SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
(Amendment No. 3)
Under the Securities Exchange Act of 1934
United Auto Group, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Voting Common Stock, par value $0.0001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
909440 10 9
- --------------------------------------------------------------------------------
(CUSIP Number of Class of Securities)
Philip N. Smith, Jr.
Trace International Holdings, Inc.
375 Park Avenue, 11th Floor
New York, New York 10152
(212) 230-0400
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 20, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following: |_|
<PAGE>
SCHEDULE 13D
================================================================================
1 | NAME OF REPORTING PERSON
| S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
|
| Marshall S. Cogan I.D.#
- --------------------------------------------------------------------------------
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
| (b) |X|
- --------------------------------------------------------------------------------
3 | SEC USE ONLY
|
- --------------------------------------------------------------------------------
4 | SOURCE OF FUNDS*
| PF
- --------------------------------------------------------------------------------
5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO |_|
| ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
| USA
- --------------------------------------------------------------------------------
| 7 | SOLE VOTING POWER
| | 90,000 shares
NUMBER OF |-----------------------------------------------------------
SHARES | 8 | SHARED VOTING POWER
BENEFICIALLY | | 1,000 shares
OWNED BY |-----------------------------------------------------------
EACH | 9 | SOLE DISPOSITIVE POWER
REPORTING | | 90,000 shares
PERSON |-----------------------------------------------------------
WITH | 10 | SHARED DISPOSITIVE POWER
| | 1,000 shares
- --------------------------------------------------------------------------------
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
|
| 91,000 shares
- --------------------------------------------------------------------------------
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |X|
|
- --------------------------------------------------------------------------------
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
| 0.4%
|
- --------------------------------------------------------------------------------
14 | TYPE OF REPORTING PERSON*
| IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
================================================================================
1 | NAME OF REPORTING PERSON
| S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
|
| Trace International Holdings, Inc. I.D.#58-1080969
- --------------------------------------------------------------------------------
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
| (b) |X|
- --------------------------------------------------------------------------------
3 | SEC USE ONLY
|
- --------------------------------------------------------------------------------
4 | SOURCE OF FUNDS*
| WC, BK
- --------------------------------------------------------------------------------
5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO |_|
| ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
| Delaware
- --------------------------------------------------------------------------------
| 7 | SOLE VOTING POWER
| | 4,016,110 shares
NUMBER OF |-----------------------------------------------------------
SHARES | 8 | SHARED VOTING POWER
BENEFICIALLY | | 0 shares
OWNED BY |-----------------------------------------------------------
EACH | 9 | SOLE DISPOSITIVE POWER
REPORTING | | 4,016,110 shares
PERSON |-----------------------------------------------------------
WITH | 10 | SHARED DISPOSITIVE POWER
| | 0 shares
- --------------------------------------------------------------------------------
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
|
| 4,016,110 shares
- --------------------------------------------------------------------------------
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |X|
|
- --------------------------------------------------------------------------------
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
| 20.5%
|
- --------------------------------------------------------------------------------
14 | TYPE OF REPORTING PERSON*
| HC, CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
This Amendment No. 3 to Schedule 13D (this "Amendment No. 3") is being
filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on behalf of Trace International Holdings, Inc. ("Trace International")
and Marshall S. Cogan ("Mr. Cogan" and, together with Trace International, the
"Filing Persons") and relates to the voting common stock, par value $0.0001 per
share (the "Common Stock"), of United Auto Group, Inc., a Delaware corporation
(the "Company" or "UAG"). This Amendment No. 3 amends the Schedule 13D filed by
Trace International and Mr. Cogan on April 2, 1997, as amended on August 27,
1997 and further amended on January 23, 1998.
Item 5. Interest in Securities of the Issuer.
The first paragraph of Item 5(a) is hereby amended and restated to read as
follows:
(a) The information given in this Amendment No. 3 is based on 19,621,310
shares of outstanding Common Stock as of April 21, 1998, as reported in the
Company's Proxy Statement dated April 30, 1998. Mr. Cogan owns beneficially (as
that term is defined in Rule 13d-3) 90,000 shares, including options to purchase
25,000 shares of Common Stock exercisable within 60 days, which represents less
than approximately 0.4% of the outstanding Common Stock. Trace International
owns beneficially (as that term is defined in Rule 13d-3) 4,016,110 shares,
which represents approximately 20.5% of the outstanding Common Stock.
The first paragraph of Item 5(b) is hereby amended and restated to read as
follows:
(b) Mr. Cogan has sole power to vote and to direct the disposition of
90,000 shares.
The first paragraph of Item 5(c) is hereby amended and restated to read as
follows:
(c) Neither Trace International nor Mr. Cogan nor, to the knowledge of
the Filing Persons, any of the other executive officers or directors of Trace
International, engaged in any such transactions within the past 60 days.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
Item 6 is hereby amended and supplemented by adding the following:
Series U Preferred Stock
------------------------
Pursuant to the terms of the Certificate of Designation of Trace
International, dated August 19, 1998, ("Certificate of Designation")
relating to the 10% Senior Exchangeable
<PAGE>
Preferred Stock, Series U, par value $.01 per share, with a liquidation
preference of $1,000 per share ("Series U Preferred Stock"), Trace
International issued 10,001 shares of the Series U Preferred Stock each
share of which is exchangeable, upon the occurrence of certain events for
$1,000 principal amount of Trace International's 10% Senior Secured Notes
due 2003 (the "Exchange Notes").
If more than 50% of the Common Stock held by Trace International or
any of its subsidiaries is sold or transferred for an average sale price
of less than $30.00 per share, within 15 days Trace International is
required to make an offer to purchase all of the shares of the outstanding
Series U Preferred Stock, at a purchase price specified in the Certificate
of Designation.
If the Series U Preferred Stock is not exchanged for the Exchange
Notes by December 31, 1998, Trace International is required to redeem, to
the extent funds are legally available, all outstanding shares of the
Series U Preferred Stock. The redemption price, as specified in the
Certificate of Designation, would equal the greater of (a) 100% of the
liquidation preference per share ($1,000) plus without duplication an
amount in cash equal to all accumulated and unpaid dividends per share
(including an amount equal to a prorated dividend for the period from any
dividend payment date immediately prior to the redemption date to the
redemption date) and (b) the product of (i) the Conversion Amount (as
defined in the Certificate of Designation) and (ii) the average Last Trade
Price (as defined below) of the Common Stock for the ten trading days
immediately preceding January 1, 1998.
Exchange Notes
--------------
The Exchange Notes are convertible into a number of shares of Common
Stock held by Trace International equal to the principal amount of the
Exchange Notes divided by the Conversion Price (as defined below). Trace
International may choose to satisfy any conversion with the delivery of
cash or shares of Common Stock. Trace has elected to satisfy any
conversion through the payment of cash; however, such election may be
revoked at any time. The conversion price for the Exchange Notes into
shares of Common Stock will equal $30.00 ("Conversion Price") provided
that if the average of the last trade prices for the ten consecutive days
ending on the trading day immediately prior to January 1, 1999 ("Average
Last Trade Price") is less than $24.00 per share, then the Conversion
Price will equal the product of 1.25 and the Average Last Trade Price.
If more than 50% of the Common Stock held by Trace International or
any of its subsidiaries is sold or
<PAGE>
transferred for an average sale price of less than $30.00 per share,
within 15 days Trace International is required to make an offer to
purchase all of the outstanding Exchange Notes.
The Exchange Notes will be secured by a pledge of Common Stock. The
number of shares of Common Stock pledged as collateral for the Exchange
Notes (the "Pledged Shares") is equal to the product of 1.5 and the
quotient of the outstanding principal amount of all the Exchange Notes
divided by the Conversion Price.
Securities Pledge Agreement
---------------------------
All dividends and distributions on the Pledged Shares will be held
as collateral for the Exchange Notes, provided, however, that Trace
International is entitled to receive cash dividends (to the extent paid)
on each share of Common Stock not exceeding $0.25 per annum so long as no
Event of Default (as defined in the Form of Exchange Note) has occurred.
So long as no Event of Default (as defined in the Exchange Note) has
occurred, Trace International will be entitled to all voting and other
consensual rights with respect to the Pledged Shares provided that Trace
International is prohibited from exercising such rights in any manner
which would have an adverse effect on the security intended to be provided
by the Pledge Agreement.
Item 7. Material to be Filed as Exhibits.
EXHIBIT 10.8 Certificate of Designation of Trace International, dated
August 19, 1998, relating to the 10% Senior Exchangeable
Preferred Stock, Series U, par value $.01 per share, with a
liquidation preference of $1,000 per share, and Exhibits.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 2, 1998
TRACE INTERNATIONAL HOLDINGS, INC.
By:/s/ Philip N. Smith, Jr.
-------------------------------
Name: Philip N. Smith, Jr.
Title: Senior Vice President
and General Counsel
/s/ Marshall S. Cogan
-------------------------------
Name: Marshall S. Cogan
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 10%
SENIOR EXCHANGEABLE PREFERRED STOCK, SERIES U, AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
Trace International Holdings, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation by its Certificate of Incorporation, as
amended and restated (hereinafter referred to as the "Certificate of
Incorporation"), and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, by unanimous
written consent dated as of August 14, 1998, duly approved and adopted the
following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation by its Certificate of Incorporation, the
Board of Directors does hereby create, authorize and provide for the
issuance of 10% Senior Exchangeable Preferred Stock, Series U, par value
$.01 per share, with a stated value of $1,000.00 per share, consisting of
10,001 shares, having the designations, preferences, relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth in the Certificate
of Incorporation and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "10% Senior Exchangeable Preferred Stock, Series U." The
number of shares constituting such class shall be 10,001 and are referred to
herein as the "Series U Preferred Stock." The liquidation preference of the
Series U Preferred Stock shall be $1,000.00 per share.
(b) Rank. The Series U Preferred Stock shall, with respect to
dividend distributions and distributions upon liquidation, winding-up and
dissolution of the Corporation, rank (i)
<PAGE>
- 2 -
senior (to the extent set forth herein) to all classes of Common Stock of the
Corporation and to each other class of Capital Stock of the Corporation or
series of Preferred Stock of the Corporation hereafter created the terms of
which do not expressly provide that it ranks senior to, or on a parity with, the
Series U Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Corporation (collectively
referred to, together with all classes of Common Stock of the Corporation, as
"Junior Securities"); (ii) on a parity with the Existing Convertible Preferred
Stock, the Series A Preferred Stock and any class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation hereafter created
the terms of which expressly provide that such class or series will rank on a
parity with the Series U Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities"); provided that any such Parity Securities
that were not approved by the Holders in accordance with paragraph (f)(ii)(A)
hereof shall be deemed to be Junior Securities and not Parity Securities; and
(iii) junior to each other class of Capital Stock of the Corporation or series
of Preferred Stock of the Corporation hereafter created that has been approved
by the Holders in accordance with paragraph (f)(ii)(B) hereof and the terms of
which expressly provide that such class or series will rank senior to the Series
U Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Corporation (collectively
referred to as "Senior Securities"); provided that any such Senior Securities
that were not approved by the Holders in accordance with paragraph (f)(ii)(B)
hereof (to the extent such approval is required) shall be deemed to be Junior
Securities and not Senior Securities.
(c) Dividends.
(i) From the Issue Date, the Holders of the outstanding shares of
Series U Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, dividends on each share of Series U Preferred Stock at a rate
per annum equal to 10% of the liquidation preference per share of the
Series U Preferred Stock, payable in cash; provided, however, that if at
any time, any Additional Dividends Triggering Event shall have occurred,
the per annum dividend rate will be increased by 5% during the continuance
of any such Additional Dividends Triggering Event. After the date on which
such Additional Dividends Triggering Event ceases to exist, the dividend
rate will
<PAGE>
- 3 -
revert to the rate originally borne by the Series U Preferred Stock.
Notwithstanding the foregoing, if the Consummation of the Acquisition
shall not have occurred prior to the redemption of the Series U Preferred
Stock, the holders of outstanding shares of Series U Preferred Stock shall
be entitled to receive in lieu of dividends set forth in the first
sentence of paragraph (c)(i) dividends on each share of Series U Preferred
Stock at a rate per annum equal to 15% of the liquidation preference per
share of the Series U Preferred Stock, which shall be deemed to accrue
from the Issue Date and shall be payable no later than upon redemption of
the Series U Preferred Stock. All dividends shall be cumulative, whether
or not earned or declared, on a daily basis from the Issue Date and shall
be payable semi-annually in arrears on each Dividend Payment Date,
commencing on the first Dividend Payment Date after the Issue Date. All
unpaid dividends will compound on a semi-annual basis at a rate per annum
equal to the then applicable dividend rate. Each dividend shall be payable
to the Holders of record as they appear on the stock books of the
Corporation on the Dividend Record Date immediately preceding the related
Dividend Payment Date. Dividends shall cease to accumulate in respect of
the Series U Preferred Stock exchanged for Exchange Notes on the Exchange
Date or on the date of their redemption unless the Corporation shall have
failed to issue the appropriate aggregate principal amount of Exchange
Notes in respect of the Series U Preferred Stock to be exchanged on the
Exchange Date or shall have failed to pay the relevant redemption price on
Series U Preferred Stock to be redeemed on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series U
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) (A) No dividends shall be declared by the Board of Directors
or paid or set apart for payment by the Corporation on any Parity
Securities if an Additional Dividends Triggering Event has occurred and is
continuing.
(B) So long as any share of the Series U Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities, or make any payment
on account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any of
the Junior Securities or any warrants,
<PAGE>
- 4 -
rights, calls or options exercisable for or convertible into any of the
Junior Securities whether in cash, obligations or shares of the
Corporation or other property, and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to
purchase or redeem any of the Junior Securities or any such warrants,
rights, calls or options (other than in exchange for Junior Securities).
(C) So long as any share of the Series U Preferred Stock is
outstanding, the Corporation shall not (except with respect to dividends
as permitted by paragraph (c)(iii)(A)) make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Securities
or any warrants, rights, calls or options exercisable for or convertible
into any of the Parity Securities, and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to
purchase or redeem any of the Parity Securities or any such warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith on the Series U Preferred Stock have been or
contemporaneously are paid in full.
(iv) Dividends payable on the Series U Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year
of twelve 30-day months and, for periods not involving a full calendar
month, the actual number of days elapsed (but not to exceed 30 days).
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders
of shares of Series U Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution
to its stockholders an amount in cash equal to the liquidation preference
for each share outstanding, plus, without duplication, an amount in cash
equal to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding up (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to
the date fixed for liquidation, dissolution or winding up), before any
distribution shall be made or any assets distributed in respect of Junior
Securities to the holders of any Junior Securities
<PAGE>
- 5 -
including, without limitation, Common Stock of the Corporation. If upon
any voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the amounts payable with respect to the Series U Preferred
Stock and all other Parity Securities are not paid in full, the Holders of
the Series U Preferred Stock and the Parity Securities will share equally
and ratably in any distribution of assets of the Corporation first in
proportion to the full liquidation preference to which each is entitled
until such preferences are paid in full, and then in proportion to their
respective amounts of accumulated but unpaid dividends. After payment of
the full amount of the liquidation preferences and accumulated and unpaid
dividends to which they are entitled, the Holders of shares of Series U
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Corporation.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation.
(e) Mandatory Redemption.
(i) To the extent not exchanged for Exchange Notes pursuant to
paragraph (g) hereof, on December 31, 1998, the Corporation shall redeem,
to the extent of funds legally available therefor all of the shares of the
Series U Preferred Stock then outstanding at a redemption price equal to
the greater of (a) 100% of the liquidation preference per share plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
redemption date to the redemption date) and (b) the product of (i) the
Conversion Amount and (ii) the average Last Trade Price of the UAG Common
Stock for the ten (10) trading days immediately preceding January 1, 1999.
(ii) Redemption upon UAG Share Sale. (A) Within 15 Business Days of
the sale or other transfer by the Corporation or any Subsidiary of the
Corporation of 50% or more
<PAGE>
- 6 -
of the UAG Shares held by the Corporation or any such Subsidiary on the
Issue Date for an average sale price of less than $30.00 per share (a "UAG
Share Sale"), the Corporation shall make an offer to purchase (the "UAG
Share Sale Offer") the outstanding Series U Preferred Stock at a purchase
price equal to the percentage of the liquidation preference thereof which
would yield to the Holders an internal rate of return equal to 20%
assuming that each share of Series U Preferred Stock was purchased on the
Issue Date at a price of $1,000 per share, based on annual compounding and
including in such calculation all dividends paid thereon (such applicable
purchase price being referred to as the "UAG Share Sale Offer Purchase
Price"). Notwithstanding the foregoing, the Corporation shall and shall
cause each of its Subsidiaries to be in compliance with the first sentence
of paragraph (l)(iii) hereof. Immediately upon receipt of the cash
proceeds of any UAG Share Sale which triggers the Corporation's obligation
to make a UAG Share Sale Offer, the Corporation shall place such cash
proceeds in escrow for the benefit of the Holders pending the consummation
of the UAG Share Sale Offer.
