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Exhibit 10.26
UGLY DUCKLING CORPORATION
5,000,000 Shares(1)
Common Stock
Purchase Agreement
February 10, 1997
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
Potomac Tower
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Dear Sirs:
Ugly Duckling Corporation, a Delaware corporation (the "Company"), hereby
confirms its agreement with you in connection with a private placement of equity
securities as set forth below.
1. Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to you an aggregate of 5,000,000 shares (the
"Firm Securities") of the Company's Common Stock, $.001 par value per share (the
"Common Stock"). The Company also proposes to issue and sell to you not more
than 750,000 additional shares of Common Stock if requested by you as provided
in Section 3 of this Agreement. Any and all shares of Common Stock to be
purchased by you pursuant to such option are referred to herein as the "Option
Securities," and the Firm Securities and any Option Securities are collectively
referred to herein as the "Securities."
2. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with, you that:
(i) The Confidential Private Placement Memorandum, subject to
completion dated February 4, 1997 (the "Preliminary Memorandum") and the
Confidential Private Placement Memorandum dated as of even date (the "Final
Memorandum"; the Preliminary Memorandum and the Final Memorandum are
sometimes collectively referred to herein as the "Memorandums"), which
relate to the offer and sale of the Securities, including without limitation
all exhibits attached thereto and all documents incorporated therein by
reference (collectively, the "Additional Materials"), do not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, except to the
extent that statements in the Preliminary Memorandum, the Final
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(1) Plus an option to purchase up to 750,000 additional shares of Common Stock.
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Memorandum and any Additional Materials have been supplemented or amended by
the Final Memorandum or any Additional Materials bearing a later date.
(ii) The Company and each of its subsidiaries have been duly organized
and are validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation and are duly qualified to
transact business as foreign corporations and are in good standing under the
laws of all other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified does not
result in a material adverse effect in the condition (financial or
otherwise), business, net worth or results of operations of the Company and
its subsidiaries, taken as a whole (a "Material Adverse Effect").
(iii) The Company and the subsidiaries have full power (corporate and
other) to own or lease their respective properties and conduct their
respective businesses as described in the Memorandums; and the Company has
full power (corporate and other) to enter into this Agreement and to carry
out all the terms and provisions hereof to be carried out by it.
(iv) The Company has an authorized, issued and outstanding
capitalization as set forth in the Memorandums. All of the issued shares of
capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. The Firm Securities and the Option
Securities have been duly authorized and at the Firm Closing Date (as
defined below) or the related Option Closing Date (as defined below), as the
case may be, after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable.
(v) The consolidated financial statements and schedules of the Company
and its consolidated subsidiaries included in the Memorandums fairly present
the financial position of the Company and its consolidated subsidiaries and
the results of operations and cash flows as of the dates and periods therein
specified. Such financial statements and schedules have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved (except as otherwise
noted therein). The selected financial data set forth under the captions
"Summary Consolidated Financial Information," "Capitalization" and "Selected
Consolidated Financial Data" in the Memorandums fairly present, in
accordance with GAAP, as applicable, on the basis stated in the Memorandums,
the information included therein.
(vi) KPMG Peat Marwick LLP, which has audited certain financial
statements of the Company and its consolidated subsidiaries and delivered
their reports with respect to the audited consolidated financial statements
included in the Memorandums, are independent public accountants as required
by the Securities Act of 1933, as amended (the "Act") and the applicable
rules and regulations thereunder.
(vii) The execution and delivery of this Agreement has been duly
authorized by the Company and this Agreement has been duly executed and
delivered by the Company, and is the valid and binding agreement of the
Company, enforceable against the Company
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in accordance with its terms, except as such enforceability may be limited
by the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to rights and remedies of creditors or by
general equitable principles.
