SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of report (Date of earliest event reported)December 8, 1998
METRIS COMPANIES INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 41-1849591
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
600 South Highway 169, Suite 1800, St. Louis Park MN 55426
Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (612) 525-5020
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On December 9, 1998, Direct Merchants Credit Card Bank, National
Association, a subsidiary of the Company, completed the
acquisition of approximately $821 million in credit card
receivables and nearly 500,000 accounts from PNC National Bank
pursuant to a Purchase and Sale Agreement dated as of September
4, 1998. The Company financed the acquired portfolio through
securitization of the portfolio and bank sponsored third-party
commercial paper conduits and a portion of the $300 million
investment by certain affiliates of the Thomas H. Lee Company
(the "Lee Investors").
Additional information concerning the portfolio acquisition is
disclosed in the Exhibits set forth in Item 7(c), which are
incorporated by reference herein.
Item 5. Other Events.
On December 9, 1998, the Company issued and sold to the Lee
Investors $200 million of 12.5% Series B Perpetual Preferred Stock
(the "Series B Preferred Stock"), $100 million aggregate
principal amount of 12% Senior Notes due 2006 (the "Notes") and
warrants to purchase 3,750,000 shares of the Company's common
stock at an exercise price of $30 per share (the "Warrants").
Upon obtaining stockholder and regulatory approval, the Company
will exchange its Series C Perpetual Convertible Preferred Stock
(the "Series C Preferred Stock") for the outstanding Series B
Preferred Stock, Notes and Warrants. Each share of Series C
Preferred Stock has a pay-in-kind, cumulative dividend rate of
9%, compounded quarterly, and, if issued, will be convertible
into ten shares of the Company's common stock at a conversion
price of $37.25 per share, subject to adjustment. If, however,
stockholder or regulatory approval is not obtained and the
exchange does not occur, the annual pay-in-kind dividend rate on
the Series B Preferred Stock and the annual interest rate on the
notes will increase to 15%. If stockholder approval is not
obtained, the Warrants will become exercisable after regulatory
approval is obtained.
In connection with the investment by the Lee Investors, the
Company entered into an amendment to its Amended and Restated
Credit Agreement allowing the Lee Investors to own up to 35% of
the voting power of the Company without effecting a change of
control under such agreement. In addition, the Company entered
into a waiver agreement with Fingerhut Corporation ("Fingerhut")
in which Fingerhut agreed not to terminate any of its existing
agreements with the Company as a result of the investment by the
Lee Investors.
Effective December 8, 1998, also in connection with the
investment by the Lee Investors, the Board of Directors of the
Company redeemed the preferred stock purchase rights attached to
shares of the Company's common stock at a price of $0.01 per
right, pursuant to the terms of the Rights Agreement dated as of
September 10, 1998 between the Company and Norwest Bank
Minnesota, National Association. The Company will make a cash
payment of $.01 per share of common stock on December 18, 1998 to
all stockholders of record on December 8, 1998.
Additional information concerning the investment made by the Lee
Investors is disclosed in the Exhibits set forth in Item 7(c),
which are incorporated by reference herein.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired:
Not applicable.
(b) Pro forma financial information:
Not applicable.
(c) Exhibits:
4.1 Certificate of Designation of Series B Perpetual Preferred Stock.
4.2 Certificate of Designation of Series C Perpetual Convertible
Preferred Stock.
4.3 Certificate of Designation of Series D Junior Participating Convertible
Preferred Stock.
4.4 Indenture dated as of December 9, 1998 among the Company,
the Guarantors named therein and The Bank of New York, as
Trustee.
4.5 Warrant Agreement dated as of December 9, 1998 between the
Company and the Purchasers named therein.
10.1 Purchase and Sale Agreement dated as of September 4, 1998
between PNC National Bank and Direct Merchants Credit Card Bank,
National Association is incorporated herein by reference to
Exhibit 10.3 to the Company's Form 10-Q for the quarter ended
September 30, 1998.
10.2 Securities Purchase Agreement dated as of November 13, 1998
among the Company, the Thomas H. Lee Equity Fund IV, L.P. and
certain affiliates of the Thomas H. Lee Equity Fund IV, L.P..
10.3 Registration Rights Agreement dated as of December 9, 1998
between the Company and the Investors named therein.
10.4 Waiver Agreement dated as of December 8, 1998 between
Fingerhut, Infochoice USA, Inc., Metris Direct, Inc., Direct
Merchants Credit Card Bank, National Association and Metris
Direct Services, Inc.
10.5 Amendment dated as of December 3, 1998 to the Amended and
Restated Credit Agreement, dated as of June 30, 1998, among the
Company, the lenders named therein, NationsBank, N.A., as
syndication agent, Deutsche Bank, as documentation agent, U.S.
Bank National Association, as documentation agent, Barclays Bank
PLC, as co-agent, Bank of America National Trust and Savings
Association, as co-agent, and The Chase Manhattan Bank, as
administrative agent.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
METRIS COMPANIES INC.
Date: December 21, 1998 By:/s/ Z. Jill Barclift
Name: Z. Jill Barclift
Title: Executive Vice President,
General Counsel and Secretary
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No.
4.1 Certificate of Designation of Series B Perpetual Preferred
Stock.
4.2 Certificate of Designation of Series C Perpetual Convertible
Preferred Stock.
4.3 Certificate of Designation of Series D Junior Participating
Convertible Preferred Stock.
4.4 Indenture dated as of December 9, 1998 among the Company,
the Guarantors named therein and The Bank of New York, as
Trustee.
4.5 Warrant Agreement dated as of December 9, 1998 between the
Company and the Purchasers named therein.
10.1 Purchase and Sale Agreement dated as of September 4, 1998
between PNC National Bank and Direct Merchants Credit Card Bank,
National Association is incorporated herein by reference to
Exhibit 10.3 to the Company's Form 10-Q for the quarter ended
September 30, 1998.
10.2 Securities Purchase Agreement dated as of November 13, 1998
among the Company, the Thomas H. Lee Equity Fund IV, L.P. and
certain affiliates of the Thomas H. Lee Equity Fund IV, L.P..
10.3 Registration Rights Agreement dated as of December 9, 1998
between the Company and the Investors named therein.
10.4 Waiver Agreement dated as of December 8, 1998 between
Fingerhut, Infochoice USA, Inc., Metris Direct, Inc., Direct
Merchants Credit Card Bank, National Association and Metris
Direct Services, Inc..
10.5 Amendment dated as of December 3, 1998 to the Amended and
Restated Credit Agreement, dated as of June 30, 1998, among the
Company, the lenders named therein, NationsBank, N.A., as
syndication agent, Deutsche Bank, as documentation agent, U.S.
Bank National Association, as documentation agent, Barclays Bank
PLC, as co-agent, Bank of America National Trust and Savings
Association, as co-agent, and The Chase Manhattan Bank, as
administrative agent.
CERTIFICATE OF DESIGNATION
of
SERIES B PERPETUAL
PREFERRED STOCK
of
METRIS COMPANIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Metris Companies Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority
contained in its Certificate of Incorporation, as amended, and in
accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors
(the "Board of Directors") has adopted the following resolution
creating a series of its Preferred Stock, par value $.01 per
share, designated as Series B Perpetual Preferred Stock:
RESOLVED, that a series of authorized Preferred Stock, par
value $.01 per share, of the Corporation be hereby created, and
that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount.
The shares of such series shall be designated, as the
"Series B Perpetual Preferred Stock" (the "Series B Preferred
Stock") and the number of shares constituting such series shall
be 2,400,000 shares of Series B Preferred Stock. Section 10
below contains the definitions of certain defined terms used
herein.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series B Preferred Stock,
in preference to the holders of shares of the Series A Junior
Participating Preferred Stock, Series C Perpetual Convertible
Preferred Stock, Series D Junior Participating Preferred Stock,
Common Stock and of any other capital stock of the Corporation
ranking junior to the Series B Preferred Stock as to payment of
dividends, shall be entitled to receive on the last day of each
calendar quarter, cumulative dividends on the Series B Preferred
Stock accruing on a daily basis (computed on the basis of a 360-
day year of twelve 30-day months) at the rate per annum equal to
the Dividend Rate (as defined herein) per share of Series B
Preferred Stock calculated as a percentage of $372.50, compounded
quarterly, from and including December 9, 1998 until the
redemption of the Series B Preferred Stock. Such dividends shall
be paid in kind quarterly on or prior to the tenth anniversary of
the original issuance of this Series B Preferred Stock as herein
provided, except as otherwise provided in Sections 2, 5 and 7
hereof, and will be paid whether or not they have been declared
and whether or not there are profits, surplus or other funds of
the Corporation legally available for the payment of dividends.
Dividends on the Series B Preferred Stock shall be paid in
additional shares of Series B Preferred Stock valued at $372.50
per share; provided that with respect to periods following
December 9, 2008 or following a Change in Control Trigger Event,
dividends shall be paid quarterly in cash. For purposes hereof,
the "Dividend Rate" shall mean 12.5% per annum from December 9,
1998 through March 31, 1999 (or such later date agreed to by a
majority of the holders of the then outstanding shares of Series
B Preferred Stock but not later than June 30, 1999), and
thereafter, shall be fifteen percent (15%) per annum, except as
otherwise provided in Section 5(b) or 5(c). Notwithstanding the
foregoing, if the Board of Directors determines in good faith for
legal, tax or regulatory reasons or other good reason that it is
inappropriate or inadvisable to pay one or more dividends in kind
as described above, the Board of Directors of the Corporation, by
a vote of 80% of the members of the Board of Directors (which 80%
must include a majority of the directors elected or designated by
the holders of Series B Preferred Stock, if there is one or more
such directors so designated or elected), may determine to pay
such dividend in cash, debt securities, convertible securities or
other securities or property of the Corporation or any
combination thereof so long as, in the reasonable opinion of the
Board of Directors, such dividends, at the time of declaration,
shall be substantially economically equivalent to the in kind
dividend that would have been declared; provided, however, that
if there are no directors elected or designated by the holders of
Series B Preferred Stock, no such determination to pay dividends
other than in kind shall be permitted without the affirmative
consent of the holders of a majority of the Series B Preferred
Stock then outstanding. In making such determination, the Board
may rely upon the advice or report of independent legal and
financial advisors or other experts.
(b) In case the Corporation or any Subsidiary of the
Corporation shall at any time or from time to time declare,
order, pay or make a dividend or other distribution (including,
without limitation, any distribution of stock or other securities
or property or rights or warrants to subscribe for securities of
the Corporation or any of its Subsidiaries by way of dividend or
spinoff) on the Common Stock other than a redemption of rights to
purchase Series A Junior Participating Preferred Stock for a
redemption amount not greater than $.01 per right attached to
each share of Common Stock, then, and in each such case (a
"Triggering Distribution"), the holders of shares of Series B
Preferred Stock shall be entitled to receive from the
Corporation, with respect to each share of Series B Preferred
Stock held, in addition to the dividends payable under paragraph
(a) of this Section 2, the same dividend or distribution received
by a holder of the number of shares of Common Stock equal to the
Common Liquidation Equivalent per share of Series B Preferred
Stock on the record date for such dividend or distribution. Any
such dividend or distribution shall be declared, ordered, paid or
made on the Series B Preferred Stock at the same time such
dividend or distribution is declared, ordered, paid or made on
the Common Stock and shall be in addition to any dividends
payable under paragraph (a) of this Section 2.
Section 3. Voting Rights.
(a) So long as any shares of Series B Preferred Stock
shall be outstanding and unless the consent or approval of a
greater number of shares shall then be required by law, without
first obtaining the consent or approval of the Requisite Holders
(as defined below), voting as a single class, given in person or
by proxy at a meeting at which the holders of such shares shall
be entitled to vote separately as a class, or by written consent,
the Corporation shall not: (i) authorize, create or issue any
class or series, or any shares of any class or series, of stock
having any preference or priority as to voting, dividends or upon
redemption, liquidation, dissolution, or winding up over the
Series B Preferred Stock ("Senior Stock"); (ii) authorize, create
or issue any class or series, or any shares of any class or
series, of stock ranking on a parity as to voting, dividends or
upon redemption, liquidation, dissolution or winding up with the
Series B Preferred Stock ("Parity Stock"); (iii) reclassify any
shares of stock of the Corporation into shares of Senior Stock or
Parity Stock; (iv) authorize any security exchangeable for,
convertible into, or evidencing the right to purchase any shares
of Senior Stock or Parity Stock; (v) alter or change the rights,
preferences or privileges of the Series B Preferred Stock; (vi)
increase or decrease the authorized number of shares of Series B
Preferred Stock or issue shares of Series B Preferred Stock other
than to holders of Series B Preferred Stock pursuant to its
terms; or (vii) amend or waive any provision of the Corporation's
Certification of Incorporation in a manner adverse to the
holders of Series B Preferred Stock; provided, however, that
nothing herein shall prohibit (i) the authorization of the Series
C Perpetual Convertible Preferred Stock or the Series D Junior
Participating Convertible Preferred Stock in the form approved by
the Requisite Holders on the date of initial issuance of the
Series B Preferred Stock, or (ii) the Corporation from
distributing rights pursuant to the terms of that certain Rights
Agreement, dated as of September 10, 1998 between the Corporation
and Norwest Bank Minnesota, National Association, as Rights
Agent, as such Agreement is in effect on the Closing Date of the
Securities Purchase Agreement or pursuant to a similar rights
plan approved by the Board of Directors of the Corporation. For
purposes hereof, the "Requisite Holders" shall mean the holders
of a majority of the then-outstanding shares of Series B
Preferred Stock.
(b) Except as provided in this Certificate of
Designation of Series B Preferred Stock or as required by law,
the holders of shares of Series B Preferred Stock shall have no
voting rights and their consent shall not be required for the
taking of any corporation action.
Section 4. Certain Restrictions.
(a) Whenever the Corporation shall have not redeemed
the shares of Series B Preferred Stock within five (5) Business
Days of the date such redemption is required by Section 5 (a
"Redemption Default"), thereafter and until all redemption
payments shall have been made or all necessary funds shall have
been Set Apart for Payment, and at all times following a Change
in Control Triggering Event during which any shares of Series B
Preferred Stock remain outstanding, the Corporation shall not,
nor shall it permit any of its Subsidiaries to: (A) declare or
pay dividends, or make any other distributions, on any shares of
Common Stock or other capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series B Preferred Stock, other than
dividends or distribution payable in Junior Stock; (B) declare or
pay dividends, or make any other distributions, on any shares of
Parity Stock, other than dividends or distributions payable in
Junior Stock, except dividends paid ratably on the Series B
Preferred Stock and all Parity Stock on which dividends are
payable or in arrears, in proportion to the total amounts to
which the holders of all such shares are then entitled; (C)
redeem or purchase or otherwise acquire for consideration (other
than Junior Stock) any shares of Junior Stock or Parity Stock
(other than, with respect to Parity Stock, ratably with the
Series B Preferred Stock); or (D) purchase or otherwise acquire
for consideration any shares of Series B Preferred Stock, other
than purchases ratably among all holders of the Series B
Preferred Stock.
(b) The Corporation shall not permit any Subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation
unless the Corporation could, pursuant to paragraph (a) of this
Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Redemption.
(a) Except as provided in this Section 5(a) or 5(b), the
Corporation shall have no right to require the redemption of any
share of Series B Preferred Stock and the holders of Series B
Preferred Stock shall have no right to compel such redemption.
At any time after December 31, 2005, the Corporation shall have
the right, at its sole option and election, to redeem any or all
of the outstanding shares of Series B Preferred Stock by paying
therefor in cash the Liquidation Preference; provided, however,
that if the Corporation shall redeem fewer than all shares of
Series B Preferred Stock outstanding, (i) such redemption shall
be made from the holders pro rata in proportion to the shares
owned by each, and (ii) if such redemption shall be taxable as a
dividend for federal income tax purposes, the Corporation shall
make to each holder a "Gross Up Payment" which shall be equal to
the federal, state and local income tax payable by such holder
with respect to such dividend, including the tax payable with
respect to the Gross Up Payment. Such Gross Up Payment shall be
made at least ten (10) days before the relevant tax is payable.
(b) In the event there occurs a Change in Control, the
Corporation shall have the right to offer to purchase from each
holder all, but not less than all, of the Series B Preferred
Stock held by such holder for an amount equal to 101% of the
Liquidation Preference by delivery of a notice of such offer (a
"Change in Control Redemption Offer") within five days of the
Change in Control. In the event the Corporation makes a Change
in Control Redemption Offer, each holder of Series B Preferred
Stock shall have the right (but not the obligation) to require
the Corporation to purchase all, but not less than all, of the
Series B Preferred Stock held by such holder for an amount equal
to 101% of the Liquidation Preference. In the event there occurs
a Change in Control and the Corporation does not make a Change in
Control Redemption Offer in accordance with this paragraph (a
"Change in Control Triggering Event"), then effective as of the
date of such Change in Control:
(i) Each holder of Series B Preferred Stock shall
be entitled to receive a distribution of additional shares of
Series B Preferred Stock such that the total number of shares of
Series B Preferred Stock held by such holder as of the date of
the Change in Control shall equal the Liquidation Preference
divided by $372.50;
(ii) Following the earlier of (x) March 31, 1999,
and (y) the date on which the holders of Series B Preferred Stock
shall have obtained all necessary approvals from the Office of
the Comptroller of the Currency (the "OCC") and on which all
applicable notice and comment periods shall have expired without
disapproval by the OCC, without the consent of the holders of a
majority of the outstanding shares of the Series B Preferred
Stock, the Corporation will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and the
Corporation and its Subsidiaries will not issue any Disqualified
Stock, and the Corporation will not permit any of its
Subsidiaries to issue any shares of preferred stock, provided,
however, that the Corporation and its Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock or the Corporation's Subsidiaries may issue
shares of preferred stock if the Consolidated Leverage Ratio of
the Corporation, calculated on a pro forma basis after giving
effect to the incurrence of the additional Indebtedness to be
incurred or the Disqualified Stock or preferred stock to be
issued and the application of the proceeds therefrom, would have
been less than 2 to 1. Notwithstanding this subparagraph (iv),
the Corporation may incur the following Indebtedness
(collectively, "Permitted Debt"):
A. Indebtedness of the Corporation under
the Credit Agreement and Guaranties thereof by the
Corporations's Subsidiaries in an aggregate amount
not to exceed $300 million at any time
outstanding;
B. Indebtedness of the Corporation and its
Subsidiaries existing on December 9, 1998;
C. Indebtedness of any Subsidiary of the
Corporation represented by a guaranty of
Indebtedness of the Corporation which constitutes
Permitted Debt;
D. Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are
used to refund, refinance, defease, renew or
replace, any Indebtedness (other than intercompany
Indebtedness) that was permitted to be incurred
under this subparagraph (iv);
E. Intercompany Indebtedness of the
Subsidiary of the Corporation owing to the
Corporation; provided, however, that any sale or
other transfer of any such Indebtedness to a
person that is not the Corporation shall be
deemed, in each case, to constitute an incurrence
of such Indebtedness by such Subsidiary that was
not permitted by this clause (E);
F. The issuance by a Subsidiary of the
Corporation of preferred stock to the Corporation;
provided, however, that any subsequent transfer of
such preferred stock to a person other than the
Corporation shall be deemed to be an issuance of
preferred stock by such Subsidiary that was not
permitted by this clause (F).
G. Hedging Obligations that are incurred in
the ordinary course of business;
H. Capital Lease Obligations and/or
Purchase Money Indebtedness of the Corporation or
a Subsidiary of the Corporation incurred in the
ordinary course of business not to exceed $30.0
million at any time outstanding;
I. The guarantee by the Corporation or any
of its Subsidiaries of Indebtedness of the
Corporation or a Subsidiary of the Corporation
that was permitted to be incurred by another
provision of this clause (I);
J. Additional Indebtedness of the
Corporation and its Subsidiaries in an aggregate
principal amount (or accreted value, as
applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (J),
not to exceed $10.0 million at any time
outstanding.
Notwithstanding anything in this subparagraph (iv)
to the contrary, consummation of a Securitization shall
not be deemed to be the incurrence of Indebtedness or
the issuance of Disqualified Stock or preferred stock
by the Corporation or a Subsidiary of the Corporation.
For purposes of determining compliance with this
subparagraph (iv), in the event that an item of
Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (A)
through (J) above or is entitled to be incurred
pursuant to the first paragraph of this subparagraph
(iv), the Corporation shall, in its sole discretion,
classify such item of Indebtedness in any manner that
complies with this subparagraph (iv) and such item of
Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to the
first paragraph hereof.
(iii) Following the earlier of (x) March 31,
1999, (y) the date on which the holders of Series B Preferred
Stock shall have obtained all necessary approvals from the OCC
and on which all applicable notice and comment periods shall have
expired without disapproval by the OCC, without the consent of
the holders of a majority of the outstanding shares of Series B
Preferred Stock, (i) the Corporation shall not permit the
Leverage Ratio at any time to exceed 6 to 1 and (ii) the
Corporation shall not permit the amount of Unsecured Indebtedness
of the Corporation and its subsidiaries to exceed $25,000,000 in
the aggregate at any time outstanding.
If the Corporation shall fail to comply with any one or more
of the provisions of this paragraph 5(b) or, following a Change
in Control Triggering Event, paragraph 2(a) or Section 4, then in
any such event (i) the Dividend Rate shall be increased to 18%
and, (ii) at any time following the 91st day after the maturity
or payment in full of the Corporation's 10% Senior Notes due 2004
issued pursuant to the Indenture, the holders of a majority of
the shares of Series B Preferred Stock shall be entitled to
require the Corporation to redeem all outstanding shares of
Series B Preferred Stock for an amount equal to 101% of the
Liquidation Preference.
(c) (i) Notice of any redemption of shares of Series
B Preferred Stock pursuant to paragraph (a) of this Section 5
shall be mailed at least thirty, but no more than sixty, days
prior to the date fixed for redemption to each holder of shares
of Series B Preferred Stock to be redeemed, at such holder's
address as it appears on the transfer books of the Corporation.
No redemption of shares of Series B Preferred Stock pursuant to
paragraph (a) of this Section 5 shall take place unless such
notice shall have been mailed in accordance with this
subparagraph (c)(i). In order to facilitate the redemption of
shares of Series B Preferred Stock, the Board of Directors may
fix a record date for the determination of shares of Series B
Preferred Stock to be redeemed, not more than sixty days nor less
than thirty days prior to the date fixed for such redemption.
(ii) Within 20 Business Days of an event giving a
holder of shares of Series B Preferred Stock the right, pursuant
to paragraph (b) of this Section 5, to require the Corporation to
redeem any of such shares, the Corporation shall give notice by
mail to each holder of Series B Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation,
of such event, which notice shall set forth each holder's right
to require the Corporation to redeem any or all shares of Series
B Preferred Stock held by it which are eligible for redemption
pursuant to the terms of paragraph (b), the redemption date
(which date shall be thirty (30) Business Days following the date
of such mailed notice), and the procedures to be followed by such
holder in exercising its right to cause such redemption. In the
event a record holder of shares of Series B Preferred Stock shall
elect to require the Corporation to redeem any or all such shares
of Series B Preferred Stock pursuant to paragraph (b) of this
Section 5, such holder shall deliver within twenty Business Days
of the mailing to it of the Corporation's notice described in
this subparagraph (ii), a written notice to the Corporation so
stating, specifying the number of shares to be redeemed pursuant
to paragraph (b) of this Section 5. The Corporation shall, in
accordance with the terms hereof, redeem the number of shares so
specified on the date fixed for redemption, which will be no
later than thirty Business Days following receipt by the
Corporation of a holder's election to redeem the shares of Series
B Preferred Stock. Failure of the Corporation to give any notice
required by this subparagraph (ii), or the formal insufficiency
of any such notice, shall not prejudice the rights of any holders
of shares of Series B Preferred Stock to cause the Corporation to
redeem any such shares held by them and, in the event of any such
failure or immediately after there has arisen a right on the part
of the holders of Series B Preferred Stock to Compel redemption
under Section 5(b) following a Change in Control Triggering
Event, the holders of a majority of the shares of Series B
Preferred Stock outstanding shall be entitled to exercise their
right to cause the Corporation to redeem any such shares held by
delivery of written notice to such effect by such holders to the
Corporation and such shares shall be redeemed upon receipt of
such notice by the Corporation. Notwithstanding the foregoing,
the Board of Directors of the Corporation may modify any offer
pursuant to this Section 5(c)(ii) to the extent necessary to
comply with the Exchange Act and the rules and regulations
thereunder.
(iii) At any time after a notice of redemption
shall have been mailed and before such date of redemption the
Corporation may deposit for the benefit of the holders of the
Series B Preferred Stock called for redemption the funds
necessary for such redemption with a bank or trust company doing
business in the Borough of Manhattan, the City of New York, and
having a capital and surplus of at least $1,000,000,000. Any
interest allowed on moneys so deposited shall be paid to the
Corporation. Upon the deposit of such funds or, if no such
deposit is made, upon the date fixed for redemption (unless the
Corporation shall default in making payment of the appropriate
redemption amount), whether or not certificates for shares so
called for redemption have been surrendered for cancellation, the
shares of Series B Preferred Stock to be redeemed shall be deemed
to be no longer outstanding and the holders thereof shall cease
to be stockholders with respect to such shares and shall have no
rights with respect thereto, except for the rights to receive the
amount payable upon redemption, but without interest. Such
deposit in trust shall be irrevocable, and any funds deposited by
the Corporation which are unclaimed at the end of one year from
the date fixed for such redemption shall be paid over to the
Corporation upon its request, and upon such repayment the holders
of the shares of Series B Preferred Stock so called for
redemption shall look only to the Corporation for payment of the
appropriate amount. Any such unclaimed amounts paid over to the
Corporation shall, for a period of six years from the date fixed
for such redemption, be set apart and held by the corporation in
trust for the benefit of the holders of such shares of Series B
Preferred Stock, but no such holder shall be entitled to interest
thereon. At the expiration of such six-year period, all right,
title, interest and claim of such holders in or to such unclaimed
amounts shall be extinguished, terminated and discharged, and
such unclaimed amounts shall become part of the general funds of
the Corporation free of any claim of such holders. If the
Corporation shall not have redeemed the shares of Series B
Preferred Stock within five Business Days of the date such
redemption is required by this Section 5, all redemption payments
that are past due shall accrue interest at an annual rate of
fifteen percent (15%), compounded quarterly.
Section 6. Reacquired Shares.
Any shares of Series B Preferred Stock, redeemed, purchased
or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition
thereof, and, if necessary to provide for the lawful redemption
or purchase of such shares, the capital represented by such
shares shall be reduced in accordance with the General
Corporation Law of the State of Delaware. All such shares shall
upon their cancellation become authorized but unissued shares of
Preferred Stock, par value $.01 per share, of the Corporation and
may be reissued as part of another series of Preferred Stock,
par value $.01 per share, of the Corporation subject to the
conditions or restrictions on authorizing, or creating or
issuing any class or series, or any shares of any class or
series, set forth in paragraph (b) of Section 3.
Section 7. Liquidation, Dissolution or Winding Up.
If the Corporation shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the Federal
bankruptcy laws or any other applicable state or Federal
bankruptcy, insolvency or similar law, or consent to the entry of
an order for relief in any involuntary case under any such law or
to the appointment of a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the
Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become
due, or if a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and any such decree or order shall be unstayed and in
effect for a period of 90 consecutive days and on account of such
event the Corporation shall liquidate, dissolve or wind up, or
upon any other liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of
shares of Junior Stock, unless prior thereto, the holders of
shares of Series B Preferred Stock shall have received in cash
the Liquidation Preference, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series B
Preferred Stock and all such Parity Stock in proportion to the
total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up of the
Corporation. For the purposes of this Section 7, the voluntary
sale, conveyance, exchange or transfer of all or substantially
all of the property or assets of the Corporation or the
consolidation or merger of the Corporation with or into one or
more other corporations shall not be deemed to be a liquidation,
winding-up or dissolution of the Corporation.
Section 8. Common Liquidation Equivalent.
(a) Subject to the provisions for adjustment
hereinafter set forth, the "Common Liquidation Equivalent" of
each share of Series B Preferred Stock shall be equal to an
amount which would be payable to the holder of such share upon
the occurrence of an event described in Section 7 had such
holder, immediately prior to such event, exchanged such shares
for shares of Common Stock at the Applicable Exchange Rate. The
Applicable Exchange Rate in effect at any time shall be the
quotient obtained by dividing $372.50 by the Applicable Exchange
Value, calculated as provided in Section 8(b).
(b) The Applicable Exchange Value shall be $37.25,
except that such amount shall be adjusted from time to time in
accordance with this Section 8. In computing each adjusted
Applicable Exchange Value, the result shall be rounded to the
nearest thousandth of a cent, and such adjustment shall be made
separately in each instance, and in the event the adjustment
results in a change to the Applicable Exchange Value of less than
$.01, no adjustment to the then Applicable Exchange Value shall
be made, but the amount of said adjustment calculated thereby
shall be carried forward to successive occasions until such
adjustments in the aggregate equal or exceed $0.01.
(c) Adjustments to Applicable Exchange Value.
(i)(A) Upon Sale of Common Stock. If the
Corporation shall, while there are any shares of Series B
Preferred Stock outstanding, issue or sell shares of its Common
Stock without consideration or at a price per share less than the
Applicable Exchange Value in effect immediately prior to such
issuance or sale, then the Applicable Exchange Value upon each
such issuance or sale shall be lowered, except as hereinafter
provided, so as to be equal to an amount determined by
multiplying the Applicable Exchange Value by a fraction:
(1) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock
(calculated on a fully diluted basis assuming the conversion
or exercise of all outstanding securities then convertible
or exercisable for Common Stock), plus (b) the number of
shares of Common Stock which the net aggregate
consideration, if any, received by the Corporation for the
total number of such additional shares of Common Stock so
issued would purchase at the Applicable Exchange Value in
effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number
of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock
(calculated on a fully diluted basis assuming the conversion
of all outstanding Series B Preferred Stock and the
conversion or exercise of all outstanding securities then
convertible or exercisable for Common Stock) plus (b) the
number of such additional shares of Common Stock so issued.
(B) Upon Issuance of Warrants, Options and Rights to
Purchase Common Stock.
(1) For the purposes of this Section 8(c)(i), the
issuance of any warrants, options, subscriptions, or
purchase rights with respect to shares of Common Stock and
the issuance of any securities convertible into or
exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such
convertible or exchangeable securities) shall be deemed an
issuance of such Common Stock at such time if the Net
Consideration Per Share (as hereinafter determined) which
may be received by the Corporation for such Common Stock
shall be less than the Applicable Exchange Value at the time
of such issuance. Any obligation, agreement, or undertaking
to issue warrants, options, subscriptions, or purchase
rights at any time in the future shall be deemed to be an
issuance at the time such obligation, agreement or
undertaking is made or arises. No adjustment of the
Applicable Exchange Value shall be made under this Section
8(c)(i) upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants,
options, subscriptions, or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any
convertible securities if any adjustment shall previously
have been made or deemed not required hereunder, upon the
issuance of any such warrants, options, or subscription or
purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or
any rights therefor) as above provided.
Should the Net Consideration Per Share of any such warrants,
options, subscriptions, or purchase rights or convertible
securities be decreased or increased from time to time,
then, upon the effectiveness of each such change, the
Applicable Exchange Value shall be adjusted to such
Applicable Exchange Value as would have been obtained
(1) had the adjustments made upon the issuance of such
warrants, options, rights, or convertible securities been
made upon the basis of the decreased or increased Net
Consideration Per Share of such securities, and (2) had
adjustments made to the Applicable Exchange Value since the
date of issuance of such securities been made to the
Applicable Exchange Value as adjusted pursuant to (1) above.
Any adjustment of the Applicable Exchange Value with respect
to this paragraph which relates to warrants, options,
subscriptions, purchase rights or convertible securities
with respect to shares of Common Stock shall be disregarded
if, as, when and to the extent such warrants, options,
subscriptions, purchase rights or convertible securities
expire or are canceled without being exercised or converted,
so that the Applicable Exchange Value effective immediately
upon such cancellation or expiration shall be equal to the
Applicable Exchange Value in effect at the time of the
issuance of the expired or canceled warrants, options,
subscriptions, purchase rights, or convertible securities
with such additional adjustments as would have been made to
that Applicable Exchange Value had the expired or canceled
warrants, options, subscriptions, purchase rights or
convertible securities not been issued.
(2) For purposes of this paragraph, the "Net
Consideration Per Share" which may be received by the
Corporation shall be determined as follows:
(a) The "Net Consideration Per Share" shall
mean the amount equal to the total amount of
consideration, if any, received by the Corporation for
the issuance of such warrants, options, subscriptions,
or other purchase rights or convertible or exchangeable
securities, plus the minimum amount of consideration,
if any, payable to the Corporation upon exercise or
conversion thereof, divided by the aggregate number of
shares of Common Stock that would be issued if all such
warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities were
exercised, exchanged, or converted.
(b) The Net Consideration Per Share which
may be received by the Corporation shall be determined
in each instance as of the date of issuance of
warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities
without giving effect to any possible future upward
price adjustments or rate adjustments which may be
applicable with respect to such warrants, options,
subscriptions, or other purchase rights or convertible
or exchangeable securities unless and until such upward
price or rate adjustments are in fact made in
accordance with the provisions set forth in subsection
(B)(1) above. Notwithstanding anything to the contrary
set forth herein, no adjustment upon any such price or
rate increase shall result in an increase in the
Applicable Exchange Value to an amount in excess of the
Applicable Exchange Value in effect immediately prior
to the issuance of such warrants, options,
subscriptions, purchase rights or convertible
securities.
(C) Stock Dividends. In the event the Corporation
shall make or issue a dividend or other distribution payable
in Common Stock or securities of the Corporation convertible
into or otherwise exchangeable for the Common Stock of the
Corporation, then such Common Stock or other securities
issued in payment of such dividend shall be deemed to have
been issued without consideration.
(D) Consideration Other than Cash. For purposes
of this Section 8(c), if a part or all of the consideration
received by the Corporation in connection with the issuance
of shares of the Common Stock or the issuance of any of the
securities described in this Section 8(c) consists of
property other than cash, such consideration shall be deemed
to have a fair market value as is reasonably determined in
good faith by the Board of Directors of the Corporation.
(E) Exceptions. This Section 8(c)(i) shall not
apply under any of the circumstances which would constitute
an Extraordinary Common Stock Event (as hereinafter defined
in Section 8(c)(ii)). Further, the provisions of this
Section 8(c)(i) shall not apply to (i) shares issued, stock
option, stock grants and other equity incentives issued or
reserved for issuance pursuant to plans and agreements
approved by a majority of the Corporation's Board of
Directors, (ii) shares of Common Stock issued upon exercise
of Warrants issued pursuant to the Securities Purchase
Agreement dated November 13, 1998, and (iii) shares issued
upon exercise of options to acquire 96,125 shares issued to
Rakesh R. Kahl pursuant to a settlement agreement dated
October 18, 1996.
(ii) Upon Extraordinary Common Stock Event. Upon
the happening of an Extraordinary Common Stock Event (as
hereinafter defined), the Applicable Exchange Value shall,
simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by multiplying the then effective
Applicable Exchange Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
immediately prior to such Extraordinary Common Stock Event and
the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such Extraordinary Common
Stock Event, and the product so obtained shall thereafter be the
Applicable Exchange Value. The Applicable Exchange Value shall
be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) a
subdivision of outstanding shares of Common Stock into a
greater number of shares of Common Stock, or (ii) a
combination of outstanding shares of the Common Stock into
a smaller number of shares of Common Stock.
(d) Certificate as to Adjustments; Notice by
Corporation. In each case of an adjustment or readjustment of
the Applicable Conversion Rate, the Corporation at its expense
will furnish each holder of Series B Preferred Stock with a
certificate, executed by the president and chief financial
officer (or in the absence of a person designated as the chief
financial officer, by the treasurer) showing such adjustment or
readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
Section 9. Definitions.
For the purposes of the Certificate of Designation of
Series B Perpetual Preferred Stock which embodies this
resolution:
"Accrued Dividends" to a particular date (the "Applicable
Date") means (i) all dividends accrued but not paid on the
Series B Preferred Stock pursuant to paragraph (a) of Section 2,
whether or not declared, accrued to the Applicable Date, plus
(ii) all dividends or distributions payable pursuant to
paragraph (b) of Section 2 for which the Triggering Distribution
was declared, ordered, paid or made on or prior to the
Applicable Date.
"Acquired Debt" means, with respect to any specified
person, (i) Indebtedness of any other person existing at the
time such other person is merged with or into or became a
Subsidiary of such specified person, including, without
limitation, Indebtedness incurred in connection with, or in
contemplation of, such other person merging with or into or
becoming a Restricted Subsidiary of such specified person, and
(ii) Indebtedness secured by a lien encumbering any asset
acquired by such specified person.
"Approval Date" means the date (i) on which the Corporation
shall have obtained all necessary approvals from the Office of
the Comptroller of the Currency ("OCC") and other banking and
regulatory authorities with jurisdiction over the acquisition of
the Series C Preferred Stock and (ii) on which all applicable
notice and comment periods shall have expired without
disapproval by the OCC or such other authorities. Such approval
of the OCC and such other authorities shall mean approvals with
respect to the holders of the Series B Preferred Stock
acquisition of the Series C Preferred Stock and the exercise of
rights contemplated thereby including, without limitation, the
voting, dividend, anti-dilution and conversion rights contained
therein, which approval shall be reasonably acceptable to such
holders.
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated by the Securities and Exchange Commission under the
Exchange Act.
"Business Day" means any day other than a Saturday, Sunday,
or a day on which commercial banks in the City of New York are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability
in respect of a capital lease that would at such time be
required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (iii)
in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited)
and (iv) any other interest or participation that confers on a
person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing person.
"Change in Control" shall mean any of the following:
(a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), other than the Corporation, or any of its
Subsidiaries, or any employee benefit plan or related trust of
the Corporation or any of its Subsidiaries or any Excluded
Person or Excluded Group (an "Acquiring Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of thirty-five percent (35%) or more of the
combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors; or
(b) during any period of 12 consecutive months after
the original issuance of the Series B Preferred Stock, the
individuals who at the beginning of any such 12-month period
constituted the Board of Directors of the Corporation (the
"Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that (i) any individual
becoming a director whose election, or nomination for election
by the Corporation's stockholders, was approved by a vote of the
stockholders having the right to designate such director
(including, without limitation, the exercise by the Requisite
Holders of their right to elect directors) and (ii) any director
whose election to the Board or whose nomination for election by
the stockholders of the Corporation was approved by majority
vote of the Board of Directors of the Corporation, shall, in
each such case, be considered as though such individual were a
member of the Incumbent Board, but excluding, as a member of the
Incumbent Board, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the directors of the
Corporation (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) and further excluding
any person who is an affiliate or associate (as those terms are
defined in the General Rules and Regulations under the Exchange
Act) of a Person having acquired or proposing to acquire
beneficial ownership of 25% or more of the continued voting
power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors; or
(c) the approval by the stockholders of the
Corporation of a reorganization, merger or consolidation, in
each case, with respect to which all or substantially all of the
individuals and entities who were the respective beneficial
owners of the voting securities of the Corporation immediately
prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than fifty
percent (50%) of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the Corporation resulting from such
reorganization, merger or consolidation; or
(d) the Corporation ceases to own, directly or
indirectly, one hundred percent (100%) of the capital stock of
Direct Merchants Credit Card Bank, National Association; or
(e) the sale or other disposition of all or
substantially all the assets of the Corporation in one
transaction or series of related transactions; or
(f) the occurrence of a "Change of Control" as
defined in that certain indenture (the "Indenture"), dated as of
November 7, 1997, among Metris Companies Inc., as issuer, the
guarantors named therein and The First National Bank of Chicago,
as Trustee, pursuant to which the Corporation is obligated to
make an Offer to Purchase the securities governed thereby, so
long as such Indenture remains in effect; or
(g) the occurrence of a "Change of Control" as
defined in the Fingerhut Agreements (as defined in the
Securities Purchase Agreement) which has not been waived, so
long as such Fingerhut Agreements remain in effect;
provided that the occurrence of any event identified in
subparagraphs (a) through (g) above that would otherwise be
treated as a Change in Control shall not constitute a Change in
Control hereunder if (i) the Board of Directors of the
Corporation, by vote duly taken, and (ii) the holders of a
majority of the outstanding shares of Series B Preferred Stock,
by written consent, shall so determine.
"Closing Price" per share of Common Stock on any date shall
be the last sale price, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, in
either case as reported on the Nasdaq National Market or in the
principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York
Stock Exchange or American Stock Exchange, as the case may be,
or, if the Common Stock is listed or admitted to trading on the
New York Stock Exchange or American Stock Exchange, or, if the
Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or such other system then in use, or, if on
any such date the Common Stock is not quoted by any such
organization, the average of the Closing bid and asked prices as
furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors and reasonably
acceptable to the Requisite Holders.
"Common Liquidation Equivalent" shall have the meaning set
forth in Section 8.
"Consolidated Indebtedness" means, with respect to any
person as of any date of determination, the sum, without
duplication, of (i) the total amount of Indebtedness of such
person and its Subsidiaries, plus (ii) the total amount of
Indebtedness of any other person, to the extent that such
Indebtedness has been Guaranteed by the referent person or one
or more of its Subsidiaries, plus (iii) the aggregate
liquidation value of all Disqualified Stock of such person and
all preferred stock of Subsidiaries of such person (other than,
in the case of the Corporation, preferred stock of a Subsidiary
of the Corporation held by the Corporation or a Guarantor), in
each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Leverage Ratio" means, with respect to any
person, as of any date of determination, the ratio of (i) the
Consolidated Indebtedness of such person as of such date
excluding, however, all Hedging Obligations that constitute
Permitted Debt to (ii) the Consolidated Net Worth of such person
as of such date.
"Consolidated Net Worth" shall mean, as at any date of
determination, the consolidated stockholders' equity of the
Corporation and its Subsidiaries, as determined on a
consolidated basis in conformity with GAAP consistently applied,
which consolidated stockholders' equity shall include the Series
B Preferred Stock.
"Consolidated Tangible Net Worth" shall mean, as at any
date of determination, Consolidated Net Worth less (to the
extent reflected in determining Consolidated Net Worth) the sum
of (without duplication) (a) all write-ups subsequent to March
31, 1998 in the book value of any asset by the Corporation or
any of its Subsidiaries, (b) all investments in persons that are
not consolidated Subsidiaries and (c) all unamortized debt
discount and expense (other than unamortized fees), unamortized
deferred charges (except to the extent offset by deferred
income), goodwill, patents, trademarks, service marks, trade
names, anticipated future benefit of tax loss carry-forwards,
copyrights, organization or developmental expenses and other
intangible assets.
"Credit Agreement" shall mean the Amended and Restated
Credit Agreement, dated as of June 30, 1998, among Metris
Companies Inc., the Lenders named therein and certain agents and
co-agents named therein, including the Chase Manhattan Bank, as
Administrative Agent, together with the related documents
thereto (including, without limitation, any Guaranty Agreements
and security documents), in each case as such Agreements may be
amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing
or otherwise restructuring, in whole or in part, all or any
portion of the Indebtedness under such Agreement or any
successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders and whether in the
form of a Revolving Credit Facility or a Term Loan Facility or
any combination thereof.
"Cumulative Securitization Gains" shall mean cumulative
gains on securitization transactions to the extent such gains
exceed cumulative related fees, to the extent the foregoing are
first reflected on a consolidated balance sheet of the
Corporation and its Subsidiaries on or after March 31, 1998, as
determined on a consolidated basis in conformity with GAAP
consistently applied to the extent applicable.
"Current Market Price" per share of Common Stock on any
date shall be the average of the Closing Prices of a share of
Common Stock for the five consecutive Trading Days commencing
not more than 20 Trading Days before, and ending not later than,
the earlier of the date in question. If on any such Trading Day
the Common Stock is not quoted by any organization referred to
in the definition of Closing Price, the fair value of the Common
Stock on such day, as reasonably determined in good faith by the
Board of Directors of the Corporation, shall be used.
"Designated Debt" shall mean, as at any date, all
obligations of the Corporation and its consolidated Subsidiaries
which are (or as of such date, should be) accounted for as
indebtedness on a consolidated balance sheet of the Corporation
in conformity with GAAP consistently applied whether such
obligations are classified as long-term or short-term under GAAP
consistently applied.
"Disqualified Stock" means any Capital Stock that, either
(A) by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to December 31, 2006 or (B) is
designated by the Corporation (in a Board Resolution of the
Corporation delivered to the Trustee) as Disqualified Stock.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Excluded Group" means a "group" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) that includes one
or more Excluded Persons; provided that the voting securities
of the Corporation "beneficially owned" (as such term is used in
Rule 13d-3 promulgated under the Exchange Act) by such Excluded
Persons represents a majority of the voting securities
"beneficially owned" (as such term is used in Rule 13d-3
promulgated under the Exchange Act) by such group.
"Excluded Person" means Thomas H. Lee Equity Fund IV, L.P.
and any affiliate (as defined in the Exchange Act) thereof.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of
the accounting profession, which are in effect on December 9,
1998 and consistently applied.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any person,
the obligations of such person under (i) interest rate or
currency swap agreements, interest rate cap agreements and
interest rate or currency collar agreements and related
agreements and (ii) other agreements or arrangements designed to
protect such person against fluctuations in interest rates,
currencies and commodities in the ordinary course of business.
"Indebtedness" means, with respect to any person, any
indebtedness of such person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any
such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness
(other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such person
prepared in accordance with GAAP, as well as all indebtedness of
others secured by a lien (except liens on receivables and other
assets (including spread accounts relating to a Securitization)
incurred in connection with a Securitization) on any asset of
such person (whether or not such indebtedness is assumed by such
person and the value thereof being the lesser of the amount of
such indebtedness so secured and the fair market value of such
asset that has a lien placed upon it) and, to the extent not
otherwise included, the Guarantee by such person of any
indebtedness of any other person. Notwithstanding the
foregoing, the term "Indebtedness" shall not include (i)
obligations pursuant to representations, warranties, covenants
and indemnities or payments to owners of beneficial interests in
receivables, in each case in connection with a Securitization,
(ii) deposit liabilities of any Subsidiary of the Corporation,
the deposits of which are insured by the Federal Deposit
Insurance Corporation or any successor thereto or (iii)
guarantees related to the fulfillment of the Corporation's
obligations to bank card associations in the ordinary course of
business. The amount of any Indebtedness outstanding as of any
date shall be (i) the accreted value thereof, in the case of any
Indebtedness that does not require current payments of interest,
and (ii) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case
of any other Indebtedness.
"Junior Stock" means any stock of the Corporation ranking
junior to the Series B Preferred Stock with respect to the
payment of dividends and the distribution of assets, whether
upon liquidation or otherwise.
"Leverage Ratio" shall mean, at any time, the ratio of (a)
Designated Debt of the Corporation at such time to (b)
Consolidated Tangible Net Worth (excluding Cumulative
Securitization Gains) at such time.
"Liquidation Preference" shall mean an amount per share of
Series B Preferred Stock equal to the greater of (i) the Common
Liquidation Equivalent, and (ii) the Preferred Liquidation
Amount.
"Permitted Refinancing Indebtedness" means any Indebtedness
or Disqualified Stock of the Corporation or any of its
Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease,
redeem or refund other Indebtedness or Disqualified Stock of the
Corporation or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal
amount (or accreted value, if applicable) or liquidation value
of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable) or
liquidation value, plus accrued interest or dividends on, the
Indebtedness so extended, refinanced, renewed, replaced,
defeased, redeemed or refunded (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date or redemption
date, as the case may be, later than the final maturity date or
redemption date, as the case may be, of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased, redeemed or refunded;
and (iii) such Indebtedness or Disqualified Stock is incurred or
issued, as the case may be, either by the Corporation or by the
Subsidiary who is the obligor or issuer, as the case may be, on
the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased, redeemed or refunded.
"Person" shall mean an individual, partnership,
corporation, limited liability company or partnership,
unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof, or other
entity of any kind.
"Preferred Liquidation Amount" per share of Series B
Preferred Stock shall be an amount equal to $372.50 plus all
Accrued Dividends thereon to the date of determination.
"Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, dated as of November 13, 1998, by
and between the Corporation and the Initial Purchasers of the
Series B Preferred Stock.
"Securitization" means any transaction or series of
transactions that have been or may be entered into by the
Corporation or any of its Subsidiaries in connection with or
reasonably related to a transaction or series of transactions in
which the Corporation or any of its Subsidiaries may sell,
convey or otherwise transfer, directly or indirectly, to any
person, or may grant a security interest in, any receivables or
any interests in such receivables (whether such Receivables are
then existing or arising in the future) and any assets related
thereto including, without limitation, all security interests in
any collateral relating thereto, the proceeds of such
receivables, and other assets which are customarily sold or in
respect of which security interests are customarily granted in
connection with securitization transactions involving such
assets.
"Set Apart for Payment" shall mean the Corporation shall
have deposited with a bank or trust company doing business in
the Borough of Manhattan, the City of New York, and having a
capital and surplus of at least $1,000,000,000 in trust for the
exclusive benefit of the holders of shares of Series B Preferred
Stock, funds sufficient to satisfy the Corporation's payment
obligation.
"Subsidiary" of any Person means any corporation or other
entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or
indirectly, by such Person.
