under the Indenture as of any date, (i) the principal amount of an
Original Issue Discount Security that will be deemed to be Outstanding will be
the amount of the principal thereof that would be due and payable as of such
date upon acceleration of the Maturity thereof to such date, (ii) if, as of such
date, the principal amount payable at the Stated Maturity of a Debt Security is
not determinable (for example, because it is based on an index), the principal
amount of such Debt Security deemed to be Outstanding as of such date will be an
amount determined in the manner prescribed for such Debt Security, and (iii) the
principal amount of a Debt Security denominated in one or more foreign
currencies or currency units that will be deemed to be Outstanding will be the
U.S. dollar equivalent, determined as of such date in the manner prescribed for
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such Debt Security, of the principal amount of such Debt Security (or, in the
case of a Debt Security described in clause (i) or (ii) above, of the amount
described in such clause). Certain Debt Securities, including those for whose
payment or redemption money has been deposited or set aside in trust for the
Holders and those that have been fully defeased pursuant to Section 1302 of the
Indenture, will not be deemed to be Outstanding. (Section 101).
Except in certain limited circumstances, the Company will be entitled
to set any day as a record date for the purpose of determining the Holders of
Outstanding Debt Securities of any series entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver, or other action under
the Indenture, in the manner and subject to the limitations provided in the
Indenture. In certain limited circumstances, the Trustee will be entitled to set
a record date for action by Holders. If a record date is set for any action to
be taken by Holders of a particular series, such action may be taken only by
persons who are Holders of Outstanding Debt Securities of that series on the
record date. To be effective, such action must be taken by Holders of the
requisite principal amount of such Debt Securities within a specified period
following the record date. For any particular record date, this period will be
180 days or such other shorter period as may be specified by the Company (or the
Trustee, if it sets the record date), and may be shortened or lengthened (but
not beyond 180 days) from time to time. (Section 104).
Defeasance and Covenant Defeasance
The provisions of Section 1302, relating to defeasance and discharge of
indebtedness, and Section 1303, relating to defeasance of certain restrictive
covenants in the Indenture, will apply to the Debentures.
Defeasance and Discharge. Pursuant to Section 1302, the Company will be
discharged from all its obligations with respect to the Debentures (except for
certain obligations to exchange or register the transfer of Debentures, to
replace stolen, lost, or mutilated Debentures, to maintain paying agencies, and
to hold moneys for payment in trust) upon satisfaction of certain conditions,
including the deposit in trust for the benefit of the Holders of Debentures of
money or U.S. Government Obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of and any premium
and interest on the Debentures on the respective Stated Maturities or on any
Redemption Date established for the Debentures in accordance with the terms of
the Indenture and such Debentures. Such defeasance or discharge may occur only
if, among other things, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or there has been a change
in tax law, in either case to the effect that Holders of the Debentures will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance, and discharge and will be subject to federal income tax on
the same amount, in the same manner, and at the same times as would have been
the case if such deposit, defeasance, and discharge were not to occur. (Sections
1302 and 1304).
Defeasance of Certain Covenants. Pursuant to Section 1303, if certain
conditions are satisfied, the Company may omit to comply with certain
restrictive covenants in the Indenture, and the occurrence of certain Events of
Default, which are described above in clause (d) (with respect to such
restrictive covenants) under "Events of Default," will be deemed not to be or
result in an Event of Default and the provisions of Article Fourteen relating to
subordination will cease to be effective, in each case with respect to the
Debentures. The Company, in order to exercise such option, will be required to
deposit, in trust for the benefit of the Holders of the Debentures, money or
U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and any premium and
interest on the Debentures on the respective Stated Maturities or on any
Redemption Dates established for the Debentures in accordance with the terms of
the Indenture and the Debentures. The Company will also be required, among other
things, to deliver to the Trustee an Opinion of Counsel to the effect that
Holders of the Debentures will not recognize gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount, in the same manner,
and at the same times as would have been the case if such deposit and defeasance
were not to occur. In the event the Company exercised this option with respect
to the Debentures and the Debentures were declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S. Government
Obligations so deposited in trust would be sufficient to pay amounts due on the
Debentures at the time of their respective Stated Maturities, but may not be
sufficient to pay amounts due on the Debentures upon any acceleration resulting
from such Event of Default. In such case, the Company would remain liable for
such payments. (Sections 1303 and 1304).
36
<PAGE>
Satisfaction and Discharge
The Indenture will also be deemed to be satisfied and discharged,
except as to certain limited provisions, as to Debentures that have become due
and payable or will become due and payable at their Stated Maturity within one
year from the date of determination or are to be called for redemption within
one year under arrangements satisfactory to the Trustee, but only if the Company
deposits money in an amount sufficient to pay the entire principal, premium, and
interest to the date of deposit (as to Debentures that have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be, and
certain other conditions are satisfied. (Section 401). See also "Defeasance and
Covenant Defeasance."
Notices
Notices to Holders of Debentures will be given by mail to the addresses
of such Holders as they may appear in the Security Register. (Sections 101 and
106).
Title
The Company, the Trustee, and any agent of the Company or the Trustee
may treat the Person in whose name a Debenture is registered as the absolute
owner thereof (whether or not such an Debenture may be overdue) for the purpose
of making payment and for all other purposes. (Section 308).
Governing Law
The Indenture and the Debt Securities will be governed by, and
construed in accordance with, the law of the State of Arizona (Section 112).
Regarding the Trustee
The Trustee under the Indenture is Harris Trust and Savings Bank. The
Company maintains normal banking arrangements with the Trustee, which include
the use of an affiliated company, Harris Trust Company of California, as the
transfer agent for the Common Stock. In addition, Harris Trust and Savings Bank
acts as trustee for the Company's securitization transactions.
37
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is a Delaware corporation and its affairs are governed by
its Certificate of Incorporation and Bylaws and the Delaware General Corporation
Law. The following description of the Company's capital stock, which is complete
in all material respects, is qualified in its entirety by reference to the
provisions of the Company's Certificate of Incorporation and Bylaws, as amended.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, par value $.001 per share, and 10,000,000 shares of
Preferred Stock, par value $.001 per share. As of February 14, 2000,
approximately 14,906,152 shares of Common Stock were issued and outstanding. As
of February 14, 2000, there were no issued and outstanding shares of Preferred
Stock.
Common Stock
Holders of Common Stock are entitled to one vote for each share held of
record on all matters on which stockholders are entitled to vote. Holders of
Common Stock do not have cumulative voting rights, and therefore holders of a
majority of the shares voting for the election of directors can elect all of the
directors. In such event, the holders of the remaining shares will not be able
to elect any directors.
Holders of Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The Company does not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy." In the event of liquidation,
dissolution, or winding up of the Company, the holders of Common Stock are
entitled to share ratably in any corporate assets remaining after payment of all
debts, subject to any preferential rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, conversion, or redemption
rights and are not subject to further calls or assessments by the Company. All
of the outstanding shares of Common Stock are validly issued, fully paid, and
nonassessable.
Preferred Stock
The Board of Directors of the Company has the authority, without
further action by the Company's stockholders, to issue from time to time up to
10,000,000 shares of Preferred Stock in one or more series and to fix the number
of shares, designations, voting powers, preferences, optional and other special
rights, and the restrictions or qualifications thereof. The rights, preferences,
privileges, and restrictions or qualifications of different series of Preferred
Stock may differ with respect to dividend rates, amounts payable on liquidation,
voting rights, conversion rights, redemption provisions, sinking fund
provisions, and other matters. The issuance of Preferred Stock could: (i)
decrease the amount of earnings and assets available for distribution to holders
of Common Stock; (ii) adversely affect the rights and powers, including voting
rights, of holders of Common Stock; and (iii) have the effect of delaying,
deferring, or preventing a change in control of the Company.