(viii) The issuance, offering and sale of the Securities to you by the
Company pursuant to this Agreement, the execution and delivery of this
Agreement by the Company, the compliance by the Company with the other
provisions of this Agreement and the consummation of the other transactions
herein contemplated do not (A) require the consent, approval, authorization,
registration or qualification of or with any court, government or
governmental authority, domestic or foreign, except such as have been
obtained and such as may be required under state securities or blue sky
laws, as to which the Company makes no representation, or (B) conflict with
or result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties are bound, or the charter documents or
by-laws of the Company or any of its subsidiaries, or any statute or any
judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company or any of
its subsidiaries, in each case, which would have a Material Adverse Effect.
(ix) Subsequent to December 31, 1996, neither the Company nor any of
its subsidiaries has sustained any loss or interference with their
respective businesses or properties having or resulting in a Material
Adverse Effect from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any legal
or governmental proceeding and there has not been any event, circumstance,
or development that results in, or that the Company believes would result
in, a Material Adverse Effect, except in each case as described in or
contemplated by the Memorandum.
(x) The Company has not, directly or indirectly, in violation of any
law, rule or regulation (i) taken any action designed to cause or to result
in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities or (ii)
since the respective dates of the Memorandums (A) sold, bid for, purchased,
or paid anyone any compensation (except under this Agreement) for soliciting
purchases of, the Securities or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(xi) The Company has not distributed and, prior to the later of (A)
the Firm Closing Date or any Option Closing Date and (B) the completion of
the distribution of the Securities, will not distribute any written offering
material in connection with the offering and sale of the Securities other
than the Memorandums or any amendments or supplements thereto, or other
materials, if any, permitted by the Act.
(xii) The Company has not offered to sell the Securities by any form
of general solicitation or general advertising, including, but not limited
to, any advertisement, article, notice, or other communication published in
any newspaper, magazine, or similar media or
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broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(xiii) The press release relating to the offering of the Securities
issued by the Company complied with the requirements of Rule 135C of the Act
and did not constitute an offer within the meaning of Section 5 of the Act.
(b) You represent and warrant to, and agree with, the Company that:
(i) You either (i) have a reasonable basis for determining that
all of the purchasers of Securities in the offering will be accredited
investors within the meaning of subparagraph (a) of Rule 501 under the Act,
or (ii) will sell the Securities to foreign persons in offshore transactions
under Regulation S of the Act.
(ii) In your capacity as Initial Purchaser (as defined in the
Memorandums) of the Securities, you have complied with all laws, rules and
regulations applicable to you in connection with the private placement of
the Securities, including without limitation Rule 10b-6 under the Act.
(iii) You have not, directly or indirectly, in violation of any
law, rule or regulation (i) taken any action designed to cause or result in,
or that has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or (ii) since the
respective dates of the Memorandums (A) sold, bid for, purchased, or paid
anyone any compensation for soliciting purchases of, the Securities or (B)
paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Company.
(iv) You have not offered to sell the Securities by any form of
general solicitation or general advertising, including, but not limited to,
any advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio,
or any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
3. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to you, and you agree to purchase from the
Company, at a purchase price of $17.69375 per share, the Firm Securities on the
Firm Closing Date. One or more certificates in definitive form for the Firm
Securities that you have agreed to purchase hereunder, in such denomination or
denominations and registered in such name or names as you request upon notice to
the Company at least 48 hours prior to the Firm Closing Date, shall be delivered
by or on behalf of the Company to you, against payment by you of the aggregate
purchase price therefor by wire transfer in same day funds (the "Wired Funds")
to the account of the Company. Such delivery of and payment for the Firm
Securities shall be made at the offices of Xxxxx & Xxxxxx L.L.P.,
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Xxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000-0000 at 8:00 A.M., Phoenix, Arizona
time, on February 13, 1997, or at such other place, time or date as we may agree
upon, such time and date of delivery against payment being herein referred to as
the "Firm Closing Date." The Company will make such certificate or certificates
for the Firm Securities available for checking and packaging by you at the
offices of the Company's transfer agent or registrar at least 24 hours prior to
the Firm Closing Date or, if available, will coordinate the transfer of the Firm
Securities to you through the facilities of the Depository Trust Company.