"Surviving Person" shall mean the continuing or surviving
Person of a merger, consolidation or other corporate
combination, the Person receiving a transfer of all or a
substantial part of the properties and assets of the
Corporation, or the Person consolidating with or merging into
the Corporation in a merger, consolidation or other corporate
combination in which the Corporation is the continuing or
surviving Person, but in connection with which the Series B
Preferred Stock or Common Stock of the Corporation is exchanged,
converted or reinstated into the securities of any other Person
or cash or any other property; provided, however, if such
Surviving Person is a direct or indirect Subsidiary of a Person,
the parent entity also shall be deemed to be a Surviving Person.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is quoted, listed
or admitted to trading is open for the transaction of business
or, if the Common Stock is not quoted, listed or admitted to
trading on any national securities exchange (including the
Nasdaq Stock Market), any day other than a Saturday, Sunday, or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Trading Price" per share of Common Stock on any date shall
be the lowest sales price for the Common Stock reported on the
Nasdaq Stock Market (or if the Common Stock is not then quoted
thereon, then for the principal national securities exchange on
which the Common Stock is listed or admitted to trading) or, if
the Common Stock is not quoted on the Nasdaq Stock Market and is
not listed or admitted to trading on any national securities
exchange, in the over-the-counter market, as reported by NASDAQ
or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, as
furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors of the Company
and reasonably acceptable to the Requisite Holders.
"Unsecured Indebtedness" means general unsecured
Indebtedness other than (i) Indebtedness outstanding on the date
immediately preceding the Change in Control giving rise to the
Change in Control Triggering Event but excluding any
Indebtedness incurred in connection with or in contemplation of
such Change in Control, and any unsecured Permitted Refinancing
Indebtedness which is on terms substantially equivalent to the
Indebtedness being refinanced or replaced, the proceeds of which
are used to refinance or replace such previously outstanding
Indebtedness and (ii) Indebtedness represented by bank deposit
accounts at Direct Merchants Credit Card Bank, National
Association.
"Voting Stock" means the outstanding shares of capital
stock of the Corporation entitled to vote generally in the
election of directors.
"Weighted Average Life to Maturity" means, when applied to
any Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
Section 10. Rank.
The Series B Preferred Stock shall rank, with respect to
dividend rights and rights upon liquidation, winding up and
dissolution, prior to all classes and series of the
Corporation's preferred stock authorized or outstanding on the
date of initial issuance of the Series B Preferred Stock.
Section 11. Article IV, Section 5.
The provisions of Article IV, Section 5 of the Certificate
of Incorporation shall not apply to the Series B Preferred
Stock.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Designation of Series B Perpetual Preferred Stock to be duly
executed by its President and attested to by its Secretary and
has caused its corporate seal to be affixed hereto, this 8th
day of December, 1998.
METRIS COMPANIES INC.
By:/s/ Ronald N. Zebeck
President
ATTEST:
By:/s/ Z. Jill Barclift
Secretary
CERTIFICATE OF DESIGNATION
of
SERIES C PERPETUAL
CONVERTIBLE PREFERRED STOCK
of
METRIS COMPANIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Metris Companies Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority
contained in its Certificate of Incorporation, as amended, and in
accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors
(the "Board of Directors") has adopted the following resolution
creating a series of its Preferred Stock, par value $.01 per
share, designated as Series C Perpetual Convertible Preferred
Stock:
RESOLVED, that a series of authorized Preferred Stock, par
value $.01 per share, of the Corporation be hereby created, and
that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series C
Perpetual Convertible Preferred Stock" (the "Series C Preferred
Stock") and the number of shares constituting such series shall
be 2,000,000 shares of Series C Preferred Stock. Section 10
below contains the definitions of certain defined terms used
herein.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series C Preferred Stock,
in preference to the holders of shares of the Series A Junior
Participating Preferred Stock, Common Stock, Non-Voting Stock and
of any other capital stock of the Corporation ranking junior to
the Series C Preferred Stock as to payment of dividends, shall be
entitled to receive on the last day of each calendar quarter,
cumulative dividends on the Series C Preferred Stock accruing on
a daily basis (computed on the basis of a 360-day year of twelve
30-day months) at the rate per annum equal to the Dividend Rate
(as defined herein) per share of Series C Preferred Stock
calculated as a percentage of $372.50, compounded quarterly, from
and including December 9, 1998 until the redemption or conversion
of the Series C Preferred Stock. Such dividends shall be paid in
kind as herein provided, except as otherwise provided in this
Section 1(a) or in Sections 5 and 7 hereof, and will be paid
whether or not they have been declared and whether or not there
are profits, surplus or other funds of the Corporation legally
available for the payment of dividends. Dividends on the Series
C Preferred Stock shall be paid in additional shares of Series C
Preferred Stock valued at $372.50 per share; provided that with
respect to periods following a Change in Control Triggering
Event, dividends shall be paid quarterly in cash. For purposes
hereof, except as otherwise provided in Section 5(b) or 5(c), the
"Dividend Rate" shall mean (i) 9% per annum from the date of
initial issuance of the Series C Preferred Stock until the
occurrence of a Change in Control Triggering Event or December 9,
2008, (ii) 11.5% following a Change in Control Triggering Event
and prior to December 9, 2008, and (iii) 15% per annum from and
after December 9, 2008, regardless of whether a Change in Control
Triggering Event has occurred. Notwithstanding the foregoing, if
the Board of Directors determines in good faith for legal, tax or
regulatory reasons or other good reason that it is inappropriate
or inadvisable to pay one or more dividends in kind as described
above, the Board of Directors of the Corporation, by a vote of
80% of the members of the Board of Directors (which 80% must
include a majority of the directors elected by the holders of
Series C Preferred Stock, if there are any such directors so
elected), may determine to pay such dividend in cash, debt
securities, convertible securities or other securities or
property of the Corporation or any combination thereof so long
as, in the reasonable opinion of the Board of Directors, such
dividends, at the time of declaration, shall be substantially
economically equivalent to the in kind dividend that would have
been declared; provided; however, that if there are no directors
elected or designated by the holders of Series C Preferred Stock,
no such determination to pay dividends other than in kind shall
be permitted without the affirmative consent of the holders of a
majority of the Series C Preferred Stock then outstanding. In
making such determination, the Board may rely upon the advice or
report of independent legal and financial advisors or other
experts.
(b) In case the Corporation or any Subsidiary of the
Corporation shall at any time or from time to time declare,
order, pay or make a dividend or other distribution (including,
without limitation, any distribution of stock or other securities
or property or rights or warrants to subscribe for securities of
the Corporation or any of its Subsidiaries by way of dividend or
spin off) on the Common Stock or Non-Voting Stock, other than any
dividend or distribution of shares of Common Stock or Non-Voting
Stock covered by paragraph (b)(i) of Section 8 hereof and other
than a redemption of rights to purchase Series A Junior
Participating Preferred Stock for a redemption amount not greater
than $.01 per right attached to each share of Common Stock, then,
and in each such case (a "Triggering Distribution"), the holders
of shares of Series C Preferred Stock shall be entitled to
receive from the Corporation, with respect to each share of
Series C Preferred Stock held, in addition to the dividends
payable under paragraph (a) of this Section 2, the same dividend
or distribution received by a holder of the number of shares of
Common Stock or Non-Voting Stock into which such share of Series
C Preferred Stock is convertible on the record date for such
dividend or distribution. Any such dividend or distribution
shall be declared, ordered, paid or made on the Series C
Preferred Stock at the same time such dividend or distribution is
declared, ordered, paid or made on the Common Stock or Non-Voting
Stock and shall be in addition to any dividends payable under
paragraph (a) of this Section 2.
Section 3. Voting Rights.
In addition to any voting rights provided elsewhere herein,
and any voting rights provided by law, the holders of shares of
Series C Preferred Stock shall have the following voting rights:
(a) So long as the Series C Preferred Stock is
outstanding, each share of Series C Preferred Stock shall entitle
the holder thereof to vote on all matters voted on by holders of
the capital stock of the Corporation into which such share of
Series C Preferred Stock is convertible, voting together as a
single class with the other shares entitled to vote, at all
meetings of the stockholders of the Corporation, except that with
respect to the election of directors of the Corporation, holders
of the Series C Preferred Stock shall have only those voting
rights specified in paragraphs (c) and (d) hereof. With respect
to any such vote, each share of Series C Preferred Stock shall
entitle the holder thereof to cast the number of votes equal to
the number of votes which could be cast in such vote by a holder
of the shares of capital stock of the Corporation into which such
share of Series C Preferred Stock is convertible on the record
date for such vote or, if no such record date is established, on
the date any written consent of stockholders is solicited;
provided, however, that if such vote relates to a Change in
Control, the liquidation, dissolution or winding up of the
Corporation or any other matter which, if approved would entitle
the holder thereof to receive on an accelerated basis any
additional shares of Series C Preferred Stock, then the number of
votes such holder shall be entitled to cast shall be the number
of votes equal to the number of votes which could be cast in such
vote by a holder of shares of capital stock of the Corporation
into which such share of Series C Preferred Stock (and any
Series C Preferred Stock that would be so received on an
accelerated basis) would be convertible (or, in the event of a
Change in Control or liquidation, dissolution or winding up, the
number of shares of Common Stock that would be used to determine
the Liquidation Preference pursuant to clause (i)(A) of the
definition thereof if such Change in Control or liquidation,
dissolution or winding up were to occur).
(b) So long as any shares of Series C Preferred Stock
shall be outstanding and unless the consent or approval of a
greater number of shares shall then be required by law, without
first obtaining the consent or approval of the Requisite Holders
(as defined below), voting as a single class, given in person or
by proxy at a meeting at which the holders of such shares shall
be entitled to vote separately as a class, or by written consent,
the Corporation shall not: (i) authorize, create or issue any
class or series, or any shares of any class or series, of stock
having any preference or priority as to voting, dividends or upon
redemption, liquidation, dissolution, or winding up over the
Series C Preferred Stock ("Senior Stock"); (ii) authorize, create
or issue any class or series, or any shares of any class or
series, of stock ranking on a parity as to voting, dividends or
upon redemption, liquidation, dissolution or winding up with the
Series C Preferred Stock ("Parity Stock"); (iii) reclassify any
shares of stock of the Corporation into shares of Senior Stock or
Parity Stock; (iv) authorize any security exchangeable for,
convertible into, or evidencing the right to purchase any shares
of Senior Stock or Parity Stock; (v) alter or change the rights,
preferences or privileges of the Series C Preferred Stock; (vi)
increase or decrease the authorized number of shares of Series C
Preferred Stock or issue shares of Series C Preferred Stock other
than to holders of Series C Preferred Stock pursuant to its
terms; or (vii) amend or waive any provision of the Corporation's
Certification of Incorporation or bylaws in a manner adverse in
any material respect to the holders of Series C Preferred Stock;
provided, however, that nothing herein shall prohibit the Company
from distributing rights pursuant to the terms of that certain
Rights Agreement, dated as of September 10, 1998 between the
Company and Norwest Bank Minnesota, National Association, as
Rights Agent, as such Agreement is in effect on the Closing Date
of the Securities Purchase Agreement or pursuant to a similar
rights plan approved by the Board of Directors of the
Corporation. For purposes hereof, the "Requisite Holders" shall
mean the holders of a majority of the then-outstanding shares of
Series C Preferred Stock.
(c) So long as the initial purchasers of Series C
Preferred Stock or their Affiliates own at least 25% of the
shares of Series C Preferred Stock purchased by them under the
Securities Purchase Agreement or shares of Common Stock issued
upon conversion thereof, then the size of the Company's Board of
Directors shall be set at eleven (11) and the Requisite Holders
shall be entitled to elect four (4) directors. So long as the
initial purchasers of the Series C Preferred Stock or their
Affiliates own less than 25% of the shares but at least 10% of
the shares of Series C Preferred Stock purchased by them under
the Securities Purchase Agreement or the shares of Common Stock
issuable upon conversion thereof, then the Requisite Holders
shall be entitled to elect one (1) director. At such time as the
initial purchasers of the Series C Preferred Stock or their
Affiliates own less than 10% of the shares of Series C Preferred
Stock purchased by them under the Securities Purchase Agreement
or the shares of Common Stock issuable upon conversion thereof,
then the right of the Requisite Holders to elect directors under
this Section 3(c) shall terminate, except as provided below. So
long as it shall own any shares of Series C Preferred Stock or
any shares of Common Stock issued upon conversion thereof, and
the holders of Preferred Shares shall be entitled to elect at
least four directors, Thomas H. Lee Equity Fund IV, L.P. ("Fund
IV") shall have the right to appoint one (1) of the four
directors. If Fund IV does not exercise such right, the
Requisite Holders shall be entitled to elect all four directors.
In the event that within 90 days of the Exchange Date (as defined
in the certain Securities Purchase Agreement), the initial
purchasers thereunder sell or transfer Series C Preferred Stock
with an original aggregate Conversion Value equal to or greater
than $25 million to an unaffiliated person or group, then such
original purchasers and such unaffiliated person or group shall
be treated as though they were the original purchasers under the
Securities Purchase Agreement of that number of shares of Series
C Preferred Stock owned by them immediately following such sale
and, if consented to by the Requisite Holders at the time of such
transfer, for so long as such person or group owns Series C
Preferred Stock with an aggregate Conversion Value equal to or
greater than $10 million then such person or group shall be
entitled to designate one of the directors elected by the Series
C Preferred Stock during any period the Series C Preferred Stock
is entitled to elect four or more directors. In the event of a
default under the Corporation's principal credit facility or any
other instrument or instruments governing more than $20,000,000
of indebtedness of the Corporation or its Subsidiaries, which
default, with the passage of time or the delivery of notice, or
both, entitles the holders of such indebtedness to accelerate the
maturity of such indebtedness and which default is not cured or
waived within sixty (60) days (a "Material Default"), the
Requisite Holders shall be entitled to elect up to a majority of
the Corporation's Board of Directors for as long as such Material
Default remains uncured or waived and for a period of six months
thereafter; provided, however, that from and after the second
Material Default the Requisite Holders shall be entitled to elect
up to a majority of the Corporation's Board of Directors
notwithstanding any cure or waiver. The Corporation shall
provide the holders of Series C Preferred Stock with prompt
notice of the Corporation becoming aware of any default which,
after the passage of time or the delivery of notice or both,
could become a Material Default. In the event of a Material
Default, the Corporation shall take whatever actions are
necessary in order to allow the Requisite Holders to elect, as
promptly as practicable, a majority of the Board of Directors as
contemplated hereby.
(d) Notwithstanding anything to the contrary contained
herein, in no event shall the Series C Preferred Stock permit a
holder or holders thereof to vote as part of a single class with
the shares of capital stock into which the Series C Preferred
Stock is convertible to the extent that such voting right would
cause such holder or holders, including any group acting for the
purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act to which
such holder belongs, to vote more than the Maximum Percentage of
the shares entitled to vote on such matter. In addition,
notwithstanding anything to the contrary set forth herein, in the
event holders of Series C Preferred Stock convert such shares
into Common Stock, and hold such Common Stock at a time when they
also have a right to elect directors, voting as a separate class,
then the number of directors which they may elect as a class
shall be reduced to that number which, when added to the
Cumulative Number of Directors (as herein defined) is less than
half of the total number of Directors. The Cumulative Number of
Directors shall mean that number of Directors, rounded up to the
nearest whole number, equal to the number of directors subject to
election by the holders of Common Stock (after giving effect to
any increase required by the immediately preceding sentence)
multiplied by a fraction, the numerator of which is the sum of
all shares of Common Stock held by holders of Series C Preferred
Stock as of the date of determination and, without duplication,
the Reserved Shares and the denominator of which is the sum of
all outstanding shares of Common Stock as of the date of
determination and, without duplication, the Reserved Shares.
"Reserved Shares" shall mean that number of shares of Common
Stock reserved as of September 25, 1998 by the Corporation for
issuance with respect to options to purchase shares of Common
Stock from the Corporation, subject to appropriate adjustment for
stock splits, stock dividends and other events giving rise to
adjustment of shares subject to such options.
(e) Except as provided in this Certificate of
Designation of Series C Preferred Stock (including, without
limitation, the right to vote with the Common Stock on all
matters submitted to a vote of stockholders of the Corporation as
set forth in paragraphs (a) and (b) of this Section 3, subject to
the limitation contained in this paragraph (e)) or as required by
law, the holders of shares of Series C Preferred Stock shall have
no voting rights and their consent shall not be required for the
taking of any corporate action.
Section 4. Certain Restrictions.
(a) Whenever the Corporation shall have not redeemed
the shares of Series C Preferred Stock within five (5) Business
Days of the date such redemption is required by Section 5 (a
"Redemption Default"), thereafter and until all redemption
payments shall have been made or all necessary funds shall have
been Set Apart for Payment, and at all times following a Change
in Control Triggering Event, if and so long as any shares of
Series C Preferred Stock remain outstanding, the Corporation
shall not, nor shall it permit any of its Subsidiaries to: (A)
declare or pay dividends, or make any other distributions, on any
shares of Common Stock or Non-Voting Stock or other capital stock
of the Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred
Stock, other than dividends or distribution payable in Junior
Stock; (B) declare or pay dividends, or make any other
distributions, on any shares of Parity Stock, other than
dividends or distributions payable in Junior Stock, except
dividends paid ratably on the Series C Preferred Stock and all
Parity Stock on which dividends are payable or in arrears, in
proportion to the total amounts to which the holders of all such
shares are then entitled; (C) redeem or purchase or otherwise
acquire for consideration (other than Junior Stock) any shares of
Junior Stock or Parity Stock (other than, with respect to Parity
Stock, ratably with the Series C Preferred Stock); or (D)
purchase or otherwise acquire for consideration any shares of
Series C Preferred Stock, other than purchases ratably among all
holders of the Series C Preferred Stock.
(b) The Corporation shall not permit any Subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation
unless the Corporation could, pursuant to paragraph (a) of this
Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Redemption.
(a) Except as provided in this Section 5(a), the
Corporation shall have no right to redeem any shares of Series C
Preferred Stock. If at any time after December 31, 2001, both
(i) the average Trading Price per share of Common Stock equals or
exceeds $64.00 (appropriately adjusted to reflect the occurrence
of any event described in subparagraph (i) of paragraph (b) of
Section 8) for the twenty Trading Days immediately preceding the
date of determination and (ii) the Corporation's unsecured debt
securities shall have ratings equal to or better than Baa3 from
Moody's Investor Services and BBB- from Standard & Poor's
Corporation, then during such time as the criteria set forth as
clauses (i) and (ii) shall continue to be met, the Corporation
shall have the right, at its sole option and election, to redeem
all, but not less than all, of the outstanding shares of Series C
Preferred Stock by paying therefor in cash 103% of (x) $372.50
per share, plus (y) all Accrued Dividends thereon to the date of
redemption. In addition, from and after December 9, 2008, the
Corporation shall have the right, at its sole option and
election, to redeem all, but not less than all, of the
outstanding shares of Series C Preferred Stock by paying therefor
in cash (x) $372.50 per share, plus (y) all Accrued Dividends
thereon to the date of redemption. Notwithstanding the foregoing
requirement that any such redemption shall be for all, but not
less than all, shares of Series C Preferred Stock, if any such
redemption of less than all of the outstanding shares of Series C
Preferred Stock would not result in the Redemption Price being
treated as a dividend (as opposed to a capital transaction) by
the holders of Series C Preferred Stock, then the Corporation
shall have the right to make such a redemption of less than all
of the outstanding shares of Series C Preferred Stock pro rata
from each of the holders thereof. Notwithstanding the provisions
of this Section 5(a), the Corporation shall have no right to
redeem the shares of Preferred Stock pursuant to this Section
5(a) until the Corporation shall have reserved from its
authorized and unissued Common Stock and Non-Voting Stock such
number of shares of Common Stock and Non-Voting Stock as shall be
sufficient to effect the conversion of all then outstanding
shares of Series C Preferred Stock into Common Stock or Non-
Voting Stock, as the case may be.
(b) In the event there occurs a Change in Control, the
Corporation shall have the right to offer to purchase from each
holder all, but not less than all, of the Series C Preferred
Stock held by such holder for an amount equal to 101% of the
Liquidation Preference by delivery of a notice of such offer (a
"Change in Control Redemption Offer") within five days of the
Change in Control. In the event the Corporation makes a Change
in Control Redemption Offer, each holder of Series C Preferred
Stock shall have the right (but not the obligation) to require
the Corporation to purchase all, but not less than all, of the
Series C Preferred Stock held by such holder for an amount equal
to 101% of the Liquidation Preference. In the event there occurs
a Change in Control and the Corporation does not make a Change in
Control Redemption Offer in accordance with this paragraph (a
"Change in Control Triggering Event"), then effective as of the
date of such Change in Control:
(i) Each holder of Series C Preferred Stock shall
be entitled to receive a distribution of additional shares of
Series C Preferred Stock such that the total number of shares of
Series C Preferred Stock held by such holder as of the date of
the Change in Control shall equal the Liquidation Preference
divided by $372.50;
(ii) Without the consent of the holders of a
majority of the outstanding shares of the Series C Preferred
Stock, the Corporation will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and the
Corporation and its Subsidiaries will not issue any Disqualified
Stock, and the Corporation will not permit any of its
Subsidiaries to issue any shares of preferred stock, provided,
however, that the Corporation and its Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock or the Corporation's Subsidiaries may issue
shares of preferred stock if the Consolidated Leverage Ratio of
the Corporation, calculated on a pro forma basis after giving
effect to the incurrence of the additional Indebtedness to be
incurred or the Disqualified Stock or preferred stock to be
issued and the application of the proceeds therefrom, would have
been less than 2 to 1. Notwithstanding this subparagraph (iv),
the Corporation may incur the following Indebtedness
(collectively, "Permitted Debt"):
A. Indebtedness of the Corporation under the
Credit Agreement and Guaranties thereof by the
Corporations's Subsidiaries in an aggregate amount
not to exceed $300 million at any time
outstanding;
B. Indebtedness of the Corporation and its
Subsidiaries existing on December 9, 1998;
C. Indebtedness of any Subsidiary of the
Corporation represented by a guaranty of
Indebtedness of the Corporation which constitutes
Permitted Debt;
D. Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are
used to refund, refinance, defease, renew or
replace, any Indebtedness (other than intercompany
Indebtedness) that was permitted to be incurred
under this subparagraph (iv);
E. Intercompany Indebtedness of the Subsidiary
of the Corporation owing to the Corporation;
provided, however, that any sale or other transfer
of any such Indebtedness to a person that is not
the Corporation shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by
such Subsidiary that was not permitted by this
clause (E);
F. The issuance by a Subsidiary of the
Corporation of preferred stock to the Corporation;
provided, however, that any subsequent transfer of
such preferred stock to a person other than the
Corporation shall be deemed to be an issuance of
preferred stock by such Subsidiary that was not
permitted by this clause (F).
G. Hedging Obligations that are incurred in the
ordinary course of business;
H. Capital Lease Obligations and/or Purchase
Money Indebtedness of the Corporation or a
Subsidiary of the Corporation incurred in the
ordinary course of business not to exceed $30.0
million at any time outstanding;
I. The guarantee by the Corporation or any of
its Subsidiaries of Indebtedness of the
Corporation or a Subsidiary of the Corporation
that was permitted to be incurred by another
provision of this clause (I);
J. Additional Indebtedness of the Corporation
and its Subsidiaries in an aggregate principal
amount (or accreted value, as applicable) at any
time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness
incurred pursuant to this clause (J), not to
exceed $10.0 million at any time outstanding.
Notwithstanding anything in this
subparagraph (iv) to the contrary, consummation of
a Securitization shall not be deemed to be the
incurrence of Indebtedness or the issuance of
Disqualified Stock or preferred stock by the
Corporation or a Subsidiary of the Corporation.
For purposes of determining compliance with this
subparagraph (iv), in the event that an item of
Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in
clauses (A) through (J) above or is entitled to be
incurred pursuant to the first paragraph of this
subparagraph (iv), the Corporation shall, in its
sole discretion, classify such item of
Indebtedness in any manner that complies with this
subparagraph (iv) and such item of Indebtedness
will be treated as having been incurred pursuant
to only one of such clauses or pursuant to the
first paragraph hereof.
(iii) Without the consent of the holders of a
majority of the outstanding shares of Series C Preferred Stock,
(i) the Corporation shall not permit the Leverage Ratio at any
time to exceed 6 to 1; and (ii) the Corporation shall not permit
the amount of Unsecured Indebtedness of the Corporation and its
subsidiaries to exceed $25,000,000 in the aggregate at any time
outstanding.
If the Corporation shall fail to comply with any one or more
of the provisions of this paragraph 5(b) or, following a Change
in Control Triggering Event, paragraph 2(a) or Section 4, then in
any such event, (i) the Dividend Rate shall be increased by 2%
per annum above the Dividend Rate which otherwise would be in
effect and (ii) at any time following the 91st day after the
maturity or payment in full of the Corporation's 10% Senior Notes
due 2004 issued pursuant to the Indenture, the holders of a
majority of the shares of Series C Preferred Stock shall be
entitled to require the Corporation to redeem all outstanding
shares of Series C Preferred Stock for an amount equal to 101% of
the Liquidation Preference.
(c) (i) Notice of any redemption of shares of Series
C Preferred Stock pursuant to paragraph (a) of this Section 5
shall be mailed at least thirty, but no more than sixty, days
prior to the date fixed for redemption to each holder of shares
of Series C Preferred Stock to be redeemed, at such holder's
address as it appears on the transfer books of the Corporation.
No redemption of shares of Series C Preferred Stock pursuant to
paragraph (c) of this Section 5 shall take place unless such
notice shall have been mailed in accordance with this
subparagraph (c)(i). In order to facilitate the redemption of
shares of Series C Preferred Stock, the Board of Directors may
fix a record date for the determination of shares of Series C
Preferred Stock to be redeemed, not more than sixty days nor less
than thirty days prior to the date fixed for such redemption.
(ii) Within 20 Business Days of an event giving a
holder of shares of Series C Preferred Stock the right, pursuant
to paragraph (b) of this Section 5, to require the Corporation to
redeem any of such shares, the Corporation shall give notice by
mail to each holder of Series C Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation,
of such event, which notice shall set forth each holder's right
to require the Corporation to redeem any or all shares of Series
C Preferred Stock held by it which are eligible for redemption
pursuant to the terms of paragraph (b) the redemption date (which
date shall be thirty (30) Business Days following the date of
such mailed notice), and the procedures to be followed by such
holder in exercising its right to cause such redemption. In the
event a record holder of shares of Series C Preferred Stock shall
elect to require the Corporation to redeem any or all such shares
of Series C Preferred Stock pursuant to paragraph (b) of this
Section 5, such holder shall deliver within twenty Business Days
of the mailing to it of the Corporation's notice described in
this subparagraph (ii), a written notice to the Corporation so
stating, specifying the number of shares to be redeemed pursuant
to paragraph (b) of this Section 5. The Corporation shall, in
accordance with the terms hereof, redeem the number of shares so
specified on the date fixed for redemption, which will be no
later than thirty Business Days following receipt by the
Corporation of a holder's election to redeem the shares of Series
C Preferred Stock. Failure of the Corporation to give any notice
required by this subparagraph (ii), or the formal insufficiency
of any such notice, shall not prejudice the rights of any holders
of shares of Series C Preferred Stock to cause the Corporation to
redeem any such shares held by them and, in the event of any such
failure or immediately after there has arisen a right on the part
of the holders of Series C Preferred Stock to compel redemption
under Section 5(b) following a Change in Control Triggering
Event, the holders of a majority of the shares of Series C
Preferred Stock outstanding shall be entitled to exercise their
right to cause the Corporation to redeem all such shares held by
delivery of written notice to such effect by such holders to the
Corporation and such shares shall be redeemed upon receipt of
such notice by the Corporation. Notwithstanding the foregoing,
the Board of Directors of the Corporation may modify any offer
pursuant to this Section 5(c)(ii) to the extent necessary to
comply with the Exchange Act and the rules and regulations
thereunder.
(iii) The Corporation shall publish the fact
that it is redeeming, or offering to redeem, shares of Series C
Preferred Stock through a nationally prominent newswire service
on the date of mailing any notice of redemption or right of
redemption. At any time after a notice of redemption shall have
been mailed and before such date of redemption the Corporation
may deposit for the benefit of the holders of the Series C
Preferred Stock called for redemption the funds necessary for
such redemption with a bank or trust company doing business in
the Borough of Manhattan, the City of New York, and having a
capital and surplus of at least $1,000,000,000. Any interest
allowed on moneys so deposited shall be paid to the Corporation.
Upon the deposit of such funds or, if no such deposit is made,
upon the date fixed for redemption (unless the Corporation shall
default in making payment of the appropriate redemption amount),
whether or not certificates for shares so called for redemption
have been surrendered for cancellation, the shares of Series C
Preferred Stock to be redeemed shall be deemed to be no longer
outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights
with respect thereto, except for the rights to receive the amount
payable upon redemption, but without interest, and, up to the
close of business on the date immediately preceding the date
fixed for such redemption, the right to convert such shares
pursuant to Section 8 hereof. Such deposit in trust shall be
irrevocable except that any funds deposited by the Corporation
which shall not be required for the redemption for which they
were deposited because of the exercise of conversion rights shall
be returned to the Corporation forthwith, and any funds deposited
by the Corporation which are unclaimed at the end of one year
from the date fixed for such redemption shall be paid over to the
Corporation upon its request, and upon such repayment the holders
of the shares of Series C Preferred Stock so called for
redemption shall look only to the Corporation for payment of the
appropriate amount. Any such unclaimed amounts paid over to the
Corporation shall, for a period of six years from the date fixed
for such redemption, be set apart and held by the corporation in
trust for the benefit of the holders of such shares of Series C
Preferred Stock, but no such holder shall be entitled to interest
thereon. At the expiration of such six-year period, all right,
title, interest and claim of such holders in or to such unclaimed
amounts shall be extinguished, terminated and discharged, and
such unclaimed amounts shall become part of the general funds of
the Corporation free of any claim of such holders. If the
Corporation shall have not redeemed the shares of Series C
Preferred Stock within five Business Days of the date such
redemption is required by this Section 5, all redemption payments
that are past due shall accrue interest at an annual rate of
fifteen percent (15%), compounded quarterly.
Section 6. Reacquired Shares.
Any shares of Series C Preferred Stock converted, redeemed,
purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the
acquisition thereof, and, if necessary to provide for the lawful
redemption or purchase of such shares, the capital represented by
such shares shall be reduced in accordance with the General
Corporation Law of the State of Delaware. All such shares shall
upon their cancellation become authorized but unissued shares of
Preferred Stock, par value $.01 per share, of the Corporation and
may be reissued as part of another series of Preferred Stock,
par value $.01 per share, of the Corporation subject to the
conditions or restrictions on authorizing, or creating or
issuing any class or series, or any shares of any class or
series, set forth in paragraph (b) of Section 3.
Section 7. Liquidation, Dissolution or Winding Up.
If the Corporation shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the Federal
bankruptcy laws or any other applicable state or Federal
bankruptcy, insolvency or similar law, or consent to the entry of
an order for relief in any involuntary case under any such law or
to the appointment of a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the
Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become
due, or if a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and any such decree or order shall be unstayed and in
effect for a period of 90 consecutive days and on account of such
event the Corporation shall liquidate, dissolve or wind up, or
upon any other liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of
shares of Junior Stock, unless prior thereto, the holders of
shares of Series C Preferred Stock shall have received in cash
the Liquidation Preference, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series C
Preferred Stock and all such Parity Stock in proportion to the
total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up of the
Corporation. For the purposes of this Section 7, the voluntary
sale, conveyance, exchange or transfer of all or substantially
all of the property or assets of the Corporation or the
consolidation or merger of the Corporation with or into one or
more other corporations shall not be deemed to be a liquidation,
winding-up or dissolution of the Corporation.
Section 8. Conversion.
Each share of Series C Preferred Stock may, at the option of
the holder thereof, be converted into shares of Common Stock or,
if applicable, Non-Voting Stock at any time, whether or not the
Corporation has given notice of redemption under Section 5, on
the terms and conditions set forth in this Section 8. In
addition, if at any time after December 9, 2005, the Trading
Price per share of Common Stock equals or exceeds $64.00
(appropriately adjusted to reflect the occurrence of any event
described in subparagraph (ii) of paragraph (b) of Section 8) for
at least twenty (20) consecutive Trading Days, then all shares of
Series C Preferred Stock shall automatically be converted into
shares of Common Stock (and rights to acquire shares of Series A
Junior Participating Preferred Stock on a basis no less favorable
than that which applies to any other shares of Common Stock) or,
if applicable, Non-Voting Stock on the terms and conditions as
set forth in this Section 8.
(a) Subject to paragraph (h) below and to the
provisions for adjustment hereinafter set forth, each share of
Series C Preferred Stock shall be convertible in the manner
hereinafter set forth into a number of fully paid and
nonassessable shares of Common Stock equal to the product
obtained by multiplying the Applicable Conversion Rate by the
number of shares of Series C Preferred Stock being converted.
The Applicable Conversion Rate shall be the quotient obtained by
dividing the Conversion Value on the date of conversion by the
applicable Conversion Price.
(b) The Conversion Price shall be subject to
adjustment from time to time as follows:
(i) In case the Corporation shall at any time or
from time to time after the original issuance of the Series C
Preferred Stock declare a dividend, or make a distribution, on
the outstanding shares of Common Stock in either case, in shares
of Common Stock, or effect a subdivision, combination,
consolidation or reclassification of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common
Stock, then, and in each such case, the Conversion Price in
effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted by multiplying
the Conversion Price by a fraction, the numerator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event and the denominator of which is
the number of shares of Common Stock outstanding immediately
after such event. An adjustment made pursuant to this clause (i)
shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the
record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y)
in the case of any such subdivision, reclassification,
consolidation or combination, at the close of business on the day
upon which such corporate action becomes effective.
(ii) In case the Corporation shall issue shares of
Common Stock (or options, rights or warrants or other securities
convertible into or exchangeable for shares of Common Stock) at a
price per share (or having an exercise or conversion price per
share) less than the Conversion Price as of the date of issuance
of such shares (or of such options, rights, warrants or other
convertible securities), other than (x) in a transaction to which
paragraph (b) of Section 2 or subparagraph (i) of this paragraph
(b) is applicable, (y) pursuant to any employee benefit plan or
program of the Corporation approved by the Requisite Holders, or
(z) pursuant to the exercise of the options, warrants or other
convertible securities set forth on Schedule 3.02 to the
Securities Purchase Agreement (the issuances under clauses (x),
(y) and (z) being referred to as "Excluded Issuances"), then, and
in each such case, the Conversion Price in effect immediately
prior to such event shall be lowered so as to be equal to an
amount determined by dividing the aggregate consideration
received by the Corporation in connection with such issuance by
the total number of shares of Common Stock so issued (or into
which the options, rights, warrants or other convertible
securities may convert). For purposes of this subparagraph, the
aggregate consideration receivable by the Corporation in
connection with the issuance of shares of Common Stock or of
options, rights, warrants or other convertible securities shall
be deemed to be equal to the sum of the gross offering price
(before deduction of underwriting discounts or commissions and
expenses payable to third parties) of all such securities plus
the minimum aggregate amount, if any, payable upon conversion of
any such options, rights, warrants or other convertible
securities into shares of Common Stock, less any original issue
discount, premiums and other similar incentives which have the
effect of reducing the effective price per share. Such
adjustment shall become effective immediately after the date of
such issuance for purposes of this clause (ii).
(iii) In addition to the foregoing adjustments
in subsections (i) and (ii) above, the Corporation will be
permitted to make such reductions in the Conversion Price as it
considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the shares of Common
Stock.
(iv) In any case in which this Section 8 shall
require that an adjustment (including by reason of the last
sentence of subsection (i) above) be made immediately following a
record date, the Corporation may elect to defer the effectiveness
of such adjustment (but in no event until a date later than the
effective time of the event giving rise to such adjustment), in
which case the Corporation shall, with respect to any share of
Series C Preferred Stock converted after such record date and on
and before such adjustment shall have become effective (i) defer
paying any cash payment pursuant to Section 8(f) hereof or
issuing to the holder of such shares of Series C Preferred Stock
the number of shares of Common Stock and other capital stock of
the Corporation (or other assets or securities) issuable upon
such conversion in excess of the number of shares of Common Stock
and other capital stock of the Corporation issuable thereupon
only on the basis of the Conversion Price prior to adjustment,
and (ii) not later than five Business Days after such adjustment
shall have become effective, pay to such holder the appropriate
cash payment pursuant to Section 8(f) hereof and issue to such
holder the additional shares of Common Stock and other capital
stock of the Corporation issuable on such conversion.
(v) No adjustment in the Conversion Price shall
be required unless such adjustment would require an increase or
decrease of at least 0.1% of the Conversion Price; provided, that
any adjustments which by reason of this subsection (v) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(c) In case of any capital reorganization or
reclassification of outstanding shares of Common Stock (other
than a reclassification covered by paragraph (b) (i) of this
Section 8), or in case of any consolidation or merger of the
Corporation with or into another corporation, or in case of any
sale or conveyance to another corporation of the property of the
Corporation as an entirety or substantially as an entirety (each
of the foregoing being referred to as a "Transaction"), each
share of Series C Preferred Stock then outstanding shall
thereafter be convertible into, in lieu of the Common Stock
issuable upon such conversion prior to the consummation of such
Transaction, the kind and amount of shares of stock and other
securities and property (including cash) receivable upon the
consummation of such transaction by a holder of that number of
shares of Common Stock into which one share of Series C Preferred
Stock was convertible immediately prior to such Transaction
(including, on a pro rata basis, the cash, securities or property
received by holders of Common Stock in any tender or exchange
offer that is a step in such Transaction). In any such case, if
necessary, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions set
forth in this Section 8 with respect to rights and interests
thereafter of the holders of shares of Series C Preferred Stock
to the end that the provisions set forth herein for the
protection of the conversion rights of the Series C Preferred
Stock shall thereafter be applicable, as nearly as reasonably may
be, to any such other shares of stock and other securities and
property deliverable upon conversion of the shares of Series C
Preferred Stock remaining outstanding (with such adjustments in
the conversion price and number of shares issuable upon
conversion and such other adjustments in the provisions hereof as
the Board of Directors shall determine to be appropriate). In
case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all
references in this Section 8 shall be deemed to apply, so far as
appropriate and as nearly as may be, to such other securities or
property.
Notwithstanding anything contained herein to the contrary,
the Corporation will not effect any Transaction unless, prior to
the consummation thereof, (i) the Surviving Person (as defined in
Section 10) thereof shall assume, by written instrument mailed to
each record holder of shares of Series C Preferred Stock, at such
holder's address as it appears on the transfer books of the
Corporation, the obligation to deliver to such holder such cash
and such securities to which, in accordance with the foregoing
provisions, such holder is entitled. Nothing contained in this
paragraph (c) shall limit the rights of holders of the Series C
Preferred Stock to convert the Series C Preferred Stock in
connection with the Transaction or to exercise their rights to
require the redemption of the Series C Preferred Stock under
Section 5(b).
(d) The holder of any shares of Series C Preferred
Stock may exercise its right to convert such shares into shares
of Common Stock by surrendering for such purpose to the
Corporation, at its principal office or at such other office or
agency maintained by the Corporation for that purpose, a
certificate or certificates representing the shares of Series C
Preferred Stock to be converted duly endorsed to the Corporation
in blank accompanied by a written notice stating that such holder
elects to convert all or a specified whole number of such shares
in accordance with the provisions of this Section 8. The
Corporation will pay any and all issue and other taxes (other
than taxes based on income) that may be payable in respect of any
issue or delivery of shares of Common Stock on conversion of
Series C Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within three Business Days after
the surrender of such certificate or certificates and the receipt
of such notice relating thereto and, if applicable, payment of
all transfer taxes (or the demonstration to the satisfaction of
the Corporation that such taxes have been paid), the Corporation
shall deliver or cause to be delivered (i) certificates
registered in the name of such holder representing the number of
validly issued, fully paid and nonassessable full shares of
Common Stock to which the holder of shares of Series C Preferred
Stock so converted shall be entitled and (ii) if less than the
full number of shares of Series C Preferred Stock evidenced by
the surrendered certificate or certificates are being converted,
a new certificate or certificates, of like tenor, for the number
of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such
conversion shall be deemed to have been made at the close of
business on the date of receipt of such notice and of such
surrender of the certificate or certificates representing the
shares of Series C Preferred Stock to be converted so that the
rights of the holder thereof as to the shares being converted
shall cease except for the right to receive shares of Common
Stock and any declared but unpaid dividends in accordance
herewith, and the person entitled to receive the shares of Common
Stock shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time.
(e) Shares of Series C Preferred Stock may be
converted at any time and, if subject to mandatory redemption, up
to the close of business on the last Business Day immediately
preceding the date fixed for such mandatory redemption of such
shares.
(f) In connection with the conversion of any shares of
Series C Preferred Stock, no fractions of shares of Common Stock
shall be issued, but in lieu thereof the Corporation shall pay a
cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the
Current Market Price per share of Common Stock on the day on
which such shares of Series C Preferred Stock are deemed to have
been converted.
(g) In case at any time or from time to time the
Corporation shall pay any dividend or make any other distribution
to the holders of its Common Stock, or shall offer for
subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of
the Common Stock of the Corporation or consolidation or merger of
the Corporation with or into another corporation, or any sale or
conveyance to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, or
there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, then, in any one or
more of said cases the Corporation shall give at least 20 days'
prior written notice (the time of mailing of such notice shall be
deemed to be the time of giving thereof) to the registered
holders of the Series C Preferred Stock at the addresses of each
as shown on the books of the Corporation of the date on which (i)
the books of the corporation shall close or a record shall be
taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which paragraph
(c) applies the Corporation shall give at lest 30 days' prior
written notice as aforesaid. Such notice shall also specify the
date as of which the holders of the Common Stock and of the
Series C Preferred Stock of record shall participate in said
dividend, distribution or subscription rights or shall be
entitled to exchange their Common Stock or Series C Preferred
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or
conveyance, or participate in such dissolution, liquidation or
winding up, as the case may be.
(h) Notwithstanding any other provision contained in this
Section (8) to the contrary, no shares of Series C Preferred
Stock may be converted by a holder thereof into Common Stock
unless, after giving effect to such conversion, such holder,
including any group acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act to which such holder belongs, shall not
beneficially own (determined pursuant to Rule 13d-3 and 13d-5
under the Exchange Act, except that such holder and any such
group shall be deemed to beneficially own all shares that such
holder or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise) a number of shares of
Common Stock which represents greater than the Maximum Percentage
of the voting power represented by the shares of the Corporation
entitled to vote with the Common Stock at all meetings of the
stockholders of the Corporation. In the event any shares of
Series C Preferred Stock are at any time unable to be converted
into shares of Common Stock pursuant to the restriction contained
in this paragraph (h), then such shares of Series C Preferred
Stock shall be convertible instead into that number of shares of
Non-Voting Stock (as defined herein) as shall equal the number of
shares of Common Stock that such Series C Preferred Stock would
have been convertible if not for the restrictions contained in
this paragraph (h).
Section 9. Reports as to Adjustments.
Whenever the number of shares of Common Stock into which
each share of Series C Preferred Stock is convertible (or the
number of votes to which each share of Series C Preferred Stock
is entitled) is adjusted as provided in Section 8 hereof, the
Corporation shall promptly mail to the holders of record of the
outstanding shares of Series C Preferred Stock at their
respective addresses as the same shall appear in the
Corporation's stock records a notice stating that the number of
shares of Common Stock into which the shares of Series C
Preferred Stock are convertible has been adjusted and setting
forth the new number of shares of Common Stock (or describing the
new stock, securities, cash or other property) into which each
share of Series C Preferred Stock is convertible, as a result of
such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof, and when such adjustment
became effective.
Section 10. Definitions.
For the purposes of the Certificate of Designation of Series
C Perpetual Convertible Preferred Stock which embodies this
resolution:
"Accrued Dividends" to a particular date (the "Applicable
Date") means (i) all dividends accrued but not paid on the
Series C Preferred Stock pursuant to paragraph (a) of Section 2,
whether or not declared, accrued to the Applicable Date, plus
(ii) all dividends or distributions payable pursuant to paragraph
(b) of Section 2 for which the Triggering Distribution was
declared, ordered, paid or made on or prior to the Applicable
Date.
"Acquired Debt" means, with respect to any specified person,
(i) Indebtedness of any other person existing at the time such
other person is merged with or into or became a Subsidiary of
such specified person, including, without limitation,
Indebtedness incurred in connection with, or in contemplation of,
such other person merging with or into or becoming a Subsidiary
of such specified person, and (ii) Indebtedness secured by a lien
encumbering any asset acquired by such specified person.
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated by the Securities and Exchange Commission under the
Exchange Act.
"Approval Date" shall have the meaning ascribed thereto in
the Securities Purchase Agreement.
"Business Day" means any day other than a Saturday, Sunday,
or a day on which commercial banks in the City of New York are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability
in respect of a capital lease that would at such time be required
to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (iii)
in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited)
and (iv) any other interest or participation that confers on a
person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing person.
"Change in Control" shall mean any of the following:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), other than the Corporation, or any of its
Subsidiaries, or any employee benefit plan or related trust of
the Corporation or any of its Subsidiaries or any Excluded Person
or Excluded Group (an "Acquiring Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of thirty-five percent (35%) or more of the
combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors; or
(b) during any period of 12 consecutive months after
December 9, 1998, the individuals who at the beginning of any
such 12-month period constituted the Board of Directors of the
Corporation (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that (i)
any individual becoming a director whose election, or nomination
for election by the Corporation's stockholders, was approved by a
vote of the stockholders having the right to designate such
director (including, without limitation, the exercise by the
Requisite Holders of their right to elect directors) and (ii) any
director whose election to the Board or whose nomination for
election by the stockholders of the Corporation was approved by
majority vote of the Board of Directors of the Corporation,
shall, in each such case, be considered as though such individual
were a member of the Incumbent Board, but excluding, as a member
of the Incumbent Board, any such individual whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Corporation (as such terms are used in Rule 14a-
11 of Regulation 14A promulgated under the Exchange Act) and
further excluding any person who is an affiliate or associate (as
those terms are defined in the General Rules and Regulations
under the Exchange Act) of an Acquiring Person having or
proposing to acquire beneficial ownership of 25% or more of the
continued voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors; or
(c) the approval by the stockholders of the
Corporation of a reorganization, merger or consolidation, in each
case, with respect to which all or substantially all of the
individuals and entities who were the respective beneficial
owners of the voting securities of the Corporation immediately
prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than fifty percent
(50%) of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors of the Corporation resulting from such reorganization,
merger or consolidation; or
(d) the Corporation ceases to own, directly or
indirectly, one hundred percent (100%) of the capital stock of
Direct Merchants Credit Card Bank, National Association; or
(e) the sale or other disposition of all or
substantially all the assets of the Corporation in one
transaction or series of related transactions; or
(f) the occurrence of a "Change of Control" as defined
in that certain indenture (the "Indenture"), dated as of
November 7, 1997, among Metris Companies Inc., as issuer, the
guarantors named therein and The First National Bank of Chicago,
as Trustee, but only if the Corporation is obligated to make an
Offer to Purchase outstanding 10% Notes governed thereby, so long
as such Indenture remains in effect; or
(g) the occurrence of a "Change of Control," as
defined in the Fingerhut Agreements (as defined in the Securities
Purchase Agreement), which has not been waived, so long as such
Fingerhut Agreements remain in effect;
provided that the occurrence of any event identified in
subparagraphs (a) through (g) above that would otherwise be
treated as a Change in Control shall not constitute a Change in
Control hereunder if (i) the Board of Directors of the
Corporation, by vote duly taken, and (ii) the holders of a
majority of the outstanding shares of Series C Preferred Stock,
by written consent, shall so determine.
Notwithstanding the foregoing, no Change in Control shall be
deemed to occur under paragraph (a) or (b) as a result of a sale
by a holder of Series C Preferred Stock to an acquiring person
that causes the Acquiring Person to own more than thirty-five
percent (35%) of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors or permits the Acquiring
Person to elect a majority of the Board of Directors which is not
approved by the Incumbent Board.
"Closing Price" per share of Common Stock on any date shall
be the last sale price, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, in
either case as reported on the Nasdaq National Market or in the
principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock
Exchange or American Stock Exchange, as the case may be, or, if
the Common Stock is listed or admitted to trading on the New York
Stock Exchange or American Stock Exchange, or, if the Common
Stock is not listed or admitted to trading on any national
securities exchange, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such
date the Common Stock is not quoted by any such organization, the
average of the Closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock
selected by the Board of Directors and reasonably acceptable to
the Requisite Holders.
"Consolidated Indebtedness" means, with respect to any
person as of any date of determination, the sum, without
duplication, of (i) the total amount of Indebtedness of such
person and its Subsidiaries, plus (ii) the total amount of
Indebtedness of any other person, to the extent that such
Indebtedness has been Guaranteed by the referent person or one or
more of its Subsidiaries, plus (iii) the aggregate liquidation
value of all Disqualified Stock of such person and all preferred
stock of Subsidiaries of such person (other than, in the case of
the Corporation, preferred stock of a Subsidiary of the
Corporation held by the Corporation or a Guarantor), in each
case, determined on a consolidated basis in accordance with GAAP.
"Consolidated Leverage Ratio" means, with respect to any
person, as of any date of determination, the ratio of (i) the
Consolidated Indebtedness of such person as of such date
excluding, however, all Hedging Obligations that constitute
Permitted Debt to (ii) the Consolidated Net Worth of such person
as of such date.
"Consolidated Net Worth" shall mean, as at any date of
determination, the consolidated stockholders' equity of the
Corporation and its Subsidiaries, as determined on a consolidated
basis in conformity with GAAP consistently applied, which
consolidated stockholders' equity shall include the Series C
Preferred Stock.
"Consolidated Tangible Net Worth" shall mean, as at any date
of determination, Consolidated Net Worth less (to the extent
reflected in determining Consolidated Net Worth) the sum of
(without duplication) (a) all write-ups subsequent to March 31,
1998 in the book value of any asset by the Corporation or any of
its Subsidiaries, (b) all investments in persons that are not
consolidated Subsidiaries and (c) all unamortized debt discount
and expense (other than unamortized fees), unamortized deferred
charges (except to the extent offset by deferred income),
goodwill, patents, trademarks, service marks, trade names,
anticipated future benefit of tax loss carry-forwards,
copyrights, organization or developmental expenses and other
intangible assets.