(B) The Corporation shall within 15 days after the
occurrence of a UAG Share Sale send by first-class mail, postage prepaid,
to each Holder of Series U Preferred Stock, at the address appearing in
the register maintained for the Series U Preferred Stock, a notice
stating:
(1) that the UAG Share Sale Offer is being made pursuant to
this paragraph (e)(ii) and that all of the Series U Preferred Stock
tendered will be accepted for payment, and otherwise subject to the
terms and conditions set forth herein;
(2) the UAG Share Sale Offer Purchase Price and the purchase
date (which shall be a Business Day no earlier than 20 days nor
later than 45 days from the date such notice is mailed (the "UAG
Share Sale Offer Payment Date"));
(3) that any Series U Preferred Stock not tendered will
continue to accrue dividends;
(4) that, unless the Corporation defaults in the payment of
the UAG Share Sale Offer Purchase Price, any Series U Preferred
Stock accepted for payment pursuant to the UAG Share Sale Offer
shall cease
<PAGE>
- 7 -
to accumulate dividends after the UAG Share Sale Offer Payment Date;
(5) that Holders accepting the offer to have their Series U
Preferred Stock purchased pursuant to a UAG Share Sale Offer will be
required to surrender their certificates representing the Series U
Preferred Stock to the Corporation, properly endorsed for transfer
together with such customary documents as the Corporation and the
transfer agent may reasonably require, in the manner and at the
address specified in the notice prior to the close of business on
the Business Day preceding the UAG Share Sale Offer Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the Corporation receives, not later than the close of
business on the third Business Day preceding the UAG Share Sale
Offer Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the number of shares of
Series U Preferred Stock delivered for purchase, and a statement
that such Holder is withdrawing its election to have such Series U
Preferred Stock purchased;
(7) that Holders whose Series U Preferred Stock are being
purchased only in part will be issued new certificates representing
the number of shares of Series U Preferred Stock equal to the
unpurchased portion of the certificates surrendered; and
(8) a summary of any other procedures that a Holder must
follow to accept an UAG Share Sale Offer or effect withdrawal of
such acceptance.
(C) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
redemption of the Series U Preferred Stock in connection with an UAG Share
Sale Offer. To the extent such compliance requires the Corporation to take
action inconsistent with the terms of this paragraph (e), any actions so
required to be taken shall not be deemed to be a breach or violation of
this paragraph (e).
(D) On the UAG Share Sale Offer Payment Date, the
Corporation shall (A) accept for payment the shares of
<PAGE>
- 8 -
Series U Preferred Stock validly tendered pursuant to the UAG Share Sale,
(B) promptly mail to the Holders of shares so accepted the UAG Share Sale
Offer Purchase Price therefor in cash and (C) cancel and retire each
surrendered certificate and execute a new certificate representing that
number of shares of Series U Preferred Stock equal to any unpurchased
shares represented by a certificate surrendered. Unless the Corporation
defaults in the payment for the shares of Series U Preferred Stock
tendered pursuant to the UAG Share Sale Offer, dividends shall cease to
accrue with respect to the shares of Series U Preferred Stock tendered and
all rights of Holders of such tendered shares shall terminate, except for
the right to receive payment therefor, on the UAG Share Sale Offer Payment
Date.
(f) Voting Rights.
(i) The Holders of the Series U Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs (ii)
and (iii) below, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the
Corporation.
(ii) (A) So long as any shares of the Series U Preferred Stock are
outstanding, the Corporation shall not authorize or issue any class of
Parity Securities or amend the terms of any existing Parity Securities in
a manner which adversely effects the rights of the Holders of Series U
Preferred Stock without the affirmative vote or consent of Holders of at
least a majority of the then outstanding shares of the Series U Preferred
Stock, voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an
annual or special meeting or by written consent in lieu of a meeting.
(B) So long as any shares of the Series U Preferred Stock
are outstanding, the Corporation shall not authorize or issue any class of
Senior Securities or amend the terms of any existing Senior Securities in
a manner which adversely effects the rights of Holders of Series U
Preferred Stock without the affirmative vote or consent of Holders of at
least a majority of the outstanding shares of the Series U Preferred
Stock, voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an
<PAGE>
- 9 -
annual or special meeting or by written consent in lieu of a meeting.
(C) So long as any shares of the Series U Preferred Stock
are outstanding, the Corporation shall not amend this Resolution or
Certificate of Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of Holders of Series U Preferred
Stock without the affirmative vote or consent of Holders of at least a
majority of the issued and outstanding shares of Series U Preferred Stock
voting or consenting, in each case, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting or by written consent in lieu of a meeting.
(D) While any shares of the Series U Preferred Stock are
outstanding, the Corporation shall not amend or modify the Exchange Notes
without the affirmative vote or consent of Holders of at least a majority
of the issued and outstanding shares of Series U Preferred Stock voting or
consenting, as the case may be, together as one class, given in person or
by proxy, either in writing or by resolution adopted at an annual or
special meeting or by written consent in lieu of a meeting.
(E) Except as set forth in this paragraph (ii), the
creation, authorization or issuance of any shares of Junior Securities,
Parity Securities or Senior Securities shall not require the consent of
the Holders of Series U Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of Holders
of shares of Series U Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of at least
a majority of the issued and outstanding shares of the Series U Preferred
Stock, voting or consenting, as the case may be, as a separate class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting, the Corporation shall not, in a single
transaction or series of related transactions, consolidate with or merge
with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person
unless: (A) either (1) the Corporation is the survivor of such merger,
consolidation, sale, assignment, transfer, lease, conveyance or other
disposition or (2) the surviving or transferee Person is a corporation,
<PAGE>
- 10 -
partnership, limited liability company or trust organized and existing
under the laws of the United States, any state thereof or the District of
Columbia and such surviving or transferee Person expressly assumes all the
obligations of the Corporation under the Series U Preferred Stock and this
Certificate of Designation; (B) if the Corporation is not the surviving,
transferee or resulting entity, the Series U Preferred Stock shall be
converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor,
transferee or resulting Person the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the Series U Preferred Stock had
immediately prior to such transaction; and (C) immediately after giving
effect to such transaction (including any Indebtedness incurred or
anticipated to be incurred in connection with the transaction), no
Additional Dividends Triggering Event has occurred and is continuing.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Corporation (to a Person other then the
Corporation or another Subsidiary of the Corporation), the Capital Stock
of which constitutes all or substantially all of the properties and assets
of the Corporation shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Corporation.
(g) Exchange.
(i) Requirements. All of the outstanding shares of Series U
Preferred Stock shall be exchanged by the Corporation concurrently with
the Consummation of the Acquisition for the Corporation's 10% Senior
Secured Notes due 2003 (the "Exchange Notes") to be in the form of Exhibit
A hereto. The exchange rate shall be $1.00 principal amount of Exchange
Notes for each $1.00 of liquidation preference of Series U Preferred
Stock, including, to the extent necessary, Exchange Notes in principal
amounts less than $1,000.
(ii) Procedure for Exchange. (A) At least 3 days and not more than
10 days prior to any date fixed for exchange, notice, subsequently
confirmed in writing (the
<PAGE>
- 11 -
"Exchange Notice") shall be given to each Holder of record on the record
date fixed for such exchange of the Series U Preferred Stock at such
Holder's address as the same appears on the stock books of the
Corporation, or by any other method deemed acceptable by each Holder as
evidenced in a written acknowledgment by such Holder; provided that no
failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of Series U
Preferred Stock to be exchanged except as to the Holder or Holders to whom
the Corporation has failed to give said notice or except as to the Holder
or Holders whose notice was defective, and in each case did not have
actual knowledge. The Exchange Notice shall state:
(1) the Exchange Date;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, its certificate or
certificates representing the shares of Series U Preferred Stock;
(3) that dividends on the shares of Series U Preferred Stock
shall cease to accumulate on such Exchange Date whether or not
certificates for shares of Series U Preferred Stock are surrendered
for exchange unless the Corporation shall default in the delivery of
Exchange Notes;
(4) that interest on the Exchange Notes shall accrue from
the Exchange Date whether or not certificates for shares of Series U
Preferred Stock are surrendered for exchange on such Exchange Date;
and
(5) that all accrued and unpaid dividends on the Series U
Preferred Stock shall be paid on the first interest payment date for
the Exchange Notes (provided that such payment of accrued dividends
shall be made no later than December 31, 1998).
(B) Each Holder of shares of Series U Preferred Stock to be
exchanged shall surrender certificates representing such shares of Series
U Preferred Stock in the manner and at the place designated in the
Exchange Notice. The Corporation shall cause the Exchange Notes to be
executed on the Exchange Date and, upon surrender in accordance with the
Exchange Notice of the certificates for shares of Series U Preferred Stock
so exchanged, duly en-
<PAGE>
- 12 -
dorsed (or otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation for
Exchange Notes. The Corporation shall pay interest on the Exchange Notes
at the rate and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice all Exchange Notes necessary for
such exchange shall have been duly executed by the Corporation, then the
rights of the Holders of Series U Preferred Stock so exchanged as
stockholders of the Corporation shall cease as of the Exchange Date
(except the right to receive Exchange Notes and an amount in cash equal to
the amount of accrued and unpaid dividends to the Exchange Date, which
accrued and unpaid dividends shall be paid on the first interest payment
date for the Exchange Notes (provided that such payment of accrued
dividends shall be made no later than December 31, 1998)), and the Person
or Persons entitled to receive the Exchange Notes issuable upon exchange
shall be treated for all purposes as the registered holder or holders of
such Exchange Notes as of the Exchange Date.
(h) Change of Control.
(i) Within 15 Business Days after the occurrence of a Corporation
Change of Control (the date of such occurrence being the "Corporation
Change of Control Date"), the Corporation shall make an offer to purchase
(the "Corporation Change of Control Offer") the outstanding Series U
Preferred Stock at a purchase price equal to the percentage of the
liquidation preference thereof which would yield to the Holders an
internal rate of return equal to 20% assuming that each share of Series U
Preferred Stock was purchased on the Issue Date at a price of $1,000 per
share, based on annual compounding and including in such calculation all
dividends paid thereon (such applicable purchase price being hereinafter
referred to as the "Corporation Change of Control Purchase Price"). In
addition, within 15 Business Days after the occurrence of a UAG Change of
Control (the date of such occurrence being the "UAG Change of Control
Date"), the Corporation shall make an offer to purchase (the "UAG Change
of Control Offer") the outstanding Series U Preferred Stock at a purchase
price equal to 101% of the liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon (including
<PAGE>
- 13 -
an amount in cash equal to a prorated dividend for the period from the
immediately preceding Dividend Payment Date to the Change of Control
Payment Date) (such applicable purchase price being hereinafter referred
to as the "UAG Change of Control Purchase Price").
(ii) The Corporation shall within 15 days after the occurrence of
any Change of Control send by first-class mail, postage prepaid, to each
Holder of Series U Preferred Stock, at the address appearing in the
register maintained for the Series U Preferred Stock, a notice stating:
(1) that a Change of Control Offer is being made pursuant to
this paragraph (h) and that all of the Series U Preferred Stock
tendered will be accepted for payment, and otherwise subject to the
terms and conditions set forth herein;
(2) the applicable Change of Control Purchase Price and the
purchase date (which shall be a Business Day no earlier than 20 days
nor later than 45 days from the date such notice is mailed (the
"Change of Control Payment Date"));
(3) that any Series U Preferred Stock not tendered will
continue to accrue dividends;
(4) that, unless the Corporation defaults in the payment of
the applicable Change of Control Purchase Price, any Series U
Preferred Stock accepted for payment pursuant to a Change of Control
Offer shall cease to accumulate dividends after the Change of
Control Payment Date;
(5) that Holders accepting the offer to have their Series U
Preferred Stock purchased pursuant to any Change of Control Offer
will be required to surrender their certificates representing the
Series U Preferred Stock to the Corporation, properly endorsed for
transfer together with such customary documents as the Corporation
and the transfer agent may reasonably require, in the manner and at
the address specified in the notice prior to the close of business
on the Business Day preceding the Change of Control Payment Date;
<PAGE>
- 14 -
(6) that Holders will be entitled to withdraw their
acceptance if the Corporation receives, not later than the close of
business on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Series
U Preferred Stock delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Series U Preferred
Stock purchased;
(7) that Holders whose Series U Preferred Stock are being
purchased only in part will be issued new certificates representing
the number of shares of Series U Preferred Stock equal to the
unpurchased portion of the certificates surrendered; and
(8) a summary of any other procedures that a Holder must
follow to accept such Change of Control Offer or effect withdrawal
of such acceptance.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
redemption of the Series U Preferred Stock in connection with each Change
of Control Offer. To the extent such compliance requires the Corporation
to take action inconsistent with the terms of this paragraph (h), any
actions so required to be taken shall not be deemed to be a breach or
violation of this paragraph (h).
(iv) On the Change of Control Payment Date, the Corporation shall
(A) accept for payment the shares of Series U Preferred Stock validly
tendered pursuant to the applicable Change of Control Offer, (B) promptly
mail to the Holders of shares so accepted the applicable Change of Control
Purchase Price therefor in cash and (C) cancel and retire each surrendered
certificate and execute a new certificate representing that number of
shares of Series U Preferred Stock equal to any unpurchased shares
represented by a certificate surrendered. Unless the Corporation defaults
in the payment for the shares of Series U Preferred Stock tendered
pursuant to such Change of Control Offer, dividends shall cease to accrue
with respect to the shares of Series U Preferred Stock tendered and all
rights of Holders of such tendered shares shall terminate, except for the
right to receive payment therefor, on the Change of Control Payment Date.
<PAGE>
- 15 -
(v) If the repurchase of Series U Preferred Stock would violate or
constitute a default or be otherwise prohibited under any Indebtedness of
the Corporation then outstanding, then, notwithstanding anything to the
contrary contained above, prior to complying with the foregoing
provisions, but in any event prior to the Change of Control Payment Date,
the Corporation will, to the extent required to permit the repurchase of
the Series U Preferred Stock required by this paragraph (h), either (A)
repay in full all such Indebtedness on the basis required to permit such
purchase of Series U Preferred Stock or (B) obtain the requisite consents,
if any, under the agreements, documents and instruments governing such
Indebtedness required to permit the repurchase of Series U Preferred Stock
required by this paragraph (h). Until the requirements of the immediately
preceding sentence are satisfied, the Corporation shall not and shall not
be obligated to purchase any Series U Preferred Stock pursuant to any
Change of Control Offer; provided that the Corporation's failure to comply
with the provisions of this paragraph (h)(v) shall constitute an
Additional Dividends Triggering Event.
(i) Conversion or Exchange. The Holders of shares of Series U
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Series U Preferred Stock. Shares of Series U
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Covenants.
(i) Limitation on Incurrence of Additional Indebtedness. The
Corporation shall not, and will not per-
<PAGE>
- 16 -
mit any UAG Intermediate Subsidiary to incur any Indebtedness (including
Acquired Indebtedness) other than Permitted Indebtedness or issue any
Preferred Stock (other than Preferred Stock issued in compliance with
paragraph (f) hereof).
(ii) Limitation on Restricted Payments. Prior to the
occurrence of a Restricted Payment Covenant Termination Event, the
Corporation shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly (i) declare or pay any dividend or any other
distribution or payment to any Restricted Shareholder on Parity Securities
or Junior Securities of the Corporation or Capital Stock of any Subsidiary
of the Corporation (other than (x) dividends or distributions on the
Series U Preferred Stock and (y) payments made by Foamex in connection
with the Consummation of the Acquisition as contemplated by such
transaction, (ii) purchase, redeem or otherwise acquire or retire for
value from any Restricted Shareholder any Parity Securities or Junior
Securities of the Corporation or Capital Stock of any of its Subsidiaries
or any option, warrants or other rights to purchase such Parity Securities
or Junior Securities or Capital Stock, as the case may be, (iii) forgive
any Indebtedness of any Restricted Shareholder to the Corporation or a
Subsidiary of the Corporation or (iv) make any payment (including, without
limitation, by way of salary, wages, bonus, compensation, benefit, or any
other renumeration) or transfer or lease any property or assets or provide
any services to or make any Investment in any Restricted Shareholder (each
of the events described in clauses (i) through (iv) above, a "Restricted
Payment"); provided, however, that if no Additional Dividends Triggering
Event shall have occurred and be continuing or shall result from the
making of any such Restricted Payment, the Corporation and its
Subsidiaries may make Restricted Payments not to exceed $10.0 million
after the Issue Date.