(b) For the sole purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Memorandum, the Company hereby grants to you an option to purchase the Option
Securities. The purchase price to be paid for any Option Securities shall be the
same price per share as the price per share for the Firm Securities set forth
above in paragraph (a) of this Section 3. The option granted hereby may be
exercised as to all or any part of the Option Securities from time to time
within thirty days after the date of the Final Memorandum (or, if such 30th day
shall be a Saturday or Sunday or a holiday, on the next business day thereafter
when the Nasdaq National Market is open). You shall not be under any obligation
to purchase any of the Option Securities prior to the exercise of such option.
You may from time to time exercise the option granted hereby by giving notice in
writing or by telephone (confirmed within 24 hours in writing) to the Company
setting forth the aggregate number of Option Securities as to which you are then
exercising the option and the date and time for delivery of and payment for such
Option Securities. Any such date of delivery shall be determined by you but
shall not be earlier than two business days or later than five business days
after such exercise of the option and, in any event, shall not be earlier than
the Firm Closing Date. The time and date set forth in such notice, or such other
time on such other date as you and the Company may agree upon, is herein called
the "Option Closing Date" with respect to such Option Securities. Upon exercise
of the option as provided herein, the Company shall become obligated to sell
you, and, subject to the terms and conditions herein set forth, you shall become
obligated to purchase from the Company, the Option Securities. If the option is
exercised as to all or any portion of the Option Securities, one or more
certificates in definitive form for such Option Securities, and payment
therefor, shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (a) of this Section 3,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph 3(b), to refer to such Option
Securities and Option Closing Date, respectively.
(c) The Company hereby acknowledges that the wire transfer by you of the
purchase price for any Securities does not constitute closing of a purchase and
sale of the Securities. Only execution and delivery of a receipt (by facsimile
or otherwise) for the Securities by you indicates completion of the closing of a
purchase of the Securities from the Company. Furthermore, in the event that you
wire funds to the Company prior to the completion of the closing of a purchase
of Securities, the Company hereby acknowledges that until you execute and
deliver a receipt for the Securities, by facsimile or otherwise, the Company
will not be entitled to the wired funds and shall return the wired funds to you
as soon as practicable (by wire transfer of same-day funds) upon demand. In the
event that the closing of a purchase of Securities is not completed and the wire
funds are not returned by the Company to you on the same day the wired funds
were received by the Company, the Company agrees to pay to you in respect of
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each day the wire funds are not returned by it, in same-day funds, interest at
the Prime Rate as stated in the Wall Street Journal on the date hereof on the
amount of such wire funds.
4. Offering of Securities. Upon your authorization of the release of the
Firm Securities, the Company understands that you propose to offer the Firm
Securities for sale in a private placement upon the terms set forth in the Final
Memorandum.
5. Covenants of the Company. The Company covenants and agrees with you that:
(a) If, at any time prior to the Option Closing Date, any event occurs as
a result of which the Memorandums, as then amended or supplemented, would
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Company will
promptly notify you thereof and will prepare, at the Company's expense, an
amendment or supplement to the Memorandums that corrects such statement or
omission or effects such compliance.
(b) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Memorandums.
(c) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) (A) sell, bid for, purchase, or pay anyone any compensation
(except under this Agreement) for soliciting purchases of, the Securities or (B)
pay or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
6. Expenses. The Company will pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing or other production of documents with respect to the transactions,
including any costs of printing the Memorandums and any amendments or
supplements thereto, this Agreement and any blue sky memoranda, (ii) all
arrangements relating to the delivery to you of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation,
issuance and delivery to you of any certificates evidencing the Securities,
including transfer agent's and registrar's fees, (v) the filing for exemptions
of the Securities from state securities and blue sky laws, including filing fees
and fees and disbursements of counsel for you relating thereto, and (vi) any
additional listing of the Securities on the Nasdaq National Market. If the sale
of the Securities provided for herein is not consummated because any condition
to your obligations set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 11 hereof or because of any failure,
refusal or inability on the part of the Company to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder other
than by reason of a default by you, the Company will reimburse you upon demand
for all reasonable out-of-pocket expenses (including counsel fees
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and disbursements) that shall have been incurred by you in connection with the
proposed purchase and sale of the Securities. The Company shall not in any event
be liable to you for the loss of anticipated profits from the transactions
covered by this Agreement. If the sale of the Securities provided for herein is
consummated, you shall pay all of your own out-of-pocket expenses (including
fees and disbursements of counsel) and the Company shall have no obligation
therefor.