"Credit Agreement" shall mean the Amended and Restated
Credit Agreement, dated as of June 30, 1998, among Metris
Companies Inc., the Lenders named therein and certain agents and
co-agents named therein, including the Chase Manhattan Bank, as
Administrative Agent, together with the related documents thereto
(including, without limitation, any Guaranty Agreements and
security documents), in each case as such Agreements may be
amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing
or otherwise restructuring, in whole or in part, all or any
portion of the Indebtedness under such Agreement or any successor
or replacement agreement and whether by the same or any other
agent, lender or group of lenders and whether in the form of a
Revolving Credit Facility or a Term Loan Facility or any
combination thereof.
"Conversion Price" shall initially be $37.25 per share, as
adjusted from time to time in accordance with Section 8.
"Conversion Value" per share of Series C Preferred Stock
shall be an amount equal to $372.50 plus all Accrued Dividends
thereon to the date of conversion or redemption as the case may
be, and the Premium Amount.
"Cumulative Securitization Gains" shall mean cumulative
gains on securitization transactions to the extent such gains
exceed cumulative related fees, to the extent the foregoing are
first reflected on a consolidated balance sheet of the
Corporation and its Subsidiaries on or after March 31, 1998, as
determined on a consolidated basis in conformity with GAAP
consistently applied to the extent applicable.
"Current Market Price" per share of Common Stock on any date
shall be the average of the Closing Prices of a share of Common
Stock for the five consecutive Trading Days commencing not more
than 20 Trading Days before, and ending not later than, the
earlier of the date in question. If on any such Trading Day the
Common Stock is not quoted by any organization referred to in the
definition of Closing Price, the fair value of the Common Stock
on such day, as reasonably determined in good faith by the Board
of Directors of the Corporation, shall be used.
"Designated Debt" shall mean, as at any date, all
obligations of the Corporation and its consolidated Subsidiaries
which are (or as of such date, should be) accounted for as
indebtedness on a consolidated balance sheet of the Corporation
in conformity with GAAP consistently applied whether such
obligations are classified as long-term or short-term under GAAP
consistently applied.
"Disqualified Stock" means any Capital Stock that, either
(A) by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to December 31, 2006 or (B) is
designated by the Corporation (in a Board Resolution of the
Corporation delivered to the Trustee) as Disqualified Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Group" means a "group" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) that includes one
or more Excluded Persons; provided that the voting securities of
the Corporation "beneficially owned" (as such term is used in
Rule 13d-3 promulgated under the Exchange Act) by such Excluded
Persons represents a majority of the voting securities
"beneficially owned" (as such term is used in Rule 13d-3
promulgated under the Exchange Act) by such group.
"Excluded Person" means each of Thomas H. Lee Equity Fund
IV, L.P. and any affiliate (as defined in the Exchange Act) of
any of the foregoing.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of
the accounting profession, which are in effect on December 9,
1998 and consistently applied.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any person, the
obligations of such person under (i) interest rate or currency
swap agreements, interest rate cap agreements and interest rate
or currency collar agreements and related agreements and (ii)
other agreements or arrangements designed to protect such person
against fluctuations in interest rates, currencies and
commodities in the ordinary course of business.
"Indebtedness" means, with respect to any person, any
indebtedness of such person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property
or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters
of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of such person prepared in accordance with
GAAP, as well as all indebtedness of others secured by a lien
(except liens on receivables and other assets (including spread
accounts relating to a Securitization) incurred in connection
with a Securitization) on any asset of such person (whether or
not such indebtedness is assumed by such person and the value
thereof being the lesser of the amount of such indebtedness so
secured and the fair market value of such asset that has a lien
placed upon it) and, to the extent not otherwise included, the
Guarantee by such person of any indebtedness of any other person.
Notwithstanding the foregoing, the term "Indebtedness" shall not
include (i) obligations pursuant to representations, warranties,
covenants and indemnities or payments to owners of beneficial
interests in receivables, in each case in connection with a
Securitization, (ii) deposit liabilities of any Subsidiary of the
Corporation, the deposits of which are insured by the Federal
Deposit Insurance Corporation or any successor thereto or (iii)
guarantees related to the fulfillment of the Corporation's
obligations to bank card associations in the ordinary course of
business. The amount of any Indebtedness outstanding as of any
date shall be (i) the accreted value thereof, in the case of any
Indebtedness that does not require current payments of interest,
and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Junior Stock" means any stock of the Corporation ranking
junior to the Series C Preferred Stock with respect to the
payment of dividends and the distribution of assets, whether upon
liquidation or otherwise.
"Leverage Ratio" shall mean, at any time, the ratio of (a)
Designated Debt of the Corporation at such time to (b)
Consolidated Tangible Net Worth (excluding Cumulative
Securitization Gains) at such time.
"Liquidation Preference" shall mean an amount per share of
Series C Preferred Stock equal to the greater of (i)(A) in the
event of any liquidation or winding up of the Corporation, the
amount the holders of the Series C Preferred Stock would have
received had they converted into Common Stock immediately prior
to such liquidation or winding up and, if such liquidation or
winding up occurs prior to December 9, 2005, the amount such
holders would have received had they received the additional
dividends that would have been paid from the date of liquidation
or winding up through December 9, 2005, and such additional
shares were also converted into Common Stock immediately prior to
such liquidation or winding up and (B) in the event of
determination in connection with a Change in Control or other
redemption of shares of Series C Preferred Stock, the value of
the Series C Preferred Stock on an as converted basis, valued
with respect to each share of Common Stock or Non-Voting Stock
into which the Series C Preferred Stock is convertible at the
Current Market Price or, in connection with a Change in Control,
if greater, at the amount paid per share of Common Stock by the
Acquiring Person in the Change in Control and, if such Change in
Control or other redemption occurs prior to December 9, 2005, the
value of the Common Stock as so determined that such holders
would have received had they received the additional dividends
that would have been paid from the date of such Change in Control
or other redemption through December 9, 2005 and converted them
into shares of Common Stock pursuant to Section 8 in connection
with such Change in Control or other redemption, and (ii) the
Conversion Value.
"Maximum Percentage" shall mean (a) for a period ending on
the later to occur of (i) December 31, 2000 or (ii) the date upon
which all of the 10% Notes remain outstanding under the
Indenture, 34.9% and (b) thereafter, 100%.
"Non-Voting Stock" shall mean, if there shall be no shares
of Non-Voting Common Stock outstanding, shares of Series D Junior
Participating Preferred Stock of the Company authorized by the
Board of Directors on the date of authorization of the Series C
Preferred Stock, and, if there shall be authorized a class of Non-
Voting Common Stock of the Company, such class of Non-Voting
Common Stock. The Non-Voting Common Stock shall be automatically
convertible into shares of Common Stock to the extent that, after
such conversion, the holder thereof, together with any group
acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act to which such holder belongs, shall not beneficially
own (determined pursuant to Rule 13d-3 and 13d-5 under the
Exchange Act, except that such holder and any such group shall be
deemed to beneficially own all shares that such holder or group
has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening
of an event or otherwise) shares of Common Stock representing the
Maximum Percentage of shares of capital stock of the Corporation
entitled to vote at all meetings of the stockholders of the
Corporation. Each share of the Non-Voting Stock shall be
economically equivalent to the Common Stock and shall be entitled
to share equally in dividends and distributions paid on the
Common Stock, except that dividends or distributions of voting
securities on the Common Stock shall entitle the holders of Non-
Voting Stock to receive equivalent non-voting securities.
"Permitted Refinancing Indebtedness" means any Indebtedness
or Disqualified Stock of the Corporation or any of its
Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease, redeem or
refund other Indebtedness or Disqualified Stock of the
Corporation or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal
amount (or accreted value, if applicable) or liquidation value of
such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable) or
liquidation value, plus accrued interest or dividends on, the
Indebtedness so extended, refinanced, renewed, replaced,
defeased, redeemed or refunded (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date or redemption
date, as the case may be, later than the final maturity date or
redemption date, as the case may be, of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased, redeemed or refunded;
and (iii) such Indebtedness or Disqualified Stock is incurred or
issued, as the case may be, either by the Corporation or by the
Subsidiary who is the obligor or issuer, as the case may be, on
the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased, redeemed or refunded.
"Person" shall mean an individual, partnership, corporation,
limited liability company or partnership, unincorporated
organization, trust or joint venture, or a governmental agency or
political subdivision thereof, or other entity of any kind.
"Premium Amount" per share of Series C Preferred Stock, as
of the date of conversion or redemption of the Series C Preferred
Stock or the date of any payments on the Series C Preferred Stock
under Section 7 hereof or as of any other date on which it is
necessary to determine the number of shares of Common Stock into
which a share of Series C Preferred Stock is then convertible,
shall mean an amount calculated to provide the holder of a share
of Series C Preferred Stock, as of such date, with a gross amount
of accretion calculated at the rate of 9% on $372.50 per share of
Series C Preferred Stock, compounded quarterly, from the date of
conversion or redemption of the Series C Preferred Stock or the
date of any payments on the Series C Preferred Stock under
Section 7 hereof or the date of any other determination, as the
case may be, to and including December 9, 2005. In the event
that any Series C Preferred Stock is converted voluntarily by the
holder on or before December 31, 2003 pursuant to Section 8 and
not (i) in connection with the Corporation's election or
obligation to redeem the shares of Series C Preferred Stock under
Section 5 (a) or 5(b) or (ii) in connection with a Change in
Control or (iii) in connection with the occurrence of any of the
events described in Section 7, then the Premium Amount used in
determining the Conversion Value shall be reduced by the
percentage of the Premium Amount set forth opposite the relevant
period listed below; provided that if such optional conversion
occurs at any point within a year commencing January 1, 2000 and
ending December 31, 2003, the Premium Amount will be further
reduced so that upon application of the conversion formula set
forth in Section 8, the number of shares of Common Stock the
holder shall be entitled to receive upon such conversion shall be
that number of shares which, when added to the number of shares
of Common Stock issuable upon conversion of shares of Series C
Preferred Stock paid or accrued during such year as dividends
with respect to the shares to be converted (without giving effect
to any Premium Amount with respect to a conversion of such
dividend shares), would equal that number of shares of Common
Stock which would have been issuable upon conversion of the
shares being converted as of the first day of such year, subject
only to anti-dilution adjustments occurring after the beginning
of such year.
Conversion Date Reduction to Premium Amount
Prior to December 31, 1999 100.0%
January 1, 2000 through December 31, 2000 85.9%
January 1, 2001 through December 31, 2001 59.0%
January 1, 2002 through December 31, 2002 45.6%
January 1, 2003 through December 31, 2003 23.5%
January 1, 2004 and thereafter 0.0%
"Securities Purchase Agreement" shall mean that certain
agreement dated as of November 13, 1998, by and among the
Corporation and certain purchasers of the Series C Preferred
Stock party thereto.
"Securitization" means any transaction or series of
transactions that have been or may be entered into by the
Corporation or any of its Subsidiaries in connection with or
reasonably related to a transaction or series of transactions in
which the Corporation or any of its Subsidiaries may sell, convey
or otherwise transfer, directly or indirectly, to any person, or
may grant a security interest in, any receivables or any
interests in such receivables (whether such Receivables are then
existing or arising in the future) and any assets related thereto
including, without limitation, all security interests in any
collateral relating thereto, the proceeds of such receivables,
and other assets which are customarily sold or in respect of
which security interests are customarily granted in connection
with securitization transactions involving such assets.
"Set Apart for Payment" shall mean the Corporation shall
have deposited with a bank or trust company doing business in the
Borough of Manhattan, the City of New York, and having a capital
and surplus of at least $1,000,000,000 in trust for the exclusive
benefit of the holders of shares of Series C Preferred Stock,
funds sufficient to satisfy the Corporation's payment obligation.
"Subsidiary" of any Person means any corporation or other
entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or
indirectly, by such Person.
"Surviving Person" shall mean the continuing or surviving
Person of a merger, consolidation or other corporate combination,
the Person receiving a transfer of all or a substantial part of
the properties and assets of the Corporation, or the Person
consolidating with or merging into the Corporation in a merger,
consolidation or other corporate combination in which the
Corporation is the continuing or surviving Person, but in
connection with which the Series C Preferred Stock or Common
Stock of the Corporation is exchanged, converted or reinstated
into the securities of any other Person or cash or any other
property; provided, however, if such Surviving Person is a direct
or indirect Subsidiary of a Person, the parent entity also shall
be deemed to be a Surviving Person.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is quoted, listed
or admitted to trading is open for the transaction of business
or, if the Common Stock is not quoted, listed or admitted to
trading on any national securities exchange (including the Nasdaq
Stock Market), any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Trading Price" per share of Common Stock on any date shall
be the lowest sales price for the Common Stock reported on the
Nasdaq Stock Market (or if the Common Stock is not then quoted
thereon, then for the principal national securities exchange on
which the Common Stock is listed or admitted to trading) or, if
the Common Stock is not quoted on the Nasdaq Stock Market and is
not listed or admitted to trading on any national securities
exchange, in the over-the-counter market, as reported by NASDAQ
or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, as furnished
by a professional market maker making a market in the Common
Stock selected by the Board of Directors of the Company and
reasonably acceptable to the Requisite Holders.
"Unsecured Indebtedness" means general unsecured
Indebtedness other than (i) Indebtedness outstanding on the date
immediately preceding the Change in Control giving rise to the
Change in Control Triggering Event but excluding any Indebtedness
incurred in connection with or in contemplation of such Change in
Control, and any unsecured Permitted Refinancing Indebtedness
which is on terms substantially equivalent to the Indebtedness
being refinanced or replaced, the proceeds of which are used to
refinance or replace such previously outstanding Indebtedness and
(ii) Indebtedness represented by bank deposit accounts at Direct
Merchants Credit Card Bank, National Association.
"Voting Stock" means the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of
directors.
"Weighted Average Life to Maturity" means, when applied to
any Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
Section 11. Rank.
The Series C Preferred Stock shall rank, with respect to
dividend rights and rights upon liquidation, winding up and
dissolution, prior to all classes and series of the Corporation's
preferred stock authorized or outstanding on the date of initial
issuance of the Series C Preferred Stock and prior to all classes
of Common Stock and Non-Voting Stock.
Section 12. Article IV, Section 5.
The provisions of Article IV, Section 5 of the Certificate
of Incorporation shall not apply to the Series C Preferred Stock.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Designation of Series C Perpetual Convertible Preferred Stock
to be duly executed by its President and attested to by its
Secretary and has caused its corporate seal to be affixed hereto,
this 8th day of December, 1998.
METRIS COMPANIES INC.
By:/s/Ronald N. Zebeck
President
ATTEST:
By:/s/ Z. Jill Barclift
Secretary
CERTIFICATE OF DESIGNATION
of
SERIES D JUNIOR PARTICIPATING
CONVERTIBLE PREFERRED STOCK
of
METRIS COMPANIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Metris Companies Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority
contained in its Certificate of Incorporation, as amended, and in
accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors
(the "Board of Directors") has adopted the following resolution
creating a series of its Preferred Stock, par value $.01 per
share, designated as Series D Junior Participating Preferred
Stock:
RESOLVED, that a series of authorized Preferred Stock, par
value $.01 per share, of the Corporation be hereby created, and
that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount.
(a) The shares of such series shall be
designated, as the "Series D Junior Participating Preferred
Stock" (the "Series D Preferred Stock") and the number of shares
constituting such series shall be 100,000 shares of Series D
Preferred Stock. Section 6 below contains the definitions of
certain defined terms used herein.
(b) The Series D Preferred Stock shall be
identical in all respects to the Common Stock of the Company
except as otherwise provided in this Certificate of Designation.
Section 2. Dividends and Distributions. In case the
Corporation or any Subsidiary of the Corporation shall at any
time or from time to time declare, order, pay or make a dividend
or other distribution (including, without limitation, any
distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any
of its Subsidiaries) by way of dividend or spin off on the Common
Stock, then and in each such case, the holders of shares of
Series D Preferred Stock shall be entitled to receive from the
Corporation, with respect to each share of Series D Preferred
Stock held, the same dividend or distribution received by the
holders of Common Stock with respect to each share of Common
Stock held by them; provided, however, that if any dividend or
other distribution includes securities of the Corporation which
could entitle the holder thereof to vote on any matters acted
upon by the stockholders of the Corporation, the Corporation
shall instead distribute to the holders of Series D Preferred
Stock similar securities identical in all respects, except that
such similar securities shall not permit the holders thereof to
vote on any matters acted upon by the stockholders of the
Corporation and shall be a convertible, on the same basis as
shares of Series D Preferred Stock are convertible into shares of
Common Stock, into shares of the securities distributed or paid
to the holders of Common Stock. Any such dividend or
distribution shall be declared, ordered, paid or made on the
Series D Preferred Stock at the same time as such dividend or
distribution is declared, ordered, paid or made on the Common
Stock.
Section 3. Voting Rights. Except as required by law,
the holders of shares of Series D Preferred Stock shall have no
voting rights and their consent shall not be required for the
taking of any corporation action.
Section 4. Liquidation, Dissolution or Winding Up.
If the Corporation shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the Federal
bankruptcy laws or any other applicable state or Federal
bankruptcy, insolvency or similar law, or consent to the entry of
an order for relief in any involuntary case under any such law or
to the appointment of a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the
Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become
due, or if a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and any such decree or order shall be unstayed and in
effect for a period of 90 consecutive days and on account of such
event the Corporation shall liquidate, dissolve or wind up, or
upon any other liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of
shares of Common Stock, unless prior thereto, the holders of
shares of Series D Preferred Stock shall have received in cash
$.01 per share (the "Series D Liquidation Preference") and then,
after payment of the Series D Liquidation Preference to the
holders of Series D Preferred Stock, payments shall be made
ratably on the Series D Preferred Stock and Common Stock in
proportion to the total number of shares of Common Stock such
holders would own if all shares of Series D Preferred Stock were
converted to Common Stock and the Maximum Percentage were 100%.
For the purposes of this Section 4, the voluntary sale,
conveyance, exchange or transfer of all or substantially all of
the property or assets of the Corporation or the consolidation or
merger of the Corporation with or into one or more other
corporations shall not be deemed to be a liquidation, winding-up
or dissolution of the Corporation.
Section 5. Conversion.
(a) Each share of Series D Preferred Stock shall
automatically convert into shares of Common Stock at the time
such conversion is not prohibited by the restrictions contained
in paragraph 5(b), on the terms and conditions set forth in this
Section 5. Subject to the provisions for adjustment hereinafter
set forth, each share of Series D Preferred Stock shall be
convertible into one share of Common Stock. In case the
Corporation shall at any time or from time to time while a share
of Series D Preferred Stock is outstanding, effect a subdivision,
combination, consolidation or reclassification of the outstanding
shares of Common Stock into a greater or lesser number of shares
of Common Stock, then, and in each such case, the Corporation
shall also effect a subdivision, combination, consolidation or
reclassification of the outstanding shares of Series D Preferred
Stock into a greater or lesser number of shares of Series D
Preferred Stock in the same manner as was applied to the Common
Stock.
(b) Notwithstanding any other provision contained
in this Section 5 to the contrary, no shares of Series D
Preferred Stock may be converted into Common Stock unless, after
giving effect to such conversion, the holder thereof, including
any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act to which such holder belongs, shall not
beneficially own (determined pursuant to Rule 13d-3 and 13d-5
under the Exchange Act, except that such holder and any such
group shall be deemed to beneficially own all shares that such
holder or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise) a number of shares of
Common Stock which represents greater than the Maximum Percentage
of the voting power represented by the shares of the Corporation
entitled to vote with the Common Stock at all meetings of the
stockholders of the Corporation.
Section 6. Definitions. For purposes of the Certificate
of Designation of Series D Junior Participating Preferred Stock
which embodies this resolution:
"Indenture" means that certain indenture dated as of
November 7, 1997, among Metris Companies Inc., as Issuer, the
Guarantors named therein and the First National Bank of Chicago,
as Trustee.
"Maximum Percentage" shall mean (a) for a period ending on
the later to occur of (i) December 31, 2000 or (ii) the date upon
which the all of the 10% Senior Notes due 2004 no longer remain
outstanding under the Indenture, 34.9% and (b) thereafter, 100%.
"Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, dated as of November 13, 1998, by
and among the Corporation and certain purchasers of the
Securities referred to therein.
Section 7. Rank. The Series D Preferred Stock shall
rank, with respect to rights upon liquidation, winding up and
dissolution, prior to the Common Stock and junior to all classes
and series of the Corporation's preferred stock authorized or
outstanding on the date of the closing of the Securities Purchase
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Designation of Series D Junior Participating Convertible
Preferred Stock to be duly executed by its President and attested
to by its Secretary and has caused its corporate seal to be
affixed hereto, this 9th day of December, 1998.
METRIS COMPANIES INC.
By:/s/ Ronald N. Zebeck
President
ATTEST:
By:/s/ Z. Jill Barclift
Secretary
INDENTURE
DATED AS OF DECEMBER 9, 1998
AMONG
METRIS COMPANIES INC., AS ISSUER,
THE GUARANTORS NAMED HEREIN
AND
THE BANK OF NEW YORK, AS TRUSTEE
$100,000,000
12% SENIOR NOTES DUE 2006, SERIES A
CROSS-REFERENCE TABLE
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
Sections 310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.08, 7.10.
(b). 7.08; 7.10; 11.02
(c). N.A.
Sections 311 (a). 7.11
(b). 7.11
(c). N.A.
Sections 312 (a). 2.05
(b). 11.03
(c). 11.03
Sections 313 (a). 7.06
(b)(1) N.A.
(b)(2) 7.06
(c). 7.06; 11.02
(d). 7.06
Section 314 (a). 4.09; 4.11; 11.02
(b). N.A.
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(d). N.A.
(e). 11.05
(f). N.A.
Sections 315 (a). 7.01(b)
(b). 7.05; 11.02
(c). 7.01(a)
(d). 7.01(c)
(e). 6.11
Sections 316 (a)(last sentence) 2.09
(a)(1)(A). 6.05
(a)(1)(B). 6.04
(a)(2) N.A.
(b). 6.07
(c). 9.04
Sections 317 (a)(1) 6.08
(a)(2) 6.09
(b). 2.04
Sections 318 (a). 11.01
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be
deemed to be a part of the Indenture.
TABLE OF CONTENTS
PAGE
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions 1
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act 19
SECTION 1.03. Rules of Construction 20
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating 20
SECTION 2.02. Execution and Authentication. 21
SECTION 2.03. Registrar and Paying Agent. 22
SECTION 2.04. Paying Agent To Hold Assets in Trust. 22
SECTION 2.05. Holder Lists. 23
SECTION 2.06. Transfer and Exchange 23
SECTION 2.07. Replacement Securities. 25
SECTION 2.08. Outstanding Securities. 25
SECTION 2.09. Treasury Securities 25
SECTION 2.10. Temporary Securities. 26
SECTION 2.11. Cancellation. 26
SECTION 2.12. Defaulted Interest. 26
SECTION 2.13. CUSIP Number. 27
SECTION 2.14. Deposit of Moneys 27
SECTION 2.15. Book-Entry Provisions for Global Securities 27
SECTION 2.16. Registration of Transfers and Exchanges 28
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. 32
SECTION 3.02. Selection of Securities To Be Redeemed. 32
SECTION 3.03. Notice of Redemption. 33
SECTION 3.04. Effect of Notice of Redemption. 33
SECTION 3.05. Deposit of Redemption Price 33
SECTION 3.06. Securities Redeemed in Part 34
PAGE
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities 34
SECTION 4.02. Maintenance of Office or Agency 34
SECTION 4.03. Limitation on Transactions with Affiliates. 35
SECTION 4.04. Limitation on Indebtedness. 35
SECTION 4.05. Payments for Consents 37
SECTION 4.06. Limitation on Investment Company Status 37
SECTION 4.07. Limitation on Asset Sales 38
SECTION 4.08. Limitation on Restricted Payments 39
SECTION 4.09. Notice of Defaults. 42
SECTION 4.10. Observance of Limitation on Liens 42
SECTION 4.11. Reports 42
SECTION 4.12. Limitations on Dividend and Other Payment
Restrictions Affecting Subsidiaries 43
SECTION 4.13. Additional Subsidiary Guarantees. 43
SECTION 4.14. Offer to Purchase upon Change of Control. 43
SECTION 4.15. Compliance Certificate. 44
SECTION 4.16. Corporate Existence 45
SECTION 4.17. Use of Proceeds 45
SECTION 4.18 Redemption of Other Securities 45
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc. 46
SECTION 5.02. Successor Corporation Substituted 47
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default 47
SECTION 6.02. Acceleration. 49
SECTION 6.03. Other Remedies. 50
SECTION 6.04. Waiver of Past Default. 50
SECTION 6.05. Control by Majority 51
SECTION 6.06. Limitation on Suits 51
SECTION 6.07. Rights of Holders To Receive Payment. 52
SECTION 6.08. Collection Suit by Trustee. 52
SECTION 6.09. Trustee May File Proofs of Claim. 53
SECTION 6.10. Priorities. 53
SECTION 6.11. Undertaking for Costs 53
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee 54
SECTION 7.02. Rights of Trustee 55
SECTION 7.03. Individual Rights of Trustee. 56
SECTION 7.04. Trustee's Disclaimer. 56
SECTION 7.05. Notice of Defaults. 57
SECTION 7.06. Reports by Trustee to Holders 57
SECTION 7.07. Compensation and Indemnity. 57
SECTION 7.08. Replacement of Trustee. 58
SECTION 7.09. Successor Trustee by Merger, etc. 59
SECTION 7.10. Eligibility; Disqualification 59
SECTION 7.11. Preferential Collection of Claims Against
Company 60
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations. 61
SECTION 8.02. Legal Defeasance and Covenant Defeasance. 61
SECTION 8.03. Conditions to Legal Defeasance or Covenant
Defeasance 62
SECTION 8.04. Application of Trust Money; Trustee
Acknowledgment and Indemnity. 63
SECTION 8.05. Repayment to Company. 63
SECTION 8.06. Reinstatement 64
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. 64
SECTION 9.02. With Consent of Holders 65
SECTION 9.03. Compliance with Trust Indenture Act 66
SECTION 9.04. Record Date for Consents and Effect of
Consents 66
SECTION 9.05. Notation on or Exchange of Securities 66
SECTION 9.06. Trustee To Sign Amendments, etc 67
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee. 67
SECTION 10.02. Severability 68
SECTION 10.03. Release of a Guarantor 68
SECTION 10.04. Limitation of Guarantor's Liability. 69
SECTION 10.05. Contribution 69
SECTION 10.06. Execution of Security Guarantee. 70
SECTION 10.07. Subordination of Subrogation and Other
Rights. 70
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls 70
SECTION 11.02. Notices. 71
SECTION 11.03. Communications by Holders with Other Holders 71
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent 72
SECTION 11.05. Statements Required in Certificate 72
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. 72
SECTION 11.07. Governing Law. 72
SECTION 11.08. No Recourse Against Others 73
SECTION 11.09. Successors 73
SECTION 11.10. Counterpart Originals. 73
SECTION 11.11. Severability 73
SECTION 11.12. No Adverse Interpretation of Other
Agreements. 73
SECTION 11.13. Legal Holidays 73
SIGNATURES. S-1
EXHIBIT A Form of Series A Security A-1
EXHIBIT B Form of Legend for Global Securities. B-1
EXHIBIT C Form of Transfer Certificate. C-1
EXHIBIT D Form of Transfer Certificate for Institutional
Accredited Investors. D-1
EXHIBIT E Form of Transferee Letter of Representations. E-1
EXHIBIT F Form of Transfer Certificate for Regulation S
Transfers F-1
INDENTURE dated as of December 9, 1998, among METRIS
COMPANIES INC, a Delaware corporation (the "COMPANY"), the
GUARANTORS named herein and The Bank of New York, a New York
banking corporation, as trustee (the "TRUSTEE").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary
of such specified Person, including, without limitation,
Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted
Subsidiary of such specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such
specified Person.
"AFFILIATE" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.
For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"AFFILIATE TRANSACTION" has the meaning provided in Section 4.03.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET SALE" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition) or other
disposition (including, without limitation, any merger,
consolidation or sale-leaseback transaction) to any Person other
than the Company or a Wholly-Owned Restricted Subsidiary of the
Company, in one transaction or a series of related transactions,
of (i) any Equity Interest of any Restricted Subsidiary of the
Company; (ii) any material license, franchise or other
authorization of the Company or any Restricted Subsidiary of the
Company; (iii) any assets of the Company or any Restricted
Subsidiary of the Company which constitute substantially all of
an operating unit or line of business of the Company or any
Restricted Subsidiary of the Company; or (iv) any other property
or asset of the Company or any Restricted Subsidiary of the
Company outside of the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to
any property or asset and awards of compensation for any asset
taken by condemnation, eminent domain or similar proceedings).
For the purposes of this definition, the term "Asset Sale" shall
not include (a) any transaction consummated in compliance with
Section 5.01 and the creation of any Lien not prohibited by
Section 4.10; PROVIDED, HOWEVER, that any transaction consummated
in compliance with Section 5.01 involving a sale, conveyance,
assignment, transfer, lease or other disposal of less than all of
the properties or assets of the Company shall be deemed to be an
Asset Sale with respect to the properties or assets of the
Company and the Restricted Subsidiaries of the Company that are
not so sold, conveyed, assigned, transferred, leased or otherwise
disposed of in such transaction; (b) sales of property or
equipment that has become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of
the Company or any Restricted Subsidiary of the Company, as the
case may be; (c) any transaction consummated in compliance with
Section 4.08; (d) a pledge, or transfer pursuant to a pledge of
assets, which pledge is a Permitted Lien; and (e) sales of
Receivables or interests in Receivables in connection with
Securitizations or otherwise in the ordinary course of business.
In addition, solely for purposes of Section 4.07, any sale,
conveyance, transfer, lease or other disposition of any property
or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in
excess of $1.0 million in any fiscal year shall be deemed not to
be an Asset Sale.
"BANKRUPTCY LAW" has the meaning provided in Section 6.01.
"BOARD OF DIRECTORS" means the Board of Directors or other
governing body charged with the ultimate management of any
Person, or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person or a
duly authorized committee of such Board of Directors.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which banking institutions in New York, New York or
Chicago, Illinois are not required to be open.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be
capitalized on a balance sheet in accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (iii) in the
case of a partnership or limited liability company, partnership
or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means: (a) U.S. dollars; (b) securities issued
or directly and fully guaranteed or insured by the U.S.
government or any agency or instrumentality thereof having
maturities of not more than six months from the date of
acquisition; (c) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of
$500 million; (d) repurchase obligations with a term of not more
than seven days for underlying securities of the types described
in clauses (b) and (c) above entered into with any financial
institution meeting the qualifications specified in clause (c)
above; (e) commercial paper rated P-1, A-1 or the equivalent
thereof by Moody's Investors Service, Inc. or Standard & Poor's
Ratings Services, respectively, and in each case maturing within
six months after the date of acquisition; and (f) money market
funds, the portfolios of which are limited to investments
described in clauses (a) through (c) above.
"CHANGE OF CONTROL" means the occurrence of any of the following
events (whether or not approved by the Board of Directors of the
Company): (i) any Person (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act, including any group acting for the
purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than the Permitted Holders, is or becomes the "beneficial owner"
or "beneficial owners" (as defined in Rule 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event
or otherwise), directly or indirectly, of more than 35% of the
total voting power of the then outstanding Voting Stock of the
Company; but only in the event that the Permitted Holders
"beneficially own", directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the then
outstanding Voting Stock of the Company than such other Person
and 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 of the Company; (ii) the Company consolidates
with, or merges with or into, another Person (other than the
Company or a Wholly-Owned Restricted Subsidiary of the Company)
or the Company or its Restricted Subsidiaries sell, assign,
convey, transfer, lease or otherwise dispose of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries (determined on a consolidated basis) to any Person
(other than the Company or a Wholly-Owned Restricted Subsidiary
of the Company), other than any such transaction where
immediately after such transaction the Person or Persons that
"beneficially owned" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time), immediately prior to such
transaction, directly or indirectly, a majority of the then
outstanding Voting Stock of the Company "beneficially own" (as so
determined), directly or indirectly, a majority of the total
voting power of the then outstanding Voting Stock of the
surviving or transferee Person; or (iii) during any period of two
consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of a majority of the directors
of the Company then still in office who were either directors at
the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company
then in office.
"CHANGE OF CONTROL DATE" has the meaning provided in Section
4.14.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or
order signed in the name of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President, a Vice
President or its Treasurer, and by its Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the
Trustee.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as
of any date of determination, the sum, without duplication, of
(i) the total amount of Indebtedness of such Person and its
Restricted Subsidiaries, plus (ii) the total amount of
Indebtedness of any other Person, to the extent that such
Indebtedness has been Guaranteed by the referent Person or one or
more of its Restricted Subsidiaries, plus (iii) the aggregate
liquidation value of all Disqualified Stock of such Person and
all preferred stock of Restricted Subsidiaries of such Person
(other than, in the case of the Company, preferred stock of a
Restricted Subsidiary of the Company held by the Company or a
Guarantor), in each case, determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED LEVERAGE RATIO" means, with respect to any Person,
as of any date of determination, the ratio of (i) the
Consolidated Indebtedness of such Person as of such date
excluding, however, all Hedging Obligations that constitute
Permitted Debt to (ii) the Consolidated Net Worth of such Person
as of such date.
"CONSOLIDATED NET INCOME" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and
its Restricted Subsidiaries (for such period, on a consolidated
basis, determined in accordance with GAAP); PROVIDED that (i) the
Net Income (but not loss) of any Person that is not a Restricted
Subsidiary of such Person or that is accounted for by the equity
method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent
Person or a Wholly-Owned Restricted Subsidiary thereof, (ii) the
Net Income of any Restricted Subsidiary of such Person shall be
excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as
of such date plus (ii) the respective amounts reported on such
Person's balance sheet as of such date with respect to any series
of preferred stock (other than Disqualified Stock) that by its
terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in
respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of
such preferred stock, less (x) all write-ups (other than write-
ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issue
Date in the book value of any asset owned by such Person or a
consolidated Restricted Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries,
and (z) all unamortized debt discount and expense and unamortized
deferred financing charges as of such date, all of the foregoing
determined in accordance with GAAP.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" means the principal
office of the Trustee at which at any particular time its
corporate trust business shall be administered, which office at
the date of original execution of this Indenture is located at
101 Barclay Street, Floor 21 West, New York, New York 10286,
except that, with respect to presentation of the Securities for
payment or registration of transfers or exchanges and the
location of the register, such term means the office or agency of
the Trustee at which at any particular time its corporate agency
business shall be conducted, which at the date of original
execution of this Indenture is located at
101 Barclay Street, Ground Floor, New York, NY 10286.
"CREDIT AGREEMENT" means the Revolving Credit Facility, together
with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in
each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring,
in whole or in part (including, without limitation, increasing
the amount of available borrowings thereunder (PROVIDED that such
increase in borrowings is permitted by Section 4.04), or adding
Restricted Subsidiaries of the Company as additional borrowers or
guarantors thereunder to the extent permitted by this Indenture),
all or any portion of the Indebtedness under such agreement or
any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders and whether in the
form of a revolving credit facility or a term loan facility or
any combination thereof.
"CUSTODIAN" has the meaning provided in Section 6.01.
"DEFAULT" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"DEPOSITORY" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust
Company or another Person designated as Depository by the
Company, which must be a clearing agency registered under the
Exchange Act.
"DISQUALIFIED STOCK" means any Capital Stock that, either (A) by
its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after
the date on which the Securities mature or (B) is designated by
the Company (in a Board Resolution of the Company delivered to
the Trustee) as Disqualified Stock.
"EQUITY INTERESTS" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital
Stock).
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"EXPIRATION DATE" has the meaning set forth in the definition of
"OFFER TO PURCHASE."
"FAIR MARKET VALUE" means, with respect to any asset, the price
(after taking into account any liabilities relating to such
assets) which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing and
able buyer, neither of which is under any compulsion to complete
the transaction; PROVIDED, HOWEVER, that the Fair Market Value of
any such asset or assets shall be determined conclusively by the
Board of Directors of the Company acting in good faith, and shall
be evidenced by Board Resolutions of the Company delivered to the
Trustee.
"FINAL MATURITY DATE" means November 1, 2006.
"FUNDING GUARANTOR" has the meaning provided in Section 10.05.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity
as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date and
consistently applied.
"GLOBAL SECURITIES" means one or more 144A Securities, Regulation
S Securities or IAI Securities issued in global form.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"GUARANTORS" means each of (i) Metris Direct, Inc. and (ii) any
other Restricted Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate or currency
swap agreements, interest rate cap agreements and interest rate
or currency collar agreements and related agreements and (ii)
other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, currencies and
commodities in the ordinary course of business.
"HOLDERS" means the registered holders of the Securities.
"IAI SECURITY" means a permanent security in registered form
representing a Security transferred after the Issue Date to an
Institutional Accredited Investor, or, in the case of an IAI
Security issued in global form, the aggregate principal amount of
Securities transferred after the Issue Date to Institutional
Accredited Investors.
"INCUR" has the meaning set forth in Section 4.04.
"INDEBTEDNESS" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property
or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters
of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all indebtedness of others secured by a Lien
(except Liens on Receivables and other assets (including spread
accounts relating to a Securitization) incurred in connection
with a Securitization) on any asset of such Person (whether or
not such indebtedness is assumed by such Person and the value
thereof being the lesser of the amount of such indebtedness so
secured and the Fair Market Value of such asset that has a Lien
placed upon it) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
Notwithstanding the foregoing, the term "Indebtedness" shall not
include (i) obligations pursuant to representations, warranties,
covenants and indemnities or payments to owners of beneficial
interests in Receivables, in each case in connection with a
Securitization, (ii) deposit liabilities of any Restricted
Subsidiary of the Company, the deposits of which are insured by
the Federal Deposit Insurance Corporation or any successor
thereto or (iii) guarantees related to the fulfillment of the
Company's obligations to bank card associations in the ordinary
course of business. The amount of any Indebtedness outstanding as
of any date shall be (i) the accreted value thereof, in the case
of any Indebtedness that does not require current payments of
interest, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"INITIAL PURCHASERS" means Thomas H. Lee Equity Fund IV, L.P. and
Affiliates thereof purchasing Securities pursuant to the
Securities Purchase Agreement.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is
an "accredited investor" as that term is defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"INTEREST" means, with respect to the Securities, the sum of any
cash interest accrued on the principal thereof and, if permitted
by law, the interest thereon, whether at the rate of 12% or 15%,
as provided in the form of Security attached as Exhibit A hereto,
and any Liquidated Damages (as defined in the Registration Rights
Agreement).
"INTEREST PAYMENT DATE" means each semiannual interest payment
date on January 1 and July 1 of each year, commencing on July 1,
1999.
"INTEREST RECORD DATE" for the interest payable on any Interest
Payment Date (except a date for payment of defaulted interest)
means the June 15 or December 15 (whether or not a Business Day),
as the case may be, immediately preceding such Interest Payment
Date.
"INVESTMENTS" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the
forms of direct or indirect loans (including Guarantees of
Indebtedness or other obligations), advances or capital
contributions (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with
all items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP. If the Company or
any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, such Person is no longer
a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or
disposition equal to the book value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of Section 4.08.
"ISSUE DATE" means the Date of Initial Issuance of the
Securities.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give
a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"NET CASH PROCEEDS" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of
any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration
received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or
payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale, a defeasance of a Securitization
and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and
before any reduction in respect of preferred stock dividends,
excluding, however, (i) any gain (but not loss), together with
any related provision for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its
Restricted Subsidiaries and (ii) any extraordinary or
nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain
(but not loss).
"OBLIGATIONS" means any principal, interest (including, without
limitation, post-petition interest), penalties, fees,
indemnifications, reimbursement obligations, damages and other
liabilities payable under the documentation governing any
Indebtedness.
"OFFER" has the meaning set forth in the definition of "OFFER TO
PURCHASE."
"OFFER TO PURCHASE" means a written offer (the "OFFER") sent by
or on behalf of the Company by first-class mail, postage prepaid,
to each Holder at his address appearing in the register for the
Securities on the date of the Offer offering to purchase up to
the principal amount of Securities specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to
this Indenture). Unless otherwise required by applicable law,
the Offer shall specify an expiration date (the "EXPIRATION
DATE") of the Offer to Purchase, which shall be not less than 20
Business Days nor more than 60 days after the date of such Offer,
and a settlement date (the "PURCHASE DATE") for purchase of
Securities to occur no later than five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15
Business Days (or such shorter period as is acceptable to the
Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer
shall contain all the information required by applicable law to
be included therein. The Offer shall also contain information
concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to
make an informed decision with respect to the Offer to Purchase
(which at a minimum will include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee
pursuant to this Indenture (which requirements may be satisfied
by delivery of such documents together with the Offer), (ii) a
description of material developments in the Company's business
subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein).
The Offer shall contain all instructions and materials necessary
to enable such Holders to tender Securities pursuant to the Offer
to Purchase. The Offer shall also state: (1) the Section of this
Indenture pursuant to which the Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date; (3) the aggregate
principal amount of the outstanding Securities offered to be
purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount
has been determined pursuant to this Section of this Indenture
requiring the Offer to Purchase) (the "PURCHASE AMOUNT"); (4) the
purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture) (the "PURCHASE PRICE"); (5)
that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a
Security tendered must be tendered in an integral multiple of
$1,000 principal amount; (6) the place or places where Securities
are to be surrendered for tender pursuant to the Offer to
Purchase; (7) that interest on any Security not tendered or
tendered but not purchased by the Company pursuant to the Offer
to Purchase will continue to accrue; (8) that on the Purchase
Date the Purchase Price will become due and payable upon each
Security being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and
after the Purchase Date; (9) that each Holder electing to tender
all or any portion of a Security pursuant to the Offer to
Purchase will be required to surrender such Security at the place
or places specified in the Offer prior to the close of business
on the Expiration Date (such Security being, if the Company or
the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing); (10) that each Holder
will be entitled to withdraw all or any portion of any Securities
tendered by such Holder if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth
Business Day next preceding the Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of the Security such Holder
tendered, the certificate number of the Security such Holder
tendered and a statement that such Holder is withdrawing all or a
portion of his tender; (11) that (a) if Securities in an
aggregate principal amount less than or equal to the Purchase
Amount are duly tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase all such Securities and
(b) if Securities in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to
the Offer to Purchase, the Company shall purchase Securities
having an aggregate principal amount equal to the Purchase Amount
on a PRO RATA basis (with such adjustments as may be deemed
appropriate so that only Securities in denominations of $1,000
principal amount or integral multiples thereof shall be
purchased); and (12) that in the case of any Holder whose
Security is purchased only in part, the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered. An Offer to
Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer.
"OFFICER" means, with respect to the Company or any Guarantor,
the Chairman, any Vice Chairman, the President, any Vice
President, the Chief Financial Officer, the Treasurer or the
Secretary of the Company or such Guarantor, as the case may be.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or Assistant
Secretary of the Company complying with Sections 11.04 and 11.05.
"144A SECURITY" means a permanent security in registered form
representing a Security sold in reliance on Rule 144A, or in the
case of a 144A Security issued in global form, the aggregate
principal amount of Securities sold in reliance on Rule 144A.
"OPINION OF COUNSEL" means a written opinion from legal counsel.
The counsel may be an employee of or counsel to the Company or
the Trustee.
"PARTICIPANTS" has the meaning provided in Section 2.15.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PERMITTED HOLDER" means Fingerhut Companies, Inc. and any of its
Affiliates.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company
or in a Wholly-Owned Restricted Subsidiary of the Company; (b)
any Investment in Cash Equivalents; (c) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person,
if as a result of such Investment (i) such Person becomes a
Wholly-Owned Restricted Subsidiary of the Company or (ii) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly-Owned Restricted
Subsidiary of the Company; (d) any Restricted Investment made as
a result of the receipt of non-cash consideration from an Asset
Sale that was made pursuant to and in compliance with Section
4.07; (e) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of
the Company; (f) Investments by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in
connection with or arising out of Securitizations; (g) Hedging
Obligations of the Company and its Restricted Subsidiaries
entered into in the ordinary course of business; and (h) other
Investments by the Company or any of its Restricted Subsidiaries
in any Person (other than an Affiliate of the Company that is not
also a Restricted Subsidiary of the Company) that do not exceed
$5.0 million in the aggregate at any one time outstanding
(measured as of the date made and without giving effect to
subsequent changes in value).
"PERMITTED LIENS" means (i) Liens existing on the Issue Date;
(ii) Liens to secure borrowings under the Credit Agreement,
PROVIDED that such borrowings were permitted by this Indenture to
be incurred; (iii) Liens on Receivables, related contract rights,
collections on Receivables and the proceeds of all such property
incurred in connection with Securitizations or permitted
Guarantees thereof; (iv) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; PROVIDED
that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with
the Company or such Restricted Subsidiary; (v) Liens on property
existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company; PROVIDED that such Liens
were in existence prior to the contemplation of such acquisition;
(vi) Liens securing Purchase Money Indebtedness permitted to be
incurred under this Indenture and incurred in the ordinary course
of business; PROVIDED, HOWEVER, that any such Lien may not extend
to any other property owned by the Company or any of its
Restricted Subsidiaries at the time the Lien is incurred, and the
Indebtedness secured by the Lien may not be incurred more than
180 days after the latter of the acquisition or completion of
construction of the property subject to the Lien; PROVIDED,
FURTHER, that the amount of Indebtedness secured by such Liens do
not exceed the Fair Market Value of the property purchased or
constructed with the proceeds of such Indebtedness; (vii) Liens
to secure any Permitted Refinancing Indebtedness incurred to
refinance any Indebtedness secured by any Lien referred to in the
foregoing clauses (i) through (vi); PROVIDED, HOWEVER, that such
new Lien shall be limited to all or part of the same property
that secured the original Lien and the Indebtedness secured by
such Lien at such time is not increased to any amount greater
than the outstanding principal amount or, if greater, committed
amount of the Indebtedness described under clauses (i) through
(vi), as the case may be, at the time the original Lien became a
Permitted Lien; (viii) Liens in favor of the Company or a
Guarantor; (ix) Liens incurred in the ordinary course of business
of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $10.0 million in the
aggregate at any one time outstanding; (x) Liens to secure the
performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred
in the ordinary course of business (including, without
limitation, lessor Liens on leased assets); (xi) Liens securing
Capital Lease Obligations permitted to be incurred under this
Indenture and incurred in the ordinary course of business; (xii)
Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and
diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with
GAAP in existence at such time shall have been made therefor and
(xiii) certain Liens consisting of restrictions on the use of
real property which do not materially interfere with the
property's use.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness or
Disqualified Stock of the Company or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease, redeem or
refund other Indebtedness or Disqualified Stock of the Company or
any of its Restricted Subsidiaries (other than intercompany
Indebtedness); PROVIDED THAT: (i) the principal amount (or
accreted value, if applicable) or liquidation value of such
Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable) or liquidation
value, plus accrued interest or dividends on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased, redeemed or
refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date or redemption date, as the
case may be, later than the final maturity date or redemption
date, as the case may be, of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased, redeemed or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the
Securities, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Securities on terms at
least as favorable to the holders of Securities as those
contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
and (iv) such Indebtedness or Disqualified Stock is incurred or
issued, as the case may be, either by the Company or by the
Restricted Subsidiary who is the obligor or issuer, as the case
may be, on the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased, redeemed or refunded.
"PERSON" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust, joint
venture, or a governmental agency or political subdivision
thereof.
"PHYSICAL SECURITIES" means one or more certificated Securities
in registered form.
"PRIVATE PLACEMENT LEGEND" means the legend set forth on the
Securities in the form of Exhibit A hereto.
"PURCHASE AGREEMENT" means the Purchase Agreement dated as of
November 13, 1998 by and among the Company and the Initial
Purchasers.
"PURCHASE AMOUNT" has the meaning set forth in the definition of
"OFFER TO PURCHASE."
"PURCHASE DATE" has the meaning set forth in the definition of
"OFFER TO PURCHASE."
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company
and its Restricted Subsidiaries incurred in the ordinary course
of business for the purpose of financing all or any part of the
purchase price, or the cost of installation, construction or
improvement, of property or equipment.
"PURCHASE PRICE" has the meaning set forth in the definition of
"OFFER TO PURCHASE."
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under
the Securities Act.
"RECEIVABLES" means credit card, consumer or commercial loans
that are purchased or originated in the ordinary course of
business by the Company or any Subsidiary of the Company.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to
this Indenture.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to
this Indenture as set forth in the form of Security annexed
hereto as Exhibit A.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date between the Company and the
Initial Purchasers.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S SECURITY" means a permanent security in registered
form representing a Security sold in reliance on Regulation S
under the Securities Act, or, in the case of a Regulation S
Security issued in global form, the aggregate principal amount of
Securities sold in reliance on Regulation S under the Securities
Act.
"RESPONSIBLE OFFICER" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the
Trustee, including any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or any
other officer of the Trustee who customarily performs functions
similar to those performed by the persons who at the time shall
be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and
familiarity with the particular subject and who shall have direct
responsibility for the administration of this Indenture.
"RESTRICTED INVESTMENT" means any Investment other than a
Permitted Investment.
"RESTRICTED PAYMENT" has the meaning provided in Section 4.08.
"RESTRICTED SECURITY" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; PROVIDED, HOWEVER, that the Trustee
shall be entitled to request and conclusively rely upon an
Opinion of Counsel with respect to whether any Security is a
Restricted Security.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means the Amended and Restated Credit
Agreement dated as of June 30, 1998 among the Company, the
Lenders named therein, and Chase Manhattan Bank, as Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES" means the Company's 12% Senior Notes Due 2006, as
amended or supplemented from time to time in accordance with the
terms of this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"SECURITY GUARANTEE" means the Form of Security Guarantee of each
Guarantor to be endorsed on each of the Securities in the form of
EXHIBIT A hereto.