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<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AND DIRECTOR BENEFICIAL OWNERSHIP
The following table shows the beneficial ownership of common stock of
the Company by the Company's executive officers and directors as of February 14,
2000:
<S> <C> <C> <C>
- --------------------- --------------------------------------- ------------------------------------- ------------------
Name of Beneficial Owner, Address and Amount and Nature of Beneficial Percent of
Title of Class Other Information (1) Ownership (#)(2)(3) Class (2)(3)
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Ernest C. Garcia II, Chairman of the 4,500,000 Direct 32%
Board and 5% Owner, indirect 294,500 Indirect
ownership consists of 136,500 shares 20,000 Vested Options
held by The Garcia Family Foundation, -----------
Inc., an Arizona nonprofit 4,814,500 Total
corporation, and 158,000 shares held ===========
by Verde, an affiliate of Mr. Garcia.
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Gregory B. Sullivan, Director, 50,800 Direct 2.35%
President and Chief Executive Officer 0 Indirect
307,800 Vested Options
358,600 Total
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Steven T. Darak, Senior Vice 140,000 Direct 1.1%
President - Chief Financial Officer 0 Indirect
_28,999 Vested Options
168,999 Total
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Donald L. Addink, Senior Vice 98,000 Direct *
President - Treasurer 0 Indirect
_18,700 Vested Options
116,700 Total
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Steven A. Tesdahl, Senior Vice 14,565 Direct *
President and Chief Information 0 Indirect
Officer 20,000 Vested Options
------
34,565 Total
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Jon D. Ehlinger, Vice President, 2,000 Direct
Secretary and General Counsel 0 Indirect
_3,500 Vested Options
_5,500 Total
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Christopher D. Jennings, (4) 6,444 Direct *
Director, indirect ownership of a 19,833 Indirect
warrant to purchase 19,833 shares of 5,000 Vested Options
our common stock held on behalf of ------
Mr. Jennings by Cruttenden Roth, an 31,277 Total
investment banking firm and previous ======
employer of Mr. Jennings. The
warrants are convertible into our
common stock at any time through June
21, 2001 at an exercise price of
$9.45 per share and are fully vested
- --------------------- --------------------------------------- ------------------------------------- ------------------
39
<PAGE>
- --------------------- --------------------------------------- ------------------------------------- ------------------
Name of Beneficial Owner, Address and Amount and Nature of Beneficial Percent of
Title of Class Other Information (1) Ownership (#)(2)(3) Class (2)(3)
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock John N. MacDonough, (4) Director, 4,444 Direct *
indirect ownership consists of shares 100 Indirect
of our common stock acquired by Mr. 5,000 Vested Options
MacDonough's son. -----
9,544 Total
=====
- --------------------- --------------------------------------- ------------------------------------- ------------------
Common Stock Frank P. Willey,(4),(5) Director 27,144 Direct *
0 Indirect
5,000 Vested Options
------
32,144 Total
======
- --------------------- --------------------------------------- ------------------------------------- ------------------
<FN>
* Represents less than one percent of the outstanding common stock.
(1) Unless otherwise noted, the address of each of the listed beneficial owners of our common stock is 2525 East Camelback Road,
Suite 500, Phoenix, Arizona 85016.
(2) "Vested Options" are options that the holder can exercise as of April 13, 2000. These options were issued under either the
Company's Long Term Incentive Plan, Director's Stock Option Plan or 1998 Executive Incentive Plan and their related terms and
conditions, including vesting schedules.
(3) Shares of the Company's common stock that are subject to options, warrants or other rights which are currently exercisable or
exercisable as of April 13, 2000 are treated as outstanding for purposes of computing the percentage of the person holding
the option, warrant or other right, but are not treated as outstanding for computing the percentage of any other person.
Except as indicated in footnote (4) below, the amounts and percentages are based upon 14,906,152 shares of the Company's
common stock outstanding as of February 14, 2000, net of shares the Company holds in treasury.
(4) The total and direct ownership for each independent board member includes 4,444 shares of the Company's common stock that the
Company granted under its Director Plan. The Company granted and issued shares having a value of $30,000 on or about the date
of grant (i.e., 4,444 shares of common stock) to each independent board member upon his appointment or election to the
Company's board in June 1996. Under the Director Plan, these shares generally vest over a 3-year period at an annual rate of
33%, beginning on the first anniversary date after the grant date (June 1996).
(5) Possible indirect ownership of shares of Ugly Duckling acquired by Fidelity National Financial, Inc., an affiliate of Mr.
Willey. Mr. Willey disclaims beneficial ownership of such shares.
</FN>
</TABLE>
40
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion summarizes certain United States federal
income tax consequences associated with the Exchange Offer and the ownership of
Debentures. The discussion is intended only as a summary and does not purport to
be a complete analysis of all potential tax considerations that may be relevant
in connection with the Exchange Offer. The discussion is based upon the Internal
Revenue Code of 1986, as amended to the date hereof (the "Code"), existing and
proposed United States Treasury regulations promulgated thereunder, current
administrative pronouncements and judicial decisions, changes to any of which
could materially affect the continued validity of the discussion herein and
could be made on a retroactive basis. No rulings will be sought from the
Internal Revenue Service with respect to the treatment of the Exchange Offer and
no assurance may be given that contrary positions may not be taken by the
Internal Revenue Service or by a court of law.
Scope
The discussion relating to stockholders who participate in the Exchange
Offer addresses only stockholders who are "United States persons" and who hold
Shares as capital assets within the meaning of Section 1221 of the Code, and
does not address all of the tax consequences that may be relevant to particular
stockholders in light of their personal circumstances, or to certain types of
stockholders (such as certain financial institutions, dealers in securities or
commodities, insurance companies, tax-exempt organizations, persons who acquired
Shares as compensation and persons who hold Shares as a position in a "straddle"
or as a part of a "hedging" or "conversion" transaction for United States
federal income tax purposes). In the context of the discussion pertaining to the
Debentures, the discussion describes certain tax consequences applicable only to
original holders of the Debentures. The discussion does not include any
description of the tax laws of any state, local, or non-U.S. government that may
be applicable to a particular stockholder. As used herein, a "United States
person" means (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States, any State or any political subdivision thereof, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision of the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust.
THE SUMMARY DISCUSSION SET FORTH HEREIN IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE TAX CONSEQUENCES OF AN EXCHANGE OF SHARES FOR DEBENTURES
PURSUANT TO THE EXCHANGE OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE
PARTICULAR SITUATION AND CIRCUMSTANCES OF THE TENDERING STOCKHOLDER. ALL
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF EXCHANGES
MADE BY THEM PURSUANT TO THE EXCHANGE OFFER, INCLUDING THE EFFECT OF THE STOCK
OWNERSHIP ATTRIBUTION RULES DESCRIBED HEREIN.
Certain Federal Income Tax Consequences to Tendering Stockholders
Characterization of the Exchange
An exchange of Shares for Debentures by a stockholder pursuant to the
Exchange Offer will be a taxable transaction for United States federal income
tax purposes. The United States federal income tax consequences of such exchange
to a Stockholder may vary depending upon the Stockholder's particular facts and
circumstances. Depending on such facts and circumstances, the exchange will be
treated as either a sale or a distribution for United States federal income tax
purposes.