7. Conditions of Your Obligations. Your obligation to purchase and pay for
the Firm Securities shall be subject to the accuracy of the representations and
warranties of the Company contained herein as of the date hereof and as of the
Firm Closing Date, as if made on and as of the Firm Closing Date, to the
accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company of its covenants and
agreements hereunder, in each case in all material respects, and to the
following additional conditions:
(a) You shall have received an opinion, dated the Firm Closing Date, of
Xxxxx & Xxxxxx L.L.P., counsel for the Company, dated the Firm Closing Date to
the effect that:
(i) the Company and each of its subsidiaries listed in Schedule 1
hereto (the "Subsidiaries") have been duly organized and are validly
existing as corporations in good standing under the laws of their respective
jurisdictions of incorporation and are duly qualified to transact business
as foreign corporations and are in good standing under the laws of all other
jurisdictions where, to counsel's knowledge, the ownership or leasing of
their respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified
does not or would not have a Material Adverse Effect;
(ii) the Company and each of the Subsidiaries have corporate power to
own or lease their respective properties and conduct their respective
businesses as described in the Memorandums, and the Company has the
corporate power to enter into this Agreement and to carry out all the terms
and provisions hereof to be carried out by it;
(iii) the issued and outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and, to counsel's knowledge, are owned by the Company
free and clear of any perfected security interests (other than security
interests relating to debt described in the Memorandum);
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Memorandums; all of the issued and
outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable, and, to counsel's
knowledge, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities; the Firm
Securities have been duly authorized by all necessary corporate action of
the Company and, when issued and delivered to and paid for by you pursuant
to this Agreement, will be validly issued, fully paid and nonassessable;
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(v) the execution and delivery of this Agreement has been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by you, is a valid and binding
agreements of the Company, enforceable in accordance with their terms,
except insofar as indemnification provisions may be limited by applicable
law as to which counsel need not express any opinion and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally or by general equitable principles;
(vi) the issuance, offering and sale of the Securities to you by the
Company pursuant to this Agreement, the compliance by the Company with the
other provisions of this Agreement and the consummation of the other
transactions herein contemplated do not (A) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required
under state securities or blue sky laws, or (B) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any material contract, indenture, mortgage, deed of trust,
lease or other agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries or any of their respective properties are bound, or the
charter documents or by-laws of the Company or any of the Subsidiaries, or,
so far as it is known to such counsel, any statute or any judgment, decree,
order, rule or regulation of any court or other governmental authority or
any arbitrator having jurisdiction over the Company or any of the
Subsidiaries, in each case, where such conflict, breach, violation or
default would have a Material Adverse Effect;
(vii) the Company is not, and the transactions contemplated by this
Agreement will not cause the Company to become, an investment company
subject to registration under the 1940 Act;
(viii) the stock certificate of the Company to be issued to you is in
due and proper form to evidence Securities, has been duly authorized and
approved by the Board of Directors of the Company and complies with all
legal requirements applicable under the Delaware General Corporation Law;
and
(ix) the issuance and sale of the Securities is exempt from
registration under the Act.
Such counsel shall also state that they have no reason to believe that the Final
Memorandum, as of its date and the date of such opinion, included or includes
any untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except such counsel
need express no view as to the financial statements and notes thereto, schedules
and reports thereon, and other financial and statistical data included or
incorporated by reference in the Final Memorandum).