"SECURITIZATION" means any transaction or series of transactions
that have been or may be entered into by the Company or any of
its Subsidiaries in connection with or reasonably related to a
transaction or series of transactions in which the Company or any
of its Subsidiaries may sell, convey or otherwise transfer,
directly or indirectly, to (i) a Securitization Entity or (ii)
any other Person, or may grant a security interest in, any
Receivables or any interests in such Receivables (whether such
Receivables are then existing or arising in the future) and any
assets related thereto including, without limitation, all
security interests in any collateral relating thereto, the
proceeds of such Receivables, and other assets which are
customarily sold or in respect of which security interests are
customarily granted in connection with securitization
transactions involving such assets.
"SECURITIZATION ENTITY" means any Person (whether or not a
Subsidiary of the Company) established and maintained exclusively
for one or more of the following purposes: (i) purchasing or
otherwise acquiring Receivables (together with any assets related
to such Receivables, including, without limitation, all
collateral securing such Receivables, all contracts and all
Guarantees or other obligations in respect of such Receivables,
proceeds of such Receivables and other assets which are
customarily transferred in connection with asset securitization
transactions involving Receivables) in connection with a
Securitization, (ii) selling such Receivables (and related
assets) to a special purpose owner trust or other Person in
connection with a Securitization, (iii) issuing asset-backed
securities, or beneficial interests in Receivables, (iv) serving
as a corporate general partner (or managing member of a limited
liability company) of another Securitization Entity, (v)
investing in and holding Investments in Securitization Entities
issuing securities backed by Receivables, or (vi) engaging in
activities that are incidental to and necessary, suitable or
convenient for the accomplishment of the purposes specified
above, PROVIDED, HOWEVER, that the obligations of such
Securitization Entity are without recourse to the Company and any
Restricted Subsidiary of the Company other than such
Securitization Entity. For purposes of this definition, "without
recourse" shall mean that the Indebtedness of such Securitization
Entity and none of the other obligations (contingent or
otherwise) of a Securitization Entity (i) is guaranteed by the
Company or any other Restricted Subsidiary of the Company, (ii)
obligates the Company or any other Restricted Subsidiary of the
Company in any way other than pursuant to representations,
warranties, covenants (including any covenant to deliver
Receivables in a pre-funded Securitization) and indemnities
entered into in connection with a Securitization, or (iii)
subjects any property or asset of the Company or any Restricted
Subsidiary of the Company other than such Securitization Entity,
directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities entered into in connection
with a Securitization. For purposes of the foregoing, a Permitted
Investment in a Securitization Entity shall not be deemed
recourse. As of the Issue Date, each of the Metris Master Trust,
Metris Receivables, Inc., Metris Funding Co. and the Metris Owner
Trust and Securitization Entities formed in connection with any
Securitization prior to the Issue Date shall be deemed to satisfy
the requirements of this definition.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to
the Securities Act, as such Regulation is in effect on the date
hereof.
"SPECIFIED SENIOR INDEBTEDNESS" means (i) the Indebtedness of any
Person, whether outstanding on the Issue Date or thereafter
incurred, and (ii) accrued and unpaid interest (including
interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to such Person to the
extent post filing interest is allowed in such proceeding) in
respect of (A) Indebtedness of such Person for money borrowed and
(B) Indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is
responsible or liable unless, in the case of either clause (i) or
(ii), in the instrument creating or evidencing the same pursuant
to which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the
Securities; PROVIDED, HOWEVER, that Specified Senior Indebtedness
shall not include (1) any obligation of such Person to any
Subsidiary of such Person, (2) any liability for Federal, state,
local or other taxes owed or owing by such Person, (3) any
accounts payable or other liability to trade creditors arising in
the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (4) any obligations in
respect of Capital Stock of such Person or (5) that portion of
any Indebtedness which at the time of incurrence is incurred in
violation of this Indenture.
"STATED MATURITY" means with respect to any installment of
interest or principal on any series of Indebtedness, the date on
which such payment of interest or principal was scheduled to be
paid in the original documentation governing such Indebtedness,
and shall not include any contingent obligations to repay, redeem
or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"SUBSIDIARY GUARANTEES" means the guarantee of the Securities by
the Guarantors under Article Ten.
"SURVIVING PERSON" means the Person formed by or surviving a
transaction permitted by Section 5.01 or the Person to which a
sale, assignment, transfer, lease, or conveyance or other
disposition is made in a transaction permitted by Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb), as amended, as in effect on the date of
this Indenture (except as provided in Section 9.03) until such
time as this Indenture is qualified under the TIA, and thereafter
as in effect on the date on which this Indenture is qualified
under the TIA.
"TRUST OFFICER" means any officer within the corporate trust
department (or any successor group of the Trustee) including any
vice president, assistant vice president, assistant secretary or
any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons
who at that time shall be such officers, and also means, with
respect to a particular corporate trust matter, any other officer
to whom such trust matter is referred because of his knowledge of
and familiarity with the particular subject.
"TRUSTEE" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with
the provisions of this Indenture and thereafter means such
successor.
"2004 Notes" means the 10% Senior Notes Due 2004, Series A and B,
of the Company.
"UNITED STATES GOVERNMENT OBLIGATIONS" means direct non-callable
obligations of the United States of America for the payment of
which the full faith and credit of the United States is pledged.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company
that is designated by the Board of Directors of the Company as an
Unrestricted Subsidiary pursuant to a Board Resolution, but only
to the extent that such Subsidiary: (a) has not at the time of
designation, and does not thereafter, create, incur, assume,
guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender thereof
has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less
favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional
Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any
specified levels of operating results; and (d) has not otherwise
directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was
permitted by Section 4.08. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by
a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date
under Section 4.04, the Company shall be in default under Section
4.04). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the Consolidated Leverage
Ratio test set forth in the first paragraph of Section 4.04, and
(ii) no Default or Event of Default would be in existence
following such designation.
"UNUTILIZED NET CASH PROCEEDS" has the meaning provided in
Section 4.07.
"VOTING STOCK" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a
Restricted Subsidiary of such Person all of the outstanding
Capital Stock or other ownership interests of which (other than
directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly-Owned Restricted Subsidiaries of
such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have
the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITY HOLDER" means a Holder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" means the Company or any other obligor on the
Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined
by SEC rule and not otherwise defined herein have the meanings
assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect from time to time, and any other reference
in this Indenture to "generally accepted accounting principles"
refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of
EXHIBIT A hereto, which is hereby incorporated in and expressly
made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall
be dated the date of its issuance and shall show the date of its
authentication. Each Security shall have an executed Subsidiary
Guarantee from each of the Guarantors endorsed thereon
substantially in the form set forth in EXHIBITS A and B hereto.
The terms and provisions contained in the Securities annexed
hereto as EXHIBITS A and B shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent
applicable, the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A and
Securities offered and sold in reliance on Regulation S shall be
issued initially as Physical Securities substantially in the form
set forth in EXHIBIT A hereto and authenticated by the Trustee as
hereinafter provided. Securities in global form shall bear the
legend set forth in EXHIBIT B hereto. The aggregate principal
amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter
provided.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one
Officer (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) of the Company or
a Guarantor, as the case may be, shall attest to, the Securities
for the Company, and the Subsidiary Guarantees for the
Guarantors, by manual or facsimile signature.
If an Officer whose signature is on a Security or a
Subsidiary Guarantee, as the case may be, was an Officer at the
time of such execution but no longer holds that office at the
time the Trustee authenticates the Security or Subsidiary
Guarantee, as the case may be, the Security or Subsidiary
Guarantee, as the case may be, shall be valid nevertheless. A
Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the
Security. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate the Securities for original
issue in an aggregate principal amount not to exceed $100,000,000
upon a written order of the Company in the form of an Officers'
Certificate. Such written order shall specify the amount of
Securities to be authenticated and the date on which the
Securities are to be authenticated whether the Securities are to
be issued as Physical Securities or Global Securities and such
other information as the Trustee may reasonably request. The
Securities issued under this Indenture shall vote and consent
together on all matters (as to which any of such Securities may
vote or consent) as one class and no series of Securities will
have the right to vote or consent as a separate class on any
matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless
otherwise provided in the appointment, an authenticating agent
may authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent
shall have the same rights as an Agent to deal with the Company
and Affiliates of the Company.
The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral
multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency, which may be
in the Borough of Manhattan, The City of New York, where (a)
Securities may be presented or surrendered for registration of
transfer or for exchange (the "REGISTRAR"), (b) Securities may be
presented or surrendered for payment (the "PAYING AGENT") and (c)
notices and demands in respect of the Securities and this
Indenture may be served. The Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company,
upon notice to the Trustee, may appoint one or more co-Registrars
and one or more additional Paying Agents. The term "PAYING AGENT"
includes any additional Paying Agent. Except as provided herein,
the Company may act as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice,
the Trustee shall act as such and shall be entitled to
appropriate compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a
successor has been appointed.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in
trust for the benefit of Holders or the Trustee all assets held
by the Paying Agent for the payment of principal of, or interest
on, the Securities, and shall notify the Trustee of any Default
by the Company in making any such payment. The Company at any
time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such
Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to
the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent (if other than the Company), the
Paying Agent shall have no further liability for such assets. If
the Company or any of their Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest
on the Securities, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the
principal or interest so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so
to act.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Holders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee before each
Interest Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the
Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer of such Securities or to
exchange such Securities for an equal principal amount of
Securities of other authorized denominations of the same series,
the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such
transaction are met; PROVIDED, HOWEVER, that the Securities
surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar or co-Registrar,
duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than
any such transfer taxes or other governmental charge payable upon
exchanges or transfers pursuant to Section 2.02, 2.10, 3.06,
4.07, 4.14, or 9.05). The Registrar or co-Registrar shall not be
required to register the transfer or exchange of any Security (i)
during a period beginning at the opening of business 15 days
before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to
Article Three hereof, except the unredeemed portion of any
Security being redeemed in part.
Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee and any Agent of the
Company shall treat the person in whose name the Security is
registered as the owner thereof for all purposes whether or not
the Security shall be overdue, and none of the Company, the
Trustee or any such Agent shall be affected by notice to the
contrary. Any consent, waiver or actions of a Holder shall be
binding upon any subsequent Holders of such Security or a
Security received upon transfer. Any Holder of a beneficial
interest in a Global Security shall, by acceptance of such
beneficial interest in a Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only
through a book-entry system maintained by the Depository (or its
agent), and that ownership of a beneficial interest in a Global
Security shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the
Trustee's requirements for replacement of Securities are met.
Unless waived by the Company, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of
the Company and the Trustee, to protect the Company, the Trustee
and any Agent from any loss which any of them may suffer if a
Security is replaced. The Company may charge such Holder for
their reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of
the Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities
that have been authenticated by the Trustee except those canceled
by it, those delivered to it for cancellation and those described
in this Section 2.08 as not outstanding. Subject to Section 2.09,
a Security does not cease to be outstanding because the Company
or any Affiliates of the Company holds the Security. If a
Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it
that the replaced Security is held by a BONA FIDE purchaser. A
mutilated Security ceases to be outstanding upon surrender of
such Security and replacement thereof pursuant to Section 2.07.
If on a Redemption Date, Purchase Date or the Final Maturity
Date the Paying Agent holds money sufficient to pay all of the
principal and interest due on the Securities payable on that
date, and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture, then on and after that
date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or
consent, Securities owned by the Company, the Guarantors or any
of their respective Affiliates shall be disregarded, except that,
for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent,
only Securities that a Trust Officer of the Trustee actually
knows are so owned shall be disregarded.
The Company shall promptly notify the Trustee, in writing, when
the Company, any Guarantor, or any of their respective Affiliates
repurchases or otherwise acquires Securities, of the aggregate
principal amount of such Securities so repurchased or otherwise
acquired.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary
Securities upon receipt of a written order of the Company in the
form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of temporary Securities to be authenticated
and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the
form of definitive Securities but may have variations that the
Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee
shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent, and
no one else, shall cancel, and at the written direction of the
Company, dispose of and deliver evidence of such disposal of all
Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue
new Securities to replace Securities that they have paid or
delivered to the Trustee for cancellation. If the Company shall
acquire any of the Securities, such acquisition shall not operate
as a redemption or satisfaction of the Indebtedness represented
by such Securities unless and until the same are surrendered to
the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
The Company shall pay interest on overdue principal from
time to time on demand at the rate of interest then borne by the
Securities. The Company shall, to the extent lawful, pay
interest on overdue installments of interest (without regard to
any applicable grace periods) from time to time on demand at the
rate of interest then borne by the Securities.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest, plus (to the
extent lawful) any interest payable on the defaulted interest to
the Persons who are Holders on a subsequent special record date,
which date shall be the fifteenth day preceding the date fixed by
the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At
least 15 days before the subsequent special record date, the
Company shall mail to each Holder, with a copy to the Trustee, a
notice that states the subsequent special record date, the
payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior
to the expiration of the 30-day period set forth in Section
6.01(b) shall be paid to Holders as of the Interest Record Date
for the Interest Payment Date for which interest has not been
paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities will use a "CUSIP"
number and the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; PROVIDED,
HOWEVER, that any such notice may state that no representation is
made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may
be placed only on the other identification numbers printed on the
Securities. The Company shall promptly notify the Trustee of any
changes in CUSIP numbers known to it.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 1:00 p.m. New York City time on each Interest
Payment Date, Redemption Date, Purchase Date and the Final
Maturity Date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Redemption
Date, Purchase Date or Final Maturity Date, as the case may be,
in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Redemption
Date, Purchase Date or Final Maturity Date, as the case may be.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered
in the name of the Depository or the nominee of such Depository,
(ii) be delivered to the Trustee as custodian for such Depository
and (iii) bear legends as set forth in EXHIBIT B. Members of, or
participants in, the Depository ("PARTICIPANTS") shall have no
rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may
be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee
or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished
by the Depository or impair, as between the Depository and
Participants, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial
owners in the Global Securities may be transferred or exchanged
for Physical Securities in accordance with the rules and
procedures of the Depository and the provisions of Section 2.16;
PROVIDED, HOWEVER, that Physical Securities shall be transferred
to all beneficial owners in exchange for their beneficial
interests in Global Securities if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository
for any Global Security and a successor Depository is not
appointed by the Company within 90 days of such notice or (ii) an
Event of Default has occurred and is continuing and the Registrar
has received a request from the Depository to issue Physical
Securities.
(c) In connection with the transfer of Global Securities as
an entirety to beneficial owners pursuant to paragraph (b) of
this Section 2.15, the Global Securities shall be deemed to be
surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall upon written instructions
from the Company authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal
amount of Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted
Security delivered in exchange for an interest in a Global
Security pursuant to paragraph (c) of this Section 2.15 shall,
except as otherwise provided by Section 2.16, bear the Private
Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and
Persons that may hold interests through Participants, to take any
action which a Holder is entitled to take under this Indenture or
the Securities and the Trustee is entitled to rely upon any
electronic instructions from beneficial owners to the Holder of
any Global Security.
SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When
Physical Securities are presented to the Registrar or co-
Registrar with a request:
(i) to register the transfer of the Physical Securities;
or
(ii) to exchange such Physical Securities for an equal
principal amount of Physical Securities of other authorized
denominations, the Registrar or co-Registrar shall register
the transfer or make the exchange as requested if the
requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; PROVIDED,
HOWEVER, that the Physical Securities presented or
surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar
or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(II) in the case of Physical Securities the offer and sale
of which have not been registered under the Securities Act,
such Physical Securities shall be accompanied, in the sole
discretion of the Company, by the following additional
information and documents, as applicable:
(A) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for registration in
the name of such Holder, without transfer, a certification
from such Holder to that effect (substantially in the form
of EXHIBIT D hereto); or
(B) if such Physical Security is being transferred to a QIB
in accordance with Rule 144A, a certification to that effect
(substantially in the form of EXHIBIT D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form of
EXHIBIT D hereto) and a transferee letter of representation
(substantially in the form of EXHIBIT E hereto) and, at the
option of the Company, an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification to
that effect (substantially in the form of EXHIBIT D hereto)
and a transferor certificate for Regulation S transfers
substantially in the form of EXHIBIT F hereto and an Opinion
of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act; or
(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
EXHIBIT D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (substantially in the form of EXHIBIT D hereto) and,
at the option of the Company, an Opinion of Counsel
reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Physical Security
the offer and sale of which has not been registered under the
Securities Act may not be exchanged for a beneficial interest in
a Global Security except upon satisfaction of the requirements
set forth below. Upon receipt by the Registrar or co-Registrar of
a Physical Security, duly endorsed or accompanied by appropriate
instruments of transfer together with:
(A) certification, substantially in the form of EXHIBIT C
hereto, that such Physical Security is being transferred (I)
to a QIB, (II) to an Accredited Investor or (III) in an
offshore transaction in reliance on Regulation S and, with
respect to (II) or (III), at the option of the Company, an
Opinion of Counsel reasonably acceptable to the Company to
the effect that such transfer is in compliance with the
Securities Act; and
(B) written instructions directing the Registrar or co-
Registrar to make, or to direct the Depository to make, an
endorsement on the applicable Global Security to reflect an
increase in the aggregate amount of the Securities
represented by the Global Security,
then the Registrar or co-Registrar shall cancel such Physical
Security and cause, or direct the Depository to cause, in
accordance with the standing instructions and procedures existing
between the Depository and the Registrar or co-Registrar, the
principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global
Security, IAI Global Security or Regulation S Global Security, as
the case may be, is then outstanding, the Company shall, unless
either of the events in the proviso to Section 2.15(b) have
occurred and are continuing, issue and the Trustee shall, upon
written instructions from the Company in accordance with Section
2.02, authenticate such a Global Security in the appropriate
principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The
transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depository in
accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or Co-Registrar of
written instructions, or such other instruction as is customary
for the Depository, from the Depository or its nominee,
requesting the registration of transfer of an interest in a 144A
Global Security, an IAI Global Security or a Regulation S Global
Security, as the case may be, to another type of Global Security,
together with the applicable Global Securities (or, if the
applicable type of Global Security required to represent the
interest as requested to be obtained is not then outstanding,
only the Global Security representing the interest being
transferred), the Registrar or Co-Registrar shall reflect on its
records (and the applicable Global Security) the applicable
increase and decrease of the principal amount of Securities
represented by such types of Global Securities, giving effect to
such transfer. If the applicable type of Global Security
required to represent the interest as requested to be obtained is
not outstanding at the time of such request, the Company shall
issue and the Trustee shall, upon written instructions from the
Company in accordance with Section 2.02, authenticate a new
Global Security of such type in principal amount equal to the
principal amount of the interest requested to be transferred.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY
FOR A PHYSICAL SECURITY.
(i) If the Depository is at any time unwilling or unable
to continue as a depositary for the Global Securities and a
successor depositary is not appointed by the Company within
90 days or if the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of
Notes in definitive form, Physical Securities will be issued
in exchange for the Global Securities. Upon receipt by the
Registrar or co-Registrar of written instructions, or such
other form of instructions as is customary for the
Depository, from the Depository or its nominee on behalf of
any Person having a beneficial interest in a Global Security
and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the
Depository or the Person designated by the Depository as
having such a beneficial interest containing registration
instructions and, in the case of any such transfer or
exchange of a beneficial interest in Securities the offer
and sale of which have not been registered under the
Securities Act, the following additional information and
documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
EXHIBIT D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (substantially in the form of EXHIBIT D hereto) and,
at the option of the Company, an Opinion of Counsel
reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with
the standing instructions and procedures existing between the
Depository and the Registrar or co-Registrar, the aggregate
principal amount of the applicable Global Security to be reduced
and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers'
Certificate in accordance with Section 2.02, the Trustee will
authenticate and deliver to the transferee a Physical Security in
the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section
2.16(d) shall be registered in such names and in such
authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or co-Registrar in
writing. The Registrar or co-Registrar shall deliver such
Physical Securities to the Persons in whose names such
Physical Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL
SECURITIES. Notwithstanding any other provisions of this
Indenture, a Global Security may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of
the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange
or replacement of Securities not bearing the Private Placement
Legend, the Registrar or co-Registrar shall deliver Securities
that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend
unless, and the Trustee is hereby authorized to deliver
Securities without the Private Placement Legend if, (i) there is
delivered to the Trustee an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of
the Securities Act; (ii) such Security has been sold pursuant to
an effective registration statement under the Securities Act
(including pursuant to a Registration); or (iii) the date of such
transfer, exchange or replacement is two years after the later of
(x) the Issue Date and (y) the last date that the Company or any
affiliate (as defined in Rule 144 under the Securities Act) of
the Company was the owner of such Securities (or any predecessor
thereto).
(g) GENERAL. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security
acknowledges the restrictions on transfer of such Security set
forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Security only as provided in
this Indenture. The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Security (including any transfers between or among
Participants or beneficial owners of interest in any Global
Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and
to do so if and when expressly required by the terms of, this
Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof. The
Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this
Section 2.16. The Company shall have the right to inspect and
make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of
reasonable written notice to the Registrar
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
No Security may be redeemed without the consent of the
Holder thereof. If the Holder of a Security so consents and the
Company wishes to redeem such Security, it shall notify the
Trustee in writing of the Redemption Date and the principal
amount of Securities to be redeemed. The Company shall give such
notice to a Responsible Officer of the Trustee at least 45 days
before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee and the Holder of the Security to be
redeemed in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions
contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
In the event that less than all of the outstanding principal
of a Security is to be redeemed, the Trustee may select for
redemption portions of the principal amount of Securities that
have denominations equal to or larger than $1,000 in principal
amount. Securities and portions of them the Trustee so selects
shall be in amounts of $1,000 in principal amount or integral
multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of
Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption by
first-class mail to each Holder whose Securities are to be
redeemed at such Holder's registered address. Each notice of
redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the
Securities are to be surrendered for redemption;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(5) that, unless the Company defaults in making the
redemption payment, interest on Securities called for
redemption ceases to accrue on and after the Redemption Date
and the only remaining right of the Holders is to receive
payment of the redemption price upon surrender to the Paying
Agent; and
(6) in the case of any Security is being redeemed in part,
the portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, upon surrender
of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be
issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at
the Company's expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at
the redemption price. Upon surrender to the Paying Agent, such
Securities shall be paid at the redemption price, plus accrued
interest thereon, if any, to the Redemption Date, but interest
installments whose maturity is on or prior to such Redemption
Date shall be payable to the Holders of record at the close of
business on the relevant Interest Record Date.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
At least one Business Day before the Redemption Date, the
Company shall deposit with the Paying Agent (or if the Company is
its own Paying Agent, it shall, on or before the Redemption Date,
segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest, if any, on all
Securities to be redeemed on that date other than Securities or
portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid on the Redemption Date due
to the failure of the Company to deposit with the Paying Agent
money sufficient to pay the redemption price thereof, the
principal and accrued and unpaid interest, if any, thereon shall,
until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security equal in
principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities and the
Registration Rights Agreement. An installment of principal or
interest shall be considered paid on the date due if the Trustee
or Paying Agent (other than the Company or any Affiliates of the
Company) holds on that date money designated for and sufficient
to pay the installment in full and is not prohibited from paying
such money to the Holders of the Securities pursuant to the terms
of this Indenture.
The Company shall pay cash interest on overdue principal at
the same rate per annum borne by the Securities. The Company
shall pay cash interest on overdue installments of interest at
the same rate per annum borne by the Securities, to the extent
lawful, as provided in Section 2.12.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of any office or
agency required by Section 2.03. If at any time the Company
shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 11.02.
SECTION 4.03. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or
make or amend any transaction, contract, agreement,
understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers
to the Trustee (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, a Board Resolution of
the Company that such Affiliate Transaction has been approved by
a majority of the disinterested members of the Board of Directors
of the Company and (b) with respect to any Affiliate Transaction
or series of related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; PROVIDED that with
respect to any contracts or agreements, such dollar amounts shall
be with respect to annual consideration under such contracts or
agreements. The foregoing provisions shall not apply to (i) any
agreement in effect on the Issue Date and any amendments thereto;
PROVIDED that any such amendment shall be no more disadvantageous
to the Holders in any material respect than the original
agreement, (ii) any compensation arrangements entered into by the
Company or any of its Restricted Subsidiaries in the ordinary
course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (iii) transactions between
or among the Company and/or its Restricted Subsidiaries, (iv) any
transaction in connection with a Securitization and (v)
Restricted Payments that are permitted by Section 4.08.
SECTION 4.04. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to
(collectively, "INCUR") any Indebtedness (including Acquired
Debt), and the Company and the Guarantors will not issue any
Disqualified Stock, and the Company will not permit any of its
Restricted Subsidiaries (that are not Guarantors) to issue any
shares of preferred stock; PROVIDED, HOWEVER, that the Company
and the Guarantors may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock or the Company's
Restricted Subsidiaries (that are not Guarantors) may issue
shares of preferred stock if the Consolidated Leverage Ratio of
the Company, calculated on a pro forma basis after giving effect
to the incurrence of the additional Indebtedness to be incurred
or the Disqualified Stock or preferred stock to be issued and the
application of the proceeds therefrom, would have been less than
2.0 to 1. Notwithstanding the preceding paragraph, the Company
and its Restricted Subsidiaries may incur the following
Indebtedness (collectively, "PERMITTED DEBT"):
(i) Indebtedness of the Company under the Credit
Agreement and Guarantees thereof by the Guarantors in an
aggregate amount not to exceed $300.0 million at any time
outstanding;
(ii) the Indebtedness of the Company and its Restricted
Subsidiaries existing on the Issue Date;
(iii) Indebtedness of any Restricted Subsidiary of the
Company represented by a Subsidiary Guarantee;
(iv) Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance,
defease, renew or replace, any Indebtedness (other than
intercompany Indebtedness) that was permitted to be incurred
under this Section 4.04 or that was outstanding on the Issue
Date;
(v) intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries; PROVIDED,
HOWEVER, that (i) if the Company or any Guarantor is the
obligor on such Indebtedness to a Restricted Subsidiary of
the Company that is not a Wholly-Owned Restricted Subsidiary
of the Company, such Indebtedness is expressly subordinated
to the prior payment in full in cash of all Obligations with
respect to the Securities or the Subsidiary Guarantee, as
the case may be, and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company
or a Restricted Subsidiary of the Company and (B) any sale
or other transfer of any such Indebtedness to a Person that
is not either the Company or a Restricted Subsidiary of the
Company shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not
permitted by this clause (v);
(vi) the issuance by a Restricted Subsidiary of the Company
of preferred stock to the Company or to any of the
Guarantors; PROVIDED, HOWEVER, that any subsequent event or
issuance or transfer of any Capital Stock that results in
the owner of such preferred stock, in the case of a
Guarantor, ceasing to be a Restricted Subsidiary of the
Company or any subsequent transfer of such preferred stock
to a Person other than the Company or any of the Guarantors
shall be deemed to be an issuance of preferred stock by such
Restricted Subsidiary that was not permitted by this clause
(vi);
(vii) Hedging Obligations that are incurred in the ordinary
course of business;
(viii) Capital Lease Obligations and/or Purchase Money
Indebtedness of the Company or a Restricted Subsidiary of
the Company incurred in the ordinary course of business not
to exceed $30.0 million at any time outstanding;
(ix) the Guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of
the Company that was permitted to be incurred by another
provision of this Section 4.04; and
(x) additional Indebtedness of the Company and the
Guarantors in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred
pursuant to this clause (x), not to exceed $10.0 million at
any time outstanding.
Notwithstanding anything in this Indenture to the contrary,
consummation of a Securitization shall not be deemed to be the
incurrence of Indebtedness or the issuance of Disqualified Stock
or preferred stock by the Company or a Restricted Subsidiary of
the Company.
The Company will not, and will not permit any Restricted
Subsidiary of the Company to, incur any Indebtedness that is
contractually subordinated to any Indebtedness of the Company or
any such Restricted Subsidiary unless such Indebtedness is also
contractually subordinated to the Securities, or the Subsidiary
Guarantee of such Restricted Subsidiary (as applicable), on
substantially identical terms; PROVIDED, HOWEVER, that no
Indebtedness shall be deemed to be contractually subordinated to
any other Indebtedness solely by virtue of being unsecured or not
guaranteed by any Restricted Subsidiary of the Company.
For purposes of determining compliance with this Section
4.04, in the event that an item of Indebtedness meets the
criteria of more than one of the categories of Permitted Debt
described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this Section 4.04,
the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section 4.04
and such item of Indebtedness will be treated as having been
incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof.
SECTION 4.05. PAYMENTS FOR CONSENTS.
Neither the Company nor any of its Subsidiaries will,
directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to
any Holder of any Securities for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of
this Indenture or the Securities unless such consideration is
offered to be paid or is paid to all Holders of the Securities
that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or
agreement.
SECTION 4.06. LIMITATION ON INVESTMENT COMPANY STATUS.
The Company and its Subsidiaries shall not take any action,
or otherwise permit to exist any circumstance, that would require
the Company to register as an "investment company" under the
Investment Company Act of 1940, as amended.
SECTION 4.07. LIMITATION ON ASSET SALES.
The Company will not, and will not cause or permit any of
its Restricted Subsidiaries to, directly or indirectly, make any
Asset Sale, unless (i) the Company or such Restricted Subsidiary,
as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets
sold or otherwise disposed of and (ii) at least 85% of such
consideration consists of (A) cash or Cash Equivalents, (B)
properties and assets to be used in the business of the Company
and its Restricted Subsidiaries and/or (C) Equity Interests in
any Person which thereby becomes a Wholly-Owned Restricted
Subsidiary of the Company. The amount of any (i) Indebtedness
(other than any subordinated Indebtedness) of the Company or any
Restricted Subsidiary of the Company that is actually assumed by
the transferee in such Asset Sale and from which the Company and
the Restricted Subsidiaries of the Company are fully released
shall be deemed to be cash for purposes of determining the
percentage of cash consideration received by the Company or any
of its Restricted Subsidiaries and (ii) notes or other similar
obligations received by the Company or any of its Restricted
Subsidiaries from such transferee that are immediately converted,
sold or exchanged (or are converted, sold or exchanged within
thirty days of the related Asset Sale) by the Company or any of
its Restricted Subsidiaries into cash shall be deemed to be cash,
in an amount equal to the net cash proceeds realized upon such
conversion, sale or exchange, for purposes of determining the
percentage of cash consideration received by the Company or any
of its Restricted Subsidiaries.
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company and its Restricted
Subsidiaries as an entirety to a Person in a transaction
permitted under Article Five and as a result thereof the Company
is no longer an obligor on the Securities, the successor
corporation shall be deemed to have sold the properties and
assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this Section 4.07, and shall comply
with the provisions of this Section 4.07 with respect to such
deemed sale as if it were an Asset Sale. In addition, the Fair
Market Value of such properties and assets of the Company or its
Restricted Subsidiaries deemed to be sold shall be deemed to be
Net Cash Proceeds for purposes of this Section 4.07.
The Company or such Restricted Subsidiary, as the case may
be, may (i) apply the Net Cash Proceeds of any Asset Sale within
365 days of receipt thereof to repay Specified Senior
Indebtedness of the Company or such Restricted Subsidiary and
permanently reduce any related commitment, or (ii) commit in
writing to acquire, construct or improve, or acquire, construct
or improve, properties and assets to be used in the business of
the Company and its Restricted Subsidiaries and so apply such Net
Cash Proceeds within 365 days after the receipt thereof.
To the extent all or part of the Net Cash Proceeds of any
Asset Sale are not applied within 365 days of such Asset Sale as
described in clause (i) or (ii) of the immediately preceding
paragraph (such Net Cash Proceeds, the "UNUTILIZED NET CASH
PROCEEDS"), the Company shall, within 20 days after such 365th
day, make an Offer to Purchase all outstanding Securities up to a
maximum principal amount (expressed as a multiple of $1,000) of
Securities equal to such Unutilized Net Cash Proceeds, at a
purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date; PROVIDED, HOWEVER, that the Offer to Purchase may
be deferred until there are aggregate Unutilized Net Cash
Proceeds equal to or in excess of $10.0 million, at which time
the entire amount of such Unutilized Net Cash Proceeds, and not
just the amount in excess of $10.0 million, shall be applied as
required pursuant to this paragraph.
With respect to any Offer to Purchase effected pursuant to
this Section 4.07, among the Securities, to the extent the
aggregate principal amount of Securities tendered pursuant to
such Offer to Purchase exceeds the Unutilized Net Cash Proceeds
to be applied to the repurchase thereof, such Securities shall be
purchased PRO RATA based on the aggregate principal amount of
such Securities tendered by each Holder. To the extent the
Unutilized Net Cash Proceeds exceed the aggregate amount of
Securities tendered by the Holders of the Securities pursuant to
such Offer to Purchase, the Company may retain and utilize any
portion of the Unutilized Net Cash Proceeds not applied to
repurchase the Securities for any purpose consistent with the
other terms of this Indenture.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable
securities laws and regulations, including any applicable
requirements of Section 14(e) of, and Rule 14e-1 under, the
Exchange Act, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a
result of such compliance shall not be deemed a Default or an
Event of Default.
Each Holder shall be entitled to tender all or any portion
of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a
Security tendered must be tendered in an integral multiple of
$1,000 principal amount and subject to any proration among
tendering Holders as described above.
SECTION 4.08. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any
of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any
merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity
as such (other than (A) dividends, payments or distributions
payable solely in Equity Interests (other than Disqualified
Stock) of the Company and (B) dividends, payments or
distributions payable solely to the Company or its Wholly-
Owned Restricted Subsidiaries);
(ii) purchase, redeem or otherwise acquire or retire
for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any
Equity Interests of the Company or any direct or indirect
parent of the Company or other Affiliate of the Company
(other than any such Equity Interests owned by the Company
or any Wholly-Owned Restricted Subsidiary of the Company);
or
(iii) make any Restricted Investment
(all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "RESTRICTED
PAYMENTS"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall
have occurred and be continuing or would occur as a
consequence thereof;
(b) the Company would, at the time of such
Restricted Payment and after giving pro forma effect
thereto, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated
Leverage Ratio test set forth in the first paragraph of
Section 4.04; and
(c) such Restricted Payment, together with
the aggregate amount of all other Restricted Payments
made by the Company and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments
permitted by clause (ii) of the next succeeding
paragraph), is less than the sum of (i) 25% of the
aggregate cumulative Consolidated Net Income of the
Company for the period (taken as one accounting period)
from and after October 1, 1998 to the end of the
Company's most recently ended fiscal quarter for which
internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale
since the Issue Date of Equity Interests of the Company
(other than Disqualified Stock) or of Disqualified
Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company and
other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted
Investment that was made after the Issue Date is sold
for cash or otherwise liquidated or repaid for cash,
the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such
Restricted Investment.
The foregoing provisions do not prohibit (i) the payment of
any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture; (ii) the
redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of, other Equity Interests
of the Company (other than Disqualified Stock); PROVIDED that the
amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its common Equity
Interests on a PRO RATA basis; (iv) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held
by any member of the Company's (or any of its Restricted
Subsidiaries') management in connection with compensation or
severance arrangements; PROVIDED that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $1.0 million in any twelve-month
period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; (v) payments of
withholding taxes due or payments of exercise prices in
connection with exercises of options for common stock of the
Company by any employee or former employee of the Company (or any
Affiliate of the Company) by the tender of common stock owned by
such employee or the withholding of shares of common stock of the
Company in connection with such option exercise as consideration
therefor in connection with compensation arrangements; (vi) any
purchase, redemption or other acquisition or retirement for a
nominal amount of Equity Interests issued pursuant to any
shareholder rights plan of the Company, as the same may be
adopted or amended from time to time; (vii) payment of cash in
lieu of fractional shares of common stock that otherwise would be
issuable; and (viii) if no Default or Event of Default shall have
occurred and be continuing, the payment of dividends on the
Common Stock not in excess of $0.02 per share (as adjusted for
stock splits, stock dividends, reclassifications and the like)
per fiscal quarter.
The Board of Directors of the Company may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if such
designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company
and its Restricted Subsidiaries (except to the extent repaid in
cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will
reduce the amount available for Restricted Payments under the
first paragraph of this Section 4.08. All such outstanding
Investments will be deemed to constitute Investments in an amount
equal to the greater of (y) the net book value of such
Investments at the time of such designation or (z) the Fair
Market Value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all non-cash Restricted Payments shall be the
Fair Market Value on the date of the Restricted Payment of the
assets or securities proposed to be transferred or issued by the
Company or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. The Fair Market Value of any
non-cash Restricted Payment shall be determined by the Board of
Directors of the Company, whose resolution with respect thereto
shall be delivered to the Trustee, such determination to be based
upon an opinion or appraisal issued by an accounting, appraisal
or investment banking firm of national standing if such Fair
Market Value exceeds $10.0 million. Not later than 50 days after
the end of any fiscal quarter (100 days in the case of the last
fiscal quarter of the fiscal year) during which any Restricted
Payment is made, the Company shall deliver to the Trustee an
Officers' Certificate stating that all Restricted Payments made
during such fiscal quarter were permitted and setting forth the
basis upon which the calculations required by this Section 4.08
were computed, together with a copy of any opinion or appraisal
required by this paragraph.
SECTION 4.09. NOTICE OF DEFAULTS.
(a) In the event that any Indebtedness of the Company or
any of its Subsidiaries is declared due and payable before its
maturity because of the occurrence of any default (or any event
which, with notice or lapse of time, or both, would constitute
such a default) under such Indebtedness, the Company shall
promptly give written notice to the Trustee of such declaration,
the status of such default or event and what action the Company
is taking or proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default,
the Company shall promptly deliver an Officers' Certificate to
the Trustee specifying the Default or Event of Default.
SECTION 4.10. OBSERVANCE OF LIMITATION ON LIENS.
The Company and its Restricted Subsidiaries shall comply
with the provisions of the Credit Agreement and any other
agreement or instrument evidencing or relating to Indebtedness
that restrict the ability of the Company or a Restricted
Subsidiary to create or suffer to exist Liens on their property
or assets, as such provisions may be modified, amended or waived
from time to time.
SECTION 4.11. REPORTS.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Securities are outstanding, the Company
will furnish to the Trustee (i) all quarterly and annual
financial information that would be required to be contained in a
filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations
of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements
or in the footnotes thereto and in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and
its Restricted Subsidiaries separately from the financial
condition and results of operations of the Unrestricted
Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would
be required to be filed with the SEC on Form 8-K if the Company
were required to file such reports. In addition, whether or not
required by the rules and regulations of the SEC, the Company
will file a copy of all such information and reports with the SEC
for public availability (unless the SEC will not accept such a
filing) and make such information available to securities
analysts and prospective investors upon request; and
(b) Prior to and until two designees of the Purchasers
under the Purchase Agreement have been nominated for election to
the Company's Board of Directors, as described in Section 5.04 of
the Purchase Agreement, the Company shall furnish to the Trustee
copies of all financial information and/or certificates of
compliance required to be delivered under the Credit Agreement to
Chase Manhattan Bank, as administrative agent, within five
business days of such delivery.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's
receipt of the same shall not constitute constructive notice of
any information contained therein or determinable from
information contained therein, including the Company's compliance
with any of its covenants contained in this Indenture (as to
which the Trustee shall be entitled to rely exclusively on
Officers' Certificates).
SECTION 4.12. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits,
or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the
Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) this Indenture,
(b) applicable law, (c) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred
in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, PROVIDED
that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred, (d) by
reason of customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past
practices, (e) purchase money obligations for property acquired
in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so
acquired, (f) Permitted Refinancing Indebtedness, PROVIDED that
the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness
being refinanced, (g) the provisions of any Securitization that
are exclusively applicable to any Securitization Entity, or (h)
in the case of clause (iii) above, restrictions contained in
security agreements securing Indebtedness of Guarantors relating
to the properties or assets of Guarantors subject to the Liens
created thereby, PROVIDED that such Liens were otherwise
permitted to be incurred under Section 4.10.
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES.
The Company will cause each Restricted Subsidiary which
Guarantees any Indebtedness of the Company to execute and deliver
to the Trustee a Subsidiary Guarantee pursuant to which such
Restricted Subsidiary will Guarantee the Company's payment
obligations under the Securities on a senior unsecured basis,
jointly and severally, with any other Guarantors; PROVIDED, that
the foregoing shall not apply to Subsidiaries that (i) have
properly been designated as Unrestricted Subsidiaries in
accordance with this Indenture for so long as they continue to
constitute Unrestricted Subsidiaries or (ii) qualify as
Securitization Entities for so long as they continue to
constitute Securitization Entities.
SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL.
(a) Following the occurrence of a Change of Control (the
date of such occurrence being the "CHANGE OF CONTROL DATE"), the
Company shall notify the Holders of the Securities of such
occurrence in the manner prescribed by this Indenture and shall,
within 30 days after the Change of Control Date, make an Offer to
Purchase all Securities then outstanding at a purchase price in
cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Purchase
Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant
Interest Payment Date). Each Holder shall be entitled to tender
all or any portion of the Securities owned by such Holder
pursuant to the Offer to Purchase, subject to the requirement
that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount.
(b) On or prior to the Purchase Date specified in the Offer
to Purchase, the Company shall (i) accept for payment all
Securities or portions thereof validly tendered pursuant to the
Offer, (ii) deposit with the Paying Agent or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as
provided in Section 2.04, money sufficient to pay the Purchase
Price of all Securities or portions thereof so accepted and (iii)
deliver or cause to be delivered to the Trustee for cancellation
all Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof accepted for payment
by the Company. The Paying Agent (or the Company, if so acting)
shall promptly mail or deliver to Holders of Securities so
accepted, payment in an amount equal to the Purchase Price for
such Securities, and the Trustee shall promptly authenticate and
mail or deliver to each Holder of Securities a new Security or
Securities equal in principal amount to any unpurchased portion
of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
(c) If the Company makes an Offer to Purchase, the Company
will comply with all applicable tender offer laws and
regulations, including, to the extent applicable, Section 14(e)
and Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of
Securities pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations
conflict with the provisions of this Section 4.14, the Company
shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under
this Section 4.14.
SECTION 4.15. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days
after the close of each fiscal year a certificate signed by the
principal executive officer, principal financial officer or
principal accounting officer stating that a review of the
activities of the Company has been made under the supervision of
the signing officer with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers
know of any Default or Event of Default by the Company that
occurred during such fiscal year. If they do know of such a
Default or Event of Default, such certificate shall also indicate
the status thereof and the action the Company is taking or
proposes to take with respect thereto. The first certificate to
be delivered by the Company pursuant to this Section 4.15 shall
be for the fiscal year ending December 31, 1998.
SECTION 4.16. CORPORATE EXISTENCE.
Subject to Article Five, the Company shall do or shall cause
to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate,
partnership or other existence of each Restricted Subsidiary in
accordance with the respective organizational documents of each
such Restricted Subsidiary and the rights (charter and statutory)
and material franchises of the Company and the Restricted
Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right or franchise, or the
corporate existence of any Restricted Subsidiary, if the Board of
Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of
the Company and the Restricted Subsidiaries, taken as a whole;
PROVIDED, FURTHER, HOWEVER, that a determination of the Board of
Directors of the Company shall not be required in the event of a
merger of one or more Wholly-Owned Restricted Subsidiaries of the
Company with or into another Wholly-Owned Restricted Subsidiary
of the Company or another Person, if the surviving Person is a
Wholly-Owned Restricted Subsidiary of the Company organized under
the laws of the United States or a State thereof or of the
District of Columbia. This Section 4.16 shall not prohibit the
Company from taking any other action otherwise permitted by, and
made in accordance with, the provisions of this Indenture.
SECTION 4.17. USE OF PROCEEDS.
The Company shall use the proceeds of the Securities (i) for
the purpose of financing the acquisition by its Subsidiary,
Direct Merchant Credit Card Bank, National Association, of the
assets described in the Purchase and Sale Agreement dated
September 4, 1998 between such Subsidiary and PNC National Bank,
and (ii) for general corporate purposes.
SECTION 4.18. REDEMPTION OF OTHER SECURITIES.
In the event that the Company shall elect to redeem any of
the 2004 Notes pursuant to paragraph 5 thereof, it shall make an
Offer to Purchase the Securities on terms comparable to those
provided for in such paragraph 5 to the Holders of the
Securities, which Offer to Purchase shall not be effective as to
any Security unless and until accepted by the Holder of each
Security. Notwithstanding the foregoing, in the event that the
Company elects to redeem the 2004 Notes from the Net Cash
Proceeds of any Asset Sale, the Company shall not be obligated to
purchase Securities except to the extent that the Net Cash
Proceeds of such Asset Sale exceeds the redemption price,
including principal, premium and interest, of all of the 2004
Notes so redeemed.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, SALE OF ASSETS, ETC.
(a) The Company may not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity
or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District
of Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company) or the
entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all
the obligations of the Company under the Securities and this
Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately before
and after such transaction, no Default or Event of Default
exists; and (iv) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will
have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) would, at
the time of such transaction and after giving pro forma effect
thereto, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Leverage Ratio test set
forth in the first paragraph of Section 4.04.
(b) Notwithstanding paragraph (a) above or paragraph (d)
below, any Wholly-Owned Restricted Subsidiary of the Company may
consolidate with or merge into the Company or any Guarantor;
PROVIDED that the Company or the Guarantor, as the case may be,
is the surviving corporation, and any Guarantor may consolidate
with or merge into the Company. Notwithstanding anything in this
Indenture to the contrary, consummation of one or more
Securitizations shall not constitute the sale of all or
substantially all of the properties or assets of the Company.
(c) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of transactions) of all or substantially all the properties and
assets of one or more Restricted Subsidiaries the Equity Interest
of which constitutes all or substantially all the properties and
assets of the Company shall be deemed to be the transfer of all
or substantially all the properties and assets of the Company.
(d) No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such
Guarantor unless, subject to the provisions of Section 10.03, (i)
the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the obligations
of such Guarantor under its Subsidiary Guarantee pursuant to a
supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Securities and this
Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction), equal to
or greater than the Consolidated Net Worth of such Guarantor
immediately preceding the transaction; and (iv) immediately after
giving effect to such transaction, the Company would have been
able to incur at least $1.00 of additional Indebtedness pursuant
to the Consolidated Leverage Ratio test set forth in the first
paragraph of Section 4.04.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
In the event of any transaction (other than a lease)
described in and complying with the conditions listed in Section
5.01 in which the Company or a Guarantor, as the case may be, is
not the Surviving Person and the Surviving Person is to assume
all the Obligations of the Company under the Securities, this
Indenture and the Registration Rights Agreement or of such
Guarantor under its Subsidiary Guarantee, this Indenture and the
Registration Rights Agreement, as the case may be, pursuant to a
supplemental indenture, such Surviving Person shall succeed to,
and be substituted for, and may exercise every right and power
of, the Company or such Guarantor, as the case may be, and the
Company, as the case may be, shall be discharged from its
Obligations under this Indenture and the Securities or such
Guarantor shall be discharged from its Obligations under this
Indenture and its Subsidiary Guarantee, as the case may be.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following shall be an "Event of Default" for
purposes of this Indenture:
(a) failure to pay principal of (or premium, if any, on)
any Security when due;
(b) failure to pay any interest on any Security when due,
which failure continues for 30 days or more;
(c) failure by the Company or any of its Restricted
Subsidiaries to comply with its obligations under Section
4.04, Section 4.07, Section 4.12 or Section 4.14;
(d) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice from the Trustee or
the Holders of at least 25% in aggregate principal amount of
the Securities then outstanding to comply with any of the
other covenants or agreements in this Indenture;
(e) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness now
exists, or is created after the Issue Date, which default
(a) is caused by a failure to pay principal of or premium,
if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness
on the date of such default (a "PAYMENT DEFAULT") or (b)
results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount
of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(f) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or
stayed for a period of 60 days;
(g) the Company or any of its Significant Subsidiaries (or
one or more Restricted Subsidiaries that, taken together
would constitute a Significant Subsidiary) pursuant to or
within the meaning of any Bankruptcy Law: (i) admits in
writing its inability to pay its debts generally as they
become due; (ii) commences a voluntary case or proceeding;
(iii) consents to the entry of an order for relief against
it in an involuntary case or proceeding; (iv) consents or
acquiesces in the institution of a bankruptcy or insolvency
proceeding against it; (v) consents to the appointment of a
Custodian of it or for all or substantially all of its
property; or (vi) makes a general assignment for the benefit
of its creditors, or any of them takes any action to
authorize or effect any of the foregoing;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief
against the Company or any Significant Subsidiary (or one or
more Restricted Subsidiaries that, taken together would
constitute a Significant Subsidiary) of the Company in an
involuntary case or proceeding; (ii) appoints a Custodian of
the Company or any Significant Subsidiary (or one or more
Restricted Subsidiaries that, taken together would
constitute a Significant Subsidiary) of the Company for all
or substantially all of its property; or (iii) orders the
liquidation of the Company or any Significant Subsidiary (or
one or more Restricted Subsidiaries that, taken together
would constitute a Significant Subsidiary) of the Company;
and in each case the order or decree remains unstayed and in
effect for 60 days; PROVIDED, HOWEVER, that if the entry of
such order or decree is appealed and dismissed on appeal,
then the Event of Default hereunder by reason of the entry
of such order or decree shall be deemed to have been cured;
(i) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in a judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be
in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee;
(j) an Event of Default shall occur under the Indenture
dated as of November 7, 1997 among the Company, the
Guarantors named therein and The First National Bank of
Chicago, as trustee and shall not be cured by the Company or
a Guarantor named therein, as the case may be, and shall not
be waived by the holders of at least a majority in principal
amount of the securities issued pursuant thereto; or
(k) prior to and until two designees of the Purchasers
under the Purchase Agreement have been nominated for
election to the Company's Board of Directors, as described
in Section 5.04 of the Purchase Agreement, an "event of
default" as defined in Article VII of the Credit Agreement
as in effect upon the date hereof shall have occurred and be
continuing, regardless of whether such event of default
shall have been waived by the lenders thereunder; provided
that such event shall not constitute an "Event of Default"
hereunder unless and until the Company receives notice
thereof from the holders of at least a majority in principal
amount of the securities issued pursuant hereto and the
Event of Default shall continue unremedied for a period of
ten (10) business days.