Under Section 302 of the Code, an exchange of Shares for Debentures
pursuant to the Exchange Offer will be treated as a "sale or exchange" of such
Shares for United States federal income tax purposes (rather than as a deemed
distribution by the Company with respect to Shares continued to be held (or
41
<PAGE>
deemed to be held) by the tendering stockholder) if the receipt of Debentures
upon such exchange (i) is "substantially disproportionate" with respect to the
stockholder, (ii) results in a "complete termination" of the stockholder's
interest in the Company, or (iii) is "not essentially equivalent to a dividend"
with respect to the stockholder. These tests (the "Section 302 Tests") are
explained more fully below. See "Section 302 Tests" below.
If any of the Section 302 Tests is satisfied and the exchange of the
tendered Shares for Debentures is, therefore, treated as a "sale or exchange" of
such Shares for United States federal income tax purposes, the tendering
stockholder will recognize capital gain or loss equal to the difference between
(a) the "issue price" of the Debentures received by the stockholder and (b) the
stockholder's adjusted tax basis in the Shares exchanged pursuant to the
Exchange Offer. For a discussion of the "issue price" of the Debentures, see
"Issue Price of Debentures - Defined" below. Such capital gain or loss will
generally be long-term capital gain or loss if the tendering stockholder held
the tendered Shares for more than 12 months. Under current law, any such gain or
loss recognized by individuals, trusts or estates will be subject to a maximum
20 percent federal tax rate if the Shares have been held for more than 12
months.
If none of the Section 302 Tests is satisfied, then, to the extent of
the Company's current and accumulated earnings and profits (as determined for
federal income tax purposes), the tendering stockholder will generally be
treated as having received a dividend taxable as ordinary income in an amount
equal to the fair market value of the Debentures (determined as of the date of
the Exchange) received by the stockholder pursuant to the Exchange Offer
(without reduction for the adjusted tax basis of the Shares tendered pursuant to
the Exchange Offer), no loss will be recognized, and (subject to reduction as
described below for corporate stockholders eligible for the dividends-received
deduction), the tendering stockholder's adjusted tax basis in the Shares
exchanged pursuant to the Exchange Offer will be added to such stockholder's
adjusted tax basis in the stockholder's remaining Shares, if any. If a tendering
stockholder does not retain any Shares, such stockholder may lose tax basis
entirely. If the exchange of Shares by a stockholder is not treated as a sale or
exchange for federal income tax purposes, the amount (if any) by which the fair
market value of the Debentures exceeds the current or accumulated earnings and
profits of the Company (as determined for federal income tax purposes) will be
treated, first, as a nontaxable return of capital to the extent of the
stockholder's basis in the Shares, and thereafter, as taxable capital gain.
Constructive Ownership of Stock
In determining whether any of the Section 302 Tests is satisfied, a
stockholder must take into account not only the Shares which are actually owned
by the stockholder, but also Shares which are constructively owned by the
stockholder by reason of the attribution rules contained in Section 318 of the
Code. Under Section 318 of the Code, a stockholder may be treated as owning (i)
Shares that are actually owned, and in some cases constructively owned, by
certain related individuals or entities in which the stockholder owns an
interest, or, in the case of stockholders that are entities, by certain
individuals or entities that own an interest in the stockholder and (ii) Shares
which the stockholder has the right to acquire by exercise of an option or a
conversion right contained in another instrument held by the stockholder.
Section 302 Tests
One of the following tests must be satisfied in order for the exchange
of Shares pursuant to the Exchange Offer to be treated as a sale or exchange for
federal income tax purposes.
a. Substantially Disproportionate Test. The exchange of Shares for
Debentures by a stockholder will be "substantially disproportionate" if
the percentage of the outstanding Shares actually and constructively
owned by the stockholder immediately following the exchange of Shares
pursuant to the Exchange Offer (treating as not being outstanding all
Shares exchanged pursuant to the Exchange Offer) is less than 80% of the
percentage of the outstanding Shares actually and constructively owned by
such stockholder immediately before the exchange of Shares pursuant to
the Exchange Offer (treating as outstanding all Shares exchanged pursuant
to the Exchange Offer). Stockholders should consult their own tax
advisors with respect to the application of the "substantially
disproportionate" test to their particular situation and circumstances.
42
<PAGE>
b. Complete Termination Test. The exchange of Shares for Debentures will be
a "complete termination" of a stockholder's interest in the Company if
either (i) all of the Shares actually and constructively owned by the
stockholder are exchanged pursuant to the Exchange Offer or (ii) all of
the Shares actually owned by the stockholder are exchanged pursuant to
the Exchange Offer and, with respect to the Shares constructively owned
by the stockholder which are not exchanged pursuant to the Exchange
Offer, the stockholder is eligible to waive (and effectively waives)
constructive ownership of all such Shares under procedures described in
Section 302(c) of the Code. Stockholders considering making such a waiver
should do so in consultation with their own tax advisors.
c. Not Essentially Equivalent to a Dividend Test. Even if the exchange of
Shares for Debentures fails to result in satisfaction of the
"substantially disproportionate" test and the "complete termination"
test, a stockholder may nevertheless satisfy the "not essentially
equivalent to a dividend" test if the stockholder's exchange of Shares
pursuant to the Exchange Offer results in a "meaningful reduction" in the
stockholder's proportionate interest in the Company. Whether the receipt
of Debentures by a stockholder who exchanges Shares pursuant to the
Exchange Offer will be "not essentially equivalent to a dividend" will
depend upon the stockholder's particular facts and circumstances. The
Internal Revenue Service has indicated in published revenue rulings that
even a small reduction in the proportionate interest of a small minority
stockholder in a publicly held corporation who exercises no control over
corporate affairs may constitute such a "meaningful reduction." The
Internal Revenue Service held, for example, in Rev. Rul. 76-385, 1976-2
C.B. 92, that a reduction in the percentage ownership interest of a
stockholder in a publicly held corporation from .0001118% to .0001081% (a
reduction of only 3.3% in the stockholder's prior percentage ownership
interest) would constitute a "meaningful reduction." Stockholders
expecting to rely on the "not essentially equivalent to a dividend" test
should consult their own tax advisors as to its application to their
particular situation and circumstances.
The Company cannot predict whether or to what extent the Exchange Offer
will be oversubscribed. If the Exchange Offer is oversubscribed, proration of
the tenders pursuant to the Exchange Offer will cause the Company to accept
fewer Shares than are tendered. Therefore, a stockholder can be given no
assurance that a sufficient number of such stockholder's Shares will be
exchanged pursuant to the Exchange Offer to ensure that such exchange will
satisfy one or more of the Section 302 Tests and be treated as a sale or
exchange rather than as a dividend, for United States federal income tax
purposes pursuant to the rules discussed above.
Contemporaneous dispositions or acquisitions of Shares by a stockholder
or related individuals or entities may be deemed to be part of a single
integrated transaction which will be taken into account in determining whether
any of the Section 302 Tests has been satisfied in connection with Shares
exchanged pursuant to the Exchange Offer. Thus, for example, if a stockholder
sells Shares to persons other than the Company at or about the time such
stockholder also exchanges Shares pursuant to the Exchange Offer, and the
various sales effected by the stockholder are part of an overall plan to reduce
or terminate such stockholder's proportionate interest in the Company, then the
sales to persons other than the Company may, for United States federal income
tax purposes, be integrated with the stockholder's exchange of Shares pursuant
to the Exchange Offer and, if integrated, should be taken into account in
determining whether the holder satisfies any of the Section 302 Tests described
above.