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In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deem(s) proper, on certificates or opinions of
responsible officers of the Company and public officials and the representations
and warranties of you and the Company contained herein, and may limit its
opinions to the laws of the United States of America and the States of Arizona
and Delaware, as appropriate.
References to the Final Memorandum in this paragraph (a) shall include any
amendment or supplement thereto at the date of such opinion.
(b) You shall have received from KPMG Peat Marwick LLP a letter or
letters dated, respectively, the date hereof and the Firm Closing Date, in form
and substance satisfactory to you, to the effect that:
(i) they are independent accountants with respect to the Company and
its consolidated subsidiaries within the meaning of the Act and the
applicable rules and regulations thereunder;
(ii) in their opinion, the audited consolidated financial statements
examined by them and included in the Memorandums comply in form in all
material respects with the applicable accounting requirements of the Act and
the related published rules and regulations;
(iii) on the basis of carrying out certain specified procedures (which
do not constitute an examination made in accordance with generally accepted
auditing standards) that would not necessarily reveal matters of
significance with respect to the comments set forth in this paragraph (iii),
a reading of the minute books of the shareholders, the board of directors
and any committees thereof of the Company and each of its consolidated
subsidiaries, and inquiries of certain officials of the Company and its
consolidated subsidiaries who have responsibility for financial and
accounting matters, nothing came to their attention that caused them to
believe that at a specific date not more than five business days prior to
the date of such letter, there were any changes in the capital stock or
total debt of the Company and its consolidated subsidiaries or any decreases
in total assets or stockholders' equity of the Company and its consolidated
subsidiaries, in each case compared with amounts shown on the December 31,
1996 consolidated balance sheet included in the Final Memorandum, or for the
period from January 1, 1997 to such specified date there were any decreases,
as compared with the same period in the prior year, in total revenues, net
income or net income per share, respectively, of the Company and its
consolidated subsidiaries, except in all instances for changes, decreases or
increases set forth in such letter; and
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and its consolidated subsidiaries and are included in the
Memorandums, and have compared such amounts, percentages and financial
information with such records of the Company and its consolidated
subsidiaries and with
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information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation.
In the event that the letters referred to above set forth any such changes,
decreases or increases which, in your reasonable discretion, are likely to
result in a Material Adverse Effect, it shall be a further condition to your
obligations that such letters shall be accompanied by a written explanation of
the Company as to the significance thereof, unless you deem such explanation
unnecessary.
References to the Memorandums in this paragraph (b) with respect to either
letter referred to above shall include any amendment or supplement thereto by
the date of such letter.
(c) You shall have received a certificate, dated the Firm Closing Date,
of Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx in their capacities as the President
and the Chief Financial Officer, respectively, of the Company to the effect
that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects as if made on and as
of the Firm Closing Date; the Final Memorandum, as amended or supplemented
as of the Firm Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and the Company has performed in all material
respects all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the Firm Closing Date; and
(ii) subsequent to the dates as of which information is given in the
Final Memorandum, neither the Company nor any of its subsidiaries has
sustained any loss or interference with their respective businesses or
properties having or resulting in a Material Adverse Effect from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, and there has not been any event, circumstance, or development
that results in, or that the Company reasonably believes will result in, a
Material Adverse Effect, except in each case as described in or contemplated
by the Final Memorandum.
(d) On or before the Firm Closing Date, you and your legal counsel shall
have received such further certificates, documents or other information as they
may have reasonably requested from the Company, including a certificate of the
Company's Secretary which states that the Company has not amended any charter of
any subsidiary since October 29, 1996.
All opinions, certificates, letters and documents delivered pursuant to this
Agreement will comply with the provisions hereof only if they are reasonably
satisfactory in all material respects to you and your legal counsel. The Company
shall furnish to you such conformed copies of such opinions, certificates,
letters and documents in such quantities as you and your legal counsel shall
reasonably request.
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Your obligation to purchase and pay for any Option Securities shall be
subject, in your discretion, to each of the foregoing conditions to purchase the
Firm Securities, except that all references to the Firm Securities and the Firm
Closing Date shall be deemed to refer to such Option Securities and the related
Option Closing Date, respectively.