(iii) Limitation on Transfer of Certain Assets; Incurrence of
Certain Liens; Business Activities of UAG Intermediate Subsidiaries. The
Corporation or one or more UAG Intermediate Subsidiaries shall at all
times be the record and beneficial owner of the UAG Shares; provided,
however, that at no time shall the Corporation and the UAG Intermediate
Subsidiaries own fewer UAG Shares than those necessary to be in compliance
with Section 5 of the Exchange Notes. In addition, the Corporation shall
not and shall not permit any UAG Intermediate Subsidiary to cre-
<PAGE>
- 17 -
ate, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or assets
of the Corporation or any of the UAG Intermediate Subsidiaries or any
shares of Capital Stock or Indebtedness of any UAG Intermediate
Subsidiary, now owned or hereafter acquired. The Corporation shall not
permit any of the UAG Intermediate Subsidiaries to engage in any material
business activities or to hold any material assets other than the UAG
Shares.
(iv) Reports. For so long as any shares of the Series U
Preferred Stock remain outstanding, the Corporation will furnish to each
Holder:
(a) as soon as available and in any event within 60 days
after the end of each of the first three fiscal quarters of each
fiscal year (1) the consolidated balance sheets of each of Foamex,
UAG and CHF at the end of such fiscal quarter, (2) the related
statements of operations, stockholders' equity and cash flows for
such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding periods of the previous fiscal year, all in
reasonable detail and certified by the chief financial officer of
the applicable entity that they fairly present the financial
condition of such entity as at the dates indicated and the results
of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end
adjustments and (3) in lieu of (1) and (2) for an entity, the
quarterly report on Form 10-Q for such quarterly period for such
entity to the extent filed with the Commission;
(b) as soon as available and in any event within 120 days
after the end of each fiscal year, (1) the consolidated balance
sheets of each of Foamex, UAG and CHF and the unconsolidated balance
sheet of the Corporation as at the end of such fiscal year, (2) the
related statements of operations, stockholders' equity and cash
flows for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal
year, all in reasonable detail and certified by the chief financial
officer of the applicable entity that
<PAGE>
- 18 -
they fairly present the financial condition of such entity as at the
dates and the results of their operations and their cash flows for
the periods indicated, (3) in lieu of (1) and (2) for an entity, the
annual report on Form 10-K for such year for such entity to the
extent filed with the Commission, and (4) in each case, a report
thereon of independent certified public accountants of recognized
national standing, which report shall be unqualified as to scope of
audit, shall state that such financial statements fairly present the
financial position of the applicable entity as at the dates
indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards; and
(c) promptly upon the sending or filing thereof, copies of
all financial statements, reports, notices and proxy statements sent
or made available generally by each of Foamex, UAG, CHF and the
Corporation to its security holders.
(m) Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary or assumed in connection with
the acquisition of assets from such Person.
"Additional Dividends Triggering Event" means the occurrence of any
of the following: (i) the Corporation fails to redeem all of the
outstanding shares of Series U Preferred Stock on or before December 31,
1998, (ii) the Corporation fails to pay all accumulated dividends on the
Series U Preferred Stock prior to or concurrently with the redemption or
exchange thereof, (iii) the Corporation fails to make a UAG Share Sale
Offer following a UAG Share Sale or fails to purchase shares of Series U
Preferred Stock from Holders who elect to have such shares purchased
<PAGE>
- 19 -
pursuant to a UAG Share Sale Offer in each case as provided in paragraph
(e)(ii), (iv) the Corporation fails to make any Change of Control Offer
following any Change of Control or fails to purchase shares of Series U
Preferred Stock from Holders who elect to have such shares purchased
pursuant to any Change of Control Offer, in each case as provided in
paragraph (h), (v) the Corporation breaches or violates any of the
provisions set forth in paragraph (l) hereof which material breach or
material violation is not curred within thirty (30) days after the
occurrence thereof (provided that in such case additional dividends shall
accrue from and including the date of such breach or violation and not
such 30th day) or (vi) the Corporation fails to exchange the Series U
Preferred Stock for Exchange Notes as provided in paragraph (g) hereof.
"Affiliate" means, of any Person, a Person who, directly or
indirectly, through one or more intermediaries controls, or is controlled
by, or is under common control with, such other Person. The term "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"BNS Facility" means the Second Amended and Restated Credit
Agreement dated as of December 24, 1997 between the Corporation and The
Bank of Nova Scotia, as amended.
"Board of Directors" means the Board of Directors of the Corporation
or a duly authorized committee thereof.
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock, including each class of
Common Stock and Preferred Stock of such Person and warrants or options to
purchase any of the foregoing and (ii) with respect to any Person that is
not a corporation, any and all partnership or other equity interests of
such Person.
<PAGE>
- 20 -
"Certificate of Designation" means this Certificate of Designation,
as amended from time to time, creating the Series U Preferred Stock.
"Certificate of Incorporation" shall have the meaning provided in
the first paragraph.
"Change of Control" means a Corporation Change of Control or a UAG
Change of Control.
"Change of Control Offer" means a Corporation Change of Control
Offer or a UAG Change of Control Offer.
"Change of Control Payment Date" shall have the meaning provided in
paragraph (h)(ii).
"Change of Control Purchase Price" means a Corporation Change of
Control Purchase Price or a UAG Change of Control Purchase Price.
"CHF" means CHF Industries, Inc., a Delaware corporation.
"Commission" means the Securities and Exchange Commission and any
successor agency.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and
whether voting or non-voting) of, such Person's Common Stock, whether
outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such Common Stock.
"Consummation of the Acquisition" means the consummation of the
transaction pursuant to which the Corporation directly or indirectly
becomes the beneficial owner of at least 80% of the outstanding Common
Stock of Foamex.
"Continuing Director" means a director who either was a member of
the board of directors of UAG on the Issue Date or who became a director
of UAG subsequent to the Issue Date and whose election, or nomination for
election by UAG's stockholders, was duly approved by a majority of the
Continuing Directors then on the board of directors of UAG, either by a
specific vote or by approval of the proxy statement issued by UAG on
behalf of the board of direc-
<PAGE>
- 21 -
tors of UAG in which such individual is named as nominee for director.
"Conversion Amount" means initially 333,333 shares of UAG Common
Stock, provided, however, if the average Last Trade Price of the UAG
Common Stock for the ten (10) trading days immediately preceding January
1, 1999 (the "Average Last Trade Price") is less than $24.00 per share,
then the Conversion Amount shall be equal to $10 million divided by the
product of (i) 1.25 and (ii) the Average Last Trade Price. Notwithstanding
the foregoing, the determination of the Conversion Amount will give effect
to the impact of any stock splits, stock dividends, reclassifications,
extraordinary distributions or dividends relating to the UAG Common Stock.
"Corporation" shall have the meaning provided in the first
paragraph.
A "Corporation Change of Control" will be deemed to have occurred at
such time as (i) any Person (including a Person's Affiliates) becomes the
beneficial owner (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of a greater percentage of
the total voting power of the Corporation's Common Stock than that which
is then beneficially owned by the Permitted Holders, in the aggregate, and
the Permitted Holders do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors, (ii) there shall be consummated any consolidation or
merger of the Corporation in which the Corporation is not the continuing
or surviving corporation or pursuant to which the Common Stock of the
Corporation would be converted into cash, securities or other property,
other than a merger or consolidation of the Corporation in which the
holders of the Common Stock of the Corporation outstanding immediately
prior to the consolidation or merger hold, directly or indirectly, at
least a majority of the voting power of the Common Stock of the surviving
corporation immediately after such consolidation or merger or (iii) during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors (together with any new
directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Corporation has been approved by a
majority of the directors then still in office who either were directors
at the beginning of such period or whose election or
<PAGE>
- 22 -
recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors.
"Corporation Change of Control Date" shall have the meaning provided
in paragraph (h)(i).
"Corporation Change of Control Offer" shall have the meaning
provided in paragraph (h)(i).
"Corporation Change of Control Purchase Price" shall have the
meaning provided in paragraph (h)(i).
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof, in
whole or in part, on or prior to the mandatory redemption date of the
Series U Preferred Stock. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to include (i) any Preferred
Stock of a Subsidiary of the Corporation, (ii) any Preferred Stock of the
Corporation if, under the terms of such Preferred Stock, by agreement or
otherwise, the Corporation is obligated to pay current dividends or
distributions in cash during the period prior to the redemption date of
the Series U Preferred Stock (subject to the proviso below), and (iii) as
long as the Series U Preferred Stock remains outstanding, Senior
Securities (subject to the proviso below); provided, however, that
Preferred Stock of the Corporation or any Subsidiary thereof that is
issued with the benefit of provisions requiring a change of control offer
to be made for such Preferred Stock in the event of a change of control of
the Corporation or Subsidiary, which provisions have substantially the
same effect as paragraph (h) hereof shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions; and provided, further,
that the Series U Preferred Stock, the Series A Preferred Stock and the
Existing Convertible Preferred Stock shall not be considered Disqualified
Capital Stock and provided, further, that Senior Securities the issuance
of which are approved by the Holders pursuant to paragraph (f) hereof
shall not be considered Disqualified Capital Stock.
"Dividend Payment Date" means December 31 and June 30 of each year.
<PAGE>
- 23 -
"Dividend Record Date" means December 15 and June 15 of each year.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Date" means the date of original issuance of the Exchange
Notes.
"Exchange Notes" shall have the meaning provided in paragraph (g).
"Exchange Notice" shall have the meaning provided in paragraph (g).
"Existing Convertible Preferred Stock" means the 1,000,000 shares of
the Corporation's Convertible Preferred Stock, par value $100.00 per
share.
"Foamex" means Foamex International Inc., a Delaware corporation.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"Holder" means a holder of shares of Series U Preferred Stock as
reflected in the stock books of the Corporation.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of
such Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person; provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such
Indebtedness; provided, further, that the amortization of original issue
discount on Indebtedness issued with original issue discount or the
accumulation of dividends on Disqualified Capital Stock shall not be
deemed an incurrence of Indebtedness.
<PAGE>
- 24 -
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property (excluding, without limitation, any
balances that constitute accounts payable or trade payables and other
accrued liabilities or accrued expenses arising in the ordinary course of
business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and shall also include, to the extent not otherwise
included, (i) any capitalized lease obligations, (ii) obligations secured
by a Lien to which the property or assets owned or held by such Person are
subject, whether or not the obligation or obligations secured thereby
shall have been assumed other than a Lien securing an obligation which is
not Indebtedness, (iii) guarantees of items of other Persons which would
be included within this definition for such other Persons (whether or not
such items would appear upon the balance sheet of the guarantor), (iv) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) Disqualified
Capital Stock of the Corporation or any Subsidiary thereof and (vi)
obligations of any such Person under any interest rate agreement or
currency agreement applicable to any of the foregoing (if and to the
extent such interest rate agreement or currency agreement obligations
would appear as a liability upon a balance sheet of such Person prepared
in accordance with GAAP). Notwithstanding any other provision of the
foregoing definition, any contingent obligations arising out of customary
indemnification agreements with respect to the sale of assets or
securities shall not be deemed to be "Indebtedness" of the Corporation or
any Subsidiaries for purposes of this definition. Furthermore, guarantees
of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall
not also be included.
"Investment" by any Person in any other Person means, directly or
indirectly, any advance, account receivable (other than an account
receivable arising in the ordinary course of business), loan or capital
contribution to (by
<PAGE>
- 25 -
means of transfers of property to others, payments for property or
services for the account or use of others or otherwise), the purchase of
any stocks, bonds, notes, debentures, partnership or joint venture
interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock
or other evidence of beneficial ownership of, such other Person or the
making of any investment by such Person in any other Person. Investments
shall exclude extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices and repurchases. Notwithstanding
the foregoing, the following shall not be considered Investments by a
Person in any other Person: (i) trade receivables and prepaid expenses, in
each case arising in the ordinary course of business; provided that such
receivables and prepaid expenses would be recorded as assets of such
Person in accordance with GAAP, (ii) Investments received in connection
with the bankruptcy or reorganization of suppliers and customers or in
good faith bona fide settlement of delinquent ordinary course of business
trade receivables of customers and (iii) endorsements for collection or
deposit in the ordinary course of business by such Person of bank drafts
and similar negotiable instruments of such other Person received as
payment for ordinary course of business trade receivables.
"Issue Date" means the date of original issuance of the Series U
Preferred Stock.
"Junior Securities" shall have the meaning provided in paragraph
(b).
"Last Trade Price" means, for any security as of any date, the last
trade price for such security on The New York Stock Exchange, Inc.
("NYSE") as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
NYSE is not the principal trading for such security, the last trade price
of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no last trade price is reported for such
security by Bloomberg, the last closing trade price of such security as
reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the average of the last trade prices for such
security as reported in the
<PAGE>
- 26 -
"pink sheets" by the National Quotation Bureau, Inc. If the last trade
price cannot be calculated for such security on such date on any of the
foregoing bases, the last trade price of such security on such date shall
be the fair market value as mutually determined by the Corporation and the
Holders of a majority of the outstanding Shares.
"Lien" means any consensual lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof and any agreement to give any security interest).
"Parity Securities" shall have the meaning provided in paragraph
(b).
"Permitted Holder" means (i) Marshall S. Cogan or any Immediate
Family Member (as defined in NASD Rule 2110-1 as in effect as of the Issue
Date) of Marshal S. Cogan, (ii) any trust or estate the sole beneficiaries
of which consist of any person described in clause (i), and (iii) any
Affiliate of any Person specified in clause (i) or (ii).
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) all Indebtedness of the Corporation and its Subsidiaries
outstanding on the Issue Date;
(ii) additional Indebtedness under the BNS Facility not to
exceed $10.0 million;
(iii) Indebtedness of a Subsidiary of the Corporation to the
Corporation or to a Subsidiary of the Corporation for so
long as such Indebtedness is owned by the Corporation or
a Subsidiary of the Corporation, in each case with no
Lien securing such Indebtedness held by a Person other
than the Corporation or a Subsidiary of the Corporation;
provided that if as of any date any Person other than
the Corporation or a Subsidiary of the Corporation owns
any such Indebtedness or holds a Lien securing any such
Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting
<PAGE>
- 27 -
Permitted Indebtedness under this clause (iii);
(iv) and Refinancing Indebtedness of Indebtedness described
under clauses (i), (ii) and (iii) above.
"Permitted Liens" means (i) Liens in favor of the Corporation or any
of the UAG Intermediate Subsidiaries, (ii) statutory liens or landlords',
carriers', warehouseman's, mechanics', suppliers', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which do not secure any Indebtedness and with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceedings, if
a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, (iii) Liens for taxes,
assessments or governmental charges that are being contested in good faith
by appropriate proceedings, (iv) easements, rights-of-way, zoning
restrictions and other similar charges or encumbrances in respect of real
property not interfering in any material respect with the ordinary conduct
of the business of the Corporation or any of the UAG Intermediate
Subsidiaries, (v) Liens securing the BNS Facility (as the BNS Facility is
in effect on the Issue Date) and the Other Loan Agreement (as defined in
the BNS Facility) (as the Other Loan Agreement is in effect on the Issue
Date)), (vi) Liens existing on the Issue Date, (vii) Liens in favor of the
Holders, (viii) Liens on property or shares of Capital Stock of another
person at the time such other person becomes a Subsidiary of the
Corporation or any UAG Intermediate Subsidiary; provided, however, that
such Liens are not created, incurred or assumed in connection with, or in
contemplation of, such other person becoming a Subsidiary, (ix) Liens on
property at the time the Corporation or any UAG Intermediate Subsidiary
acquires such property, including any acquisition by means of a merger or
consolidation with or into such person; provided, however, that such Liens
are not created, incurred or assumed in connection with, or in
contemplation of, such acquisition, and (x) any extensions, substitutions,
replacements or renewals of the foregoing.
"Person" means an individual, partnership, corporation,
unincorporated organization, joint stock company, limited liability
company, trust or joint venture, or a governmental agency or political
subdivision thereof.
<PAGE>
- 28 -
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemption or upon liquidation.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Corporation outstanding on
the Issue Date or other Indebtedness permitted to be incurred by the
Corporation or its Subsidiaries pursuant to the terms of this Certificate
of Designation, but only to the extent that (i) the Refinancing
Indebtedness which is Disqualified Capital Stock is subordinated to the
Series U Preferred Stock to at least the same extent as the Indebtedness
being refunded, refinanced or extended, if at all, (ii) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the
maturity date of the Series U Preferred, (iii) if any of the Refinancing
Indebtedness is scheduled to mature on or prior to December 31, 1998, such
Refinancing Indebtedness has a Weighted Average Life to Maturity at the
time such Refinancing Indebtedness is incurred that is equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being
refunded, refinanced or extended and (iv) such Refinancing Indebtedness is
in an aggregate principal amount that is equal to or less than the sum of
(a) the aggregate principal amount then outstanding under the Indebtedness
being refunded, refinanced or extended, (b) the amount of accrued and
unpaid interest or dividends, if any, and premiums owed, if any, not in
excess of preexisting prepayment provisions on such Indebtedness being
refunded, refinanced or extended and (c) the amount of customary fees,
expenses and costs related to the incurrence of such Refinancing
Indebtedness.