"Issue Price" of Debentures Defined
If the Debentures are listed on the AMEX at any time during the period
ending 30 days after the Exchange, the "issue price" of the Debentures will be
the fair market value of the Debentures as of the date of the Exchange. In
determining the fair market value of the Debentures as of the date of the
Exchange, the Company intends to rely on the trading value of the Debentures on
the AMEX on such date if the Debentures are traded on the AMEX on such date. In
the absence of trading of the Debentures on the date of the Exchange, the
43
<PAGE>
Company intends to rely on other evidence probative of the fair market value of
the Debentures as of such date to determine the "issue price" of the Debentures
in such situation.
If the Debentures are not listed on the AMEX at any time during the
period ending 30 days after the Exchange but the Shares are listed on NASDAQ at
any time during the 60-day period ending 30 days after the Exchange, the "issue
price" of the Debentures will be the fair market value of the Shares on the date
of the Exchange.
If the Debentures are not listed on the AMEX and the Shares are not
listed on NASDAQ, each within the applicable time periods described above, the
"issue price" of the Debentures will be the "stated redemption price at
maturity" of the Debentures (generally the face amount of the Debentures) unless
either (i) the Debentures do not bear "adequate stated interest" within the
meaning of Section 1274 of the Code, which is unlikely or (ii) also unlikely,
the Debentures are issued in a so-called "potentially abusive situation" as
defined in the Treasury Regulations under Section 1274 of the Code, in which
case the "issue price" of the Debentures would be the present value of all
payments to be made on the Debentures, discounted at the applicable federal
rate.
Because a tendering stockholder will receive no cash pursuant to the
Exchange Offer, a stockholder will need to use other cash resources of the
stockholder to satisfy any tax liabilities arising from an exchange of Shares
for Debentures.
Tendering stockholders seeking information regarding the actual "issue
price" of the Debentures in determining the tax consequences associated with
their exchange of Shares for Debentures may contact the Company. Further, on or
before January 31, 2001, the Company will furnish or cause to be furnished to
tendering stockholders IRS Form 1099 which will reflect the "issue price" of the
Debentures and certain additional information. Tendering stockholders who do not
qualify for sale or exchange treatment in connection with an exchange of Shares
for Debentures and who will, as a consequence thereof, recognize dividend income
in connection with the Exchange Offer are advised that if the Debentures are not
listed on the AMEX at any time within the 30 day period following the Exchange,
the amount of dividend income could exceed the "issue price" of the Debentures.
STOCKHOLDERS CONTEMPLATING AN EXCHANGE OF DEBENTURES FOR SHARES ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE SECTION 302 TESTS,
INCLUDING THE EFFECT OF THE ATTRIBUTION RULES AND THE POSSIBILITY THAT A
SUBSTANTIALLY CONTEMPORANEOUS SALE OF SHARES TO PERSONS OTHER THAN THE COMPANY
MAY ASSIST IN SATISFYING ONE OR MORE OF THE SECTION 302 TESTS, AS WELL AS THE
SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF EXCHANGES
MADE BY THEM PURSUANT TO THE EXCHANGE OFFER.
Corporate Stockholder Dividend Treatment
If an exchange of Shares pursuant to the Exchange Offer by a corporate
stockholder is treated as a dividend, the corporate stockholder (other than an S
corporation) may be entitled to claim the dividends-received deduction
(generally 70%, but 80% under certain circumstances) with respect to the gross
dividend under Section 243 of the Code, subject to applicable limitations. With
respect to specific limitations on claiming the dividends-received deduction,
corporate stockholders should consider the effect of Section 246(c) of the Code,
which disallows the dividends-received deduction with respect to any dividend on
any share of stock that is held for 45 days or less during the 90-day period
beginning on the date which is 45 days before the date on which such share
becomes ex-dividend with respect to such dividend. For this purpose, the length
of time a taxpayer is deemed to have held stock may be reduced by periods during
which the taxpayer's risk of loss with respect to the stock is diminished by
reason of the existence of certain options or other hedging transactions.
Additionally, corporate stockholders that have incurred indebtedness directly
attributable to an investment in Shares should consider the effect of Section
246A of the Code which reduces the dividends-received deduction by a percentage
generally computed based on the amount of such indebtedness and the
stockholder's total adjusted tax basis in the Shares.
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<PAGE>
In addition, any amount received by a corporate stockholder pursuant to
the Exchange Offer that is treated as a dividend may constitute an
"extraordinary dividend" under Section 1059 of the Code. Accordingly, a
corporate stockholder may be required under Section 1059(a) of the Code to
reduce its adjusted tax basis (but not below zero) in its Shares by the
non-taxed portion of the extraordinary dividend (i.e. the portion of the
dividend for which a deduction is allowed), and, if such portion exceeds the
stockholder's adjusted tax basis in its Shares, to treat the excess as gain from
the sale of such Shares in the year in which the dividend is received. These
basis reductions and gain recognition rules would be applied by taking account
only the stockholder's adjusted tax basis in the Shares that were exchanged,
without regard to other Shares that the stockholder may continue to own.
CORPORATE STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
APPLICATION OF SECTION 1059 OF THE CODE TO THE EXCHANGE OFFER AND ANY DIVIDENDS
WHICH MAY BE TREATED AS PAID WITH RESPECT TO SHARES EXCHANGED PURSUANT TO THE
EXCHANGE OFFER.
Certain Federal Income Tax Consequences to Prospective Holders of Debentures
Interest on the Debentures -- General
With respect to stockholders who exchange Shares for Debentures in the
Exchange Offer, stated interest on the Debentures will be taxable as ordinary
interest income at the time such amounts are accrued or received in accordance
with the holder's method of accounting for United States federal income tax
purposes.
Depending upon a stockholder's particular circumstances, the tax
consequences of holding Debentures may be less advantageous than the
consequences of holding Shares because, for example, interest payments on the
Debentures will not be eligible for any dividends-received deduction that might
otherwise be available to corporate stockholders, if dividends were issued with
respect to the Shares.
Original Issue Discount on Debentures
If the "stated redemption price at maturity" of the Debentures exceeds
the "issue price" of the Debentures by more than a de minimis amount (0.25% of
the "stated redemption price at maturity" multiplied by the number of years to
maturity), the Debentures will be treated as having original issue discount
("OID") to the extent of such excess.
The "stated redemption price at maturity" of the Debentures will equal
the total of all payments under the Debentures, other than payments of
"qualified stated interest." "Qualified stated interest" generally is stated
interest that is unconditionally payable in cash or other property (other than
an additional debt instrument of the issuer) at least annually at a single fixed
rate. Stated interest on the Debentures will be treated as "qualified stated
interest" for this purpose.
The "issue price" of the Debentures is defined generally above under
the caption "Issue Price of Debentures - Defined."
Accordingly, depending upon the determination of the actual "issue
price" of the Debentures, the Debentures may have significant OID.