8. Registration Rights.
(a) The Company hereby agrees to use its best efforts to file with the
Securities and Exchange Commission (the "Commission") within thirty days after
the date of this Agreement a registration statement (a "Registration Statement")
for the benefit of the holders of the Securities. The Company further agrees
that it will use its best efforts to cause such Registration Statement to be
declared effective under the Act as soon as reasonably practicable after such
filing. The Company shall further use its best efforts to qualify or register
the Securities under such blue sky and other state securities laws as the
holders of such Securities shall reasonably request; provided, however, that the
Company shall not be obligated to effect any such qualification or registration
in any state in which, as a condition thereto, the Company would be required to
qualify as a foreign corporation to conduct business in such state or to file a
general consent to the service or process.
(b) If any holder of Securities desires to sell its or his Securities
included in the Registration Statement through an underwriter, it may do so
provided that the underwriter is reasonably acceptable to the Company. The
Company agrees to enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected for such
underwriting. The holders of Securities shall not be required to make any
representations or warranties to the Company or the underwriter other than those
relating to such holders, their Securities and their intended method of
distribution for use in the Registration Statement. Other than Sun America Life
Insurance Company or its affiliates, transferees or nominees, neither the
Company nor any other shareholders of the Company shall be entitled to
participate in such registration.
(c) All registration expenses (exclusive of underwriting discounts and
commissions, if any) incurred in connection with any registration, qualification
or compliance pursuant to this Section 8 shall be borne by the Company. The
Company shall also bear the reasonable fees and expenses of one special counsel
of the holders of Securities in connection with such matters.
(d) The Company will notify each participating holder in writing upon the
effectiveness of the registration statement and will, at its expense (i) keep
such registration effective until the holders have completed the distribution
described in the registration statement relating thereto or until Securities may
be sold without restriction or limitation in compliance with federal securities
laws, whichever first occurs; and (ii) furnish such number of prospectuses and
other documents incident thereto as a holder from time to time may reasonably
request.
(e) The rights to cause the Company to register Securities pursuant to
this Agreement may be exercised by any person who purchases Securities from the
Initial Purchaser (a "Purchaser") or any permitted assignee of the Purchaser;
provided that the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of the name
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and address of such permitted transferee or assignee and the Securities with
respect to which such Securities are being assigned. The Company shall, at its
expense, update the registration periodically (no more often than quarterly) to
substitute transferees as appropriate.
(f) The Company agrees to indemnify and hold harmless each holder of
Securities included in the Registration Statement and each person, if any, who
controls such holder within the meaning of Section 15 of the Act or Section 20
of the Securities Exchange Act of 1934 (the "Exchange Act"), against any losses,
claims, damages or liabilities to which such holder or such controlling person
(collectively "Indemnified Parties") may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto; (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or (iii) any violation
or alleged violation by the Company of the Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, the Exchange
Act or any state securities law; and the Company will reimburse, as incurred,
the Indemnified Parties for any legal or other expenses reasonably incurred by
such Indemnified Parties in connection with investigating or defending against
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Indemnified
Party specifically for use therein. This indemnity agreement will be in addition
to any liability that the Company may otherwise have. The Company shall not,
without the consent of the Indemnified Parties who have notified the Company of
a potential claim of indemnification hereunder, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification is available hereunder (whether
or not any Indemnified Parties are a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Parties from all liability arising out
of such claim, action, suit or proceeding.
(g) Each holder of Securities included in the Registration Statement
shall agree to indemnify and hold harmless the Company, each of its directors,
each of its officers, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any losses, claims, damages or liabilities to which the Company or any such
director, officer of the Company, or controlling person of the Company may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any Violation, in each case to the extent, and only to the extent, such
violation was made in reliance upon and in conformity with written information
furnished to the Company by such holder specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any
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such director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which any
such holder may otherwise have.
(h) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section .
