Offer Letter to Acquire Outstanding Stock of Ugly Duckling Corporation via Merger (Ernest C. Garcia, II and Ugly Duckling Corporation)

Summary

This letter from Ernest C. Garcia, II proposes to acquire all outstanding shares of Ugly Duckling Corporation (UDC) not already owned by him through a merger with a new entity he controls. Shareholders would receive $7.00 per share, split between cash and promissory notes. The merger is subject to approval by UDC’s board, shareholders, creditors, and regulators. The letter is not legally binding except for confidentiality on disclosures, and both parties must negotiate and sign final documents for the merger to proceed.

EX-10.27 17 0017.txt OFFER LETTER TO PURCHASE OUTSTANDING STOCK April 16, 2001 Board of Directors Ugly Duckling Corporation 2525 East Camelback Road, Suite 500 Phoenix, Arizona 85016 Re: Merger Proposal Gentlemen: The purpose of this letter is to propose the principal terms of the acquisition of all outstanding common stock of Ugly Duckling Corporation not already owned by me through a merger with Ugly Duckling Corporation. Merger: Ugly Duckling Corporation ("UDC") shall merge with a new corporation owned by me ("UDC Acquisition Corp.") in a merger transaction where UDC Acquisition Corp. will be the surviving entity (the "Merger"). Greg Sullivan will have an option to acquire up to a 20% interest in UDC Acquisition Corp. and will continue to operate UDC's business as Chief Executive Officer. I do not expect that any personnel of UDC will be terminated as a result of the merger and I will continue UDC's business. UDC Shares: As part of the Merger, the holders of all outstanding shares of common stock of UDC not held by me (the "UDC Shares") shall receive $7.00 per UDC Share (the "Merger Price"). The Merger Price represents a premium of nearly 100% over the current market price of the UDC Shares. The Merger Price shall be paid partially in cash in the amount of $2.00 per UDC Share and the balance of $5.00 per UDC Share shall be paid by the promissory notes of UDC to the holders of the UDC Shares (the "Merger Notes"). The Merger Notes shall accrue interest at 10%, be payable in semi-annual installments of interest only and mature in 10 years. The Merger Notes shall be unsecured and subordinate to all other existing indebtedness of UDC. Page 2 of 2 Board of Directors April 16, 2001 Conditions: The Merger is conditioned upon satisfaction of the following primary contingencies: UDC Board Approval. Approval of the Merger by the Board of Directors of UDC. I understand that the Board of Directors of UDC may require a fairness opinion before granting approval. UDC Shareholder Approval. Approval of the Merger by the holders of the required number of UDC Shares. If the holders of 5% or more of the UDC Shares exercise statutory appraisal rights, then I may elect to terminate the Merger. Creditor Approval. Approval of the Merger by all creditors of UDC that may have a right to object to the Merger. Regulatory Approvals. The receipt of any approvals required of any applicable governmental agencies. Disclosure: I intend to revise the Schedule 13D and the Schedule 13E-3 I filed with the Securities Exchange Commission regarding my possible intention to acquire additional UDC Shares to disclose this proposal. Each party agrees that it will not issue any press release or other disclosure relating to the proposed transaction without the prior approval of the other, which shall not be unreasonably withheld or delayed, unless such disclosure is required by applicable securities laws (in which event prior notice of the contents of the proposed disclosure shall be furnished). Documentation: This proposal of the principal terms of the Merger is not an offer and does not create any legally binding obligation (except that the last sentence of the preceding paragraph shall be binding upon the parties). However, we agree to use good faith efforts to prepare and execute mutually acceptable merger documents and neither party shall have any legally binding obligation to complete the proposed transaction unless and until mutually acceptable Merger Documents are executed. Please respond by April 25, 2001, 2000. You may contact me at ###-###-#### if you any questions or comments regarding the proposed Merger. Very truly yours, Ernest C. Garcia, II