Taxation of Original Issue Discount on Debentures - General
If the Debentures have OID, each holder of a Debenture will be required
to include in gross income an amount equal to the sum of the "daily portions" of
the OID for all days during the taxable year in which such holder holds or is
deemed to hold the Debenture regardless of the holder's method of accounting and
even though the cash to which such income is attributable may not be received
until the sale, redemption, or maturity of the Debenture. The daily portions of
OID required to be included in a holder's gross income in a taxable year will be
determined under a constant yield method by allocating to each day during the
45
<PAGE>
taxable year in which the holder holds or is deemed to hold the Debenture a pro
rata portion of the OID thereon which is attributable to the accrual period in
which such day is included. The amount of the OID attributable to each accrual
period will be the "adjusted issue price" of the Debenture at the beginning of
such accrual period multiplied by the "yield to maturity" of the Debenture
(properly adjusted for the length of the accrual period). The adjusted issue
price of a Debenture at the beginning of an accrual period will be the original
"issue price" of the Debenture plus the aggregate amount of OID that accrued in
all prior accrual periods, less any cash payments on the Debenture. The "yield
to maturity" is the discount rate that, when used in computing the present value
of all principal and interest payments to be made under the Debentures, produces
an amount equal to the "issue price" of the Debentures.
The Company will cause to be furnished annually to the Internal Revenue
Service and to record holders of the Debentures information relating to the OID,
if any, accruing during the calendar year.
Acquisition Premium
A debt instrument is considered "purchased" at an "acquisition premium"
if its adjusted tax basis immediately after the purchase is (i) less than or
equal to the sum of all amounts payable on the instrument after the purchase
(other than payments of "qualified stated interest") and (ii) greater than the
instrument's "issue price." An exchange of Shares for Debentures pursuant to the
Exchange Offer will be considered a "purchase" of the Debentures for this
purpose. Thus, for example, a Debenture will be considered purchased at an
"acquisition premium" if (a) the exchange of Shares for Debentures is not
treated as a "sale or exchange" of the Shares under the Section 302 Tests and
(b) the fair market value of the Debentures (and hence the adjusted tax basis)
as of the date of the Exchange of the Shares exceeds the "issue price" of the
Debentures.
If a Debenture is purchased at an "acquisition premium," the holder
may, pursuant to Section 1272(a)(7) of the Code, reduce the amount of OID
includable as gross income each day by a fraction (a) the numerator of which is
the excess of (1) the adjusted basis of the Debenture immediately after its
purchase over (2) the adjusted "issue price" of the Debenture, and (b) the
denominator of which is the excess of (1) the sum all amounts payable on the
Debenture (other than "qualified stated interest") over (2) the adjusted "issue
price" of the Debenture. But for such reduction in the amount of OID includable
in gross income, the sum of the holder's adjusted tax basis of the Debentures
(immediately after the Exchange) and the amount of OID would exceed the "stated
redemption price at maturity" of the Debentures.
Election
A U.S. holder of a Debenture may elect to treat all interest that
accrues on a Debenture as OID and calculate the amount includable in gross
income under the constant yield method described above. See "Taxation of
Original Issue Discount or Debentures - General" above. For purposes of this
election, interest includes stated interest, OID, de minimis OID, market
discount, de minimis market discount, as adjusted (as relevant) for acquisition
premium. The election is to be made for the taxable year in which the holder
acquires the Debenture, and may not be revoked without the consent of the
Internal Revenue Service.
BECAUSE THE RULES GOVERNING OID MAY REQUIRE HOLDERS OF DEBENTURES TO
PAY SIGNIFICANT FEDERAL INCOME TAXES ON INCOME IN ADVANCE OF RECEIPT OF THE CASH
ATTRIBUTABLE TO SUCH INCOME, STOCKHOLDERS CONTEMPLATING AN EXCHANGE OF SHARES
FOR DEBENTURES PURSUANT TO THE EXCHANGE OFFER ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING OID, THE RELEVANCE OF ACQUISITION PREMIUM AND THE ADVANTAGES
AND DISADVANTAGES OF ALL RELEVANT ELECTIONS.
Market Discount
If the "issue price" of a Debenture exceeds the holder's adjusted tax
basis in the Debentures at the time of the exchange of Shares for Debentures,
the Debenture will be considered issued with "market discount" unless such
excess is less than a specified de minimis amount. Under the market discount
rules, a holder of a market discount Debenture will be required to treat any
principal payment on the Debenture or any gain on a sale, exchange or other
disposition of the Debenture as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on the Debenture at the time of such payment or disposition.
46
<PAGE>
Additionally, a holder of such a Debenture may be required to defer, until the
maturity of the Debenture or its earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry the Debenture.
Any market discount will be considered to accrue ratably during the
period from the date of the Exchange to the maturity date of the Debenture
unless the holder elects to accrue on a constant yield basis.
A holder may elect to include market discount in income as its accrues
(on either a ratable or a constant yield method), in which case the rule
described above regarding deferral of interest deductions will not apply. The
election to include market discount in income currently, once made, applies to
all market discount obligations acquired on or after the first taxable year to
which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
A Department of Treasury legislative proposal would require accrual
basis taxpayers to include market discount in income as it accrues. The holder's
yield for purposes of determining market discount in such case would be limited
to the greater of (a) the original yield-to-maturity of the debt instrument plus
five (5) percentage points or (b) the applicable Federal rate at the time the
holder acquired the debt instrument plus five (5) percentage points. The
proposal would be effective for debt instruments acquired on or after the date
of enactment.
BECAUSE OF THE SIGNIFICANCE OF THE RULES REGARDING MARKET DISCOUNT,
STOCKHOLDERS CONTEMPLATING AN EXCHANGE OF SHARES FOR DEBENTURES ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE RELEVANCE OF MARKET DISCOUNT.
Redemption or Sale of Debentures
Generally, any redemption (including the payment of the principal on
the Debentures) or sale of the Debentures by a holder will result in taxable
gain or loss equal to the difference between the sum of the amount of cash and
the fair market value of the other property received (except to the extent
attributable to accrued but previously untaxed interest) and the holder's
adjusted tax basis in the Debentures. A holder's initial tax basis in the
Debentures will be increased by any OID with respect to the Debentures included
in the holder's income prior to sale or redemption of the Debentures and will be
reduced by any cash payments other than payments of "qualified stated interest."
Except to the extent attributable to accrued but previously untaxed
interest and except with respect to "accrued market discount" (See "Market
Discount" above), such gain or loss (if any) will generally be long-term capital
gain or loss if the holder's holding period for the Debentures exceeds twelve
months and if the Debenture is held as a capital asset by the holder.
Backup Withholding
Backup withholding at a rate of 31% may apply to interest (including
OID) payments and the proceeds from a redemption of the Debentures unless the
holder (i) is a corporation or comes within certain other exempt categories and
demonstrates such fact or (ii) provides a correct taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with all applicable requirements of the backup withholding
rules. The backup withholding tax is not an additional tax and may be credited
against a holder's United States federal income tax liability provided that
correct information is provided to the Internal Revenue Service. Stockholders
may furnish their correct taxpayer identification number and otherwise comply
with the backup withholding rules by completing and returning the Substitute
Form W-9, included as a part of the Letter of Transmittal.
Tax Consequences to Company
The Company will recognize no gain or loss in connection with the
acquisition of Shares in exchange for Debentures.
<PAGE>
Exhibit T3E.2
LETTER OF TRANSMITTAL
To Tender
Of
UGLY DUCKLING CORPORATION
Pursuant to the Offering Circular Dated February 22, 2000
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME,
ON MARCH 21, 2000, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
The Exchange Agent:
Harris Trust and Savings Bank
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail By Facsimile By Hand/Overnight Delivery:
Harris Trust and Savings Bank Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company c/o Harris Trust Company c/o Harris Trust Company
of New York of New York of New York
Wall Street Station 212-701-7636 88 Pine Street
P.O. Box 1010 Confirm Receipt of Facsimile By 19th Floor
New York, New York 10268-1010 Telephone to 212-701-7624 New York, New York 10005
---------- ---------- ----------
</TABLE>
Delivery of this Instrument to an address other than
as set forth above does not constitute a valid delivery.