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, sequestrator or similar official under
any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
If an Event of Default with respect to the Securities (other
than an Event of Default specified in clauses (g) or (h) of
Section 6.01) occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the
outstanding Securities, by notice in writing to the Company (and
to the Trustee if given by the Holders) may declare the unpaid
principal of (and premium, if any) and accrued interest to the
date of acceleration on all outstanding Securities to be due and
payable immediately and, upon any such declaration, such
principal amount (and premium, if any) and accrued interest,
notwithstanding anything contained in this Indenture or the
Securities to the contrary, shall become immediately due and
payable.
If an Event of Default specified in clauses (g) or (h) of
Section 6.01 occurs, all unpaid principal of and accrued interest
on all outstanding Securities shall IPSO FACTO become immediately
due and payable without any declaration or other act on the part
of the Trustee or any Holder. Any such declaration with respect
to the Securities may be rescinded and annulled by the Holders of
a majority in aggregate principal amount of the outstanding
Securities by written notice to the Trustee if all existing
Events of Default (other than the nonpayment of principal of and
interest on the Securities which has become due solely by virtue
of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. No
such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity
to collect the payment of principal of or interest on the
Securities or to enforce the performance of any provision of the
Securities or this Indenture. The Trustee may maintain a
proceeding even if it does not possess any of the Securities or
does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or
remedy maturing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy.
All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. WAIVER OF PAST DEFAULT.
Subject to Sections 2.09, 6.07 and 9.02, prior to the
declaration of acceleration of the Securities, the Holders of not
less than a majority in aggregate principal amount of the
outstanding Securities by written notice to the Trustee may waive
an existing Default or Event of Default and its consequences,
except a Default in the payment of principal of or interest on
any Security as specified in clauses (a), (b) and (c) of Section
6.01 or a Default in respect of any term or provision of this
Indenture that may not be amended or modified without the consent
of each Holder affected as provided in Section 9.02. The Company
shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such
waiver and attaching copies of such consents. In case of any
such waiver, the Company, the Trustee and the Holders shall be
restored to their former positions and rights hereunder and under
the Securities, respectively. This Section 6.04 shall be in lieu
of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B)
of the TIA is hereby expressly excluded from this Indenture and
the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and
be deemed to have been cured and not to have occurred, and any
Event of Default arising therefrom shall be deemed to have been
cured and not to have occurred for every purpose of this
Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of
another Holder, it being understood that the Trustee shall have
no duty (subject to Section 7.01) to ascertain whether or not
such actions or forebearances are unduly prejudicial to such
holders, or that may involve the Trustee in personal liability;
PROVIDED, HOWEVER, that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such
direction. In the event the Trustee takes any action or follows
any direction pursuant to this Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole
discretion against any loss, damage, claim, liability or expense
caused by taking such action or following such direction. This
Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA,
and such Section 316(a)(1)(A) of the TIA is hereby expressly
excluded from this Indenture and the Securities, as permitted by
the TIA.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal
amount of the outstanding Securities make a written request
to the Trustee to pursue a remedy;
(iii) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability, claim, damage or expense;
(iv) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and
(v) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities do not give
the Trustee a direction which is inconsistent with the
request.
A Holder may not use this Indenture to prejudice the rights
of another Holder or to obtain a preference or priority over such
other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of or
interest on a Security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement
of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest
specified in Section 6.01(a), (b) or (c) occurs and is
continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other
obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue
on principal and to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each
case at the rate PER ANNUM borne by the Securities and such
further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders allowed in any
judicial proceedings relative to the Company (or any other
obligor upon the Securities), its creditors or its property and
shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and
to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; PROVIDED, HOWEVER, that the
Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and may be a member of
the creditors' committee.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to
this Article Six, it shall pay out the money or property in the
following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and
interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may
fix a record date and payment date for any payment to the
Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action
taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11
shall not apply to a suit by the Trustee, a suit by a Holder or
group of Holders of more than 10% in aggregate principal amount
of the outstanding Securities, or to any suit instituted by any
Holder for the enforcement or the payment of the principal or
interest on any Securities on or after the respective due dates
expressed in the Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the
performance of such duties as are specifically set forth
herein; and
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions conforming to the requirements of
this Indenture; however, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture (but need not confirm or investigate the
accuracy of any mathematical calculations or other facts
stated therein).
(c) The Trustee shall not be relieved from liability for
its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01;
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder or to take or omit to take any action under
this Indenture or take any action at the request or
direction of Holders if it shall have reasonable grounds for
believing that repayment of such funds is not assured to it
or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk,
claim, liability, loss, fee or expense which might be
incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b),
(c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in
writing with the Company. Money held in trust by the
Trustee need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the
proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of
Counsel, which shall conform to the provisions of Section
11.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion or in the event the Company fails to
provide such Officers' Certificate and/or opinion of counsel
within a reasonable period following such request.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or
negligence of any agent or attorney (other than an agent who
is an employee of the Trustee) appointed with due care and
appointed with the consent of the Company.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes
to be authorized or within its rights or powers.
(e) Before the Trustee acts or refrains from acting, it may
consult with counsel of its own selection and the advice or
opinion of such counsel as to matters of law shall be full
and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) Any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order and any resolution of the Board of
Directors may be sufficiently evidenced by a Board
Resolution.
(g) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture
at the request or direction of any of the Holders pursuant
to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to
it against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or
direction.
(h) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney at the
sole cost of the Company and shall incur no liability of any
kind by reason of such inquiry or investigation.
(i) The Trustee shall not be deemed to have notice of any
Event of Default unless a Trust Officer of the Trustee has
actual knowledge thereof or unless the Trustee shall have
received written notice thereof at the Corporate Trust
Office of the Trustee, and such notice references the
Securities and this Indenture.
(j) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and
duties hereunder.
(k) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a
duty and the Trustee shall not be answerable for other than
its gross negligence or willful misconduct.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal
with the Company or their Affiliates with the same rights it
would have if it were not Trustee, subject to Section 7.10
hereof. Any Agent may do the same with like rights. However,
the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture
or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or
any statement in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing
and a Responsible Officer of the Trustee has actual knowledge of
such Defaults or Events of Default, the Trustee shall mail to
each Holder notice of the Default or Event of Default within 30
days after the occurrence thereof. Except in the case of a
Default or an Event of Default in payment of principal of or
interest on any Security or a Default or Event of Default in
complying with Section 5.01, the Trustee may withhold the notice
if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of
Holders. This Section 7.05 shall be in lieu of the proviso to
Section 315(b) of the TIA and such proviso to Section 315(b) of
the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA Section 313(a), as amended, within 60
days after each October 1 beginning with October 1, 1999, the
Trustee shall mail to each Holder a report dated as of such
October 1 that complies with TIA Section 313(a). The Trustee
also shall comply with TIA Section 313(b), (c) and (d). A copy of
each such report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange, if any, on which the
Securities are listed. The Company shall promptly notify the
Trustee in writing if the Securities become listed on any stock
exchange or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time, and
the Trustee shall be entitled to, such compensation as the
Company and the Trustee shall from time to time agree in writing
for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for
all disbursements, expenses and advances, including all costs and
expenses of collection (including reasonable fees, disbursements
and expenses of its agents and outside counsel) incurred or made
by it in addition to the compensation for its services except any
such disbursements, expenses and advances as may be attributable
to the Trustee's gross negligence or willful misconduct. Such
expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents, accountants, experts and
outside counsel and any taxes or other expenses incurred by a
trust created pursuant to Section 8.01 hereof.
The Company shall fully indemnify the Trustee for, and hold
it harmless against any and all loss, damage, claims, liability
or expense, including taxes (other than franchise taxes imposed
on the Trustee and taxes based upon, measured by or determined by
the income of the Trustee), arising out of or in connection with
the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself
against or investigating any claim or liability in connection
with the exercise or performance of any of its powers or duties
hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own gross negligence or
willful misconduct. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it
may seek indemnity. However, the failure by the Trustee to so
notify the Company shall not relieve the Company of its
obligations hereunder unless the Company has been prejudiced
thereby. The Company shall defend the claim and the Trustee shall
cooperate in the defense at the Company's expense, PROVIDED that
the Company shall not be liable in any action or for which it has
assumed the defense for the expenses of separate counsel to the
Trustee unless (1) the employment of separate counsel has been
authorized by the Company, (2) the Trustee has reasonably
concluded (based upon advice of counsel to the Trustee) that
there may be legal defenses available to the Trustee that are
different from or in addition to those available to the Company
or (3) a conflict or potential conflict exists (based upon advice
of counsel to the Trustee) between the Trustee and the Company,
and PROVIDED, FURTHER, that in any such event the Company's
reimbursement obligation with respect to separate counsel of the
Trustee will be limited to the reasonable fees and expenses of
such counsel.
The Company need not pay for any settlement made without
their written consent, which consent shall not be unreasonably
withheld. The Company need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee
as a result of its own gross negligence or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Securities
against all money or property held or collected by the Trustee,
in its capacity as Trustee, except money or property held in
trust to pay principal of or interest on particular Securities or
the Purchase Price or redemption price of any Securities to be
purchased pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after
an Event of Default specified in Section 6.01(g) or (h) occurs,
the expenses (including the reasonable fees and expenses of its
agents and counsel) and the compensation for the services shall
be preferred over the status of the Holders in a proceeding under
any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's under
this Section 7.07 and any claim arising hereunder shall survive
the resignation or removal of any Trustee, the discharge of the
Company's obligations pursuant to Article Eight and any rejection
or termination under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the
Company in writing. The Holders of a majority in principal
amount of the outstanding Securities may remove the Trustee by so
notifying the Trustee and the Company in writing and may appoint
a successor Trustee with the Company's consent. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an
order for relief is entered with respect to the Trustee
under any Bankruptcy Law;
(c) a custodian or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason (the Trustee in such
event being referred to herein as the retiring Trustee), the
Company shall promptly appoint a successor Trustee. Within one
year after the successor Trustee takes office, the Holders of a
majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by
the Company.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. As
promptly as practicable after that, the retiring Trustee shall
transfer, after payment of all sums then owing to the Trustee
pursuant to Section 7.07, all property held by it as Trustee to
the successor Trustee, subject to the Lien provided in Section
7.07, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have the
rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring
Trustee, the Company or the Holders of at least 10% in principal
amount of the outstanding Securities may petition, at the expense
of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee. If the Trustee fails to
comply with Section 7.10, any Holder may petition any court of
competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation or banking corporation, the
resulting, surviving or transferee corporation or banking
corporation without any further act shall be the successor
Trustee; PROVIDED, HOWEVER, that such corporation shall be
otherwise qualified and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA Sections 310(a)(1) and
310(a)(2). The Trustee shall have a combined capital and surplus
of at least $50,000,000 as set forth in its most recent published
annual report of condition. If the Trustee has or shall acquire
any "conflicting interest" within the meaning of TIA Section
310(b), the Trustee and the Company shall comply with the
provisions of TIA Section 310(b); PROVIDED, HOWEVER, that there
shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or
certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. If at any
time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 7.10, the Trustee shall promptly
resign in the manner and with the effect hereinbefore specified
in this Article Seven. The provisions of TIA Section 310 shall
apply to the Company and any other obligor of the Securities.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE
COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A
Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under the
Securities and this Indenture as well as the obligations of the
Guarantors under their respective Subsidiary Guarantees, except
those obligations referred to in the penultimate paragraph of
this Section 8.01, if :
(i) either (a) all the Securities theretofore
authenticated and delivered (except lost, stolen or
destroyed Securities which have been replaced or paid and
Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged
from such trust) have been delivered to the Trustee for
cancellation or (b) all Securities not theretofore delivered
to the Trustee for cancellation have become due and payable
or have been called for redemption and the Company has
irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Securities to the date
of deposit together with irrevocable instructions from the
Company directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may
be;
(ii) the Company has paid all other sums payable under
this Indenture by the Company; and
(iii) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel stating that
all conditions precedent under this Indenture relating to
the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the first paragraph of this Section 8.01, the
Company's obligations in Sections 2.05, 2.06, 2.07, 2.08, 7.07,
8.05 and 8.06 shall survive until the Securities are no longer
outstanding pursuant to the last paragraph of Section 2.08.
After the Securities are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive. After
such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's and
Guarantors' obligations under the Securities, the Subsidiary
Guarantees and this Indenture except for those surviving
obligations specified above.
SECTION 8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE
(a) The Company may terminate its obligations in respect of
the Securities by delivering all outstanding Securities to the
Trustee for cancellation and paying all sums payable by it on
account of principal of and interest on all Securities or
otherwise. In addition to the foregoing, the Company may, at its
option, at any time elect to have either paragraph (b) or (c)
below be applied to all outstanding Securities, subject in either
case to compliance with the conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof
of the option applicable to this paragraph (b), the Company
shall, subject to the satisfaction of the conditions set forth in
Section 8.03, be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, except
for (i) the rights of Holders to receive payments in respect of
the principal of, premium, if any, and interest on the Securities
when such payments are due, (ii) the Company's obligations with
respect to the Securities under Sections 2.02 through 2.07,
inclusive, 2.10, 2.13, 4.02 and 4.16, (iii) the rights, powers,
trust, duties and immunities of the Trustee under this Indenture
and the Company's obligations in connection therewith and (iv)
Article Eight of this Indenture (hereinafter, "LEGAL
DEFEASANCE"). Subject to compliance with this Article Eight, the
Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph
(c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof
of the option applicable to this paragraph (c), the Company
shall, subject to the satisfaction of the conditions set forth in
Section 8.03, be released from its obligations under the
covenants contained in Sections 4.03 through 4.15, inclusive, and
Article Five with respect to the outstanding Securities
(hereinafter, "COVENANT DEFEASANCE") and thereafter any omission
to comply with such obligations shall not constitute a Default or
an Event of Default with respect to the Securities. In addition,
upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), subject to the
satisfaction of the conditions set forth in Section 8.03, any
failure or omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the
Securities.
SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
In order to exercise either Legal Defeasance pursuant to
Section 8.02(b) or Covenant Defeasance pursuant to Section
8.02(c):
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in U.S.
dollars or United States Government Obligations, or a
combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of
premium, if any, and interest on the Securities on the
stated date for payment thereof or on the applicable
redemption date, as the case may be;
(b) in the case of an election under Section 8.02(b), the
Company shall have delivered to the Trustee an Opinion of
Counsel in the United States confirming that (A) the Company
has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c), the
Company shall have delivered to the Trustee an Opinion of
Counsel in the United States confirming that the Holders of
the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Sections
6.01(g) and 6.01(h) are concerned, at any time in the period
ending on the 91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of or constitute a Default
under this Indenture or any other material agreement or
instrument to which the Company or any of its Restricted
Subsidiaries is a party or by which the Company or any of
its Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders
over any other creditors of the Company or with the intent
of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance
have been complied with; and
(h) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that assuming no
intervening bankruptcy or insolvency of the Company between
the date of deposit and the 91st day following the deposit
and that no Holder is an insider of the Company, after the
91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar law affecting
creditors' rights generally.
Notwithstanding the foregoing, the opinion of counsel required by
clause (b) above need not be delivered if all Securities not
theretofore delivered to the Trustee for cancellation (x) have
become due and payable, (y) will become due and payable on the
Final Maturity Date within one year or (z) are to be called for
redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in
the name, and at the expense, of the Company.
SECTION 8.04. APPLICATION OF TRUST MONEY; TRUSTEE ACKNOWLEDGMENT
AND INDEMNITY.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 8.03, and shall
apply the deposited money and the money from United States
Government Obligations in accordance with this Indenture solely
to the payment of principal of and interest on the Securities.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon
request shall acknowledge in writing the discharge of the
Company's obligations under the Securities and this Indenture
except for those surviving obligations specified above. The
Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States
Government Obligations deposited pursuant to Section 8.03 or the
principal and interest received in respect thereof other than any
such tax, fee or other charge which by law is for the account of
the Holders of outstanding Securities.
SECTION 8.05. REPAYMENT TO COMPANY.
Subject to Sections 7.07 and 8.04, the Trustee shall promptly pay
to the Company upon written request any excess money held by it
at any time. The Trustee shall pay to the Company upon written
request any money held by it for the payment of principal or
interest that remains unclaimed for two years; PROVIDED, HOWEVER,
that the Trustee before being required to make any payment may at
the expense of the Company cause to be published once in a
newspaper of general circulation in The City of New York or mail
to each Holder entitled to such money notice that such money
remains unclaimed and that, after a date specified therein which
shall be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Holders
entitled to money must look solely to the Company for payment as
general creditors unless an applicable abandoned property law
designates another person and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.06. REINSTATEMENT.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 8.02 by reason
of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations
under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section
8.02 until such time as the Trustee is permitted to apply all
such money or United States Government Obligations in accordance
with Section 8.02; PROVIDED, HOWEVER, that if the Company has
made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or United
States Government Obligations held by the Trustee.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, when authorized by a resolution
of the Board of Directors, and the Trustee may amend or
supplement this Indenture or the Securities without notice to or
consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
PROVIDED, HOWEVER, that such amendment or supplement does
not adversely affect the rights of any Holder;
(b) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this
Indenture in connection with any transaction complying with
Article Five of this Indenture;
(c) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(d) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under
the TIA;
(e) to make any change that would provide any additional
benefit or rights to the Holders;
(f) to make any other change that does not adversely affect
the rights of any Holder under this Indenture;
(g) to add to the covenants of the Company for the benefit
of the Holders, or to surrender any right or power herein
conferred upon the Company;
(h) to add a Guarantor in accordance with Section 4.13 or
otherwise; or
(i) to secure the Securities pursuant to the requirements
of Section 4.10 or otherwise;
PROVIDED, HOWEVER, that the Company has delivered to the Trustee
an Opinion of Counsel stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company and the Guarantors,
when authorized by a Board Resolution, and the Trustee may
modify, amend or supplement, or waive compliance by the Company
with any provision of, this Indenture or the Securities with the
written consent of the Holders of at least a majority in
principal amount of the outstanding Securities. However, without
the consent of each Holder affected, no such modification,
amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may:
(a) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the Stated Maturity of
any Security or alter the provisions with respect to the
repurchase or redemption of the Securities (other than
provisions relating to Section 4.07 or 4.14);
(c) reduce the rate of or change the time for payment of
interest on any Security,;
(d) make any Security payable in money other than that
stated in the Securities;
(e) make any change in the provisions of this Indenture
relating to the rights of holders of Securities to receive
payments of principal of or premium, if any, or interest on
the Securities;
(f) modify any provisions of Section 6.04 (other than to
add sections of this Indenture or the Securities subject
thereto) or 6.07 or this Section 9.02 (other than to add
sections of this Indenture or the Securities which may not
be modified, amended, supplemented or waived without the
consent of each Holder affected);
(g) reduce the percentage of the principal amount of
outstanding Securities necessary for amendment to or waiver
of compliance with any provision of this Indenture or the
Securities or for waiver of any Default in respect thereof;
(h) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the
Securities (except a rescission of acceleration of the
Securities by the Holders thereof as provided in Section
6.02 and a waiver of the payment default that resulted from
such acceleration);
(i) waive a repurchase or redemption payment with respect
to any Security (other than a payment required by Section
4.07 or 4.14); or
(j) modify the ranking or priority of any Security or the
Subsidiary Guarantee in respect thereof of any Guarantor in
any manner adverse to the Holders of the Securities.
It shall not be necessary for the consent of the Holders
under this Section 9.02 to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders
affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such amendment, supplement
or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.04. RECORD DATE FOR CONSENTS AND EFFECT OF CONSENTS.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Securities entitled
to consent to any amendment, supplement or waiver. If a record
date is fixed, then those persons who were Holders of Securities
at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such
Securities after such record date. No such consent shall be valid
or effective for more than 90 days after such record date. The
Trustee is entitled to rely upon any electronic instruction from
beneficial owners to the Holders of any Global Security. After
an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of
clauses (a) through (i) of Section 9.02. In that case the
amendment, supplement or waiver shall bind each Holder of a
Security who has consented to it and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as
the consenting Holder's Security.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to
deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security about the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so
determine, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects
the changed terms. Failure to make the appropriate notation or
issue a new Security shall not affect the validity and effect of
such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the
execution of any amendment, supplement or waiver authorized
pursuant to this Article Nine is authorized or permitted by this
Indenture and that such amendment, supplement or waiver
constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms (subject to
customary exceptions). The Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an
indemnity reasonably satisfactory to it.
ARTICLE TEN
GUARANTEE
SECTION 10.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally, jointly and
severally, guarantees (each, a "SUBSIDIARY GUARANTEE") to each
Holder of a Security authenticated by the Trustee and to the
Trustee and its successors and assigns that: the principal of
and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity,
by acceleration or otherwise, and interest on the overdue
principal and interest on any overdue interest on the Securities,
to the extent lawful, and all other obligations of the Company to
the Holders or the Trustee hereunder or under the Securities will
be promptly paid in full or performed, all in accordance with the
terms hereof and thereof. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Securities or this
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to
any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Guarantor. Each Guarantor
hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever and
covenants that the Subsidiary Guarantee will not be discharged
except by complete performance of the obligations contained in
the Securities, this Indenture and this Subsidiary Guarantee. If
any Holder or the Trustee is required by any court or otherwise
to return to the Company, any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation
to the Company or any Guarantor, any amount paid by the Company
or any Guarantor to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor further
agrees that, as between each Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided
in Article Six for the purpose of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article Six, such obligations
(whether or not due and payable) shall forth become due and
payable by each Guarantor for the purpose of this Subsidiary
Guarantee.
SECTION 10.02. SEVERABILITY.
In case any provision of this Subsidiary Guarantee shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 10.03. RELEASE OF A GUARANTOR.
If the Securities are defeased in accordance with the terms
of this Indenture, or if Section 5.01(b) is complied with, or if,
subject to the requirements of Section 5.01(a), all or
substantially all of the assets of any Guarantor or all of the
Equity Interests of any Guarantor are sold (including by issuance
or otherwise) by the Company in a transaction constituting an
Asset Sale and (x) the Net Cash Proceeds from such Asset Sale are
used in accordance with Section 4.07 or (y) the Company delivers
to the Trustee an Officers' Certificate to the effect that the
Net Cash Proceeds from such Asset Sale shall be used in
accordance with Section 4.07 and within the time limits specified
by Section 4.07, then each Guarantor (in the case of defeasance)
or such Guarantor (in the case of compliance with Section 5.01(b)
or in the event of a sale or other disposition of all of the
Equity Interests of such Guarantor) or the corporation acquiring
such assets (in the event of a sale or other disposition of all
or substantially all of the assets of such Guarantor) shall be
released and discharged from all obligations under this Article
Ten without any further action required on the part of the
Trustee or any Holder.
The Trustee shall, at the sole cost and expense of the
Company and upon receipt of an Opinion of Counsel that the
provisions of this Section 10.03 have been complied with, deliver
an appropriate instrument evidencing such release upon receipt of
a request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 10.03. Any
Guarantor not so released remains liable for the full amount of
principal of and interest on the Securities and the other
obligations of the Company hereunder as provided in this Article
Ten.
SECTION 10.04. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such
parties that the guarantee by such Guarantor pursuant to its
Subsidiary Guarantee not constitute a fraudulent transfer or
conveyance for purposes of title 11 of the United States Code, as
amended, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar U.S. Federal or state or
other applicable law. To effectuate the foregoing intention,
the Holders and each Guarantor hereby irrevocably agree that the
obligations of each Guarantor under its Subsidiary Guarantee
shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect
of the obligations of such other Guarantor under its Subsidiary
Guarantee or pursuant to Section 10.05, result in the obligations
of such Guarantor under its Subsidiary Guarantee not constituting
such a fraudulent transfer or conveyance under Federal or State
law.
SECTION 10.05. CONTRIBUTION.
In order to provide for just and equitable contribution
among the Guarantors, the Guarantors agree, INTER SE, that in the
event any payment or distribution is made by any Guarantor (a
"FUNDING GUARANTOR") under the Subsidiary Guarantee, such Funding
Guarantor shall be entitled to a contribution from all other
Guarantors in a PRO RATA amount, based on the net assets of each
Guarantor (including the Funding Guarantor), determined in
accordance with GAAP, subject to Section 10.04, for all payments,
damages and expenses incurred by such Funding Guarantor in
discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to
the Subsidiary Guarantee.
SECTION 10.06. EXECUTION OF SECURITY GUARANTEE.
To further evidence their Subsidiary Guarantee to the
Holders, each of the Guarantors hereby agrees to execute a
Security Guarantee to be endorsed on each Security ordered to be
authenticated and delivered by the Trustee. Each Security
Guarantee shall be substantially in the form set forth in
EXHIBITS A AND B hereto. Each Guarantor hereby agrees that its
Subsidiary Guarantee set forth in Section 10.01 shall remain in
full force and effect notwithstanding any failure to endorse on
each Security a Security Guarantee. Each such Security Guarantee
shall be signed on behalf of each Guarantor by two Officers prior
to the authentication of the Security on which it is endorsed,
and the delivery of such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery
of such Security Guarantee on behalf of such Guarantor. Such
signature upon the Security Guarantee may be manual or facsimile
signature of such officer and may be imprinted or otherwise
reproduced on the Security Guarantee, and in case such officer
who shall have signed the Security Guarantee shall cease to be
such officer before the Security on which such Security Guarantee
is endorsed shall have been authenticated and delivered by the
Trustee or disposed of by the Company, such Security nevertheless
may be authenticated and delivered or disposed of as though the
Person who signed the Security Guarantee had not ceased to be
such officer of such Guarantor.
SECTION 10.07. SUBORDINATION OF SUBROGATION AND OTHER RIGHTS.
Each Guarantor hereby agrees that any claim against the
Company that arises from the payment, performance or enforcement
of such Guarantor's obligations under its Subsidiary Guarantee or
this Indenture, including, without limitation, any right of
subrogation, shall be subject and subordinate to, and no payment
with respect to any such claim of such Guarantor shall be made
before, the payment in full in cash of all outstanding Securities
in accordance with the provisions provided therefor in this
Indenture.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the
extent applicable, be governed by such provisions. If any
provision of this Indenture modifies any TIA provision that may
be so modified, such TIA provision shall be deemed to apply to
this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded,
such TIA provision shall be excluded from this Indenture.
The provisions of TIA SectionSection 310 through 317 that
impose duties on any Person (including the provisions
automatically deemed included unless expressly excluded by this
Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 11.02. NOTICES.
Any notice or communication shall be sufficiently given if
in writing and delivered in person, by facsimile and confirmed by
overnight courier, or mailed by first-class mail addressed as
follows:
if to the Company:
Metris Companies Inc.
600 South Highway 169 Interchange Tower
Suite 1800 St, Louis Park, Minnesota 55426-1222
Attention: Chief Financial Officer
Facsimile: (612) 525-5070 Telephone: (612) 525-5094
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Facsimile: (212) 815-5915
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed, first-class, postage prepaid,
to a Holder including any notice delivered in connection with TIA
Section 310(b), TIA Section 313(c), TIA Section 314(a) and TIA
Section 315(b), shall be mailed to him at his address as set
forth on the Security Register and shall be sufficiently given to
him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be
mailed to any Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to
other Holders. Except for a notice to the Trustee, which is
deemed given only when received, if a notice or communication is
mailed in the manner provided above, it is duly given, whether or
not the addressee receives it.
SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture
or the Securities. The Company, the Trustee, the Registrar and
any other person shall have the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the
Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate in form and substance
satisfactory to the Trustee stating that, in the opinion of
the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel in form and substance
satisfactory to the Trustee stating that, in the opinion of
such counsel, all such conditions precedent have been
complied with; PROVIDED, HOWEVER, that with respect to
matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE.
Each certificate with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements
contained in such certificate are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied
with.
SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Paying Agent or Registrar may make
reasonable rules for its functions.
SECTION 11.07. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE,
THE SECURITIES AND THE SUBSIDIARY GUARANTEES WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or stockholder
of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or any Guarantor
under the Securities or the Subsidiary Guarantees, as the case
may be, or this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each
Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration
for the issuance of the Securities and the Subsidiary Guarantees.
SECTION 11.09. SUCCESSORS.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of each
Guarantor in this Indenture shall bind its successor. All
agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 11.10. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together
represent the same agreement.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture, in the Securities
or in the Subsidiary Guarantees shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby, and a Holder shall have no claim therefor against any
party hereto.
SECTION 11.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or a Subsidiary
of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 11.13. LEGAL HOLIDAYS.
If a payment date is not a Business Day at a place of
payment, payment may be made at that place on the next succeeding
Business Day.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
METRIS COMPANIES INC.
By/s/ Ronald N. Zebeck
Name: Ronald N. Zebeck
Title:President
METRIS DIRECT, INC.
By/s/ Ronald N. Zebeck
Name: Ronald N. Zebeck
Title:President
THE BANK OF NEW YORK
By/s/ Michael Culhane
Name: Michael Culhane
Title:Vice President
SECURITIES PURCHASE AGREEMENT
between
METRIS COMPANIES INC.
AND
THOMAS H. LEE EQUITY FUND IV, L.P.,
____________________
November 13, 1998
____________________
SECURITIES PURCHASE AGREEMENT
AGREEMENT made and entered into on this 13th day of
November, 1998, among METRIS COMPANIES INC., a Delaware
corporation (the "Company"), THOMAS H. LEE EQUITY FUND IV, L.P.,
a Delaware limited partnership ("THL Equity Fund", and
collectively with any Affiliate of THL Equity Fund who shall
agree to purchase Bridge Securities pursuant to this Agreement in
accordance with the terms hereof, the "Purchasers").
WITNESSETH
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase from the Company, shares of the
Company's Series B Perpetual Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), and senior notes due 2006
of the Company (the "Senior Notes"), and warrants to purchase
shares of the Common Stock, par value $.01 per share ("Common
Stock"), of the Company (including any rights to acquire Series A
Junior Participating Preferred Stock of the Company ("Junior
Preferred Stock") associated therewith) (the "Warrants" and,
together with the Series B Preferred Stock and the Senior Notes,
the "Bridge Securities"); and
WHEREAS, upon the occurrence of certain events, the Bridge
Securities will automatically be exchanged for shares of the
Company's Series C Perpetual Convertible Preferred Stock, par
value $.01 per share (the "Series C Preferred Stock" and,
together with the Bridge Securities, the "Securities"), each such
share to be convertible in accordance with the Certificate of
Designation of Series C Perpetual Convertible Preferred Stock
into shares of Common Stock (including any rights to acquire
Junior Preferred Stock associated therewith) and shares of the
Non-Voting Stock (as defined herein); and
WHEREAS, the Company and the Purchasers are entering into
this Agreement to provide for said purchase and sale of
Securities and to establish various rights and obligations in
connection therewith, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises and
covenants contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
AUTHORIZATION OF ISSUANCE OF THE SECURITIES
Prior to the Closing, the Company shall have duly authorized
and taken all such corporate and other action which is necessary
in accordance with the terms of this Agreement to effect the valid
issuance, sale and delivery to the Purchasers of the Securities to
be purchased by each Purchaser hereunder.
ARTICLE II
PURCHASE AND SALE OF BRIDGE SECURITIES; CLOSING
Section 2.01. Purchase and Sale. Upon the terms and subject
to the conditions hereinafter set forth, on the Closing Date, the
Company shall issue, sell and deliver to each Purchaser, and each
Purchaser shall purchase from the Company, the Bridge Securities
set forth opposite the name of such Purchaser on Schedule I
hereto, for the purchase price set forth thereon. Payment for the
Bridge Securities shall be made by wire transfer of immediately
available funds to the account of the Company designated on
Schedule 2.01 hereto (or in such other manner as may be agreed by
the Purchasers and the Company), and shall be wired against the
issuance and delivery by the Company on the Closing Date to the
respective Purchasers of certificates in definitive and fully
registered form representing the aggregate number of Bridge
Securities being purchased by each Purchaser. The obligations
undertaken by each of the Purchasers under this Agreement are
several and not joint, and the failure of one Purchaser to comply
with its obligations hereunder shall not relieve the other
Purchaser from its respective obligations hereunder.
Section 2.02. Closing. Subject to the terms and conditions
of this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Hutchins, Wheeler & Dittmar, A Professional Corporation, at 10:00
a.m., Eastern time, on December 3, 1998, or at such other later
date or such other place as the parties shall mutually agree. The
date of the Closing is referred to in this Agreement as the
"Closing Date."
Section 2.03 Deliveries. At or prior to the Closing, the
parties shall deliver all documents, instruments, certificates and
writings required to be executed and delivered by them at or prior
to the Closing pursuant to this Agreement.
Section 2.04 Use of Proceeds. The proceeds from the
purchase and sale of the Bridge Securities hereunder will be used
for general corporate purposes and in connection with the
acquisition simultaneously with the Closing of certain assets of
the PNC National Bank in accordance with the Purchase and Sale
Agreement, dated September 4, 1998, by and between Direct
Merchants Credit Card Bank, National Association and the PNC
National Bank, as amended (the "PNC Agreement").
Section 2.05 Definitions. Terms used as defined terms
herein and not otherwise defined shall have the meanings set forth
in Article XII.
Section 2.06 Allocation of Purchase Price. The parties
hereto agree that $100,000,000 of the purchase price shall be
allocated to the Senior Notes and $200,000,000 shall be allocated
to the Series B Preferred Stock and the Warrants, as an investment
unit, and neither party will take any position for tax purposes
inconsistent with such allocations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser
as follows:
Section 3.01. Organization and Good Standing. The Company
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly
qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the
business transacted by it or the character or location of the
properties owned or leased by it requires such qualification,
except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect. The Company has full
corporate power and authority to own and manage its properties and
to carry on its business as it is now being (and as it is
currently proposed to be) conducted. The copies of the Company's
certificate of incorporation, by-laws and other organizational
documents and instruments (in each case, as amended and/or
restated through the date hereof), heretofore made available to
the Purchasers, are true, complete and correct copies thereof.
The Company, directly or indirectly, owns all of the outstanding
capital stock of each Subsidiary. The Company does not own any
interest in any other company or entity other than the
Subsidiaries set forth on Schedule 3.01(b), and other than
interests in trusts established by the Company or its Subsidiaries
in connection with the Company's securitization program. Each
Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization and has the power and authority to own or lease its
properties and to conduct its business as now conducted. Except
as set forth on Schedule 3.01(c), all outstanding shares of the
capital stock of each Subsidiary have been validly issued and are
fully paid and non-assessable. Except as set forth on Schedule
3.01(d) hereto, there are no outstanding options, warrants,
rights, agreements or commitments of any nature whatsoever of any
third party to subscribe for or purchase any equity security of
any Subsidiary or to cause any Subsidiary to issue any such equity
security.
Section 3.02. Capitalization. The authorized capitalization
of the Company consists of: (a) 100,000,000 shares of Common
Stock, par value $.01 per share, and (b) 10,000,000 shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"),
1,000,000 of which have been designated as Series A Junior
Participating Preferred Stock. At the Closing, (i) 2,400,000
shares of Preferred Stock shall have been designated as Series B
Preferred Stock, (ii) 2,000,000 shares of Preferred Stock shall
have been designated as Series C Preferred Stock, and (iii)
100,000 shares of Preferred Stock shall have been designated as
Series D Preferred Stock. As of September 30, 1998, there were
19,242,000 shares of Common Stock outstanding, and there are
currently no shares of Preferred Stock outstanding. No other
class or series of capital stock of the Company is, or at the
Closing will be, authorized or issued except, as of the Closing,
for the Bridge Securities. All such shares outstanding on the
date hereof are, and the Securities, when issued, will be, duly
authorized, validly issued and fully paid and non-assessable.
Except as set forth on Schedule 3.02, there are no outstanding
options, warrants, rights, puts, calls, commitments, or other
contracts, arrangements, or understandings issued by or binding
upon the Company requiring or providing for, and there are no
outstanding debt or equity securities of the Company which upon
the conversion, exchange or exercise thereof would require or
provide for, the issuance by the Company of any shares of capital
stock (or any other securities of the Company which, with notice,
lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for shares of
capital stock). Except as set forth in Schedule 3.02, there are
no preemptive or other similar rights available to the existing
holders of Common Stock or other securities of the Company. From
the date hereof until the Closing, the Company will not issue any
shares of its capital stock or securities convertible or
exchangeable for shares of capital stock, except for the issuances
set forth on Schedule 3.02.
Section 3.03. Due Authorization; Execution and Delivery.
The Company has all requisite corporate right, power and authority
to enter into this Agreement, the Registration Rights Agreement,
the Warrant Agreement and the Indenture (the Registration Rights
Agreement, the Warrant Agreement and the Indenture referred to
collectively as the "Related Agreements), and to consummate the
transactions contemplated hereby and thereby, including without
limitation the issuance of the Bridge Securities, the issuance of
the Series C Preferred Stock pursuant to the Exchange and the
issuance of Common Stock or Non-Voting Stock upon conversion of
the Series C Preferred Stock and exercise of the Warrants, and the
exercise by the Purchasers of their rights hereunder and
thereunder. The execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby, have been duly
authorized and approved by the Board of Directors of the Company
and no further corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance by
the Company of such agreements or the consummation by the Company
of the transactions contemplated hereby or thereby, including
without limitation the issuance of the Bridge Securities, the
Series C Preferred Stock pursuant to the Exchange, and the Common
Stock or Non-Voting Stock upon conversion of the Series C
Preferred Stock and exercise of the Warrants, and the exercise by
the Purchasers of their rights hereunder and thereunder. This
Agreement constitutes, and the Related Agreements will constitute
as of the Closing Date, the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with
their respective terms, except that such enforcement may be
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights, and the remedies of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may
be brought.
Section 3.04. Absence of Breach; No Conflict. Except as set
forth on Schedule 3.04 hereto, the execution, delivery, and
performance of this Agreement and the Related Agreements by the
Company, the consummation by the Company of the transactions
contemplated hereby and thereby, including without limitation the
issuance of the Bridge Securities, the Series C Preferred Stock
pursuant to the Exchange, and the issuance of Common Stock or Non-
Voting Stock upon conversion of the Series C Preferred Stock and
exercise of the Warrants, and the exercise by the Purchasers of
their rights hereunder and thereunder, will not (a) give rise to a
right to (or otherwise) terminate, accelerate the maturity of or
accelerate or increase any payment due under, trigger a right of
redemption of, conflict with, result in a breach or violation of
any of the terms, conditions or provisions of, constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, require any approval, waiver or
consent under, or result in the creation or imposition of any
obligations on behalf of the Company or any Lien upon any property
or assets of the Company or any Subsidiary pursuant to the terms
of, any note, bond, mortgage, pledge, indenture, deed of trust,
lease, agreement, indemnity, obligation, commitment, instrument,
franchise, license, certificate or permit to which the Company or
any of the Subsidiaries is a party or by which any of their
respective properties or assets may be bound; (b) violate or
conflict with any term or provision of the certificate of
incorporation, by-laws or equivalent organizational instruments
and documents (in each case, as amended and/or restated through
the date hereof) of the Company or any Subsidiary; or (c) assuming
the accuracy of the representations and warranties of the
Purchasers contained in Article IV hereof, violate any judgment,
decree, order, writ, statute, rule or regulation of any judicial,
arbitral, public, or governmental authority having jurisdiction
over the Company, any of the Subsidiaries or any of their
respective properties or assets. None of the issuance of the
Bridge Securities, the issuance of the Series C Preferred Stock
pursuant to the Exchange and the issuance of the Common Stock and
Non-Voting Stock upon conversion thereof, will violate the rules,
regulations or bylaws of the Nasdaq Stock Market or any other
securities exchange on which the securities of the Company are
traded or listed.
Section 3.05. Validity. The Bridge Securities to be issued,
sold and delivered to the Purchasers hereunder, all shares of
Series C Preferred Stock to be issued pursuant to the Exchange and
the Common Stock and Non-Voting Stock issuable upon the
conversion, exercise or exchange of the Warrants or the Series C
Preferred Stock shall, upon such issuance, sale, exercise and
delivery in accordance with this Agreement and the Certificates of
Designation and the Indenture, be duly authorized, validly issued,
fully paid and non-assessable, and free and clear of any and all
Liens and preemptive and other similar rights.
Section 3.06. Securities Law Compliance. Assuming the
representations and warranties of the Purchasers set forth in
Section 4.02 hereof are true and correct in all material respects,
the offer and sale of the Securities and the shares of Common
Stock and Non-Voting Common Stock issuable upon conversion of the
Series C Preferred Stock (collectively, the "Issuable Securities")
pursuant to this Agreement will be exempt from the registration
requirements of the Securities Act. Neither the Company nor any
Person acting on its behalf has, in connection with the offering
of the Securities and the Issuable Securities, engaged in (i) any
form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 502(c) under the
Securities Act), (ii) any action involving a public offering
within the meaning of Section 4(2) of the Securities Act, or (iii)
any action that would require the registration under the
Securities Act of the offering and sale of the Issuable Securities
pursuant to this Agreement or that would violate applicable state
securities or "blue sky" laws. The Company has not made and will
not prior to the Closing make, directly or indirectly, any offer
or sale of the Issuable Securities or of securities of the same or
similar class as the Issuable Securities if, as a result, the
offer and sale contemplated hereby could fail to be entitled to
exemption from the registration requirements of the Securities
Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
Section 3.07. Commission Documents; Financial Information.
(a) The Company has made available to the Purchasers
true and complete copies of all SEC Documents filed with the
Commission prior to the date hereof and will furnish the
Purchasers a true and correct copy of each amendment thereto and
any SEC Documents filed by the Company with the Commission on or
before the Closing Date. As of their respective filing dates, the
SEC Documents complied (or will comply) in all material respects
with the requirements of the Securities Act, Exchange Act and the
rules and regulations of the Commission thereunder applicable to
such SEC Documents, and as of their respective dates none of the
SEC Documents contained (or will contain) any untrue statement of
a material fact or omitted (or will omit) to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the
Company and its Subsidiaries included in the SEC Documents comply
(or will comply) as of their respective dates as to form in all
material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto
(except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q promulgated
by the Commission), and present fairly (or will present fairly) as
of their respective dates the consolidated financial position of
the Company and the Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated
cash flows for each of the respective periods, in conformity with
GAAP. As used in this Agreement, the consolidated balance sheet
of the Company and its Subsidiaries at September 30, 1998
previously provided to the Purchasers is hereinafter referred to
as the "Balance Sheet", and September 30, 1998 is hereinafter
referred to as the "Balance Sheet Date."
(b) Except as and to the extent expressly set forth in
the Balance Sheet, or the notes, schedules or exhibits thereto, or
as disclosed in the SEC Documents, (i) as of the Balance Sheet
Date, neither the Company nor the Subsidiaries had any material
liabilities or obligations (whether absolute, contingent, accrued
or otherwise) that would be required to be included on a balance
sheet or in the notes, schedules or exhibits thereto prepared in
accordance with GAAP and (ii) since the Balance Sheet Date, the
Company and its Subsidiaries have not incurred any such material
liabilities or obligations other than in the ordinary course of
business.
Section 3.08. Approvals; Compliance with Laws; Licenses and
Authorities.
(a) Except as set forth on Schedule 3.08(a) and
assuming the accuracy of the representations and warranties of the
Purchasers contained in Article IV hereof, no notices, reports or
other filings are required to be made by the Company or any
Subsidiary with, nor are any consents, registrations,
applications, approvals, permits, licenses or authorizations
required to be obtained by the Company or any Subsidiary from, any
public or governmental authority or other third party in
connection with the execution and delivery of this Agreement the
consummation by the Company of the transactions contemplated
hereby, or the exercise by the Purchasers of their rights
hereunder, except for any of the foregoing, the failure of which
to make or obtain would not have a Material Adverse Effect or
adversely affect the Purchasers' rights hereunder.
(b) Except as set forth on Schedule 3.08(b) and except
as would not have a Material Adverse Effect, the business of the
Company and each of the Subsidiaries has been and is presently
being conducted in compliance with all applicable federal, state,
county and local ordinances, statutes, rules, regulations and laws
(collectively "Laws"), including without limitation, any consumer
lending Laws of any Authority to which the Company's or its
Subsidiaries' operations are or have been subject.
(c) Except as disclosed on Schedule 3.08(c) and except
as would not have a Material Adverse Effect, (i) the Company and
its Subsidiaries have all permits or licenses of all Authorities
that are necessary to carry on the business of the Company and its
Subsidiaries as now conducted; (ii) each such permit or license is
in full force and effect and has not been revoked, canceled or
encumbered and the Company or relevant Subsidiary is in compliance
therewith in all respects; and (iii) no such permit or license
will be terminated or adversely affected by virtue of the
execution of the Agreement or the performance by the parties of
their obligations or the exercise by the parties of their rights
hereunder.
Section 3.09. Litigation. Except as set forth in SEC
Documents filed with the Commission prior to the date of this
Agreement or as set forth on Schedule 3.09, there are no pending
actions, suits, proceedings, arbitrations or investigations
against or affecting the Company or any of its Subsidiaries or any
of their respective properties, assets or operations, or with
respect to which the Company or any such Subsidiary is responsible
by way of indemnity or otherwise (a "Material Claim"), that are
required under the Securities Act or Exchange Act to be described
in such SEC Documents or which, if there is an adverse decision,
could singly, or in the aggregate, with all such other actions,
suits, investigations or proceedings, have a Material Adverse
Effect and, to the knowledge of the Company, no such actions,
suits, proceedings or investigations are threatened. No adverse
development has occurred with respect to any Material Claim except
as disclosed in the SEC Documents filed with the Commission prior
to the date of this Agreement.
Section 3.10. Tax Matters.
Except as described in Schedule 3.10:
(a) Each of the Company and its Subsidiaries has filed or
caused to be filed, or has properly filed extensions for, all
material Tax Returns that are required to be filed by or respect
to the Company, any of its Subsidiaries or the business of the
Company and its Subsidiaries; and each of the Company and its
Subsidiaries has timely paid or caused to be paid all material
Taxes with respect thereto whether or not shown on said Tax
Returns (and on all material assessments received by it) to the
extent that such Taxes and assessments have become due, except for
any failure to so file or cause to be filed, any failure to so
file an extension, or any failure to so pay or cause to be paid,
in each case that would not, individually or in the aggregate,
have a Material Adverse Effect, and, except for any failure to pay
or cause to be paid Taxes the validity or amount of which is being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves, in accordance with generally
accepted accounting principles, have been set aside. All said Tax
Returns are complete and accurate in all respects and have been
prepared in compliance with all applicable laws and regulations,
except for any such failure to be complete and accurate or to be
so prepared that would not, individually or in the aggregate, have
a Material Adverse Effect. The Company and its Subsidiaries
reasonably believe (i) the reserves on the Balance Sheet of the
Company and its Subsidiaries for Taxes due or owing by the Company
and its Subsidiaries to be adequate in all material respects for
all unpaid Taxes, whether or not disputed, of the Company and its
Subsidiaries for all fiscal years that, as of the Balance Sheet
Date, had not been examined and reported on by any taxing
authorities (or closed by applicable statutes), and (ii) that as
of the Closing Date, such reserves as adjusted on the books in
accordance with past practice, will be sufficient for the then-
unpaid taxes of the Company and its Subsidiaries attributable to
periods prior to and ending on the Closing Date, except in either
case where any failure to establish any such reserve would not
individually or in the aggregate constitute a Material Adverse
Effect.
(b) Except for the Tax Sharing Agreement with Fingerhut
Companies, Inc. ("Fingerhut"), dated October 31, 1996, as amended
as of January 1, 1998 (the "Tax Sharing Agreement"), neither the
Company nor any Subsidiary is a party to nor is bound by any tax
allocation or sharing agreement with a third party allocating
liability for Taxes among members of a combined, consolidated or
unitary group.
(c) There are no actions or proceedings currently pending
or, to the best knowledge of the Company or any of its
Subsidiaries, threatened in writing against the Company, any of
its Subsidiaries or any affiliated group with respect to the
Company, any of its Subsidiaries or the business of the Company
and its Subsidiaries by any governmental authority for the
assessment or collection of material Taxes, and no claim for the
assessment or collection of material Taxes has been asserted in
writing against the Company or any of its Subsidiaries or any
affiliate group with respect to the Company, any of its
Subsidiaries or the business of the Company and its Subsidiaries,
in either case which singly or in the aggregate are likely to have
a Material Adverse Effect.
(d) Except for the IRS ruling relating to the distribution
of stock of the Company by Fingerhut, neither the Company nor any
Subsidiary has received any written ruling of a taxing authority
related to Taxes or entered into any written and legally binding
agreement with a taxing authority relating to Taxes which
currently has any ongoing effect on the Company. The IRS ruling
relating to the distribution of stock of the Company by Fingerhut
has not been withdrawn or revoked by the IRS.
(e) During the past three years, no written claim has ever
been made on the Company or any Subsidiary by a taxing authority
of a jurisdiction where the Company or any Subsidiary does not
file, or has not filed, Tax Returns to the effect that the Company
or such Subsidiary is or may be subject to the imposition of any
Tax by that jurisdiction.
Section 3.11. Material Contracts. All of the material
contracts of the Company or any of its Subsidiaries that are
required to be described in the SEC Documents or to be filed as
exhibits thereto prior to the date hereof are described in the SEC
Documents filed prior to the date hereof or filed as exhibits
thereto and are in full force and effect. True and complete
copies of all such material contracts have been made available to
the Purchasers. All material contracts to which the Company or
its Subsidiaries are parties on or prior to the date hereof which
will be required to be described or filed as an Exhibit in the SEC
Documents required to be filed following the date hereof,
including any amendment to the PNC Agreement have been provided to
the Purchasers or are listed on Schedule 3.11 and are in full
force and effect. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any other party is in
material breach of or in default under any such contract.