"Resolution" shall have the meaning provided in the first paragraph.
"Restricted Payment" shall have the meaning provided in paragraph
(l)(ii).
"Restricted Payment Covenant Termination Event" means the first day
on which the Last Trade Price of UAG Common Stock is equal to or greater
than $50.00.
"Restricted Shareholder" means any Person that is the direct or
indirect owner of 10% or more of the Corpora-
<PAGE>
- 29 -
tion's Common Stock, on a fully diluted basis, and any Affiliate of any
such Person other than the Corporation or a Subsidiary thereof.
"Senior Securities" shall have the meaning provided in paragraph
(b).
"Series A Preferred Stock" means the 1,000 shares of the
Corporation's Series A Preferred Stock, par value $.01 per share.
"Series U Preferred Stock" means the 10% Senior Exchangeable
Preferred Stock, Series U, liquidation preference $1,000 per share of the
Corporation issued pursuant to this Certificate of Designation.
"Subsidiary" with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person; provided, however, that for purposes of
paragraph (l)(ii) "Subsidiary" shall be deemed to also include UAG and
Foamex.
"UAG" means United Auto Group, Inc., a Delaware corporation, and any
successor entity.
"UAG Change of Control" will be deemed to have occurred in the event
that (whether or not otherwise permitted by this Certificate of
Designation) after the Issue Date (a) any transaction (including, without
limitation, any merger or consolidation) shall be consummated after which
any Person or any Persons acting together that would constitute a group
(for purposes of Section 13(d) of the Exchange Act, or any successor
provision thereto) (a "Group"), together with any Affiliates, other than
the Corporation or any Subsidiary of the Corporation, shall "beneficially
own" (as defined in Rule 13d-3 under the Exchange Act, or any successor
provision thereto) at least (x) 50% of the voting power of the outstanding
Voting Stock of UAG or (y) 40% of the voting power of the Voting Stock of
UAG, and the Corporation and its Subsidiaries own in the aggregate less
than such Person or Group (in doing the "own less than" comparison in this
clause (y), the
<PAGE>
- 30 -
holdings of the Corporation and its Subsidiaries who are members of the
new Group shall not be counted in the voting power of such new Group); (b)
(x) UAG or any Subsidiary sells, leases or otherwise transfers all or
substantially all of the assets of UAG and its Subsidiaries, taken as a
whole, to any Person other than a wholly owned Subsidiary of UAG, or (y)
UAG consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, UAG, in either case under this
clause (b), in one transaction or series of related transactions in which
immediately after the consummation thereof Persons owning a majority of
the voting power of the Voting Stock of UAG immediately prior to such
consummation shall cease to own a majority of the voting power of the
Voting Stock of UAG or the surviving or transferee entity if other than
UAG; (c) Continuing Directors cease to constitute at least a majority of
the board of directors of UAG; or (d) the stockholders of UAG approve any
plan or proposal for the liquidation or dissolution of UAG.
"UAG Change of Control Date" shall have the meaning provided in
paragraph (h)(i).
"UAG Change of Control Offer" shall have the meaning provided in
paragraph (h)(i).
"UAG Change of Control Purchase Price" shall have the meaning
provided in paragraph (h)(i).
"UAG Intermediate Subsidiary" means any Subsidiary of the
Corporation that directly or indirectly owns any of the UAG Shares.
"UAG Share Sale" shall have the meaning provided in paragraph
(e)(ii) above.
"UAG Share Sale Offer" shall have the meaning provided in paragraph
(e)(ii) above.
"UAG Share Sale Offer Payment Date" shall have the meaning provided
in paragraph (e)(ii) above.
"UAG Share Sale Offer Purchase Price" shall have the meaning
provided in paragraph (e)(ii) above.
"UAG Shares" means the 4,016,100 shares of the Common Stock of UAG
owned by the Corporation and any additional
<PAGE>
- 31 -
shares of such Common Stock or other property or assets issued in
connection with the ownership of such shares of Common Stock less any
shares which have been sold in compliance with paragraph (e) hereof.
"Voting Stock" of any Person means the Capital Stock of such Person
which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times
or only so long as no senior class of securities has such voting power by
reason of any contingency.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.
(n) Transfer.
(i) Each certificate representing shares of Series U Preferred
Stock, unless otherwise agreed by the Corporation and the Holder thereof, shall
bear the following (or substantially equivalent) legend on the face or reverse
side thereof:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND SUCH LAWS AND THE RESPECTIVE RULES AND REGULATIONS THEREUNDER. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED
BY THE TERMS OF THAT CERTAIN PURCHASE AGREEMENT, DATED AUGUST 20, 1998.
ANY OFFER, SALE OR OTHER DISPOSITION IS SUBJECT TO THE RIGHT OF THE
CORPORATION TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THE CORPORATION IN FORM
AND SUBSTANCE."
<PAGE>
- 32 -
(ii) Each Holder of Series U Preferred Stock must be the registered
owner of at least 1,000 shares of Series U Preferred Stock, and each transfer of
such shares to another Holder must be of a minimum denomination of 1,000 shares.
(iii) Notwithstanding any other provision herein, the Series U
Preferred Stock may not be held by more than 10 Holders for purposes of the
Investment Company Act of 1940 Act, as amended (the "1940 Act"), and the
Corporation has the right to refuse to register any transfer of the Series U
Preferred Stock if, in its reasonable judgment, such transfer would result in
there being deemed to be more than 10 Holders for purposes of the 1940 Act.
<PAGE>
- 33 -
IN WITNESS WHEREOF, said Trace International Holdings, Inc., has
caused this Certificate of Designation to be signed by Philip N. Smith, Jr., its
Senior VP, this 19th day of August, 1998.
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Name: Philip N. Smith, Jr.
Title: Senior Vice President
<PAGE>
No. [ ] EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER. TRANSFER OF THE SECURITIES
REPRESENTED HEREBY IS ALSO RESTRICTED BY THE TERMS OF THE PURCHASE AGREEMENT,
DATED AUGUST 20, 1998, BETWEEN THE PAYOR AND THE INITIAL PURCHASERS SIGNATORIES
THERETO. ANY OFFER, SALE OR OTHER DISPOSITION IS SUBJECT TO THE RIGHT OF THE
PAYOR TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER
INFORMATION ACCEPTABLE TO PAYOR IN FORM AND SUBSTANCE.
TRACE INTERNATIONAL HOLDINGS, INC.
a Delaware Corporation
FORM OF 10% SENIOR SECURED NOTE
DUE OCTOBER 31, 2003
$[ ] [ ], 1998
TRACE INTERNATIONAL HOLDINGS, INC., a Delaware corporation (the
"Payor"), for value received, promises to pay to the order of [ ] (the "Payee"),
the principal amount of [ ] DOLLARS ($[ ]), together with accrued interest
thereon, calculated and payable as set forth in this Note. The principal and
interest on this Note is payable in lawful money of the United States of America
in immediately available funds at such place in the United States as Payee may
from time to time designate in writing to Payor.
This Note is one of a series of Notes (collectively, the "Notes")
with an aggregate principal amount outstanding of $10,001,000 which have been
issued pursuant to that certain Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and other Special Rights of
10% Senior Exchangeable Preferred Stock, Series U (the "Series U Preferred
Stock") (the "Certificate of Designation") of the Payor in exchange for shares
of Series U Preferred Stock and shall rank pari passu in right of payment with
all such other Notes at any time outstanding.
<PAGE>
- 2 -
1. Payment of Principal and Interest
1.1 Calculation and Payment of Interest. Interest on the principal
balance of this Note outstanding from time to time until paid in full or
converted to UAG Common Stock as provided herein shall accrue at the rate of ten
percent (10%) per annum, computed on the basis of a 360-day year of twelve
30-day months and, for periods not involving a full calendar month, the actual
number of days elapsed but not to exceed 30 days, commencing on the date hereof
for this Note. Payment of such interest shall be made in cash in arrears
semi-annually on each December 31 and June 30 commencing on the first such date
following the date hereof.
The Payor shall pay interest on overdue principal and on overdue
installments of interest at the rate borne by this Note to the extent lawful.
1.2 Payment on Maturity Date. On October 31, 2003 (the "Maturity Date")
the Payor shall pay to the Payee an amount equal to (a) 125.0% of the principal
amount of this Note, plus (b) any accrued and unpaid interest on this Note.
1.3 Optional Redemption.
(a) The Payor may redeem this Note, in whole or in part, at any
time on or after December 31, 2001 at the following redemption prices (expressed
as a percentage of principal amount), together, in each case, with accrued and
unpaid interest to the redemption date, if redeemed during the twelve-month
period beginning on December 31 of each year listed below:
Year Percentage
---- ----------
2001................................................... 120.0%
2002 and thereafter.................................... 125.0%
(b) At least 20 days, and no more than 45 days, before a
redemption date, the Payor shall mail, or cause to be mailed, a notice of
redemption to the Payee.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
<PAGE>
- 3 -
(3) if this Note is being redeemed in part, the portion of the
principal amount of this Note to be redeemed and that, after the
redemption date and upon surrender of this Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) that any Note called for redemption must be surrendered to the
Payor to collect the redemption price;
(5) that unless the Payor defaults in making the redemption
payment, interest on the portion of this Note called for redemption ceases
to accrue on and after the redemption date;
(6) the Section of this Note pursuant to which this Note is being
redeemed; and
(7) the aggregate principal amount of this Note that is being
redeemed.
Any redemption of less than the entire outstanding principal amount
of all Notes shall be effected on a pro rata basis.
1.4 Payment Only on Business Days. Any payment hereunder which, but for
this Section 1.4, would be payable on a day which is not a Business Day shall
instead be due and payable on the Business Day next following such date for
payment.
2. Events of Default.
The following shall constitute "Events of Default" under the Notes:
(a) there is a failure to pay the principal or premium, if any, on
any Note when such principal or premium becomes due and payable, at
maturity, upon acceleration, redemption or otherwise;
(b) there is a failure to pay interest on any Note when the same
becomes due and payable and such default continues for a period of 10
days;
(c) the Payor fails to make a Change of Control Offer or a UAG
Share Sale Offer if any such offer is required by the provisions of the
Notes or fails to purchase any Note if any Payee of a Note elects to have
such Note purchased pursuant to any such offer;
<PAGE>
- 4 -
(d) the Payor defaults in the observance or performance of any
other covenant or agreement in the Notes (including, without limitation,
the provisions of Section 4 hereof) which default continues for a period
of 30 days after the Payor receives written notice thereof specifying the
default from any Payee of a Note;
(e) there is a default in the payment at final maturity of
principal in an aggregate amount of $20.0 million or more with respect to
any Indebtedness of the Payor or any Subsidiary thereof which default
shall not be cured, waived or postponed pursuant to an agreement with the
holders of such Indebtedness within 60 days after written notice, or the
acceleration of any such Indebtedness aggregating $20.0 million or more
which acceleration shall not be rescinded or annulled within 10 days after
written notice to the Payor of such default by the Payee;
(f) any final judgment or judgments which can no longer be
appealed for the payment of money in excess of $20.0 million shall be
rendered against the Payor or any Subsidiary thereof, and shall not be
discharged or bonded for a period of 60 consecutive days during which a
stay of enforcement of such judgment shall not be in effect;
(g) the Payor or any Subsidiary pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it
in an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) admits in writing its inability to pay its debts
generally as they become due;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Payor or any Subsidiary in an
involuntary case,
<PAGE>
- 5 -
(B) appoints a Custodian of the Payor or any Subsidiary or
for all or substantially all of the property of the Payor or any
Subsidiary, or
(C) orders the liquidation of the Payor or any Subsidiary,
and the order or decree remains unstayed and in effect for 60 days;
(i) any Security Interest ceases to be in full force and effect or
there is a default under the Pledge Agreement; or
(j) any of the Guarantees cease to be in full force and effect
other than in accordance with the terms of the Notes.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
If an Event of Default specified above shall have occurred and be
continuing, then Payees of Notes holding a majority of the outstanding principal
amount of the Notes by notice in writing to Payor may declare the entire
principal amount of the Notes (including a pro rata portion of any premium which
would be payable at maturity as provided for in Section 1.2) and the interest
accrued thereon to be due and payable and upon any such declaration the same
shall become due and payable at such time. If an Event of Default specified in
Section 2(g) or 2(h) hereof occurs, the principal balance of (including a pro
rata portion of any premium which would be payable at maturity as provided for
in Section 1.2) and accrued interest on the Notes shall become due and payable
immediately without any declaration or other act on the part of any Payee of a
Note.
If any Event of Default shall have occurred and be continuing, any
Payee of a Note may proceed to protect and enforce its rights either by suit in
equity or by action at law, or both, whether for specific performance of any
provision of the Notes or in aid of the exercise of any power granted to such
Payee under the Notes.
<PAGE>
- 6 -
3. Certain Covenants.
(a) Limitation on Restricted Payments. Prior to the occurrence of
a Restricted Payment Covenant Termination Event, the Payor shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly (i) declare or pay
any dividend or any other distribution or payment to any Restricted Shareholder
on Capital Stock of the Payor or any Subsidiary of the Payor, (ii) purchase,
redeem or otherwise acquire or retire for value from any Restricted Shareholder
any Capital Stock of the Payor or any of its Subsidiaries or any options,
warrants or other rights to purchase such Capital Stock, (iii) forgive any
Indebtedness of any Restricted Shareholder to the Payor or a Subsidiary of the
Payor or (iv) make any payment (including, without limitation, by way of salary,
wages, bonus, compensation, benefit, or any other renumeration) or transfer or
lease any property or assets or provide any services to or make any Investment
in any Restricted Shareholder (each of the events described in clauses (i)
through (iv) above, a "Restricted Payment"); provided, however, that, if no
Default or Event of Default shall have occurred and be continuing or shall
result from the making of any such Restricted Payment, the Payor and its
Subsidiaries may make Restricted Payments not to exceed $20.0 million in any
calendar year.
(b) Limitation on Transfer of UAG Shares; Subsidiary Guarantees.
The Payor or one or more UAG Intermediate Subsidiaries shall at all times be the
record and beneficial owner of the Pledged Shares. The Payor shall not transfer
or permit the transfer of any of the Pledged Shares to any Subsidiary unless
such Person is a Wholly-Owned Subsidiary of the Payor at the time of such
transfer and at all times thereafter and, simultaneously with such transfer,
such Wholly-Owned Subsidiary executes a Guarantee of this Note substantially in
the form of Exhibit A hereto. The Payor will not permit any of the UAG
Intermediate Subsidiaries to engage in any material business activities or to
hold any material assets other than the UAG Shares.
(c) Limitation on Certain Liens. The Payor shall not and shall not
permit any UAG Intermediate Subsidiary of the Payor to create, incur or
otherwise cause or suffer to exist or become effective any Liens of any kind,
other than Permitted Liens, upon any UAG Shares owned by the Payor or any UAG
Intermediate Subsidiary of the Payor.
(d) Redemption upon UAG Share Sale. (I) Within 15 Business Days of
the sale or other transfer by the Payor or any
<PAGE>
- 7 -
Subsidiary of the Payor of 50% or more of the UAG Shares held by the Payor or
any such Subsidiary on the Issue Date for an average sale price of less than
$30.00 per share (a "UAG Share Sale"), the Payor shall make an offer to purchase
(the "UAG Share Sale Offer") the Notes at a purchase price equal to the
percentage of the principal amount thereof which would yield to each Payee an
internal rate of return equal to 20% assuming that each Payee of a Note acquired
its Notes in exchange for its shares of Series U Preferred Stock which shares
were purchased on the Series U Issue Date at a price of $1,000 per share, and
based on annual compounding and including in such calculation all dividends paid
on the Series U Preferred Stock and all interest paid on the Notes to the UAG
Share Sale Offer Payment Date (such applicable purchase price being referred to
as the "UAG Share Sale Offer Purchase Price"). Notwithstanding the foregoing,
the Payor shall and shall cause each of its Subsidiaries to be in compliance
with the first sentence of clause (b) above. Immediately upon receipt of the
cash proceeds of any UAG Share Sale which triggers the Payor's obligation to
make a UAG Share Sale Offer, the Payor shall place such cash proceeds in escrow
for the benefit of the payees of the Notes pending the consummation of the UAG
Share Sale Offer.