(i) In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded or shall have been advised by its counsel that there
may be one or more legal defenses available to it and/or other indemnified
parties that conflict with those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances), or (ii) the indemnifying party does
not promptly retain counsel reasonably satisfactory to the indemnified party or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party.
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold you harmless and each
person, if any, who controls you within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which you or such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
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(i) any breach by the Company of the representations or warranties set
forth in Section 2(a) of this Agreement;
(ii) any untrue statement or alleged untrue statement of any material
fact contained in the Memorandums or any amendments or supplements thereto;
(iii) the omission or alleged omission to state in the Memorandums or
any amendments or supplements thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading; or
(iv) any untrue statement or alleged untrue statement of any material
fact contained in any audio or visual materials produced by the Company and
used in connection with the marketing of the Securities, including without
limitation, slides, videos, films, tape recordings, and, such party or
parties, as the case may be, will reimburse, as incurred, you and each such
controlling person for any legal or other expenses reasonably incurred by
you or such controlling person in connection with investigating or defending
against any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon (i) any untrue statement or alleged untrue statement or omission or
alleged omission made in such Memorandums, or any amendments or supplements
thereto in reliance upon and in conformity with written information
furnished to the Company by you specifically for use therein, or (ii) any
breach of Section 2(b) hereof. This indemnity agreement will be in addition
to any liability that the Company may otherwise have. The Company shall not,
without your prior written consent, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification is available hereunder
(whether or not you or any person who controls you within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of you and all of such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
(b) You agree to indemnify and hold harmless the Company, each of its
directors, each of its officers, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer of the Company, or controlling person of
the Company or may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Memorandums or any amendments or supplements
thereto, (ii) the omission or the alleged omission to state therein a material
fact required to be stated in the Memorandums or any amendments or supplements
thereto, or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by you
specifically for use therein, or (iii) any breach of Section 2(b) hereof; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
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Company or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or any action
in respect thereof. This indemnity agreement will be in addition to any
liability which you may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 9, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section .
(d) In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded or shall have been advised by its counsel that there
may be one or more legal defenses available to it and/or other indemnified
parties that conflict with those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by you in the case of
paragraph (a) of this Section 9, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel reasonably satisfactory to
the indemnified party or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the consent of the indemnifying party.
(e) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 9 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying party,
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate
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to reflect (i) the relative benefits received by the indemnifying party or
parties on the one hand and the indemnified party on the other from the offering
of the Securities or (ii) if the allocation provided by the foregoing clause (i)
is not permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and you on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received by the
Company bear to the total commissions or discounts received by you. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or you, the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Company and you agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (e), you shall not be obligated to make
contributions hereunder that in the aggregate exceed the total price of the
Securities purchased by you under this Agreement, less the aggregate amount of
any damages that you have otherwise been required to pay in respect of the same
or any substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers, and
you set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement shall remain in full force and effect, regardless of
(i) any investigation made by or on behalf of the Company, any of its officers
or directors, you or any controlling person referred to in Section 9 hereof and
(ii) delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6 and 9 hereof
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to the Firm Securities
or any Option Securities in your sole discretion by notice to the Company given
prior to the Firm Closing Date or the related Option Closing Date, respectively,
in the event that the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder at or prior thereto or, if at or prior to the Firm
Closing Date or, such Option Closing Date, respectively,
(i) the Company or any of its Subsidiaries shall have, in your
reasonable judgment, sustained any loss or interference with their
respective businesses or properties having or resulting in a Material
Adverse Effect from fire, flood, hurricane, accident or
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other calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding or there shall have been any
event, circumstance of development that results in, or that you reasonably
believe would result in, a Material Adverse Effect, except in each case as
described in or contemplated by the Final Memorandum;
(ii) trading in the Common Stock shall have been suspended by the
Commission or the Nasdaq National Market or minimum or maximum prices shall
have been established on the Nasdaq National Market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an outbreak
or escalation of any other insurrection or armed conflict involving the
United States or (C) any other calamity or crisis or material adverse change
in general economic, political or financial conditions having an effect on
the U.S. financial markets that, in your reasonable judgment, makes it
impractical or inadvisable to proceed with the public offering or the
delivery of the Securities as contemplated by the Memorandum, as amended as
of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party.