Section 3.12. Title to Properties, Encumbrances. Except as
set forth on Schedule 3.12, each of the Company and its
Subsidiaries has good and valid title to its respective assets,
free and clear of all defects and Liens except (a) matters
specified in Schedule 3.12; (b) materialmen's, mechanics',
carriers', workmen's, warehousemen's, repairmen's, or other like
Liens arising in the ordinary course of business; (c) Liens for
current Taxes not yet due and payable; (d) Liens or minor
imperfections of title that do not materially interfere with the
use or materially detract from the value of such property and (e)
Liens permitted by Section 6.03 of the Credit Agreement.
Section 3.13. Plant and Equipment; Sufficiency Of Assets.
(a) The plant and equipment used by the Company and its
Subsidiaries has been maintained to the standards of operating
condition and repair typical of companies engaged in the same or
similar businesses except as would not have a Material Adverse
Effect.
(b) Each of the Company and its Subsidiaries own or
have the lawful right to use all assets, properties, operating
rights, easements, contracts, leases, licenses, and other
instruments necessary to operate their businesses lawfully and to
maintain the same as presently conducted except as would not have
a Material Adverse Effect.
Section 3.14. Benefits Plans.
(a) Schedule 3.14(a) contains a list of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(l) of ERISA),
"employee benefit plans" (as defined in Section 3(3) of ERISA),
and all other material Benefit Plans maintained, or contributed
to, by the Company for the benefit of any current or former
employees, officers, or directors of the Company or any of its
Subsidiaries. The Company has made available to the Purchasers
true, complete, and correct copies of each such Benefit Plan (or,
in the case of any unwritten Benefit Plans, descriptions thereof).
Each Benefit Plan has been administered in all material respects
in accordance with its terms. The Company, its Subsidiaries, and
all the Benefit Plans are all in compliance in all material
respects with applicable provisions of applicable law, including
ERISA and the Code. All contributions required to be made under
the terms of each Benefit Plan have been timely made or have been
reflected on the most recent audited financial statements included
in the SEC Documents.
(b) Each Pension Plan has been the subject of a
determination letter from the Internal Revenue Service to the
effect that such plan is qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code,
and no such determination letter has been revoked nor has any
event occurred since the issuance of such determination letter
that would adversely affect the plan's qualification or materially
increase its costs.
(c) With respect to each Benefit Plan that is an
employee welfare benefit plan, there are no understandings,
agreements, or undertakings, written or oral, that would prevent
any such plan from being amended or terminated without material
liability to the Company or any Subsidiary on or at any time after
the Closing Date. No employee welfare benefit plan of the Company
or any Subsidiary provides for continuing benefits or coverages
after termination or retirement from employment, except for
benefits mandated by Section 4980B of the Code or applicable State
statute. None of the Benefit Plans is a "multiple employer
welfare arrangement" as described in Section 3(40) of ERISA.
(d) None of the Company, any Subsidiary, or any person
or entity that, together with the Company, is treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA
maintains, contributes to, or has any liability or contingent
liability to the Pension Benefit Guaranty Corporation or any other
person, plan, or entity under or with respect to (i) a Pension
Plan subject to Title IV of ERISA (including under Section 4069 of
ERISA) or Section 412 of the Code, or (ii) a "multiemployer
pension plan", as defined in Section 3(37) of ERISA.
(e) Except as disclosed in Schedule 3.14(e), the
consummation of the transactions contemplated by this Agreement
would not, directly or indirectly (including, without limitation,
as a result of any termination of employment prior to or following
the Closing Date) reasonably be expected to (i) entitle any
current or former employee, consultant, or director of the Company
or any Subsidiary to any payment (including severance pay, change
of control payments, or similar compensation), (ii) result in the
vesting or acceleration of any benefits under any Benefit Plan, or
(iii) result in any material increase in benefits under any
Benefit Plan.
(f) Neither the Company nor any Subsidiary maintains
any compensation plans, programs, or arrangements the payments
under which would not be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and the
regulations issued thereunder, except for any such payments which
in the aggregate would not constitute a Material Adverse Effect.
(g) As a result, directly or indirectly, of the
transactions contemplated by this Agreement (including, without
limitation, as a result of any termination of employment prior to
or following the Closing Date) none of the Company or any of its
subsidiaries will be obligated to make a payment to an individual
who is a "disqualified individual" that would be characterized as
an "excess parachute payment" (as such terms are defined in
Section 280G(b)(1) of the Code) without regard to whether such
payment is reasonable compensation for personal services performed
or to be performed in the future, except for any such payments
which in the aggregate would not constitute a Material Adverse
Effect.
Section 3.15. Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is
party to any labor or collective bargaining agreement and there
are no labor or collective bargaining agreements which pertain to
employees of the Company or any of its Subsidiaries.
(b) No employees of the Company or any Subsidiary are
represented by any labor organization. No labor organization or
group of employees of the Company or any of its Subsidiaries has
made a pending demand for recognition or certification, and there
are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or, to the
knowledge of the Company, threatened to be brought or filed, with
the NLRB or any other labor relations tribunal or authority. To
the knowledge of the Company, there are no organizing activities
involving the Company or any of its Subsidiaries pending with, or
threatened by, any labor organization.
(c) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other
material labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company or any of its
Subsidiaries. Except as would not result in any Material Adverse
Effect, there are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of the Company, threatened
by or on behalf of any employee or group of employees of the
Company or any of its Subsidiaries.
Section 3.16. Environmental Matters.
(a) Except as set forth in Schedule 3.16, (i) each of
the Company and its Subsidiaries is in material compliance with
all Environmental Laws and (ii) neither the Company nor any of its
Subsidiaries has received any written communication from a
governmental authority with respect to such compliance or the
failure thereof.
(b) Except as set forth in Schedule 3.16, (i) there is
no civil, criminal or administrative action, claim, demand,
investigation or notice relating to a violation of an
Environmental Law (an "Environmental Claim") pending or, to the
knowledge of the Company, threatened and (ii) to the knowledge of
the Company, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any
chemical, pollutant, contaminant, waste, toxic substance,
petroleum or petroleum product, that would form the basis of any
Environmental Claim, in either case (A) against the Company or any
of its Subsidiaries, (B) against any person or entity whose
liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (C) involving any real or
personal property which the Company or any of its Subsidiaries
owns, leases or manages except, in each case, as would not have a
Material Adverse Effect.
Section 3.17. Investment Company; Operating Company; Bank
Regulatory Matters. Subject to the accuracy of the
representations and warranties of the Purchasers contained in
Section 4.06, the Company is not (and immediately after
consummation of the transactions contemplated by this Agreement
will not be) an investment company, a company controlled by an
investment company, or otherwise subject to any provisions of the
Investment Company Act of 1940, as amended, and/or the rules and
regulations of the Commission promulgated thereunder. The Company
is an "operating company" within the meaning of Department of
Labor Regulation 2510.3-101. The Company is not a "bank holding
company" as that term is defined in the Bank Holding Company Act
of 1956, and Direct Merchants Credit Card Bank, National
Association and each other Subsidiary of the Company which engages
in credit transactions; (i) engages only in credit card
operations, (ii) does not accept demand deposits or deposits that
the depositor may withdraw by check or similar means for payment
to third parties or others, (iii) does not accept any savings or
time deposits of less than $100,000, (iv) maintains only one
office that accepts deposits, and (v) does not engage in the
business of making commercial loans.
Section 3.18. No Existing Violation, Default, Etc. Neither
the Company nor any of its Subsidiaries is (a) in violation of any
provision of its certificate of incorporation, by-laws or other
organizational documents or (b) in violation of any applicable
Law, stock exchange rule or regulation, which violation has or
would reasonably be expected to have a Material Adverse Effect.
Except as disclosed on Schedule 3.18, no breach, event of default
or event that, but for the giving of notice or the lapse of time
or both, would constitute an event of default exists under any
indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, permit, license or
other agreement to which the Company or any of its Subsidiaries is
a party or by which the Company or any such Subsidiary is bound or
to which any of the properties, assets or operations of the
Company or any such Subsidiary is subject, which breach, event of
default, or event that, but for the giving of notice or the lapse
of time or both, would constitute an event of default, has or
would reasonably be expected to have a Material Adverse Effect.
Section 3.19. Affiliate Transactions. Except as disclosed
in the SEC Documents or on Schedule 3.19, the Company and its
Subsidiaries have not entered into any material transaction or
material series of transactions with any current or former
director, officer, employee or Affiliate of the Company.
Section 3.20. Insurance. The Company and its Subsidiaries,
in the reasonable determination of the Company's management,
maintain with financially sound and reputable insurers insurance
against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or a
similar business and similarly situated, and of such types and in
such amounts as is customarily carried under similar circumstances
by such other corporations.
Section 3.21. Unlawful Payments and Contributions. Neither
the Company nor any of its directors, officers or, to the
Company's knowledge, any of its other employees or agents has (a)
used any Company funds for any unlawful contribution, endorsement,
gift, entertainment or other unlawful expense relating to
political activity; (b) made any direct or indirect unlawful
payment to any government official or employee from Company funds;
(c) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended in connection with the
Company's and its Subsidiaries' business; or (d) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment to any person or entity with respect to matters pertaining
to the Company.
Section 3.22. Absence of Certain Events; No Material Adverse
Change. Except as disclosed in the SEC Documents filed with the
Commission prior to the date hereof, since the Balance Sheet Date,
the Company and its Subsidiaries each has conducted its business
operations in the ordinary course and there has not occurred any
event or condition having or, that is reasonably likely to have, a
Material Adverse Effect. Without limiting the generality of the
foregoing, other than as is disclosed in the SEC Documents filed
with the Commission prior to the date hereof or on Schedule 3.22
hereto, since the Balance Sheet Date there has not occurred:
(a) any change or agreement to change the character or
nature of the business of the Company or any of its Subsidiaries;
(b) any purchase, sale, transfer, assignment,
conveyance or pledge of the assets or properties of the Company or
any of its Subsidiaries, except in the ordinary course of
business;
(c) any waiver or modification by the Company or any of
its Subsidiaries of any right or rights of substantial value, or
any payment, direct or indirect, in satisfaction of any liability,
in each case, having a Material Adverse Effect;
(d) any liability, contract, agreement, license or
other commitment entered into or assumed by or on behalf of the
Company or any of its Subsidiaries relating to the business,
assets or properties of the Company or any of its Subsidiaries,
whether oral or written, except in the ordinary course of
business;
(e) any loan, advance or capital expenditure by the
Company or any of its Subsidiaries, except for loans, advances and
capital expenditures made in the ordinary course of business;
(f) any change in the accounting principles, methods,
practices or procedures followed by the Company in connection with
the business of the Company or any change in the depreciation or
amortization policies or rates theretofore adopted by the Company
in connection with the business of the Company and its
Subsidiaries;
(g) any declaration or payment of any dividends, or
other distributions in respect of the outstanding shares of
capital stock of the Company or any of its Subsidiaries (other
than dividends declared or paid by wholly-owned Subsidiaries);
(h) any issuance of any shares of capital stock of the
Company or any of its Subsidiaries or any other change in the
authorized capitalization of the Company or any of its
Subsidiaries, except as contemplated by this Agreement;
(i) any grant or award of any options, warrants,
conversion rights or other rights to acquire any shares of capital
stock of the Company or any of its Subsidiaries, except as
contemplated by this Agreement or except pursuant to employee
benefit plans, programs or arrangements in existence on the date
hereof, in the ordinary course of business consistent with past
practice;
(j) (a) any granting by the Company or any of its
Subsidiaries to any employee earning in excess of $100,000 per
year any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most
recent audited financial statements included in the SEC Documents,
(b) any granting by the Company or any of its Subsidiaries to any
employee earning in excess of $100,000 per year of any increase in
severance or termination pay, except as was required under any
employment, severance, or termination agreements in effect as of
the date of the most recent audited financial statements included
in the SEC documents, or (c) any entry by the Company or any of
its Subsidiaries into any employment, severance, or termination
agreement with any employee earning in excess of $100,000 per
year; or
(k) any adoption, or amendment in any material respect,
by the Company or any of its Subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation,
severance, change of control, retention, disability, death
benefit, hospitalization, medical, or other plan, arrangement, or
understanding (whether or not legally binding) providing benefits
to any current or former employee, officer, or director of the
Company or any of its Subsidiaries (collectively, "Benefit
Plans").
Section 3.23 Year 2000. The Company has engaged in a
review of the hardware, software and firmware products used by the
Company and its Subsidiaries in its business (collectively, the
"Software") which it believes to be adequate to identify any
material deficiency in "Year 2000 Capabilities". "Year 2000
Capabilities" means the ability of the Software (i) to manage and
manipulate data involving dates, including single century formulas
and multi-century formulas, and to not generate incorrect values
or invalid results involving such dates, (ii) to provide that all
date-related user interface functionalities and data fields
include the indication of century, and (iii) to provide that all
date-related data interface functionalities include the indication
of century. The Company is taking appropriate steps to identify
exposure to deficiencies in Year 2000 Capabilities resulting from
the Year 2000 Capabilities of its vendors, and to address them on
a timely basis. In addition, the Company believes that it has
adequate resources to cause its Software to include Year 2000
Capabilities which currently may not contain them and that the
costs of causing its Software to include Year 2000 Capabilities
will not be material to the Company's consolidated financial
position, results of operations or cashflows.
Section 3.24. Full Disclosure. None of the statements made
by the Company in this Agreement (including, without limitation,
the representations and warranties made by the Company herein and
in the schedules and exhibits hereto which are incorporated by
reference herein and which constitute an integral part of this
Agreement) contains (or will contain on the Closing Date) any
untrue statement of a material fact, or omits (or will omit on the
Closing Date) to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally as to itself (but not
jointly) represents and warrants and covenants to the Company as
follows:
Section 4.01. Organization and Standing. Each of the
Purchasers which is an entity represents and warrants that it is
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation.
Section 4.02. Investment Representation. Each Purchaser
represents and warrants that it is an "Accredited Investor" within
the meaning of Rule 501(a) of Regulation D under the Securities
Act, and it is or will be acquiring the Issuable Securities for
its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities Act.
It understands that the Issuable Securities have not been
registered under the Securities Act by reason of a specific
exemption from the registration provisions thereof which depends
upon, among other things, the bona fide nature of their investment
intent as expressed herein. Each Purchaser hereby acknowledges
and agrees that upon the original issuance thereof, and until such
time as the same is no longer required under the applicable
requirements of the Securities Act and the rules and regulations
thereunder, the Issuable Securities may bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE LAWS REGULATING THE SALE OF
SECURITIES AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
Section 4.03. Due Authorization; Execution and Delivery.
Each of the Purchasers represents and warrants that it has the
requisite right, power and authority to enter into this Agreement
and the Registration Rights Agreement, and to consummate the
transactions contemplated hereby and thereby, and that the
execution, delivery and performance of each of this Agreement and
the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly
authorized by all necessary action on its behalf, and this
Agreement constitutes, and when executed and delivered the
Registration Rights Agreement will constitute, the legal, valid
and binding obligation of it, enforceable against it in accordance
with the terms hereof and thereof, except that such enforcement
may be subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights, and the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may
be brought.
Section 4.04. Absence of Breach; No Conflict. Each of the
Purchasers represents and warrants that the execution, delivery
and performance of this Agreement and the Registration Rights
Agreement, and the consummation of the transactions contemplated
hereby and thereby, will not (a) conflict with, or constitute a
default under, any agreement to which such Purchaser is a party or
by which any of the properties or assets of such Purchaser may be
bound; (b) violate or conflict with the governing organizational
instruments and documents (in each case, as amended and/or
restated through the date hereof) of such Purchaser or (c)
assuming that the Company is an "operating company" as such term
is defined in Department of Labor Regulation 2510.3-101, violate
any statute, rule, regulation, order, judgment, writ or decree of
any judicial public or governmental authority having jurisdiction
over such Purchaser, or any of the properties or assets of such
Purchaser, which violation would prevent, impair, hinder or delay
the consummation of the transactions contemplated by this
Agreement or the Registration Rights Agreement.
Section 4.05. No Consents. Each of the Purchasers
represents and warrants that no consent, authorization or approval
of, or filing with, any person or any federal, state or local
government department, commission, board, agency or
instrumentality is required to be made or obtained by such
Purchaser in connection with its execution and performance of this
Agreement or the Registration Rights Agreement except in
connection with the Exchange as may be required under the HSR Act
or pursuant to the laws, rules and regulations of the Office of
the Comptroller of the Currency (the "OCC"), and except for such
consents, authorizations, approvals and filings the absence of
which would not prevent, impair, hinder or delay the consummation
of the transactions contemplated by this Agreement or the
Registration Rights Agreement.
Section 4.06. Investment Company. Each Purchaser represents
and warrants that it is not (and immediately after consummation of
the transactions contemplated by this Agreement will not be) an
investment company, a company controlled by an investment company,
or otherwise subject to any provisions of the Investment Company
Act of 1940, as amended, and/or the rules and regulations of the
Commission promulgated thereunder.
Section 4.07. Ownership of Stock of the Company. Each of
the Purchasers represents and warrants that it does not own
beneficially or of record any shares of capital stock or other
securities of the Company and does not have any present intention
or plan to acquire shares of capital stock or other securities of
the Company except pursuant to this Agreement and the transactions
contemplated hereby.
4.08. Certain Regulatory Matters. Each Purchaser
represents and warrants that it is not aware of any facts or
circumstances regarding such Purchaser, including the record or
beneficial ownership of any securities by such Purchaser, which
can reasonably be expected to cause the OCC, the Department of
Justice or the Federal Trade Commission to prohibit such
Purchaser's acquisition of Securities contemplated hereunder or
the exercise by such Purchaser of its rights contained herein
pursuant to their regulatory authority over such matters.
4.09. Due Diligence. Without in any way affecting or
mitigating the representations and warranties of the Company
contained in Article III of this Agreement or affecting any rights
resulting from a breach thereof, each of the Purchasers
acknowledges that it has had an opportunity to engage in due
diligence on the Company and has had an opportunity to discuss the
Company and its business and prospects with management of the
Company.
ARTICLE V
COVENANTS
Section 5.01. Covenants of the Company
(a) Access and Confidentiality. Upon reasonable notice
prior to the Closing, the Company shall (and shall cause each of
its Subsidiaries to) afford the Purchasers and their respective
representatives reasonable access during normal business hours to
its properties, books, contracts and records and personnel and
advisors and the Company shall (and shall cause each of the
Subsidiaries to) furnish promptly to the Purchasers all
information concerning its business, properties and personnel as
the Purchasers or their respective representatives may reasonably
request, provided that any review will be conducted in a way that
will not interfere unreasonably with the conduct of the Company's
business.
(b) Announcements. No party or any Affiliate, officer or
agent of the parties hereto shall make any announcement concerning
the transactions contemplated hereby without the other parties'
written consent, which consent shall not unreasonably be withheld;
provided, however, that any party or such Affiliate, officer or
agent may make any announcements required by applicable law so
long as the text of such announcement shall have been provided to
the parties hereto prior to the making of such announcement. The
parties agree to consult with each other with respect to
announcements concerning the transactions contemplated hereby.
(c) Securities. The Company hereby covenants to each of the
Purchasers, that from and after the date hereof and so long as any
Purchaser owns any Issuable Securities, the Company shall:
(i) Unissued shares of Common Stock and Non-Voting
Stock; Securities. (A) Reserve and keep available out of its
authorized but unissued shares of Series C Preferred Stock, Common
Stock and Non-Voting Stock (including any shares held by the
Company in its corporate treasury), for the purpose of effecting
the Exchange and the exercise in full of those conversion rights
related to the Series C Preferred Stock, such number of its duly
authorized shares of Series C Preferred Stock, Common Stock and,
if applicable, shares of Non-Voting Stock, as shall be sufficient
to effect such exercise, and if at any time the number of
authorized but unissued shares of Series C Preferred Stock, Common
Stock or, if applicable, shares of Non-Voting Stock shall not be
sufficient to effect such exercise, subject to any required
approval by the holders of the Common Stock and as may otherwise
be required pursuant to the General Corporation Law of Delaware
and applicable federal and state securities laws, the Company
shall take all such corporate action as may be necessary (and
desirable in the reasonable discretion of the Purchasers) to
increase its authorized but unissued shares of Series C Preferred
Stock, Common Stock and, if applicable, shares of Non-Voting
Stock, to such number of shares as shall be sufficient for such
purposes, and (B) reserve and keep available out of its authorized
but unissued shares of Series B Preferred Stock, for the purpose
of issuing dividends on the Series B Preferred Stock, such number
of its duly authorized shares of Series B Preferred Stock as shall
be sufficient to effect any such dividend contemplated by the
Series B Preferred Stock, and if at any time the number of
authorized but unissued Series B Preferred Stock shall not be
sufficient to effect such dividends, subject to any required
approval by the holders of the Common Stock and as may otherwise
be required pursuant to the General Corporation Law of Delaware
and applicable federal and state securities laws, the Company
shall take all corporate action as may be necessary (and desirable
in the reasonable discretion of the Purchasers) to increase its
authorized but unissued Series B Preferred Stock to such number of
shares as shall be sufficient for such purposes.
(ii) Exchange of Certificates. Upon surrender by the
holder of any certificates representing Securities (or securities
issued upon exchange, conversion or exercise thereof) for exchange
or reissuance at the office of the Company, cause to be issued in
exchange therefor new certificates in such denomination or
denominations as may be requested for the same aggregate number of
Securities (or securities issued upon exchange, conversion or
exercise thereof) represented by the certificates so surrendered
and registered as such holder may request, subject to the
provisions hereof.
(iii) Replacement of Certificates. Upon receipt by
the Company of evidence reasonably satisfactory to it of loss,
theft, destruction or mutilation of any certificate evidencing any
of the Securities (or securities issued upon exchange, conversion
or exercise thereof), and (in case of loss, theft or destruction)
of indemnity reasonably satisfactory to the Company, and upon the
surrender and cancellation of such certificate, if mutilated, the
Company shall make and deliver in lieu of such certificate a new
certificate for the number of Securities (or securities issued
upon exchange, conversion or exercise thereof), as the case may
be, evidenced by such lost, stolen, destroyed or mutilated
certificate which remains outstanding. A Purchaser's (which term
does not include any successors or assigns of the initial
Purchasers) agreement of indemnity shall constitute indemnity
satisfactory to the Company for the purposes of this Section
5.01(c) without the need of any further surety or bond.
(iv) Government and Other Approvals. Promptly prepare,
submit and file with all public and governmental authorities, all
applications, notices, registrations, certificates, statements and
such other information, documents and instruments as may be
required pursuant to any federal, state, local or foreign Law or
rule or regulation of the NASD or any securities exchange, in
connection with the consummation of the transactions contemplated
by this Agreement, including the effect of any dividends, exchange
or conversion rights, anti-dilution provisions or Board control
contemplated by the terms of the Securities or other securities of
the Company which may be acquired by the Purchasers pursuant to
this Agreement. The Company shall use its best efforts to obtain
any necessary consents or approvals from any Authority in
connection with the consummation of the transactions contemplated
by this Agreement, including the effect of any dividends, exchange
or conversion rights, anti-dilution provisions or Board control
contemplated by the terms of the Securities or other securities of
the Company which may be acquired by the Purchasers pursuant to
this Agreement and shall amend in form reasonably satisfactory to
the Purchasers any and all agreements to which the Company is a
party or to which its assets are subject, including, without
limitation (A) that certain Rights Agreement, dated as of
September 10, 1998, among the Company and Norwest Bank Minnesota,
National Association, as Rights Agent, concerning the rights to
acquire Series A Junior Participating Preferred Stock of the
Company, (as in effect on the date hereof, the "Rights Agreement")
(provided, however, that in lieu of amending the Rights Agreement
the Company may, prior to the Closing, redeem all outstanding
rights issued pursuant thereto in accordance with the terms of the
Rights Agreement), (B) the following agreements among the Company
and Fingerhut or its subsidiaries and affiliates: Data Sharing
Agreement, dated October 31, 1996; Database Access Agreement,
dated October 31, 1996; Co-Brand Credit Card Agreement, dated
October 31, 1996; Card Registration Agreement, dated
February 5, 1998; Extended Service Plan Agreement, dated October
31, 1996; Administrative Service Agreement, dated October 31, 1996
(collectively, the "Fingerhut Agreements"), (C) the Amended and
Restated Credit Agreement, dated as of June 30, 1998, among the
Company, certain lenders party thereto and the Chase Manhattan
Bank, as Administrative Agent (the "Credit Agreement"), and (D)
the severance and stock option agreements entered into by and
between the Company and those persons listed on Schedule 5.03, so
as to exclude from the provisions thereof the effect of the
Purchasers' purchase of the Issuable Securities contemplated
hereby and the other transactions contemplated by this Agreement,
including the effect of any exchange or conversion rights,
dividends, anti-dilution provisions or Board control contemplated
by the terms of the Securities or other securities of the Company
which may be acquired by the Purchasers pursuant to this
Agreement; provided that the amendment to the Agreement described
in clause (D) shall not be applicable in the event the Purchasers
exercise their right to control the Company's Board of Directors.
(d) Operating Company; Bank Holding Company. The Company
will not take any action that would cause it to cease to be an
"operating company" within the meaning of Department of Labor
Regulation 2510.3-101 or become a "bank holding company" within
the meaning of the Bank Holding Company Act of 1956.
(e) Tax Matters. The Purchasers intend that no pay in
kind dividends on the Series B Preferred Stock or the Series C
Preferred Stock will, when paid or accrued, be includible in the
Purchasers' gross income for federal, state or local tax purposes.
Accordingly, unless the Company concludes in good faith that there
is no reasonable basis to make or file any Tax Return that is
consistent with such intention, the Company shall not make or file
any Tax Return that is inconsistent with such intention. Moreover,
the Company agrees that if for any reason the pay in kind
dividends which accrue or are paid with respect to the Series B
Preferred Stock or Series C Preferred Stock become taxable as
income for tax purposes when paid or accrued, the Company shall
pay to the holders of such securities such additional amount (the
"Gross Up Amount") as may be necessary to fund any federal, state
or local income tax payable with respect to such dividend. Such
Gross Up Amount shall also include an amount necessary to fund the
payment of any such income tax payable with respect to the Gross
Up Amount. Such Gross Up Amount shall be paid upon notice to the
Company at least ten (10) days before the date on which the
relevant income tax payment is due or made. Prior to receiving
any taxable distribution from the Company, each Purchaser shall
provide the Company with such documentation as may be reasonably
requested by the Company in order to make such distribution
without withholding for tax purposes. All amounts paid or accrued
on any Security shall be net of applicable withholding taxes.
(f) OCC Authorization. The Company and the Purchasers shall
use their reasonable best efforts to obtain the consent of the OCC
and any other applicable Authority for the Purchasers' investment
contemplated hereby, including without limitation, the Purchasers'
exercise of all rights set forth in Section 5.04 hereof and in the
terms of the Series C Preferred Stock relating to conversion of
the Series C Preferred Stock, anti-dilution and Board election
rights. The Company and the Purchasers shall use their reasonable
best efforts to cause their representatives to meet with
representatives of the OCC as soon as practicable following the
signing of this Agreement, and in any event prior to November 20,
1998, for the purpose of obtaining assurance that the OCC would
permit the Purchasers' investment contemplated hereby, including
without limitation the Purchasers' exercise of all rights set
forth in the Series C Preferred Stock relating to the conversion
of the Series C Preferred Stock, anti-dilution and Board election
rights.
(g) Equity Purchase Rights. The Company hereby grants to
each Significant Purchaser, the right to purchase all or part of
its Pro Rata Share of New Securities (as defined herein) which the
Company, from time to time, proposes to sell and issue. For
purposes of this purchase right, the term "Pro Rata Share" shall
mean the ratio of the number of shares of Common Stock and Non-
Voting Stock which such shareholder owns or has the right to
acquire (after giving effect to full conversion of the Securities
as if all approvals regarding conversion had been received) to the
total number of shares of Common Stock and Non-Voting Stock of the
Company outstanding (after giving effect to full conversion of the
Securities as if approvals regarding conversion had been
received). The Significant Purchasers shall have a right of over-
allotment pursuant to this Section 5.01 such that to the extent a
Significant Purchaser does not exercise its purchase right in full
hereunder, such additional shares of New Securities which such
Significant Purchaser does not purchase may be purchased by the
other Significant Purchasers in proportion to their Pro Rata
Share. "New Securities" shall mean any capital stock of the
Company or its Subsidiaries or indebtedness convertible into
equity of the Company or any of its Subsidiaries whether now
authorized or not, and rights, options or warrants to purchase any
of the foregoing, and securities of any type whatsoever that are,
or may become convertible into or exchangeable for capital stock
or debt securities of the Company or its Subsidiaries issued on or
after the date hereof; provided that term "New Securities" does
not include (a) securities owned as of the date of this Agreement
or securities issued upon conversion thereof in accordance with
their terms as in effect on the date hereof, (b) Common Stock
issued as a stock dividend to holders of Common Stock or upon any
stock split, subdivision or combination of shares of Common Stock,
(c) shares (or options or rights to acquire such shares) of the
Company's Common Stock reserved for issuance upon exercise of
options pursuant to the Company's Long-Term Incentive and Stock
Option Plan and Non-Employee Director Stock Option Plan in effect
on the date hereof that have been or may be granted by the
Company's Board of Directors, and (d) securities issued in a
public offering registered pursuant to the Securities Act of 1933,
as amended or offerings exempt therefrom pursuant to Rule 144A
promulgated under such Act which contemplate the registration of
such securities or securities exchangeable for such securities
pursuant to said Act. In the event the Company or any of its
Subsidiaries proposes to undertake an issuance of New Securities,
the Company shall give each Significant Purchaser written notice
of its intention, describing the type of New Securities and the
price and the terms upon which the Company or its Subsidiary
proposes to issue the same. Each Significant Purchaser shall have
ten (10) business days from the date of receipt of any such notice
to agree to purchase up to its Pro Rata Share of such New
Securities (and any over-allotment amount pursuant to the
operation of this Section 5.01) for the price and upon the terms
specified in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to be
purchased. In the event any Significant Purchaser fails to
exercise in full its purchase right (after giving effect to the
over-allotment provision of this Section 5.01), the Company shall
have ninety (90) days thereafter to sell the New Securities with
respect to which such Significant Purchaser's Purchase Right was
not exercised, at a price not more favorable to the purchasers
thereof than that specified in the Company's notice and upon terms
not materially more favorable to the purchasers thereof than those
specified in the Company's notice. To the extent the Company or
its Subsidiary does not sell all the New Securities offered within
said ninety (90) day period, the Company or its Subsidiary shall
not thereafter issue or sell such New Securities without first
again offering such securities to each Significant Purchaser in a
manner provided above. Notwithstanding the foregoing, if the
Board of Directors determines in good faith for legal, tax or
regulatory reasons or other good reason that it is inappropriate
or inadvisable to permit the Significant Purchasers to exercise
their equity purchase rights contained herein, the Board of
Directors of the Company, by a vote of 80% of the members of the
Board of Directors (which 80% must include one director elected by
the holders of the Securities or securities of the Company which
they have the right to acquire hereunder if there is such a
director so elected), then the Company may issue such New
Securities as if all of the Significant Purchasers waived their
rights under this paragraph (g).
Section 5.02 Proxy Matters; Standstill
(a) Each of the Purchasers hereby agrees that during
the Standstill Period (hereinafter defined) it will not, nor will
it permit any of its Affiliates (any such Purchaser together with
its Affiliates being hereinafter referred to as a "Purchaser
Group") to, directly or indirectly, unless in any such case
specifically requested in advance to do so by the Board of
Directors of the Company:
(i) acquire, offer to acquire, or agree to acquire
by purchase, by joining a partnership, limited partnership,
syndicate or other "group" (as such term is used in Section
13(d)(3) of the Exchange Act, hereinafter referred to as "13D
Group"), any securities of the Company entitled to vote generally
in the election of directors, or securities convertible into or
exercisable or exchangeable for such securities (collectively,
"Restricted Securities") or any material portion of the assets or
businesses of the Company and its Subsidiaries if and to the
extent that (a) such action would trigger a Change of Control
provision in one of the contracts described in Section
5.01(c)(iv), (b) such action would trigger indemnity by the
Company under its Tax Sharing Agreement or (c) such action has not
received any requisite approval from governmental authorities;
provided, however, that nothing contained herein shall prohibit
any member of a Purchaser Group from acquiring any Restricted
Securities (w) upon conversion of convertible securities of the
Company acquired pursuant to this Agreement or otherwise
contemplated hereby, (x) as a result of a stock split, stock
dividend or similar recapitalization by the Company, (y) upon the
execution of unsolicited buy orders by any member of a Purchaser
Group which is a registered broker-dealer for the bona fide
accounts of its brokerage customers unaffiliated and not acting in
concert with any member of such Purchaser, or (z) pursuant to the
exercise of any warrant, option or other right to acquire
Restricted Securities ("Rights"), which it receives directly from
the Company. Prior to acquiring any shares of capital stock of
the Company, other than upon exercise of its rights under the
Agreement, the Related Agreements and the Securities, the
Purchasers will give written notice of their intent to do so to
the Company. If within ten (10) days after receipt of such
notice, the Company advises the Purchasers in writing that, based
on the advice of its advisors, it believes that the proposed
acquisition would be prohibited by this paragraph, the parties
shall thereafter discuss in good faith whether such acquisition
would in fact be so prohibited;
(ii) participate in, or encourage, the formation of
any 13D Group which owns or seeks to acquire beneficial ownership
of, or otherwise acts in respect of, Restricted Securities, other
than any 13D Group which is comprised exclusively of the Purchaser
or a Purchaser Group and any other permitted transferee or
transferees of securities from a Purchaser in accordance with
Section 5.03;
(iii) make, or in any way participate in,
directly or indirectly, any "solicitation" of "Proxies" (as such
terms are defined or used in Regulation 14A under the Exchange
Act) or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange Act)
with respect to the Company, or initiate, propose or otherwise
solicit stockholders for the approval of one or more stockholder
proposals with respect to the Company or induce or attempt to
induce any other person to initiate any stockholder proposal,
provided, however, that the limitation contained in this clause
(iii) shall not apply to (y) the election of any directors to be
elected by the holders of Securities or (z) any matter to be voted
on by the Company's stockholders that is not initiated or proposed
by any member of a Purchaser Group or any Affiliate thereof; or
(iv) call or seek to have called any meeting of the
stockholders of the Company, provided, however, that the
limitation contained in this clause (iv) shall not apply to any
meeting of the stockholders of the Company called for the purpose
of voting on any matter described in the proviso of clause (iii)
above.
(b) Nothing in this Section 5.02 shall preclude members
of a Purchaser Group from exercising the voting and other rights,
(i) granted to the Purchasers pursuant to this Agreement, the
Related Agreements, the Rights Agreement, the Certificates of
Designations or (ii) in connection with any proposed merger, sale
of assets or similar transaction, or tender or exchange offer
proposed by any person who is not part of a Purchaser Group or any
of its Affiliates.
(c) As used herein, the term "Standstill Period" shall
mean the period from the date of this Agreement until the earlier
to occur of:
(i) the date which is the second anniversary of
the Closing Date; provided, however, that the period described in
this clause (i) shall continue with respect to any acquisition or
other action which would trigger a Change of Control provision in
one of the contracts described in Section 5.01(c)(iv) or in the
indenture pursuant to which the 10% Senior Notes due 2004 were
issued until expiration of such agreements or Indenture; or
(ii) the designation of any date as the termination
date of the Standstill Period by a majority of the directors of
the Company at a duly convened meeting thereof or by all of the
directors of the Company by written consent; or
(iii) the Company's material breach of any of
its obligations contained in this Agreement or the Registration
Rights Agreement; or
(iv) the occurrence of a Material Default (as
defined in the Series C Preferred Stock Certificate of
Designation); or
(v) the Company or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy" as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"), which,
in the case of a Subsidiary of the Company, has had or would have
a Material Adverse Effect; or an involuntary case is commenced
against the Company or any of its Subsidiaries and the petition
not controverted within 10 days, or is not dismissed within 60
days after commencement of the case, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or a custodian (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or any substantial part
of the property of the Company or any of its Subsidiaries, which,
in the case of a Subsidiary of the Company, has had or would have
a Material Adverse Effect; or the Company or any of its
Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of
debtors, rehabilitation, dissolution, insolvency or liquidation or
similar law of any jurisdiction, whether now or hereafter in
effect, relating to the Company or such Subsidiary, or there is
commenced against the Company or any of its Subsidiaries any such
proceeding which remains undismissed for a period of 60 days,
which, in the case of a Subsidiary of the Company, has had or
would have a Material Adverse Effect; or the Company or any of its
Subsidiaries is adjudicated insolvent or bankrupt, which, in the
case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or any order of relief or other order
approving any such case or proceeding is entered, which, in the
case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or the Company or any of the Subsidiaries
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or
unstayed for a period of 60 days, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its Subsidiaries makes a
general assignment for the benefit of creditors, which, in the
case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or the Company shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay,
its debts, generally as they become due, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its Subsidiaries shall
call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its Subsidiaries shall by
any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or any corporate action is taken by the Company or
any of its Subsidiaries for the purpose of effecting any of the
foregoing, which, in the case of a Subsidiary of the Company, has
had or would have a Material Adverse Effect; or
(vi) without encouragement by or the participation
of a Purchaser or any of its Affiliates, the acquisition by any
person or 13D Group (other than members of a Purchaser Group or
Affiliates thereof) of, the commencement of a tender offer by such
person or 13D Group for, or the public announcement of an
intention to acquire, Restricted Securities which, if added to the
Restricted Securities (if any) already owned by such person or 13D
Group, would represent twenty-five percent (25%) or more of the
total voting power (including rights to acquire voting power) of
the Company's Restricted Securities, or the receipt by such person
or 13D Group of the Company's agreement or consent to make such
acquisition; or
(vii) the date this Agreement is terminated in
accordance with its terms.
(d) In the event the Purchasers of Series C Preferred
Stock, while they retain the right as a class to elect any
directors, intend to acquire additional shares of voting capital
stock of the Company (through conversion or otherwise), sell any
of their shares of Series C Preferred Stock or shares of Common
Stock issuable upon conversion thereof, or take any other action
which, in the reasonable judgment of the Company, may cause more
than an insubstantial risk that the distribution of the Company's
Common Stock by Fingerhut on September 25, 1998 or the
transactions related thereto would be taxable or that any
statement or representation in the IRS ruling request related
thereto would be incorrect or incomplete in any material respect,
such holders of Series C Preferred Stock agree that they will
provide written notice to the Company of their proposed action and
discuss with the Company in good faith the potential consequences
of their action before proceeding.
Section 5.03. Restrictions on Transfer. No Purchaser shall
transfer any Securities or any shares of Common Stock issued upon
conversion thereof to any person if such transfer would violate
the HSR Act or applicable rules and regulations of the OCC or
would constitute a "Change of Control" under the Fingerhut
Agreements (as amended pursuant to Section 5.01(c)(iv)), the
indenture pursuant to which the Company's 10% Senior Notes due
2004 were issued or the Credit Agreement (as amended pursuant to
Section 5.01(c)(iv)).
Section 5.04 Board Nominations. From and after the date
upon which the Purchasers shall have obtained all necessary
approvals from the OCC, and for so long as the Purchasers shall
continue to own 25% of the Series B Preferred Stock purchased by
them on the Closing Date, the Company shall nominate for election
to the Board of Directors of the Company, and shall recommend
voting in favor of, two (2) designees of the Purchasers; provided,
however, that if the Company shall fail to redeem the Series B
Preferred Stock in accordance with its terms, such number of
designees shall be increased to four (4).
Section 5.05. Stockholder Meeting. The Company shall cause
a special meeting of its stockholders to be held as soon as
practicable but in no event later than March 15, 1999, for the
purpose of voting on (i) the Exchange contemplated by Section 5.06
hereof (the "Exchange Approval"), (ii) an amendment to the
Certificate of Incorporation of the Company providing for a class
of Non-Voting Common Stock (the "Charter Amendment Approval" and,
together with the Exchange Approval, the "Stockholder Approval"),
and (iii) transacting such other business as may properly come
before the meeting or any adjournment thereof, including any item
reasonably acceptable to the Company which the Purchasers may
request be included in such meeting (the "Stockholder Meeting").
In connection with the Stockholder Meeting, the Company (a) shall
prepare and file with the Commission in accordance with the
Exchange Act a Proxy Statement of the Company on Schedule 14A (as
amended or supplemented, including all exhibits and schedules
thereto and the documents incorporated by reference therein, the
"Proxy Statement") and shall use its reasonable best efforts to
have the Proxy Statement cleared by the Commission and timely
mailed to its stockholders in accordance with the rules and
regulations of the Exchange Act, and (b) shall use its reasonable
best efforts to obtain the necessary votes of its stockholders to
obtain the Stockholder Approval. The Company shall consult with
the Purchasers and provide reasonable opportunity for the
Purchasers to comment on drafts of the Proxy Statement before it
is originally filed with the Commission, and with respect to each
amendment thereto or modifications thereof, prior to filing with
the Commission and mailing to stockholders.
Section 5.06. Exchange. In the event the Company shall have
obtained the Exchange Approval, on the first business day
following the last to occur of (i) delivery to the Purchasers of a
Certificate of the Chief Executive Officer or other executive
officer of the Company certifying that the Exchange Approval had
been obtained, which Certificate shall be delivered within one
business day of obtaining the Exchange Approval, (ii) the Approval
Date, and (iii) termination of any applicable waiting period under
the HSR Act, then the Bridge Securities shall, without any further
action on the part of the Company or the holders thereof, be
exchanged for shares of Series C Preferred Stock (the "Exchange").
If the Exchange Date has not occurred prior to March 31, 1999, or
such later date agreed to by holders of a majority in interest of
the Bridge Securities, but in no event later than June 30, 1999,
then the Exchange shall not take place. In connection with the
Exchange, the holders of Bridge Securities shall receive the
number of shares of Series C Preferred Stock such holders would
have been entitled to on the Exchange Date (including any and all
dividends that would have been paid or accrued) if they had
acquired a number of shares of Series C Preferred Stock on the
Closing Date equal to (i) the original principal or face amount of
the Bridge Securities owned by them on the Exchange Date (without
giving effect to any accrued dividends or interest), divided by
(ii) 372.50. After the consummation of the Exchange, the Warrants
shall be canceled by the Company. From and after the Exchange
Date all of the Bridge Securities shall be deemed to have been
exchanged for the Series C Preferred Stock into which they were
exchangeable. Holders of Securities shall be entitled to obtained
certificates representing the Series C Preferred Stock to which
they are entitled pursuant to the Exchange by delivering to the
Company certificates representing the Series B Preferred Stock,
the Senior Notes and any certificates representing the Warrants.
The Company shall not take any action between the date hereof and
the earlier of (i) the Exchange Date and (ii) June 30, 1999, that
would have caused the Conversion Price (as defined in the Series C
Certificate of Designation) to be any amount other than $372.50
per share if shares of Series C Preferred Stock were outstanding
on the date hereof.
ARTICLE VI
FINANCIAL STATEMENTS; ACCESS TO INFORMATION
Section 6.01. Financial Statements. The Company covenants
that it will deliver to each Purchaser who owns any Issuable
Securities those items set forth in paragraphs (a), (b) and (d)
and that, upon request, it will deliver to each original Purchaser
(but not their transferees) those items set forth in paragraphs
(c), (e) and (f):
(a) As soon as practicable and in any event within 45
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, a consolidated statement of
income and consolidated statements of changes in financial
position and cash flows of the Company and its Subsidiaries for
such quarterly period and for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding periods in the
preceding fiscal year, all in reasonable detail and certified by
an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments; provided, however, that
delivery pursuant to clause (d) below of a copy of the Quarterly
Report on Form 10-Q of the Company for such quarterly period filed
with the Commission shall be deemed to satisfy the requirements of
this clause (a);
(b) As soon as practicable and in any event within 120
days after the end of each fiscal year, a consolidated statement
of income and consolidated statements of changes in financial
position and cash flows of the Company and its Subsidiaries for
such year, and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such year, setting forth in each
case in comparative form corresponding consolidated figures from
the preceding annual audit, all in reasonable detail together with
an opinion directed to the Company of independent public
accountants of recognized standing selected by the Company;
provided, however, that delivery pursuant to clause (d) below of a
copy of the Annual Report on Form 10-K of the Company for such
fiscal year filed with the Commission shall be deemed to satisfy
the requirements of this clause (b);
(c) As soon as practicable and in any event within 20
days after the end of each month, a consolidated statement of
income of the Company and its Subsidiaries for such month, and a
consolidated balance sheet of the Company and its Subsidiaries as
of the end of such month, together with consolidating statements
of income and balance sheets for each Subsidiary, all in
reasonable detail;
(d) Promptly upon transmission thereof, copies of all
such financial statements, proxy statements, notices and reports
as it shall send to its public stockholders and copies of all
registration statements (without exhibits), other than on Form S-8
or any similar successor form, and all reports which it files with
the Commission (or any governmental body or agency succeeding to
the functions of the Commission);
(e) Promptly upon receipt thereof, a copy of each other
report submitted to the Company or any of its Subsidiaries by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company or any of
its Subsidiaries; and
(f) With reasonable promptness, such other financial
data as any Purchaser may reasonably request.
Section 6.02. Access to Information. The Company shall
permit each Significant Purchaser (and its designated
representatives) to visit and inspect any of the properties of the
Company and its Subsidiaries, including the books and records of
the Company and its Subsidiaries (and to make extracts and copies
therefrom), and to consult with respect to and discuss the
affairs, businesses, finances, operations and accounts of the
Company and its Subsidiaries with the officers, directors and
employees of such entities, all at such reasonable times and as
often as such Significant Purchaser may reasonably request. Each
Purchaser agrees, except as otherwise required by law, to keep any
confidential information obtained pursuant to this Article VI
confidential.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY
TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY
The respective obligation of each party hereto to consummate
the transactions contemplated hereby is subject to the
satisfaction, at or before the Closing, of each of the following
conditions set forth in Section 7.01 through Section 7.04 below.
These conditions may be waived by each party (in whole or in part)
at any time in its sole discretion.
Section 7.01. No Adverse Action or Decision. There shall be
no action, suit, investigation or proceeding pending with, or to
the knowledge of the Company threatened against or affecting the
Company, any of its Subsidiaries or any of their respective
properties or rights, before any court, arbitrator or
administrative or governmental body which (a) seeks to restrain,
enjoin or prevent the consummation of the issuance, sale and
delivery of the Bridge Securities to each of the Purchasers, the
Exchange, or the issuance of the securities into which the Series
C Preferred Stock is convertible or (b) challenges the validity or
legality of the issuance, sale and delivery of the Bridge
Securities to each of the Purchasers, the Exchange or the issuance
of the securities into which the Series C Preferred Stock is
convertible or seeks to recover damages or to obtain other relief
in connection therewith, which in any single case or in the
aggregate (i) the Company or the Purchasers shall reasonably
determine is reasonably likely to result in a Material Adverse
Effect, or (ii) the Purchasers shall reasonably determine is
reasonably likely to result in a material impairment to the
Purchasers' rights hereunder.
Section 7.02. No Injunction. No temporary, preliminary or
permanent injunction or any order by any federal or state court of
competent jurisdiction shall have been issued which prohibits or
otherwise seeks to prohibit, restrain, enjoin or delay the
consummation of the issuance, sale and delivery of the Issuable
Securities to each of the Purchasers.
Section 7.03 Acquisition of PNC Assets. Simultaneously with
the Closing, the Company shall complete the acquisition of assets
contemplated by the PNC Agreement and the contemplated
securitization of such assets, and the Company shall not have
waived any material conditions to closing contained in the PNC
Agreement unless such waiver is ratified or approved by the
Purchasers, which waiver or approval shall not be unreasonably
withheld.
Section 7.04. Consents of Third Parties; Modification of
Agreements. The Company shall have duly obtained modifications of
or waivers under the agreements described in Section 5.01(c)(iv)
amending or waiving any right to acceleration, redemption or
increase of any payment or obligation of the Company or its
Subsidiaries which could arise as a result of the transactions
contemplated hereby, including without limitation the effect of
any dividends, anti-dilution provisions or board control
contemplated by the terms of the Bridge Securities, which
modifications or waivers shall be in a form reasonably
satisfactory to the Purchasers.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
TO ISSUE, SELL AND DELIVER THE BRIDGE SECURITIES
The obligations of the Company to issue, sell and deliver the
Bridge Securities are subject to the satisfaction, at or before
the Closing, of each of the following additional conditions set
forth in Sections 8.01 and 8.02 below. These conditions are for
the Company's sole benefit and may be waived by the Company (in
whole or in part) at any time in its sole discretion.
Section 8.01. Accuracy of the Purchasers' Representations
and Warranties. The representations and warranties of the
Purchasers contained in Article IV hereof shall be true and
correct as of the date when made and as of the Closing Date, as
though made on such date, and the Company shall have received a
certificate attesting thereto signed by a duly authorized officer
or agent of each of the Purchasers.
Section 8.02. Performance by the Purchasers. The Purchasers
shall have performed, satisfied and complied with, in all material
respects, all covenants, agreements, and conditions required by
this Agreement to be performed, satisfied or complied with by them
on or prior to the Closing Date, and the Company shall have
received a certificate attesting thereto signed by a duly
authorized officer or agent of each of the Purchasers.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASERS TO PURCHASE AND ACCEPT DELIVERY
OF THE BRIDGE SECURITIES
The obligations of the Purchasers hereunder to acquire and
pay for, and accept delivery of, the Bridge Securities are subject
to the satisfaction, at or before the Closing, of each of the
following additional conditions set forth in Section 9.01 through
Section 9.13 below. These conditions are for the Purchasers' sole
benefit and may be waived (in whole or in part) by the Purchasers.