(II) The Payor shall within 15 days after the occurrence of a UAG
Share Sale send by first-class mail, postage prepaid, to the holder of this Note
a notice stating:
(A) that the UAG Share Sale Offer is being made pursuant to this
Section (3)(d) and that the entire principal amount of this Note tendered
will be accepted for payment, and otherwise subject to the terms and
conditions set forth herein;
(B) the UAG Share Sale Offer Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 days nor later than 45
days from the date such notice is mailed (the "UAG Share Sale Offer
Payment Date"));
(C) that any portion of this Note not tendered will continue to
accrue interest;
(D) that, unless the Payor defaults in the payment of the UAG
Share Sale Offer Purchase Price, any portion of this Note accepted for
payment pursuant to the UAG Share Sale Offer shall cease to accrue
interest after the UAG Share Sale Offer Payment Date;
<PAGE>
- 8 -
(E) that if Payee accepts the offer to have its Note purchased
pursuant to a UAG Share Sale Offer, it will be required to surrender this
Note to the Payor, properly endorsed for transfer together with such
customary documents as the Payor may reasonably require, in the manner and
at the address specified in the notice prior to the close of business on
the Business Day preceding the UAG Share Sale Offer Payment Date;
(F) that Payee will be entitled to withdraw its acceptance if the
Payor receives, not later than the close of business on the third Business
Day preceding the UAG Share Sale Offer Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the principal amount of
this Note delivered for purchase, and a statement that Payee is
withdrawing its election to have this Note purchased;
(G) that if this Note is being purchased only in part, the Payee
will be issued a new certificate representing the principal amount of this
Note equal to the unpurchased portion of this Note surrendered; and
(H) a summary of any other procedures that the Payee must follow
to accept an UAG Share Sale Offer or effect withdrawal of such acceptance.
The Payor will comply with any securities laws and regulations, to
the extent such laws and regulations are applicable to the redemption of this
Note in connection with a UAG Share Sale Offer. To the extent such compliance
requires the Payor to take any action inconsistent with the terms of this
Section 3(d), any actions so required to be taken shall not be deemed to be a
breach or violation of this Section 3(d).
On the UAG Share Sale Offer Payment Date, the Payor shall (A) accept
for payment this Note validly tendered pursuant to the UAG Share Sale Offer, (B)
promptly mail to the Payee the UAG Share Sale Offer Purchase Price therefor in
cash and (C) cancel and retire the surrendered certificate and execute a new
certificate representing the principal amount of this Note equal to any
unpurchased portion of this Note represented by the certificate surrendered, if
any. Unless the Payor defaults in the payment for this Note tendered pursuant to
the UAG Share Sale Offer, interest shall cease to accrue with respect to this
Note tendered and all rights of Payee shall terminate, except for the right to
receive payment therefor, on the UAG Share Sale Offer Payment Date.
<PAGE>
- 9 -
(e) Change of Control. (I) Within 15 Business Days after the
occurrence of a Payor Change of Control (the date of such occurrence being the
"Payor Change of Control Date"), the Payor shall make an offer to purchase (the
"Payor Change of Control Offer") this Note at a purchase price equal to the
percentage of the principal amount thereof which would yield to the Payees of
the Notes an internal rate of return equal to 20% assuming that each Payee of a
Note acquired its Notes in exchange for the shares of Series U Preferred Stock
which shares were purchased on the Series U Issue Date at a price of $1,000 per
share, and based on annual compounding and including in such calculation all
dividends paid on the Series U Preferred Stock and all interest paid thereon to
the Change of Control Payment Date (such applicable purchase price being
hereinafter referred to as the "Change of Control Purchase Price"). In addition,
within 15 Business Days after the occurrence of a UAG Change of Control (the
date of such occurrence being the "UAG Change of Control Date"), the Payor shall
make an offer to purchase (the "UAG Change of Control Offer") the Notes at a
purchase price equal to 101% of the principal amount thereof plus, without
duplication, an amount in cash equal to all accrued and unpaid interest thereon
(including an amount in cash equal to a prorated interest for the period from
the immediately preceding interest payment date to the Change of Control Payment
Date) (such applicable purchase price being hereinafter referred to as the "UAG
Change of Control Purchase Price").
(II) The Payor shall within 15 days after the occurrence of any
Change of Control send by first-class mail, postage prepaid, to the holder of
this Note a notice stating:
(A) that a Change of Control Offer is being made pursuant to this
Section 3(e) and that the entire principal amount of this Note tendered
will be accepted for payment, and otherwise subject to the terms and
conditions set forth herein;
(B) the applicable Change of Control Purchase Price and the
purchase date (which shall be a Business Day no earlier than 20 days nor
later than 45 days from the date such notice is mailed (the "Change of
Control Payment Date"));
(C) that any portion of this Note not tendered will continue to
accrue interest;
(D) that, unless the Payor defaults in the payment of the
applicable Change of Control Purchase Price, any
<PAGE>
- 10 -
portion of this Note accepted for payment pursuant to a Change of Control
Offer shall cease to accrue interest after the Change of Control Payment
Date;
(E) that if Payee accepts the offer to have its Note purchased
pursuant to any Change of Control Offer, it will be required to surrender
this Note to the Payor, properly endorsed for transfer together with such
customary documents as the Payor may reasonably require, in the manner and
at the address specified in the notice prior to the close of business on
the Business Day preceding the Change of Control Payment Date;
(F) that Payee will be entitled to withdraw its acceptance if the
Payor receives, not later than the close of business on the third Business
Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the principal amount of
this Note delivered for purchase, and a statement that Payee is
withdrawing its election to have this Note purchased;
(G) that if this Note is being purchased only in part, the Payee
will be issued a new certificate representing the principal amount of this
Note equal to the unpurchased portion of this Note surrendered; and
(H) a summary of any other procedures that the Payee must follow
to accept such Change of Control Offer or effect withdrawal of such
acceptance.
The Payor will comply with any securities laws and regulations, to
the extent such laws and regulations are applicable to the redemption of this
Note in connection with each Change of Control Offer. To the extent such
compliance requires the Payor to take any action inconsistent with the terms of
this Section 3(e), any actions so required to be taken shall not be deemed to be
a breach or violation of this Section 3(e).
On the Change of Control Payment Date, the Payor shall (A) accept
for payment this Note validly tendered pursuant to the Change of Control Offer,
(B) promptly mail to the Payee the applicable Change of Control Purchase Price
therefor in cash and (C) cancel and retire the surrendered certificate and
execute a new certificate representing the principal amount of this Note equal
to any unpurchased portion of this Note represented by a certificate
surrendered, if any. Unless the Payor defaults in the payment for this Note
tendered pursuant
<PAGE>
- 11 -
to such Change of Control Offer, interest shall cease to accrue with respect to
this Note tendered and all rights of Payee shall terminate, except for the right
to receive payment therefor, on the Change of Control Payment Date.
(f) Reports. For so long as this Note remains outstanding, the
Payor will furnish to Payee:
(i) as soon as available and in any event within 60 days after the
end of each of the first three fiscal quarters of each fiscal year, (1)
the consolidated balance sheets of each of Foamex, UAG and CHF as at the
end of such fiscal quarter, (2) the related statements of operations,
stockholders' equity and cash flows for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of
such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous fiscal
year, all in reasonable detail and certified by the chief financial
officer of the applicable entity that they fairly present the financial
condition of each such entity and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal
year-end adjustments, and (3) in lieu of (1) and (2) for an entity, the
quarterly report on Form 10-Q for such quarterly period for such entity to
the extent filed with the Commission;
(ii) as soon as available and in any event within 120 days after
the end of each fiscal year, (1) the consolidated balance sheets of each
of Foamex, UAG and CHF and the unconsolidated balance sheet of the Payor
as at the end of such fiscal year, (2) the related statements of
operations, stockholders' equity and cash flows for such fiscal year,
setting forth in each case in comparative form the corresponding figures
for the previous fiscal year, all in reasonable detail and certified by
the chief financial officer of the applicable entity that they fairly
present the financial condition of such entity as at the dates and the
results of their operations and their cash flows for the periods
indicated, (3) in lieu of (1) and (2) for an entity, the annual report on
Form 10-K for such year for such entity to the extent filed with the
Commission and (4) in each case, a report thereon of independent certified
public accountants of recognized national standing, which report shall be
unqualified as to scope of audit and shall state that such financial
state-
<PAGE>
- 12 -
ments fairly present the financial position of the applicable entity as at
the dates indicated and the results of its operations and its cash flows
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; and
(iii) promptly upon the sending or filing thereof, copies of all
financial statements, reports, notices and proxy statements sent or made
available generally by each of Foamex, UAG, CHF and the Payor to its
security holders.
4. Conversion.
4.1 Conversion Privilege. The Payee may convert all or any portion of
this Note at any time into shares of UAG Common Stock while this Note is
outstanding subject to the terms stated herein. If this Note is called for
redemption, the Payee may convert this Note at any time before the close of
business on the Business Day immediately preceding the redemption date (unless
Payor defaults in payment of the redemption price, in which case the conversion
right will terminate on the date such default is cured). The Payee may also
convert this Note at any time before the close of business on the Maturity Date.
The Payee may convert a portion of the principal of this Note if the portion is
$1,000 or a whole multiple of $1,000.
4.2 Conversion Procedure. As soon as practical on or after the date that
a notice of conversion is provided by Payee to Payor (the "Conversion Notice
Date") (such notice to be substantially in the form of Exhibit B hereto), but in
any event within 60 days of the Conversion Notice Date, the Payor shall deliver
to Payee (I) a certificate or certificates, registered in the name of Payee,
representing the number of shares of UAG Common Stock equal to the quotient
obtained by dividing the principal amount of this Note to be converted by the
Conversion Price, (II) cash equal to the product of (i) the number of shares of
UAG Common Stock to be delivered pursuant to such conversion and (ii) the Last
Trade Price for the UAG Common Stock on the trading day immediately preceding
the Conversion Notice Date or (III) a combination of (I) or (II) above (the date
on which such requirements are satisfied, the "Conversion Date"). In the case of
fractional shares which may be issuable, Payor shall round to the nearest share
(with .50 shares rounding up). On the Conversion Date, Payor shall pay all
ac-
<PAGE>
- 13 -
crued but unpaid interest on the portion of this Note which has been converted.
Notwithstanding the foregoing, if the Last Trade Price for the UAG Common Stock
for the trading day immediately preceding the Conversion Date is less than the
Last Trade Price for the UAG Common Stock on the trading day immediately
preceding the Conversion Notice Date, then to the extent Payor has delivered
certificates for UAG Common Stock pursuant to Section 4.2(I), the Payor shall
indemnify Payee for any such decrease, on the Conversion Date, by providing to
Payee either (A) an amount in cash equal to such difference multiplied by the
number of shares of UAG Common Stock delivered pursuant to Section 4.2(I), (B)
additional shares of UAG Common Stock with a market value (which market value
shall be the Last Trade Price for such shares on the trading day immediately
preceding the Conversion Date) equal to such aggregate difference or (C) a
combination of the foregoing. Notwithstanding the foregoing, Payor covenants,
that with respect to its option to provide Payee with either cash or shares of
UAG Common Stock upon exercise by the Payee of its conversion privilege
described in this Section 4, Payor presently elects to satisfy such conversion
privilege entirely through the transfer of cash and not through the transfer of
any shares of UAG Common Stock; provided, however, that Payor may at any time or
from time to time change its election by providing Payee with written notice
thereof, provided that any such notice shall only be effective when received by
Payee and shall only be effective with respect to any Conversion Notice Date
which occurs after the date of receipt of such notice by Payee.
To convert this Note, Payee must on or before the Conversion Date
(1) complete and sign the conversion notice on the reverse of this Note, (2)
surrender this Note to the Payor and (3) furnish the appropriate endorsements
and transfer documents if reasonably required by the Payor.
Upon surrender of this Note for conversion in part, the Payor shall
execute for the Payee a new Note equal in principal amount to the unconverted
portion of this Note surrendered.
If the last day on which this Note may be converted is not a
Business Day, this Note may be surrendered to the Payor on the next succeeding
Business Day with the same force and effect as if surrendered on such last day.
4.3 Taxes on Conversion. If Payee converts this Note, the Payor shall
pay any documentary, stamp or similar issue or
<PAGE>
- 14 -
transfer tax due on the transfer of shares of UAG Common Stock upon such
conversion.
4.4 Payor to Provide Common Stock. The Payor shall at all times keep
available enough shares of UAG Common Stock to permit the conversion of this
Note.
4.5 Effect on Conversion Privilege of Certain Events Relating to UAG
Common Stock. Payor covenants that in the event that at any time from and after
the Series U Issue Date UAG shall (i) issue any shares of its Capital Stock as a
dividend or distribution, (ii) subdivide, combine or reclassify the UAG Common
Stock, (iii) distribute to holders of UAG Common Stock rights, warrants or
options to purchase Capital Stock of UAG, (iv) distribute to holders of UAG
Common Stock any cash, debt securities (or other evidences of Indebtedness) or
other assets or property other than Ordinary Course Dividends or (v) engage in
any similar activity including any merger or consolidation of UAG whereby UAG is
not the surviving Person thereof, then upon exercise by the Payee of its
conversion privilege and payment of the Conversion Price, Payee shall be
entitled to receive such additional securities, cash, property or assets
described in the foregoing clauses (i) through (v) as though the Payee had
exercised its privilege of conversion (whether or not then in existence)
immediately prior to any such event described in such clauses. It is the intent
of the Payor that the Payee upon exercise of its conversion privilege receive
the benefits of ownership of UAG Common Stock as though the Payee had exercised
its privilege of conversion immediately prior to the occurrence of any of the
events described in the foregoing clauses (i) through (v).
4.6 Status of UAG Common Stock. Notwithstanding anything in this Section
4 to the contrary, the Payor may not transfer UAG Common Stock to the Payee if,
upon such transfer, such UAG Common Stock may not be resold by the Payee,
without restriction under United States federal securities laws, as evidenced by
an Opinion of Counsel reasonably acceptable to the Payee, other than a
prospectus delivery requirement which the Payor hereby covenants to satisfy in a
manner which complies with the requirements of the Securities Act and which is
reasonably acceptable to counsel to the Payee. If the foregoing provision
prohibits the transfer of UAG Common Stock to the Payee, Payor must rely on the
other provisions of this Section 4 to satisfy its conversion obligations
described herein.
<PAGE>
- 15 -
5. Collateral and Security.
(a) In order to secure the due and punctual payment of the
principal of and interest on the Notes when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by acceleration,
purchase, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest (to the extent permitted by law), if any, on the Notes
and the performance of all other obligations of the Payor and Guarantor to the
Payee under the Notes and the Guarantee, the Payor and Guarantors and the Payee
have simultaneously with the execution of the Notes entered into the Pledge
Agreement pursuant to which the Payor and Guarantors have granted to the Payee a
first priority Lien on and security interest in the Pledged Shares. To the
extent that any Subsidiary of the Payor is required to become a Guarantor of the
Notes pursuant to the terms hereof, the Payor shall cause such Subsidiary to
become a party to the Pledge Agreement.
(b) To the extent the aggregate principal amount of the Notes is
reduced, whether by redemption, repurchase, conversion or otherwise, the Payor
shall be entitled to a pro rata reduction in the number of Pledged Shares
constituting the collateral.
6. Definitions.
As used in this Note, the following terms shall have the following
meanings (with terms defined in the singular having comparable meanings when
used in the plural and vice versa), unless the context otherwise requires:
"Affiliate" means, of any Person, a Person who, directly or
indirectly, through one or more intermediaries controls, or is controlled by, or
is under common control with, such other Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Bankruptcy Law" shall have the meaning provided in Section 2.
"Board of Directors" means the Board of Directors of the Payor or a
duly authorized committee thereof.
<PAGE>
- 16 -
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or authorized
by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital stock, including each class of Common Stock and
Preferred Stock of such Person and warrants or options to purchase any of the
foregoing and (ii) with respect to any Person that is not a corporation, any and
all partnership or other equity interests of such Person.
"Certificate of Designation" shall have the meaning provided in the
introductory paragraphs of this Note.
"Change of Control" means a Payor Change of Control or a UAG Change
of Control.
"Change of Control Offer" means a Payor Change of Control Offer or a
UAG Change of Control Offer.
"Change of Control Payment Date" shall have the meaning provided in
Section 3(e).
"Change of Control Purchase Price" means a Payor Change of Control
Purchase Price or a UAG Change of Control Purchase Price.
"CHF" means CHF Industries, Inc., a Delaware corporation.
"CHF Guarantee" means the guarantee made as of July 28, 1995 by
Payor of the obligations of CHF under its promissory note due 2002 as such
guarantee may be amended, supplemented or modified from time to time.
"Commission" means the Securities and Exchange Commission or any
successor agency.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock, whether outstanding on the
date hereof or issued after the date hereof, and includes, without limitation,
all series and classes of such common stock.
<PAGE>
- 17 -
"Continuing Director" means a director who either was a member of
the board of directors of UAG on the Series U Issue Date or who became a
director of UAG subsequent to the Series U Issue Date and whose election, or
nomination for election by UAG's stockholders, was duly approved by a majority
of the Continuing Directors then on the board of directors of UAG, either by a
specific vote or by approval of the proxy statement issued by UAG on behalf of
the board of directors of UAG in which such individual is named as nominee for
director.
"Conversion Price" means initially $30.00; provided, however, that
if the average of the Last Trade Prices for the UAG Common Stock for the ten
consecutive trading days ending on the trading day immediately prior to January
1, 1999 (the "Average Last Trade Price") is less than $24.00 per share, then the
Conversion Price shall be equal to the product of (i) 1.25 and (ii) the Average
Last Trade Price.