12. Information Supplied by You. The statements set forth in the second
paragraph of the Plan of Distribution constitute the only information furnished
by you to the Company for the purposes of Section 9 hereof. You confirm that
such statements are correct.
13. Notices. All communications hereunder shall be in writing and, if sent
to you, shall be delivered or sent by mail, telex or facsimile transmission and
confirmed in writing to Friedman, Billings, Xxxxxx & Co., Inc., Potomac Tower,
0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxx X.
Xxxxxxx; and if sent to the Company, shall be delivered or sent by mail, telex
or facsimile transmission and confirmed in writing to the Company at 0000 Xxxx
Xxxxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, Attention: Chief Executive
Officer.
14. Successors. This Agreement shall inure to the benefit of and shall be
binding upon you, the Company and our respective successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company contained in Section 9 of this Agreement shall also be for the benefit
of any person or persons who controls you within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, (ii) your indemnities contained in
Section 9 of this Agreement shall also be for the benefit of the directors and
officers of the Company, and any person or persons who control the Company
within the meaning of
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Section 15 of the Act or Section 20 of the Exchange Act, and (iii) the provision
of Section 8 shall be for the benefit of permitted transferees of you and
purchasers to the extent provided therein. No purchaser of Securities from you
shall be deemed a successor because of such purchase.
15. Applicable Law. The validity and interpretation of this Agreement, and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of Arizona, without giving effect to any
provisions relating to conflicts of laws.
16. Consent to Jurisdiction and Service of Process. All judicial proceedings
arising out of or relating to this Agreement may be brought in any state or
federal court of competent jurisdiction in the State of Virginia, and by
execution and delivery of this Agreement, the Company accepts for itself and in
connection with their respective properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agree to be bound by any judgment rendered
thereby in connection with this Agreement. The Company designates and appoints
Xxxxxx X. Xxxxxx, XX and such other persons as may hereafter be selected by the
Company irrevocably agreeing in writing to so serve, as its agent to receive on
its behalf service of all process in any such proceedings in any such court,
such service being hereby acknowledged by the Company to be effective and
binding service in every respect. A copy of any such process so served shall be
mailed by registered mail to the Company at its address provided in Section 13
hereof; provided, however, that, unless otherwise provided by applicable law,
any failure to mail such copy shall not affect the validity of service of such
process. If any agent appointed by the Company refuses to accept service, the
Company hereby agrees that service of process sufficient for personal
jurisdiction in any action against the Company in the State of Virginia may be
made by registered or certified mail, return receipt requested, to the Company
at its address provided in Section 12 hereof, and the Company hereby
acknowledges that such service shall be effective and binding in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit your right to bring proceedings against the
Company in the courts of any other jurisdiction.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing correctly sets forth our understanding please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
letter shall constitute an agreement binding the Company and you.
Very truly yours,
UGLY DUCKLING CORPORATION
By:_______________________________
Xxxxxxx X. Xxxxxxxx
President
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
By:________________________________
Name:__________________________
Title:_________________________
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Schedule 1
SUBSIDIARIES
Name Jurisdiction of Incorporation
---- -----------------------------
Duck Ventures, Inc. Arizona
Ugly Duckling Car Sales, Inc. Arizona
Champion Acceptance Corp. Arizona
Champion Financial Services, Inc. Arizona
Champion Receivables Corp. Delaware
Cygnet Finance, Inc. Arizona
Drake Insurance Services, Inc. Arizona
Drake Insurance Agency, Inc. Arizona
Udrac Rentals, Inc. Arizona
Ugly Duckling Car Sales Florida, Inc. Florida
Ugly Duckling Car Sales New Mexico, Inc. New Mexico
Udrac, Inc. Arizona