This Letter of Transmittal is to be completed by holders of Common
Stock of Ugly Duckling Corporation either if Certificates representing Shares of
Common Stock ("Common Stock Certificates") are to be forwarded herewith or if
delivery of Common Stock is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in the Offering Circular under "The
Exchange Offer -- How to Tender." Stockholders whose Common Stock Certificates
are not immediately available or who cannot transmit their Common Stock
Certificates (or confirm a book-entry transfer of such Common Stock into the
Exchange Agent's account at DTC) and transmit any other documents required
hereby to the Exchange Agent so that they are received prior to the Expiration
Time (as defined in the Exchange Offer) must tender their Common Stock according
to the guaranteed delivery procedures set forth in the Offering Circular under
"The Exchange Offer -- How to Tender." See Instruction 2 to this Letter of
Transmittal.
[ ] CHECK HERE IF COMMON STOCK IS BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE THE
FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER COMMON STOCK BY BOOK-ENTRY
TRANSFER):
Name of Tendering Institution _________________________________________
DTC Account Number ___________________________________________________
Transaction Code Number _______________________________________________
<PAGE>
[ ] CHECK HERE IF THE COMMON STOCK IS BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT.
Name(s) of Registered Holder(s)________________________________________
Window Ticket No. (if any)_____________________________________________
Date of Execution of Notice of Guaranteed Delivery_____________________
Name of Institution which Guaranteed Delivery__________________________
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK TENDERED
- ----------------------------------------------------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
Name(s) and Address(es) of Holder(s) Common Stock Tendered
(Please fill in, if blank) (Attach additional list, if necessary)
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- ----------------------- ---------------------------- --------------------
Certificate Total Shares Represented Number of Shares
Number(s) * by Certificate(s) Tendered**
--------------------
----------------------- ---------------------------- --------------------
--------------------
----------------------- ---------------------------- --------------------
--------------------
----------------------- ---------------------------- --------------------
--------------------
-------------------------------------------------------------------------
Total Number of Shares Tendered
- -------------------------------------------- -------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Need not be completed by Stockholders who deliver Common Stock by book-entry
transfer.
**Unless otherwise indicated, the total number of shares represented by
Certificate will be deemed to have been tendered.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
EXCHANGE RATIO FOR DEBENTURES
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
$11.00 PRINCIPAL AMOUNT OF 11% SUBORDINATED DEBENTURES DUE 2007 (BEARING
INTEREST AT 11% PER ANNUM FROM THE DATE OF ISSUE PAYABLE SEMIANNUALLY ON EACH
APRIL 15 AND OCTOBER 15, COMMENCING APRIL 15, 2000, UNTIL THE DEBENTURES ARE
PAID
IN FULL) FOR EACH SHARE OF COMMON STOCK
- ----------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------ -- -------------------------------------------------------
SPECIAL ISSUANCE SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
(See Instructions 8, 9 and 11) (See Instructions 8, 9 and 11)
-------------------------------------------------------
- ------------------------------------------------------------ -- -------------------------------------------------------
To be completed ONLY if Common Stock not exchanged To be completed ONLY if
Common Stock not and/or Debentures are to be issued in the name of and sent
exchanged and/or Debentures issued in the name of the to someone other than the
undersigned: undersigned are to be sent to someone other than the
undersigned or to the undersigned at an address other
than that shown above.
-------------------------------------------------------
- ------------------------------------------------------------ -- -------------------------------------------------------
Issue and Send Mail
-------------------------------------------------------
- ------------------------------------------------------------ -- -------------------------------------------------------
to: to:
-------------------------------------------------------
- ------------------------------------------------------------ -- -------------------------------------------------------
Name Name
-----------------------------------------------------
(Please Print) (Please Print)
Address Address
--------------------------------------------------
Zip Code Zip Code
Tax Identification or Social Security No.
- ------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STOCKHOLDERS SIGN HERE
(See instruction 1)
________________________________________________________________________________
Signature(s) of Owner(s)
Dated: ________________________________
Must be signed by holder(s) as name(s) appear(s) on Common Stock
Certificate(s) or by person(s) authorized to become holder(s) by endorsements
and other documents transmitted. If signature is by trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 8.
Name(s) ________________________________________________________________________
________________________________________________________________________________
Please Print
Capacity _______________________________________________________________________
Address ________________________________________________________________________
Include Zip Code
Area Code and Tel. No. _________________________________________________________
Tax Identification or Social Security No. ______________________________________
SIGNATURE GUARANTEE
(If required by Instruction 8)
Authorized Signature ___________________________________________________________
Name of Firm ___________________________________________________________________
Please Print
Dated:______________________________
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION
Under the federal income tax law, a Stockholder whose tendered Common
Stock is accepted for exchange is required to provide the Exchange Agent with
such Stockholder's correct TIN on Substitute Form W-9. If such Stockholder is an
individual, the TIN is his social security number. If the Exchange Agent is not
provided with the correct TIN, the Stockholder may be subject to a $50 penalty
imposed by federal law. In addition, payments with respect to the Debentures
<PAGE>
(including interest) may be subject to backup withholding of 31%. Backup
withholding is not an additional tax. Rather, the federal income tax liability
of persons subject to backup withholding may be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
Certain holders of securities (including, among others, all
corporations and certain foreign individuals) are not subject to backup
withholding. In order for a foreign person to qualify as an exempt recipient,
that Stockholder must attest under penalties of perjury to that person's exempt
status. Other exempt recipients can establish their exemptions from backup
withholding in the manner described in the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a
Stockholder with respect to Debentures acquired pursuant to the Exchange Offer,
the Stockholder is required to notify the Exchange Agent of his correct TIN (or
that such Stockholder is awaiting a TIN) by completing and signing the
Substitute Form W-9.
What Number to Give the Exchange Agent
The Stockholder is required to give the Exchange Agent the TIN of the
record owner of the Common Stock. If the Common Stock is in more than one name
or is not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report. If "Special Issuance
Instructions" above have been completed, the TINs of the person(s) in whose name
the Debentures are to be registered and the payee of the check for fractional
interests, as specified therein, are required to be given to the Exchange Agent.
<PAGE>
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
(Please read Guidelines for Certification
of Taxpayer Identification Number
on Substitute Form W-9
("Guidelines") before completing
this form)
AFTER COMPLETING THE FORM, RETURN TO EXCHANGE AGENT
- --------------------------------------------------------------------------------
Name (If joint names, list first and circle name of the person or entity whose
number you enter in Part I below.)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City, State, and ZIP Code
- --------------------------------------------------------------------------------
Part I Taxpayer Identification Number Part II For Payees Exempt
From Backup
Withholding (See
Guidelines)
- ------------------------- ------------------------------------------------------
- ---------------------------------------------- ------------------------------ --
Enter your taxpayer identification number in the appropriate box. For
individuals, this is your social security number. However, if you are a resident
alien OR a sole proprietor, see Guidelines. For other entities, it is your
employer identification number. If you do not have a number, see Guidelines.
Note: If the account is in more than one
name, see Guidelines for instructions on
whose number to enter.