"Conversion Date" shall have the meaning provided in Section 4.2.
"Conversion Notice Date" shall have the meaning provided in Section
4.2.
"Custodian" shall have the meaning provided in Section 2.
"Default" means any event or condition which is or after the lapse
of time or the giving of notice or both would be, an Event of Default.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the Maturity Date of this Note. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to include (i) any Preferred Stock of
a Subsidiary of the Payor or (ii) any Preferred Stock of the Payor, under the
terms of such Preferred Stock, by agreement or otherwise, the Payor is obligated
to pay current dividends or distributions in cash during the period prior to the
redemption date of this Note; provided, however, that Preferred Stock of the
Payor or any Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of con-
<PAGE>
- 18 -
trol of the Payor or Subsidiary, which provisions have substantially the same
effect as Section 3(e) hereof shall not be deemed to be Disqualified Capital
Stock solely by virtue of such provisions.
"Event of Default" shall have the meaning provided in Section 2.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Foamex" means Foamex International Inc., a Delaware corporation.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"Guarantee" means the guarantee by a Guarantor of the obligations of
Payor under this Note, substantially in the form of Exhibit A to this Note.
"Guarantor" means any Subsidiary of Payor required to execute a
Guarantee pursuant to the terms of this Note.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar instruments
or representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables and other accrued liabilities or accrued expenses
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included, (i) any capitalized lease obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such Person
are subject, whether or not the obligation or obligations secured thereby shall
have been assumed other than a Lien securing an obligation which is not
Indebtedness, (iii) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items would
appear upon the balance sheet
<PAGE>
- 19 -
of the guarantor), (iv) all obligations for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction, (v)
Disqualified Capital Stock of the Payor or any Subsidiary thereof and (vi)
obligations of any such Person under any interest rate agreement or currency
agreement applicable to any of the foregoing (if and to the extent such interest
rate agreement or currency agreement obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP).
Notwithstanding any other provision of the foregoing definition, any contingent
obligations arising out of customary indemnification agreements with respect to
the sale of assets or securities shall not be deemed to be "Indebtedness" of the
Payor or any Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Investment" by any Person in any other Person means, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any stocks, bonds,
notes, debentures, partnership or joint venture interests or other securities
of, the acquisition, by purchase or otherwise, of all or substantially all of
the business or assets or stock or other evidence of beneficial ownership of,
such other Person or the making of any investment by such Person in any other
Person. Investments shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices and repurchases.
Notwithstanding the foregoing, the following shall not be considered Investments
by a Person in any other Person: (i) trade receivables and prepaid expenses, in
each case arising in the ordinary course of business; provided that such
receivables and prepaid expenses would be recorded as assets of such Person in
accordance with GAAP, (ii) Investments received in connection with the
bankruptcy or reorganization of suppliers and customers or in good faith bona
fide settlement of delinquent ordinary course of business trade receivables of
customers and (iii) endorsements for collection or deposit in the ordinary
course of business by such Person of bank drafts and similar negotiable
instruments of such other Person received as payment for ordinary course of
business trade receivables.
"Issue Date" means the date of original issuance of this Note.
<PAGE>
- 20 -
"Last Trade Price" means, for any security as of any date, the last
trade price for such security on The New York Stock Exchange, Inc. ("NYSE") as
reported by Bloomberg Financial Markets ("Bloomberg") or, if NYSE is not the
principal trading market for such security, the last trade price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last trade price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or
if no last trade price is reported for such security by Bloomberg, the last
closing trade price of such security as reported by Bloomberg, or if no last
closing trade price is reported for such security by Bloomberg, the average of
the last trade prices for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the last trade price cannot be calculated for
such security on such date on any of the foregoing bases, the last trade price
of such security on such date shall be the fair market value as mutually
determined by the Payor and the holders of a majority of the outstanding
principal amount of Notes.
"Lien" means any consensual lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" shall have the meaning provided in Section 1.2.
"Opinion of Counsel" means an opinion of counsel to the Payor which
counsel is reasonably acceptable to the Payee, provided that such counsel may
not be internal counsel to the Payee or any of its Subsidiaries.
"Ordinary Course Dividends" means cash dividends on each Share of
UAG Common Stock not exceeding $0.25 per annum.
"Payee" shall have the meaning provided in the introductory
paragraphs to this Note and shall also mean any assignee, other transferor or
holder of this Note.
"Payor" shall have the meaning provided in the introductory
paragraphs to this Note and shall also mean any successor payor of this Note.
<PAGE>
- 21 -
A "Payor Change of Control" will be deemed to have occurred at such
time as (i) any Person (including a Person's Affiliates) becomes the beneficial
owner (as defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of a greater percentage of the total voting
power of the Payor's Common Stock than that which is then beneficially owned by
the Permitted Holders, in the aggregate, and the Permitted Holders do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors, (ii) there shall be
consummated any consolidation or merger of the Payor in which the Payor is not
the continuing or surviving corporation or pursuant to which the Common Stock of
the Payor would be converted into cash, securities or other property, other than
a merger or consolidation of the Payor in which the holders of the Common Stock
of the Payor outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the voting power of the Common
Stock of the surviving corporation immediately after such consolidation or
merger, or (iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Payor has been approved by a majority of
the directors then still in office who either were directors at the beginning of
such period or whose election or recommendation for election was previously so
approved) cease to constitute a majority of the Board of Directors.
"Payor Change of Control Date" shall have the meaning provided in
Section 3(e).
"Payor Change of Control Offer" shall have the meaning provided in
Section 3(e).
"Payor Change of Control Purchase Price" shall have the meaning
provided in Section 3(e).
"Permitted Holder" means (i) Marshall S. Cogan or any Immediate
Family Member (as defined in NASD Rule 2011-1 as in effect as of the Series U
Issue Date) of Marshall S. Cogan, (ii) any trust or estate the sole
beneficiaries of which consist of any person described in clause (i), and (iii)
any Affiliate of any Person specified in clause (i) or (ii).
"Permitted Liens" means (i) Liens on the Pledged Shares in favor of
the Payee securing Indebtedness under this Note and each other Payee under the
other Notes, (ii) Liens on
<PAGE>
- 22 -
UAG Common Stock, other than the Pledged Shares, securing the CHF Guarantee,
(iii) Liens on UAG Common Stock, other than the Pledged Shares, securing the
Permitted Margin Loans and (iv) any extensions, substitutions or renewals of the
foregoing.
"Permitted Margin Loans" means each of the following:
(i) any Indebtedness incurred by the Payor, provided that on the
date of incurrence, such Indebtedness shall have an outstanding principal
amount equal to or less than one-third of the then current market value of
the sum of (i) the shares of UAG Common Stock owned by the Payor and its
Subsidiaries less (ii) the sum of the Pledged Shares and any UAG Common
Stock securing the CHF Guarantee; and
(ii) any Indebtedness incurred by the Payor the proceeds of which
are used within two Business Day of receipt thereof by the Payor to repay
the entire outstanding principal amount and accrued but unpaid interest,
if any, on this Note.
"Person" means an individual, partnership, corporation,
unincorporated organization, joint stock company, limited liability company,
trust or joint venture, or a governmental agency or political subdivision
thereof.
"Pledge Agreement" means the Pledge Agreement substantially in the
form of Exhibit C to this Note.
"Pledged Shares" means the shares of UAG Common Stock pledged as
collateral securing the Notes pursuant to the Pledge Agreement which shall equal
the number of shares equal to the product of (a) 1.5 and (b) quotient of (i) the
outstanding principal amount of all Notes and (ii) the Conversion Price.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemption or upon liquidation.
"Restricted Payment" shall have the meaning provided in Section
3(a).
"Restricted Payment Covenant Termination Event" means the first day
on which the Last Trade Price of the UAG Common Stock is equal to or greater
than $50.0; provided that no Default or Event of Default shall have occurred or
be continuing at such time.
<PAGE>
- 23 -
"Restricted Shareholder" means any Person that is the direct or
indirect owner of 10% or more of the Payor's Common Stock, on a fully diluted
basis, and any Affiliate of any such Person other than the Payor and its
Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Security Interest" means the security interest in favor of the
Payee created in the Pledged Shares pursuant to the Pledge Agreement.
"Series U Issue Date" means the date of the original issuance of the
Series U Preferred Stock.
"Series U Preferred Stock" shall have the meaning provided for in
the introductory paragraphs to this Note.
"Subsidiary" with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person;
provided, however, that for the purposes of Section 3(a) "Subsidiary" shall be
deemed to also include UAG and Foamex.
"UAG" means United Auto Group, Inc., a Delaware corporation, and any
successor entity.
A "UAG Change of Control" will be deemed to have occurred in the
event that (whether or not otherwise permitted by this Note) after the Issue
Date (a) any transaction (including, without limitation, any merger or
consolidation) shall be consummated after which any Person or any Persons acting
together that would constitute a group (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto) (a "Group"), together with any
Affiliates, other than the Payor or any Subsidiary of the Payor, shall
"beneficially own" (as defined in Rule 13d-3 under the Exchange Act, or any
successor provision thereto) at least (x) 50% of the voting power of the
outstanding Voting Stock of UAG or (y) 40% of the voting power of the Voting
Stock of UAG, and the Payor and its Subsidiaries own in the aggregate less than
such Person or Group (in doing the "own less than" comparison in this clause
(y), the holdings
<PAGE>
- 24 -
of the Payor and its Subsidiaries who are members of the new Group shall not be
counted in the voting power of such new Group); (b) (x) UAG or any Subsidiary
sells, leases or otherwise transfers all or substantially all of the assets of
UAG and its Subsidiaries, taken as a whole, to any Person other than a
wholly-owned Subsidiary of UAG, or (y) UAG consolidates with or merges with or
into another Person or any Person consolidates with, or merges with or into,
UAG, in either case under this clause (b), in one transaction or a series of
related transactions in which immediately after the consummation thereof Persons
owning a majority of the voting power of the Voting Stock of UAG immediately
prior to such consummation shall cease to own a majority of the voting power of
the Voting Stock of UAG or the surviving or transferee entity if other than UAG;
(c) Continuing Directors cease to constitute at least a majority of the board of
directors of UAG; or (d) the stockholders of UAG approve any plan or proposal
for the liquidation or dissolution of UAG.
"UAG Change of Control Date" shall have the meaning provided in
Section 3(e).
"UAG Change of Control Offer" shall have the meaning provided in
Section 3(e).
"UAG Change of Control Purchase Price" shall have the meaning
provided in Section 3(e).
"UAG Common Stock" means the common stock, par value $.01 per share,
of UAG.
"UAG Intermediate Subsidiary" means any Subsidiary of the Payor that
directly or indirectly owns any of the UAG Shares.
"UAG Shares" means the 4,016,100 shares of UAG Common Stock owned by
the Payor and any additional shares of such UAG Common Stock or other security,
property or assets issued in connection with the ownership of such shares of UAG
Common Stock.
"UAG Share Sale" shall have the meaning provided in Section 3(d).
"UAG Share Sale Offer" shall have the meaning provided in Section
3(d).
<PAGE>
- 25 -
"UAG Share Sale Offer Payment Date" shall have the meaning provided
in Section 3(d).
"UAG Share Sale Offer Purchase Price" shall have the meaning
provided in Section 3(d).
"Voting Stock" of any Person means the Capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly-Owned Subsidiary" means any Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Payor.
7. Miscellaneous.
7.1 Section Headings. The section headings contained in this Note are
for reference purposes only and shall not affect the meaning or interpretation
of this Note.
7.2 Amendment and Waiver. Subject to the provisions of this Section 7.2,
the Payor may amend or supplement the Notes, the Guarantees or the Pledge
Agreement with the written consent of the holders of at least a majority in
principal amount of the Notes then outstanding. Subject to the provisions of
this Section 7.2, the holders of, in the aggregate, at least a majority in
principal amount of the outstanding Notes affected may waive compliance by the
Payor or any Guarantor with any provision of the Notes, any Guarantee or the
Pledge Agreement, without notice to any other Payee of a Note. However, without
the consent of each Payee of a Note affected, an amendment, supplement or waiver
may not:
(a) reduce the amount of Notes the Payees of which must consent to
an amendment, supplement or waiver of any provision of, or to take any
action under, the Notes, the Guarantees or the Pledge Agreement;
(b) reduce the rate of, or extend the time for, payment of
interest on any Note;
(c) reduce the principal amount of or extend the fixed maturity of
any Note or alter the redemption provi-
<PAGE>
- 26 -
sions with respect thereto or alter the price at which the Payor is
required to offer to purchase the Notes;
(d) waive a default in the payment of the principal of, premium or
interest on, or redemption payment or an offer to purchase Notes required
hereunder with respect to, any Note or any of the Guarantees;
(e) make any Note payable in money other than that stated in the
Note;
(f) affect the ranking or security of the Notes or the Guarantees;
(g) release any Guarantor from any of its obligations under its
Guarantee or the Pledge Agreement (except in compliance with the terms of
the Notes);
(h) modify this Section 7.2;
(i) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes or any of the Guarantees; or
(j) make any changes in the provisions concerning waiver of
Defaults by holders of Notes, or rights of holders of Notes to receive
payment of principal and interest.
After an amendment, supplement or waiver under this Section 7.2
becomes effective, the Payor shall mail to the Payee of each Note affected
thereby a notice briefly describing the amendment, supplement or waiver.
Until an amendment or waiver becomes effective, a consent to it by a
payee of a Note is a continuing consent by such payee and every subsequent payee
of that Note or portion of that Note that evidences the same debt as the
consenting payee's Note, even if notation of the consent is not made on any
Note. However, any such payee or subsequent payee may revoke the consent as to
its Note or portion of a Note. Such revocation shall be effective only if the
Payor receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective.
If an amendment, supplement or waiver changes the terms of a Note,
the Payor shall request the payee of the Note to deliver it to the Payor to
place an appropriate notation on the Note about the changed terms and return it
to the payee
<PAGE>
- 27 -
thereof. Alternatively, Payor may in exchange for the Note issue a new Note that
reflects the changed terms. Failure to make the appropriate notation or issue a
new Note shall not affect the validity and effect of such amendment, supplement
or waiver.
7.3 Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to any
conflicts of laws principles thereof that would otherwise require the
application of the law of any other jurisdiction. Any legal action or proceeding
with respect to this Note may be brought in the courts of the State of New York
or of the United States for the Southern District of New York, and, by execution
and delivery of this Note or the acknowledgment attached hereto, each of Payor
and Payee hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
7.4 Lost, Stolen, Destroyed or Mutilated Note. Upon receipt of evidence
reasonably satisfactory to Payor of the loss, theft, destruction or mutilation
of this Note and of indemnity arrangements reasonably satisfactory to Payor from
or on behalf of the holder of this Note, and upon surrender or cancellation of
this Note if mutilated, Payor shall make and deliver a new note of like tenor in
lieu of such lost, stolen, destroyed or mutilated Note, at Payor's expense.
7.5 Waiver of Presentment, Etc. Except as otherwise provided herein,
presentment, demand, protest, notice of dishonor and all other notices are
hereby expressly waived by Payor.
7.6 Usury. Nothing contained in this Note shall be deemed to establish
or require the payment of a rate of interest in excess of the maximum rate
legally enforceable. If the rate of interest called for under this Note at any
time exceeds the maximum rate legally enforceable, the rate of interest required
to be paid hereunder shall be automatically reduced to the maximum rate legally
enforceable. If such interest rate is so reduced and thereafter the maximum rate
legally enforceable is increased, the rate of interest required to be paid
hereunder shall be automatically increased to the lesser of the maximum rate
legally enforceable and the rate otherwise provided for in this Note.
7.7 Notices. Any notice, request, instruction or other document to be
given hereunder by either party to the other shall be in writing and shall be
deemed given when received and
<PAGE>
- 28 -
shall be (i) delivered personally or (ii) mailed by certified mail, postage
prepaid, return receipt requested or (iii) delivered by Federal Express or a
similar overnight courier or (iv) sent via facsimile transmission to the fax
number given below, as follows:
If to Payor, addressed to:
--------------------------
Trace International Holdings, Inc.
375 Park Avenue
11th Floor
New York, New York 10152
Attention: Karl H. Winters and
Vipul B. Tandon
Fax Number: (212) 593-1363
with a copy to:
---------------
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention: Jack H. Nusbaum, Esq.
Fax Number: (212) 728-8111
If to Payee, addressed to:
--------------------------
Attention:
Fax Number:
with a copy to:
---------------
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005-1702
Attention: Roger Meltzer, Esq.
Fax Number (212) 269-5420
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other party. In the event that any notice
under this Note is required to be made on or as of the day which is not a
Business Day, then such notice shall not be required to be made until the first
day thereafter which is a Business Day.