Section 9.01. Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
contained in Article III hereof which are not subject to a
qualification regarding materiality shall be true and correct in
all material respects as of the date when made and as of the
Closing Date, as though made on such date, the representations and
warranties of the Company contained in Article III hereof, which
are subject to a qualification regarding materiality shall be true
and correct in all respects as of the date when made and as of the
Closing Date, as though made on such date, and each Purchaser
shall have received a certificate attesting thereto signed by the
Chief Executive Officer of the Company, on behalf of the Company.
Section 9.02. Performance by the Company. The Company shall
have performed, satisfied and complied with, in all material
respects, all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with on or
prior to the Closing Date, and the Purchasers shall have received
a certificate attesting thereto signed by the Chief Executive
Officer of the Company.
Section 9.03. No Material Adverse Effect. There shall not
have occurred and there shall not otherwise exist any condition,
event or development having, or likely to have (in the reasonable
judgment of the Purchasers), a Material Adverse Effect.
Section 9.04. Registration Rights Agreement. The
Registration Rights Agreement substantially in the form of Exhibit
E attached hereto shall have been executed and delivered by the
parties thereto other than the Purchasers.
Section 9.05. Certificate of Designation; By-laws. The
Company shall have filed with the Secretary of State of the State
of Delaware the Certificates of Designation and such instruments
shall have become effective. The By-laws of the Company shall
have been amended so as to permit the Purchasers to exercise their
rights contemplated hereby, which amendment shall be in form
reasonably satisfactory to the Purchasers.
Section 9.06. Governmental Approvals and Consents. The
Company shall have duly obtained, received or effected (and all
applicable waiting and termination periods, if any, including any
extensions thereof, under any applicable law, statute, regulation
or rule, shall have expired or terminated) all authorizations,
consents, approvals, licenses, franchises, permits and
certificates by or of, and shall have made all filings and
effected all notifications, registrations and qualifications with,
all federal, state and local governmental and regulatory
Authorities necessary for the issuance, sale and delivery of the
Bridge Securities being issued and sold at the Closing and, to the
extent required at Closing, the consummation of the other
transactions contemplated hereby.
Section 9.07. Opinion. The Purchasers shall have received
from Sidley & Austin, counsel to the Company, an opinion dated the
Closing Date covering those matters set forth on Exhibit B
attached hereto and in form reasonably satisfactory to the
Purchasers.
Section 9.08. Secretary's Certificate. The Secretary or an
Assistant Secretary of the Company shall have delivered to the
Purchasers at the Closing Date a Certificate dated as of the
Closing certifying: (a) that attached thereto is a true and
complete copy of the By-Laws of the Company as in effect on the
date of such certification; (b) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of the Agreement, the issuance, sale and delivery of
the Issuable Securities, and that all such resolutions are in full
force in effect and are all the resolutions adopted in connection
with the transactions contemplated by this Agreement; (c) that
attached thereto is a true and complete copy of the Certificate of
Incorporation as in effect on the date of such certification; and
(d) to the incumbency and specimen signature of certain officers
of the Company.
Section 9.09. Proceedings. All corporate and other
proceedings to be taken by the Company in connection with the
transactions contemplated by this Agreement and the Registration
Rights Agreement and all documents reflecting or evidencing such
proceedings shall be reasonably satisfactory in scope, form and
substance to the Purchasers and their legal counsel, and the
Purchasers and their legal counsel shall have received all such
duly executed counterpart originals or certified or other copies
of such documents and instruments as they may reasonably request.
Section 9.10. Rights Agreement. Either (i) the Rights
Agreement shall have been amended so that the Purchasers are not
deemed to become an "Acquiring Person" and the Purchasers shall be
reasonably satisfied that the consummation of the transactions
contemplated hereby, including, without limitation, the issuance
of Common Stock upon conversion of the Securities and the exercise
by the Purchasers of their rights hereunder, shall not constitute
a Section 11(a)(ii) Event, as defined therein, or (ii) the Rights
(as defined in the Rights Agreement) shall have been redeemed
pursuant to Section 23 thereof.
Section 9.11. Board Election. Prior to or concurrently with
the Closing, the Board of Directors of the Company shall have been
expanded to nine members, two of whom shall be designees of the
Purchasers.
Section 9.12. Securities. The sale of the Bridge Securities
to the Purchasers hereunder, the shares of Series C Preferred
Stock for which the Bridge Securities are exchangeable, and any
securities of the Company into which such Series C Preferred Stock
is convertible, shall have been exempted from the provisions of
Section 203 of the Delaware General Corporation Law.
Section 9.13. Indenture. The Indenture substantially in the
form of Exhibit C shall have been executed and delivered.
Section 9.14 Warrant Agreement. The Warrant Agreement
substantially in the form of Exhibit D shall have been executed
and delivered.
ARTICLE X
TERMINATION
Section 10.01. Termination by Mutual Written Consent. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned, for any reason, at any time prior to the
Closing Date, by the mutual written consent of the Company and the
Purchasers purchasing a majority of the Bridge Securities (the
"Required Purchasers").
Section 10.02. Termination by the Company or the Purchasers.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of Company or the Required
Purchasers if and to the extent that (a) the Closing shall not
have occurred at or prior to 5:00 p.m., Eastern time, on December
31, 1998; provided, however, that the right to terminate this
Agreement under this Section 10.02 shall not be available to any
party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing
Date to occur on or before such date; or (b) any court or
governmental authority of competent jurisdiction shall have issued
an order, decree writing or ruling or taken any other action, or
there shall be in effect any statute, rule or regulation,
permanently restraining, enjoining or otherwise prohibiting the
purchase of the Securities hereunder, or the consummation of the
transactions contemplated by this Agreement.
Section 10.03. Termination by the Purchasers. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Required Purchasers, at
any time prior to the Closing Date, if (a) the Company shall have
failed to comply in any material respect with any of the covenants
or agreements contained in this Agreement to be complied with or
performed by the Company at or prior to such date of termination,
and the Company shall not, within a reasonable period of time
after notice of such failure, have cured or commenced prompt and
diligent measures which would promptly cure such failure, (b)
there shall have been a material misrepresentation or material
breach by the Company with respect to any representation or
warranty made by it in this Agreement and such misrepresentation
or breach cannot be cured prior to the Closing Date, (c) there
shall have occurred and be continuing any condition, event or
development having, or reasonably likely to have, a Material
Adverse Effect, or (d) the Required Purchasers shall determine
that, after meeting with representatives of the OCC pursuant to
Section 5.01(f) herein, a reasonable likelihood exists that the
OCC will not consent to the Purchasers' investment in the Company
contemplated by this Agreement, including without limitation the
Purchasers' exercise of all voting and economic rights set forth
in the terms of the Series C Preferred Stock, including those
relating to the conversion of the Series C Preferred Stock, anti-
dilution and Board election rights.
Section 10.04. Termination by the Company. This Agreement
may be terminated and the transactions contemplated hereby may be
abandoned by action of the Company, at any time prior to the
Closing Date, if (a) any of the Purchasers shall have failed to
comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or
performed by the Purchasers at or prior to such date of
termination and such Purchaser shall not, within a reasonable
period of time after notice of such failure, have cured or
commenced prompt and diligent measures which would promptly cure
such failure, or (b) there shall have been a material
misrepresentation or material breach by any of the Purchasers with
respect to any representation or warranty made by any of such
Purchasers in this Agreement and such misrepresentation or breach
cannot be cured prior to the Closing Date.
Section 10.05. Effect of Termination. If this Agreement is
terminated pursuant to this Article X, this Agreement shall become
void and of no effect with no liability on the part of any party
hereto, except (a) to the extent such termination results from the
breach by a party hereto of any of its representations,
warranties, covenants or agreements set forth in this Agreement,
and (b) that the covenants and agreements contained in Article
XIII shall survive termination hereof.
ARTICLE XI
CONDITIONS TO CLOSING THE EXCHANGE
The Exchange shall be subject to the condition that no
temporary, preliminary or permanent injunction or any order by any
federal or state court of competent jurisdiction shall have been
issued which prohibits or otherwise seeks to prohibit, restrain or
enjoin the consummation of the Exchange.
ARTICLE XII
DEFINITIONS
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated by the Commission under the Exchange Act.
"Approval Date" shall mean the date (i) on which the
Purchasers shall have obtained all necessary approvals from the
OCC and other banking and regulatory authorities with jurisdiction
over the acquisition of the Series C Preferred Stock and (ii) on
which all applicable notice and comment periods shall have expired
without disapproval by the OCC or such other authorities. Such
approval of the OCC and such other authorities shall mean
approvals with respect to the Purchasers' acquisition of the
Series C Preferred Stock and the exercise of rights contemplated
thereby including, without limitation, the voting, dividend, anti-
dilution and conversion rights contained therein, which approval
shall be reasonably acceptable to the Purchasers.
"Authorities" shall mean approvals, consents, rights,
certificates, orders, franchises, determinations, permissions,
licenses, authorities or grants issued, declared, designated or
adopted by any nation or government, any federal, state, municipal
or other political subdivision thereof or any department,
commission, board, bureau, agency or instrumentality exercising
executive, legislative, judicial, regulatory or administrative
functions pertaining to government.
"Balance Sheet" shall have the meaning set forth in Section
3.07 of this Agreement.
"Balance Sheet Date" shall have the meaning set forth in
Section 3.07 of this Agreement.
"Benefit Plans" shall have the meaning set forth in Section
3.22 of this Agreement.
"Bridge Securities" shall mean the Series B Preferred Stock,
the Senior Notes and the Warrants.
"Business Day" shall mean any day except a Saturday, Sunday
or other day on which commercial banks in the City of New York are
not open for the transaction of business.
"CERCLA" shall mean Comprehensive Environmental Response,
Compensation, and Liability Act.
"Certificates of Designation" shall mean the Series B
Certificate of Designation, the Series C Certificate of
Designation and the Series D Certificate of Designation, each in
the form attached hereto as Exhibit A-1, A-2 and A-3,
respectively.
"Charter Amendment Approval" shall have the meaning set forth
in Section 5.05 of this Agreement.
"Closing" shall have the meaning set forth in section 2.02 of
this Agreement.
"Closing Date" shall have the meaning set forth in Section
2.02 of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company" shall mean Metris Companies Inc., a Delaware
corporation.
"Credit Agreement" shall have the meaning set forth in
Section 5.01(c)(iv).
"Employee Benefit Plans" shall have the meaning set forth in
Section 3.14.
"Environmental Claim" shall have the meaning set forth in
Section 3.16.
"Environmental Laws" shall mean any applicable Law concerning
releases into any part of the natural environment, or protection
of natural resources, the environment and public and employee
health and safety including, without limitation, CERCLA, the
Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq
.), the Resource Conservation and Recovery Act (42 U.S.C. 6901
et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (33 U.S.C. 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act 17 U.S.C. 136 et seq.), and
OSHA, as such laws have been and may be amended or supplemented
through the Closing Date, and the regulations promulgated pursuant
thereto, and any applicable state or local statutes, and the
regulations promulgated pursuant thereto.
"Exchange" shall have the meaning set forth in Section 5.06
of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Exchange Approval" shall have the meaning set forth in
Section 5.05 of this Agreement.
"Exchange Date" shall mean the date on which the Exchange
occurs.
"GAAP" shall mean United States generally accepted accounting
principles.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"Indenture" shall mean the Indenture pursuant to which the
Senior Notes are issued substantially in the form of Exhibit C
attached hereto.
"IRS" shall mean the United States Internal Revenue Service.
"Liens" shall mean any lien, claim, charge, pledge, mortgage,
security interest or other encumbrance.
"Liquidation Preference" shall have the meaning set forth in
the Certificates of Designation.
"Majority Interests" shall have the meaning assigned to such
term in Section 3.01 of this Agreement.
"Material Adverse Effect" shall mean a material adverse
effect on the business, prospects, condition (financial or
otherwise), assets or results of operations of the Company and the
Subsidiaries taken as a whole.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NLRB" shall mean the National Labor Relations board.
"Non-Voting Common Stock" shall mean the Non-Voting Common
Stock of the Company described in Section 5.05, which stock shall
be convertible into Common Stock in the same manner as the Series
D Preferred Stock.
"Non-Voting Stock" shall mean the Series D Preferred Stock
prior to the Charter Amendment Approval and the Non-Voting Common
Stock after the Charter Amendment Approval.
"OSHA" shall mean Occupational Safety and Health Act.
"Permits" shall mean, collectively, each permit, license,
order or authorization from any public or governmental authority
which is material to or necessary for the conduct of the business
of the Company or any of the Subsidiaries.
"Person" shall mean any individual, firm, corporation,
partnership, limited liability company or partnership, trust,
incorporated or unincorporated association, joint venture,
government (or any agency or political subdivision thereof) or
other entity of any kind.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement to be dated as of the Closing Date by and among
the Company and the Purchasers, substantially in the form attached
hereto as Exhibit E.
"Related Agreements" shall mean the Warrant Agreement, the
Indenture and the Registration Rights Agreement.
"SEC Documents" means all reports, schedules, registration
statements and other documents (including all exhibits and
schedules thereto) filed by the Company with the Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series D Preferred Stock" shall mean the Series D Junior
Participating Convertible Preferred Stock of the Company.
"Significant Purchaser" shall mean (i) THL Equity Fund and
its Affiliates for so long as THL Equity Fund and its Affiliates
own in the aggregate at least ten percent of the Bridge Securities
purchased by them hereunder or the Series C Preferred Stock for
which such Securities are exchangeable or the securities issuable
upon conversion thereof, and (ii) any other holder of at least 15%
of the Bridge Securities or the Series C Preferred Stock for which
such securities are exchangeable or the securities issuable upon
conversion thereof.
"Subsidiary" shall mean each corporation or other entity of
which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly by
the Company.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated
taxes, customs, duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines,
additions to tax or additional amounts imposed by any public or
governmental taxing authority (domestic or foreign) and shall
include any transferee liability in respect of Taxes.
"Tax Return" shall mean all returns, declarations, reports,
estimates, information returns and statements required to be filed
in respect of any Taxes.
"Warrant Agreement" shall mean the Warrant Agreement
substantially in the form of Exhibit D attached hereto pursuant to
which the Company will grant the Warrants to the Purchasers.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Notices. Except as otherwise provided
herein, whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or
serve upon any other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration
or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or sent by
registered or certified-mail, return receipt requested, postage
prepaid, or by overnight mail or courier, or delivery service or
by telecopy and confirmed by telecopy answer back, addressed as
follows:
(a) If to the Company to:
600 South Highway 169, Suite 1800
St. Louis Park, MN 55426
Telephone: (612) 525-5020
Telecopier: (612) 525-5098
Attn: Z. Jill Barclift, Esquire
With a copy to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Telephone: (312) 853-7000
Telecopier: (312) 853-7036
Attn: Richard Clemens, Esquire
(b)(i) If to the Purchasers to:
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Telephone: (617) 227-1050
Telecopier: (617) 227-3451
Attention: C. Hunter Boll
With a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Telephone: (617) 951-6600
Telecopier: (617) 951-1295
Attention: James Westra, Esquire
or at such other address as may be substituted by notice given as
herein provided. The furnishing of any notice required hereunder
may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval,
declaration or other communication hereunder shall be deemed to
have been duly given or served on (A) the date on which personally
delivered, with receipt acknowledged, (B) the date on which
telecopied and confirmed by telecopy answer back, (C) the next
Business Day if delivered by overnight or express mail, courier or
delivery service, or (D) three Business Days after the same shall
have been deposited in the United States mail, as the case may be.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to
the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
Section 13.02. Fees and Expenses. The Company agrees,
whether or not the transactions hereby contemplated shall be
consummated, to pay, and save each Purchaser harmless against
liability for the payment of, all reasonable out-of-pocket fees
and expenses arising in connection with this Agreement (including
the payment in advance of any filing fees under the HSR Act), the
Securities being purchased hereunder, the Registration Rights
Agreement, and the transactions hereby and thereby contemplated,
including, without limitation, all such fees and expenses incurred
with respect to the enforcement of any provision of any such
agreement or instrument and the reasonable fees and expenses of
counsel to the Purchasers retained in connection with such
agreements and instruments, and the transactions hereby and
thereby contemplated. The Company further agrees to indemnify and
save harmless the Purchasers and their respective officers,
trustees, directors, partners, employees and agents from and
against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) in
connection therewith (herein called the "indemnified liabilities")
incurred by any Purchaser or any of its officers, trustees,
directors, partners, employees or agents as a result of, or
arising out of, or relating to any of the transactions
contemplated hereby, except for any indemnified liabilities
arising (i) on account of the gross negligence or willful
misconduct of such Purchaser or any of its officers, directors,
partners, employees or agents, (ii) on account of any breach of a
material term or provision of this Agreement by the Purchasers
hereunder or (iii) on account of Taxes based on income in respect
of securities of the Company, except as otherwise expressly
provided herein; provided that, if and to the extent such
agreement to indemnify may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which shall be
permissible under applicable law. The obligations of the Company
under this Section 13.02 shall survive the transfer, redemption or
conversion of any Securities. At the Closing, the Company shall
pay to one or more designees of the Thomas H. Lee Company, in
cash, an amount equal to 5.0% of the aggregate purchase price for
the Securities set forth on Schedule 1 hereto. In addition, in
the event that the sale and purchase of Securities shall not be
consummated prior to December 31, 1998 as a result of (i) a breach
by the Company of any representation, warranty, covenant or
agreement of the Company contained herein (other than a failure to
meet the condition contained in Section 9.03 hereof due to any
condition, development or event arising after the date hereof
which is not the result of any breach of the Company's obligations
contained in this Agreement), (ii) the failure to amend or redeem
the rights under the Rights Agreement as contemplated by Section
9.10, or (iii) the failure to obtain any consent to the
transactions contemplated hereby in accordance with
Section 5.01(c)(iv) herein, or (iv) the failure to consummate the
transactions contemplated by the PNC Agreement as contemplated by
Section 7.03, in addition to the indemnity for expenses herein and
above provided, the Company shall pay to one or more designees of
the Thomas H. Lee Company in cash, in addition to any and all
other rights which may be available to Purchasers due to breach of
this Agreement by the Company, a fee in the amount of 3.0% of the
aggregate purchase price for the Securities set forth on Schedule
1 hereto, payable in cash on demand. In addition, in the event
the Company shall be required to pay a fee pursuant to clause (i)
of the preceding sentence and, prior to the date which is ninety
days following the termination of this Agreement, the Company
shall acquire all or substantially all of the assets subject to
the PNC Agreement, the Company shall pay to one or more designees
of the Thomas H. Lee Company, on demand in cash, $25,000,000.
Section 13.03. Survival of Representations and Warranties.
All representations and warranties contained herein or made in
writing by the Company in connection herewith shall survive the
execution and delivery of this Agreement, the sale and purchase of
the Securities and any disposition thereof for a period ending
thirty days following the filing with the Commission of the
Company's Annual Report on Form 10-K covering the fiscal year
ending December 31, 1999, except that the representations and
warranties contained in Section 3.10 and Section 4.07 shall
survive until the expiration of the applicable statute of
limitations for Taxes.
Section 13.04. Entire Agreement. This Agreement, together
with the schedules and exhibits hereto which are incorporated by
reference herein, represent the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof
and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with
respect to such subject matter, and can be amended, supplemented
or changed, and any provision hereof can be waived, only by a
written instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought.
Notwithstanding the foregoing, any document which is contemplated
to be executed or delivered at Closing or the Exchange Date in the
form attached as an Exhibit hereto may be delivered in
substantially the form attached, together with any changes thereto
reasonably acceptable to the parties hereto.
Section 13.05. Successors and Assigns. This Agreement shall
be binding upon the parties hereto and their respective successors
and assigns, including any person to whom the Purchaser may assign
its right and obligations to purchase Bridge Securities and shall
inure to the benefit of the parties hereto and, their respective
successors and assigns.
Section 13.06. Paragraph Headings. The paragraph headings
contained in this Agreement are for general reference purposes
only and shall not affect in any manner the meaning or
interpretation of the terms or other provisions of this Agreement.
Section 13.07. Applicable Law. This Agreement shall be
governed by, construed and enforced in accordance with the laws of
the State of Delaware, applicable to contracts to be made,
executed, delivered and performed wholly within such state, and in
any case, without regard to the conflicts of law principles of
such state.
Section 13.08. Severability. If at any time subsequent to
the date hereof, any provision of this Agreement shall be held by
any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but
the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any other
provision of this Agreement.
Section 13.09. Equitable Remedies. The parties hereto agree
that irreparable harm would occur in the event that any of the
covenants contained in this Agreement were not performed in all
material respects by the parties hereto in accordance with their
specific terms or conditions or were otherwise breached, and that
money damages are an inadequate remedy for breach thereof because
of the difficulty of ascertaining and quantifying the amount of
damage that will be suffered by the parties hereto in the event
that such covenants are not performed in accordance with their
terms or are otherwise breached. It is accordingly hereby agreed
that the parties hereto shall be entitled to seek an injunction or
injunctions to restrain, enjoin and prevent breaches and
violations of any of the covenants, contained in this Agreement by
the other parties and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having competent jurisdiction, such remedy being in addition to
and not in lieu of, any other rights and remedies to which the
other parties are entitled to at law or in equity.
Section 13.10. No Waiver. The failure of any party at any
time or times to require performance of any provision hereof shall
not affect the right at a later time to enforce the same. No
waiver by any party of any condition, and no breach of any
provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be construed as a further or
continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of
this Agreement.
Section 13.11. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one and
the same original instrument.
Section 13.12. Brokers. The Company, on the one hand, and
each Purchaser as to itself, on the other hand, represents and
warrants to the other parties hereto that neither it nor any of
its officers, directors, general partners, agents, employees,
Affiliates or associates, has engaged or authorized any broker or
finder to act, directly or indirectly, on its behalf, in
connection with the transactions contemplated by this Agreement,
or has consented to or acquiesced in anyone so acting, and it
knows of no claim by any person for compensation from it for so
acting or of any basis for such a claim except, (i) in the case of
the Company, for Donaldson, Lufkin & Jenrette Securities
Corporation pursuant to the terms of the Engagement Letter
previously provided to the Purchasers, and (ii) in the case of the
Purchasers, for Solomon Smith Barney.
Section 13.13. Certain Assignment of Rights. Prior to
Closing, THL Equity Fund shall be entitled to assign any of its
rights hereunder to any Affiliates of THL Equity Fund or Thomas H.
Lee Company, or any employees thereof, who shall sign a
counterpart signature page agreeing to be bound by this Agreement
and to be entitled to the rights and obligations hereunder as if
it were an initial Purchaser hereunder.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Agreement, as of the day and year first above
written.
METRIS COMPANIES INC.
By:/s/ Ronald N. Zebeck
Name: Ronald N. Zebeck
Title: President
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC, its
General Partner
By:/s/ Thomas M. Hagerty
Name: Thomas M. Hagerty
Title: Managing Director
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, made as of the 9th day of December, 1998, by and
between Metris Companies Inc., a corporation organized and
existing under the laws of Delaware (the "Company") and those
persons whose names appear on the signature page hereof
designated as investors (collectively, the "Investors").
WHEREAS, the Investors have entered into a Securities
Purchase Agreement (the "Purchase Agreement") pursuant to which
on the date hereof they are acquiring shares of Series B
Perpetual Preferred Stock of the Company, par value $.01 per
share (the "Series B Preferred Stock"), senior notes due 2006 of
the Company (the "Senior Notes") and warrants to purchase shares
of the Common Stock, par value $.01 per share of the Company
(including the rights to acquire Series A Junior Participating
Preferred Stock of the Company associated therewith) (the
"Warrants", and collectively with the Series B Preferred Stock
and the Senior Notes, referred to as the "Securities");
WHEREAS, the Securities, upon the occurrence of certain
events, shall automatically be exchanged (the "Exchange") for
shares of the Company's Series C Perpetual Convertible Preferred
Stock, par value $.01 per share (the "Series C Preferred Stock"),
each such share to be convertible in accordance with the
Certificate of Designation of the Series C Preferred Stock into
shares of Common Stock, par value $.01 per share, of the Company
(including the rights to acquire Series A Junior Participating
Preferred Stock of the Company associated therewith), Non-Voting
Common Stock, $.01 par value, of the Company (the "Non-Voting
Common Stock") and Series D Junior Participating Convertible
Preferred Stock, $.01 par value, of the Company (the "Series D
Preferred Stock");
WHEREAS, the execution of this Agreement by the Company is a
condition precedent to the obligations of the Investors to
perform their obligations under the Purchase Agreement; and
WHEREAS, the Investors acknowledge the existence of certain
registration rights granted to Rakesh K. Kaul ("Kaul") pursuant
to the Settlement Agreement, dated as of October 18, 1996, by and
among Fingerhut Companies, Inc., the Company and Kaul (the
"Settlement Agreement").
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time.
"Commission" means the Securities and Exchange Commission,
or any other Federal agency at the time administering the Act.
"Company" means Metris Companies Inc., a Delaware
corporation, and its successors and assigns, including any
successors by merger.
"Determination Date" means the earlier of (i) the day after
the stockholders of the Company vote on the Exchange at a meeting
of the stockholders called for such purpose, whether or not the
Exchange is approved, and (ii) June 30, 1999.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Holder" means the person who is then the record owner of
Registrable Securities which have not been sold to the public.
"Kaul Securities" means (i) the 96,125 shares of Common
Stock issuable pursuant to the exercise of an option granted to
Kaul under the Settlement Agreement, and (ii) any Common Stock
issued in respect of the shares described in clause (i) upon any
stock split, stock dividend, recapitalization or other similar
event.
"Liquidated Damages" shall have the meaning set forth in
Section 12(g) hereof.
"Registrable Securities" means (i) all Securities now owned
or hereafter acquired by an Investor, (ii) all shares of Series
C Preferred Stock now owned or hereafter acquired by an Investor,
(iii) all shares of Common Stock, Non-Voting Common Stock and
Series D Preferred Stock now owned or hereafter acquired by an
Investor; (iv) all shares of Common Stock, Non-Voting Common
Stock and Series D Preferred Stock issuable with respect to
securities of the Company convertible into or exercisable for
shares of Common Stock, Non-Voting Common Stock and Series D
Preferred Stock now owned or hereafter acquired by any Investor,
including but not limited to, Common Stock, Non-Voting Common
Stock or Series D Preferred Stock issuable upon conversion of
Series C Preferred Stock; (v) all shares of Series C Preferred
Stock issuable with respect to securities of the Company
convertible into or exercisable for shares of Series C Preferred
Stock now owned or hereafter acquired by an Investor, including
but not limited to, Series C Preferred Stock issuable upon the
exchange of any Securities; and (vi) any Securities, Series C
Preferred Stock, Common Stock, Non-Voting Common Stock and Series
D Preferred Stock issued in respect of the securities described
in clause (i), (ii), (iii), (iv), or (v) upon any stock split,
stock dividend, recapitalization or other similar event.
The term "register" means to register under the Act and
applicable state securities laws for the purpose of effecting a
public sale of securities.
All capitalized words used herein as defined terms and not
otherwise defined shall have the meaning ascribed thereto in the
Purchase Agreement.
2. Registration Rights. (a) Within sixty (60) days of the
Determination Date, but in no event later than June 30, 1999, the
Company shall (and cause any Subsidiaries required to register as
guarantors to) file with the Commission a registration statement
on Form S-3 (or any successor form to Form S-3) for a public
resale offering of the Registrable Securities of the Holders and
shall use its reasonable best efforts to cause such registration
statement to become and remain effective for the period ending on
the date the resale of all shares registered thereunder is
complete. If for any reason the Company is not eligible to file
such registration statement on Form S-3 (or any successor form to
Form S-3), the Company shall effect such registration using such
form as the Company is then eligible to use.
(b) In the case of any registration pursuant to this
Section 2, the Company shall keep each person whose securities
are to be registered thereunder (a "Selling Holder") advised of
the initiation and completion of such registration. At its
expense, except as provided in Section 2(b)(iv) below, the
Company will promptly:
(i) Prepare and file with the Commission the
registration statement described in Section 2(a) above and
thereafter use reasonable best efforts to cause such registration
statement to become effective;
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectuses used in connection with such registration statement
as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement;
(iii) Furnish to the Selling Holders such
numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in
order to facilitate the disposition of the securities covered by
such registration statement;
(iv) Use commercially reasonable efforts to
register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Selling
Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in
any such states or jurisdictions;
(v) Notify each Selling Holder covered by such
registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing;
(vi) Cause all such shares of Registrable
Securities to be listed on each securities exchange or market
system on which similar securities issued by the Company are then
listed; and
(vii) Provide a transfer agent and registrar
for all such shares of Registrable Securities not later than the
effective dates of such registration statements.
(c) Each Selling Holder and the Company shall provide
the Company with all necessary and reasonable assistance in the
preparation and filing of the registration statement required to
be prepared and filed by the Company and all other obligations of
the Company under this Section 2.
(d) The Company shall pay the expenses incurred by it
in complying with its obligations under this Section 2,
including, without limitation, all registration and filing fees,
exchange listing fees, fees and expenses of counsel for the
Company, and fees and expenses of accountants for the Company.
(e) The Company shall have the right, upon the advice
of the Board of Directors of the Company (the "Board"), upon
giving written notice to each Selling Holder of the exercise of
such right, to require such Selling Holder not to sell any shares
pursuant to the registration statement filed pursuant to Section
2 for a period (as determined in good faith by the Board) from
the date on which such notice is given (a "black-out period"), if
(i)(A) the Company is engaged in discussions or negotiations with
respect to, or has proposed or taken a substantial step to
commence, or there otherwise is pending, any merger, acquisition,
other form of business combination, divesture, tender offer,
financing or other transaction, or there is an event or state of
facts relating to the Company, in each case which is material to
the Company (as reasonably determined by the Board) ( any such
negotiation, step, event or state of facts being herein called
"Material Activity"), (B) in the reasonable judgment of the
Board, after consultation with and acting upon the written advice
of outside counsel, disclosure of such Material Activity would be
necessary or advisable under applicable securities laws and (C)
such disclosure would, in the reasonable judgment of the Board,
be adverse to the interests of the Company, or (ii) the Board, in
its reasonable judgment, after consultation with and acting upon
the written advice of outside counsel, deems it necessary to file
a post-effective amendment to such registration statement or to
prepare a supplement to, or otherwise amend, the form of
prospectus contained therein. During any such black-out period,
each Selling Holder agrees not to sell any Registrable Shares
under such registration statement for such period of time as the
Board, acting on the written advice of outside counsel, may in
good faith deem advisable; provided, however, that no single
black-out period will be longer than sixty (60) calendar days
and, in the aggregate, all black-out periods in any twelve (12)
month period shall not include more than one hundred twenty
(120) calendar days; provided, further, however, that no black-
out period may be imposed by the Company during the first thirty
calendar days after the effectiveness of the registration
statement filed pursuant to Section 2. The period of
effectiveness of any registration statement in effect at the time
of a black-out period and the termination period under Section 5
shall be extended for a period equal to the black-out period.
3. Acknowledgment. The Investors hereby acknowledge and
agree that (i) under the Settlement Agreement, the Company has
the obligation to permit registration of all of the Kaul
Securities by way of a piggyback registration with respect to a
registration statement filed by the Company, and (ii)
accordingly, if the Company shall determine to register any of
the Kaul Securities pursuant to such registration rights, the
Investors shall not object to the inclusion in the registration
described in Section 2 of all or any portion of such Kaul
Securities held by Kaul; provided that, such securities shall not
be included in any underwritten offering of all or a portion of
the Registrable Shares initiated solely by the Investors without
the consent of the Investors.
4. Underwritten Offering. At the election of a majority
in interest of the Holders, all or any portion of the Registrable
Securities may be distributed by means of an underwriting;
provided that such right may be exercised no more than three (3)
times.
(a) Selection of an Underwriter. The underwriter of
any underwriting requested under this Section 4 shall be selected
by a majority in interest of the Registrable Securities included
therein, subject to the consent of the Company, which consent
shall not unreasonably be withheld.
(b) Cut-backs. In connection with any offering
involving an underwriting of Registrable Shares, if the managing
underwriter of such underwriting shall have informed the Company
(which shall distribute such notice to the Holders requesting
registration in respect of such underwritten offering) by letter
of its belief that the inclusion in such underwritten
distribution of all or a specified number of such Registrable
Securities or of other securities so requested to be included
would interfere with the successful marketing of the securities
by the underwriters (such writing to state the basis of such
belief and the approximate number of Registrable Securities and
other securities so requested to be included which may be
included in such underwritten offering without such effect, if
any), then the Company may, upon written notice to all such
Holders, exclude from such underwritten offering (if and to the
extent stated by such managing underwriter to be necessary to
eliminate such effect), the number of Registrable Securities and
other securities so requested to be included, so that the
resultant aggregate amount of such securities so included in such
offering shall be equal to the amount stated in such managing
underwriter's letter (the securities so included to be
apportioned among the selling shareholders pro rata according to
their ownership of the Registrable Securities).
(c) Information Availability. In connection an
underwritten offering under this Section 4, the Company agrees to
make available for inspection by each Holder and any underwriter
participating in such underwritten distribution, and any
attorney, accountant or other agent retained by such Holder or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such underwritten
distribution.
5. Indemnification. (a) The Company agrees to indemnify
and hold harmless, to the extent permitted by law, each holder of
Registrable Securities with rights under this Agreement, against
all damages caused by any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the
Company by such holder expressly for use therein or by such
holder's failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of
copies of the same.
(b) In connection with any registration statement in
which a holder of Registrable Securities with rights under this
Agreement is participating, each such holder will furnish to the
Company in writing such information as the Company reasonably
requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify and hold harmless the Company, its directors and
officers and each person who controls the Company (within the
meaning of the Securities Act) against all damages resulting from
any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so
furnished in writing by such holder specifically for use in such
registration statement; provided that the obligation to indemnify
will be several, not joint and several, among such holders and
the liability of each such holder will be in proportion to and
limited to the net amount received by such holder from the sale
of Common Stock, pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder
will (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification and (ii)
unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any
liability for any consent to the entry of any judgment or any
settlement made by the indemnified party without its consent (but
such consent will not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other
of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this
Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or
any officer, director or controlling person of such indemnified
party.
6. Current Public Information. Until all shares of
Registrable Securities subject to this Agreement have been sold,
the Company will timely file all reports required to be filed by
it under the Securities Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the
Commission thereunder, and will take such further action as any
holder or holders of Registrable Securities may reasonably
request, all to the extent required to enable such holders to
sell their shares pursuant to Rule 144 under the Securities Act
and pursuant to Form S-3 or similar registration form hereunder
adopted by the Commission. Upon written request, the Company
will deliver to such holders a written statement as to whether it
has complied with such requirements.
7. Termination of Registration Rights. Notwithstanding
the foregoing provisions of this Agreement, the Company's
obligations pursuant to Section 2 shall terminate, with respect
to a given Holder, at the time such Holder (i) is not an
affiliate of the Company and has not been so for the ninety (90)
consecutive days prior to the date of determination and (ii) may
sell all of his or her shares of Common Stock in compliance with
Rule 144 (other than pursuant to Rule 144(k)) in a single 90-day
period under the Securities Act.
8. Expenses. The Company shall pay all out-of-pocket
costs in connection with any registration pursuant to this
Agreement. The costs and expenses of any such registration shall
include, without limitation, the fees and expenses of the
Company's counsel and its accountants and all other out-of-pocket
costs and expenses of the Company incident to the preparation,
printing and filing under the Securities Act of the registration
statement and all amendments and supplements thereto and the cost
of furnishing copies of each preliminary prospectus, each final
prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of the securities so
registered, the costs and expenses incurred in connection with
the qualification of such securities so registered under the
"blue sky" laws of various jurisdictions, the fees and expenses
of the Company's transfer agent, the fees and expenses of one
counsel for the Holders, expenses of all marketing and
promotional efforts requested by the managing underwriter all
other costs and expenses of complying with the foregoing
provisions hereof with respect to such registration and
underwriting commissions or discounts, selling agent or similar
fees payable with respect to Registrable Securities sold by the
Investors or assigns; provided that the aggregate amount of such
commissions or fees paid by the Company shall be capped at 3.3%
of such gross proceeds. The Company shall not be responsible for
paying any underwriting commission or discount, selling agent or
similar fees relating to securities sold by the Holders, except
to the extent provided in the immediately preceding sentence.
9. Listing Application. If shares of any class of stock
of the Company shall be listed on a national securities exchange,
the Company shall, at its expense, include in its listing
application all of the shares of the listed class then owned by
any Investor.
10. Damages. The Company recognizes and agrees that the
Holder of Registrable Securities shall not have an adequate
remedy if the Company fails to comply with the provisions of this
Agreement, and that damages will not be readily ascertainable,
and the Company expressly agrees that in the event of such
failure any Holder of Registrable Securities shall be entitled to
seek specific performance of the Company's obligations hereunder
and that the Company will not oppose an application seeking such
specific performance.
11. Representations and Warranties of the Company. The
Company represents and warrants to the Investor as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all
requisite corporate action and will not violate any provision of
law, any order of any court or other agency of government by
which the Company or any of its properties or assets is bound,
the Amended and Restated Certificate of Incorporation or Amended
and Restated By-laws of the Company or any provision of any
indenture, agreement or other instrument to which the Company or
any or its properties or assets is bound, conflict with, result
in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other
instrument or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms.
12. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns
of the parties hereto (including without limitation transferees
of any Registrable Securities), whether so expressed or not.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed
by certified or registered mail, return receipt requested,
postage prepaid, or telecopied or sent by other facsimile method
addressed as set forth on Schedule I attached hereto.
(c) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without
giving effect to the conflicts of laws principles thereof.
(d) This Agreement may not be amended or modified, and
no provision hereof may be waived, without the written consent of
the Company and the holders of at least two-thirds of the
outstanding Registrable Securities.
(e) 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.
(f) If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement,
and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(g) In the event that the Company has failed to
register the Senior Notes in accordance with the terms of this
Agreement, during the continuation of such failure the Company
will be obligated to pay liquidated damages ("Liquidated
Damages") to each holder of Senior Notes in an amount equal to 1%
per annum, calculated daily, on the outstanding principal amount
of Senior Notes held by such holder. All accrued Liquidated
Damages shall be paid to holders in the same manner as interest
payments on the Senior Notes, on semi-annual payment dates which
correspond to interest payment dates for the Senior Notes.
Following the cure of such failure to register these Senior Notes
in accordance with the terms of this Agreement, the accrual of
Liquidated Damages will cease.
[The Remainder of this Page is Intentionally Left Blank]
IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized representation of each of the signatories hereto as of
the date and year first above written.
THE COMPANY:
METRIS COMPANIES INC.
By:/s/ Ronald N. Zebeck
Name: Ronald Zebeck
Title: President and Chief Executive
Officer
INVESTORS:
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its General Partner
By: /s/ Thomas M. Hagerty
Name: Thomas M. Hagerty
Title: Managing Director
THOMAS H. LEE FOREIGN FUND IV, L.P. 1997
THOMAS H. LEE NOMINEE TRUST, DAVID V.
HARKINS, THE 1995 HARKINGS GIFT TRUST,
SCOTT A SCHOEN, C. HUNTER GOLL, SCOTT M.
SPERLING, ANTHONY J. DINOVI, THOMAS M.
HAGERTY, WARRENT C. SMITH, JR., SETH W.
LAWRY, KENT R. WELDON, TERENCE M.
MULLEN, TODD M. ABBRECHT, CHARLES A
BRIZIUS, SOCTT JAECKEL, SOREN OBERG,
THOMAS R. SHEPHERD, WENDY L MASLER,
ANDREW D. FLASTER, KRISTINA A. WATTS,
ROBERT SCHIFF LEE 1998 IRREVOCABLE
TRUST, STEPHEN ZACHARY LEE, CHARLES W.
ROBINS AS CUSTODIAN FOR JESSE ALBERT
LEE, CHARLES W. ROBINS, JAMES WESTRA,
THOMAS H. LEE CHARITABLE INVESTMENT
L.P., THL-CCI INVESTORS LIMITED
PARTNERSHIP
By: /s/ Thomas M. Hagerty
Thomas M. Hagerty,
Attorney-in-fact
SCHEDULE I
Company
Metris Companies Inc.
600 South Highway 169
Suite 1800
St. Louis Park, MN 55426
Attn: Z. Jill Barclift
Fax: 612-525-5098
Investors
THL Equity Fund IV, L.P., THL Foreign Fund IV, L.P.,
1997 THL Nominee Trust, David V. Harkins, The 1995
Harkins Gift Trust, Scott A. Schoen, C. Hunter Boll,
Scott M. Sperling, Anthony J. DiNovi, Thomas M.
Hagerty, Warren C. Smith, Jr., Seth W. Lawry, Kent R.
Weldon, Terence M. Mullen, Todd M. Abbrecht, Charles
A. Brizius, Scott Jaeckel, Soren Oberg, Thomas R.
Shepherd, Wendy L. Masler, Andrew D. Flaster, Kristina
A. Watts, Robert Schiff Lee 1998 Irrevocable Trust,
Stephen Zachary Lee, Charles W. Robins as Custodian
for Jesse Albert Lee, Charles W. Robins, James Westra,
THL Charitable Investment, L.P., THL-CCI Investors
Limited Partnership
c/o the Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: C. Hunter Boll
Fax: 617-227-3514
WAIVER AGREEMENT
THIS WAIVER AGREEMENT (this "Waiver Agreement") is made
as of this 8th day of December, 1998, between FINGERHUT
CORPORATION ("Fingerhut"), INFOCHOICE USA, INC. ("Infochoice"), a
wholly owned subsidiary of Fingerhut, METRIS DIRECT, INC.
("Metris"), Metris' wholly owned subsidiary, DIRECT MERCHANTS
CREDIT CARD BANK, NATIONAL ASSOCIATION ("Direct Merchants") and
METRIS DIRECT SERVICES, INC. ("Metris Services"), a wholly owned
subsidiary of Metris.
RECITALS
A. The parties, as described below, have entered into
the following agreements:
Database Access Agreement between Fingerhut and Metris, dated
October 31, 1996 (the "Database Access Agreement");
Data Sharing Agreement between Fingerhut and Direct Merchants,
dated October 31, 1996 (the "Data Sharing Agreement");
Extended Service Plan Agreement between Fingerhut, Infochoice and
Metris, dated October 31, 1996 (the "Extended Service Plan
Agreement");
Co-Brand Credit Card Agreement between Fingerhut, Metris and
Direct Merchants, dated October 31, 1996 (the "Co-Brand Credit
Card Agreement"); and
Agreement between Fingerhut and Metris Services, dated February
5, 1998, relating to credit card registration (the "Credit Card
Registration Agreement").
Collectively, the foregoing agreements are sometimes referred to
herein as the "Agreements" and individually as an "Agreement".
B. Metris desires to enter into the transaction
described in Exhibit A attached hereto (the "Transaction").
C. Certain elements of the Transaction may constitute
a "change of control" as defined in each of the Agreements,
permitting Fingerhut to terminate any or all of the Agreements.
D. Metris, Direct Merchants and Metris Services have
requested that Fingerhut waive its right to terminate the
Agreements, and Fingerhut is willing to do so, but only on the
terms and conditions set forth in this Waiver Agreement.
ACCORDINGLY, the parties hereby agree as follows:
1. Fingerhut hereby agrees not to terminate any of
the Agreements as a result of consummation of Phase 1 of the
Transaction; and Fingerhut agrees not to terminate any of the
Agreements as a result of consummation of Phase 2 of the
Transaction so long as consummation of phase 2 of the Transaction
occurs on or before June 30, 1999, all in accordance with the
description attached hereto as Exhibit A. In executing this
Waiver Agreement, Fingerhut expressly reserves the right to
terminate each of the Agreements upon the occurrence of any
change of control, as defined in that Agreement, other than the
change of control resulting from consummation of the Transaction
on or before the date specified above; provided, however, that
Fingerhut will agree to a subsequent change of control so long as
it is demonstrated to Fingerhut's reasonable satisfaction that
such change of control will not result from a transaction that
involves an entity that is deemed reasonably likely to compete
with Fingerhut or any of its affiliates.
2. The Database Access Agreement is hereby amended as
follows:
(a) Section 1.1 of the Database Access Agreement is hereby
revised by deleting the fourth and fifth sentence thereof and
substituting the following:
"Fingerhut reserves for itself, its affiliates and subsidiaries,
and its licensees, the right to use the Customer Database
(specifically the Fingerhut customer file and the suppress file),
including without limitation the right to license the use of the
Customer Database to unaffiliated third parties, provided,
however, that neither Fingerhut, its subsidiaries or other
affiliates (except to the extent permitted in Exhibit B) shall
have the right to use the Customer Database to offer Financial
Service Products until after October 31, 2001. Fingerhut and
Metris confirm that Fingerhut may continue to license the
Customer Database (specifically the Fingerhut Customer files and
the suppress files) to the parties identified in Exhibit D
attached hereto and incorporated herein by reference; provided,
however, that through October 31, 2001, such parties do not use
the Customer Database to offer Financial Services Products,
except those Financial Services Products now being offered by
such parties through use of the Customer Database, which may
continue to be offered; and provided further that Fingerhut will
remit to Metris monthly 80% of all revenues received by Fingerhut
from such licensing through December 31, 1999 and 25% of all
revenues received by Fingerhut from such licensing thereafter
through October 31, 2001. For purposes of the preceding
sentence, any product offered by any Company listed on Exhibit D
at the end of 1999 which is known to Metris and not regarded by
Metris as a Financial Services Product prior to December 31, 1999
shall not be regarded as a Financial Services Product after
December 31, 1999"
(b) Exhibit B to the Database Access Agreement is hereby
deleted and Exhibit B attached hereto is hereby substituted
therefor.
(c) Exhibit C to the Database Access Agreement is hereby
amended by reducing the amount of the non-refundable Database
License fee due in 2001 and 2002 (on October 31 in each year)
from $2,000,000 each year to $1,000,000 each year.
(d) Exhibit D to the Database Access Agreement is hereby
deleted and Exhibit D attached hereto is hereby substituted
therefor.
(e) The first and second sentences of Section 7.1 of the
Database Access Agreement are hereby deleted and the following
substituted therefor:
"This Agreement shall take effect upon the date first written
above and shall remain in effect until October 31, 2003;
provided, however, that after October 31, 2001, (i) Metris' use
of the Customer Database shall be limited to nonexclusive access
to the Customer Database (specifically the Fingerhut Customer
files and the suppress file), and (ii) Fingerhut may use the
Customer Database for any purpose whatsoever. On or before
October 31, 2001, Metris and Fingerhut shall mutually agree on
the parameters and the frequency of Metris' access to the
Fingerhut Customer files."
3. The Data Sharing Agreement is hereby amended by
deleting the first and second sentences of Section 3.1 and
substituting the following:
"This Agreement will terminate on October 31, 2003; provided,
however, that that after October 31, 2001, all rights in this
Agreement characterized as exclusive to Direct Merchants shall
automatically be nonexclusive, and the rights in the fourth
sentence of Section 2.3 of this Agreement, characterized as
exclusive to Fingerhut, shall automatically be nonexclusive."
4. The Extended Service Plan Agreement is hereby
amended as follows:
(a) Section 1.1 of the Extended Service Plan Agreement is
hereby deleted and the following substituted therefor:
"Section 1.1 During the term of this Agreement, Fingerhut
will offer the Extended Service Agreement to all of its Customers
who purchase merchandise eligible for extended service beyond the
Merchandise Warranty and will particularly emphasize the Extended
Service Agreement in respect of all electronics products sold by
Fingerhut."
(b) Section 5.14 of the Extended Service Plan Agreement is
hereby amended by deleting the first and second sentences of
Section 5.14(a) and substituting the following:
"Unless otherwise mutually agreed to by the parties, on or before
January 1 1999 and 2001, Fingerhut and Metris agree to evaluate
the Marketing Management Fee and the Underwriting and Servicing
Fee (collectively, the "Fees") as set forth in this Agreement and
Exhibits A and B attached hereto to ensure that the Fees to be
charged in the year beginning on each such January 1 are
competitive with those charged by others for comparable
services."
(c) The first sentence of Section 5.14(b) is hereby deleted
and the following substituted therefor:
"In the event Fingerhut and Metris are unable to agree on the
then market rate for the Fees to be charged hereunder, they agree
to send out within five (5) days after January 1, requests for
proposals ("RFPs") to three (3) reputable companies that are in
the business of providing extended product service or extended
warranty coverage for retailers to sell to their customers (the
"Independent Providers").
5. In addition to the consideration in the form of
the mutual promises and agreements set forth in the preceding
sections of this Waiver Agreement, including Fingerhut's
agreement herein not to terminate the Agreements as a result of
the "change of control" under the Transaction, as additional
consideration for the respective agreements of the parties
hereto, Fingerhut agrees that neither Fingerhut nor any affiliate
of Fingerhut shall, directly or indirectly, recruit, solicit or
otherwise induce any present or future employee of Metris, Direct
Merchants, Metris Services or any affiliate of any of them to
become an employee of Fingerhut or any affiliate of Fingerhut or
to otherwise discontinue such employment relationship, or
otherwise interfere with any such employment relationship
(provided that nothing herein shall prohibit the solicitation by
Fingerhut or any affiliate of Fingerhut of employees by general
advertisement or searches).
6. In addition to the consideration in the form of
the mutual promises and agreements set forth in the preceding
sections of this Waiver Agreement, as additional consideration
for the respective agreements of the parties hereto, Metris,
Direct Merchants and Metris Services each agree that neither
Metris, Direct Merchants, Metris Services nor any affiliate of
any of them shall, directly or indirectly, recruit, solicit or
otherwise induce any present or future employee of Fingerhut or
any affiliate of Fingerhut to become an employee of Metris,
Direct Merchants, Metris Services or any affiliate of any of them
or to otherwise discontinue such employment relationship, or
otherwise interfere with any such employment relationship
(provided that nothing herein shall prohibit the solicitation by
Metris, Direct Merchants, Metris Services or any affiliate of any
of them of employees by general advertisement or searches).