- ----------------------------------------------
- ---------------------------------------------- ------------------------------
Social security number
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
- ---------------------------------------------- ------------------------------
or
- ---------------------------------------------- ------------------------------
- ----------------------------------------------
Employer identification
number
- ----------------------------------------------
- ----------------------------------------------
- ---------------------------------------------- -- -- -- ---- --- --- -- --- -
- ---------------------------------------------- ------------------------------
- ---------------------------------------------- ------------------------------ --
- ------------------------------ -------------------------------------------------
Part III Certification
- ------------------------------ -------------------------------------------------
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
Certification Instructions - You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest or dividends on your tax return.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sign here
- --------------------------------------------------------------------------------
<PAGE>
Ladies and Gentlemen:
The Common Stockholder(s) whose signature(s) appear(s) hereon (the
"Stockholder") hereby tenders to Ugly Duckling Corporation, Inc., a Delaware
corporation (the "Company"), Common Stock pursuant to the Company's offer as
contained in the Offering Circular dated February 22, 2000 (the "Exchange
Offer"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together constitute the "Offer"), in exchange for 11%
Subordinated Debentures due 2007 (the "Debentures") on the basis of $11.00
principal amount of Debentures for each Share of Common Stock. Capitalized terms
not defined herein have the meanings set forth in the Offering Circular,
Upon the terms and subject to the conditions of the Exchange Offer, the
Stockholder deposits with you the above-described Common Stock. The Stockholder
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Shares of Common Stock as are being
tendered hereby (and any and all shares of capital stock or other securities
issued or issuable in respect of such Common Stock) after the acceptance for
exchange of such Shares of Common Stock. The Stockholder hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the Stockholder (with full knowledge that such Exchange
Agent also acts as the agent of the Company) with respect to such Shares of
Common Stock and any such securities with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver such Shares of Common Stock or transfer ownership of such Shares of
Common Stock on the account books maintained by DTC, together in either case
with all accompanying evidences of transfer and authenticity to or upon the
order of the Company upon receipt by the Exchange Agent as the Stockholder's
agent of the Debentures in the exchange ratio specified above for exchange and
(b) receive all benefits (including without limitation, all interest, shares and
other securities resulting from any distribution, combination or exchange
involving such Shares of Common Stock) and otherwise exercise all rights of
beneficial ownership of such Shares of Common Stock and any such securities, all
in accordance with the terms of the Exchange Offer.
The Stockholder hereby represents and warrants that the Stockholder has
full power and authority to tender, sell, assign and transfer the Shares of
Common Stock tendered hereby (and such shares of capital stock or other
securities issued in respect thereof) and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are
purchased by the Company. The Stockholder will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the sale, assignment and transfer of the
Shares of Common Stock and any such securities tendered hereby.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the Stockholder and every obligation of the
Stockholder hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the Stockholder. Except as stated in the Offering
Circular, this tender is irrevocable.
The Stockholder understands that the tender of Common Stock pursuant to
any one of the procedures described under in the Offering Circular under "The
Exchange Offer -- How to Tender" and in the instructions hereto will constitute
an agreement between the Stockholder and the Company upon the terms and subject
to the conditions of the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please deliver Debentures (and, if applicable, Common Stock not
exchanged in an over-subscription) registered in the name of the Stockholder to
<PAGE>
the Stockholder. Similarly, unless otherwise indicated in the box entitled
"Special Delivery Instructions," please send Debentures (and, if applicable,
Common Stock not exchanged in an over-subscription) to the Stockholder at the
address shown below the signature of the Stockholder. The Stockholder recognizes
that the Company has no obligation pursuant to the Special Issuance Instructions
to transfer any Common Stock from the name of the registered holder thereof if
the Company accepts none of the Common Stock for exchange.
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of Letter of Transmittal and Common Stock. Common Stock Certificates
(or confirmation of a book-entry transfer of such Common Stock into the Exchange
Agent's account at DTC), together with a properly completed and duly executed
Letter of Transmittal or manually signed facsimile thereof, or an Agent's
Message, in the case of a book-entry transfer, and any other documents required
by this Letter of Transmittal should be transmitted to the Exchange Agent at the
appropriate address set forth herein and must be received by the Exchange Agent
prior to the Expiration Time (as defined in the Offering Circular).
2. Guarantee of Delivery. Stockholders who cannot deliver their Common Stock
Certificates and all other required documents to the Exchange Agent by the
Expiration Time must tender their Common Stock pursuant to the guaranteed
delivery procedure set forth in the Offering Circular under "The Exchange Offer
- -- How to Tender." Pursuant to such procedure: (a) such tender must be made by
or through an Eligible Institution; (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Company, must be received by the Exchange Agent prior to the Expiration Time;
and (c) the Common Stock Certificates evidencing all tendered Common Stock in
proper form for tender, or a confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of all Common Stock delivered electronically, in
each case together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message), and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent within three Nasdaq National Market trading
days of the date of execution of such Notice of Guaranteed Delivery, all as
provided in the Offering Circular under "The Exchange Offer - How to Tender."
Issuance of Debentures in exchange for Common Stock tendered and
accepted for exchange pursuant to the Exchange Offer will be made only against
timely deposit of Common Stock Certificates (or confirmation of a book entry
transfer of such Common Stock into the Exchange Agent's account at DTC), a
properly completed and duly executed Letter of Transmittal, or an Agent's
Message, in the case of a book-entry transfer, and any other required documents.
3. Method of Delivery of Letter of Transmittal and Certificates. The method of
delivery of this Letter of Transmittal, the Common Stock Certificates (or
confirmation of a book-entry transfer of such Common Stock into the Exchange
Agent's account at DTC), and any other required documents is at the option and
risk of the Stockholder but, except as otherwise provided in Instruction 2
above, the delivery will be deemed made only when actually received by the
Exchange Agent. If such delivery is by mail, it is suggested that registered
mail with return receipt requested, properly insured, be used.
4. No Conditional Tenders. The Company is not obligated to accept any
alternative, conditional, irregular or contingent tenders.
5. Inadequate Space. If the space provided in the box entitled "Description of
Common Stock Tendered" of this Letter of Transmittal is inadequate, the Common
Stock Certificate numbers and number of shares should be listed on a separate
signed schedule to be affixed hereto.
<PAGE>
6. Partial Tenders. Issuance of Debentures in exchange for Shares of Common
Stock will be made only against deposit of tendered Shares of Common Stock. If
less than the entire number of Shares of Common Stock evidenced by a submitted
Common Stock Certificate is tendered, the tendering Stockholder should fill in
the number of Shares of Common Stock tendered in the appropriate boxes above
entitled "Number of Shares Tendered." The Exchange Agent will then issue and
send to the tendering holder (unless otherwise requested by the holder under
"Special Issuance Instructions" and "Special Delivery Instructions" in this
Letter of Transmittal), a newly issued Common Stock Certificate for Shares of
Common Stock submitted but not tendered, together with any tendered Shares of
Common Stock that were not accepted for exchange because of proration or
otherwise. The entire number of all Shares of Common Stock deposited with the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Tendered Shares of Common Stock not accepted for exchange by the
Company, including as a result of proration, if any, will be returned without
expense to the tendering holder of such Shares of Common Stock (or, in the case
of the Shares of Common Stock tendered by book-entry transfer into the Exchange
Agent's account at DTC, such Shares of Common Stock will be credited to an
account maintained at DTC) as promptly as practicable following the Expiration
Time, subject to delays, if any, resulting from proration.
7. Denominations. The Debentures will be issued only in denominations of $1.00
and any integral multiple thereof.