<PAGE>
- 29 -
7.8 Minimum Denominations. Each Note must be issued in a minimum
principal amount of $1,000,000 and may only be transferred in a minimum
principal amount of $1,000,000.
IN WITNESS WHEREOF, Payor has executed and delivered this Note as of
the date hereinabove first written.
TRACE INTERNATIONAL HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Payor. The Agent may substitute
another to act for him.
Date: Your Signature:
--------------------------- ------------------------------
---------------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
---------------------------------------------
<PAGE>
OPTION OF PAYEE TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased
by the Payor pursuant to Section 3(d) or Section 3(e) of this Note, check the
appropriate box:
|_| Section 3(d) |_| Section 3(e)
If you want to have only part of this Note purchased by the Company
pursuant to Section 3(d) or Section 3(e) of this Note, state the amount you
elect to have purchased:
$
------------------------
Date:
--------------------
Your Signature:
---------------------------
(Sign exactly as your name appears on
the face of this Note)
- ---------------------------
Signature Guaranteed
<PAGE>
CONVERSION NOTATION
To convert this Note into UAG Common Stock, check the box:
|_|
To convert only part of this Note, state the amount to be converted (must be in
multiples of $1,000):
$
-------------------------------------------------------------------------------
If you want the stock certificate made out in another person's name, fill in the
form below:
- --------------------------------------------------------------------------------
(Insert other person's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
- --------------------------------------------------------------------------------
Date: Your Signature:
----------------------- -----------------------------------
(Sign exactly as your
name appears on the
other side of this Note)
Signature Guaranteed:
----------------------------------------------------------
<PAGE>
EXHIBIT B
FORM OF GUARANTEE
This Guarantee is made as of [ ] (this "Guarantee") by
[ ] in favor of Payee. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the 10% Senior
Secured Notes due October 31, 2003 of Trace International Holdings, Inc., a
Delaware corporation (the "Notes"), to which this Guarantee relates.
1.1 Terms of Guarantee.
For value received, the undersigned (the "Guarantor") hereby
unconditionally and irrevocably guarantees, jointly and severally with each of
the guarantors of the Note, to Payee and its successors and assigns (a) the full
and punctual payment of principal of, premium, if any, and interest on the Notes
when due, whether at maturity, by acceleration, by redemption or otherwise, and
all other monetary obligations of Payor under the Notes and (b) the full and
punctual performance within applicable grace periods of all other obligations of
Payor under the Notes (all the foregoing being hereinafter collectively called
the "Guaranteed Obligations"). The Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from such Guarantor and that such Guarantor will remain bound
under this Guarantee notwithstanding any extension or renewal of any Guaranteed
Obligation.
Guarantor waives presentation to, demand of, payment from and
protest to the Payor of any of the Guaranteed Obligations and also waives notice
of protest for nonpayment. Guarantor waives notice of any default under the
Notes or the Guaranteed Obligations. The obligations of Guarantor hereunder
shall not be affected by (a) the failure of Payee to assert any claim or demand
or to enforce any right or remedy against Payee or any other Guarantor or any
other agreement or otherwise; (b) any extension or renewal of any thereof; (c)
any rescission, waiver, amendment or modification of any of the terms or
provisions of the Notes or any other agreement; (d) the release of any security
held by Payee for the Guaranteed Obligations or any of them; (e) the failure of
Payee to exercise any right or remedy against any other guarantor of the
Guaranteed Obligations; or (f) any change in the ownership of Guarantor.
Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance
<PAGE>
- 2 -
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by Payee to any security held for payment of the
Guaranteed Obligations. The Holders hereby agree that prior to enforcing their
rights of payment and performance against Guarantor pursuant to this Guarantee,
the Holders shall have (x) made demand on Payor to perform such obligation,
covenant or agreement hereunder, (y) given Payor a reasonable opportunity to
comply with such obligation, covenant or agreement, and (z) determined in their
reasonable discretion that Payor has not or will not comply with such
obligation, covenant or agreement.
Except as expressly set forth in Sections 1.2, 1.4 and 1.6, the
obligations of Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of Payee to assert any claim or demand or to
enforce any remedy under the Notes or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Guaranteed Obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of Guarantor or would otherwise
operate as a discharge of Guarantor as a matter of law or equity.
Guarantor further agrees that its Guarantee herein shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of, premium, if any, or interest on any
Guaranteed Obligation is rescinded or must otherwise be restored by Payee upon
the bankruptcy or reorganization of the Payor or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which Payee has at law or in equity against Guarantor by virtue hereof,
upon the failure of Payor to pay the principal of, premium, if any, or interest
on any obligation under the Notes when and as the same shall become due, whether
at maturity, by acceleration, by redemption or otherwise, Guarantor hereby
promises to and will, upon receipt of written demand by Payee, forthwith pay, or
cause to be paid, in cash, to Payee an amount equal to the sum of (i) the unpaid
<PAGE>
- 3 -
amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such
Guaranteed Obligations (but only to the extent not prohibited by law) and (iii)
all other monetary Guaranteed Obligations of Payor to Payee.
Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Guaranteed Obligations guaranteed hereby until
payment in full of all Guaranteed Obligations. Each Guarantor further agrees
that, as between it, on the one hand, and the Payee, on the other hand, (x) the
maturity of the Guaranteed Obligations hereby may be accelerated as provided in
Section 2 of the Note for the purposes of Guarantor's Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the obligations under the Notes guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Section 2 of the Note, such obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Guarantee.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Payee in enforcing any
rights under this Guarantee.
1.2 Limitation on Liability.
Any term or provision of the Guarantee to the contrary
notwithstanding, the maximum aggregate amount of the obligations guaranteed
hereunder by Guarantor shall not exceed the maximum amount that can be hereby
guaranteed without rendering the Guarantee, as it relates to Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. To effectuate the
foregoing intention, the obligations of Guarantor shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other guarantor of the Notes in respect of
the obligations of such other guarantor under its guarantee or pursuant to its
contribution obligations hereunder, result in the obligations of Guarantor under
this Guarantee not constituting a fraudulent conveyance or fraudulent transfer
under federal, state or foreign law.
1.3 Successors and Assigns.
This Guarantee shall be binding upon Guarantor and its successors
and assigns and shall inure to the benefit of
<PAGE>
- 4 -
the successors and assigns of the Payee and, in the event of any transfer or
assignment of rights by Payee, the rights and privileges conferred upon that
party in the Notes shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions of the Note and
this Guarantee.
1.4 Release of Guarantor.
Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets to, the Payor or another
Guarantor; or
(ii) the Guarantor ceases to own, directly or indirectly, any UAG
Common Stock;
and in each such case, the Guarantor has delivered to Payor a certificate of the
principal executive and accounting offices stating that all conditions precedent
herein provided for relating stating to such transactions have been complied
with.
1.5 Section Headings.
The section headings contained in this Guarantee are for reference
purposes only and shall not affect the meaning or interpretation of this
Guarantee.
1.6 Amendment and Waiver.
The provisions of this Guarantee may be amended or waived only as
provided for in Section 7.2 of the Notes. No failure or delay in exercising any
right, power or privilege hereunder shall imply or otherwise operate as a waiver
of any rights of Payee, nor shall any single or partial exercise thereof
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege.
1.7 Governing Law.
This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to any conflicts
of laws principles thereof that would otherwise require the application of the
law of any other jurisdiction. Any legal action or proceeding with respect to
this Guarantee may be brought in the courts of the State of New
<PAGE>
- 5 -
York or of the United States for the Southern District of New York, and, by
execution and delivery of this Guarantee, each of Guarantor and Payee hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.
1.8 Lost, Stolen, Destroyed or Mutilated Guarantee.
Upon receipt of evidence reasonably satisfactory to Guarantor of the
loss, theft, destruction or mutilation of this Guarantee and of indemnity
arrangements reasonably satisfactory to Guarantor from or on behalf of the
holder of this Guarantee, and upon surrender or cancellation of this Guarantee
if mutilated, Guarantor shall make and deliver a new guarantee in lieu of the
lost, stolen, destroyed or mutilated Guarantee, at Guarantor's expense.
1.9 Usury.
Nothing contained in this Guarantee shall be deemed to establish or
require the payment of a rate of interest in excess of the maximum rate legally
enforceable. If the rate of interest called for under the Notes at any time
exceeds the maximum rate legally enforceable, the rate of interest required to
be paid hereunder shall be automatically reduced to the maximum rate legally
enforceable. If such interest rate is so reduced and thereafter the maximum rate
legally enforceable is increased, the rate of interest required to be paid
hereunder shall be automatically increased to the lesser of the maximum rate
legally enforceable and the rate otherwise provided for in the Note.
1.10 Notices.
Any notice, request, instruction or other document to be given
hereunder by either party to the other shall be in writing and shall be deemed
given when received and shall be (i) delivered personally or (ii) mailed by
certified mail, postage prepaid, return receipt requested or (iii) delivered by
Federal Express or a similar overnight courier or (iv) sent via facsimile
transmission to the fax number given below, as follows:
<PAGE>
- 6 -
If to Guarantor, addressed to:
------------------------------
Attention:
Fax Number:
with a copy to:
---------------
Attention:
Fax Number:
If to Payee, addressed to:
--------------------------
Attention:
Fax Number:
with a copy to:
---------------
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005-1702
Attention: Roger Meltzer, Esq.
Fax Number: (212) 269-5420
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other party. In the event that any notice
under this Guarantee is required to be made on or as of the day which is not a
Business Day, then such notice shall not be required to be made until the first
day thereafter which is a Business Day.
<PAGE>
- 6 -
IN WITNESS WHEREOF, Guarantor has caused its Guarantee to be duly
executed.
GUARANTOR:
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
[Name and Address of Payee]
[Date]
Trace International Holdings, Inc.
Payee hereby elects to exercise its privilege to convert $[ ] in
principal amount of Payor's 10% Senior Secured Notes due October 31, 2003 (the
"Note") in the manner provided for under the terms of such Note.
Very truly yours,
----------------------------------------
<PAGE>
EXHIBIT D
FORM OF PLEDGE AGREEMENT
<PAGE>
SECURITIES PLEDGE AGREEMENT
SECURITIES PLEDGE AGREEMENT (this "Agreement"), dated as of
[ ], 1998, made by [ ] having
its registered office at [ ]
("Pledgor"), in favor of Chase Bank of Texas, National Association, having an
office at [ ] as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, "Collateral
Agent").
R E C I T A L S :
- - - - - - - -
A. Pursuant to a certain Purchase Agreement, dated as of
August 20, 1998 (as amended, amended and restated, supplemented or otherwise
modified from time to time, (the "Purchase Agreement"), among Trace
International Holdings, Inc., a Delaware corporation ("Trace") and [ ], Trace
has agreed to issue 10,001 Shares of 10% Senior Exchangeable Preferred Stock,
Series U, $1,000 liquidation preference per share (the "Shares"). The Shares are
to be issued pursuant to the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of
10% Senior Exchangeable Preferred Stock, Series U, and Qualifications,
Limitations and Restrictions Thereof (the "Certificate of Designation") relating
thereto. Pursuant to the terms for the Certificate of Designation, Trace will be
required under certain circumstances to exchange all of the Shares for an
aggregate of $10,001,000 in principal amount of Trace's 10% Senior Secured Notes
due 2003 (the "Notes") to be issued pursuant to the Certificate of Designation.
The obligation of Trace under the Notes may, under certain circumstances, be
guaranteed (the "Guarantees" and, together with the Notes, the "Securities"), on
a joint and several basis, by certain of Trace's subsidiaries. The obligations
of Trace under the Notes also will be secured by a pledge of shares of the
Common Stock, par value $.01 per share, of United Auto Group, Inc., a Delaware
corporation, pursuant to the terms hereof and thereof. Capitalized terms used
herein but not otherwise defined herein have the meanings assigned to such terms
in the Securities.
B. Pledgor is the legal and beneficial owner of the Pledged
Collateral (as hereinafter defined).
<PAGE>
- 2 -
C. In order to secure the performance of the Secured Obligations
(as hereinafter defined), the parties hereto are entering into this Agreement
regarding the terms and conditions of Pledgor's pledge of the Pledged Collateral
to the Collateral Agent, for the benefit of itself and the holders of the
Securities (the Collateral Agent and such holders, each a "Secured Party" and
collectively, the "Secured Parties").
A G R E E M E N T :
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to Collateral Agent for its benefit and the
benefit of the Secured Parties, a first priority lien and a continuing security
interest in and to all of the right, title and interest of Pledgor in, to and
under the following property, whether now existing or hereafter acquired (the
"Pledged Collateral"):
(a) issued and outstanding shares of capital stock described in
Schedule I hereto (the "Pledged Shares"), including the certificates
representing the Pledged Shares and any interest of Pledgor in the entries
on the books of any financial intermediary pertaining to the Pledged
Shares;
(b) all additional shares of capital stock of the issuer of the
Pledged Shares from time to time required pursuant to the terms of the
Securities to be pledged by Pledgor (which are and shall remain at all
times until this Agreement terminates, certificated shares) which
additional shares shall be deemed to be part of the Pledged Shares,
including the certificates representing such additional shares and any
interest of Pledgor in the entries on the books of any financial
intermediary pertaining to such additional shares;
(c) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed to Pledgor in respect of or in exchange for any or all of the
Pledged Shares (the "Distributions"); and
<PAGE>
- 3 -
(d) all "proceeds" (as such term is defined in the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "UCC") or
under other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)) of (i) all obligations of Pledgor now existing or
hereafter arising under or in respect of the Securities (including, without
limitation, Pledgor's obligation to pay principal or premium, if any, and
interest on the Securities when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and all other
amounts due or to become due under or in connection with the Securities, and
(ii) without duplication of the amounts described in clause (i), all
obligations, indebtedness and liabilities of Pledgor now existing or hereafter
arising under or in respect of this Agreement, including, without limitation,
with respect to all charges, fees, expenses, commissions, reimbursements,
premiums, indemnities and other payments related to or in respect of the
obligations contained in this Agreement, in each case whether in the regular
course of business or otherwise (the obligations described in clauses (i) and
(ii), collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on
Collateral Agent or any Secured Party to perform or observe any such term,
covenant, condition or agreement on Pledgor's part to be so performed or
observed or shall impose any liability on Collateral Agent or any Secured Party
for any act or omission on the part of Pledgor relating thereto or for any
breach of any representation or warranty on the part of Pledgor contained in
this Agreement or under or in respect of the Pledged Collateral or made in
connection herewith or therewith. The obligations of Pledgor contained in this
Section 3 shall survive the termination of this Agreement and the discharge of
Pledgor's other obligations under this Agreement.
<PAGE>
- 4 -
Section 4. Delivery of Pledged Collateral.
(a) All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to
Collateral Agent, shall be delivered to and held by or on behalf of Collateral
Agent pursuant hereto. All Pledged Collateral shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank. Collateral Agent shall have the right, at any
time upon the occurrence of an Event of Default and without notice to Pledgor,
to endorse, assign or otherwise transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the Pledged Collateral. In
addition, Collateral Agent shall have the right at any time to exchange
certificates representing or evidencing Pledged Collateral for certificates of
smaller or larger denominations.
(b) If the issuer of Pledged Shares is incorporated in a
jurisdiction which does not permit the use of certificates to evidence equity
ownership, then Pledgor shall, to the extent permitted by applicable law, record
such pledge on the stock register of the issuer, execute any customary stock
pledge forms or other documents necessary or appropriate to complete the pledge
and give Collateral Agent the right to transfer such Pledged Shares under the
terms hereof and provide to Collateral Agent an opinion of counsel, in form and
substance satisfactory to Collateral Agent, confirming such pledge.
Section 5. Supplements, Further Assurances.
(a) Pledgor agrees that at any time and from time to time, at the
sole cost and expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, including, without limitation, supplemental
or additional UCC-1 financing statements, and take all further action that may
be necessary or that Collateral Agent may request, in order to perfect and
protect the pledge, security interest and Lien granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Pledged Collateral.
(b) Pledgor shall, upon obtaining any Pledged Collateral, promptly
(and in any event within five Business Days) deliver to Collateral Agent a
pledge amendment, duly executed by Pledgor, in substantially the form of Exhibit
1 hereto (each, a "Pledge Amendment"), in respect of the additional Pledged
Collateral which is to be pledged pursuant to this
<PAGE>
- 5 -
Agreement, and confirming the attachment of the Lien hereby created on and in
respect of such additional collateral. Pledgor hereby authorizes Collateral
Agent to attach each Pledge Amendment to this Agreement and agrees that all
Pledged Collateral listed on any Pledge Amendment delivered to Collateral Agent
shall for all purposes hereunder be considered Pledged Collateral.
Section 6. Representations, Warranties and Covenants. Pledgor
represents, warrants and covenants as follows:
(a) No Liens. Pledgor is as of the date hereof, and at the time of
any delivery of any Pledged Collateral to Collateral Agent pursuant to
Section 4 or Section 5 of this Agreement, Pledgor will be, the sole legal
and beneficial owner of the Pledged Collateral. All Pledged Collateral is
on the date hereof, and will be, so owned by Pledgor free and clear of any
Lien except for the Lien created by this Agreement.