7. Except as expressly amended by this Waiver
Agreement or as necessary to give effect to the amendments
contained in this Waiver Agreement, all of the Agreements shall
remain in full force and effect.
8. The undersigned acknowledge that not all of the
parties hereto are a party to every Agreement, and the
undersigned executed this Waiver Agreement and are bound hereby
only with respect to the Agreements to which they are a party.
Executed as of the day and year first above written.
FINGERHUT CORPORATION
By/s/ Michael Sherman
Its Executive Vice President
METRIS DIRECT, INC.
By/s/ Ronald N. Zebeck
Its President
DIRECT MERCHANTS CREDIT CARD
BANK, NATIONAL ASSOCIATION
By/s/ Ronald N. Zebeck
Its Chairman
METRIS DIRECT SERVICES, INC.
By/s/ Ronald N. Zebeck
Its President and Chief Executive Officer
INFOCHOICE USA, INC.
By/s/ Michael Sherman
Its Executive Vice President
EXHIBIT A
THE TRANSACTION
Phase 1
Affiliated entities of Thomas H. Lee Company (the "Lee Company")
will purchase $200,000,000 of Series B Perpetual Preferred Stock
with a dividend rate of 12.5% (the "Series B Preferred") and
$100,000,000 of Senior Notes due 2006 (the "Notes") with an
interest rate of 12% and receive 3.75 million ten-year warrants
to purchase Metris common stock at a strike price of $30 per
share (the "Warrants"). Upon the issuance of the Series B
Preferred and the Notes, subject to applicable regulatory
approval, the Lee Company will be entitled to appoint two
additional directors to the Board, increasing the size of the
Board to nine directors. In the event that shareholder or
regulatory approval is not obtained, both the dividend rate on
the Series B Preferred and the interest rate on the Notes will
increase to 15%, and the Warrants will become immediately
exercisable.
Phase 2
Upon receipt of applicable regulatory and shareholder approval,
Series B Preferred, the Warrants and the Notes will automatically
convert to approximately 805,369 of Series C Perpetual
Convertible Stock (the "Series C Preferred Stock"), subject to
adjustments. Each share of the Series C Preferred Stock will be
convertible into ten (10) common shares at an effective
conversion price of $37.25 per common share, subject to
adjustment, and will have a 9% dividend payable in additional
Series C Preferred Stock, guaranteed for a seven-year period.
When the Series C Preferred Stock is converted into common
shares, the Lee Company would initially own approximately 28.7%
of Metris, on a fully diluted basis. Upon completion of the
exchange of Series B Preferred and the Notes into the Series C
Preferred Stock, the Warrants would be cancelled and the holders
of the Series C Preferred Stock would be entitled to elect two
additional directors to the Board, thereby increasing the size of
the Board to eleven directors.
EXHIBIT B
FINANCIAL SERVICE PRODUCTS
Accidental Death Insurance
- Metris can offer Credit Life and Accidental Death Insurance
to its customers
- Fingerhut can offer Credit Life and Accidental Death
Insurance to its customers
Medical and Hospitalization Insurance Products
Warranty or Extended Service Plans
Bank Deposit Accounts
Investment Services (Annuities, Mutual Funds, CDs)
Consumer Loans (other than closed end installment or revolving
credit loans to customers of Fingerhut Corporation and its
affiliates)
Student Loans
Auto Lending/Leasing
Equity Loans, Mortgages
Bank Credit Cards
Prepaid Affiliation Cards, including smart cards, but only of
Visa, Mastercard, American Express and Discover
Debit Cards
Co Branded Bank Cards, except private label cards issued by
Fingerhut National Bank to customers of Fingerhut or affiliates
Credit Card Registration
Roadside Assistance Clubs Affinity Bank Credit Cards Membership
fee-based Travel Clubs Mobile Home Financing
Credentials Products (membership based product providing credit
data to consumers)
Financial Services Products may be offered via the Internet to
persons in the Customer Database by any affiliate of Fingerhut
which is not controlled by Fingerhut so long as until October 31,
2001, (i) the business of the affiliate is offering goods and
services via the Internet which are not primarily Financial
Services Products, (ii) the affiliate does not offer Financial
Services Products through other direct marketing channels and
(iii) the business of offering any such Financial Services
Products by the affiliate is subordinate to the business of
offering other goods and services. An affiliate of Fingerhut
that is not controlled by Fingerhut but becomes controlled by
Fingerhut may continue offering Financial Services Products via
the Internet to persons in the Customer Database to the extent
required by any contractual obligations incurred by it prior to
becoming controlled by Fingerhut so long as until October 31,
2001 the conditions in clauses (i), (ii) and (iii) above continue
to be met. As of this date Fingerhut does not control any
affiliates the business of which is offering goods and services
via the Internet.
For purposes of the foregoing paragraph, Fingerhut shall not be
deemed to control an affiliate unless it owns more than 50% of
the affiliates' voting stock or unless more than 50% of the
members of the affiliates' board of directors are employees or
directors of Fingerhut.
M1:430862.11
EXHIBIT D
1. 20th Century Insurance
2. Allstate (except Roadside Assistance)
3. American General Finance
4. Blue Cross Blue Shield
5. Cigna
6. Colonial Exchange
7. Eastern Mortgage
8. Gerber
9. Globe Life
10. Guarantee Reserve
11. Guarantee Trust Life
12. Harvest Life Insurance
13. HealthFirst
14. Kaiser CHP
15. Lincoln Mutual
16. Metropolitan Life
17. Millersfirst
18. Mutual of Omaha
19. Nationwide Insurance
20. Personal Mortgage Corp.
21. PMIC *
22. Providian
23. Response Insurance 24. Response Marketing
25. Signature Group - Security Card
26. Superior Bank
27. Universal Lending Group
* Financial Services Products are now being offered by Metris
without obligation to remit any portion of revenues received
until November 1, 2001, following which date, Metris will remit
to Fingerhut 25% of all revenues received from PMIC.
AMENDMENT, dated as of December 3, 1998 (this
"Amendment"), to the AMENDED AND RESTATED CREDIT AGREEMENT (the
"Credit Agreement"), dated as of June 30, 1998, among METRIS
COMPANIES INC., a Delaware corporation (the "Borrower"), the
lenders listed in Schedule 2.01 thereto (the "Lenders"),
NATIONSBANK, N.A., as Syndication Agent (in such capacity, the
"Syndication Agent"), DEUTSCHE BANK, as documentation agent, U.S.
BANK NATIONAL ASSOCIATION, as documentation agent (collectively
in such capacity, the "Documentation Agents"), BARCLAYS BANK PLC
as co-agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as co-agent (collectively in such capacity, the "Co-
Agents"), and THE CHASE MANHATTAN BANK, as administrative agent
for the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders
have agreed to make, and have made, certain loans and other
extensions of credit to the Borrower; and
WHEREAS, the Borrower has requested, and, upon this
Amendment becoming effective, the Lenders have agreed, that the
investment (the "Lee Investment"), described in Annex I hereto
shall be permitted under the Credit Agreement.
NOW, THEREFORE, for valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in
consideration of the premises contained herein, the parties
hereto hereby agree as follows:
SECTION I. SECTION I. AMENDMENT
I.1. Defined Terms. Unless otherwise defined herein,
capitalized terms which are defined in the Credit Agreement are
used herein as defined therein.
I.2. Amendment. The Lenders and the Borrower hereby
agree that upon the effectiveness of this Amendment the
definition of "Change in Control" set forth in Section 1.1 of the
Credit Agreement is amended and restated in its entirety to read
as follows:
A "Change in Control" shall be deemed to have
occurred if (a) any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) shall
beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act) shares representing more than 35% of the
aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the Borrower, (b) at any
time, individuals who on the Effective Date (after giving
effect to the Spin-off) were directors of the Borrower
(together with any replacement or additional directors
nominated or appointed by the majority of directors then in
office) cease to constitute a majority of the Board of
Directors of the Borrower or (c) a "Change of Control" shall
occur as defined in the Senior Note Indenture.
SECTION II. SECTION II. MISCELLANEOUS
II.1. Conditions to Effectiveness of Amendment. This
Amendment shall become effective as of the date first set forth
above upon the Administrative Agent having received counterparts
of this Amendment duly executed and delivered by the Borrower and
the Required Lenders.
II.2.II.2. Representations and Warranties. The
Borrower represents and warrants to each Lender that as of the
effective date of this Amendment: (a) the representations and
warranties made by the Loan Parties in the Loan Documents are
true and correct in all material respects on and as of the date
hereof (except to the extent that such representations and
warranties are expressly stated to relate to an earlier date, in
which case such representations and warranties shall have been
true and correct in all material respects on and as of such
earlier date); and (b) no Default or Event of Default shall have
occurred and be continuing as of the date hereof
II.3. CounterpartsII.3. Counterparts. This Amendment
may be executed by one or more of the parties to this Amendment
on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall
be deemed to constitute one and the same instrument. A set of
the copies of this Amendment signed by all the parties shall be
lodged with the Borrower and the Administrative Agent.
II.4. Continuing Effect; No Other Amendments. Except
to the extent expressly stated herein, all of the terms and
provisions of the Credit Agreement and the other Loan Documents
are and shall remain in full force and effect and are not waived
in any respect. This Amendment shall constitute a Loan Document.
II.5. Payment of Expenses. The Borrower agrees to pay
and reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and reasonable expenses incurred to date in
connection with this Amendment and the other Loan Documents,
including, without limitation, the reasonable fees and
disbursements of legal counsel to the Administrative Agent.II.5.
Payment of Expenses. The Borrower agrees to pay and reimburse
the Administrative Agent for all of its reasonable out-of-pocket
costs and reasonable expenses incurred to date in connection with
this Amendment and the other Loan Documents, including, without
limitation, the reasonable fees and disbursements of legal
counsel to the Administrative Agent.
II.6. GOVERNING LAWII.6. GOVERNING LAW. THIS
AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their
respective proper and duly authorized officers as of the day
and year first above written.
METRIS COMPANIES INC., as Borrower
By:/s/ Paul Runice
Name:Paul Runice
Title: Senior Vice President and Treasurer
THE CHASE MANHATTAN BANK, as
Administrative Agent, Lender and
Issuing Bank
By:/s/ Gail Weiss
Name: Gail A. Weiss
Title: Vice President
NATIONSBANK, N.A.
By:/s/ Mary P. Riggins
Name: Mary Pat Riggins
Title:Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By:/s/ Gayma Z. Shivnarain
Name: Gayma Z. Shivnarain
Title: Vice President
By: /s/John S. McGill
Name: John S. McGill
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By:/s/ Elliot Jaffe
Name: Elliot Jaffee
Title: Vice President
BARCLAYS BANK PLC,
NEW YORK BRANCH
By:/s/ Eric Jaegher
Name: Eric Jaegher
Title: Director
THE SUMITOMO BANK, LTD.
By:/s/ John H. Kemper
Name: John H. Kemper
Title: Senior Vice President
THE BANK OF NEW YORK
By: /s/ Michael Flannery
Name: Michael Flannery
Title: Vice President
THE BANK OF NOVA SCOTIA
By:/s/ F.C.H. Ashby
Name: F.C. Ashby
Title: Senior Manager Loan Operations
BANQUE NATIONALE DE PARIS
By:/s/ Arnaud Collin du Bocage
Name: Arnaud Collin du Bocage
Title: Executive Vice President and General Manager
THE LONG TERM CREDIT BANK OF JAPAN, LTD.
By:/s/ Armund J. Schoen, Jr.
Name: Armund J. Schoen, Jr.
Title: Senior Vice President
THE FUJI BANK, LIMITED
By:/s/ Peter L. Chinnici
Name: Peter L. Chinnici
Title: Joint General Manager
KZH IV LLC
By:/s/ Virginia Conway
Name: Virginia Conway
Title: Authorized Agent
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By:/s/ Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
KZH III LLC
By:/s/ Virginia Conway
Name: Virginia Conway
Title: Authorized Agent
KZH SHOSHONE LLC
By:/s/ Virginia Conway
Name: Virginia Conway
Title: Authorized Agent
AMARA-1 FINANCE LTD
By:/s/ Ian David Moore
Name: Ian David Moore
Title: Director
AMARA-2 FINANCE LTD
By:/s/ Ian David Moore
Name: Ian David Moore
Title: Director
CERES FINANCE LTD.
By:/s/ David Egglishaw
Name: David Egglishaw
Title: Director
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:/s/ Mary P. Riggins
Name: Mary Pat Riggins
Title: Vice President
WARRANT AGREEMENT
METRIS COMPANIES INC.
DATED AS OF DECEMBER 9, 1998
WARRANT AGREEMENT
Table of Contents
Section Page
1. Issue of Warrant to Purchasers; Form of Warrants - 1 -
2. Registration - 2 -
3. Transfer of Warrants - 2 -
4. Term; Exercise - 2 -
5. Surrender of Warrant Certificates - 3 -
6. Mutilated or Missing Warrant Certificate - 3 -
7. Reservation of Common Stock, etc. - 4 -
8. Anti-dilution Adjustments - 4 -
8.1 Exercise Price Adjustment - 4 -
8.2 Special Rules for Adjusting the Exercise Price - 4 -
8.3 Extraordinary Distributions - 6 -
8.4 Equitable Adjustments - 7 -
8.5 Certain Readjustments - 7 -
8.6 Adjustment in Shares Purchasable - 8 -
8.7 Notice of Adjustment - 8 -
8.8 Reflection of Adjustments on Certificates - 8 -
8.9 De Minimis Adjustments - 8 -
8.10 Exemptions - 9 -
9. Constraints - 9 -
10. Consolidation or Merger - 9 -
11. Certain Events - 10 -
12. Absence of Registration - 11 -
13. Information Covenants - 11 -
13.1 Notice of Stockholder Meetings - 11-
13.2 Notice of Distributions - 12 -
13.3 Financial Statements, etc. - 12-
13.4 Proper Books and Records; Inspection - 12-
14. Notices - 12 -
15. Warrant Obligations Independent of Debt Obligations - 13 -
16. Fractional Interests - 13-
17. Cancellation - 13 -
18. Binding Effect; Survival - 13 -
19. Counterparts - 13 -
20. Governing Law - 13 -
EXHIBITS
A Warrant Certificate
WARRANT AGREEMENT dated as of December 9, 1998 between
Metris Companies Inc., a Delaware corporation (the "Company"),
and the purchasers set forth on Schedule I attached hereto (each
individually a Purchaser and collectively the "Purchasers"). The
Purchasers, so long as they are holders of any warrants
hereunder, together with any permitted transferees or assignees
who are registered holders of any warrant issued hereunder or a
like warrant or warrants issued upon the transfer of such warrant
(each individually a "Warrant" and collectively the "Warrants"),
are referred to collectively as the "Holders" and individually as
a "Holder."
WHEREAS, pursuant to the terms of a Securities Purchase
Agreement dated as of November 13, 1998 among the Company, and
the Purchasers (the "Purchase Agreement"), the Company has agreed
to issue to each Purchaser a Warrant as hereinafter described to
purchase shares of the Company's Common Stock, par value $.01 per
share (together with any other or additional classes of the
Company's capital stock for which the Warrants may become
exercisable in accordance with Section 8.4 of this Agreement, the
"Common Stock"), upon the terms and subject to the conditions set
forth in the Purchase Agreement; and
WHEREAS, the Company wishes to set forth, among other
things, the provisions of such Warrants and the terms and
conditions on which such Warrants may be issued, exchanged,
exercised and replaced;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as
follows:
1. Issue of Warrant to Purchasers; Form of Warrants. The
Company shall on the date hereof issue and deliver to the
Purchasers for no additional consideration Warrants to purchase
an aggregate of Three Million Seven Hundred Fifty Thousand
(3,750,000) shares of Common Stock, subject to adjustment
pursuant to Section 8 hereof. Each Purchaser shall receive a
Warrant to purchase that number of shares of Common Stock set
forth opposite such Purchaser's name on Schedule I attached
hereto. Each Warrant, and any additional Warrants which may be
issued upon partial exercise, replacement or transfer of such
Warrant or Warrants, shall be evidenced by, and subject to the
terms of, a Warrant Certificate (including the Forms of Election
to Purchase and Assignment attached thereto, a "Warrant
Certificate") in the form of Exhibit A attached hereto, in each
case executed on behalf of the Company by the manual or facsimile
signature of the President or Vice President of the Company,
under its corporate seal affixed or in facsimile, and attested by
the Secretary or an Assistant Secretary of the Company. A
Warrant Certificate evidencing the original Warrant issued to
each Purchaser shall be executed and delivered to such Purchaser
simultaneously with the execution of this Agreement. The Company
will pay any documentary stamp taxes attributable to the initial
issuance of Warrants and the issuance of Common Stock upon the
exercise of Warrants.
2. Registration. All Warrant Certificates shall be
numbered and shall be registered in a warrant register (the
"Warrant Register") as they are issued. Subject to its
compliance with the foregoing, the Company shall be entitled to
treat the registered Holder of any Warrant on the Warrant
Register as the owner in fact of such Warrant for all purposes
and shall not be bound to recognize any equitable or other claim
to or interest in such Warrant on the part of any other person or
entity, and shall not be liable for any registration or transfer
of Warrants which are registered or to be registered in the name
of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein
amounts to bad faith.
3. Transfer of Warrants. Any Warrant may be transferred
or endorsed to another party in whole or in part by giving
written notice thereof to the Company at its principal office.
If a new Warrant Certificate is requested in connection with such
transfer, shall be surrendered for cancellation, endorsed or
accompanied by a written instrument of transfer, in form
satisfactory to the Company, duly executed by the Holder thereof
in person or by a duly authorized representative, agent or
attorney-in-fact appointed in writing. Upon receipt thereof, the
Company shall issue and deliver, in the name of the transferee, a
new Warrant Certificate containing the same terms as the
surrendered Warrant Certificate. In the case of the transfer of
fewer than all of the rights evidenced by the surrendered Warrant
Certificate, the Company shall issue a new Warrant Certificate to
the Holder thereof for the remaining number of shares specified
in the Warrant Certificate so surrendered.
4. Term; Exercise. A Warrant entitles the Holder thereof
to purchase the number of shares of Common Stock specified in the
Warrant Certificate held by such Holder at a purchase price of
Thirty ($30.00) Dollars per share (the "Exercise Price") at any
time on or after the Initial Date (as herein defined) and on or
before 5:00 p.m. Eastern Time on December 31, 2008 (the
"Expiration Date"). The Initial Date shall be the first to occur
of (i) the date on which the shareholders of the Company vote to
disapprove the Exchange (as defined in the Purchase Agreement)
and (ii) June 30, 1999, subject to the termination of any
applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and as prescribed by the Office of the
Comptroller of the Currency. The Exercise Price and the number
of shares issuable upon exercise of any Warrant are subject to
adjustment upon the occurrence of certain events, pursuant to the
provisions of Section 8 of this Agreement. Subject to the
provisions of this Agreement, the Holder of a Warrant shall have
the right, which may be exercised in whole or in part, to
purchase from the Company, and the Company shall issue and sell
to such Holder, the number of fully paid and non-assessable
shares of Common Stock (together with any other shares of the
Company's Common Stock issuable upon exercise of Warrants, the
"Shares") specified in the Warrant Certificate held by such
Holder. Such right shall be exercised by surrender to the
Company, or its duly authorized agent, of such Warrant
Certificate, with the Form of Election to Purchase attached
thereto duly completed and signed, and upon payment to the
Company of the Exercise Price, as adjusted in accordance with the
provisions of Section 8, for the number of Shares in respect of
which the Warrant is then exercised. Payment of such Exercise
Price may be made in cash, by certified check or bank draft
payable to the order of the Company, by wire transfer of
immediately available funds or by tender of an equivalent face
amount of the Company's 12% Senior Notes due November 1, 2006
(the "Senior Notes"). Upon such surrender of the Warrant
Certificate and payment of the Exercise Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the Holder of such
Warrant, in such name or names as such Holder may designate, a
certificate or certificates for the number of full Shares so
purchased, together with cash, as provided in Section 16 of this
Agreement, in respect of any fraction of a Share otherwise
issuable upon such surrender. Such certificate or certificates
shall be deemed to have been issued and any person or entity so
designated to be named therein shall be deemed to have become a
holder of record of such Shares as of the date of the surrender
of the Warrant Certificate and payment of the Exercise Price as
aforesaid; provided, however, that if, at the date of surrender
of a Warrant Certificate and payment of such Exercise Price the
transfer books for the Common Stock (or, upon adjustment, such
other class of stock as may be purchasable upon the exercise of
the Warrant) shall be closed, the certificates for the Shares in
respect of which such Warrant is then exercised shall be issued
as of the date on which such books shall next be opened (whether
before, on or after the Expiration Date) and until such date the
Company shall be under no duty to deliver any certificate for
such Shares; provided further, however, that the transfer books
shall not be closed at any time for a period longer than
forty-eight (48) hours unless otherwise required by law. A
Warrant shall be exercisable, at the election of the Holder
thereof, either for all or for part only of the Shares specified
in the Warrant Certificate and if any Warrant is exercised in
part prior to the Expiration Date, the Company shall issue a new
Warrant Certificate for the remaining number of Shares specified
in the Warrant Certificate so surrendered. The Company covenants
that if any Shares issuable upon the exercise of Warrants require
(under any federal or state law or applicable governing rule or
regulation of any national securities exchange) registration with
or approval of any governmental authority before such Shares may
be issued upon exercise, the Company, upon receipt from any
Purchaser of notice of intent to exercise, will in good faith and
as expeditiously as possible endeavor to cause such Share to be
duly registered, approved or listed on the relevant national
securities exchange, as the case may be.
5. Surrender of Warrant Certificates. Any surrender of a
Warrant Certificate for transfer pursuant to Section 3 above or
upon exercise pursuant to Section 4 above shall be made (a) to
the Company at its principal office or (b) to the Company at such
other place or to such agent of the Company as the Company shall
hereafter notify the Holders.
6. Mutilated or Missing Warrant Certificate. If a Warrant
Certificate is mutilated, lost, stolen or destroyed, the Company
shall issue and deliver (a) in exchange and substitution for and
upon cancellation of any mutilated Warrant Certificate or (b) in
lieu of and in substitution for any Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor
representing an equivalent right or interest.
7. Reservation of Common Stock, etc. The Company shall
reserve for so long as any Warrant remains outstanding a number
of authorized and unissued Shares sufficient to provide for the
exercise of all such Warrants, and the transfer agent for the
Common Stock, which may be the Company (the "Transfer Agent"), is
hereby irrevocably authorized and directed at all times until the
Expiration Date to reserve such number of authorized and unissued
Shares as necessary for such purpose. The Company shall keep
copies of this Agreement on file with the Transfer Agent and
shall supply the Transfer Agent with duly executed stock
certificates for such purpose and will itself provide or
otherwise make available any cash payable as provided in Section
16 of this Agreement. All Warrant Certificates surrendered upon
the exercise of Warrants shall be cancelled, and such cancelled
Warrant Certificates shall constitute sufficient evidence of the
number of Shares which have been issued upon the exercise of
Warrants. The Company shall furnish to the Transfer Agent a copy
of all notices of adjustment, and certificates related thereto,
required to be transmitted to each Holder pursuant to Section 8.7
hereof.
8. Anti-dilution Adjustments. The Exercise Price in
effect at any time and the number and kind of Shares purchasable
upon exercise of the Warrants shall be subject to adjustments
from time to time upon the happening of the events hereinafter
specified. No adjustment shall be made for any cash dividends or
any Shares issued or issuable upon exercise of the Warrants, and
if any adjustment results in an Exercise Price which is less that
the stated par value per share of the Shares issuable upon such
exercise, the Company agrees that such stated par value shall
also be adjusted such that the Exercise Price shall at no time be
less than the par value of such Shares. Notwithstanding any
other provision hereof or of any Warrant, the Exercise Price, as
adjusted from time to time shall not in any event be less than
the par value (if any) of the Common Stock. The Company hereby
covenants that, to the extent permitted by law, the par value of
each share of Common Stock shall not be more than $.01 and the
Company will not increase such par value so long as any Warrant
is outstanding.
8.1 Exercise Price Adjustment. (a) At any time the
Company issues or sells any shares of Common Stock (except as
provided in Section 8.10 and except for issuances subject to
Section 8.4) for a consideration per share less than the Exercise
Price in effect immediately prior to such issue or sale, the
Exercise Price in effect immediately prior to such issue or sale
shall thereupon be reduced to the price (calculated to the
nearest cent) determined as follows:
(1) by dividing (x) the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing Exercise
Price, and (ii) the consideration, if any, received by the
Company upon such issue or sale, by (y) the total number of
shares of Common Stock outstanding immediately after such
issue or sale of Securities.
(b) In addition to the foregoing adjustments in
paragraph (a) above, the Corporation will be permitted to make
such reductions in the Exercise Price as it considers to be
advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights will not be
taxable to the holders of the shares of Common Stock.
8.2 Special Rules for Adjusting the Exercise Price. For
the purposes of Section 8.1 above, the following paragraphs (a)
to (d), inclusive, shall also be applicable:
(a) Treatment of Options, Rights, etc. At any time
the Company grants any rights to subscribe for, or any
rights or options to purchase, Common Stock or any
securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable securities being herein
called "Convertible Securities"), whether or not such rights
or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the
exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by
dividing (1) the total amount, if any, received or
receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the
exercise of such rights or options, plus, in the case of any
such rights or options which relate to such Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or
exchange thereof, by (2) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
rights or options) is less than the Exercise Price in effect
immediately prior to the granting of such rights or options,
then the maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon
conversion or exchange of the maximum number of such
Convertible Securities issuable upon the exercise of such
rights or options shall (as of the date of granting of such
rights or options) be deemed to be outstanding and to have
been issued for such price per share. Except as provided in
Section 8.5, no further adjustments of the Exercise Price
shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such rights
or options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
(b) Treatment of Convertible Securities. At any time
the Company issues or sells any Convertible Securities,
whether or not the rights to exchange or convert thereunder
are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or
exchange (determined by dividing (1) the total amount
received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange
thereof, by (2) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities) is less than the Exercise Price in
effect immediately prior to the time of such issue or sale,
then the maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding and
to have been issued for such price per share, provided that
(i) except as provided in Section 8.5, no further
adjustments of the Exercise Price shall be made upon the
actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities and (ii) if any such
issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or
any option to purchase any such Convertible Securities for
which adjustments of the Exercise Price have been or are to
be made pursuant to other provisions of this Section 8.2, no
further adjustment of the Exercise Price shall be made by
reason of such issue or sale.
(c) Computation of Consideration. For purposes of
this Section 8: (1) the consideration received for any
shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or
Convertible Securities issued or sold for cash shall be
deemed to be the amount received by the Company therefor,
without deduction of any expenses incurred or any
underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith; (2) if any
shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or
Convertible Securities are issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the Company shall
be deemed to be the fair value of such consideration as
reasonably determined in good faith by the board of
directors of the Company, without deduction therefrom of any
expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in
connection therewith; and (3) the consideration for any
shares of Common Stock or Convertible Securities issued by
the Company in connection with any merger or consolidation
of another corporation into the Company shall be deemed to
be the fair value of the assets of such merged or
consolidated corporation as reasonably determined in good
faith by the board of directors of the Company after
deducting therefrom all cash and other consideration (if
any) paid by the Company in connection with such merger.
(d) Record Date. At any time the Company takes a
record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other
distribution payable in Convertible Securities, or (2) to
subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or
the date of the granting of such right or subscription or
purchase, as the case may be.
8.3 Extraordinary Distributions. If the Company makes
any distribution of its assets upon or with respect to its Common
Stock, as a liquidating or partial liquidating dividend, or other
than as a dividend payable out of earnings or any surplus legally
available for dividends under the laws of the jurisdiction of
incorporation of the Company, each Holder of a Warrant shall,
upon the exercise of such Warrant after the record date for such
distribution or, in the absence of a record date, after the date
of such distribution, receive, in addition to the shares
subscribed for, the amount of such assets (or, at the option of
the Company, a sum equal to the value thereof at the time of
distribution as reasonably determined in good faith by the board
of directors of the Company) which would have been distributed to
such Holder if such Holder had exercised such Holder's Warrant
immediately prior to the record date for such distribution or, in
the absence of a record date, immediately prior to the date of
such distribution.
8.4 Equitable Adjustments. If the Company (i)
declares or pays a dividend on its Common Stock in shares of its
capital stock or makes a distribution in shares of Common Stock,
(ii) subdivides its outstanding Common Stock, (iii) combines its
outstanding Common Stock into a smaller number of shares of
Common Stock or (iv) issues any shares of its capital stock in a
reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing entity), the number of Shares
of Common Stock for which Warrants are exercisable in effect at
the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification shall
be proportionately adjusted so that the Holder of any Warrant
exercised after such date shall be entitled to receive the
aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, it would have
owned upon such exercise and been entitled to receive upon such
dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed
above shall occur, but no duplicative adjustment shall be made
hereunder.
8.5 Certain Readjustments. If the purchase price
provided for in any right or option referred to in Section
8.2(a), or the rate at which any Convertible Securities referred
to in Section 8.2(a) or 8.2(b) are convertible into or
exchangeable for Common Stock, shall change or a different
purchase price or rate shall become effective at any time or from
time to time (other than under or by reason of provisions
designed to protect against dilution), then, upon such change
becoming effective, the Exercise Price then in effect hereunder
shall thereupon be increased or decreased to such Exercise Price
as would have obtained had the adjustments made upon the granting
or issuance of such rights or options or Convertible Securities
been made upon the basis of (1) the issuance of the number of
shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or
exchange of such Convertible Securities, and the total
consideration received therefor, and (2) the granting or issuance
at the time of such change of any such options, rights, or
Convertible Securities then still outstanding for the
consideration, if any, received by the Company therefor and to be
received on the basis of such changed price. On the expiration
of any right or option referred to in Section 8.2(a), or on the
termination of any right to convert or exchange any Convertible
Securities referred to in Section 8.2(a) or 8.2(b), the Exercise
Price shall thereupon be readjusted to such amount as would have
obtained had the adjustment made upon the granting or issuance of
such rights or options or Convertible Securities been made upon
the basis of the issuance or sale of only the number of shares of
Common Stock actually issued upon the exercise of such options or
rights or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right
or option, or the rate at which any such Convertible Securities
are convertible into or exchangeable for Common Stock, shall
change at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible
Security, the Exercise Price then in effect hereunder shall
forthwith be decreased to such Exercise Price as would have
obtained had the adjustments made upon the issuance of such right
or option or Convertible Security been made upon the basis of the
issuance of (and the total consideration received for) the shares
of Common Stock delivered as aforesaid.
8.6 Adjustment in Shares Purchasable. Whenever the
Exercise Price is adjusted pursuant to Section 8.1 above, each
Warrant outstanding at the time of such adjustment shall become
the right to purchase that number of Shares obtained by
multiplying the number of Shares into which such Warrant is
exercisable immediately prior to such adjustment by the Exercise
Price in effect immediately prior to the adjustment, and dividing
the product so obtained by the Exercise Price in effect
immediately after such adjustment, so that upon exercise of such
Warrant with respect to all the Shares purchasable thereby the
Company shall receive the same amount of consideration it would
have received if the event occasioning the adjustment had not
occurred and such Warrant were exercised with respect to all the
Shares purchasable thereby.
8.7 Notice of Adjustment. Whenever an adjustment is
made pursuant to this Section 8, the Company shall promptly cause
a notice setting forth the adjusted Exercise Price and adjusted
number of Shares issuable upon exercise of each Warrant to be
mailed to each Holder at such Holder's last address appearing on
the Warrant Register and shall cause a certified copy thereof to
be mailed to the Transfer Agent, if such Transfer Agent is not
the Company. The Company shall, upon the request in writing of
the Holders of a majority of the Warrants, retain a nationally
recognized firm of independent public accountants of recognized
standing selected by the board of directors of the Company to
make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment, which shall be binding on the
Holders and the Company.
8.8 Reflection of Adjustments on Certificates.
Notwithstanding any adjustments in the Exercise Price or the
number or kind of Shares purchasable upon exercise of Warrants,
any Warrant Certificate theretofore or thereafter issued may
continue to express the same price and number and kind of Shares
as are stated in the Warrant Certificate initially issuable
pursuant to this Agreement.
8.9 De Minimis Adjustments. Anything in this Section
8 to the contrary notwithstanding, the Company shall not be
required to make any adjustments of the Exercise Price in any
case in which the amount by which such Exercise Price would be
reduced in accordance with the foregoing provisions would be less
than ten cents ($.10), but in such case any adjustment that would
otherwise be made shall be carried forward and made at the time
and together with the next subsequent adjustment which, together
with any and all such adjustments so carried forward, shall
amount to not less than ten cents ($.10).
8.10 Exemptions. The Company shall not be required to
make any adjustment of the Exercise Price in the case of
(a) the granting by the Company of stock
options to its employees so long as the shares of
Common Stock covered by all such options do not in the
aggregate exceed on a cumulative basis 10% of the
shares of Common Stock issued and outstanding at the
time of the latest granting of any such option, or
(b) the issuance of shares of Common Stock
pursuant to the exercise of such options, whether
granted prior to or subsequent to the date hereof, or
(c) the issuance of such additional shares
of Common Stock as may be issuable upon the exercise of
such options as a result of adjustment in the number of
shares covered by such options for stock dividends,
stock splits or other changes in the capitalization of
the Company, or
(d) the issuance or sale of shares of Common
Stock to the Company's employees pursuant to any stock
purchase plan in effect on the date hereof (except to
the extent such plan is subsequently amended), or
(e) the granting by the Company of any
options or warrants, on the issuance of shares upon
exercise thereof, to the extent the same are disclosed
in the disclosure schedule to the Purchase Agreement.
9. Constraints. Notwithstanding the other provisions of
this Agreement, in no event may a Warrant be exercised prior to
receipt by the holder of all approvals from, or the expiration of
all waiting or notice periods imposed by, applicable governmental
authorities which are entitled to approve or review issuances of
securities of the Company.
10. Consolidation or Merger. If the Company shall at any
time prior to the Expiration Date consolidate with or merge with
or into another entity, each Holder of a Warrant shall thereafter
be entitled to receive, upon the exercise thereof and payment of
the Exercise Price in accordance with the terms of this
Agreement, the aggregate number and kind of securities and
property (including any cash), if any, which if such Warrant had
been exercised immediately prior to such consolidation or merger
and at a time when the transfer books of the Company were open,
it would have owned upon such exercise and been entitled to
receive upon such merger or consolidation. The Company shall
take such steps in connection with such consolidation or merger
as may be necessary to ensure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or property (including any cash)
thereafter deliverable upon the exercise of the Warrants;
provided, however, that if upon such consolidation or merger
different holders of Common Stock shall be entitled to receive
different forms of consideration for their Common Stock, the form
of such consideration thereafter deliverable upon the exercise of
the Warrants shall be as determined in good faith by the board of
directors of the Company, whose determination shall be
conclusive. A sale of all or substantially all the assets of the
Company for a consideration (apart from the assumption of
obligations) consisting primarily of securities shall be deemed a
consolidation or merger for the purposes of this Section 9. The
Company shall not effect any such consolidation, merger or sale
of all or substantially all of its assets (in one or more
transactions) unless prior to or simultaneously with the
consummation thereof, the successor or surviving corporation or
entity (if other than the Company) resulting from such
consolidation or merger, or the corporation or other entity to
which such assets are transferred, shall assume, by written
agreement duly executed and mailed to the Holders or delivered in
accordance with Section 14 hereof, the obligation to deliver to
each Holder the Shares of stock, securities or assets which such
Holder is entitled to purchase in accordance with the foregoing
provisions. The provisions of this Section 10 shall also apply
to successive mergers or consolidations.
11. Certain Events. If any of the following occurs on or
before the Expiration Date:
(a) a consolidation or merger of the Company with or
into another entity (other than any merger as to which the
Company is the surviving corporation and there is no change
in the Common Stock in connection therewith),
(b) a liquidating dividend with respect to the Common
Stock, or
(c) a tender offer or exchange offer with respect to
the Common Stock (other than a tender offer opposed by the
Company's board of directors),
(each, an "Event"), then, in connection with any such Event, each
Holder of a Warrant shall have the right, in lieu of exercising
such Warrant in advance of such Event and receiving the
consideration which a Holder of the Shares issuable upon exercise
of such Warrant would receive in connection with such
consolidation or merger, liquidating dividend or tender offer
(the "Event Consideration"), upon surrender of the Warrant
Certificate evidencing such Warrant to the Company or its duly
authorized agent or to the depositary or exchange agent, as the
case may be, to receive the Event Consideration with respect to
the Shares for which such Warrant is exercisable reduced by the
Exercise Price. Such reduction in the Event Consideration shall
first be applied to any cash included in the Event Consideration
and, to the extent that such cash is less than the Exercise
Price, the amount of the securities or other property to be
received by such Holder shall be reduced by an amount that,
together with any such cash, is (in the reasonable judgment of
the Company's board of directors) equal to the Exercise Price.
The Company hereby covenants
(A) to give notice of any Event specified in (a) or
(b) above to each Holder of Warrants at least fifteen (15)
business days in advance of the record date for determining
stockholders' rights with respect to such Event, and
(B) that any agreements, resolutions, offers or other
documents with respect to any Event shall contain terms
consistent with the provisions of this Section 10 and, in
the case of any Event specified in (c) above, shall be
forwarded to each Holder of Warrants.
The provisions of this Section 11 shall also apply to successive
Events.
12. Absence of Registration. By acceptance of a Warrant
Certificate evidencing the Warrant, each Holder represents and
agrees that such Holder is acquiring the Warrant, and that upon
exercise thereof it will acquire the Shares, with its own funds
for its own account for investment, and not with a view to any
sale, distribution or transfer thereof in violation of the
Securities Act of 1933 (the "Securities Act").
Each Holder acknowledges that such Holder has been informed by
the Company or by the previous Holder of the Warrant that the
Warrant may not, under the Securities Act and applicable
regulations thereunder, be re-sold, transferred or otherwise
disposed of without registration under the Securities Act or an
applicable exemption from the registration requirements of the
Securities Act.
Warrant Certificates shall bear the following legend:
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). IT MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
13. Information Covenants.
13.1 Notice of Stockholder Meetings. Nothing
contained in this Agreement shall be construed as conferring upon
any Holder the right to vote or to consent to or receive notice
as a stockholder in respect of the meetings of stockholders or
the election of directors of the Company or any other matter, or
any rights whatsoever as a stockholder of the Company; provided,
however, that if a meeting of the stockholders of the Company is
called or if consents of the Company's stockholders are solicited
to consider and take action on a proposal for (i) the declaration
of a dividend with respect to Shares, other than in cash, (ii)
the redemption or repurchase of any Shares, other than pursuant
to repurchase agreements with employees, (iii) the voluntary
dissolution of the Company or (iv) any consolidation, merger or
sale of all or substantially all of its property, assets,
business and good will as an entirety, then the Company shall
cause a notice thereof to be sent by first class mail, postage
prepaid, at least twenty (20) business days prior to the record
date for determining stockholders entitled to vote at such
meeting or to take action with respect to such consent, to each
Holder of Warrants at such Holder's address appearing on the
Warrant Register; but failure to mail or to receive such notice
or any defect therein or in the mailing thereof shall not affect
the validity of any action taken at such meeting or by such
consent.
13.2 Notice of Distributions. If the Company
determines to make any distribution on its Common Stock, then the
Company shall deliver a notice of its intention to make such
distribution by first class mail, postage prepaid, at least
twenty (20) business days prior to the record date for such
distribution to each registered Holder of Warrants at such
Holder's address appearing on the Warrant Register, but failure
to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken
in connection with such distribution.
13.3 Financial Statements, etc. Notwithstanding
Section 13.1 above, the Company shall promptly deliver to each
Holder copies of all regular and periodic financial information,
proxy materials and other information and reports, if any, which
the Company or any of its subsidiaries shall file with the
Securities and Exchange Commission. In addition, the Company
shall deliver to each Holder all financial statements and other
reports required to be delivered to holders of Senior Notes
pursuant to paragraph 6.1 of the Purchase Agreement.
13.4 Proper Books and Records; Inspection. The
Company covenants that it will keep proper books and records in
which full, true and correct entries in conformity with generally
accepted accounting principles shall be made of all dealings and
transactions in relation to its business and activities. The
Company further covenants that it will permit, and will cause
each of its subsidiaries to permit, any person designated in
writing by any Holder to visit and inspect any of its properties,
to examine its corporate, financial and operating records and to
make copies thereof or extracts therefrom, and to discuss its
affairs, finances and accounts with its directors, officers,
employees and independent accountants, all at such times, upon
reasonable notice, as may reasonably be desired.
14. Notices. Any notice pursuant to this Agreement to be
given or made by any Holder to or on the Company shall be made by
hand delivery, prepaid first-class mail (registered or certified,
return receipt requested), telegraph, facsimile transmission
(receipt confirmed), or overnight air courier guaranteeing next
day delivery, addressed to: the Company at: 600 South Highway
169, Suite 1800, St. Louis Park, MN 55426, Attention: Z. Jill
Barclift, Esquire (facsimile transmission number: (612) 525-5098,
with a copy to, Sidley & Austin, One First National Plaza,
Chicago, IL 60603, Attention: Richard Clemens, Esquire
(facsimile transmission number: (312) 853-7036.
Any notice or demand authorized by this Agreement to be given or
made by the Company to any Holder shall be sufficiently given or
made (except as otherwise provided in this Agreement) if sent as
provided above, addressed to such Holder's address appearing on
the Warrant Register, with a copy, in the case of a Purchaser, to
Hutchins, Wheeler & Dittmar, 101 Federal Street, Boston,
Massachusetts 02110, Attention: James Westra (facsimile
transmission number: (617) 951-1295).
15. Warrant Obligations Independent of Debt Obligations.
Pursuant to the Purchase Agreement, the Company has issued Senior
Notes to the Purchasers. The obligations of the Company or its
affiliates with respect to the Warrants, including, without
limitation, the obligations set forth in this Agreement, are
independent of any obligations of the Company under the Senior
Notes, and such obligations with respect to the Warrants shall
remain valid and binding notwithstanding the performance of, or
any breach by the Company or its affiliates with respect to,
their obligations under the Senior Notes.
16. Fractional Interests. The Company shall not be
required to issue fractions of Shares on the exercise of
Warrants. If the Company elects not to issue fractions of
Shares, then with respect to any fraction of a Share that would
otherwise have been issuable on the exercise of a Warrant, the
Company shall purchase such fraction for an amount in cash equal
to the fraction of the then current Exercise Price attributable
to such fractional share.
17. Cancellation. The Warrants shall be automatically
cancelled, without further notice to or action on the part of,
the Holder thereof upon consummation of the Exchange (as defined
in the Purchase Agreement).
18. Binding Effect; Survival. This Agreement shall survive
the exercise of the Warrants and shall be binding upon the
Company and its successors and assigns and shall be binding upon
and inure to the benefit of the Holders of the Warrants and each
holder of Shares issued upon exercise of the Warrants.
19. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed
to be an original; but such counterparts together shall
constitute but one and the same instrument.
20. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Delaware.
[The rest of this page intentionally left blank]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Warrant Agreement to be duly executed as a sealed instrument as
of the day, month and year first above written.
THE COMPANY:
METRIS COMPANIES INC.
By:/s/ Ronald N. Zebeck
Name: Ronald N. Zebeck
Title: President and Chief Executive Officer
INVESTORS:
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC, its General Partner
By:/s/ Thomas M. Hagerty
Name: Thomas M. Hagerty
Title: Managing Director
THOMAS H. LEE FOREIGN FUND IV,
L.P., 1997 THOMAS H. LEE NOMINEE TRUST, DAVID
V. HARKINS, THE 1995 HARKINS GIFT TRUST,
SCOTT A. SCHOEN, C. HUNTER BOLL, SCOTT M.
SPERLING, ANTHONY J. DINOVI, THOMAS M.
HAGERTY, WARREN C. SMITH, JR., SETH W. LAWRY,
KENT R. WELDON, TERENCE M. MULLEN, TODD
M. ABBRECHT, CHARLES A. BRIZIUS, SCOTT
JAECKEL, SOREN OBERG, THOMAS R. SHEPHERD,
WENDY L. MASLER, ANDREW D. FLASTER, KRISTINA
A. WATTS, ROBERT SCHIFF LEE 1998 IRREVOCABLE
TRUST, STEPHEN ZACHARY LEE, CHARLES W. ROBINS
AS CUSTODIAN FOR JESSE ALBERT LEE, CHARLES W.
ROBINS, JAMES WESTRA, THOMAS H. LEECHARITABLE
INVESTMENT L. P., THL-CCI INVESTORS LIMITED
PARTNERSHIP
By:/s/ Thomas M. Hagerty
Thomas M. Hagerty,
Attorney-in-fact
EXHIBIT A
WARRANT CERTIFICATE
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). IT MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
THE TRANSFER OR EXCHANGE OF THIS WARRANT MUST BE REGISTERED IN
ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
NO. , 1998
VOID AFTER 5:00 P.M. EASTERN TIME
TIME ON DECEMBER 31, 2008
Metris Companies Inc.
Warrant Certificate
THIS CERTIFIES THAT for value received,
, or its registered assigns, is the owner of a Warrant which
entitles it to purchase at any time on or after the first to
occur of (i) the date on which the shareholders of the Company
vote to disapprove the Exchange (as defined in the Purchase
Agreement dated as of November 13, 1998) and (ii) June 30, 1999,
subject to the termination of any applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and as prescribed by the Office of the Comptroller of the
Currency, and on or before 5:00 p.m. Eastern Time on December 31,
2008 or on such later date, if any, as provided in the Warrant
Agreement (as hereinafter defined) (the "Expiration Date"),
fully paid and nonassessable Shares of the Common Stock, $.01 par
value (the "Common Stock") of the Company, at the purchase price
of $30.00 per share (the "Exercise Price") upon presentation and
surrender of this Warrant Certificate with the Form of Election
to Purchase attached hereto duly executed. The Expiration Date
is subject to extension as provided in said Warrant Agreement.
The number of Shares which may be purchased upon exercise of the
Warrant evidenced by this Warrant Certificate is the number as of
the date of the original issue of such Warrant, based on the
Shares of Common Stock of the Company as constituted at such
date. As provided in the Warrant Agreement, the number and kind
of Shares which may be purchased upon the exercise of the Warrant
evidenced by this Warrant Certificate, and the Exercise Price at
which such shares are purchasable, are, upon the happening of
certain events, subject to modification and adjustment.
This Warrant Certificate and the Warrant it represents are
subject to, and entitled to the benefits of, all of the terms,
provisions and conditions of a certain Warrant Agreement dated as
of December 9, 1998 (the "Warrant Agreement") between the Company
and the original holder hereof, which Warrant Agreement is hereby
incorporated herein by reference and made a part hereof and to
which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations,
duties and immunities hereunder of the Company and the holder of
this Warrant Certificate. Copies of the Warrant Agreement are on
file at the principal office of the Company.
Subject to the terms of the Warrant Agreement, this Warrant
Certificate, upon surrender at the principal office of the
Company, may be exchanged for another Warrant Certificate or
Warrant Certificates of like tenor and date evidencing a Warrant
or Warrants entitling the holder to purchase a like aggregate
number of Shares of Common Stock as the Warrant evidenced by the
Warrant Certificate surrendered entitled such holder to purchase.
No fractional Shares of Common Stock need be issued upon the
exercise of any Warrant evidenced hereby, but in lieu thereof a
cash payment may be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to
vote or receive dividends or be deemed the holder of Common Stock
or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to
stockholders at any meeting thereof, to give or withhold consent
to any corporate action (whether upon any recapitalization, issue
of stock, reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger,
conveyance or otherwise), to receive notice of meetings (except
as provided in the Warrant Agreement), or to receive dividends or
subscription rights or otherwise, until the Warrant evidenced by
this Warrant Certificate shall have been exercised and the Common
Stock purchasable upon the exercise thereof shall have become
deliverable as provided in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for
exercise within any period during which the transfer books for
the Company's Common Stock are closed for any purpose, the
Company shall not be required to make delivery of certificates
for Shares purchasable upon such exercise until the date of the
reopening of said transfer books.
IN WITNESS WHEREOF, the Company has caused the signature (or
facsimile signature) of its President and Secretary to be printed
herein and its corporate seal (or facsimile) to be printed
herein.
Attest: METRIS COMPANIES INC.
By: By:
Z. Jill Barclift Ronald N. Zebeck
Secretary President and Chief Executive Officer
FORM OF ELECTION TO PURCHASE
To be executed if the Holder desires to exercise the Warrant.
TO METRIS COMPANIES INC.:
The undersigned hereby irrevocably elects to exercise the
Warrant evidenced by this Warrant Certificate No. to purchase
Shares of Common Stock issuable upon the exercise of such Warrant
and requests that certificates for such Shares be issued in the
name of:
Name
Address
Social Security Number
If such number of Shares shall not be all the Shares with
respect to which this Warrant is exercisable, a new Warrant for
the balance remaining of such Shares will be registered in the
name of and delivered to:
Name
Address
Social Security Number
Date:
Signature
(Signature must conform in all
respects to name of
holder as specified on the face of
this Warrant Certificate)
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificates)
For value received, hereby sells, assigns and transfers unto ___________
the within Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
attorney, to transfer said Warrant Certificate on the books of
the within-named Company, with full power of substitution in the
premises.
Dated: ,
NOTE: The above signature
should correspond
exactly with the name on the face
of this Warrant Certificate.
SCHEDULE I
Warrant Purchasers Number Purchased
Warrant Agreement