8. Signatures on Letter of Transmittal and Endorsements; Guarantee or
Signatures. If the Letter of Transmittal is signed by the holder of the Common
Stock tendered hereby, the signature must correspond with the name as written on
the face of the Common Stock Certificates without alteration, enlargement or any
change whatsoever.
If the Shares of Common Stock tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
When this Letter of Transmittal is signed by the holder or holders of
the Common Stock Certificates transmitted hereby, no endorsement of Common Stock
Certificates is required. If, however, the Debentures are to be issued, or the
Common Stock reissued to someone other than the registered holder, then
endorsements of Common Stock Certificates transmitted hereby are required.
Signatures on such Certificates must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
holder or holders of the Common Stock Certificates tendered hereby, the Common
Stock Certificates must be endorsed and signed exactly as the name or names of
the holder or holders appear on the Common Stock Certificates. Signatures on
such Certificates must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Common Stock Certificates are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Signatures on Common Stock Certificates required by this Instruction 8
must be guaranteed by an Eligible Institution.
<PAGE>
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Common Stock Certificates are tendered (i) by
a holder of such Shares who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal
or (ii) for the account of an Eligible Institution.
9. Transfer Taxes. The Company will pay any transfer taxes applicable to the
transfer of Common Stock to it or its order pursuant to the Exchange Offer. If,
however, delivery of Debentures is to be made to, or is to be registered or
issued in the name of any person other than the holder of the Common Stock
tendered hereby, or if the Common Stock tendered hereby is registered in the
name of any person other than the person signing this Letter of Transmittal, or
if for any other reason other than the transfer of Common Stock to the Company
or its order pursuant to the Exchange Offer a transfer tax is imposed, the
amount of any such transfer taxes (whether imposed on the holder or any other
person) will be payable by the tendering Stockholder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes due will be billed directly to such tendering
Stockholder.
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Common Stock Certificates listed in
this Letter of Transmittal.
10. Substitute Form W-9. The tendering Stockholder is required to provide the
Exchange Agent with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, unless an exemption applies. Failure to provide the
information on the form may subject the tendering Stockholder to backup
withholding tax of 31% on payments with respect to the Debentures (including
interest). If the tendering Stockholder has not been issued a TIN and has
applied for a number, the tendering Stockholder should write "Applied for" on
the face of the Substitute Form W-9. If the Exchange Agent is not provided with
a TIN within 60 days, the Exchange Agent will withhold 31% of all such payments
until a TIN is provided to the Exchange Agent. See "Important Tax Information"
on the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" for additional information concerning Substitute Form
W-9 and 31% backup withholding, including information on exemptions from backup
withholding.
11. Special Issuance and Delivery Instructions. If Debentures and/or Shares of
Common Stock and/or a check for payment for fractional interests in respect of
Debentures are to be issued in the name of or delivered to a person other than
the signer of the Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on the Letter of Transmittal should be completed.
12. Waiver of Conditions. The Company reserves the absolute right to waive any
of the specified conditions in the Exchange Offer in the case of any Shares of
Common Stock tendered.
13. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Offering Circular and the Letter of Transmittal may be
directed to the Information Agent at the address and telephone number set forth
below or to your broker, dealer, commercial bank or trust company.
IMPORTANT: This Letter of Transmittal or a manually signed facsimile
thereof (together with Common Stock Certificates or confirmation of a book-entry
transfer of such Common Stock into the account of the Exchange Agent at The
Depository Trust Company) and all other required documents must be received by
the Exchange Agent or a Notice of Guaranteed Delivery must be received by the
Exchange Agent, prior to the Expiration Time, all as defined in the Offering
Circular.
<PAGE>
THE INFORMATION AGENT IS:
CORPORATE INVESTOR
COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
-----------------
Toll Free: 1-877-977-6192
<PAGE>
Exhibit 99.7
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as Trustee
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) ______
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Megan Carmody, Harris Trust and Savings Bank,
311 West Monroe Street, Chicago, Illinois, 60606
312-461-6030 phone 312-461-3525 facsimile
(Name, address and telephone number for agent for service)
UGLY DUCKLING CORPORATION
(Note Issuer)
Delaware 86-0721358
(State of Incorporation) (I.R.S. Employer Identification No.)
2525 E. Camelback Road, Suite 1150
Phoenix Arizona 85016
(Address of principal executive offices)
11% Subordinated Debentures due 2007
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of
Governors of the Federal Reserve System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise
corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as
now in effect and includes the authority of the Trustee to
commence business and to exercise corporate trust powers was filed
in connection with the Registration Statement of Louisville Gas
and Electric Company, File No. 2-44295, and is incorporated herein
by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of Commercial Federal
Corporation, File No. 333-20711, and is incorporated herein by
reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
(included as Exhibit B on page 3 of this statement)
1
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 17th day of February, 2000.
HARRIS TRUST AND SAVINGS BANK
By: /S/ MEGAN CARMODY
-----------------
Megan Carmody
Assistant Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /S/ MEGAN CARMODY
-----------------
Megan Carmody
Assistant Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of September 30, 1999, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[HARRIS BANK LOGO]
<TABLE>
<CAPTION>
<S> <C> <C>
THOUSANDS
ASSETS OF DOLLARS
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin.................... $1,139,804
Interest bearing $223,943
balances............................................................................
Securities:.........................................................................
a. Held-to-maturity securities $0
b. Available-for-sale securities $5,773,313
Federal funds sold and securities purchased under agreements to resell $148,650
Loans and lease financing receivables:
Loans and leases, net of unearned $9,752,500
income..............................................................................
LESS: Allowance for loan and lease $111,660
losses..............................................................................
------------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus $9,640,840
4.b)................................................................................
Assets held in trading $193,520
accounts............................................................................
Premises and fixed assets (including capitalized leases)............................. $271,847
Other real estate $339
owned...............................................................................
Investments in unconsolidated subsidiaries and associated companies.................. $0
Customer's liability to this bank on acceptances outstanding......................... $44,067
Intangible $245,968
assets...............................................................................
Other $1,328,114
assets...............................................................................
-----------
TOTAL ASSETS $19,010,405
===========
LIABILITIES
Deposits:
In domestic $9,579,731
offices.............................................................................
Non-interest $2,953,755
bearing..........................................................................
Interest $6,625,976
bearing.............................................................................
In foreign offices, Edge and Agreement subsidiaries, and $1,396,781
IBF's................................
Non-interest $21,682
bearing..........................................................................
Interest $1,375,099
bearing.............................................................................
Federal funds purchased and securities sold under agreements to repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased & securities sold under agreements to repurchase.......... $3,951,113
Trading Liabilities 91,252
Other borrowed
money:............................................................................ $1,978,203
a. With remaining maturity of one year or less $0
b. With remaining maturity of more than one year
Bank's liability on acceptances executed and outstanding $44,067
Subordinated notes and $225,000
debentures.......................................................................
Other $481,642
liabilities......................................................................
--------------
TOTAL LIABILITIES $17,747,789
==============
EQUITY CAPITAL
Common $100,000
stock............................................................................
Surplus.......................................................................... $609,913
a. Undivided profits and capital reserves....................................... $657,705
b. Net unrealized holding gains (losses) on available-for-sale securities ($105,002)
----------------------------
TOTAL EQUITY CAPITAL $1,262,616
============================
Total liabilities, limited-life preferred stock, and equity $19,010,405
capital......................................
============================
</TABLE>
I, Christy Wipper, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
CHRISTY WIPPER 10/26/99
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
ALAN G. McNALLY,
EDWARD W. LYMAN,
LEO M. HENIKOFF
Directors.
4