(b) Authorization, Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and,
assuming due execution and delivery by the other parties hereto, this
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms.
(c) No Consents, etc. Except as set forth on Schedule 6(C), no
consent of any party (including, without limitation, stockholders or
creditors of Pledgor) and no consent, authorization, approval, license or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for (x) the
pledge by Pledgor of the Pledged Collateral pursuant to this Agreement or
for the execution, delivery or performance of this Agreement by Pledgor,
(y) the exercise by Collateral Agent of the voting or other rights
provided for in this Agreement, or (z) the exercise by Collateral Agent of
the remedies in respect of the Pledged Collateral pursuant to this
Agreement and except for consents, authorizations, approvals and other
filings and notices required under the Securities Act or under state or
"Blue Sky" securities laws or as may be required in connection with a
disposition of Pledged Shares by laws affecting the offering and sale of
such securities generally.
<PAGE>
- 6 -
The parties hereto acknowledge that the transfer of the Pledged
Shares to the Collateral Agent and/or the Secured Parties may result in
the termination by certain original equipment manufacturers of their
contracts with United Auto Group, Inc.
(d) Due Authorization and Issuance. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
(e) Chief Executive Office. Pledgor's chief executive office is
located at 375 Park Avenue, New York, NY 10152. Pledgor shall not move its
chief executive office except to such new location as Pledgor may
establish in accordance with the last sentence of this Section 6(e).
Pledgor shall not establish a new location for its chief executive office
nor shall it change its name until (i) it shall have given Collateral
Agent not less than 45 days prior written notice of its intention so to
do, clearly describing such new location or name and providing such other
information in connection therewith as Collateral Agent or any Secured
Party may request, and (ii) with respect to such new location or name,
Pledgor shall have taken all action necessary as identified in an opinion
of counsel addressed to the Collateral Agent, to maintain the perfection
and priority of the security interest of Collateral Agent for the benefit
of the Secured Parties in the Pledged Collateral intended to be granted
hereby.
(f) Delivery of Pledged Collateral; Filings. Pledgor has delivered
to Collateral Agent all of the Pledged Collateral and has filed
appropriate UCC-1 or similar financing statements in such jurisdiction or
jurisdictions as is necessary or advisable to create a valid and perfected
first priority security interest in the, Pledged Collateral, in each case,
evidencing the Lien created by this Agreement, and, as identified in an
opinion of counsel addressed to the Collateral Agent, such filing and
pledge of the Pledged Collateral pursuant to this Agreement will create a
valid and perfected first priority security interest in the Pledged
Collateral securing the payment of the Secured Obligations pursuant to:
(i) the UCC or similar law in effect in each applicable jurisdiction,
including, without limitation, the State of New York and (ii) the laws of
any such other applicable jurisdiction.
<PAGE>
- 7 -
(g) Pledged Collateral. All information set forth herein,
including the Schedules annexed hereto relating to the Pledged Collateral
is accurate and complete in all material respects.
(h) No Violations, etc. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U, X or Y of
the Federal Reserve Board.
(i) Ownership of Pledged Collateral. Except as otherwise permitted
by the Securities, Pledgor at all times will be the sole beneficial owner
of the Pledged Collateral.
(j) No Options, Warrants, etc. There are no options, warrants,
calls, rights, commitments or agreements of any character to which Pledgor
is a party or by which it is bound obligating Pledgor to issue, deliver or
sell or cause to be issued, delivered or sold, Pledged Shares or
obligating Pledgor to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are no voting trusts
or other agreements or understandings to which Pledgor is a party with
respect to the voting of the capital stock of any issuer of the Pledged
Shares.
Section 7. Voting Rights; Distributions; etc.
(a) So long as no Event of Default shall have occurred:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement or the Securities; provided, however, that Pledgor shall not in
any event exercise such rights in any manner which would have an adverse
effect on the security intended to be provided by this Agreement.
(ii) Subject to the terms of the Securities, Pledgor shall be
entitled to receive and retain, and to utilize free and clear of the Lien
of this Agreement, any and all Ordinary Course Dividends.
(iii) Collateral Agent shall be deemed without further action or
formality to have granted to Pledgor all necessary consents relating to
voting rights and shall,
<PAGE>
- 8 -
if necessary, upon written request of Pledgor and at Pledgor's sole cost
and expense, from time to time execute and deliver (or cause to be
executed and delivered) to Pledgor all such instruments as Pledgor may
reasonably request in order to permit Pledgor to exercise the voting and
other rights which it is entitled to exercise pursuant to Section 7(a)(i)
hereof and to receive the Distributions which it is authorized to receive
and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence of an Event of Default:
(i) All rights of Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to
Section 7(a)(i) hereof without any action or the giving of any notice
shall cease, and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to exercise
such voting and other consensual rights.
(ii) All rights of Pledgor to receive Ordinary Course Dividends
which it would otherwise be authorized to receive and retain pursuant to
Section 7(a)(ii) hereof shall cease and all such rights shall thereupon
become vested in Collateral Agent, which shall thereupon have the sole
right to receive and hold as Pledged Collateral such Ordinary Course
Dividends.
(c) Pledgor shall, at its sole cost and expense, from time to time
execute and deliver to Collateral Agent appropriate instruments as Collateral
Agent may reasonably request in order to permit Collateral Agent to exercise the
voting and other rights which it may be entitled to exercise pursuant to Section
7(b)(i) hereof and to receive all Ordinary Course Dividends which it may be
entitled to receive under Section 7(b)(ii) hereof.
(d) All Ordinary Course Dividends which are received by Pledgor
contrary to the provisions of Section 7(b)(ii) hereof shall be received in trust
for the benefit of Collateral Agent, shall be segregated from other funds of
Pledgor and shall immediately be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).
<PAGE>
- 9 -
Section 8. Transfers and Other Liens; Additional Shares.
(a) Pledgor shall not (i) sell, convey, assign or otherwise
dispose of, or grant any option, right or warrant with respect to, any of the
Pledged Collateral except as permitted by the Securities or (ii) create or
permit to exist any Lien upon or with respect to any Pledged Collateral other
than the Lien and security interest granted to Collateral Agent pursuant to this
Agreement.
(b) Pledgor shall pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
capital stock or other equity securities of the issuer of the Pledged Shares
which are required to be pledged hereunder or pursuant to the terms of the
Securities.
Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of similar instruments or
interests, it being understood that neither Collateral Agent nor any of the
Secured Parties shall have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Collateral Agent or
any other Secured Party has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Decisions Relating to Exercise of
Remedies.
(a) If an Event of Default shall have occurred, Collateral Agent
shall have the right, in addition to other rights and remedies provided for
herein or otherwise available to it to be exercised from time to time, (i) to
retain and apply the Distributions to the Secured Obligations as provided in
Section 11 hereof, and (ii) to exercise all the rights and remedies of a secured
party on default under the UCC in effect in the State of New York at that time
or under the laws of any other applicable jurisdiction, and Collateral Agent may
also in its sole discretion, without notice except as specified below, sell the
Pledged Collateral or any part thereof (including, without limitation, any
partial interest in the Pledged Shares)
<PAGE>
- 10 -
in one or more parcels at public or private sale, at any exchange, broker's
board or at any of Collateral Agent's offices or elsewhere, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms as
Collateral Agent may deem commercially reasonable, irrespective of the impact of
any such sales on the market price of the Pledged Collateral. Collateral Agent
or any other Secured Party or any of their respective Affiliates may be the
purchaser of any or all of the Pledged Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at such
sale, to use and apply any of the Secured Obligations owed to such Person as a
credit on account of the purchase price of any Pledged Collateral payable by
such Person at such sale. Each purchaser at any such sale shall acquire the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives, to the fullest extent permitted by law, all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor acknowledges and agrees that, to the extent notice of sale shall be
required by law, fifteen days notice to Pledgor of the time and place of any
public sale or the time after which any private sale or other intended
disposition is to take place shall constitute reasonable notification of such
matters. No notification need be given to Pledgor if it has signed, after the
occurrence of an Event of Default, a statement renouncing or modifying any right
to notification of sale or other intended disposition. Collateral Agent shall
not be obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. Collateral Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. Pledgor hereby waives, to the fullest extent permitted by law, any
claims against Collateral Agent arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. Collateral Agent shall not be
liable for any incorrect or improper payment made pursuant to this Section 10 in
the absence of gross negligence or willful misconduct.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws,
Collateral Agent may be compelled, with
<PAGE>
- 11 -
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to Collateral Agent than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would agree to do so.
(c) If Collateral Agent determines to exercise its right to sell
any or all of the Pledged Collateral, upon written request, Pledgor shall from
time to time furnish to Collateral Agent all such information as Collateral
Agent may reasonably request in order to determine the number of securities
included in the Pledged Collateral which may be sold by Collateral Agent as
exempt transactions under the Securities Act and the rules of the Commission
thereunder, as the same are from time to time in effect.
(d) Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign governmental
authority, Collateral Agent may be compelled, with respect to any sale of all or
any part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign governmental authority. Pledgor acknowledges that
any such sales may be at prices and on terms less favorable to Collateral Agent
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale shall
be deemed to have been made in a commercially reasonable manner and that, except
as may be required by applicable law, Collateral Agent shall have no obligation
to engage in public sales.
(e) In addition to any of the other rights and remedies hereunder,
Collateral Agent shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations hereunder.
<PAGE>
- 12 -
Section 11. Application of Proceeds. All Distributions held from
time to time by Collateral Agent and all proceeds received by Collateral Agent
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by Collateral Agent of
its remedies as a secured creditor as provided in Section 10 hereof shall,
together with any other sums then held by Collateral Agent pursuant to this
Agreement, shall be applied by the Collateral Agent as set forth in the
Securities.
Section 12. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and the fees and expenses of any experts and
agents, which Collateral Agent may incur in connection with (i) the collection
of the Secured Obligations, (ii) the enforcement and administration of this
Agreement, (iii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Pledged Collateral, (iv) the
exercise or enforcement of any of the rights of Collateral Agent or any Secured
Party hereunder or (v) the failure by Pledgor to perform or observe any of the
provisions hereof. All amounts payable by Pledgor under this Section 12 shall be
due upon demand and shall be part of the Secured Obligations. Pledgor's
obligations under this Section 12 shall survive the termination of this
Agreement and the discharge of Pledgor's other obligations hereunder.
Section 13. No Waiver; Cumulative Remedies. (a) No failure on the
part of Collateral Agent to exercise, no course of dealing with respect to, and
no delay on the part of Collateral Agent in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Collateral Agent, then and in every such case, Pledgor, Collateral Agent and
each Secured Party shall be restored to their respective former positions and
rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of Col-
<PAGE>
- 13 -
lateral Agent and the Secured Parties shall continue as if no such proceeding
had been instituted.
Section 14. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to this Agreement and the Securities. Collateral Agent
shall have the right hereunder to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking action
(including, without limitation, the release or substitution of Pledged
Collateral), in accordance with this Agreement. Collateral Agent may resign and
a successor Collateral Agent may be appointed by the Pledgor with the consent of
holders of a majority in principal amount of outstanding Securities. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent may (but shall not be obligated to)
do the same or cause it to be done or remedy any such breach, and may expend
funds for such purpose. Any and all amounts so expended by Collateral Agent or
such Secured Party shall be paid by Pledgor promptly upon demand therefor, with
interest at rate then in effect under the Securities during the period from and
including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement and the Securities. Pledgor hereby appoints Collateral
Agent its attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in
Collateral Agent's discretion to take any action and to execute any instrument
consistent with the terms of this Agreement and the Securities which Collateral
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement. The foregoing grant of authority is a power of attorney coupled with
an interest and such appointment shall be
<PAGE>
- 14 -
irrevocable for the term of this Agreement. Pledgor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof.
Section 16. Indemnity.
(a) Indemnity. Pledgor agrees to indemnify, pay and hold harmless
Collateral Agent and each of the Secured Parties and the officers, directors,
employees, agents and Affiliates of Collateral Agent and each of the Secured
Parties (collectively, the "Indemnitees") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs (including, without limitation, settlement costs), expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of a breach by Pledgor of
its obligations under this Agreement (including, without limitation, any
misrepresentation by Pledgor in this Agreement) (the "indemnified liabilities");
provided that Pledgor shall not have any obligation to an Indemnitee hereunder
with respect to indemnified liabilities if it has been determined by a final
decision (after all appeals and the expiration of time to appeal) of a court of
competent jurisdiction that such indemnified liability arose from the gross
negligence or willful misconduct of that Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, Pledgor shall contribute the maximum portion which it is permitted to
pay and satisfy under applicable law, to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them.
(b) Survival. The obligations of Pledgor contained in this Section
16 shall survive the termination of this Agreement and the discharge of
Pledgor's other obligations under this Agreement.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
<PAGE>
- 15 -
Section 17. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Securities and unless in
writing and signed by Collateral Agent. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement or the Securities, no notice to or
demand on Pledgor in any case shall entitle Pledgor to any other or further
notice or demand in similar or other circumstances.
Section 18. Termination; Release. Pledgor shall be entitled to the
release of Pledged Shares to the extent provided for in Section 5(b) of the
Notes. When all the Secured Obligations have been paid in full, this Agreement
shall terminate. Upon termination of this Agreement or any release of Pledged
Collateral in accordance with the provisions of the Securities, Collateral Agent
shall, upon the request and at the sole cost and expense of Pledgor, forthwith
assign, transfer and deliver to Pledgor, against receipt and without recourse to
or warranty by Collateral Agent, such of the Pledged Collateral to be released
(in the case of a release) as may be in the possession of Collateral Agent and
as shall not have been sold or otherwise applied pursuant to the terms hereof,
and, with respect to any other Pledged Collateral, proper instruments (including
UCC termination statements on Form UCC-3) acknowledging the termination of this
Agreement or the release of such Pledged Collateral, as the case may be.
Notwithstanding anything else set forth herein, upon the transfer of any Pledged
Shares by the Pledgor to an UAG Intermediate Subsidiary in accordance with the
terms of the Securities and the execution by such UAG Intermediate Subsidiary of
a pledge agreement substantially similar to this Agreement, which agreement is
reasonably acceptable to the Collateral Agent, the Collateral Agent shall
release such Pledged Shares and transfer such Pledged Shares to the collateral
agent under such new pledge agreement for the benefit of the holders of the
Securities.
Section 19. Notices. Unless otherwise provided herein or in the
Securities, any notice or other communication herein required or permitted to be
given shall be given in the manner set forth in the Securities, as to either
party, addressed to it at the address set forth in the Securities or at
<PAGE>
- 16 -
such other address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this Section 19;
provided that notices to Collateral Agent shall not be effective until received
by Collateral Agent.
Section 20. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns and (ii) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any interest herein or any
right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Secured Party may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Secured Party, herein or otherwise, subject however, to
the provisions of the Securities and the Purchase Agreement dated as of August
20, 1998, among the Pledgor and the initial purchasers signatory thereto.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 22. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
<PAGE>
- 17 -
original, but all such counterparts together shall constitute one and the same
Agreement.
Section 24. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
Section 25. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
(ii) any lack of validity or enforceability of the Securities or
any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Securities
or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, the
Securities, or any other documents relating to the Securities except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 17 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
<PAGE>
- 18 -
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.
[ ],
as Pledgor
By:
------------------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Collateral Agent
By:
------------------------------------------
Name:
Title:
<PAGE>
Securities Pledge Agreement
---------------------------
SCHEDULE I
----------
Pledged Shares
--------------
"Pledged Shares" has the meaning provided therefor in the
Securities.
<PAGE>
Securities Pledge Agreement
---------------------------
SCHEDULE 6(C)
-------------
No Consents
-----------
1. Pursuant to Section 1.5 of the Agreement (the "Agreement") between
American Honda Motor Company, Inc. ("AHM") and United Auto Group, Inc.,
transfer of the Pledged Shares (as defined in the Exchange Notes) requires
the consent of AHM pursuant to the terms of the Agreement.
<PAGE>
EXHIBIT 1
---------
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant
to Section 5 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of ________________, between the undersigned and Chase Bank of Texas,
National Association, as Collateral Agent (the "Agreement"; capitalized terms
used herein and not defined shall have the meanings assigned to them in the
Agreement) and that the Pledged Shares listed on this Pledge Amendment shall be
deemed to be and shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
[ ],
as Pledgor
By:
------------------------------------
Name:
Title:
<PAGE>
Pledged Shares
--------------
PERCENTAGE OF ALL
CAPITAL OR OTHER
CLASS PAR CERTIFICATE NUMBER OF EQUITY INTERESTS
ISSUER OF STOCK VALUE NO(S). SHARES OF ISSUER
- ------ -------- ----- ----------- --------- -----------------
